What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-09 compared with 2021-05-10 · 1858 added, 1812 removed, 1664 unchanged (69% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

March 31, 2021

June 30, 2021

December 31, 2020

6 unchanged sentences

Restricted cash and cash equivalents

Restricted foreign currency (cost of $411 and $319,

respectively)

Restricted foreign currency (cost of $378 and $319, respectively)

Interest and dividend receivable

1 unchanged sentence

Escrow receivable

Receivable for common stock sold

Prepaid expenses and other receivables

5 unchanged sentences

Accounts payable and accrued expenses

Unrealized depreciation on foreign currency forward contracts

Advances received from unfunded credit facilities

1 unchanged sentence

Commitments and contingencies (See Note 8)

Common stock, 20,583,835 and 20,546,032 shares issued and

outstanding, par value $0.001 per share, respectively, and 100,000,000 shares authorized

Common stock, 20,722,596 and 20,546,032 shares issued and outstanding, par value $0.001 per share, respectively, and 100,000,000 shares authorized

Paid-in capital in excess of par

4 unchanged sentences

Net asset value per share

See notes to the consolidated financial statements

See notes to the consolidated financial

WhiteHorse Finance, Inc.

Consolidated Statements of Operations (Unaudited)

Consolidated Statements of Operations

(in thousands, except share and per share

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

Investment income

30 unchanged sentences

Net change in unrealized appreciation (depreciation)

Net realized and unrealized losses on investments

Net increase (decrease) in net assets resulting from operations

Net realized and unrealized gains (losses) on investments

Net increase in net assets resulting from operations

Per Common Share Data

Basic and diluted earnings (loss) per common share

Basic and diluted earnings per common share

Dividends and distributions declared per common share

2 unchanged sentences

WhiteHorse Finance, Inc.

Consolidated Statements of Changes in Net Assets

(in thousands, except share and per share

Consolidated Statements of Changes

in Net Assets (Unaudited)

(in thousands, except share and per

Undistributed

1 unchanged sentence

Balance at December 31, 2020

Stock issued in connection with at-the-market offering

Net increase in net assets resulting from operations:

1 unchanged sentence

Net realized gains (losses) on investments

Net change in unrealized appreciation

(depreciation) on investments

Net change in unrealized appreciation (depreciation) on investments

Distributions declared

Balance at March 31, 2021

Balance at December 31, 2020

Stock issued in connection with at-the-market offering

Stock issued in connection with dividend reinvestment plan

Net increase in net assets resulting from operations:

3 unchanged sentences

Distributions declared

Balance at June 30, 2021

Undistributed

(Overdistributed)

Balance at December 31, 2019

Net increase in net assets resulting from operations:

Net investment income after excise tax

Net realized gains (losses) on investments

Net change in unrealized appreciation (depreciation) on investments

Distributions declared

Balance at March 31, 2020

See notes to the consolidated financial statements

Net increase in net assets resulting from operations:

Net investment income after excise tax

Net realized gains (losses) on investments

Net change in unrealized appreciation (depreciation) on investments

Distributions declared

Balance at June 30, 2020

See notes to the consolidated financial

WhiteHorse Finance, Inc.

1 unchanged sentence

(in thousands)

Three months ended

Six months ended June 30,

Cash flows from operating activities

Net increase (decrease) in net assets resulting from operations

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided

by operating activities:

Net increase in net assets resulting from operations

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by operating activities:

Paid-in-kind income

1 unchanged sentence

Net unrealized (appreciation) depreciation on investments

Net unrealized appreciation on translation of assets and liabilities in foreign currencies

Net unrealized (appreciation) depreciation on translation of assets and liabilities in foreign currencies

Net unrealized depreciation on foreign currency forward contracts

37 unchanged sentences

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

March 31, 2021

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

Investment Type (1)

Acquisition Date (10)

North America

Debt Investments

SmartSign Holdings LLC

First Lien Secured Term Loan

(1.00% Floor)

Air Freight & Logistics

Access USA Shipping, LLC

First Lien Secured Term Loan

(1.50% Floor)

Application Software

Secured Term Loan

Freight & Logistics

Shipping, LLC

Secured Term Loan

Atlas Purchaser, Inc.

Second Lien Secured Term Loan

Connexity, Inc.

First Lien Secured Term Loan

(1.50% Floor)

Newscycle Solutions, Inc.

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan(7)

(1.00% Floor)

Solutions, Inc.

First Lien Secured Revolving

TaxSlayer LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan(7)

(1.00% Floor)

Automotive Retail

Team Car Care Holdings, LLC

First Lien Secured Term Loan (12)

Secured Revolving Loan

Car Care Holdings, LLC (12)

Secured Term Loan

Base rate+ 7.99%

(1.00% Floor)

Building Products

Drew Foam Companies Inc

First Lien Secured Term Loan

(1.00% Floor)

LHS Borrower, LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan (7)

(1.00% Floor)

Cable & Satellite

Bulk Midco, LLC

First Lien Secured Term Loan (15)

(1.00% Floor)

Construction & Engineering

SFP Holding, Inc.

First Lien Secured Delayed Draw Loan (7)

(1.00% Floor)

First Lien Secured Revolving Loan (7)

(1.00% Floor)

First Lien Secured Term Loan

(1.00% Floor)

Construction Materials

Claridge Products and Equipment, LLC

Borrower, LLC (7)

Secured Revolving Loan

Midco, LLC (15)

Secured Term Loan

& Engineering

Holding, Inc.

Lien Secured Term Loan

Secured Term Loan

Claridge Products and Equipment,

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan (7)

(1.00% Floor)

Consumer Finance

Products and Equipment, LLC (7)

Secured Revolving Loan

Secured Term Loan

Maxitransfers Blocker Corp

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan (4)(7)

(1.00% Floor)

Data Processing & Outsourced Services

Maxitransfers

Blocker Corp (4)(7)

Secured Revolving Loan

Processing & Outsourced Services

Escalon Services Inc

First Lien Secured Term Loan

(1.00% Floor)

FPT Operating Company, LLC/

TLabs Operating Company, LLC

First Lien Secured Term Loan

(1.00% Floor)

Geo Logic Systems Ltd.

(13.00% Cash + 1.50% PIK)

FPT Operating Company, LLC/ TLabs

Operating Company, LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan (7)(13)

(1.00% Floor)

Department Stores

Mills Fleet Farm Group, LLC

Logic Systems Ltd.

First Lien Secured Term Loan

(1.00% Floor)

Crown Brands, LLC

Second Lien Secured Term Loan (19)

(1.50% Floor)

Second Lien Secured Delayed Draw Loan (19)

(1.50% Floor)

notes to the consolidated financial statements

Logic Systems Ltd.

First Lien Secured Revolving

Acquisition Co.

(dba Integreon)

Secured Term Loan

See notes to the consolidated financial

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

March 31, 2021

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

Diversified Chemicals

Sklar Holdings, Inc.

Farm Group, LLC

Secured Term Loan

Brands, LLC (19)

Second Lien Secured Term Loan

Brands, LLC (19)

Secured Delayed Draw Loan

Sklar Holdings,

Secured Term Loan

Support Services

NNA Services,

Secured Term Loan

EducationDynamics,

Secured Term Loan

Equipment & Instruments

LMG Holdings, Inc.

First Lien Secured Term Loan

(1.00% Floor)

Diversified Support Services

NNA Services, LLC

Holdings, Inc.

Secured Revolving Loan

Care Facilities

Epiphany Dermatology

First Lien Secured Term Loan

(1.50% Floor)

Education Services

EducationDynamics, LLC

Dermatology (7)

First Lien Secured Revolving

Dermatology (7)

First Lien Secured Delayed Draw

HIMA San Pablo, Inc.

First Lien Secured Term Loan

(1.00% Floor)

Health Care Facilities

Epiphany Dermatology

HIMA San Pablo, Inc.

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan (7)

(1.00% Floor)

First Lien Secured Delayed Draw Loan (7)

(1.00% Floor)

Grupo HIMA San Pablo, Inc.

First Lien Secured Term Loan A (8)

First Lien Secured Term Loan B (8)

(1.50% Floor)

Second Lien Secured Term Loan (8)

Health Care Services

HIMA San Pablo, Inc.

Secured Term Loan

(13.75% Cash + 2.00% PIK)

Care Services

CHS Therapy, LLC

First Lien Secured Term Loan A

(1.50% Floor)

First Lien Secured Term Loan C

(1.50% Floor)

First Lien Secured Term Loan

CHS Therapy, LLC

First Lien Secured Term Loan

DCA Investment Holding, LLC

First Lien Secured Term Loan

(0.75% Floor)

First Lien Secured Delayed Draw Loan (7)

(0.75% Floor)

Investment Holding, LLC (7)

First Lien Secured Delayed Draw

Ivy Rehab Holdings LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan (7)

(1.00% Floor)

First Lien Secured Delayed Draw Loan (7)

(1.00% Floor)

Rehab Holdings LLC (7)

First Lien Secured Revolving

Rehab Holdings LLC (7)

First Lien Secured Delayed Draw

Lab Logistics, LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Delayed Draw Loan

(1.00% Floor)

PG Dental New Jersey Parent, LLC

Lab Logistics, LLC

First Lien Secured Delayed Draw

PG Dental New Jersey Parent,

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan (7)

(1.00% Floor)

Home Furnishings

Sure Fit Home Products, LLC

Dental New Jersey Parent, LLC (7)

Secured Revolving Loan

Electrical Equipment

PPS CR Acquisition, Inc.

Power Plant Services)

First Lien Secured Term Loan

(1.00% Floor)

Interactive Media & Services

What If Media Group, LLC

CR Acquisition, Inc.

(dba Power Plant Services) (7)

Secured Revolving Loan

Fit Home Products, LLC

Secured Term Loan

The Kyjen Company, LLC (dba Outward

First Lien Secured Term Loan

(1.00% Floor)

Internet & Direct Marketing Retail

Kyjen Company, LLC (dba Outward Hound) (7)

Lien Secured Revolving Loan

Media & Services

Media Group, LLC

Secured Term Loan

& Direct Marketing Retail

BBQ Buyer, LLC

First Lien Secured Term Loan

(1.50% Floor)

Clarus Commerce, LLC

First Lien Secured Term Loan

(1.00% Floor)

Luxury Brand Holdings, Inc.

First Lien Secured Term Loan

(1.00% Floor)

Potpourri Group, Inc.

First Lien Secured Term Loan

(1.50% Floor)

Investment Banking & Brokerage

JVMC Holdings Corp.

Secured Term Loan

See notes to the consolidated financial

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

Banking & Brokerage

JVMC Holdings

(f/k/a RJO Holdings Corp)

Secured Term Loan

Consulting & Other Services

AST-Applications Software Technology

First Lien Secured Term Loan

(1.00% Floor)

IT Consulting & Other Services

AST-Applications Software Technology LLC

(8.00% Cash + 1.00% PIK)

Holdings Limited (5)(13)

First Lien Secured Term Loan

(1.00% Floor)

Holdings Limited (5)(7)(12)(13)

First lien Secured Revolving

Core BTS, Inc.

First Lien Secured Term Loan

(1.50% Floor)

First Lien Secured Delayed Draw Loan (7)

(1.50% Floor)

Leisure Facilities

Honors Holdings, LLC

Secured Delayed Draw Loan

Holdings, LLC (16)

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Delayed Draw Loan (16)

(1.00% Floor)

(8.31% Cash + 0.50% PIK)

Holdings, LLC (16)

First Lien Secured Delayed Draw

(8.04% Cash + 0.58% PIK)

Lift Brands, Inc.

(aka Snap Fitness Holdings, Inc.)

First Lien Secured Term Loan A

(1.00% Floor)

First Lien Secured Term Loan B

First Lien Secured Term Loan C (9)

notes to the consolidated financial statements

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

March 31, 2021

(in thousands)

Office Services & Supplies

Empire Office, Inc.

First Lien Secured Term Loan

(1.50% Floor)

Packaged Foods & Meats

Lenny & Larry's, LLC

(aka Snap Fitness

Holdings, Inc.)

First Lien Secured Term Loan

(1.00% Floor)

Personal Products

Inspired Beauty Brands, Inc.

Lift Brands, Inc.

(aka Snap Fitness

Holdings, Inc.)

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan (7)

(1.00% Floor)

Property & Casualty Insurance

Policy Services Company, LLC (5)

(0.00% Cash + 9.50% PIK)

(aka Snap Fitness Holdings, Inc.) (9)

Secured Term Loan C

(0.00% Cash + 9.50% PIK)

PlayMonster LLC

First Lien Secured Term Loan

(1.00% Floor)

Research & Consulting Services

Comniscient Technologies LLC

Secured Delayed Draw Loan

Services & Supplies

American Crafts, L.C.

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan (7)

(1.00% Floor)

Nelson Worldwide, LLC

Empire Office,

Secured Term Loan

Foods & Meats

& Larry's, LLC (17)

Secured Term Loan

(7.69% Cash + 1.72% PIK)

Inspired Beauty Brands, Inc.

First Lien Secured Term Loan

(1.00% Floor)

Beauty Brands, Inc.

Secured Revolving Loan

& Casualty Insurance

Services Company, LLC (5)

Secured Term Loan

& Consulting Services

ALM Media, LLC

First Lien Secured Term Loan

(1.00% Floor)

LS GFG Holdings Inc.

First Lien Secured Term Loan

(1.00% Floor)

Specialized Consumer Services

Nelson Worldwide,

Secured Term Loan

(10.25% Cash + 1.00% PIK)

LS GFG Holdings

Secured Term Loan

(7.00% Cash + 2.00% PIK)

Consumer Services

True Blue Car Wash, LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Delayed Draw Loan (7)

(1.00% Floor)

Specialized Finance

Golden Pear Funding Assetco, LLC (5)

Blue Car Wash, LLC (7)

Secured Delayed Draw Loan

Pear Funding Assetco, LLC (5)

Second Lien Secured Term Loan

(1.00% Floor)

WHF STRS Ohio Senior Loan Fund LLC

Subordinated Note (4)(5)(7)(9)(14)

Specialty Chemicals

Flexitallic Group SAS

STRS Ohio Senior Loan Fund LLC (4)(5)(7)(9)(14)

IDIG Parent LLC

First Lien Secured Term Loan

(1.00% Floor)

Systems Software

Parent LLC (7)

First Lien Secured Delayed Draw

Parent LLC (7)

Secured Revolving Loan

See notes to the consolidated financial

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

Technology Hardware, Storage

& Peripherals

Arcstor Midco, LLC

First Lien Secured Term Loan

(1.00% Floor)

IDIG Parent LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Delayed Draw Loan (7)

(1.00% Floor)

First Lien Secured Revolving Loan (7)

(1.00% Floor)

Technology Hardware, Storage & Peripherals

Source Code Midco, LLC

First Lien Secured Term Loan

(1.00% Floor)

Telestream Holdings Corporation

First Lien Secured Term Loan

(1.00% Floor)

Telestream Holdings Corporation (7)

First Lien Secured Revolving Loan

(1.00% Floor)

Trading Companies & Distributors

1 unchanged sentence

First Lien Secured Term Loan

(1.00% Floor)

LINC Systems, LLC (7)

First Lien Secured Revolving Loan

(1.00% Floor)

Total Debt Investments

1 unchanged sentence

Data Processing & Outsourced Services

Escalon Services Inc Warrants (4)

Escalon Services Inc (4)

Diversified Support Services

Quest Events, LLC Preferred Units (4)

ImageOne Industries, LLC Common A Units (4)

Quest Events, LLC (4)

Preferred Units

ImageOne Industries, LLC (4)

Common A Units

Health Care Services

Lab Logistics Preferred Units (4)

Lab Logistics (4)

Preferred Units

Internet & Direct Marketing Retail

BBQ Buyer, LLC Shares (4)

Ross-Simons Topco, LP Preferred Units (4)

BBQ Buyer, LLC (4)

Ross-Simons Topco, LP (4)

Preferred Units

Investment Banking & Brokerage

Arcole Holding Corp.

Shares (4)(5)(6)(18)

(4)(5)(6)(18)

IT Consulting & Other Services

Keras Holdings, LLC Shares (4)

CX Holdco LLC (4)

Keras Holdings, LLC (4)

Leisure Facilities

Lift Brands, Inc.

(aka Snap Fitness Holdings, Inc.) Class A Common Stock (4)

(aka Snap Fitness Holdings,

Class A Common Stock

Lift Brands, Inc.

(aka Snap Fitness Holdings, Inc.) Warrants (4)

(aka Snap Fitness Holdings,

Other Diversified Financial Services

SFS Global Holding Company Warrants (4)

Sigue Corporation Warrants (4)

SFS Global Holding Company (4)

Sigue Corporation (4)

Specialized Finance

NMFC Senior Loan Program I LLC Units (4)(5)(6)

WHF STRS Ohio Senior Loan Fund LLC Interests (4)(5)(7)(14)

WHF STRS Ohio Senior Loan Fund (4)(5)(7)(14)

LLC Interests

Total Equity Investments

Total Investments

notes to the consolidated financial statements

See notes to the consolidated

financial statements

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

March 31, 2021

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

Forward Currency Contracts

Currency to be

Settlement date

Currency Contracts

Morgan Stanley

(1) Except as otherwise noted, all investments are non-controlled/non-affiliate investments as defined

by the Investment Company Act of 1940, as amended (the “1940 Act”), and provide collateral for the Company’s credit

(2) The investments bear interest at a rate that may be determined by reference to the London Interbank

Offered Rate (“LIBOR”

or “L”), which resets monthly, quarterly or semiannually, the Canadian Dollar Offered Rate

(“CDOR”

(1) Except as otherwise noted, all

investments are non-controlled/non-affiliate investments as defined by the Investment Company Act of 1940,

as amended (the “1940 Act”), and provide collateral for the Company’s credit facility.

(2) The investments bear interest at a rate that may be determined by reference

to the London Interbank Offered Rate (“LIBOR”

or “L”), which resets monthly, quarterly or semiannually, the Canadian

Dollar Offered Rate (“CDOR”

or “C”), or the U.S.

1 unchanged sentence

or “P”).

The one, three and six-month LIBOR were 0.1%, 0.2% and 0.2%, respectively,

as of March 31, 2021.

The Prime was 3.25% as of March 31, 2021.

The CDOR was 0.4 %

as of March 31, 2021.

The one, three and six-month USD LIBOR were 0.1%, 0.1% and 0.2%, respectively, as of June 30, 2021.

The one, three

and six-month GBP LIBOR were all 0.1% as of June 30, 2021.

The CDOR and Prime was 0.4% and 3.25%, respectively, as of June 30, 2021.

(3) The interest rate is the “all-in-rate”

including the current index and spread, the fixed

rate, and the payment-in-kind (“PIK”) interest rate, as the case may be.

(4) The investment or a portion of the investment does not provide collateral for the Company’s credit

(5) Not a qualifying asset under Section

55(a) of the 1940 Act.

including the current index and spread, the fixed rate, and the payment-in-kind (“PIK”) interest

rate, as the case may be.

(4) The investment or a portion of the investment does

not provide collateral for the Company’s credit facility.

(5) Not a qualifying

asset under Section 55(a) of the 1940 Act.

Under the 1940 Act, the Company may not acquire any non-qualifying

asset unless, at the time the acquisition is made, qualifying assets represent at least 70%

of total assets.

Qualifying assets represented 86% of total assets as of the date of the

consolidated schedule of investments.

(6) Investment is a non-controlled/affiliate investment as defined by the 1940 Act.

(7) The investment has an unfunded commitment in addition to any amounts presented in the consolidated

schedule of investments as of March 31, 2021.

asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of total assets.

Qualifying assets represented 86.5% of total assets as of the date of the consolidated schedule of investments.

(6) Investment is a non-controlled/affiliate investment

as defined by the 1940 Act.

(7) The investment has an unfunded

commitment in addition to any amounts presented in the consolidated schedule of investments as of June

(8) The investment is on non-accrual status.

(9) Security is perpetual with no defined maturity date.

(10) Except as otherwise noted, all of the Company’s portfolio company investments,

which as of the date of the consolidated schedule of investments represented 196% of the

Company’s net assets or 92% of the Company’s total assets, are subject to legal

restrictions on sales.

(11) The fair value of each investment was determined using significant unobservable

(12) The investment was comprised of two contracts, which were indexed to different

base rates, L and P, respectively.

The Spread Above Index and Interest Rate presented represent the weighted average of both contracts.

(13) Principal amount is denominated in Canadian dollars.

(14) Investment is a controlled affiliate investment as defined by the 1940 Act.

On January 14, 2019, the

Company entered into an agreement (as described in Note 4 hereto) with State Teachers Retirement System of Ohio, a public pension fund

established under Ohio law (“STRS Ohio”), to create WHF STRS Ohio Senior Loan Fund, LLC (“STRS JV”), a joint venture,

which invests primarily in senior secured first and second lien term loans.

(15) In addition to the interest earned based on the stated interest rate of this security, the Company

is entitled to receive an additional interest amount of 2.75% on its “last out”

tranche of the portfolio company’s senior

term debt, which was previously syndicated into “first out”

(10) Except as otherwise noted, all

of the Company’s portfolio company investments, which as of the date of the consolidated schedule

of investments represented 209.8% of the Company’s net assets or 95.8% of the Company’s total

assets, are subject to legal restrictions on sales.

(11) The fair value of each investment was determined using

significant unobservable inputs.

investment was comprised of two contracts, which were indexed to different base rates, L

and P, respectively.

The Floor, Spread Above Index and Interest Rate presented represent

the weighted average of both contracts.

(13) Principal

amount is non-USD denominated and is based in Canadian dollars or British Pounds.

(14) Investment is a controlled affiliate

investment as defined by the 1940 Act.

On January 14, 2019, the Company entered into an agreement (as

described in Note 4 hereto) with State Teachers Retirement System of Ohio, a public pension fund established

under Ohio law (“STRS Ohio”), to create WHF STRS Ohio Senior Loan Fund, LLC (“STRS JV”),

a joint venture, which invests primarily in senior secured first and second lien term loans.

(15) In addition to

the interest earned based on the stated interest rate of this security, the Company is entitled

to receive an additional interest in the amount of 2.75% on its “last out”

of the portfolio company’s senior term debt, which was previously syndicated into “first

and “last out”

tranches, whereby the “first

tranche will have priority as to the “last out”

tranche with respect to payments of principal, interest and any

other amounts due thereunder.

(16) In addition to the interest earned based on the stated interest rate of this security, the Company

is entitled to receive an additional interest amount of 3.50% on its “last out”

tranche of the portfolio company’s senior

term debt, which was previously syndicated into “first out”

tranches, whereby the “first out”

will have priority as to the “last out”

tranche with respect to payments of principal,

interest and any other amounts due thereunder.

(16) In addition to

the interest earned based on the stated interest rate of this security, the Company is entitled

to receive an additional interest in the amount of 3.50% on its “last out”

of the portfolio company’s senior term debt, which was previously syndicated into “first

and “last out”

tranches, whereby the “first

tranche will have priority as to the “last out”

tranche with respect to payments of principal, interest and any

other amounts due thereunder.

(17) In addition to the interest earned based on the stated interest rate of this security, the Company

is entitled to receive an additional interest amount of 3.00% on its “last out”

tranche of the portfolio company’s senior

term debt, which was previously syndicated into “first out”

tranches, whereby the “first out”

will have priority as to the “last out”

tranche with respect to payments of principal,

interest and any other amounts due thereunder.

(17) In addition to

the interest earned based on the stated interest rate of this security, the Company is entitled

to receive an additional interest in the amount of 3.00% on its “last out”

of the portfolio company’s senior term debt, which was previously syndicated into “first

and “last out”

tranches, whereby the “first

tranche will have priority as to the “last out”

tranche with respect to payments of principal, interest and any

other amounts due thereunder.

(18) On October 1, 2020, as part of a restructuring agreement between the Company and Arcole Acquisition

Corp, the Company’s investments in first lien secured term loans to Arcole Acquisition Corp were converted into common shares of

Arcole Holding Corp.

(19) At the option of the issuer, interest can be paid in cash or cash and PIK.

The issuer may elect to

pay up to 2.00% PIK.

notes to the consolidated financial statements

tranches, whereby the “first out”

will have priority as to the “last out”

tranche with respect to payments of principal,

interest and any other amounts due thereunder.

(18) On October 1, 2020, as part of a restructuring agreement

between the Company and Arcole Acquisition Corp, the Company’s investments in first lien secured

term loans to Arcole Acquisition Corp were converted into common shares of Arcole Holding Corp.

(19) At the option of the issuer, interest can be paid

in cash or cash and PIK.

The issuer may elect to pay up to 2.00% PIK.

See notes to the consolidated financial statements

WHITEHORSE FINANCE, INC.

2 unchanged sentences

(in thousands)

Investment Type (1)

North America

1 unchanged sentence

Lien Secured Term Loan

(0.50% Floor)

SmartSign Holdings LLC

SmartSign Holdings

Lien Secured Term Loan

(1.00% Floor)

Agricultural & Farm Machinery

Bad Boy Mowers Acquisition, LLC

& Farm Machinery

Bad Boy Mowers

Acquisition, LLC

Lien Secured Term Loan

(1.00% Floor)

Air Freight & Logistics

Access USA Shipping, LLC

Access USA Shipping,

Lien Secured Term Loan

(1.50% Floor)

Application Software

Connexity, Inc.

Lien Secured Term Loan

(1.50% Floor)

Newscycle Solutions, Inc.

