UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2018

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

SIGULER GUFF SMALL BUSINESS CREDIT OPPORTUNITIES FUND, INC.

(Exact name of registrant as specified in its charter)

Commission File Number: 814-01157

Maryland		47-1290650
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

825 Third Avenue, 10^th Floor, New York, NY 10022

(Address of principal executive offices) (Zip code)

(212) 332-5100

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name or former address, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

☐ Yes ☒ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or emerging growth company in Rule 12b-2 of the Exchange Act

Large accelerated filer ☐

Accelerated Filer ☐

Non-accelerated filer ☒ (Do not check if a smaller reporting company)		Smaller reporting company ☐

	Emerging Growth Company ☐

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS

As of August 14, 2018, there were 100,000 shares of the registrant’s common stock outstanding.

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PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	5

	Consolidated Statements of Assets and Liabilities (Unaudited) As of June 30, 2018 and December 31, 2017	5

	Consolidated Schedules of Portfolio Investments (Unaudited) As of June 30, 2018 and December 31, 2017	6

	Consolidated Statements of Operations (Unaudited) For the Three Months Ended June 30, 2018 and 2017 and the Six Months Ended June 30, 2018 and 2017	8

	Consolidated Statements of Changes in Net Assets (Unaudited) For the Six Months Ended June 30, 2018 and 2017	9

	Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended June 30, 2018 and 2017	10

	Notes to Consolidated Financial Statements (Unaudited)	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40

Item 4.	Controls and Procedures	41

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3.	Defaults Upon Senior Securities	43

Item 4.	Mine Safety Disclosures	43

Item 5.	Other Information	43

Item 6.	Exhibits	44

SIGNATURES		45

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology. You should read statements that contain these words carefully because they discuss our plans, strategies, prospects and expectations concerning our business, operating results, financial condition and other similar matters. We believe that it is important to communicate our future expectations to our investors. Our forward-looking statements include information in this report regarding general domestic and global economic conditions, our future financing plans, our ability to operate as a business development company (“BDC”) and the expected performance of, and the yield on, our portfolio companies. There may be events in the future, however, that we are not able to predict accurately or control. The factors listed under “Risk Factors” as well as any cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. The occurrence of the events described in these risk factors and elsewhere in this report could have a material adverse effect on our business, results of operation and financial position. Any forward-looking statement made by us in this report speaks only as of the date of this report. Factors or events that could cause our actual results to differ from our forward-looking statements may emerge from time to time, and it is not possible for us to predict all of them. You are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the U.S. Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Under Section 21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to statements made in periodic reports we file under the Exchange Act, such as this quarterly report on Form 10-Q.

The following factors are among those that may cause actual results to differ materially from our forward-looking statements:

our future operating results;

changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets;

uncertainty surrounding the strength of the U.S. economic recovery;

our business prospects and the prospects of our portfolio companies;

the impact of investments that we expect to make;

the impact of increased competition;

our contractual arrangements and relationships with third parties;

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

the ability of our current prospective portfolio companies to achieve their objectives;

the relative and absolute performance of our investment adviser;

our expected financings and investments;

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

our ability to make distributions;

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the adequacy of our cash resources and working capital including our ability to raise additional capital;

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

the impact of future acquisitions and divestitures;

the effect of changes in tax laws and regulations and interpretations thereof;

our ability to maintain our status as a BDC and a qualifying regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”);

actual and potential conflicts of interest with Siguler Guff Advisers, LLC (“Siguler Guff Advisers” or the “Investment Manager”) and its affiliates;

general price and volume fluctuations in the financial markets;

the ability of the Investment Manager to attract and retain highly talented professionals; and

the impact on our business of new legislation.

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PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

Siguler Guff Small Business Credit Opportunities Fund, Inc.