Newscycle Solutions,

Lien Secured Term Loan

(1.00% Floor)

Lien Secured Revolving Loan (7)

(1.00% Floor)

TaxSlayer LLC

Lien Secured Term Loan

(1.00% Floor)

Lien Secured Revolving Loan (7)

(1.00% Floor)

Automotive Retail

Team Car Care Holdings, LLC

Team Car Care

Holdings, LLC

Lien Secured Term Loan (12)

Base rate+ 8.00%

(1.00% Floor)

BW Gas & Convenience Holdings, LLC

Convenience Holdings, LLC

Lien Secured Term Loan

(0.00% Floor)

Alpha Media, LLC

Lien Secured Term Loan

(2.00% Floor)

Building Products

Drew Foam Companies Inc

Drew Foam Companies

Lien Secured Term Loan

(1.00% Floor)

Lien Secured Revolving Loan (7)

(1.00% Floor)

LHS Borrower, LLC

LHS Borrower,

Lien Secured Term Loan

(1.00% Floor)

Lien Secured Revolving Loan (7)

See notes to consolidated financial statements

See notes to consolidated financial

WHITEHORSE FINANCE, INC.

2 unchanged sentences

(in thousands)

Investment Type (1)

Cable & Satellite

1 unchanged sentence

Lien Secured Term Loan (15)

(1.00% Floor)

Communications Equipment

2 unchanged sentences

Lien Secured Term Loan (5)

(0.00% Floor)

Sorenson Communications, LLC

Lien Secured Term Loan

(0.00% Floor)

Secured Term Loan

Construction & Engineering

Atlas Intermediate Holdings LLC

Lien Secured Term Loan

(1.00% Floor)

Secured Term Loan

Road Safety Services, Inc.

Lien Secured Term Loan

(1.00% Floor)

Secured Term Loan

Lien Secured Revolving Loan (7)

(1.00% Floor)

Lien Secured Term Loan

(1.00% Floor)

Secured Term Loan

Construction Materials

Claridge Products and Equipment, LLC

Lien Secured Term Loan

(1.00% Floor)

Claridge Products and Equipment,

Secured Term Loan

Lien Secured Revolving Loan (7)

(1.00% Floor)

Consumer Finance

Maxitransfers Blocker Corp

Lien Secured Term Loan

(1.00% Floor)

Secured Term Loan

Lien Secured Revolving Loan (4)

(1.00% Floor)

Data Processing & Outsourced Services

Data Processing & Outsourced

Escalon Services Inc

Lien Secured Term Loan

(0.75% Floor)

Secured Term Loan

FPT Operating Company, LLC/

TLabs Operating Company, LLC

Lien Secured Term Loan

(1.00% Floor)

Geo Logic Systems Ltd.

Secured Term Loan

Logic Systems Ltd.

Lien Secured Term Loan (13)

(1.00% Floor)

Lien Secured Revolving Loan (7) (13)

(1.00% Floor)

See notes to consolidated financial statements

See notes to consolidated financial

WHITEHORSE FINANCE, INC.

2 unchanged sentences

(in thousands)

Investment Type(1)

Department Stores

Mills Fleet Farm Group, LLC

First Lien Secured Term Loan

(1.00% Floor)

Lien Secured Term Loan

Crown Brands, LLC

Second Lien Secured Term Loan (20)

(1.50% Floor)

Second Lien Secured Delayed Draw Loan (20)

(1.50% Floor)

Lien Secured Term Loan (20)

Lien Secured Delayed Draw Loan (20)

Diversified Chemicals

Sklar Holdings, Inc.

First Lien Secured Term Loan

(1.00% Floor)

Secured Term Loan

Diversified Support Services

ImageOne Industries, LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan (4)(7)

(1.00% Floor)

Secured Term Loan

Lien Secured Revolving Loan (4)(7)

NNA Services, LLC

First Lien Secured Term Loan

(1.50% Floor)

Lien Secured Term Loan

Education Services

EducationDynamics, LLC

First Lien Secured Term Loan

(1.00% Floor)

Secured Term Loan

AG Kings Holdings, Inc.

First Lien Secured Term Loan (4)(8)

(0.75% Floor)

Superpriority Secured Debtor-In- Possession Term Loan (4)(18)

(1.00% Floor)

Lien Secured Term Loan (4)(8)

Superpriority

Secured Debtor-In- Possession Term Loan (4)(18)

Health Care Facilities

Epiphany Dermatology

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan (7)

(1.00% Floor)

First Lien Secured Delayed Draw Loan (7)

(1.00% Floor)

Secured Term Loan

Lien Secured Revolving Loan (7)

Lien Secured Delayed Draw Loan (7)

Grupo HIMA San Pablo, Inc.

First Lien Secured Term Loan A

First Lien Secured Term Loan B

(1.50% Floor)

Second Lien Secured Term Loan (8)

Secured Term Loan A

Secured Term Loan B

Lien Secured Term Loan (8)

Health Care Services

CHS Therapy, LLC

First Lien Secured Term Loan A

(1.50% Floor)

First Lien Secured Term Loan C

(1.50% Floor)

See notes to consolidated financial statements

Secured Term Loan A

Secured Term Loan C

See notes to consolidated financial

WHITEHORSE FINANCE, INC.

2 unchanged sentences

(in thousands)

Investment Type (1)

Ivy Rehab Holdings LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan (7)

(1.00% Floor)

Lien Secured Revolving Loan (7)

First Lien Secured Delayed Draw

(1.00% Floor)

Lab Logistics, LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Delayed Draw

(1.00% Floor)

PG Dental New Jersey Parent, LLC

First Lien Secured Delayed

PG Dental New Jersey Parent,

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan (7)

(1.00% Floor)

Lien Secured Revolving Loan (7)

Home Furnishings

Sure Fit Home Products, LLC

First Lien Secured Term Loan (8)

(1.00% Floor)

Lien Secured Term Loan (8)

Interactive Media & Services

1 unchanged sentence

First Lien Secured Term Loan

(1.00% Floor)

Internet & Direct Marketing Retail

Internet & Direct Marketing

BBQ Buyer, LLC

First Lien Secured Term Loan

(1.50% Floor)

First Lien Secured Revolving Loan (7)

(1.50% Floor)

Lien Secured Revolving Loan (7)

Luxury Brand Holdings, Inc.

First Lien Secured Term Loan

(1.00% Floor)

Potpourri Group, Inc.

First Lien Secured Term Loan

(1.50% Floor)

Investment Banking & brokerage

2 unchanged sentences

First Lien Secured Term Loan

(1.00% Floor)

IT Consulting & Other Services

AST-Applications Software Technology

IT Consulting & Other

AST-Applications Software

Technology LLC

First Lien Secured Term Loan

9.00% (1.00% PIK)

(1.00% Floor)

RCKC Acquisitions LLC

(dba KSM Consulting LLC)

RCKC Acquisitions LLC (dba KSM Consulting LLC)

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan (7)

(1.00% Floor)

First Lien Secured Delayed Draw Loan (7)

(1.00% Floor)

See notes to consolidated financial statements

Lien Secured Revolving Loan (7)

Lien Secured Delayed Draw Loan (7)

See notes to consolidated financial

WHITEHORSE FINANCE, INC.

2 unchanged sentences

(in thousands)

Investment Type (1)

Leisure Facilities

Honors Holdings, LLC

First Lien Secured Term Loan (16)

(1.00% Floor)

Lien Secured Term Loan (16)

First Lien Secured Delayed Draw

(1.00% Floor)

Lift Brands, Inc.

(aka Snap Fitness

Holdings, Inc)

First Lien Secured Term Loan A

(1.00% Floor)

First Lien Secured Term Loan B

First Lien Secured Term Loan C (9)

Fitness Holdings, Inc)

First Lien Secured Term Loan

Lien Secured Term Loan C (9)

Office Services & Supplies

1 unchanged sentence

First Lien Secured Term Loan

(1.50% Floor)

Packaged Foods & Meats

Lenny & Larry's, LLC

First Lien Secured Term Loan (17)

(1.00% Floor)

Lien Secured Term Loan (17)

Personal Products

1 unchanged sentence

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving

(1.00% Floor)

Property & Casualty Insurance

Policy Services Company, LLC

First Lien Secured Term Loan (5)

(1.00% Floor)

Lien Secured Term Loan (5)

Research & Consulting Services

1 unchanged sentence

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving

(1.00% Floor)

Nelson Worldwide, LLC

First Lien Secured Term Loan

(1.00% Floor)

ALM Media, LLC

First Lien Secured Term Loan

(1.00% Floor)

LS GFG Holdings Inc.

First Lien Secured Term Loan

(1.00% Floor)

Specialized Consumer Services

1 unchanged sentence

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Delayed Draw

(1.00% Floor)

notes to consolidated financial statements

See notes to consolidated financial

WHITEHORSE FINANCE, INC.

2 unchanged sentences

(in thousands)

Specialized Finance

Pear Funding Assetco, LLC (5)

Lien Secured Term Loan

(1.00% Floor)

Second Lien Secured

Legal Finance, LLC (5)

Lien Secured Term Loan

(1.00% Floor)

STRS Ohio Senior Loan Fund LLC

Second Lien Secured Term Loan

WHF STRS Ohio Senior Loan Fund

Note (4)(5)(7)(9)(14)

Lien Secured Term Loan

(1.00% Floor)

Lien Secured Term Loan

(1.00% Floor)

Hardware, Storage & Peripherals

Code Midco, LLC

Lien Secured Term Loan

(1.00% Floor)

Holdings Corporation

Lien Secured Term Loan

(1.00% Floor)

Specialty Chemicals

Flexitallic Group SAS

First Lien Secured Term Loan

Systems Software

Vero Parent, Inc.

First Lien Secured Term Loan

Technology Hardware, Storage

& Peripherals

Source Code Midco, LLC

First Lien Secured Term Loan

Telestream Holdings Corporation

First Lien Secured Term Loan

Lien Secured Revolving Loan (7)

(1.00% Floor)

Debt Investments

Processing & Outsourced Services

Total Debt Investments

Equity Investments

Data Processing & Outsourced

Services Inc Warrants (4)

Support Services

Diversified Support Services

Events, LLC Preferred Units (4)

Industries, LLC Common A Units (4)

Care Services

Health Care Services

Logistics Preferred Units (4)

& Direct Marketing Retail

Internet & Direct Marketing

Buyer, LLC Shares (4)

Topco, LP Preferred Units (4)

Banking & Brokerage

Investment Banking & Brokerage

Holding Corp.

Shares (4)(5)(6)(19)

Consulting & Other Services

IT Consulting & Other Services

Holdings, LLC Shares(dba KSM Consulting LLC) (4)

Leisure Facilities

(aka Snap Fitness Holdings, Inc.) Class A Common Stock (4)

(aka Snap Fitness Holdings, Inc.) Warrants (4)

See notes to consolidated financial statements

See notes to consolidated financial

WHITEHORSE FINANCE, INC.

2 unchanged sentences

(in thousands)

Investment Type (1)

Other Diversified Financial Services

RCS Creditor Trust Class B Units (4)(6)

SFS Global Holding Company

Sigue Corporation Warrants (4)

Other Diversified Financial

Creditor Trust Class B Units (4)(6)

Global Holding Company Warrants (4)

Corporation Warrants (4)

Specialized Finance

NMFC Senior Loan Program I LLC Units (4)(5)(6)

WHF STRS Ohio Senior Loan Fund

LLC Interests (4)(5)(7)(14)

Senior Loan Program I LLC Units (4)(5)(6)

STRS Ohio Senior Loan Fund LLC Interests (4)(5)(7)(14)

Total Equity Investments

Total Investments

(1) Except as otherwise noted, all investments are non-controlled/non-affiliate investments as defined

by the Investment Company Act of 1940, as amended (the “1940 Act”), and provide collateral for the Company’s credit

(2) The investments bear interest at a rate that may be determined by reference to the London Interbank

Offered Rate (“LIBOR”

or “L”), which resets monthly, quarterly or semiannually, the Canadian Dollar Offered Rate

(“CDOR”

(1) Except as otherwise noted, all investments

are non-controlled/non-affiliate investments as defined by the Investment Company Act of 1940, as

amended (the “1940 Act”), and provide collateral for the Company’s credit facility.

(2) The investments bear interest at a rate

that may be determined by reference to the London Interbank Offered Rate (“LIBOR”

or “L”),

which resets monthly, quarterly or semiannually, the Canadian Dollar Offered Rate (“CDOR”

or “C”) or the U.S.

1 unchanged sentence

or “P”).

The one, three and six-month LIBOR were 0.1%, 0.2% and 0.3%, respectively, as of December 31, 2020.

The one, three and six-month LIBOR were 0.1%, 0.2% and 0.3%, respectively, as

of December 31, 2020.

The Prime was 3.25% as of December 31, 2020.

1 unchanged sentence

(3) The interest rate is the “all-in-rate”

including the current index and spread, the fixed

rate, and the payment-in-kind (“PIK”) interest rate, as the case may be.

(4) The investment or a portion of the investment does not provide collateral for the Company’s credit

(5) Not a qualifying asset under Section 55(a) of the 1940 Act.

Under the 1940 Act, the Company may not

acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of total assets.

Qualifying assets represented 84% of total assets as of the date of the consolidated schedule of investments.

(6) Investment is a non-controlled/affiliate investment as defined by the 1940 Act.

(7) The investment has an unfunded commitment in addition to any amounts presented in the consolidated

schedule of investments as of December 31, 2020.

including the current index and spread, the fixed rate, and the payment-in-kind (“PIK”)

interest rate, as the case may be.

(4) The investment or a portion of the investment does not provide collateral

for the Company’s credit facility.

(5) Not a qualifying asset under Section

55(a) of the 1940 Act.

Under the 1940 Act, the Company may not acquire any non-qualifying asset unless,

at the time the acquisition is made, qualifying assets represent at least 70% of total assets.

assets represented 84% of total assets as of the date of the consolidated schedule of investments.

(6) Investment is a non-controlled/affiliate investment as defined by

the 1940 Act.

(7) The investment has an unfunded commitment

in addition to any amounts presented in the consolidated schedule of investments as of December 31,

(8) The investment is on non-accrual status.

(9) Security is perpetual with no defined maturity date.

(10) Except as otherwise noted, all of the Company’s portfolio company investments,

which as of the date of the consolidated schedule of investments represented 221% of the Company’s net assets or 96% of the Company’s

total assets, are subject to legal restrictions on sales.

(11) The fair value of each investment was determined

using significant unobservable inputs.

notes to consolidated financial statements

WHITEHORSE FINANCE, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2020

(in thousands)

(12) The investment was comprised of two contracts, which were indexed to different

base rates, L and P, respectively.

The Spread Above Index and Interest Rate presented represent the weighted average of both contracts.

(13) Principal amount is denominated in Canadian dollars.

(14) Investment is a controlled affiliate investment as defined by the 1940 Act.

(10) Except as otherwise noted, all of the

Company’s portfolio company investments, which as of the date of the consolidated schedule

of investments represented 221% of the Company’s net assets or 96% of the Company’s total

assets, are subject to legal restrictions on sales.

(11) The fair value of each investment was determined using significant

unobservable inputs.

(12) The investment

was comprised of two contracts, which were indexed to different base rates, L and P, respectively.

The Spread Above Index and Interest Rate presented represent the weighted average of both

(13) Principal amount is denominated in Canadian

(14) Investment

is a controlled affiliate investment as defined by the 1940 Act.

On January 14, 2019, the

Company entered into an agreement (as described in Note 4 hereto) with State Teachers Retirement System of Ohio, a public pension fund

established under Ohio law (“STRS Ohio”), to create WHF STRS Ohio Senior Loan Fund, LLC (“STRS JV”), a joint venture,

which invests primarily in senior secured first and second lien term loans.

(15) In addition to the interest earned based on the stated interest rate of this security, the Company

Company entered into an agreement (as described in Note 4 hereto) with State Teachers Retirement

System of Ohio, a public pension fund established under Ohio law (“STRS Ohio”),

to create WHF STRS Ohio Senior Loan Fund, LLC (“STRS JV”), a joint venture, which

invests primarily in senior secured first and second lien term loans.

addition to the interest earned based on the stated interest rate of this security, the Company

is entitled to receive an additional interest amount of 2.75% on its “last out”

tranche of the portfolio company’s senior

term debt, which was previously syndicated into “first out”

tranche of the portfolio company’s senior term debt, which was previously syndicated

into “first out”

and “last out”

1 unchanged sentence

tranche will have priority as to the “last out”

tranche with respect to payments of principal, interest and any

other amounts due thereunder.

(16) In addition to the interest earned based on the stated interest rate of this security, the Company

tranche with respect

to payments of principal, interest and any other amounts due thereunder.

addition to the interest earned based on the stated interest rate of this security, the Company

is entitled to receive an additional interest amount of 3.50% on its “last out”

tranche of the portfolio company’s senior

term debt, which was previously syndicated into “first out”

tranche of the portfolio company’s senior term debt, which was previously syndicated

into “first out”

and “last out”

1 unchanged sentence

tranche will have priority as to the “last out”

tranche with respect to payments of principal, interest and any

other amounts due thereunder.

(17) In addition to the interest earned based on the stated interest rate of this security, the Company

tranche with respect

to payments of principal, interest and any other amounts due thereunder.

addition to the interest earned based on the stated interest rate of this security, the Company

is entitled to receive an additional interest amount of 3.00% on its “last out”

tranche of the portfolio company’s senior

term debt, which was previously syndicated into “first out”

tranche of the portfolio company’s senior term debt, which was previously syndicated

into “first out”

and “last out”

1 unchanged sentence

tranche will have priority as to the “last out”

tranche with respect to payments of principal, interest and any

other amounts due thereunder.

(18) In August 2020, in conjunction with the AG Kings Holdings, Inc.

tranche with respect

to payments of principal, interest and any other amounts due thereunder.

(18) In August

2020, in conjunction with the AG Kings Holdings, Inc.

bankruptcy, the Company converted approximately

$14.2 million of its existing first lien secured term loan into a new superpriority secured debtor-in-possession term loan.

(19) On October 1, 2020, as part of a restructuring agreement between the Company and Arcole Acquisition

Corp, the Company’s investments in first lien secured term loans to Arcole Acquisition Corp were converted into common shares of

Arcole Holding Corp.

(20) At the option of the issuer, interest can be paid in cash or cash and PIK.

The issuer may elect to

pay up to 2.00% PIK.

$14.2 million of its existing first lien secured term loan into a new superpriority secured

debtor-in-possession term loan.

(19) On October 1, 2020, as part of a restructuring

agreement between the Company and Arcole Acquisition Corp, the Company’s investments

in first lien secured term loans to Arcole Acquisition Corp were converted into common shares

of Arcole Holding Corp.

(20) At the option of the issuer, interest

can be paid in cash or cash and PIK.

The issuer may elect to pay up to 2.00% PIK.

notes to consolidated financial statements

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements

March 31, 2021

June 30, 2021

(in thousands, except share and per share

10 unchanged sentences

common stock trades on the Nasdaq Global Select Market under the symbol “WHF.”

The Company’s investment objective

is to generate attractive risk-adjusted returns primarily by originating and investing in senior secured loans, including first lien and

second lien facilities, to performing lower middle market companies across a broad range of industries that typically carry a floating

interest rate based on a risk-free index rate such as the London Interbank Offered Rate (“LIBOR”) and have a term of three

to six years.

While the Company focuses principally on originating senior secured loans to lower middle market companies, it may also

opportunistically make investments at other levels of a company’s capital structure, including mezzanine loans or equity interests

and may receive warrants to purchase common stock in connection with its debt investments.

WhiteHorse Finance’s

investment activities are managed by H.I.G.

The Company’s investment objective is to

generate attractive risk-adjusted returns primarily by originating and investing in senior secured loans, including first lien and second

lien facilities, to performing lower middle market companies across a broad range of industries that typically carry a floating interest

rate based on a risk-free index rate such as the London Interbank Offered Rate (“LIBOR”) and have a term of three to six years.

While the Company focuses principally on originating senior secured loans to lower middle market companies, it may also opportunistically

make investments at other levels of a company’s capital structure, including mezzanine loans or equity interests and may receive

warrants to purchase common stock in connection with its debt investments.

WhiteHorse Finance’s investment activities are managed

WhiteHorse Advisers, LLC (“WhiteHorse Advisers”

or the “Investment Adviser”).

WhiteHorse Administration, LLC (“WhiteHorse Administration”

or the “Administrator”) provides

administrative services necessary for the Company to operate.

commodity interest transactions such as swap transactions or futures contracts for the Company may cause WhiteHorse Advisers to

fall within the definition of “commodity pool operator”

under the Commodity Exchange Act (“CEA”), and

related regulations promulgated by the U.S.

Commodity Futures Trading Commission (the CFTC”).

On January 23, 2020, WhiteHorse

Advisers claimed an exclusion from the definition of the term “commodity pool operator”

under the CEA and the CFTC

regulations in connection with its management of the Company (the “Exclusion”) and, therefore, is not subject to CFTC

registration or regulation under the CEA as a commodity pool operator with respect to its management of the Company.

Advisers has affirmed the Exclusion on February 24, 2021, and intends to continue to affirm the Exclusion on an annual basis.

WhiteHorse Administration,

LLC (“WhiteHorse Administration”

or the “Administrator”) provides administrative services necessary for the Company

Engaging in commodity interest transactions

such as swap transactions or futures contracts for the Company may cause WhiteHorse Advisers to fall within the definition of “commodity

pool operator”

under the Commodity Exchange Act (the “CEA”) and related regulations promulgated by the U.S.

Futures Trading Commission (the “CFTC”).

On January 23, 2020, WhiteHorse Advisers claimed an exclusion from the definition

of the term “commodity pool operator”

under the CEA and the CFTC regulations in connection with its management of the Company

(the “Exclusion”) and, therefore, WhiteHorse Advisers is not subject to CFTC registration or regulation under the CEA as a

commodity pool operator with respect to its management of the Company.

WhiteHorse Advisers has affirmed the Exclusion on February 24,

2021 and intends to continue to affirm the Exclusion on an annual basis.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation :

The accompanying

consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States

of America (“GAAP”) and include the accounts of WhiteHorse Finance and its wholly owned subsidiaries, WhiteHorse Finance Credit

I, LLC (“WhiteHorse Credit”), and its subsidiary WhiteHorse Finance (CA), LLC (“WhiteHorse California”), and WhiteHorse

Finance Warehouse, LLC (“WhiteHorse Warehouse”).

The Company meets the definition of an investment company under Accounting

Standards Codification (“ASC”) Topic 946, Financial Services - Investment Companies , and therefore applies the accounting

and reporting guidance discussed therein to its consolidated financial statements.

All significant intercompany balances and transactions

have been eliminated.

of Presentation :

The accompanying consolidated financial statements have been prepared in conformity with accounting principles

generally accepted in the United States of America (“GAAP”) and include the accounts of WhiteHorse Finance and its wholly

owned subsidiaries, WhiteHorse Finance Credit I, LLC (“WhiteHorse Credit”), and its subsidiary WhiteHorse Finance (CA), LLC

(“WhiteHorse California”), WhiteHorse Finance Warehouse, LLC (“WhiteHorse Warehouse”), WHF PMA Holdco Blocker,

LLC, WhiteHorse RCKC Holdings, LLC and WhiteHorse Finance Holdings, LLC.

The Company meets the definition of an investment company under

Accounting Standards Codification (“ASC”) Topic 946, Financial Services - Investment Companies , and therefore applies

the accounting and reporting guidance discussed therein to its consolidated financial statements.

All significant intercompany balances

and transactions have been eliminated.

Additionally, the accompanying consolidated

11 unchanged sentences

Principles of Consolidation :

investment company rules and regulations pursuant to ASC Topic 946, WhiteHorse Finance is precluded from consolidating any entity other

than another investment company.

As provided under ASC Topic 946, WhiteHorse Finance generally consolidates any investment company when

it owns 100% of its partners’

the investment company rules and regulations pursuant to ASC Topic 946, WhiteHorse Finance is precluded from consolidating any entity

other than another investment company.

As provided under ASC Topic 946, WhiteHorse Finance generally consolidates any investment company

when it owns 100% of its partners’

or members’

capital or equity units.

The Company does not consolidate its investment in STRS

The Company does not consolidate its investment in

See further description in Note 4.

13 unchanged sentences

the measurement date.

Investments are measured at fair value as

determined in good faith by the Investment Adviser’s investment committee (the “Investment Committee”), generally

on a quarterly basis, and such valuations are reviewed by the audit committee of the Company’s board of directors and

ultimately approved by the Company’s board of directors, based on, among other factors, consistently applied valuation procedures on each

measurement date.

Any changes to the valuation methodology are reviewed by management and the Company’s board of directors to

confirm that the changes are justified.

The Company continues to review and refine its valuation procedures in response to market

The Company engages independent

external valuation firms to periodically review material investments.

These external reviews are used by the Company’s board

of directors to review the Company’s internal valuation of each investment over the year.

Investments are measured at fair value

as determined in good faith by the Investment Adviser’s investment committee (the “Investment Committee”), generally

on a quarterly basis, and such valuations are reviewed by the audit committee of the Company’s board of directors and ultimately

approved by the Company’s board of directors, based on, among other factors, consistently applied valuation procedures on each measurement

Any changes to the valuation methodology are reviewed by management and the Company’s board of directors to confirm that the

changes are justified.

The Company continues to review and refine its valuation procedures in response to market changes.

The Company engages independent external

valuation firms to periodically review material investments.

These external reviews are used by the Company’s board of directors

to review the Company’s internal valuation of each investment over the year.

Investment Transactions :

The Company records

investment transactions on a trade date basis.

These transactions may settle subsequent to the trade date depending on the transaction

Certain expenses related to legal and tax consultation, due diligence, rating fees, valuation expenses and independent collateral

appraisals may arise when the Company makes certain investments.