Consolidated Statements of Assets and Liabilities (Unaudited)

	June 30, 2018		December 31, 2017
Assets
Portfolio Investments at Fair Value:
Non-controlled, non-affiliated portfolio investments (cost, June 30, 2018: $32,975,306; December 31, 2017: $41,154,948)	$	32,975,306	$	41,154,948
Cash		5,118,978		4,346,368
Due from Affiliates		369,641		467,896
Interest receivable		169,720		106,922
Other receivable		124,037		189,673
Prepaid taxes		21,163		9,831
Deferred financing costs (net of accumulated amortization, June 30, 2018: $96,264; December 31, 2017: $38,972)		8,594		91,026
Total Assets	$	38,787,439	$	46,366,664

Liabilities
Investor note credit facility	$	20,429,580	$	16,800,000
Accrued expenses and other liabilities		274,302		231,310
Due to Affiliate		1,338		2,850
Total Liabilities		20,705,220		17,034,160
Net Assets	$	18,082,219	$	29,332,504

Commitments and Contingencies (Note 8)

Components of Net Assets
Common stock, $0.001 par value, 10,000,000 shares authorized, 100,000 issued and 100,000 outstanding at June 30, 2018 and December 31, 2017		100		100
Paid-in capital in excess of par		16,359,699		28,660,632
Accumulated undistributed net investment income/(loss)		1,722,420		605,469
Accumulated undistributed net realized gain/(loss)		-		66,303
Total Net Assets	$	18,082,219	$	29,332,504

Net Asset Value Per Share	$	180.82	$	293.33

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

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Consolidated Schedules of Portfolio Investments (Unaudited)

June 30, 2018

Portfolio Investment	Industry	Interest Rate			Maturity	Principal / Shares		Fair Value

Senior Subordinated Notes (138%) ^{(1), (2)}
United States
Audax AAMP Holdings, Inc.	Electronic Equipment		12.91	%	02/15/2023	$	5,388,730	$	5,286,696
Chairman’s Foods, LLC ⁽³⁾	Processed & Packaged Goods		11.00	%	01/16/2024	$	1,285,116		1,260,719
Drew Foam Companies Inc. ⁽³⁾	Manufacturing		11.00	%	11/30/2023	$	1,290,444		1,264,917
Earthlite, LLC ⁽³⁾	Business Equipment		11.00	%	07/11/2022	$	1,279,809		1,260,881
Gatekeeper Systems, Inc. ⁽³⁾	Security and Protection Services		11.00	%	03/02/2022	$	1,280,730		1,264,054
La Tavola, LLC ⁽³⁾	Commercial Retail		8.00	%	06/01/2021	$	1,289,666		1,276,042
Medsurant Holdings, LLC ⁽³⁾	Healthcare Services		12.25	%	06/30/2020	$	1,286,362		1,262,528
Northeastern Bus Rebuilders Inc. ⁽³⁾	Business Services		10.00	%	06/05/2022	$	5,602,816		5,537,298
Resource Employment Solutions, LLC ⁽³⁾	Staffing / Outsourcing Services		11.00	%	11/10/2023	$	1,292,488		1,267,121
S.R. Smith, LLC	Consumer / Sporting Goods		11.00	%	03/27/2022	$	1,273,371		1,260,674
Schlotterbeck & Foss, LLC ⁽³⁾	Processed & Packaged Goods		11.00	%	03/01/2023	$	1,283,843		1,263,947
Taylored Services LLC ⁽³⁾	Business Services		11.00	%	12/21/2023	$	1,426,457		1,398,020
Trachte, LLC ⁽³⁾	Manufacturing		11.00	%	04/13/2021	$	1,277,160		1,264,130
Total Senior Subordinated Notes (Cost: $24,867,027)								$	24,867,027

Term Notes (44%) ^{(1), (2)}
United States
Arc Drilling, LLC ^(3)/(4)	Manufacturing		11.50	%	11/17/2022	$	1,296,455	$	1,271,917
Environmental Group Holdings, LLC ⁽⁴⁾	General Contracting		11.82	%	02/06/2023	$	1,307,355		1,282,825
McVeigh Global Meetings and Events, LLC ⁽³⁾	Business Services		10.00	%	06/29/2023	$	3,036,432		2,975,703
NetFortris Operating Co., Inc. ⁽⁵⁾	Telecommunications		10.40	%	02/21/2021	$	1,256,783		1,255,376
Whitney, Bradley & Brown, Inc. ⁽⁶⁾	Technical Services		10.99	%	10/18/2022	$	1,266,615		1,256,242
Total Term Notes (Cost: $8,042,063)								$	8,042,063

Total Senior Subordinated and Term Notes (Cost: $32,909,090)								$	32,909,090

Money Market Fund (0%)
United States
Western Asset Institutional U.S. Treasury Reserves (Cost: $66,216)	U.S. Treasury Bills and Notes						66,216	$	66,216

Total United States (Cost: $32,975,306)								$	32,975,306

Total Portfolio Investments (Cost: $32,975,306)								$	32,975,306

Notes:

(1)

The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in companies in which the Company owns more than 25% of the voting securities or has rights to maintain greater than 50% of the board representation; “Affiliate Investments” are defined as investments in companies in which the Company owns between 5% and 25% of the voting securities; and “Non-Control/Non-Affiliate Investments” are defined as investments that are neither Control Investments nor Affiliate Investments. The Portfolio Investments are classified as Non-Control/Non-Affiliate Investments.

(2)	The Portfolio Investments are valued using unobservable inputs (Level 3). Refer to Note 2 in the accompanying notes to the consolidated financial statements for more information.

(3)	The Portfolio Investments have a stated payment-in-kind interest income rate of up to 4.75% which is not reflected in the stated interest rate.

(4)	The interest rate of this investment is equal to LIBOR plus 9.50%.

(5)

The interest rate of this investment is equal to the greater of LIBOR plus 8.40% or 8.90% through the current fiscal quarter. Thereafter, the interest rate is equal to the greater of LIBOR plus 8.40% or 8.90% if the senior leverage ratio is greater than or equal to 3.50x, the greater of LIBOR plus 9.00% or 9.50% if the senior leverage ratio is less than 3.50x and greater than or equal to 3.00x or the greater of LIBOR plus 9.50% or 10.00% if the senior leverage ratio is less than 3.00x. The senior leverage ratio is equal to total obligations minus total cash divided by EBITDA of the portfolio investment.

(6)	The interest rate of this investment is equal to LIBOR plus 9.00%.

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

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Consolidated Schedules of Portfolio Investments (Unaudited)

December 31, 2017

Portfolio Investment	Industry	Interest Rate			Maturity	Principal / Shares		Fair Value

Senior Subordinated Notes (97%) ^{(1), (2)}
United States
Earthlite, LLC ⁽³⁾	Business Equipment		11.00	%	07/11/2022	$	1,425,350	$	1,402,339
Gatekeeper Systems, Inc. ⁽³⁾	Security and Protection Services		11.00	%	03/02/2022	$	2,773,873		2,733,904
La Tavola, LLC ⁽³⁾	Commercial Retail		11.00	%	06/01/2021	$	3,690,785		3,646,065
Medsurant Holdings, LLC ⁽³⁾	Healthcare Services		12.25	%	06/30/2020	$	4,113,937		4,021,901
Northeastern Bus Rebuilders Inc. ⁽³⁾	Business Services		10.00	%	06/05/2022	$	5,602,816		5,531,014
S.R. Smith, LLC	Consumer / Sporting Goods		11.00	%	03/27/2022	$	2,649,963		2,620,770
Schlotterbeck & Foss, LLC ⁽³⁾	Processed & Packaged Goods		11.00	%	03/01/2023	$	4,986,679		4,903,282
Trachte, LLC ⁽³⁾	Manufacturing		11.00	%	04/13/2021	$	3,695,640		3,652,337
Total Senior Subordinated Notes (Cost: $28,511,612)								$	28,511,612