These expenses are recognized in the consolidated statements of operations

as they are incurred.

The Company records investment transactions on a trade date basis.

These transactions may settle subsequent to the trade date depending

on the transaction type.

Certain expenses related to legal and tax consultation, due diligence, rating fees, valuation expenses and independent

collateral appraisals may arise when the Company makes certain investments.

These expenses are recognized in the consolidated statements

of operations as they are incurred.

Foreign currency translation:

The Company’s books and

records are maintained in U.S.

The Company’s

books and records are maintained in U.S.

Any foreign currency amounts are translated into U.S.

dollars on the following basis:

(1) cash and cash equivalents, restricted cash and cash equivalents, fair value of investments, interest receivable,

and other assets and liabilities —

(1) cash and cash equivalents, restricted cash and cash equivalents, fair value of investments, interest receivable, and other assets

and liabilities —

at the spot exchange rate on the last business day of the period;

1 unchanged sentence

at the exchange rates prevailing on the respective dates of such transactions.

Although net assets and fair values are

presented based on the applicable foreign exchange rates described above, the Company does not isolate that portion of the results of

operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in fair values of

investments held.

Although net assets and fair values are presented

based on the applicable foreign exchange rates described above, the Company does not isolate that portion of the results of operations

resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in fair values of investments

Such fluctuations are included with the net realized and unrealized gain or loss from investments.

Fluctuations arising

from the translation of assets other than investments and liabilities are included with the net change in unrealized appreciation (depreciation)

Fluctuations arising from the

translation of assets other than investments and liabilities are included with the net change in unrealized appreciation (depreciation)

on translation of assets and liabilities in foreign currencies on the consolidated statements of operations.

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limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments

in foreign markets to be less liquid and prices more volatile than those of comparable U.S.

in foreign markets to be less liquid and prices to be more volatile than those of comparable U.S.

companies or U.S.

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Non-accrual loans :

Loans are placed

on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal

placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal

or interest will be collected.

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losses, if any, out of the assets legally available for distribution.

In addition, the Company will incur a nondeductible excise tax

equal to 4% of the amount by which (1) 98% of ordinary income for the calendar year (taking into account certain deferrals and elections),

In addition, the Company will incur a nondeductible excise tax equal

to 4% of the amount by which (1) 98% of ordinary income for the calendar year (taking into account certain deferrals and elections), (2)

98.2% of capital gains in excess of capital losses, adjusted for certain ordinary losses, for the one-year period ending on October 31

31 of the calendar year and (3) any ordinary income and capital gain income for preceding years that were not distributed during such

years and on which the Company incurred no U.S.

of the calendar year and (3) any ordinary income and capital gain income for preceding years that were not distributed during such years

and on which the Company incurred no U.S.

federal income tax exceed distributions for the year.

The Company accrues estimated excise

tax on the amount, if any, that estimated taxable income is expected to exceed the level of stockholder distributions described above.

The Company accrues estimated excise tax

on the amount, if any, that estimated taxable income is expected to exceed the level of stockholder distributions described above.

The Company recognizes the financial statement

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Management has analyzed the Company’s tax positions, and the Company has concluded that the Company

did not have any unrecognized tax benefits or unrecognized tax liabilities related to uncertain tax positions as of March 31, 2021 and

did not have any unrecognized tax benefits or unrecognized tax liabilities related to uncertain tax positions as of June 30, 2021 and

December 31, 2020.

1 unchanged sentence

related to any income taxes would be classified as general and administrative expenses on the consolidated statements of operations.

Company had no amounts accrued for interest or penalties as of March 31, 2021 or December 31, 2020.

Company had no amounts accrued for interest or penalties as of June 30, 2021 or December 31, 2020.

The Company does not expect the total

7 unchanged sentences

remain subject to examination by the Internal Revenue Service.

As of March 31, 2021 and December 31,

As of June 30, 2021 and December 31,

2020, the cost of investments for federal income tax purposes was $682,367 and $701,493 resulting in net unrealized depreciation of $11,893

1 unchanged sentence

This is comprised of gross unrealized appreciation of $10,193 and $16,954, and gross unrealized depreciation

of $24,332 and $27,712, on a tax basis, as of March 31, 2021 and December 31, 2020, respectively.

of $22,086 and $27,712, on a tax basis, as of June 30, 2021 and December 31, 2020, respectively.

Dividends and Distributions :

Dividends and distributions to common stockholders are recorded on the ex-dividend date.

Quarterly distribution payments are

determined by the Company’s board of directors and are paid from taxable earnings estimated by management and may include a

return of capital and/or capital gains.

Net realized capital gains, if any, are distributed at least annually, although the Company

may decide to retain such capital gains for investment.

The Company maintains an “opt out”

distribution reinvestment plan for common stockholders.

As a result, if the Company declares a distribution or other dividend, stockholders’

cash distributions will be automatically reinvested in additional shares of common stock, unless they specifically “opt out”

of the distribution reinvestment plan so as to receive cash distributions.

and distributions to common stockholders are recorded on the ex-dividend date.

Quarterly distribution payments are determined by the Company’s

board of directors and are paid from taxable earnings estimated by management and may include a return of capital and/or capital gains.

Net realized capital gains, if any, are distributed at least annually, although the Company may decide to retain such capital gains for

The Company maintains an “opt

dividend reinvestment plan (“DRIP”) for common stockholders.

As a result, if the Company declares a distribution

or other dividend, stockholders’

cash distributions will be automatically reinvested in additional shares of common stock, unless

they specifically “opt out”

of the DRIP so as to receive cash distributions.

Earnings per Share :

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Reclassifications :

Certain amounts in the consolidated financial statements for the three month period ended March 31, 2020 have been reclassified.

These reclassifications had no material impact on the Company’s consolidated financial position, results of operations or cash

flows as previously reported.

Recent Accounting Pronouncements :

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform

on Financial Reporting , which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and

other transactions to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting

if certain criteria are met.

The guidance is effective from March 12, 2020 through December 31, 2022.

As of March 31, 2021, the guidance

did not have a material impact on the consolidated financial statements.

Certain amounts

in the consolidated financial statements have been reclassified.

These reclassifications

had no material impact on the Company’s consolidated financial position, results of operations or cash flows as previously reported.

Accounting Pronouncements :

In March 2020, the Financial Accounting Standards Board issued ASU 2020-04, Reference Rate Reform

(Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides optional expedients and exceptions

for applying GAAP to contracts, hedging relationships, and other transactions to ease the potential burden in accounting for (or recognizing

the effects of) reference rate reform on financial reporting if certain criteria are met.

The guidance is effective from March 12, 2020

through December 31, 2022.

As of June 30, 2021, the guidance did not have a material impact on the consolidated financial statements.

NOTE 3 - FORWARD CURRENCY CONTRACTS

The Company may enter into foreign

currency forward contracts from time to time to facilitate settlement of purchases and sales of investments denominated in foreign

currencies and to hedge economically the impact that an adverse change in foreign exchange rates would have on the value of the

Company’s investments denominated in foreign currencies.

A foreign currency forward contract is a commitment to purchase or

sell a foreign currency at a future date at a negotiated forward rate.

These contracts are marked-to-market by recognizing the

difference between the contract forward exchange rate and the forward market exchange rate on the last day of the period presented

as unrealized appreciation or depreciation.

Realized gains or losses are recognized when forward contracts are settled.

as a result of the potential inability of the counterparties to meet the terms of their contracts.

The Company attempts to limit

counterparty risk by only dealing with well-known counterparties.

The Company utilizes forward foreign currency

exchange contracts to protect itself against fluctuations in exchange rates.

During the three months ended March 31, 2021 and 2020, the

Company recognized a realized gain of $0 and $6 and an unrealized loss of $1 and $1, respectively in the statement of operations relating

to forward currency exchange contracts held during the year.

The Company may choose to renew contracts quarterly unless otherwise settled

by the Company or the counterparty.

The Company may enter into foreign currency

forward contracts from time to time to facilitate settlement of purchases and sales of investments denominated in foreign currencies and

to hedge economically the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments

denominated in foreign currencies.

A foreign currency forward contract is a commitment to purchase or sell a foreign currency at a future

date at a negotiated forward rate.

These contracts are marked-to-market by recognizing the difference between the contract forward exchange

rate and the forward market exchange rate on the last day of the period presented as unrealized appreciation or depreciation.

gains or losses are recognized when forward contracts are settled.

Risks arise as a result of the potential inability of the counterparties

to meet the terms of their contracts.

The Company attempts to limit counterparty risk by only dealing with well-known counterparties.

The Company utilizes forward foreign

currency exchange contracts to protect itself against fluctuations in exchange rates.

The Company may choose to renew contracts quarterly

unless otherwise settled by the Company or the counterparty.

The following table provides a breakdown

of our forward currency contracts for the three and six months ended June 30, 2021 and 2020:

For the three

Risk exposure category

June 30, 2021

Realized (loss) on forward currency contracts

Unrealized appreciation on forward currency contracts

For the three

Risk exposure category

June 30, 2020

Realized (loss) on forward currency contracts

Unrealized (depreciation) on forward currency contracts

The value associated with unrealized

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and liabilities.

Open contracts at March 31, 2021 are as follows:

Open contracts as of June 30, 2021 were as follows:

Currency to be

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Morgan Stanley

The foreign currency forward contracts open at the end of

the period are generally indicative of the volume of activity during the period.

The foreign currency forward contracts open at the end

of the period are generally indicative of the volume of activity during the period.

Offsetting of Derivative Instruments

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the Company’s assets and liabilities related to derivatives by counterparty, net of amounts available for offset under a master

netting arrangement and net of any collateral received or pledged by the Company for such assets and liabilities as of March 31, 2021.

As of March 31, 2021

Assets Subject

Morgan Stanley

Liabilities Subject

Liabilities (3)

netting arrangement and net of any collateral received or pledged by the Company for such assets and liabilities as of June 30, 2021.

of June 30, 2021

($ in thousands)

Assets Subject to Master Netting Agreement

Liabilities Subject to Master Netting Agreement (1)

Available for Offset

Collateral Received (2 )

Collateral Pledged (2)

Collateral Received (2)

Collateral Pledged (2)

Amount of Derivative Assets (3)

Amount of Derivative Liabilities (4)

Morgan Stanley

some instances, the actual amount of the collateral received and/or pledged may be more than

the amount shown due to overcollateralization.

(1) Derivative liabilities subject to master netting agreement amounts

to less than one thousand.

(2) In some instances, the actual amount of the collateral received and/or pledged may be more than the amount shown due to overcollateralization.

(3) Net amount of derivative assets represents the net amount due from the counterparty to the Company in the event of default.

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NOTE 4 - INVESTMENTS

Investments consisted of the following:

March 31, 2021

consisted of the following:

June 30, 2021

December 31, 2020

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Equity in STRS JV

The following

table shows the portfolio composition by industry (1) grouping at fair value:

March 31, 2021

The following table shows the portfolio composition by industry

grouping at fair value:

Industry ($ in thousands)

June 30, 2021

December 31, 2020

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Cable & Satellite

Commodity Chemicals

Communications Equipment

Construction & Engineering

Construction Material

Construction Materials

Consumer Finance

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Education Services

Electronic Equipment & Instruments

Health Care Facilities

Health Care Services

Heavy Electrical Equipment

Home Furnishings

Household Products

Interactive Media & Services

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Leisure Facilities

Leisure Products

Office Services & Supplies

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Specialized Finance (1)

Specialty Chemicals

Systems Software

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(1) Excludes investments in STRS JV.

As of March 31, 2021, the portfolio companies

underlying the investments are all located in the United States and its territories, except for Arcole Acquisition Corp and Geo Logic

(which are located in Canada).

As of March 31, 2021 and December 31, 2020, the weighted average remaining term of the Company’s

debt investments were approximately 3.7 years and 3.6 years, respectively.

As of March 31, 2021 and December 31, 2020, the total fair

As of June 30,

2021, the portfolio companies underlying the investments are all located in the United States and its territories, except for Arcole Acquisition

Corp and Geo Logic Systems Ltd., which are domiciled in Canada, and Cennox Holdings Limited, which is domiciled in the United Kingdom.

As of June 30, 2021 and December 31, 2020, the weighted average remaining term of the Company’s debt investments, excluding non-accrual

investments, were approximately 3.7 years and 3.6 years, respectively.

As of June 30, 2021 and December 31, 2020, the total fair

value of non-accrual loans were $9,667 and $11,620, respectively.

An affiliated company is generally a portfolio

company in which the Company owns 5% or more of its voting securities.

A controlled affiliated company is generally a portfolio company

in which the Company owns more than 25% of its voting securities or has the power to exercise control over its management or policies

An affiliated company is generally a

portfolio company in which the Company owns 5% or more of its voting securities.

A controlled affiliated company is generally a portfolio

company in which the Company owns more than 25% of its voting securities or has the power to exercise control over its management or policies

(including through a management agreement).

The following table presents the schedule of investments in and advances to affiliated and

controlled persons (as defined by the 1940 Act) as of and for the three months ended March 31, 2021:

controlled persons (as defined by the 1940 Act) as of and for the six months ended June 30, 2021:

(Depreciation)

Non-controlled affiliates

Arcole Holdings Corp Shares

NMFC Senior Loan

Total Non-controlled

Holdings Corp Shares

Senior Loan Program I LLC Units

Non-controlled affiliates

(Depreciation)

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Controlled affiliates

The following table presents the schedule

of investments in and advances to affiliated and controlled affiliated persons (as defined by the 1940 Act) as of and for the year ended

December 31, 2020:

The following table presents the

schedule of investments in and advances to affiliated and controlled affiliated persons (as defined by the 1940 Act) as of and for the

year ended December 31, 2020:

dividends and

Fair Value at

(Depreciation)

Non-controlled affiliates

Arcole Holding Corp Shares

Arcole Holding Corp

NMFC Senior Loan

Total Non-controlled

Total Non-controlled affiliates

dividends and

Fair Value at

(Depreciation)

STRS Ohio Senior Loan Fund LLC *

Controlled affiliates

WHF STRS Ohio Senior Loan Fund LLC *

Total Controlled affiliates

Company and STRS Ohio are the members of STRS JV, a joint venture formed as a Delaware limited

19 unchanged sentences

that typically carry a floating interest rate based on a risk-free index rate such as LIBOR and have a term of three to six years.

In July 2019, STRS JV formally

launched operations.

As of March 31, 2021 and December 31, 2020, STRS JV had total assets of $193,686 and $181,382 respectively.

STRS JV’s portfolio consisted of debt investments in 22 and 20 portfolio companies as of March 31, 2021 and December 31, 2020,

respectively.

As of March 31, 2021 and December 31, 2020, the largest investment by aggregate principal amount (including any

unfunded commitments) in a single portfolio company in STRS JV’s portfolio was $15,972 and $14,593, respectively.

largest investments in portfolio companies by fair value in STRS JV totaled $60,953 and $60,252 as of March 31, 2021 and December

31, 2020, respectively.

STRS JV invests in portfolio companies in the same industries in which the Company may directly invest.

In July 2019, STRS JV formally launched operations.

As of June 30, 2021 and December 31, 2020, STRS JV had total assets of $219,200 and $181,382, respectively.

STRS JV’s portfolio

consisted of debt investments in 25 and 20 portfolio companies as of June 30, 2021 and December 31, 2020, respectively.

As of June 30,

2021 and December 31, 2020, the largest investment by aggregate principal amount (including any unfunded commitments) in a single portfolio

company in STRS JV’s portfolio was $16,931 and $14,593, respectively.

The five largest investments in portfolio companies by fair

value in STRS JV totaled $65,744 and $60,252 as of June 30, 2021 and December 31, 2020, respectively.

STRS JV invests in portfolio companies

in the same industries in which the Company may directly invest.

The Company provides capital to STRS JV in the

form of LLC equity interests and through interest-bearing subordinated notes.

As of March 31, 2021 and December 31, 2020, the Company

and STRS Ohio owned 60% and 40%, respectively, of the LLC equity interests of STRS JV.

As of June 30, 2021 and December 31, 2020, the Company and

STRS Ohio owned 60% and 40%, respectively, of the LLC equity interests of STRS JV.

The Company’s investment in STRS JV consisted

of equity contributions of $11,132 and $10,268 and advances of the subordinated notes of $44,529 and $41,073 as of March 31, 2021 and

December 31, 2020, respectively.

As of March 31, 2021, the Company had commitments to fund equity interests and subordinated notes in

STRS JV of $15,000 and $60,000, of which $3,868 and $15,471 were unfunded, respectively.

As of December 31, 2020, the Company had commitments

to fund equity interests and subordinated notes in STRS JV of $15,000 and $60,000, of which $4,732 and $18,927 were unfunded, respectively.

The Company and STRS Ohio each appoint two members

to STRS JV’s four-person board of managers.

All material decisions with respect to STRS JV, including those involving its investment

portfolio, require unanimous approval of a quorum of the board of managers.

Quorum is defined as (i) the presence of two members of the

board of managers;

of equity contributions of $12,452 and $10,268 and advances of the subordinated notes of $49,809 and $41,073 as of June 30, 2021 and December

31, 2020, respectively.

As of June 30, 2021, the Company had commitments to fund equity interests and subordinated notes in STRS JV of

$15,000 and $60,000, of which $2,548 and $10,191 were unfunded, respectively.

As of December 31, 2020, the Company had commitments to

fund equity interests and subordinated notes in STRS JV of $15,000 and $60,000, of which $4,732 and $18,927 were unfunded, respectively.

The Company and STRS Ohio each appoint

two members to STRS JV’s four-person board of managers.

All material decisions with respect to STRS JV, including those involving

its investment portfolio, require unanimous approval of a quorum of the board of managers.

Quorum is defined as (i) the presence of two

members of the board of managers;

provided that at least one individual is present that was elected, designated or appointed by each member;

presence of three members of the board of managers;

provided that the individual that was elected, designated or appointed by the member

with only one individual present shall be entitled to cast two votes on each matter;

or (iii) the presence of four members of the board

(ii) the presence of three members of the board of managers;

provided that the individual that was elected, designated or appointed by

the member with only one individual present shall be entitled to cast two votes on each matter;

or (iii) the presence of four members

of the board of managers;

provided that two individuals are present that were elected, designated or appointed by each member.

On July 19, 2019, STRS JV entered

into a $125,000 credit and security agreement (the “STRS JV Credit Facility”) with JPMorgan Chase Bank, National

Association (“JPMorgan”).

On January 27, 2021, the terms of the STRS JV Credit Facility were amended to, among other

things, increase the size of the STRS JV Credit Facility from $125,000 to $175,000.

As of March 31, 2021, the STRS JV Credit

Facility had $175,000 of commitments subject to leverage and borrowing base restrictions with an interest rate based on a risk-free

index rate such as LIBOR plus 2.55%.

On July 19, 2019, STRS JV entered into a

$125,000 credit and security agreement (the “STRS JV Credit Facility”) with JPMorgan Chase Bank, National Association

(“JPMorgan”).

On January 27, 2021, the terms of the STRS JV Credit Facility were amended to, among other things,

increase the size of the STRS JV Credit Facility from $125,000 to $175,000.

On April 28, 2021, the terms of the STRS JV Credit

Facility were amended and restated to, among other things, enable borrowings in British Pounds or Euros.

As of June 30, 2021, the

STRS JV Credit Facility had $175,000 of commitments subject to leverage and borrowing base restrictions with an interest rate based

on a risk-free index rate such as LIBOR or CDOR plus 2.55%.

The final maturity date of the STRS JV Credit Facility is July 19, 2024.

As of March 31, 2021,

STRS JV had $99,359 of outstanding borrowings under the STRS JV Credit Facility.

At March 31, 2021, the effective interest rate on

the STRS JV Credit Facility was 2.78% per annum.

Below is a listing of STRS JV’s individual investments

as of March 31, 2021:

As of June 30, 2021, STRS JV had $115,885 of outstanding borrowings under the STRS JV Credit Facility.

At June 30, 2021, the

effective interest rate on the STRS JV Credit Facility was 2.72% per annum.

is a listing of STRS JV’s individual investments as of June 30, 2021:

North America

Debt Investments

SmartSign Holdings

Secured Term Loan

SmartSign Holdings LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan

(1.00% Floor)

First Lien Secured Revolving

Application Software

TaxSlayer, LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan

(1.00% Floor)

Automotive Retail

BW Gas & Convenience Holdings, LLC

First Lien Secured Term Loan

(0.00% Floor)

First Lien Secured Term

TaxSlayer, LLC

First Lien Secured Revolving

Building Products

Drew Foam Companies Inc

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Term

LHS Borrower, LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan

(1.00% Floor)

First Lien Secured Term

LHS Borrower, LLC

First Lien Secured Revolving

Construction & Engineering

Road Safety Services, Inc.

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan

(1.00% Floor)

First Lien Secured Term

Road Safety Services, Inc.

First Lien Secured Revolving

SFP Holding, Inc.

First Lien Secured Term Loan

(1.00% Floor)

Lien Secured Delayed Draw Loan

(1.00% Floor)

First Lien Secured Revolving Loan

(1.00% Floor)

First Lien Secured Term Loan

(1.00% Floor)

Data Processing & Outsourced Services

First Lien Secured Term

SFP Holding, Inc.

First Lien Secured Delayed

SFP Holding, Inc.

First Lien Secured Revolving

First Lien Secured Term

Data Processing &

Outsourced Services

Geo Logic Systems Ltd.

First Lien Secured Term Loan (7)

(1.00% Floor)

First Lien Secured Revolving Loan (7)

(1.00% Floor)

First Lien Secured Term

Geo Logic Systems Ltd.

First Lien Secured Revolving

Diversified Support Services

Quest Events, LLC (9)

First Lien Secured Term Loan (9)

(1.00% Floor)

First Lien Secured

Revolving Loan (9)

(1.00% Floor)

Environmental & Facilities Services

First Lien Secured Term

7.00% (3.87% Cash + 3.13% PIK)

Quest Events, LLC (9)

First Lien Secured Revolving

Electronic Equipment

& Instruments

LMG Holdings, Inc.

First Lien Secured Term

LMG Holdings, Inc.

First Lien Secured Revolving

Environmental & Facilities

WH Lessor Corp.

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan

(1.00% Floor)

Human Resource & Employment Services

Pluto Acquisition Topco, LLC

First Lien Secured Term Loan (8)

(1.50% Floor)

First Lien Secured Term

WH Lessor Corp.

First Lien Secured Revolving

Human Resource &

Employment Services

Pluto Acquisition Topco,

First Lien Secured Term

Industrial Machinery

FR Flow Control CB LLC

First Lien Secured Term Loan B

(1.00% Floor)

First Lien Secured Term Loan C

(1.00% Floor)

Internet & Direct Marketing Retail

First Lien Secured Term

Internet & Direct

Marketing Retail

Marlin DTC-LS Midco 2, LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan

(1.00% Floor)

Investment Banking & Brokerage

TOUR Intermediate Holdings, LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Delayed Draw Loan

(1.00% Floor)

IT Consulting & Other Services

First Lien Secured Term

Marlin DTC-LS Midco 2, LLC

First Lien Secured Revolving

Investment Banking &

TOUR Intermediate Holdings,

First Lien Secured Term

TOUR Intermediate Holdings,

First Lien Secured Delayed

IT Consulting & Other

First Lien Secured Term

First Lien Secured Delayed

First Lien Secured Revolving

KSM Consulting LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Delayed Draw Loan (6)

(1.00% Floor)

First Lien Secured

Revolving Loan (6)

(1.00% Floor)

Packaged Foods & Meats

First Lien Secured Term

KSM Consulting LLC (6)

First Lien Secured Delayed

KSM Consulting LLC (6)

First Lien Secured Revolving

Packaged Foods &

Mikawaya Holdings, LLC

First Lien Secured Term Loan

(1.25% Floor)

First Lien Secured Term

Poultry Holdings, LLC

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Term

8.25% (6.75% Cash + 1.50% PIK)

Stella & Chewy's

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Delayed Draw Loan (6)

(1.00% Floor)

Westrock Coffee Company, LLC

First Lien Secured Term Loan

(1.50% Floor)

First Lien Secured Term

Stella & Chewy's (6)

First Lien Secured Delayed

Westrock Coffee Company,

First Lien Secured Term

10.50% (9.75% Cash + 0.75% PIK)

Personal Products

Sunless, Inc.

First Lien Secured Term Loan

(1.00% Floor)

First Lien Secured Revolving Loan

(1.00% Floor)

Technology Hardware, Storage & Peripherals

First Lien Secured Term

7.50% (7.00% Cash + 0.50% PIK)

Sunless, Inc.

First Lien Secured Revolving

Systems Software

IDIG Parent LLC

First Lien Secured Term

IDIG Parent LLC

First Lien Secured Revolving

Technology Hardware,

Storage & Peripherals

PS Lightwave, Inc.

First Lien Secured Term Loan

(1.50% Floor)

First Lien Secured Delayed Draw Loan

(1.50% Floor)

First Lien Secured Term

PS Lightwave, Inc.

First Lien Secured Delayed

Trading Companies &

LINC Systems, LLC

First Lien Secured Term

LINC Systems, LLC

First Lien Secured Revolving

Total Investments

(1) Except as noted, all investments provide collateral for the STRS JV Credit Facility.

The investments bear interest at a rate that may be determined by reference to LIBOR, which resets monthly, quarterly or semiannually, or CDOR.

The one, three and six-month LIBOR were 0.1%, 0.2% and 0.2%, respectively, as of March 31,2021.

The CDOR was 0.4% as of March 31, 2021.

(2) The investments bear interest at a rate that may be determined by reference to LIBOR, which resets monthly,

quarterly or semiannually, or CDOR.