Term Notes (20%) ^{(1), (2)}
United States
Arc Drilling, LLC ⁽⁴⁾	Manufacturing		10.88	%	11/17/2022	$	1,770,860	$	1,735,470
NetFortris Operating Co., Inc. ⁽⁵⁾	Telecommunications		9.78	%	02/21/2021	$	1,807,360		1,801,124
Whitney, Bradley & Brown, Inc. ⁽⁶⁾	Technical Services		10.35	%	10/18/2022	$	2,359,786		2,336,149
Total Term Notes (Cost: $5,872,743)								$	5,872,743

Total Senior Subordinated and Term Notes (Cost: $34,384,355)								$	34,384,355

Money Market Fund (23%)
United States
Western Asset Institutional U.S. Treasury Reserves (Cost: $6,770,593)	U.S. Treasury Bills and Notes						6,770,593	$	6,770,593

Total United States (Cost: $41,154,948)								$	41,154,948

Total Portfolio Investments (Cost: $41,154,948)								$	41,154,948

Notes:

(1)

(2)	The Portfolio Investments are valued using unobservable inputs (Level 3). Refer to Note 2 in the accompanying notes to the consolidated financial statements for more information.

(3)	The Portfolio Investments have a stated payment-in-kind interest income rate of up to 2.00% which is not reflected in the stated interest rate.

(4)	The interest rate of this investment is equal to LIBOR plus 9.50%.

(5)

The interest rate of this investment is equal to the greater of LIBOR plus 8.40% or 8.90% through the fiscal quarter ending December 31, 2017. Thereafter, the interest rate is equal to the greater of LIBOR plus 8.40% or 8.90% if the senior leverage ratio is greater than or equal to 3.50x, the greater of LIBOR plus 9.00% or 9.50% if the senior leverage ratio is less than 3.50x and greater than or equal to 3.00x or the greater of LIBOR plus 9.50% or 10.00% if the senior leverage ratio is less than 3.00x. The senior leverage ratio is equal to total obligations minus total cash divided by EBITDA of the portfolio investment.

(6)	The interest rate of this investment is equal to LIBOR plus 9.00%.

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

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Consolidated Statements of Operations (Unaudited)

	For the Three Months Ended June 30, 2018			For the Six Months Ended June 30, 2018			For the Three Months Ended June 30, 2017		For the Six Months Ended June 30, 2017
Investment Income
Non-Controlled, Non-Affiliated Investments:
Interest income	$	839,425		$	2,168,174		$	892,995	$	1,592,675
Payment-in-kind interest income		40,001			102,548			48,794		98,178
Other income		(8,685	)		(8,685	)		230,764		230,764
Reallocation of other income		-			(56,951	)		-		-
Total Investment Income		870,741			2,205,086			1,172,553		1,921,617

Expenses
Interest		132,176			304,672			-		-
Professional fees		122,462			199,772			61,170		94,907
Investment Management Fee		101,163			179,838			94,760		185,815
Directors fees		44,250			86,500			44,250		85,500
Amortization of deferred financing costs		20,054			57,292			-		-
Other general and administrative		5,242			33,954			7,228		9,091
Total Expenses		425,347			862,028			207,408		375,313
Investment Management Fee Waived (Note 7)		-			-			493		493
Total Net Expenses		425,347			862,028			207,901		375,806
Net Investment Income/(Loss) before income tax (benefit)/expense		445,394			1,343,058			964,652		1,545,811
Income tax (benefit)/expense (Note 2)		-			-			321,038		567,527
Net Investment Income/(Loss) after income tax (benefit)/expense		445,394			1,343,058			643,614		978,284

Realized Gain/(Loss) on Portfolio Investments
Non-Controlled, Non-Affiliated Investments:
Net Realized Gain/(Loss)		-			-			85,684		85,684
Net Realized Gain/(Loss) on Portfolio Investments		-			-			85,684		85,684

Net Increase/(Decrease) in Net Assets Resulting from Operations	$	445,394		$	1,343,058		$	729,298	$	1,063,968

Net Investment Income/(Loss) after income tax (benefit)/expense	$	4.45		$	13.43		$	6.44	$	9.78
Per Share (Basic and Diluted)	$	4.45		$	13.43		$	6.44	$	9.78