The one, three and six-month LIBOR were 0.1%, 0.1% and 0.2%, respectively, as of June 30, 2021.

CDOR was 0.4% as of June 30, 2021.

(3) The interest rate is the “all-in-rate”

including the current index and spread, the fixed rate, and the PIK interest rate, as the case may be.

Except as otherwise noted, all of the STRS JV’s portfolio company investments, which as of the date of the portfolio represented 1,021% of STRS JV’s net assets or 96% of STRS JV’s total assets, are subject to legal restrictions on sales.

including the current index and spread, the fixed rate, and the PIK interest rate,

as the case may be.

(4) Except as otherwise noted, all of the STRS JV’s portfolio company investments, which as of the date

of the portfolio represented 1,040% of STRS JV’s net assets or 96% of STRS JV’s total assets, are subject to legal restrictions

(5) The fair value of each investment was determined using significant unobservable inputs.

1 unchanged sentence

(7) Principal is denominated in Canadian dollars.

In addition to the interest earned based on the stated interest rate of this security, STRS JV is entitled to receive an additional interest amount of 3.00% on its “last out”

tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out”

(8) In addition to the interest earned based on the stated interest rate

of this security, STRS JV is entitled to receive an additional interest in the amount of 3.00% on its “last out”

the portfolio company’s senior term debt, which was previously syndicated into “first out”

and “last out”

1 unchanged sentence

tranche will have priority as to the “last out”

tranche with respect to payments of principal, interest and any other amounts due thereunder.

tranche with respect to payments

of principal, interest and any other amounts due thereunder.

(9) At the option of the issuer, interest can be paid in cash or cash and PIK.

may elect to pay up to 7.00% PIK.

The issuer may elect to pay up to 7.00% PIK.

Below is a listing of STRS JV’s individual investments

as of December 31, 2020:

Lien Secured Term Loan

Lien Secured Revolving Loan

Foam Companies Inc

Lien Secured Term Loan

Lien Secured Revolving Loan

Borrower, LLC

Lien Secured Term Loan

Lien Secured Revolving Loan

& Engineering

Holding, Inc.

Lien Secured Term Loan

Lien Secured Delayed Draw Loan

Lien Secured Revolving Loan

Lien Secured Term Loan

Processing & Outsourced Services

Logic Systems Ltd.

North America

Debt Investments

SmartSign Holdings LLC

Lien Secured Term Loan

Lien Secured Revolving Loan (7)

Support Services

(1.00% Floor)

Secured Revolving Loan

Building Products

Drew Foam Companies Inc

Secured Term Loan

(1.00% Floor)

Secured Revolving Loan

(1.00% Floor)

LHS Borrower, LLC

Secured Term Loan

(1.00% Floor)

Secured Revolving Loan

Construction & Engineering

SFP Holding, Inc.

Secured Term Loan

(1.00% Floor)

Secured Delayed Draw Loan

(1.00% Floor)

Secured Revolving Loan

(1.00% Floor)

Secured Term Loan

Data Processing & Outsourced

Geo Logic Systems Ltd.

Lien Secured Term Loan (7)

(1.00% Floor)

Lien Secured Revolving Loan (7)

Investment Type (1)

Diversified Support Services

Quest Events, LLC

Secured Term Loan

(1.00% Floor)

Secured Revolving Loan

Environmental & Facilities

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Lien Secured Term Loan

(1.00% Floor)

Lien Secured Revolving Loan

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Lien Secured Term Loan (8)

FR Flow Control CB LLC

(1.50% Floor)

Control CB LLC

Secured Term Loan B

Lien Secured Term Loan C

SelectQuote, Inc.

Lien Secured Term Loan

(1.00% Floor)

Secured Term Loan C

(1.00% Floor)

Secured Term Loan

(1.00% Floor)

& Direct Marketing Retail

Marlin DTC-LS Midco 2, LLC

Marlin DTC-LS

Secured Term Loan

Lien Secured Revolving Loan

(1.00% Floor)

Secured Revolving Loan

(1.00% Floor)

Banking & Brokerage

TOUR Intermediate Holdings, LLC

TOUR Intermediate

Holdings, LLC

Secured Term Loan

Lien Secured Delayed Draw Loan

(1.00% Floor)

Secured Delayed Draw Loan

(1.00% Floor)

Foods & Meats

Mikawaya Holdings, LLC

Holdings, LLC

Secured Term Loan

Poultry Holdings, LLC

(1.25% Floor)

Holdings, LLC

Secured Term Loan

(1.00% Floor)

Stella & Chewy's

Lien Secured Term Loan

(1.00% Floor)

Lien Secured Delayed Draw Loan (6)

Coffee Company, LLC

(1.00% Floor)

Westrock Coffee Company, LLC

Lien Secured Term Loan

Sunless, Inc.

Lien Secured Term Loan

(1.00% Floor)

Lien Secured Revolving Loan

arcserve (USA) LLC

Lien Secured Term Loan

Hardware, Storage & Peripherals

Lightwave, Inc.

PS Lightwave, Inc.

Lien Secured Term Loan

(1.50% Floor)

Lien Secured Delayed Draw Loan

(1) Except as noted, all investments provide collateral for the STRS JV Credit Facility.

(2) The investments bear interest at a rate that may be determined by reference to LIBOR,

which resets monthly, quarterly or semiannually, or CDOR.

The one, three and six-month LIBOR were 0.1%, 0.2% and 0.3%, respectively,

as of December 31, 2020.

(2) The investments bear interest at a rate that may be determined by reference to LIBOR, which resets monthly,

quarterly or semiannually, or CDOR.

The one, three and six-month LIBOR were 0.1%, 0.2% and 0.3%, respectively, as of December 31, 2020.

The CDOR was 0.5% as of December 31, 2020.

(3) The interest rate is the “all-in-rate”

including the current index and spread, the fixed

rate, and the PIK interest rate, as the case may be.

(4) Except as otherwise noted, all of the STRS JV’s portfolio company investments,

which as of the date of the portfolio represented 1,030% of STRS JV’s net assets or 96% of STRS JV’s total assets, are subject

to legal restrictions on sales.

including the current index and spread, the fixed rate, and the PIK interest rate,

as the case may be.

(4) Except as otherwise noted, all of the STRS JV’s portfolio company investments, which as of the date

of the portfolio represented 1,030% of STRS JV’s net assets or 96% of STRS JV’s total assets, are subject to legal restrictions

(5) The fair value of each investment was determined using significant unobservable inputs.

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(7) Principal is denominated in Canadian dollars.

(8) In addition to the interest earned based on the stated interest rate of this security, STRS JV is entitled

to receive an additional interest amount of 3.00% on its “last out”

tranche of the portfolio company’s senior term debt,

which was previously syndicated into “first out”

(8) In addition to the interest earned based on the stated interest rate

of this security, STRS JV is entitled to receive an additional interest in the amount of 3.00% on its “last out”

the portfolio company’s senior term debt, which was previously syndicated into “first out”

and “last out”

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tranche will have priority as to the “last out”

tranche with respect to payments of principal, interest and any other amounts

due thereunder.

As of March 31, 2021 and 2020, STRS JV

tranche with respect to payments

of principal, interest and any other amounts due thereunder.

As of June 30, 2021 and 2020, STRS JV

had no investments on non-accrual status.

STRS JV had outstanding commitments to fund investments totaling $14,940, and $4,645 under undrawn

revolver as of March 31, 2021 and March 31, 2020, respectively.

Below is certain summarized

financial information for STRS JV as of March 31, 2021 and December 31, 2020 and for the three month periods ended March 31, 2021

and March 31, 2020 (dollars in thousands):

STRS JV had outstanding commitments to fund investments totaling $17,545, and $10,862 under

delayed draw term loan commitments and undrawn revolvers as of June 30, 2021 and December 31, 2020, respectively.

Below is certain summarized financial information

for STRS JV as of June 30, 2021 and December 31, 2020 and for the three and six month periods ended June 30, 2021 and June 30, 2020 (dollars

in thousands):

Selected Balance Sheet Information

March 31, 2021

June 30, 2021

December 31, 2020

Investments, at fair value (amortized cost of $211,012 and $176,716, respectively)

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Total liabilities and members’

Three Months Ended

Six Months Ended

Selected Statement of Operations Information

Three months ended March

Interest income

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Interest and fee income

Total investment income

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Net investment income

Net realized losses on investments and foreign currency transactions

Net change in unrealized depreciation on investments and foreign currency translation

Net increase (decrease) in net assets

resulting from operations

Net realized gains/(losses) on investments and foreign currency transactions

Net change in unrealized appreciation/(depreciation) on investments and foreign currency translation

Net increase/(decrease) in net assets resulting from operations

NOTE 5 - FAIR VALUE MEASUREMENTS

Accounting standards establish a fair

value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring

Accounting standards establish

a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when

measuring fair value.

The standard describes three levels of inputs that may be used to measure fair value:

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assets or liabilities in active public markets that the entity has the ability to access as of the measurement date.

Significant other observable inputs other

than Level 1 prices such as quoted prices for similar assets or liabilities;

Significant other observable inputs

other than Level 1 prices such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs

that are observable or can be corroborated by observable market data.

inputs that are observable or can be corroborated by observable market data.

Significant unobservable inputs that reflect

a reporting entity’s own assumptions about what market participants would use in pricing an asset or liability.

In certain cases, the inputs used to

measure fair value may fall into different levels of the fair value hierarchy.

In certain cases, the inputs used

to measure fair value may fall into different levels of the fair value hierarchy.

In such cases, a financial instrument’s categorization

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specific to the financial instrument.

A review of the fair value hierarchy classifications

is conducted on a quarterly basis.

Changes in the observability of valuation inputs may result in a reclassification for certain financial

assets or liabilities.

Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in or out of the Level

3 category as of the beginning of the quarter in which the reclassifications occur.

During the three months ended March 31, 2021 and year

ended December 31, 2020, there were no changes in the observability of valuation inputs that would have resulted in a reclassification

of assets between any levels.

Fair value for each investment is derived

using a combination of valuation methodologies that, in the judgment of the Investment Committee are most relevant

to such investment, including, without limitation, being based on one or more of the following:

(i) market prices obtained from market

makers for which the Investment Committee has deemed there to be enough breadth (number of quotes) and depth (firm bids) to be indicative

of fair value, (ii) the price paid or realized in a completed transaction or binding offer received in an arm’s-length transaction,

A review of the fair value hierarchy

classifications is conducted on a quarterly basis.

Changes in the observability of valuation inputs may result in a reclassification for

certain financial assets or liabilities.

Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in

or out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur.

During the six months ended

June 30, 2021 and year ended December 31, 2020, there were no changes in the observability of valuation inputs that would have resulted

in a reclassification of assets between any levels.

Fair value for each investment

is derived using a combination of valuation methodologies that, in the judgment of the Investment Committee are most relevant to such

investment, including, without limitation, being based on one or more of the following:

(i) market prices obtained from market makers

for which the Investment Committee has deemed there to be enough breadth (number of quotes) and depth (firm bids) to be indicative of

fair value, (ii) the price paid or realized in a completed transaction or binding offer received in an arm’s-length transaction,

(iii) a discounted cash flow analysis, (iv) the guideline public company method, (v) the similar transaction method or (vi) the option

pricing method.

The following table presents investments

(as shown on the consolidated schedule of investments) that were measured at fair value as of March 31, 2021:

lien secured loans

Note to STRS JV

(excluding STRS JV)

in STRS JV (1)

The Company’s investments in forward

currency contracts, which were valued at $(1) as of March 31, 2021, are characterized in Level 2 of the hierarchy.

The following table presents investments

(as shown on the consolidated schedule of investments) that were measured at fair value as of December 31, 2020:

lien secured loans

Note to STRS JV

(excluding STRS JV)

in STRS JV (1)

(1) The Company’s equity investment in STRS JV is measured using the net asset value per share as a practical expedient for fair

value, and thus has not been classified in the fair value hierarchy.

The fair value amounts presented in this table are intended to permit

reconciliation of the fair value hierarchy to the amounts presented in the consolidated statements of assets and liabilities.

The following table presents investments (as shown on the

consolidated schedule of investments) that were measured at fair value as of June 30, 2021:

First lien secured loans

Second lien secured loans

Subordinated Note to STRS JV

Equity (excluding STRS JV)

Equity in STRS JV (1)

Total investments

The Company’s investments in forward currency contracts,

which were valued at $0 as of June 30, 2021, are characterized in Level 2 of the hierarchy.

The following table presents investments (as shown on the

consolidated schedule of investments) that were measured at fair value as of December 31, 2020:

First lien secured loans

Second lien secured loans

Subordinated Note to STRS JV

Equity (excluding STRS JV)

Equity in STRS JV (1)

Total investments

(1) The Company’s equity investment in STRS JV is measured using the net asset value per share as a practical

expedient for fair value, and thus has not been classified in the fair value hierarchy.

The fair value amounts presented in this table

are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated statements of assets and

The following table presents the changes in investments measured

at fair value using Level 3 inputs for the three months ended March 31, 2021:

at fair value using Level 3 inputs for the three months ended June 30, 2021:

Notes to STRS

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Proceeds from paydowns and sales

Realized gains

Realized gains (losses)

Net unrealized appreciation (depreciation)

Fair value, end of period

Change in unrealized appreciation (depreciation) on investments still held as of June 30, 2021

following table presents the changes in investments measured at fair value using Level 3 inputs for the six months ended June 30, 2021:

Notes to STRS

Fair value, beginning of period

Funding of investments

Non-cash interest income

Accretion of discount

Proceeds from paydowns and sales

Realized gains (losses)

Net unrealized (depreciation) appreciation

Fair value, end of period

Change in unrealized appreciation (depreciation) on investments still held as of March 31, 2021

Change in unrealized appreciation (depreciation)on investments still held as of June 30, 2021

The following table presents the changes in investments measured

at fair value using Level 3 inputs for the three months ended March 31, 2020:

at fair value using Level 3 inputs for the three months ended June 30, 2020:

Notes to STRS

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Proceeds from paydowns and sales

Realized losses

Net unrealized appreciation (depreciation)

Fair value, end of period

Change in unrealized appreciation (depreciation) on investments still held as of June 30, 2020

The following table presents the changes in investments measured

at fair value using Level 3 inputs for the six months ended June 30, 2020:

Notes to STRS

Fair value, beginning of period

Funding of investments

Non-cash interest income

Accretion of discount

Proceeds from paydowns and sales

Realized gains

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Fair value, end of period

Change in unrealized appreciation (depreciation) on investments still held as of March 31, 2020

significant unobservable inputs used in the fair value measurement of the Company’s investments are the discount rate, market

quotes and exit multiples.

An increase or decrease in the discount rate in isolation would result in significantly lower or higher

fair value measurement, respectively.

An increase or decrease in the market quote for an investment would in isolation result in

significantly higher or lower fair value measurement, respectively.

An increase or decrease in the exit multiple would in isolation

result in significantly higher or lower fair value measurement, respectively.

As the fair value of a debt investment diverges from

par, which would generally be the case for non-accrual loans, the fair value measurement of that investment is more susceptible to

volatility from changes in exit multiples as a significant unobservable input.

Change in unrealized appreciation (depreciation) on investments still held as of June 30, 2020

The significant unobservable inputs

used in the fair value measurement of the Company’s investments are the discount rate, market quotes and exit multiples.

or decrease in the discount rate in isolation would result in significantly lower or higher fair value measurement, respectively.

or decrease in the market quote for an investment would in isolation result in significantly higher or lower fair value measurement, respectively.

An increase or decrease in the exit multiple would in isolation result in significantly higher or lower fair value measurement, respectively.

As the fair value of a debt investment diverges from par, which would generally be the case for non-accrual loans, the fair value measurement

of that investment is more susceptible to volatility from changes in exit multiples as a significant unobservable input.

Quantitative information about Level 3 fair value measurements

is as follows:

Fair Value at

Range (Weighted

Investment Type

Fair Value as of

June 30, 2021

(Weighted Average)

First lien secured loans

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Discount rate

Exit EBITDA multiple

Guideline public companies

LTM EBITDA multiple

Recent transaction

Transaction price

Discounted cash flows,

Discounted cash flows, recent transaction, guideline public companies and consensus market pricing

Discount rate

recent transaction, guideline

public companies and

consensus market pricing

Market pricing

Transaction price

Exit EBITDA multiple

Expected repayment

Second lien secured loans

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19.7% (13.3%)

Exit EBITDA multiple

Recent transaction

Transaction price

Subordinated Note to STRS JV

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Similar transactions

Recent transaction

Transaction price

LTM EBITDA multiple

Discounted cash flows and Guideline public companies

Discount rate

Exit EBITDA Multiple

LTM EBITDA Multiple

NFY EBITDA Multiple

Discount for lack of marketability

Common Equity

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20.4% (16.1%)

Discount for lack

of marketability

Discounted cash flows and

Exit EBITDA Multiple

Discount for lack of marketability

10.0% –

15.0% (10.3%)

Discounted cash flows and Guideline public companies

Discount rate

Guideline public companies

Discount for lack

of marketability

Exit EBITDA Multiple

NFY EBITDA Multiple

Similar transactions

Discount for lack

of marketability

LTM EBITDA Multiple

Recent transaction

Transaction price

Discounted cash flows and

$1.00 per share

Discounted cash flows, Recent transaction and Option-pricing method

Discount rate

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41.9% (28.8%)

Option-pricing method

Discount for lack

Exit EBITDA multiple

Discount for lack of marketability

10.0% –

15.0% (10.7%)

of marketability

Discounted cash flows

Discount rate

Discount for lack

of marketability

Transaction price

$0.67 per share

Total Level 3 Investments

Investment Type

Fair Value at

Investment Type

Range (Weighted Average)

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Discount rate

7.2% – 16.6% (9.7)%

3.0x – 15.0x (7.5x)

Guideline public companies

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Transaction price

97.0 – 99.0 (97.9)

Discounted cash flows,

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Discount rate

7.1% – 16.5% (9.6)%

Market pricing

100.2 – 100.6 (100.4)

100.2 –

100.6 (100.4)

Transaction price

7.0x – 12.0x (9.3x)

Other (asset coverage and

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Discount rate

12.1% – 20.9% (14.9)%

12.1% –

20.9% (14.9)%

Other (expected repayment)

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Discount rate

12.5% – 19.8% (13.5)%

6.7x – 8.6x (7.1x)

12.5% –

19.8% (13.5)%

Discount for lack of marketability

2.0% – 15.0% (3.8)%

Discounted cash flows

Discounted cash flows and

Guideline public companies

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Discount rate

19.1% – 24.7% (24.5)%

19.1% –

24.7% (24.5)%

Option-pricing method

5.5x – 8.6x (5.6x)

3.0% – 7.8% (3.2)%

Discount for lack

of marketability

10.0% – 15.0% (10.2)%

10.0% –

15.0% (10.2)%

Recent transaction

1 unchanged sentence

Total Level 3 Investments

Valuation of investments may be determined by

weighting various valuation techniques.

Valuation of investments may be determined

by weighting various valuation techniques.

Significant judgment is required in selecting the assumptions used to determine the fair values

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to be exercised.

As it relates to

investments which do not have an active public market, there is no single standard for determining the estimated fair value.

of privately held investments are inherently uncertain, and they may fluctuate over short periods of time and may be based on estimates.

The determination of fair value may differ materially from the values that would have been used if a ready market for these investments

As it relates to investments which do

not have an active public market, there is no single standard for determining the estimated fair value.

Valuations of privately held investments

are inherently uncertain, and they may fluctuate over short periods of time and may be based on estimates.

The determination of fair value

may differ materially from the values that would have been used if a ready market for these investments existed.

In some cases, fair value for such investments

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is possible if the change results in a measurement that is equally or more representative of fair value in the circumstances.

following table presents the amortized cost and fair value of the Company’s borrowings as of March 31, 2021 and December 31,

The amortized cost disclosed below excludes debt issuance costs.

The fair value of the Credit Facility (as defined in Note 6)

was estimated by discounting remaining payments using applicable market rates or market quotes for similar instruments at the

measurement date, if available.

The fair value of the Company’s 6.0% private notes due 2023 (the “2023 Private

Notes”), the 5.375% private notes due 2025 (the “2025 Private Notes”) the 5.375% private notes due 2026 (the

“2026 Private Notes”) and the 5.625% private notes due 2027 (the “2027 Private Notes”) were estimated using

discounted future cash flows to the valuation date .

The fair value

of the 6.5% notes due 2025, (the “2025 Public Notes”) was estimated using the trailing 10-day volume weighted average

quoted price as of the valuation date.

March 31, 2021

The following table presents the par

and fair value of the Company’s borrowings as of June 30, 2021 and December 31, 2020.

The fair value of the Credit Facility (as

defined in Note 6) was estimated by discounting remaining payments using applicable market rates or market quotes for similar instruments

at the measurement date, if available.

The fair value of the Company’s 6.0% private notes due 2023 (the “2023 Private Notes”),

the 5.375% private notes due 2025 (the “2025 Private Notes”), the 5.375% private notes due 2026 (the “2026 Private Notes”)

and the 5.625% private notes due 2027 (the “2027 Private Notes”) were estimated using discounted future cash flows to the

valuation date.

The fair value of the 6.5% notes due 2025, (the “2025 Public Notes”) was estimated using the trailing 10-day

volume weighted average quoted price as of the valuation date.

June 30, 2021

December 31, 2020

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2025 Public Notes

&NegativeThickSpace;

NOTE 6 - BORROWINGS

Historically, the 1940 Act has

permitted the Company to issue “senior securities,”

including borrowing money from banks or other financial

institutions, only in amounts such that its asset coverage, as defined in the 1940 Act, equals at least 200% after such incurrence

In March 2018, the Small Business Credit Availability Act (the “SBCAA”) was enacted into law.

among other things, amended the 1940 Act to reduce the asset coverage requirements applicable to business development companies from

200% to 150% so long as the business development company meets certain disclosure requirements and obtains certain approvals.

Company’s annual meeting of stockholders held on August 1, 2018, the Company’s stockholders approved the reduced asset

coverage ratio from 200% to 150%, such that the Company’s maximum debt-to-equity ratio increased from a prior maximum of 1.0x

(equivalent of $1 of debt outstanding for each $1 of equity) to a maximum of 2.0x (equivalent to $2 of debt outstanding for each $1

As a result, the Company’s asset coverage requirements applicable to senior securities decreased from 200% to

150%, effective August 2, 2018.

As of March 31, 2021, and December 31, 2020, the Company’s asset coverage for borrowed amounts

was 192.6% and 180.2%, respectively.

Total borrowings outstanding and available as of March 31,

Historically, the 1940 Act has permitted

the Company to issue “senior securities,”

including borrowing money from banks or other financial institutions, only in amounts

such that its asset coverage, as defined in the 1940 Act, equals at least 200% after such incurrence or issuance.

In March 2018, the Small

Business Credit Availability Act (the “SBCAA”) was enacted into law.

The SBCAA, among other things, amended the 1940 Act to

reduce the asset coverage requirements applicable to business development companies from 200% to 150% so long as the business development

company meets certain disclosure requirements and obtains certain approvals.

At the Company’s annual meeting of stockholders held

on August 1, 2018, the Company’s stockholders approved the reduced asset coverage ratio from 200% to 150%, such that the Company’s

maximum debt-to-equity ratio increased from a prior maximum of 1.0x (equivalent of $1 of debt outstanding for each $1 of equity) to a

maximum of 2.0x (equivalent to $2 of debt outstanding for each $1 of equity).

As a result, the Company’s asset coverage requirements

applicable to senior securities decreased from 200% to 150%, effective August 2, 2018.

As of June 30, 2021, and December 31, 2020, the

Company’s asset coverage for borrowed amounts was 187.9% and 180.2%, respectively.

Total borrowings outstanding and available as of June 30,

2021, were as follows:

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31, 2020, were as follows:

Credit Facility

JPM Credit Facility

2023 Private Notes

2 unchanged sentences

2027 Private Notes

issuance cost

debt net issuance cost

2025 Public Notes

Debt issuance cost

Total debt net issuance cost

Credit Facility :

On December 23,

2015, WhiteHorse Credit entered into a $200,000 revolving credit and security agreement with JPMorgan Chase Bank, National Association

(“JPMorgan”), as administrative agent and lender (the “Credit Facility”).

On June 27, 2016, the Credit Facility

was amended and restated to clarify certain terms.

On June 29, 2017, WhiteHorse Credit and JPMorgan again amended and restated the terms

of the Credit Facility to, among other things, (i) extend the maturity date to December 29, 2021, (ii) increase the amount contained

within the accordion feature which allows for the expansion of the borrowing limit from $220,000 to $235,000 and (iii) reduce the interest

rate spread applicable on outstanding borrowings to 2.75%.

On May 15, 2018, the terms of the Credit Facility were again amended and restated

to, among other things, permit the financing of certain assets to be held by WhiteHorse California, a wholly owned subsidiary of WhiteHorse

In November 2018, the Company entered into an amendment to the Credit Facility, which, among other things, allows for a temporary

reduction in the required minimum outstanding borrowings.

On November 22, 2019, the terms of the Credit Facility were again amended and

restated to, among other things, (i) extend the maturity date from December 29, 2021 to November 22, 2024;

(ii) increase the size

of the facility from $200,000 to $250,000 with an additional $100,000 accordion feature, which allows for the expansion of the borrowing

limit, exercisable in increments of at least $35,000 (the “Commitment”);

(iii) reduce the interest rate spread applicable

on outstanding borrowings from 2.75% to 2.50%;

(iv) change the minimum borrowing amount from 77.5% to 70.0% of the Commitment;

the advance rate from 57% to 60%;

On December 23, 2015, WhiteHorse Credit entered into a $200,000 revolving credit and security agreement with JPMorgan Chase Bank, National Association (“JPMorgan”), as administrative agent and lender (the “Credit Facility”).