Net Increase/(Decrease) in Net Assets Resulting from Operations	$	4.45		$	13.43		$	7.29	$	10.64
Per Share (Basic and Diluted)	$	4.45		$	13.43		$	7.29	$	10.64

Distributions Declared Per Share	$	-		$	125.93		$	-	$	-

Weighted average shares outstanding		100,000			100,000			100,000		100,000

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

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Consolidated Statements of Changes in Net Assets (Unaudited)

	For the Six Months Ended June 30, 2018			For the Six Months Ended June 30, 2017

Net Increase/(Decrease) in Net Assets Resulting from Operations
Net investment income/(loss) after income tax (benefit)/expense	$	1,343,058		$	978,284
Net realized gain/(loss) on Portfolio Investments		-			85,684
Net Increase/(Decrease) in Net Assets Resulting from Operations		1,343,058			1,063,968

Capital Stock Transactions
Contributions from stockholder		-			8,468,550
Paid-in capital distributed to stockholder		(12,300,933	)		-
Distributions from net investment income/(loss)		(226,107	)		-
Distributions from net realized gain/(loss)		(66,303	)		-
Net Increase/(Decrease) in Net Assets From Capital Stock Transactions		(12,593,343	)		8,468,550

Total Increase in Net Assets
Net assets at beginning of period		29,332,504			17,909,096
Net assets at end of period	$	18,082,219		$	27,441,614


Capital Share Activity
Shares issued		-			-
Shares redeemed		-			-
Net Increase/(Decrease) in Shares Outstanding		-			-

Accumulated Undistributed Net Investment Income/(Loss)	$	1,722,420		$	1,286,706
Accumulated Undistributed Realized Gain/(Loss)	$	-		$	-

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

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Consolidated Statements of Cash Flows (Unaudited)

	For the Six Months Ended June 30, 2018			For the Six Months Ended June 30, 2017
Cash Flows From Operating Activities
Net Increase/(Decrease) in Net Assets Resulting from Operations	$	1,343,058		$	1,063,968
Adjustments to reconcile Net Increase/(Decrease) in Net Assets
Resulting from Operations to Net Cash Provided By/Used in Operating Activities:
Net realized (gain)/loss on Portfolio Investments		-			(85,684	)
Purchases of Portfolio Investments		(21,384,180	)		(8,573,749	)
Sales of Portfolio Investments		10,108,268			5,376,972
Payment-in-kind interest income		(102,548	)		(98,178	)
Accretion of discount on notes		(54,842	)		(33,740	)
Amortization of deferred financing costs		57,292			-
Decrease/(Increase) in due from Affiliates		98,255			-
Decrease/(Increase) in interest receivable		(62,798	)		24,704
Decrease/(Increase) in other receivable		65,636			(176,994	)
Decrease/(Increase) in prepaid taxes		(11,332	)		(55,541	)
Decrease/(Increase) in net deferred tax asset		-			93,415
(Decrease)/Increase in accrued expenses and other liabilities		42,992			(116,281	)
(Decrease)/Increase in due to Affiliate		(1,512	)		(1,683,955	)
(Decrease)/Increase in taxes payable		-			(96,758	)
Net Cash Provided By/Used in Operating Activities		(9,901,711	)		(4,361,821	)

Cash Flows From Financing Activities
Contributions from stockholder		-			8,468,550
Distributions paid to stockholder		(4,383,035	)		-
Proceeds from investor note credit facility		15,057,356			-
Net Cash Used in/Provided by Financing Activities		10,674,321			8,468,550
Net Increase/(Decrease) in Cash		772,610			4,106,729

Cash
Beginning of period		4,346,368			122,577
End of period	$	5,118,978		$	4,229,306