On June 27, 2016, the Credit Facility was amended and restated to clarify certain terms.

On June 29, 2017, WhiteHorse Credit and JPMorgan again amended and restated the terms of the Credit Facility to, among other things, (i) extend the maturity date to December 29, 2021, (ii) increase the amount contained within the accordion feature which allows for the expansion of the borrowing limit from $220,000 to $235,000 and (iii) reduce the interest rate spread applicable on outstanding borrowings to 2.75%.

On May 15, 2018, the terms of the Credit Facility were again amended and restated to, among other things, permit the financing of certain assets to be held by WhiteHorse California, a wholly owned subsidiary of WhiteHorse Credit.

In November 2018, the Company entered into an amendment to the Credit Facility, which, among other things, allows for a temporary reduction in the required minimum outstanding borrowings.

On November 22, 2019, the terms of the Credit Facility were again amended and restated to, among other things, (i) extend the maturity date from December 29, 2021 to November 22, 2024;

(iii) increase the size of the facility from $200,000 to $250,000 with an additional $100,000 accordion feature, which allows for the

expansion of the borrowing limit, exercisable in increments of at least $35,000 (the “Commitment”);

(iii) reduce the interest

rate spread applicable on outstanding borrowings from 2.75% to 2.50%;

(iv) change the minimum borrowing amount from 77.5% to 70.0% of

the Commitment;

(v) increase the advance rate from 57% to 60%;

and (vi) extend the non-call period from October 29, 2019 to November

On December 21, 2020, the terms of the Credit Facility were amended

to, among other things, (i) increase the minimum funding amount from $175,000 to $200,000, (ii) increase the size of the facility

from $250,000 to $285,000 and retain an accordion feature which allows for the expansion of the borrowing limit up to $350,000

and (iii) provide for the implementation of certain changes relating to the transition away from LIBOR in the market.

On April 28, 2021, the terms of the Credit Facility were amended

to, among other things, enable WhiteHorse Credit to borrow in British Pounds or Euros.

On December 21, 2020, the terms of

the Credit Facility were amended to, among other things, (i) increase the minimum funding amount from $175,000 to $200,000, (ii) increase

the size of the facility from $250,000 to $285,000 and retain an accordion feature which allows for the expansion of the borrowing limit

up to $350,000 and (iii) provide for the implementation of certain changes relating to the transition away from LIBOR in the market.

On April 28, 2021, the terms of the Credit Facility were

amended and restated to, among other things, enable WhiteHorse Credit to borrow in British Pounds or Euros.

The Credit Facility bears interest

at LIBOR (or another applicable interest rate benchmark for loans denominated in foreign currencies) plus 2.50% on outstanding

The Company is required to pay a non-usage fee which accrues at 0.75% per annum on the average daily unused amount of

the financing commitments to the extent the aggregate principal amount available under the Credit Facility has not been borrowed.

The minimum borrowing requirement is $200,000.

In connection with the Credit Facility, WhiteHorse Credit pledged securities with a

fair value of approximately $537,634 as of March 31, 2021 as collateral.

The Credit Facility has a final maturity date of November

Under the Credit Facility, the Company

has made certain customary representations and warranties and is required to comply with various covenants, including leverage restrictions,

reporting requirements and other customary requirements for similar credit facilities.

As of March 31, 2021, the Company had $214,563

in outstanding borrowings and $70,437 undrawn under the Credit Facility.

Weighted average outstanding borrowings were $224,326 at a weighted

average interest rate of 2.72%, respectively, for the three months ended March 31, 2021.

At March 31, 2021, the interest rate in effect

on outstanding borrowings was 2.69%.

The Company’s ability to draw down undrawn funds under the Credit Facility is determined by

collateral and portfolio quality requirements stipulated in the credit and security agreement.

At March 31, 2021, approximately $70,437

at LIBOR plus 2.50% on outstanding USD denominated borrowings.

The Credit Facility bears interest at EURIBOR, for EUR denominated borrowings,

CDOR for CAD denominated borrowings, SONIA, for GBP denominated, plus a spread on outstanding borrowings of 2.50%, 2.55% and 2.55%, respectively.

The Company is required to pay a non-usage fee which accrues at 0.75% per annum on the average daily unused amount of the financing commitments

to the extent the aggregate principal amount available under the Credit Facility has not been borrowed.

The minimum borrowing requirement

In connection with the Credit Facility, WhiteHorse Credit pledged securities with a fair value of approximately $592,542

as of June 30, 2021 as collateral.

The Credit Facility has a maturity date of November 22, 2024.

Under the Credit Facility, the Company has made

certain customary representations and warranties and is required to comply with various covenants, including leverage restrictions, reporting

requirements and other customary requirements for similar credit facilities.

As of June 30, 2021, the Company had $238,470 in outstanding

borrowings and $46,530 undrawn under the Credit Facility.

Weighted average outstanding borrowings were $228,236 and $226,291 at a weighted

average interest rate of 2.68% and 2.70%, respectively, for the three and six months ended June 30, 2021.

As of June 30, 2021, the interest

rate in effect on outstanding borrowings was 2.63%.

The Company’s ability to draw down undrawn funds under the Credit Facility is

determined by collateral and portfolio quality requirements stipulated in the credit and security agreement.

As of June 30, 2021, $46,530

was available to be drawn by the Company based on these requirements.

2023 Private Notes :

On July 13, 2018,

the Company entered into an agreement (the “2023 Note Purchase Agreement”) to sell in a private offering $30,000 aggregate

principal amount of senior unsecured notes to qualified institutional investors in reliance on Section 4(a)(2) of the Securities

Act of 1933, as amended.

Interest on the 2023 Private Notes is payable semiannually on February 7 and August 7, at a fixed,

annual rate of 6.00%.

This interest rate is subject to increase (up to 6.50%) in the event that, subject to certain exceptions, the 2023

Private Notes cease to have an investment grade rating.

The 2023 Private Notes mature on August 7, 2023, unless redeemed, purchased

or prepaid prior to such date by the Company or its affiliates in accordance with their terms.

The 2023 Private Notes are general unsecured

obligations of the Company that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the

The closing of the transaction occurred on August 7, 2018.

The Company used the net proceeds from this offering, together

with cash on hand, to redeem existing debt.

principal amount of senior unsecured notes to qualified institutional investors in reliance on Section 4(a)(2) of the Securities Act of

1933, as amended.

Interest on the 2023 Private Notes is payable semiannually on February 7 and August 7, at a fixed, annual rate of 6.00%.

This interest rate is subject to increase (up to 6.50%) in the event that, subject to certain exceptions, the 2023 Private Notes cease

to have an investment grade rating.

The 2023 Private Notes mature on August 7, 2023, unless redeemed, purchased or prepaid prior to such

date by the Company or its affiliates in accordance with their terms.

The 2023 Private Notes are general unsecured obligations of the

Company that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.

of the transaction occurred on August 7, 2018.

The Company used the net proceeds from this offering, together with cash on hand, to redeem

existing debt.

2025 Private Notes :

On October 20,

2020, the Company entered into a Note Purchase Agreement (the “2025 Note Purchase Agreement”) governing the issuance of $40,000

in aggregate principal amount of unsecured notes (the “2025 Private Notes”) to qualified institutional investors in a private

The 2025 Private Notes have a fixed interest rate of 5.375% and are due on October 20, 2025, unless redeemed, purchased

or prepaid prior to such date by the Company or its affiliates in accordance with their terms.

Interest on the 2025 Private Notes is due

semiannually.

This interest rate is subject to increase (up to 6.375%) in the event that, subject to certain exceptions, the 2025 Private

Notes cease to have an investment grade rating.

In addition, the Company is obligated to offer to repay the 2025 Private Notes at par

if certain change in control events occur.

The 2025 Private Notes are general unsecured obligations of the Company that rank pari passu

with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.

The Company used the net proceeds from this

offering to redeem existing debt.

October 20, 2020, the Company entered into a Note Purchase Agreement (the “2025 Note Purchase Agreement”) governing the

issuance of $40,000 in aggregate principal amount of unsecured notes (the “2025 Private Notes”) to qualified

institutional investors in a private placement.

The 2025 Private Notes have a fixed interest rate of 5.375% and are due on October

20, 2025, unless redeemed, purchased or prepaid prior to such date by the Company or its affiliates in accordance with their terms.

Interest on the 2025 Private Notes is due semiannually.

This interest rate is subject to increase (up to 6.375%) in the event that,

subject to certain exceptions, the 2025 Private Notes cease to have an investment grade rating.

In addition, the Company is

obligated to offer to repay the 2025 Private Notes at par if certain change in control events occur.

The 2025 Private Notes are

general unsecured obligations of the Company that rank pari passu with all outstanding and future unsecured unsubordinated

indebtedness issued by the Company.

The Company used the net proceeds from this offering to redeem existing debt.

2026 Private Notes :

On December 4,

2020, the Company entered into a Note Purchase Agreement (the “2026 Note Purchase Agreement”) governing the issuance of $10,000

in aggregate principal amount of unsecured notes (the “2026 Private Notes”) to qualified institutional investors in a private

The 2026 Private Notes have a fixed interest rate of 5.375% and are due on December 4, 2026, unless redeemed, purchased

or prepaid prior to such date by the Company or its affiliates in accordance with their terms.

Interest on the 2026 Private Notes is due

semiannually.

This interest rate is subject to increase (up to 6.375%) in the event that, subject to certain exceptions, the 2026 Private

Notes cease to have an investment grade rating.

In addition, the Company is obligated to offer to repay the 2026 Private Notes at par

if certain change in control events occur.

The 2026 Private Notes are general unsecured obligations of the Company that rank pari passu

with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.

The Company used the net proceeds from this

offering to redeem existing debt.

On December 4, 2020, the Company

entered into a Note Purchase Agreement (the “2026 Note Purchase Agreement”) governing the issuance of $10,000 in aggregate

principal amount of unsecured notes (the “2026 Private Notes”) to qualified institutional investors in a private placement.

The 2026 Private Notes have a fixed interest rate of 5.375% and are due on December 4, 2026, unless redeemed, purchased or prepaid prior

to such date by the Company or its affiliates in accordance with their terms.

Interest on the 2026 Private Notes is due semiannually.

This interest rate is subject to increase (up to 6.375%) in the event that, subject to certain exceptions, the 2026 Private Notes cease

to have an investment grade rating.

In addition, the Company is obligated to offer to repay the 2026 Private Notes at par if certain

change in control events occur.

The 2026 Private Notes are general unsecured obligations of the Company that rank pari passu with

all outstanding and future unsecured unsubordinated indebtedness issued by the Company.

The Company used the net proceeds from this offering

to redeem existing debt.

2027 Private Notes :

On December 4,

2020, the Company entered into a Note Purchase Agreement (the “2027 Note Purchase Agreement”) governing the issuance of $10,000

in aggregate principal amount of unsecured notes (the “2027 Private Notes”) to qualified institutional investors in a private

The 2027 Private Notes have a fixed interest rate of 5.625% and are due on December 4, 2027, unless redeemed, purchased

or prepaid prior to such date by the Company or its affiliates in accordance with their terms.

Interest on the 2027 Private Notes is due

semiannually.

This interest rate is subject to increase (up to 6.625%) in the event that, subject to certain exceptions, the 2027 Private

Notes cease to have an investment grade rating.

In addition, the Company is obligated to offer to repay the 2027 Private Notes at par

if certain change in control events occur.

The 2027 Private Notes are general unsecured obligations of the Company that rank pari passu

with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.

The Company used the net proceeds from this

offering to redeem existing debt.

On December 4, 2020, the Company

entered into a Note Purchase Agreement (the “2027 Note Purchase Agreement”) governing the issuance of $10,000 in aggregate

principal amount of unsecured notes (the “2027 Private Notes”) to qualified institutional investors in a private placement.

The 2027 Private Notes have a fixed interest rate of 5.625% and are due on December 4, 2027, unless redeemed, purchased or prepaid prior

to such date by the Company or its affiliates in accordance with their terms.

Interest on the 2027 Private Notes is due semiannually.

This interest rate is subject to increase (up to 6.625%) in the event that, subject to certain exceptions, the 2027 Private Notes cease

to have an investment grade rating.

In addition, the Company is obligated to offer to repay the 2027 Private Notes at par if certain

change in control events occur.

The 2027 Private Notes are general unsecured obligations of the Company that rank pari passu with

all outstanding and future unsecured unsubordinated indebtedness issued by the Company.

The Company used the net proceeds from this offering

to redeem existing debt.

2025 Public Notes :

On November 13,

13, 2018, the Company completed a public offering of $35,000 of aggregate principal amount of 2025 Public Notes, the net proceeds of which

were used to fund investments in debt and equity securities and repay outstanding indebtedness under its revolving credit facility.

on the 2025 Public Notes is paid quarterly on February 28, May 31, August 31 and November 30 each year, at an annual

rate of 6.50%.

The 2025 Public Notes will mature on November 30, 2025 and may be redeemed in whole or in part at any time, or from

time to time, at the Company’s option on or after November 30, 2021.

The 2025 Public Notes are direct unsecured obligations

and are structurally subordinate to borrowings under the Credit Facility and will rank equally in right of payment with the Company’s

other outstanding and future unsecured, unsubordinated indebtedness, including the 2023 and 2025 Private Notes.

The 2025 Public Notes

are listed on the Nasdaq Global Select Market under the trading symbol “WHFBZ.”

on the 2025 Public Notes is paid quarterly on February 28, May 31, August 31 and November 30 each year, at an annual rate of 6.50%.

2025 Public Notes will mature on November 30, 2025 and may be redeemed in whole or in part at any time, or from time to time, at the Company’s

option on or after November 30, 2021.

The 2025 Public Notes are direct unsecured obligations and are structurally subordinate to borrowings

under the Credit Facility and will rank equally in right of payment with the Company’s other outstanding and future unsecured, unsubordinated

indebtedness, including the 2023, 2025, 2026 and 2027 Private Notes.

The 2025 Public Notes are listed on the Nasdaq Global Select Market

under the trading symbol “WHFBZ.”

NOTE 7 - RELATED PARTY TRANSACTIONS

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any partial month or quarter.

During the three months ended March 31,

2021 and 2020, the Company incurred base management fees of $3,344 and $3,092, respectively.

WhiteHorse Advisers has agreed to waive that

portion of the base management fee payable with respect to cash and cash equivalents and restricted cash and cash equivalents to which

it would otherwise be entitled under the Investment Advisory Agreement for the fiscal quarters ended September 30, 2018, December 31,

2018, March 31, 2019 and June 30, 2019;

and for the fiscal quarter ended September 30, 2019 only to the extent that the determination

of base management fees would otherwise include June 30, 2019 cash and cash equivalents and restricted cash and cash equivalents for the

purpose of calculating the average carrying value of consolidated gross assets.

During the three and six months ended June 30,

2021, the Company incurred base management fees of $3,357 and $6,701, respectively.

During the three and six months ended June 30, 2020,

the Company incurred base management fees of $2,950 and $6,042, respectively.

Performance-based Incentive Fee

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be paid to the investment adviser at any time during the 11 full fiscal quarters following such initial full fiscal quarter.

The “Cumulative

Pre-Incentive Fee Net Return”

refers to the sum of (a) Pre-Incentive Fee Net Investment Income (as defined below) for each period

during the Incentive Fee Look-back Period and (b) the sum of cumulative realized capital gains, cumulative realized capital losses, cumulative

unrealized capital depreciation and cumulative unrealized capital appreciation during the applicable Incentive Fee Look-back Period.

The first component, which is income-based (the

“Income Incentive Fee”), is calculated and payable quarterly in arrears and is determined based on Pre-Incentive Fee Net Investment

Income for the immediately preceding calendar quarter, subject to the Incentive Fee Cap and Deferral Mechanism.

For this purpose, “Pre-Incentive

Fee Net Investment Income”

means, in each case on a consolidated basis, interest income, distribution income and any other income

(including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence

and consulting fees or other fees received from portfolio companies) accrued during the calendar quarter, minus the Company’s operating

expenses for the quarter (including the base management fee, expenses payable under the administration agreement (the “Administration

Agreement”), any interest expense and any dividends paid on any issued and outstanding preferred stock, but excluding the incentive

Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital

appreciation or depreciation.

The “Cumulative Pre-Incentive

Fee Net Return”

refers to the sum of (a) Pre-Incentive Fee Net Investment Income (as defined below) for each period during the Incentive

Fee Look-back Period and (b) the sum of cumulative realized capital gains, cumulative realized capital losses, cumulative unrealized capital

depreciation and cumulative unrealized capital appreciation during the applicable Incentive Fee Look-back Period.

The first component, which is income-based

(the “Income Incentive Fee”), is calculated and payable quarterly in arrears and is determined based on Pre-Incentive Fee

Net Investment Income for the immediately preceding calendar quarter, subject to the Incentive Fee Cap and Deferral Mechanism.

purpose, “Pre-Incentive Fee Net Investment Income”

means, in each case on a consolidated basis, interest income, distribution

income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination,

structuring, diligence and consulting fees or other fees received from portfolio companies) accrued during the calendar quarter, minus

the Company’s operating expenses for the quarter (including the base management fee, expenses payable under the administration agreement

(the “Administration Agreement”), any interest expense and any dividends paid on any issued and outstanding preferred stock,

but excluding the incentive fee).

Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital

losses or unrealized capital appreciation or depreciation.

The operation of the first component of the incentive fee

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repurchases during the current quarter.

The second component, the capital gains component

of the incentive fee (the “Capital Gains Incentive Fee”), which is determined and payable in arrears as of the end of each

calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), commenced on January 1, 2013, and

equals 20% of cumulative aggregate realized capital gains from January 1 through the end of each calendar year, computed net of aggregate

cumulative realized capital losses and aggregate cumulative unrealized capital depreciation through the end of each year (the “Capital

Gains Incentive Fee Base”), less the aggregate amount of any previously paid capital gains incentive fees and subject to the Incentive

Fee Cap and Deferral Mechanism.

If such amount is negative, then no capital gains incentive fee will be payable for the year.

Additionally,

if the Investment Advisory Agreement is terminated as of a date that is not a calendar year end, the termination date will be treated

as though it were a calendar year end for purposes of calculating and paying the capital gains incentive fee.

The capital gains component

of the incentive fee is not subject to any minimum return to stockholders.

The second component, the capital gains

component of the incentive fee (the “Capital Gains Incentive Fee”), which is determined and payable in arrears as of the end

of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), commenced on January 1,

2013, and equals 20% of cumulative aggregate realized capital gains from January 1 through the end of each calendar year, computed net

of aggregate cumulative realized capital losses and aggregate cumulative unrealized capital depreciation through the end of each year

(the “Capital Gains Incentive Fee Base”), less the aggregate amount of any previously paid capital gains incentive fees and

subject to the Incentive Fee Cap and Deferral Mechanism.

If such amount is negative, then no capital gains incentive fee will be payable

for the year.

Additionally, if the Investment Advisory Agreement is terminated as of a date that is not a calendar year end, the termination

date will be treated as though it were a calendar year end for purposes of calculating and paying the capital gains incentive fee.

capital gains component of the incentive fee is not subject to any minimum return to stockholders.

In accordance with GAAP, the Company is also required

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There can be no assurance that such unrealized capital appreciation will be realized in the future.

For the three months

ended March 31, 2021 and 2020, the Company accrued and reversed previously accrued Capital Gains Incentive Fees of $114 and $626, respectively.

As of March 31, 2021 and December 31, 2020, included in incentive fees payable on the consolidated statements of assets

and liabilities were $2,246 and $2,132, respectively, for cumulative accruals of Capital Gains Incentive Fees under GAAP, including any amounts

payable pursuant to the Investment Advisory Agreement as described above.

Because of the structure

of the incentive fee, it is possible that the Company may pay an incentive fee in a quarter where it incurs a loss subject to the Incentive

Fee Cap and Deferral Mechanism.

For example, if the Company receives Pre-Incentive Fee Net Investment Income in excess of the Hurdle Rate,

it will pay the applicable Income Incentive Fee even after incurring a loss in that quarter due to realized and unrealized capital losses.

During the three months ended March 31,

2021 and March 31, 2020, the Company incurred total performance-based incentive fees of $2,042 and $441, respectively.

For the three and six

months ended June 30, 2021, the Company accrued Capital Gains Incentive Fees of $882 and $996, respectively.

For the three and six months

ended June 30, 2020, the Company reversed previously accrued Capital Gains Incentive Fees of $0 and $626, respectively.

As of June 30,

2021 and December 31, 2020, included in incentive fees payable on the consolidated statements of assets and liabilities were $3,128 and

$2,132, respectively, for cumulative accruals of Capital Gains Incentive Fees under GAAP, including any amounts payable pursuant to the

Investment Advisory Agreement as described above.

Because of the structure of the incentive

fee, it is possible that the Company may pay an incentive fee in a quarter where it incurs a loss subject to the Incentive Fee Cap and

Deferral Mechanism.

For example, if the Company receives Pre-Incentive Fee Net Investment Income in excess of the Hurdle Rate, it will

pay the applicable Income Incentive Fee even after incurring a loss in that quarter due to realized and unrealized capital losses.

During the three and six months ended June 30,

2021, the Company incurred total performance-based incentive fees of $2,628 and $4,670, respectively.

During the three and six months

ended June 30, 2020, the Company incurred total performance-based incentive fees of $1,311 and $1,752, respectively.

As of June 30, 2021

and December 31, 2020, incentive fees payable on the consolidated statements of assets and liabilities were $6,994 and $6,117, respectively.

Administration Agreement :

Pursuant to the

Administration Agreement, WhiteHorse Administration furnishes the Company with office facilities, equipment and clerical, bookkeeping

the Administration Agreement, WhiteHorse Administration furnishes the Company with office facilities, equipment and clerical, bookkeeping

and record keeping services to enable the Company to operate.

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payments of operating expenses to third parties were made by a related party, for which such third party received reimbursement from the

During the three months ended March 31,

2021 and March 31, 2020, the Company incurred allocated administrative service fees of $171 and $171, respectively.

During the three and six months ended June 30,

2021, the Company incurred allocated administrative service fees of $170 and $341, respectively.

During the three and six months ended

June 30, 2020, the Company incurred allocated administrative service fees of $171 and $342, respectively.

Co-investments with Related Parties :

At March 31, 2020 and December 31, 2019, certain officers or employees affiliated with or employed by WhiteHorse Advisers and its related

entities maintained co-investments in the Company’s investments of $0 and $0, respectively.

At March 31, 2021 and December 31, 2020,

As of June 30, 2021 and December 31, 2020, no officers or employees affiliated with or employed by WhiteHorse Advisers and its related

entities maintained any co-investments in the Company’s investments.

As of June 30, 2021 and December 31,

2020, certain funds affiliated with WhiteHorse Advisers and its related entities maintained co-investments in the Company’s investments

of $3,341,047 and $3,191,269, respectively.

For the three month period

ended March 31, 2021, the Company sold $28,942 of investments to STRS JV at fair value and recognized $183 of net realized gains.

the three month period ended March 31, 2020, the Company sold $28,458 of investments to STRS JV at fair value and recognized $35 of net

realized gains.

For the three and

six months ended June 30, 2021, the Company sold $31,751and $60,694 of investments to STRS JV at fair value.

For the three and six months

ended June 30, 2021, the Company recognized net realized losses of $26 and net realized gains of $157, respectively.

For the three and

six months ended June 30, 2020, the Company sold $36,604 and $65,062 of investments to STRS JV at fair value and recognized net realized

losses of $37 and $3, respectively.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

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due diligence and obtaining collateral where appropriate.

The balance of unfunded commitments to

extend credit was approximately $21,411 and $19,554 as of March 31, 2021 and December 31, 2020, respectively.

Commitments to extend credit

consist principally of the unused portions of commitments that obligate the Company to extend credit, such as revolving credit arrangements

or similar transactions.

The balance of unfunded commitments to extend

credit was approximately $23,843 and $19,554 as of June 30, 2021 and December 31, 2020, respectively.

Commitments to extend credit consist

principally of the unused portions of commitments that obligate the Company to extend credit, such as revolving credit arrangements or

similar transactions.

These commitments are often subject to financial or non-financial milestones and other conditions to borrow that

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requirements.

The following table summarizes the Company’s unfunded commitments as of March 31, 2021 and December 31, 2020:

Unfunded Commitment

The following table summarizes the Company’s unfunded commitments as of June 30, 2021 and December 31, 2020:

Unfunded Commitment ($ in thousands)

As of June 30, 2021

As of December 31, 2020

Revolving Loan Commitments:

BBQ Buyer, LLC

Cennox Holdings Limited

Claridge Products and Equipment, LLC

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LINC Systems, LLC

Lift Brands, Inc.

LMG Holdings, Inc.

Maxitransfers Blocker Corp

Newscycle Solutions, Inc.

The Kyjen Company, LLC (dba Outward Hound)

PG Dental New Jersey Parent, LLC

Power Plant Services

RCKC Acquisitions LLC (dba KSM Consulting)

Road Safety Services, Inc.

SFP Holding, Inc.

TaxSlayer LLC

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Delayed Draw Loan Commitments:

Core BTS, Inc.

DCA Investment Holding,LLC

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Ivy Rehab Holdings LLC

PlayMonster LLC

RCKC Acquisitions LLC (dba KSM Consulting)

SFP Holding, Inc.

True Blue Car Wash, LLC

Total Unfunded Commitments

of March 31, 2021, the Company had commitments to fund equity interests and subordinated notes in STRS JV of $15,000 and $60,000, of which

$3,868 and $15,471 was unfunded, respectively.

As of December 31, 2020, the Company had commitments to fund equity interests

and subordinated notes in STRS JV of $15,000 and $60,000, of which $4,732 and $18,927 was unfunded, respectively.

capital commitments cannot be drawn without an affirmative vote by both the Company’s and STRS Ohio’s representatives on STRS

JV’s board of managers.

As of June 30, 2021,

the Company had commitments to fund equity interests and subordinated notes in STRS JV of $15,000 and $60,000, of which $2,548 and $10,191

was unfunded, respectively.

As of December 31, 2020, the Company had commitments to fund equity interests and subordinated notes in STRS

JV of $15,000 and $60,000, of which $4,732 and $18,927 was unfunded, respectively.

The capital commitments cannot be drawn without an

affirmative vote by both the Company’s and STRS Ohio’s representatives on STRS JV’s board of managers.

Indemnification :

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to be remote.

Proceedings :

In the normal course of business, the Company, the investment adviser and the administrator may be subject to legal

and regulatory proceedings that are generally incidental to its ongoing operations.

While there can be no assurance of the ultimate

disposition of any such proceedings, the Company does not believe any such disposition will have a material adverse effect on the

Company’s consolidated financial statements.

Developments :

In addition, during the three months ended March 31, 2021 and subsequent to March 31, 2021, the

current pandemic caused by the novel coronavirus (commonly known as “COVID-19”) has had a significant impact on the U.S.

Certain of the Company’s portfolio companies have been adversely impacted by the effects of the COVID-19 pandemic,

which had an adverse impact on the Company’s results of operations and may continue to have an adverse impact on the

Company’s future net investment income, the fair value of its portfolio investments, its financial condition and the results

of operations and financial condition of the Company’s portfolio companies.

Legal Proceedings :

In the normal course of business, the Company, the investment adviser and the administrator may be subject to legal and regulatory proceedings

that are generally incidental to its ongoing operations.

While there can be no assurance of the ultimate disposition of any such proceedings,

the Company does not believe any such disposition will have a material adverse effect on the Company’s consolidated financial statements.

COVID-19 Developments :

addition, during the three and six months ended June 30, 2021 and subsequent to June 30, 2021, the current pandemic caused by the novel

coronavirus (commonly known as “COVID-19”) has had a significant impact on the U.S.

Certain of the Company’s

portfolio companies have been adversely impacted by the effects of the COVID-19 pandemic, which had an adverse impact on the Company’s

results of operations and may continue to have an adverse impact on the Company’s future net investment income, the fair value of

its portfolio investments, its financial condition and the results of operations and financial condition of the Company’s portfolio

NOTE 9 - STOCKHOLDERS’

The following table summarizes the total

shares issued and proceeds received relating to the issuance of shares of the Company’s common

stock pursuant to at-the-market offerings from time to time (the “ATM Program”) (net offering costs) for the three

months ended March 31, 2021.

Average Price Per

Public offering

The following table summarizes the

total shares issued and proceeds received relating to the issuance of shares of the Company’s common stock from the DRIP and pursuant

to at-the-market offerings from time to time (the “ATM Program”) (net offering costs) for the six months ended June 30, 2021.

Six months ended June 30,

($ in thousands except share and per share amounts)

Shares Issued from ATM Program

Shares Issued from DRIP

Average Price Per Share

NOTE 10 - FINANCIAL HIGHLIGHTS

The following is a schedule of financial highlights:

Three months ended

following is a schedule of financial highlights:

Six months ended June 30,

Net asset value, beginning of period

Net investment income

Net realized and unrealized (losses)

gains on investments

Net increase (decrease) in net assets resulting from

Net realized and unrealized gains(losses) on investments

Net increase in net assets resulting from operations

Issuance of common stock (5)

Distributions declared from net

investment income

Distributions declared from net investment income

Net asset value, end of period

annualized return based on market value (2)

Total annualized return based on market value (2)

Total annualized return based on net asset value

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Ratios/Supplemental data:

Ratio of expenses before incentive

fees to average net assets (4)

Ratio of incentive fees to average

Ratio of total expenses to average

net assets (4)

Ratio of expenses before incentive fees to average net assets (4)

Ratio of incentive fees to average net assets

Ratio of total expenses to average net assets (4)

Ratio of net investment income to average net assets (4)

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(1) Calculated using the average shares outstanding method.

(2) Total return is based on the change in market price per share during the period and takes into account

distributions, if any, reinvested in accordance with the distribution reinvestment plan.

(2) Total return is based on the change in market price per share during

the period and takes into account distributions, if any, reinvested in accordance with the DRIP.

(3) With the exception of the portfolio turnover rate, ratios are reported on an annualized basis.

(4) Calculated using total expenses, including income tax provision.

(5) The issuance of common stock on a per share basis reflects the incremental net asset value changes as a result of the issuance

of shares of common stock pursuant to the ATM Program.

The issuance of common stock at a

price, net of commissions, that is greater than the net asset value per share results in an increase in net asset value per share.

The per share impact of the Company’s issuance of common stock net asset value of less than $0.01 per share during the three

months ended March 31, 2021.

Financial highlights are calculated for

each securities class taken as a whole.

An individual stockholder’s return and ratios may vary based on the timing of capital transactions.

NOTE 11 - CHANGE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON

The following information sets forth the computation of the

basic and diluted per share net increase in net assets resulting from operations:

Three months ended

(5) The issuance of common stock on a per share basis reflects the incremental

net asset value changes as a result of the issuance of shares of common stock pursuant to the ATM Program and DRIP.

The issuance of common

stock at a price, net of commissions, that is greater than the net asset value per share results in an increase in net asset value per

The impact of the Company’s issuance of common stock on net asset value was less than $0.01 per share during the six months

ended June 30, 2021.

Financial highlights are calculated

for each securities class taken as a whole.

An individual stockholder’s return and ratios may vary based on the timing of capital

transactions.

NOTE 11 - CHANGE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE

The following information sets forth the computation of the basic and diluted per share net increase in net assets resulting from operations:

Three months ended June 30,

Six months ended June 30,

($ in thousands except share and per share amounts)

Net increase in net assets resulting from operations

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NOTE 12 - SUBSEQUENT EVENTS

The Company has evaluated events that

have occurred after the balance sheet date but before the consolidated financial statements are issued and has determined that there were

no additional subsequent events requiring adjustment or disclosure in the consolidated financial statements.

Management has evaluated events that

have occurred after the balance sheet date but before the consolidated financial statements are issued and other than the items discussed

below, the Company has determined that there were no additional subsequent events requiring adjustment or disclosure in the consolidated

financial statements.

On July 15, 2021, the terms of the Credit Facility

were amended to, among other things, allow WhiteHorse Credit to reduce the applicable margins for interest rates to 2.35%, extend the

non-call period from November 22, 2021 to November 22, 2022, extend the end of the reinvestment period from November 22, 2023 to November

22, 2024 and extend the scheduled termination date from November 22, 2024, to November 22, 2025.

On July 15, 2021, the terms of the STRS JV Credit

Facility were amended to, among other things, allow STRS JV to reduce the applicable margins for interest rates to 2.35%, extend the non-call

period from January 19, 2022 to January 19, 2023, extend the end of the reinvestment period from July 19, 2022 to July 19, 2023 and extend

the scheduled termination date from July 19, 2024, to July 19, 2025.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

The information contained in this section

should be read in conjunction with our Consolidated Financial Statements appearing elsewhere in this quarterly report on Form 10-Q.

this quarterly report on Form 10-Q, the “Company”, "we", "us", "our"

and "WhiteHorse Finance"

The information contained in this

section should be read in conjunction with our Consolidated Financial Statements appearing elsewhere in this quarterly report on Form

In this quarterly report on Form 10-Q, the “Company”, "we", "us", "our"

and "WhiteHorse

Finance"

refer to WhiteHorse Finance, Inc.

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Forward-Looking Statements

Some of the statements

in this quarterly report on Form 10-Q constitute forward-looking statements, which relate to future events or our future performance or

financial condition.

The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties, including

statements as to:

Some of the statements in this quarterly

report on Form 10-Q constitute forward-looking statements, which relate to future events or our future performance or financial condition.

The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties, including statements as

our future operating results;

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our contractual arrangements and relationships with third parties;

changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital

markets, which could result in changes to the value of our assets, including changes from the impact of the current COVID-19 pandemic;

changes in political, economic or industry conditions, the interest rate environment or conditions affecting

the financial and capital markets, which could result in changes to the value of our assets, including changes from the impact of the

current COVID-19 pandemic;

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

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and similar expressions to identify forward-looking statements.

Our actual results could differ materially from those projected in the

forward-looking statements for any reason, including the factors set forth in “Item 1A-Risk Factors”

in our annual report

on Form 10-K and elsewhere in this quarterly report on Form 10-Q.

Our actual results could differ materially from those

projected in the forward-looking statements for any reason, including the factors set forth in “Item 1A-Risk Factors”

annual report on Form 10-K and elsewhere in this quarterly report on Form 10-Q.

We have based the forward-looking statements

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COVID-19 Developments

The ongoing COVID-19 pandemic

and its effects on the U.S.

and global economy has had adverse consequences on the business operations of some of our portfolio companies

and has adversely affected, and may continue to adversely affect, our operations and the operations of our investment adviser.

Our investment

adviser is continuing to monitor the COVID-19 pandemic and its impact on our business and the business of our portfolio companies and

has been focused on proactively engaging with our portfolio companies in order to collaborate with the management teams of certain portfolio

companies to evaluate their response to the impacts of COVID-19.

cannot predict the full impact of COVID-19, including the length of the global economic recovery and the uncertainty surrounding the

vaccine rollout and more contagious strains of the virus that have emerged in the United States and worldwide.

As such, the extent to

which COVID-19 and/or other disease pandemics may continue to negatively affect our business and our portfolio companies’

results and financial condition is uncertain.

Due to the ongoing business disruptions caused by COVID-19, some of our portfolio companies

have experienced financial distress and have defaulted on their financial obligations to us and their other capital providers.

our portfolio companies have curtailed their business operations, furloughed or laid off employees, terminated relationships with service

providers and deferred capital expenditures and may continue to do so for the duration of the pandemic.

Such developments could permanently

impair the business operations of our portfolio companies and may result in a decrease in the value of our investment in any such portfolio

In connection with the adverse

effects of the COVID-19 pandemic, we have restructured and may need to restructure additional investments in some of our portfolio companies,

which has resulted in and could result in additional diminished interest payments or in permanent impairments on our investments.

effects of the COVID-19 pandemic discussed above increase the risk that more of our portfolio investments may be placed on non-accrual

status in the future.

Any decreases in our net investment income would increase the portion of our cash flows dedicated to distribution

payments to stockholders and to servicing our existing debt under our revolving credit facility, or the Credit Facility, with JPMorgan

Chase Bank, National Association, as administrative agent and lender, or the Lender.

The ongoing COVID-19 pandemic and its effects

and global economy has had adverse consequences on the business operations of some of our portfolio companies and has adversely

affected, and may continue to adversely affect, our operations and the operations of our investment adviser.

Our investment adviser is

continuing to monitor the COVID-19 pandemic and its impact on our business and the business of our portfolio companies and has been focused

on proactively engaging with our portfolio companies in order to collaborate with the management teams of certain portfolio companies

to evaluate their response to the impacts of COVID-19.

cannot predict the full impact of COVID-19, including the length of the global economic recovery and the uncertainty surrounding the efficiency

and success of the global vaccination efforts and more contagious strains of the virus that have emerged in the United States and worldwide,

including the extent to which the available vaccines prove to be ineffective against any new COVID-19 variants (particularly the "Delta"

In addition, countries around the world, including the United States, have seen significant increases in rates of COVID-19 infections,

which was a result of, among other things, the rapid spread of COVID-19 variants (including the Delta variant), more frequent social gatherings

after businesses start to re-open and a reduction in the use of masks and social distancing.

These developments, in conjunction with the

potential adverse reactions to the vaccine, the politicization of the vaccine rollout and the general public distrust of the safety and

efficacy of the vaccine may adversely affect the success and duration of business re-openings and slow down the rate of economic recovery,

further exacerbating the risk that the pandemic will continue for an extended period of time.

As such, the extent to which COVID-19

and/or other disease pandemics may continue to negatively affect our business and our portfolio companies’

operating results and

financial condition is uncertain.

Due to the ongoing business disruptions caused by COVID-19, some of our portfolio companies have experienced

financial distress and have defaulted on their financial obligations to us and their other capital providers.

Some of our portfolio companies

have curtailed their business operations, furloughed or laid off employees, terminated relationships with service providers and deferred

capital expenditures and may continue to do so for the duration of the pandemic.

Such developments could permanently impair the business

operations of our portfolio companies and may result in a decrease in the value of our investment in any such portfolio companies.

In connection with the adverse effects of the

COVID-19 pandemic, we have restructured and may need to restructure additional investments in some of our portfolio companies, which has

resulted in and could result in additional diminished interest payments or in permanent impairments on our investments.

The effects of

the COVID-19 pandemic discussed above increase the risk that more of our portfolio investments may be placed on non-accrual status in

Any decreases in our net investment income would increase the portion of our cash flows dedicated to distribution payments

to stockholders and to servicing our existing debt under our revolving credit facility, or the Credit Facility, with JPMorgan Chase Bank,

National Association, as administrative agent and lender, or the Lender.

WhiteHorse Advisers’

credit team continues to be in close contact with the owners and management teams of each of our portfolio companies.

With the rapid onset

of the crisis, these owners and management teams have been actively assessing the impacts to their businesses and are continuing to coordinate

with us to guide their companies through the fallout.

We are operating under a philosophy that we will work hand in hand with our borrowers

to support them, allowing flexibility in our terms as appropriate, and we expect owners to support their businesses with additional equity

where possible.

will continue to monitor the rapidly evolving situation relating to the COVID-19 pandemic and guidance from U.S.

and international

authorities, including federal, state and local public health authorities and may take additional actions based on their

recommendations.

In these circumstances, there may be developments outside our control requiring us to adjust our plan of operation.

As such, given the dynamic nature of this situation, we cannot reasonably quantify the full effect of COVID-19 on our financial

condition, results of operations or cash flows in the future.

The pandemic may result in a negative impact on cash flows earned by

us during the coming quarters, which may result in a material adverse effect on our future net investment income, the fair value of

our portfolio investments, and the results of operations and financial condition of our portfolio companies.

As a business development

company, we are permitted under the 1940 Act to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least

150% after such borrowing.

credit team continues

to be in close contact with the owners and management teams of each of our portfolio companies.

With the rapid onset of the crisis, these

owners and management teams have been actively assessing the impacts to their businesses and are continuing to coordinate with us to guide

their companies through the recovery.

We are operating under a philosophy that we will work hand in hand with our borrowers to support

them, allowing flexibility in our terms as appropriate, and we expect owners to support their businesses with additional equity where

As a business development company, we

are permitted under the 1940 Act to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after

such borrowing.

We are required to comply with various covenants pursuant to the Credit Facility.

If we fail to satisfy the

covenants of the Credit Facility or are unable to cure any event of default or obtain a waiver from the applicable lender, it could result

in foreclosure by the lenders under the Credit Facility, which would accelerate our repayment obligations under the Credit Facility and

thereby result in a material adverse effect on our business, liquidity, financial condition, results of operations and ability to pay

distributions to our stockholders.

As of March 31, 2021, we were in compliance with all covenants and other requirements of the Credit

We are also subject to financial

risks, including changes in market interest rates.

As of March 31, 2021, nearly all of our debt investments at fair value were at floating

rates, which are generally based on a risk-free index rate such as LIBOR, and many of which are subject to certain floors.

In connection

with the COVID-19 pandemic, the U.S.

If we fail to satisfy the covenants

of the Credit Facility or are unable to cure any event of default or obtain a waiver from the applicable lender, it could result in foreclosure

by the lenders under the Credit Facility, which would accelerate our repayment obligations under the Credit Facility and thereby result

in a material adverse effect on our business, liquidity, financial condition, results of operations and ability to pay distributions to

our stockholders.

As of June 30, 2021, we were in compliance with all covenants and other requirements of the Credit Facility.

We are also subject to financial risks,

including changes in market interest rates.

As of June 30, 2021, nearly all of our debt investments at fair value were at floating rates,

which are generally based on a risk-free index rate such as LIBOR, and many of which are subject to certain floors.

In connection with

the COVID-19 pandemic, the U.S.

Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased.

A prolonged reduction in interest rates will reduce our gross investment income and could result in a decrease in our net investment income

prolonged reduction in interest rates will reduce our gross investment income and could result in a decrease in our net investment income

if such decreases in LIBOR are not offset by a corresponding increase in the spread over LIBOR that we earn on any portfolio investments,

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interest rates.

management team has sought strategies that will help us weather periods of economic decline.

We have attempted to avoid deeply cyclical

sectors and have only made loans where we believed a repeat of the Great Recession would allow us to recover 100% of our loans.

Additionally, we have taken

a conservative position on the Company’s liquidity, making sure we have a top-tier leverage partner and very significant cushion

against default.

We will continue to monitor the

rapidly evolving situation relating to the COVID-19 pandemic and guidance from U.S.

and international authorities, including

federal, state and local public health authorities and may take additional actions based on their recommendations.

Our management team has sought strategies

that will help us weather periods of economic decline.

We have attempted to avoid deeply cyclical sectors and have only made loans where

we believed a repeat of the Great Recession would allow us to recover 100% of our loans.

Additionally, we have taken a conservative position

on the Company’s liquidity, making sure we have a top-tier leverage partner and very significant cushion against default.

We will continue to monitor the rapidly evolving

situation relating to the COVID-19 pandemic, including the spread of the Delta variant, and guidance from U.S.

and international authorities,

including federal, state and local public health authorities and may take additional actions based on their recommendations.

circumstances, there may be developments outside our control requiring us to adjust our plan of operation.

As such, given the

dynamic nature of this situation, we cannot reasonably quantify the full effect of COVID-19 on our financial condition, results of

operations or cash flows in the future.

However, we do expect that it will continue to have a negative impact an cash flows earned

by us during the second quarter of 2021, which would result in a material adverse effect on our future net investment

income, the fair value of our portfolio investments, and the results of operations and financial condition of our portfolio

As such, given the dynamic

nature of this situation, we cannot quantify the full effect of COVID-19 on our financial condition, results of operations or cash flows

in the future.

However, we do expect that it will continue to have a negative impact on cash flows earned by us during the third quarter

of 2021, which would result in a material adverse effect on our future net investment income, the fair value of our portfolio investments,

and the results of operations and financial condition of our portfolio companies.

We generate revenue in the form of interest payable

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date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

Our primary operating expenses

include (1) investment advisory fees to WhiteHorse Advisers;

Our primary operating expenses include (1) investment

advisory fees to WhiteHorse Advisers;

(2) the allocable portion of overhead under the Administration Agreement;

(3) the interest expense on our outstanding debt;

(3) the interest expense

on our outstanding debt;

and (4) other operating costs as detailed below.

Our investment advisory fees compensate

our investment adviser for its work in identifying, evaluating, negotiating, consummating and monitoring our investments.

We bear all other costs and expenses of our operations and

transactions, including:

Our investment advisory fees compensate our investment adviser

for its work in identifying, evaluating, negotiating, consummating and monitoring our investments.

We bear all other costs and expenses of our operations

and transactions, including:

our organization;

calculating our net asset value and net asset value per share (including the costs and expenses of independent valuation firms);

fees and expenses, including travel expenses, incurred by WhiteHorse Advisers or payable to third parties in performing due diligence

on prospective portfolio companies, monitoring our investments and, if necessary, enforcing our rights;

fees and expenses, including travel expenses, incurred by WhiteHorse Advisers or payable to third parties

in performing due diligence on prospective portfolio companies, monitoring our investments and, if necessary, enforcing our rights;

the costs of all future offerings of common shares and other securities, and other incurrences of debt;

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dues, fees and charges of any trade association of which we are a member;

all other expenses reasonably incurred by us or WhiteHorse Administration in connection with administering our business, including

rent and our allocable portion of the costs and expenses of our chief financial officer and chief compliance officer along with their

respective staffs.

WhiteHorse Advisers or WhiteHorse Administration may pay for

certain expenses that we incur, which are subject to reimbursement by us.

all other expenses reasonably incurred by us or WhiteHorse Administration in connection with administering

our business, including rent and our allocable portion of the costs and expenses of our chief financial officer and chief compliance officer

along with their respective staffs.

WhiteHorse Advisers or WhiteHorse Administration may pay

for certain expenses that we incur, which are subject to reimbursement by us.

Recent Developments

For the period April 1, 2021 through May 10,

2021, we contributed an additional set of assets, which included one existing issuer of

senior secured debt facilities to STRS JV.

On July 15, 2021, the terms of the Credit Facility

were amended to, among other things, allow WhiteHorse Credit to reduce the applicable margins for interest rates to 2.35%, extend the

non-call period from November 22, 2021 to November 22, 2022, extend the end of the reinvestment period from November 22, 2023 to November

22, 2024 and extend the scheduled termination date from November 22, 2024, to November 22, 2025.

On July 15, 2021, the terms of the STRS JV Credit

Facility were amended to, among other things, allow STRS JV to reduce the applicable margins for interest rates to 2.35%, extend the non-call

period from January 19, 2022 to January 19, 2023, extend the end of the reinvestment period from July 19, 2022 to July 19, 2023 and extend

the scheduled termination date from July 19, 2024, to July 19, 2025.

For the period July 1, 2021 through August 9,

2021, we contributed an additional set of assets, which included two existing issuers of senior secured debt facilities to STRS

Consolidated Results of Operations

The consolidated results of operations

described below may not be indicative of the results we report in future periods.

Net investment income and net increase in net assets

can vary substantially from period to period due to various reasons, including the level of new investments and the recognition of realized

gains and losses and unrealized appreciation and depreciation.

As a result, quarterly comparisons of net increases in net assets resulting

from operations may not be meaningful.

The consolidated results of operations described

below may not be indicative of the results we report in future periods.

Net investment income and net increase in net assets can vary

substantially from period to period due to various reasons, including the level of new investments and the recognition of realized gains

and losses and unrealized appreciation and depreciation.

As a result, quarterly comparisons of net increases in net assets resulting from

operations may not be meaningful.

Investment Income

income for the three months ended March 31, 2021 totaled $18.0 million, and was primarily attributable to interest, dividends and fees

earned from investments in portfolio companies.

This compares to investment income for the three months ended March 31, 2020 of $14.5

The increase in net investment income for the year-over-year period was primarily attributable to higher accelerated accretion

income recognized due to higher repayment activity and higher investment income generated from STRS JV .

Investment income for the three months ended March 31, 2021 and 2020 included $0.7 million and $0.3 million of non-recurring fee income,

Investment income for the three and

six months ended June 30, 2021 totaled $17.3 million and $35.3 million, respectively, and was primarily attributable to interest, dividends

and fees earned from investments in portfolio companies.

Investment income for the three and six months ended June 30, 2020 totaled $13.8

million and $28.4 million, respectively.

The increase in net investment income for the year-over-year period was primarily attributable

to higher accelerated accretion income recognized due to higher repayment activity and higher investment income generated from STRS JV.

Investment income for the three and six months ended June 30, 2021 included $0.2 million and $0.9 million of non-recurring fee income,

respectively.

We expect to generate some level of non-recurring fee income during most quarters from prepayments, amendments and other

Investment income for the three and six months ended June 30, 2020 included $0.4 million and $0.7 million of non-recurring

fee income, respectively.

We expect to generate some level of non-recurring fee income during most quarters from prepayments, amendments

and other sources.

Operating Expenses

Expenses, excluding excise tax, totaled

$10.2 million and $8.3 million for the three months ended March 31, 2021 and 2020, respectively.

Expenses, excluding excise tax, totaled $10.8 million

and $21.0 million for the three and six months ended June 30, 2021, respectively.

This compares to expenses, excluding excise tax, of

$8.4 million and $16.6 million for the three and six months ended June 30, 2020, respectively.

Interest expense totaled $3.8 million

and $3.7 million for the three months ended March 31, 2021 and 2020, respectively.

The increase was primarily due to higher borrowing

base, partially offset by interest rates resulting from a decrease in LIBOR.

and $7.6 million for the three and six months ended June 30, 2021, respectively.

This compares to interest expense of $3.2 million and

$6.9 million for the three and six months ended June 30, 2020, respectively.

The increase in interest expense for the three and six months

ended June 30, 2021, from the three and six months ended June 30, 2020, was primarily due to higher borrowing base, partially offset by

lower interest rates resulting from a decrease in LIBOR.

Base management fees totaled $3.4 million

and $3.1 million for the three months ended March 31, 2021 and 2020, respectively.

Performance-based incentive fees totaled $2.0 million

and $0.4 million for the three months ended March 31, 2021 and 2020, respectively.

The increase in performance-based incentive fees was

mainly attributable to an increase in pre-incentive fee net investment income as well as a $0.1 million capital gains incentive fee accrual,

and $6.7 million for the three and six months ended June 30, 2021, respectively.

Base management fees totaled $3.0 million and $6.0 million

for the three and six months ended June 30, 2020, respectively.

The increase management fees for the three and six months ended June 30,

2021, from the three and six months ended June 30, 2020, was primarily due to higher gross assets.

Performance-based incentive fees totaled

$2.6 million and $4.7 million for the three and six months ended June 30, 2021, respectively.

Performance-based incentive fees totaled

$1.3 million and $1.8 million for the three and six months ended June 30, 2020, respectively.