Supplemental cash flow information
Income Taxes Paid	$	11,332		$	626,411
Interest Paid	$	275,808		$	-
In-Kind Distribution of Portfolio Investments to Stockholder	$	19,612,943		$	-
In-Kind Distribution of Deferred Financing Costs to Stockholder	$	25,140		$	-
In-Kind Distribution of Investor Note Credit Facility to Stockholder	$	(11,427,775	)	$	-

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

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

1.	Business and Organization

Siguler Guff Small Business Credit Opportunities Fund, Inc. (“SBCOF” or the “Company”), was incorporated in Maryland on July 7, 2014 as a non-diversified, closed-end management investment company and has elected status as a business development company (a “BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”) on July 1, 2015. Siguler Guff Advisers, LLC (the “Investment Manager”) serves as the Company’s Investment Manager. The Investment Manager is an investment adviser registered with the U.S. Securities and Exchange Commission, pursuant to the 1940 Act. One hundred percent of the stock of the Company is held by Siguler Guff Small Business Credit Opportunities Fund, LP (the “Partnership”). Prior to commencing its operations on October 13, 2015, the Company had no operations other than the issuance to the Partnership of 100,000 shares of common stock, $0.001 par value for $25,000 in September 2014.

Since the Partnership owns one hundred percent of the stock of the Company, the term of the Company will be the same as that of the Partnership. The term of the Partnership will continue until the later to occur of: (a) September 17, 2026, or (b) the date of which all the Partnership’s assets have been distributed and the Partnership’s obligations (including contingent obligations) have terminated, unless the Partnership is sooner dissolved in accordance with Article 9 of its Partnership Agreement dated July 9, 2014 and amended as of May 14, 2018. The term may be extended for up to three additional years with the consent of the Advisory Board.

The Company’s investment objective is to achieve attractive risk-adjusted returns by generating current income from debt investments. There can be no assurance that the Company will attain its investment objective. The Company will typically invest in U.S. companies in the lower middle market segment. The Investment Manager defines the “lower middle market” as privately-owned companies with between $2 million to $15 million of earnings before interest, taxes, depreciation, and amortization (“EBITDA”), and between $10 million to $100 million of revenue. Investments take the form of mezzanine debt as well as some “unitranche” loans with a first lien on a company’s assets, as well as second lien loans. The Partnership generally seeks to purchase equity securities alongside the Company’s investments into those same companies, generally with an aggregate cost of up to 20% of the value of the Company’s total investment. The Company also may extend mezzanine financing in forms other than subordinated loans, such as convertible loans and preferred stock.

The Company jointly co-invests in investments alongside the Partnership and Siguler Guff SBCOF Parallel Fund, LP (the “Parallel Partnership”) and may co-invest with other investment funds managed by or otherwise affiliated with the Investment Manager (collectively, the “Affiliated Funds”). The Company and the Affiliated Funds generally invest pro-rata and pari passu with each other in investments, except when tax, regulatory or investment restrictions prevent the Company or the Affiliated Funds from investing. The General Partner of the Partnership and Parallel Partnership is an Affiliate of the Investment Manager.

The Company is subject to certain investment guidelines and restrictions as set forth in its registration statement filed with the U.S. Securities and Exchange Commission on Form 10.

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

2.	Summary of Significant Accounting Policies

Unaudited Interim Consolidated Financial Statements

The accompanying unaudited consolidated financial statements of the Company included herein were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to this Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair statement of results for the interim periods. The results of operations for interim periods are not necessarily indicative of operating results for an entire year.

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2017, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2018.

Basis of Accounting

These consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and such differences could be material. The most significant estimates inherent in the preparation of the Company’s consolidated financial statements are the valuation of investments and revenue recognition.

The Company is an investment company and follows the accounting and reporting guidance as prescribed by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Financial Services – Investment Companies (“ASC 946”).

The financial statements include portfolio investments at fair value of $32,975,306 at June 30, 2018 and $41,154,948 at December 31, 2017. The portfolio investments represent approximately 182% of net assets at June 30, 2018 and approximately 140% of net assets at December 31, 2017 and their fair values have been determined in good faith by the Company’s Board of Directors (“Directors”). Because