The increase in performance-based incentive

fees for the three and six months ended June 30, 2021, from the three and six months ended June 30, 2020, was mainly attributable to an

increase in pre-incentive fee net investment income as well as capital gains incentive fee accrual of $0.9 million and $1.0 million, respectively,

which was driven by gains recognized in the portfolio in the current period.

Administrative service fees for the three months ended March

31, 2021 and 2020 totaled $0.2 million and $0.2 million, respectively.

General and administrative expenses were $0.8 million and

$0.9 million for the three months ended March 31, 2021 and 2020, respectively.

Administrative service fees for the three and six

months ended June 30, 2021 totaled $0.2 million and $0.3 million, respectively.

This compares to administrative service fees for the three

and six months ended June 30, 2020, which totaled $0.2 million and $0.3 million, respectively.

General and administrative expenses were $0.9 million

and $1.7 million for the three and six months ended June 30, 2021, respectively.

This compares to general and administrative expenses

of $0.7 million and $1.6 million for the three and six months ended June 30, 2020, respectively.

Excise Tax Expense

We have elected to be treated as a RIC under Subchapter

M of the Code and operate in a manner so as to qualify for the tax treatment applicable to RICs.

In order to be subject to tax as a RIC,

we are required to meet certain source of income and asset diversification requirements, as well as timely distribute to our stockholders

dividends for U.S.

federal income tax purposes of an amount generally at least equal to 90% of investment company taxable income, as defined

by the Code, and determined without regard to any deduction for dividends paid for each tax year.

We have made and intend to continue

to make the requisite distributions to our stockholders that will generally relieve us from U.S.

We have elected to be treated as a RIC under

Subchapter M of the Code and operate in a manner so as to qualify for the tax treatment applicable to RICs.

In order to be subject to

tax as a RIC, we are required to meet certain source of income and asset diversification requirements, as well as timely distribute to

our stockholders dividends for U.S.

federal income tax purposes of an amount generally at least equal to 90% of investment company taxable

income, as defined by the Code, and determined without regard to any deduction for dividends paid for each tax year.

We have made and

intend to continue to make the requisite distributions to our stockholders that will generally relieve us from U.S.

federal income taxes.

Depending on the level of taxable income

earned in a tax year, we may choose to retain taxable income in excess of current year distributions into the next tax year in an amount

less than what would trigger payments of U.S.

Depending on the level of taxable income earned

in a tax year, we may choose to retain taxable income in excess of current year distributions into the next tax year in an amount less

than what would trigger payments of U.S.

federal income tax under Subchapter M of the Code.

We may then be required to incur a 4%

excise tax on such income.

To the extent that we determine that our estimated current year annual taxable income may exceed estimated

current year distributions, we accrue excise tax, if any, on estimated excess taxable income as taxable income is earned.

We may then be required to incur a 4% excise

tax on such income.

To the extent that we determine that our estimated current year annual taxable income may exceed estimated current

year distributions, we accrue excise tax, if any, on estimated excess taxable income as taxable income is earned.

For the three and six

months ended June 30, 2021, we accrued a net federal excise tax expense of $0.4 million and $0.6 million, respectively.

For the three

months ended March 31, 2021 and 2020, we accrued a net excise tax expense of $0.2 million and $0.2 million, respectively, for U.S.

and six months ended June 30, 2020, we accrued a net federal excise tax expense of $0.2 million and $0.4 million, respectively.

in excise tax for the three and six months ended June 30, 2021, from the three and six months ended June 30, 2020, was primarily as a

result of higher net investment income and realized gains.

Net Realized and Unrealized Gains (Losses) on Investments

The following shows the breakdown of net realized gains and losses

for the three months ended March 31, 2021 and 2020 (in millions):

Three months ended March 31,

The following shows the breakdown of net realized gains

and losses for the three and six months ended June 30, 2021 and 2020:

Three months ended

Six months ended

($ in millions)

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

AG Kings Holdings Inc.

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Drew Foam Companies Inc

Geo Logic Systems Ltd.

Mikawaya Holdings, LLC

RCKC Acquisitions LLC

Road Safety Services, Inc.

Tax Slayer, LLC

Vero Parent, Inc.

Westrock Coffee Company, LLC

WH Lessor Corp.

Net realized gains

* Rounds to less than 0.1.

Totals may not foot due to rounding.

(1) Escrow receivable amounts

were recognized in connection with realization events.

The following shows the breakdown in the changes in unrealized appreciation

of investments for the three months ended March 31, 2021 and 2020 (in millions):

Three Months Ended March 31,

Vessco Holdings, LLC

Total realized (losses)/ gains

(1) Escrow receivable amounts were recognized in connection

with realization events.

(2) Includes various investments with aggregate realized gains or losses less than $50,000.

The following shows the breakdown in the changes in unrealized

appreciation and depreciation of investments for the three and six months ended June 30, 2021 and 2020:

Three Months Ended

Six Months Ended

($ in millions)

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Gross unrealized appreciation on investments (1)

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Reversal of prior period net unrealized (appreciation) depreciation upon a realization

Includes unrealized appreciation from the AG Kings Holdings Inc.

escrow receivable of $1.0 million.

Financial Condition, Liquidity and Capital Resources

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section above.

As a business development company, we

distribute substantially all of our net income to our stockholders.

As a business development company,

we distribute substantially all of our net income to our stockholders.

We generate cash primarily from offerings of securities, borrowings

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if our board of directors determines that leveraging our portfolio would be in our best interest and the best interests of our stockholders.

Our board of directors may decide to

issue common stock, such as through at-the-market offerings, direct placements or otherwise, to finance our operations rather than issuing

debt or other senior securities.

Any decision to sell shares below the then-current net asset value per share of our common stock is subject

to stockholder approval and a determination by our board of directors that such issuance and sale is in our and our stockholders’

board of directors may decide to issue common stock, such as through at-the-market offerings, direct placements or otherwise, to finance

our operations rather than issuing debt or other senior securities.

Any decision to sell shares below the then-current net asset value

per share of our common stock is subject to stockholder approval and a determination by our board of directors that such issuance and

sale is in our and our stockholders’

best interests.

Any sale or other issuance of shares of our common stock at a price below net asset value per share results in immediate

dilution to our stockholders’

interests in our common stock and a reduction in our net asset value per share.

If we were to issue

additional shares of our common stock during the next 12 months, we do not intend to issue shares below the then-current net asset value

Restricted cash and cash equivalents include

amounts that are collected and held by the trustee appointed as custodian of the assets securing the Credit Facility.

Restricted cash

is held by the trustee for the payment of interest expense and principal on the outstanding borrowings or reinvestment into new assets.

Any sale or other issuance of shares of our common stock at a price below

net asset value per share results in immediate dilution to our stockholders’

interests in our common stock and a reduction in our

net asset value per share.

If we were to issue additional shares of our common stock during the next 12 months, we do not intend to issue

shares below the then-current net asset value per share.

Restricted cash and cash equivalents

include amounts that are collected and held by the trustee appointed as custodian of the assets securing the Credit Facility.

cash is held by the trustee for the payment of interest expense and principal on the outstanding borrowings or reinvestment into new assets.

Restricted cash that represents interest or fee income is transferred to unrestricted cash accounts by the trustee generally once a quarter

after the payment of operating expenses and amounts due under the Credit Facility.

Our operating activities provided cash

and cash equivalents of $66.0 million during the three months ended March 31, 2021, primarily from the net proceeds received from realizations

and repayments on our investments partially offset by acquisition of investments as well and cash used from the net change in working

Our financing activities used cash and cash equivalents of $57.5 million during the three months ended March 31, 2021, primarily

due to the payment of distributions to stockholders.

Our operating activities provided cash

and cash equivalents of $15.5 million during the three months ended March 31, 2020, primarily from the net proceeds received from realizations

Our operating activities provided

cash and cash equivalents of $40.6 million during the six months ended June 30, 2021, primarily from the net proceeds received from realizations

and repayments on our investments, partially offset by acquisition of investments and cash used from the net change in working

Our financing activities used cash and cash equivalents of $38.8 million during the six months ended June 30, 2021, primarily

due to repayments on the Credit Facility and the payment of distributions to stockholders, offset by proceeds from sales of common stock.

Our operating activities provided

cash and cash equivalents of $54.5 million during the six months ended June 30, 2020, primarily from the net proceeds received from realizations

and repayments on our investments as well as cash provided from the net change in working capital.

Our financing activities used cash

and cash equivalents of $14.9 million during the three months ended March 31, 2020, primarily due to repayments on the credit facility

and the payment of distributions to stockholders.

As of March 31, 2021, we had cash and

cash equivalent resources of $24.5 million, including $16.8 million of restricted cash.

As of the same date, we had approximately $70.4

million undrawn and available to be drawn under the Credit Facility based on the collateral and portfolio quality requirements stipulated

in the related credit agreement.

As of December 31, 2020, we had cash and

cash equivalent resources of $15.9 million, including $7.9 million of restricted cash.

As of the same date, we had $19.8 million undrawn

under the Credit Facility based on the collateral and portfolio quality requirements stipulated in the related credit and security agreement.

In January 2019, we and STRS Ohio, formed

a joint venture, STRS JV, that invests primarily in senior secured loans, including first lien and second lien facilities, to performing

lower middle market companies across a broad range of industries that typically carry a floating interest rate based on the LIBOR or

an equivalent risk-free index rate and have a term of three to six years.

STRS JV was formed as a Delaware limited liability company

and is not consolidated by either us or STRS Ohio for financial reporting purposes.

and cash equivalents of $61.2 million during the six months ended June 30, 2020, primarily due to repayments on the Credit Facility and

the payment of distributions to stockholders.

30, 2021, we had cash and cash equivalent resources of $17.8 million, including $7.4 million of restricted cash.

As of June 30, 2021,

we had approximately $46.5 million undrawn and available to be drawn under the Credit Facility based on the collateral and portfolio quality

requirements stipulated in the related credit agreement.

As of December 31, 2020, we had

cash and cash equivalent resources of $15.9 million, including $7.9 million of restricted cash.

As of December 31, 2020, we had $19.8

million undrawn under the Credit Facility based on the collateral and portfolio quality requirements stipulated in the related credit

and security agreement.

In January 2019, we and STRS Ohio,

formed a joint venture, STRS JV, that invests primarily in senior secured loans, including first lien and second lien facilities, to performing

lower middle market companies across a broad range of industries that typically carry a floating interest rate based on the LIBOR or an

equivalent risk-free index rate and have a term of three to six years.

STRS JV was formed as a Delaware limited liability company and

is not consolidated by either us or STRS Ohio for financial reporting purposes.

On July 19, 2019 STRS JV formally launched operations.

As of March 31, 2021, STRS JV had total assets of $193.7 million.

As of June 30, 2021, STRS JV had total assets of $219.2 million.

STRS JV’s portfolio consisted of debt investments in 25 portfolio

companies as of March 31, 2021.

As of March 31, 2021, the five largest investments in portfolio companies in STRS JV’s portfolio

totaled $61.0 million.

companies as of June 30, 2021.

As of June 30, 2021, the five largest investments in portfolio companies in STRS JV’s portfolio totaled

$65.7 million.

STRS JV invests in portfolio companies in the same industries in which we may directly invest.

We provide capital to STRS JV in the form

of limited liability company, or LLC equity interests and subordinated notes.

As of March 31, 2021, we and STRS Ohio owned 60% and 40%,

We provide capital to STRS JV in the

form of limited liability company, or LLC equity interests, and subordinated notes.

As of June 30, 2021, we and STRS Ohio owned 60% and

40%, respectively, of the LLC equity interests of STRS JV.

Our investment in STRS JV consisted of equity contributions and subordinated note

advances of $11.1 million and $44.5 million as of March 31, 2021, respectively.

As of the same date, we had commitments to fund equity

Our investment in STRS JV consisted of equity contributions and subordinated

note advances of $12.5 million and $49.8 million as of June 30, 2021, respectively.

As of June 30, 2021, we had commitments to fund equity

interests and subordinated notes in STRS JV of $15 million and $60 million, of which $2.5 million and $10.2 million was unfunded, respectively.

STRS JV is managed by a four-person board of managers, two of whom are selected by us and two of whom are selected by STRS Ohio.

All material decisions with respect to STRS JV,

including those involving its investment portfolio, require unanimous approval of a quorum of the board of managers.

Quorum is defined

as (i) the presence of two members of the board of managers;

provided that at least one individual is present that was elected, designated

or appointed by each member;

All material decisions with respect

to STRS JV, including those involving its investment portfolio, require unanimous approval of a quorum of the board of managers.

is defined as (i) the presence of two members of the board of managers;

provided that at least one individual is present that was elected,

designated or appointed by each member;

(ii) the presence of three members of the board of managers;

provided that the individual that was elected,

designated or appointed by the member with only one individual present is entitled to cast two votes on each matter;

or (iii) the presence

of four members of the board of managers;

provided that two individuals are present that were elected, designated or appointed by each

is a summary of STRS JV’s portfolio as of March 31, 2021 and December 31, 2020 (dollars in thousands):

investments (1)

average effective yield on total portfolio (2)

Number of portfolio companies

portfolio company investment (1)

of five largest portfolio company investments (1)

(1) At fair value.

(2) Weighted average effective yield is computed by dividing (a) annualized interest income (including interest

income resulting from the amortization of fees and discounts) by (b) the weighted average cost of investment.

Investments consisted of the following (dollars in thousands):

March 31, 2021

provided that the individual that

was elected, designated or appointed by the member with only one individual present is entitled to cast two votes on each matter;

the presence of four members of the board of managers;

provided that two individuals are present that were elected, designated or appointed

by each member.

Below is a summary of STRS JV’s portfolio as of June 30, 2021 and December 31, 2020:

June 30, 2021

December 31, 2020

Total investments (1)

Weighted average effective yield on total portfolio (2)

Number of portfolio companies in STRS JV

Largest portfolio company investment (1)

Total of five largest portfolio company investments (1)

(1) At fair value.

Weighted average effective yield is computed by dividing (a) annualized interest income (including interest income resulting from the amortization of fees and discounts) by (b) the weighted average cost of investment.

Investments consisted of the following:

As of June 30, 2021

As of December 31, 2020

Amortized Cost

First lien secured loans

following table shows the portfolio composition by industry grouping at fair value (dollars in thousands):

March 31, 2021

December 31, 2020

The following table shows the portfolio composition by

industry grouping at fair value:

Industry ($ in thousands)

As of June 30, 2021

As of December 31, 2020

Application Software

Automotive Retail

Building Products

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Diversified Support Services

Electronic Equipment & Instruments

Environmental & Facilities Services

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Technology Hardware, Storage & Peripherals

See Note 4 to our consolidated financial statements for further

discussion on STRS JV’s portfolio and selected balance sheet information as of March 31, 2021 and December 31, 2020 and selected

statement of operations information for the three months ended March 31, 2021 and March 31, 2020.

Trading Companies & Distributors

See Note 4 to our consolidated financial

statements for further discussion on STRS JV’s portfolio and selected balance sheet information as of June 30, 2021 and December

31, 2020 and selected statement of operations information for the three and six months ended June 30, 2021 and June 30, 2020.

Credit Facility

On December 23, 2015, our wholly owned

subsidiary WhiteHorse Finance Credit I, LLC, or WhiteHorse Credit, entered into the $200 million Credit Facility with the Lender.

27, 2016, the Credit Facility was amended and restated to clarify certain terms.

On June 29, 2017, the Credit Facility was again amended

and restated to, among other things, (i) extend the maturity date to December 29, 2021, (ii) increase the amount contained within the

accordion feature which allows for the expansion of the borrowing limit from $220 million to $235 million and (iii) reduce the interest

On December 23, 2015, our wholly

owned subsidiary WhiteHorse Finance Credit I, LLC, or WhiteHorse Credit, entered into the $200 million Credit Facility with the Lender.

On June 27, 2016, the Credit Facility was amended and restated to clarify certain terms.

On June 29, 2017, the Credit Facility was again

amended and restated to, among other things, (i) extend the maturity date to December 29, 2021, (ii) increase the amount contained within

the accordion feature which allows for the expansion of the borrowing limit from $220 million to $235 million and (iii) reduce the interest

rate spread applicable on outstanding borrowings to 2.75%.

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the Credit Facility.

On November 22, 2019, the terms of the

Credit Facility were amended to, among other things, (i) extend the maturity date from December 29, 2021 to November

(ii) increase the size of the facility from $200 million to $250 million with an additional $100 million accordion feature,

which allows for the expansion of the borrowing limit, exercisable in increments of at least $35 million, or the Commitment;

the interest rate spread applicable on outstanding borrowings from 2.75% to 2.50%;

(iv) change the minimum borrowing amount from 77.5%

to 70.0% of the Commitment;

(v) increase the advance rate from 57% to 60%;

and (vi) extend the non-call period from October 29, 2019 to

November 22, 2021.

On December 21, 2020, the terms of the

Credit Facility were amended to, among other things, (i) increases the minimum funding amount from $175 million

to $200 million, (ii) increase the size of the facility from $250 million to $285 million and retains an accordion feature which

allows for the expansion of the borrowing limit up to $350 million and (iii) provide for the implementation of certain changes

relating to the transition away from the LIBOR in the market.

On April 28, 2021, the terms of the Credit Facility were amended

to, among other things, enable WhiteHorse Credit to borrow in British Pounds or Euros.

As of March 31, 2021, there was $214.6

million in outstanding borrowings under the Credit Facility and, based on collateral and portfolio requirements stipulated in the Credit

Facility agreement, approximately $70.4 million was available to be drawn on such date.

The Credit Facility is secured by all of the

assets of WhiteHorse Credit, which included loans with a fair value of $537.6 million as of March 31, 2021.

As of December 31, 2020, there was $265.2 million

in outstanding borrowings under the Credit Facility and, based on collateral and portfolio requirements stipulated in the Credit Facility

agreement, approximately $19.8 million was available to be drawn on such date.

The Credit Facility is secured by all of the assets of

WhiteHorse Credit, which included loans with a fair value of $601.1 million as of December 31, 2020.

The Credit Facility provides for borrowings

in an aggregate principal amount up to $285 million with an accordion feature which allows for the expansion of the borrowing limit up

to $350 million, subject to consent from the Lender and other customary conditions.

The required minimum outstanding borrowings under

the Credit Facility are $200 million, unless the accordion feature is exercised, at which time the required minimum outstanding borrowings

will be $245 million.

Under the Credit Facility, there are two

coverage tests that WhiteHorse Credit must meet on specified compliance dates in order to permit WhiteHorse Credit to make new borrowings

On November 22, 2019, the terms of the Credit

Facility were amended to, among other things, (i) extend the maturity date from December 29, 2021 to November 22, 2024;(ii) increase the

size of the facility from $200 million to $250 million with an additional $100 million accordion feature, which allows for the expansion

of the borrowing limit, exercisable in increments of at least $35 million, or the Commitment;

(iii) reduce the interest rate spread applicable

on outstanding borrowings from 2.75% to 2.50%;

(iv) change the minimum borrowing amount from 77.5% to 70.0% of the Commitment;

the advance rate from 57% to 60%;

and (vi) extend the non-call period from October 29, 2019 to November 22, 2021.

On December 21, 2020, the terms of

the Credit Facility were amended to, among other things, (i) increases the minimum funding amount from $175 million to $200 million, (ii)

increase the size of the facility from $250 million to $285 million and retains an accordion feature which allows for the expansion of

the borrowing limit up to $350 million and (iii) provide for the implementation of certain changes relating to the transition away from

the LIBOR in the market.

On April 28, 2021, the terms of the Credit Facility were

amended and restated to, among other things, enable WhiteHorse Credit to borrow in British Pounds or Euros.

The Credit Facility provides for

borrowings in an aggregate principal amount up to $285 million with an accordion feature which allows for the expansion of the borrowing

limit up to $350 million, subject to consent from the Lender and other customary conditions.

The required minimum outstanding borrowings

under the Credit Facility are $200 million, unless the accordion feature is exercised, at which time the required minimum outstanding

borrowings will be $245 million.

Under the Credit Facility, there are

two coverage tests that WhiteHorse Credit must meet on specified compliance dates in order to permit WhiteHorse Credit to make new borrowings

and to make distributions in the ordinary course - a borrowing base test and a market value test.

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of 165% of the aggregate outstanding amount of all Lender advances as set forth in the credit agreement and related documentation.

Advances under the Credit Facility

are based on the three-month LIBOR (or another applicable interest rate benchmark for loans denominated in foreign currencies) plus

an annual spread of 2.50%.

Advances under the Credit Facility are

based on the three-month LIBOR for USD denominated borrowings plus an annual spread of 2.50%.

The Credit Facility bears interest at EURIBOR,

for EUR denominated borrowings, CDOR for CAD denominated borrowings, SONIA, for GBP denominated, plus a spread on outstanding borrowings

of 2.50%, 2.55% and 2.55%, respectively.

Interest is payable quarterly in arrears.

WhiteHorse Credit is required to pay a non-usage fee which

accrues at 0.75% per annum on the average daily unused amount of the financing commitments, to the extent the aggregate principal

WhiteHorse Credit is required to pay a non-usage fee

which accrues at 0.75% per annum on the average daily unused amount of the financing commitments, to the extent the aggregate principal

amount available under the Credit Facility has not been borrowed.

WhiteHorse Credit paid an upfront fee and incurred certain other

customary costs and expenses in connection with obtaining the Credit Facility.

Any amounts borrowed under the Credit Facility will

mature, and all accrued and unpaid interest thereunder will be due and payable, on November 22, 2024.

WhiteHorse Credit paid an upfront fee and incurred certain other customary

costs and expenses in connection with obtaining the Credit Facility.

Any amounts borrowed under the Credit Facility will mature, and all

accrued and unpaid interest thereunder will be due and payable, on November 22, 2024.

The Credit Facility and the related documents

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of a change in control, or failure to maintain certain required ratios.

If we fail to perform our obligations under the

credit agreement or the related agreements, an event of default may occur, which could cause the Lender to accelerate all of the outstanding

debt and other obligations under the Credit Facility or to exercise other remedies under the credit agreement.

Any such developments could

have a material adverse effect on our financial condition and results of operations.

If we fail to perform our obligations

under the credit agreement or the related agreements, an event of default may occur, which could cause the Lender to accelerate all of

the outstanding debt and other obligations under the Credit Facility or to exercise other remedies under the credit agreement.

developments could have a material adverse effect on our financial condition and results of operations.

If any of our contractual obligations

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Any new investment management agreement would also be subject to approval by our stockholders.

As of June 30, 2021, there was $238.5

million in outstanding borrowings under the Credit Facility and, based on collateral and portfolio requirements stipulated in the Credit

Facility agreement, approximately $46.5 million was available to be drawn on such date.

The Credit Facility is secured by all of the assets

of WhiteHorse Credit, which included loans with a fair value of $592.5 million as of June 30, 2021.

As of December 31, 2020, there was

$265.2 million in outstanding borrowings under the Credit Facility and, based on collateral and portfolio requirements stipulated in the

Credit Facility agreement, approximately $19.8 million was available to be drawn on such date.

The Credit Facility is secured by all of

the assets of WhiteHorse Credit, which included loans with a fair value of $601.1 million as of December 31, 2020.

2023 Private Notes

On July 13, 2018, we entered into the 2023

Note Purchase Agreement, to sell in a private offering $30 million of aggregate principal amount of unsecured notes to qualified

institutional investors in reliance on Section 4(a)(2) of the Securities Act.

Interest on the 2023 Private Notes is payable semiannually

on February 7 and August 7, at a fixed, annual rate of 6.00%.

This interest rate is subject to increase (up to 6.50%) in the

event that, subject to certain exceptions, the 2023 Private Notes cease to have an investment grade rating.

The 2023 Private Notes mature

on August 7, 2023, unless redeemed, purchased or prepaid prior to such date by us or our affiliates in accordance with their terms.

The 2023 Private Notes are general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated

indebtedness that we may issue.

On July 13, 2018, we entered into the 2023 Note

Purchase Agreement, to sell in a private offering $30 million of aggregate principal amount of unsecured notes to qualified institutional

investors in reliance on Section 4(a)(2) of the Securities Act.

Interest on the 2023 Private Notes is payable semiannually on February

7 and August 7, at a fixed, annual rate of 6.00%.

This interest rate is subject to increase (up to 6.50%) in the event that, subject to

certain exceptions, the 2023 Private Notes cease to have an investment grade rating.

The 2023 Private Notes mature on August 7, 2023,

unless redeemed, purchased or prepaid prior to such date by us or our affiliates in accordance with their terms.

The 2023 Private Notes

are general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness that we may

The closing of the transaction occurred on August 7, 2018.

We used the net proceeds from this offering,

together with cash on hand, to redeem existing debt.

We used the net proceeds from this offering, together with cash on hand,

to redeem existing debt.

2025 Private Notes

On October 20, 2020, we entered into the 2025

Note Purchase Agreement, to sell in a private offering $40 million of aggregate principal amount of unsecured notes to qualified

On October 20, 2020, we entered into

the 2025 Note Purchase Agreement, to sell in a private offering $40 million of aggregate principal amount of unsecured notes to qualified

institutional investors in reliance on Section 4(a)(2) of the Securities Act.

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on April 20 and October 20, at a fixed, annual rate of 5.375%.

This interest rate is subject to increase (up to 6.375%) in the

event that, subject to certain exceptions, the 2025 Private Notes cease to have an investment grade rating.

The 2025 Private Notes mature

on October 20, 2025, unless redeemed, purchased or prepaid prior to such date by us or our affiliates in accordance with their terms.

The 2025 Private Notes are general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated

indebtedness that we may issue.

This interest rate is subject to increase (up to 6.375%) in the event that,

subject to certain exceptions, the 2025 Private Notes cease to have an investment grade rating.

The 2025 Private Notes mature on October

20, 2025, unless redeemed, purchased or prepaid prior to such date by us or our affiliates in accordance with their terms.

The 2025 Private

Notes are general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness that

we may issue.

The closing of the transaction occurred on October 20, 2020.

We used the net proceeds from this offering

to redeem existing debt.

We used the net proceeds from this offering to redeem existing

2026 Private Notes

On December 4, 2020, we entered into the 2026

Note Purchase Agreement, to sell in a private offering $10 million of aggregate principal amount of unsecured notes to qualified

On December 4, 2020, we entered into

the 2026 Note Purchase Agreement, to sell in a private offering $10 million of aggregate principal amount of unsecured notes to qualified

institutional investors in reliance on Section 4(a)(2) of the Securities Act.

1 unchanged sentence

on June 4 and December 4, at a fixed, annual rate of 5.375%.

This interest rate is subject to increase (up to 6.375%) in the

event that, subject to certain exceptions, the 2026 Private Notes cease to have an investment grade rating.

The 2026 Private Notes mature

on December 4, 2026, unless redeemed, purchased or prepaid prior to such date by us or our affiliates in accordance with their terms.

The 2026 Private Notes are general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated

indebtedness that we may issue.

This interest rate is subject to increase (up to 6.375%) in the event that,

subject to certain exceptions, the 2026 Private Notes cease to have an investment grade rating.

The 2026 Private Notes mature on December

4, 2026, unless redeemed, purchased or prepaid prior to such date by us or our affiliates in accordance with their terms.

The 2026 Private

Notes are general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness that

we may issue.

The closing of the transaction occurred on December 4, 2020.

We used the net proceeds from this offering

to redeem existing debt.

We used the net proceeds from this offering to redeem existing

2027 Private Notes

On December 4, 2020, we entered into the 2027 Note Purchase

Agreement, to sell in a private offering $10 million of aggregate principal amount of unsecured notes to qualified

On December 4, 2020, we entered into

the 2027 Note Purchase Agreement, to sell in a private offering $10 million of aggregate principal amount of unsecured notes to qualified

institutional investors in reliance on Section 4(a)(2) of the Securities Act.

Interest on the 2027 Private Notes is payable

semiannually on June 4 and December 4, at a fixed, annual rate of 5.625%.

This interest rate is subject to increase (up to

6.625%) in the event that, subject to certain exceptions, the 2027 Private Notes cease to have an investment grade rating.

Private Notes mature on December 4, 2027, unless redeemed, purchased or prepaid prior to such date by us or our affiliates in

accordance with their terms.

The 2027 Private Notes are general unsecured obligations that rank pari passu with all outstanding

and future unsecured unsubordinated indebtedness that we may issue.

Interest on the 2027 Private Notes is payable semiannually

on June 4 and December 4, at a fixed, annual rate of 5.625%.

This interest rate is subject to increase (up to 6.625%) in the event that,

subject to certain exceptions, the 2027 Private Notes cease to have an investment grade rating.

The 2027 Private Notes mature on December

4, 2027, unless redeemed, purchased or prepaid prior to such date by us or our affiliates in accordance with their terms.

The 2027 Private

Notes are general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness that

we may issue.

The closing of the transaction occurred on December 4, 2020.

We used the net proceeds from this offering to redeem existing debt.

We used the net proceeds from this offering to redeem existing

2025 Public Notes

On November 13, 2018, we completed a public

offering of $35.0 million of aggregate principal amount of unsecured notes, the net proceeds of which were used to fund investments

On November 13, 2018, we completed a

public offering of $35 million of aggregate principal amount of unsecured notes, the net proceeds of which were used to fund investments

in debt and equity securities and repay outstanding indebtedness under our revolving credit facility.

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is paid quarterly on February 28, May 31, August 31 and November 30 each year, at a fixed, annual rate of 6.50%.

2025 Public Notes will mature on November 30, 2025 and may be redeemed in whole or in part at any time, or from time to time, at

our option on or after November 30, 2021.

The 2025 Public Notes will rank equally in right of payment with our other outstanding

and future unsecured, unsubordinated indebtedness, including the 2025 Private Notes.

The 2025 Public Notes will effectively rank behind

all of our existing and future secured indebtedness (including indebtedness that is initially unsecured in respect of which we subsequently

grant security) in right of payment, to the extent of the value of the assets securing such indebtedness, including our Credit Facility.

The 2025 Public Notes

will mature on November 30, 2025 and may be redeemed in whole or in part at any time, or from time to time, at our option on or after

November 30, 2021.

The 2025 Public Notes will rank equally in right of payment with our other outstanding and future unsecured, unsubordinated

indebtedness, including the 2023 Private Notes, the 2025 Private Notes, the 2026 Private Notes and the 2027 Private Notes.

The 2025 Public

Notes will effectively rank behind all of our existing and future secured indebtedness (including indebtedness that is initially unsecured

in respect of which we subsequently grant security) in right of payment, to the extent of the value of the assets securing such indebtedness,

including our Credit Facility.

The 2025 Public Notes are listed on the Nasdaq Global Select Market under the trading symbol “WHFBZ.”

At-the-Market Offering

On March 15, 2021, we entered into an equity

distribution agreement (the “Equity Distribution Agreement”) with WhiteHorse Advisers, WhiteHorse Administration and

Raymond James & Associates, Inc., as the sales agent (the “Sales Agent”), in connection with the sale of shares of

the Company’s common stock, par value $0.001 per share (the “Common Stock”), with an aggregate offering price of

up to $35 million.

The Equity Distribution Agreement provides that we may offer and sell shares of our common stock from time to

time through the Sales Agent in amounts and at times to be determined by us (the “ATM Offering”).

Actual sales will

depend on a variety of factors to be determined by us from time to time, including, market conditions and the trading price of our

On March 15, 2021, we entered into an equity distribution

agreement, or the Equity Distribution Agreement, with WhiteHorse Advisers, WhiteHorse Administration and Raymond James & Associates,

Inc., as the sales agent, or the Sales Agent, in connection with the sale of shares of our common stock, par value $0.001 per share, with

an aggregate offering price of up to $35 million.

The Equity Distribution Agreement provides that we may offer and sell shares of our

common stock from time to time through the Sales Agent in amounts and at times to be determined by us, or the ATM Offering.

will depend on a variety of factors to be determined by us from time to time, including market conditions and the trading price of our

common stock.

We expect to use all or substantially all of the net proceeds from the Offering to invest in portfolio companies in

We expect to use all or substantially all of the net proceeds from the ATM Offering to invest in portfolio companies in

accordance with our investment objective and strategies and for general corporate purposes.

Portfolio Investments and Yield

As of March 31, 2021, our investment portfolio

consisted primarily of senior secured loans across 90 positions in 62 companies with an aggregate fair value of $617.0 million.

that date, the majority of our portfolio was comprised of senior secured loans to lower middle market borrowers and nearly all of those

loans were variable-rate investments (primarily indexed to LIBOR) with three fixed-rate loan investments representing 0.4% based on fair

As of March 31, 2021, our portfolio had an average investment size of $6.4 million based on fair value (average debt investment

size of $7.1 million), with investment sizes ranging from zero to $24.2 million and a weighted average effective yield of 9.7%

(and a weighted average effective yield on income-producing debt investments of 9.6%).

As of December 31, 2020, our investment

As of June 30, 2021, our investment

portfolio consisted primarily of senior secured loans across 97 positions in 67 companies with an aggregate fair value of $670.5 million.

As of that date, the majority of our portfolio was comprised of senior secured loans to lower middle market borrowers and nearly all of

those loans were variable-rate investments (primarily indexed to LIBOR) with two fixed-rate loan investments representing 0.2% based

As of June 30, 2021, the majority of our portfolio was comprised of senior secured loans to lower middle market borrowers and nearly all

of those loans were variable-rate investments (primarily indexed to LIBOR) with two fixed-rate loan investments representing 0.4% based

on fair value.

As of December 31, 2020, our portfolio had an average investment size of $6.6 million (average debt investment size of

$7.3 million), with investment sizes ranging from zero to $23.5 million and a weighted average effective yield of 9.4% (and a weighted

average effective yield on income-producing debt investments of 9.9%).

For the three months ended March 31, 2021,

we invested $72.4 million in new and existing portfolio companies, offset by repayments and sales of $149.6 million.

Proceeds from sales

totaled $56.2 million while repayments included $3.1 million of scheduled repayments and $90.5 million of unscheduled repayments

For the three months ended March 31, 2020,

As of June 30, 2021, our portfolio had an average investment size of $6.4 million based on fair value (average debt investment

size of $7.1 million), with investment sizes ranging from zero to $24.2 million and a weighted average effective yield of 9.7% (and a

weighted average effective yield on income-producing debt investments of 9.5%).

As of December 31,

2020, our investment portfolio consisted primarily of senior secured loans across 98 positions in 67 companies with an aggregate fair

value of $690.7 million.

As of that date, the majority of our portfolio was comprised of senior secured loans to lower middle market borrowers

and nearly all of those loans were variable-rate investments (primarily indexed to LIBOR) with two fixed-rate loan investments representing

0.2% based on fair value.

As of December 31, 2020, our portfolio had an average investment size of $6.6 million (average debt investment

size of $7.3 million), with investment sizes ranging from zero to $23.5 million and a weighted average effective yield of 9.4% (and a

weighted average effective yield on income-producing debt investments of 9.9%).

For the six months ended June 30, 2021, we invested

$190.8 million in new and existing portfolio companies, offset by repayments and sales of $219.3 million.

Proceeds from sales totaled

$87.8 million while repayments included $6.0 million of scheduled repayments and $125.5 million of unscheduled repayments.

For the six months ended June 30, 2020,

we invested $66.9 million in new and existing portfolio companies, offset by repayments and sales of $101.3 million.

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frequent discussions with management and sponsors, including board observation rights where possible;

comparing/analyzing financial performance to the portfolio company’s business plan, as well as our

internal projections developed at underwriting;

comparing/analyzing financial performance to the portfolio company’s business plan, as well as our internal projections developed

at underwriting;

tracking portfolio company compliance with covenants as well as other metrics identified at initial investment

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periodic review by the investment committee of each asset in the portfolio and more rigorous monitoring of “watch list”

As part of the monitoring process, our

investment adviser regularly assesses the risk profile of each of our investments and, on a quarterly basis, grades each investment on

a risk scale of 1 to 5.

This risk rating system is intended to identify and assess risks relative to when we initially made the investment

and could be impacted by such factors as company-specific performance, changes in collateral, changes in potential exit opportunities

or macroeconomic conditions.

As part of the monitoring process, our investment

adviser regularly assesses the risk profile of each of our investments and, on a quarterly basis, grades each investment on a risk scale

This risk rating system is intended to identify and assess risks relative to when we initially made the investment and could

be impacted by such factors as company-specific performance, changes in collateral, changes in potential exit opportunities or macroeconomic

All investments are initially assigned

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on the 1 to 5 investment performance rating scale at fair value:

June 30, 2021

of December 31, 2020

Investment Performance

at Fair Value

Rating ($ in millions)

Investments at

Percentage of

Total Portfolio

Investments at

Percentage of

Total Portfolio

Inflation has not had a significant effect on our

results of operations in any of the reporting periods presented in our consolidated financial statements.

Total Portfolio

Inflation has not had a significant effect

on our results of operations in any of the reporting periods presented in our consolidated financial statements.

However, from time to

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statements of assets and liabilities.

As of March 31, 2021 and December 31, 2020, we had commitments to fund approximately $21.4 million

As of June 30, 2021 and December 31, 2020, we had commitments to fund approximately $23.8 million

and $19.6 million, respectively, of revolving lines of credit or delayed draw facilities to our portfolio companies.

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Distributions

In order to maintain our status as a RIC

and to avoid the imposition of corporate-level tax on income, we must distribute dividends to our stockholders each taxable year of an

amount generally at least equal to the sum of 90% of our ordinary income and realized net short-term capital gains in excess of realized

net long-term capital losses out of the assets legally available for distribution.

In order to avoid the imposition of certain excise

taxes imposed on RICs, we must distribute dividends in respect of each calendar year of an amount at least equal to the sum of (1) 98%

of our ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gains in

excess of capital losses, or capital gain net income, adjusted for certain ordinary losses, for the one-year period ending on October

31 of the calendar year and (3) any ordinary income and capital gain net income for preceding years that were not distributed during such

years on which we incurred no U.S.

federal income tax.

During both three months ended March

31, 2021 and March 31, 2020, we declared to stockholders distributions of $0.355 per share, for total distributions of $7.3 million.

In order to maintain our status as a RIC and to avoid the imposition

of corporate-level tax on income, we must distribute dividends to our stockholders each taxable year of an amount generally at least equal

to the sum of 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses

out of the assets legally available for distribution.

In order to avoid the imposition of certain excise taxes imposed on RICs, we must

distribute dividends in respect of each calendar year of an amount at least equal to the sum of (1) 98% of our ordinary income (taking

into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gains in excess of capital losses, or capital

gain net income, adjusted for certain ordinary losses, for the one-year period ending on October 31 of the calendar year and (3) any ordinary

income and capital gain net income for preceding years that were not distributed during such years on which we incurred no U.S.

During the three and six months ended June 30,

2021 we declared to stockholders distributions of $0.355 and $0.71 per share, respectively for total distributions of $7.4 million and

$14.7 million, respectively.

During the three and six months ended June 30, 2020 we declared to stockholders distributions of $0.355 and

$0.71 per share, respectively for total distributions of $7.3 million and $14.6 million, respectively.

The timing and amount of our quarterly

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We cannot assure stockholders that they will receive any distributions.

To the extent our taxable earnings fall

below the total amount of our distributions paid for that fiscal year, a portion of those distributions may be deemed a return of capital

to our stockholders for U.S.

To the extent our taxable earnings fall below

the total amount of our distributions paid for that fiscal year, a portion of those distributions may be deemed a return of capital to

our stockholders for U.S.

federal income tax purposes.

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invested by the stockholder rather than our income or gains.

During the three months ended March 31, 2021, we estimate that distributions

During the six months ended June 30, 2021, we estimate that distributions

to stockholders included $14.7 million of ordinary income, for tax purposes, based on earnings for the fiscal year ended December 31,

and current earnings for the three months ended March 31, 2021.

2020 and current earnings for the six months ended June 30, 2021.

The specific tax characteristics of the distribution will be reported

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disclosure accompanying a distribution payment carefully and should not assume that the source of any distribution is only ordinary income

In addition, in order to satisfy the annual

distribution requirement applicable to RICs, we may declare a significant portion of our dividends in shares of our common stock instead

In addition, in order to satisfy the

annual distribution requirement applicable to RICs, we may declare a significant portion of our dividends in shares of our common stock

instead of in cash.

As long as a portion of such dividend is paid in cash (which portion may be as low as 20% of such dividend under published

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We have adopted an “opt out”

distribution reinvestment plan for our common stockholders.

reinvestment plan, or the DRIP, for our common stockholders.

As a result, if we declare a distribution, then stockholders’

cash distributions

will be automatically reinvested in additional shares of our common stock unless a stockholder specifically “opts out”

our distribution reinvestment plan.

distributions will be automatically reinvested in additional shares of our common stock unless a stockholder specifically “opts

If a stockholder opts out, that stockholder receives cash distributions.

Although distributions paid

in the form of additional shares of our common stock will generally be subject to U.S.

federal, state and local taxes in the same manner

as cash distributions, stockholders participating in our distribution reinvestment plan will not receive any corresponding cash distributions

with which to pay any such applicable taxes.

Although distributions paid in the form

of additional shares of our common stock will generally be subject to U.S.

federal, state and local taxes in the same manner as cash distributions,

stockholders participating in our DRIP will not receive any corresponding cash distributions with which to pay any such applicable taxes.

Contractual Obligations

A summary of our significant contractual payment obligations

as of March 31, 2021 is as follows:

as of June 30, 2021 is as follows:

Payments Due by Period

1 – 3 Years

3 – 5 Years

(Dollars in millions)

($ in millions)

Credit Facility

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Total contractual obligations

As of March 31, 2021, we had $70.4 million of unused borrowing

As of June 30, 2021, we had $46.5 million of unused borrowing

capacity under the Credit Facility.

We entered into the Investment

Advisory Agreement with WhiteHorse Advisers in accordance with the 1940 Act on December 4, 2012, which was most recently amended on

November 1, 2018.

Under the Investment Advisory Agreement, WhiteHorse Advisers manages our day-to-day investment operations and

provides us with access to personnel and an investment committee and certain other resources so that we may fulfill our obligation

to act as a portfolio manager of WhiteHorse Credit under the Credit Facility.

Payments under the Investment Advisory Agreement in

future periods will be equal to (1) a management fee equal to 2% of the value of our consolidated gross assets;

provided, however,

that the management fee on consolidated gross assets financed using leverage over 200% asset coverage (in other words, over 1.0x

debt to equity) will be equal to 1.25% and (2) an incentive fee based on our performance.

See “Investment Advisory

Agreement”

We entered into the Investment Advisory

Agreement with WhiteHorse Advisers in accordance with the 1940 Act on December 4, 2012, which was most recently amended on November 1,

Under the Investment Advisory Agreement, WhiteHorse Advisers manages our day-to-day investment operations and provides us with access

to personnel and an investment committee and certain other resources so that we may fulfill our obligation to act as a portfolio manager

of WhiteHorse Credit under the Credit Facility.

Payments under the Investment Advisory Agreement in future periods will be equal to (1)

a management fee equal to 2.0% of the value of our consolidated gross assets;

provided, however, that the management fee on consolidated

gross assets financed using leverage over 200% asset coverage (in other words, over 1.0x debt to equity) will be equal to 1.25% and (2)

an incentive fee based on our performance.

See “Investment Advisory Agreement”

in Note 7 to the consolidated financial statements.

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been granted a non-exclusive, royalty-free license to use the “WhiteHorse”

WhiteHorse Advisers, WhiteHorse Administration

or their respective affiliates may have other clients with similar, different or competing investment objectives.

In serving in these

multiple capacities, WhiteHorse Advisers, WhiteHorse Administration or their respective affiliates may have obligations to other clients

or investors in those entities, the fulfillment of which may not be in the best interests of us or our stockholders.

Such persons may

face conflicts in the allocation of investment opportunities among us and other investment funds or accounts advised by or affiliated

with WhiteHorse Advisers or WhiteHorse Administration.

WhiteHorse Advisers or its affiliates will seek to allocate investment opportunities

among eligible accounts in a manner that is fair and equitable over time and consistent with its allocation policy.

However, we can offer

no assurance that such opportunities will be allocated to us fairly or equitably in the short-term or over time.

We depend on the communications and information

systems and policies of WhiteHorse Advisers and its affiliates as well as certain third-party service providers to monitor and prevent

cybersecurity incidents.

Our board of directors and management periodically review and assess the effectiveness of such communications

and information systems and policies.

WhiteHorse Advisers,

WhiteHorse Administration or their respective affiliates may have other clients with similar, different or competing investment objectives.

In serving in these multiple capacities, WhiteHorse Advisers, WhiteHorse Administration or their respective affiliates may have obligations

to other clients or investors in those entities, the fulfillment of which may not be in the best interests of us or our stockholders.

Such persons may face conflicts in the allocation of investment opportunities among us and other investment funds or accounts advised

by or affiliated with WhiteHorse Advisers or WhiteHorse Administration.

WhiteHorse Advisers or its affiliates will seek to allocate investment

opportunities among eligible accounts in a manner that is fair and equitable over time and consistent with its allocation policy.

we can offer no assurance that such opportunities will be allocated to us fairly or equitably in the short-term or over time.

We depend on the

communications and information systems and policies of WhiteHorse Advisers and its affiliates as well as certain third-party service providers

to monitor and prevent cybersecurity incidents.

Our board of directors and management periodically review and assess the effectiveness

of such communications and information systems and policies.

Critical Accounting Policies

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Principles of Consolidation

Under the investment company financial

accounting guidance, as formally codified in Accounting Standards Codification, or ASC, Topic 946, Financial Services - Investment

Companies , we are precluded from consolidating any entity other than another investment company.

As provided under ASC Topic 946,

we generally consolidate any investment company when we own 100% of its partners’

Under the investment company financial accounting

guidance, as formally codified in Accounting Standards Codification, or ASC, Topic 946, Financial Services - Investment Companies, we

are precluded from consolidating any entity other than another investment company.

As provided under ASC Topic 946, we generally consolidate

any investment company when we own 100% of its partners’

or members’

capital or equity units.

own a 100% equity interest in each of WhiteHorse Credit and WhiteHorse Finance Warehouse, LLC, or WhiteHorse Warehouse, which are investment

companies for accounting purposes.

As such, we have consolidated the accounts of WhiteHorse Credit and WhiteHorse Warehouse into our financial

As a result of this consolidation, the amount outstanding under the Credit Facility is treated as our indebtedness.

We own a 100% equity interest

in each of WhiteHorse Credit and WhiteHorse Finance Warehouse, LLC, WhiteHorse Warehouse, WHF PMA Holdco Blocker, LLC, WhiteHorse RCKC

Holdings, LLC and WhiteHorse Finance Holdings, LLC, which are investment companies for accounting purposes.

As such, we have consolidated

the accounts of WhiteHorse Credit, WhiteHorse Warehouse, WHF PMA Holdco Blocker, LLC, WhiteHorse RCKC Holdings LLC and WhiteHorse Finance

Holdings, LLC into our financial statements.

As a result of this consolidation, the amount outstanding under the Credit Facility is treated

as our indebtedness.

Valuation of Portfolio Investments

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upon the disposal of such investments.

Our board of directors is ultimately responsible

for determining the fair value of the portfolio investments that are not publicly traded, whose market prices are not readily available

on a quarterly basis in good faith or any other situation where portfolio investments require a fair value determination.

directors has retained one or more independent valuation firms to review the valuation of each portfolio investment that does not have

a readily available market quotation at least once during each 12-month period.

Independent valuation firms retained by our board of directors

provide a valuation review on approximately 25% of our investments for which market quotations are not readily available each quarter

to ensure that the fair value of each investment for which a market quote is not readily available is reviewed by an independent valuation

firm at least once during each 12-month period.

Our board of directors is ultimately

responsible for determining the fair value of the portfolio investments that are not publicly traded, whose market prices are not readily

available on a quarterly basis in good faith or any other situation where portfolio investments require a fair value determination.

board of directors has retained one or more independent valuation firms to review the valuation of each portfolio investment that does

not have a readily available market quotation at least once during each 12-month period.

Independent valuation firms retained by our board

of directors provide a valuation review on approximately 25% of our investments for which market quotations are not readily available

each quarter to ensure that the fair value of each investment for which a market quote is not readily available is reviewed by an independent

valuation firm at least once during each 12-month period.

However, our board of directors does not intend to have de minimis investments

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event to corroborate our valuation.

With respect to investments for which market quotations

are not readily available, our board of directors undertakes a multi-step valuation process each quarter, as described below:

With respect to investments for which

market quotations are not readily available, our board of directors undertakes a multi-step valuation process each quarter, as described

Our quarterly valuation process begins with each portfolio company or investment being initially valued

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Preliminary valuation conclusions are then documented and discussed with our investment committee and our investment adviser.

The audit committee of our board of directors reviews these preliminary valuations, and on a quarterly basis, reviews the bases

of the valuations by our investment adviser and the independent valuation firms.

The audit committee of our board of directors reviews these preliminary valuations, and on a quarterly

basis, reviews the bases of the valuations by our investment adviser and the independent valuation firms.

At least once annually, the valuation for each portfolio investment is reviewed by an independent valuation firm.

Our board of directors discusses valuations and determines the fair value of each investment in our portfolio in good

Our board of directors discusses valuations and determines the fair value of each investment in our portfolio in good faith.

Fair value of publicly traded instruments

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of an exit price.

Fair value is the price that would be received

in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair value is the price that would be

received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement

Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters.

Where observable

prices or inputs are not available, valuation models are applied.

These valuation models involve some level of management estimation and

judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’

observable prices or inputs are not available, valuation models are applied.

These valuation models involve some level of management estimation

and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’

Our fair value analysis includes an analysis of the value of any unfunded loan commitments.

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The three levels are defined as follows:

Quoted prices (unadjusted) for identical

assets or liabilities in active public markets that the entity has the ability to access as of the measurement date.

Quoted prices (unadjusted) for identical assets

or liabilities in active public markets that the entity has the ability to access as of the measurement date.

Significant other observable inputs other

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factors specific to the financial instrument.

Fair value for each investment is derived

using a combination of valuation methodologies that, in the judgment of the investment committee of the investment adviser are most

relevant to such investment, including being based on one or more of the following:

(i) market prices obtained from market makers

for which the investment committee has deemed there to be enough breadth (number of quotes) and depth (firm bids) to be indicative

of fair value, (ii) the price paid or realized in a completed transaction or binding offer received in an arm’s-length

transaction, (iii) a discounted cash flow analysis, (iv) the guideline public company method, (v) the similar transaction method or

(vi) the option pricing method.

Fair value for each investment is derived using

a combination of valuation methodologies that, in the judgment of the investment committee of the investment adviser are most relevant

to such investment, including being based on one or more of the following:

(i) market prices obtained from market makers for which the

investment committee has deemed there to be enough breadth (number of quotes) and depth (firm bids) to be indicative of fair value, (ii)

the price paid or realized in a completed transaction or binding offer received in an arm’s-length transaction, (iii) a discounted

cash flow analysis, (iv) the guideline public company method, (v) the similar transaction method or (vi) the option pricing method.

Investment Transactions and Related Investment Income and

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements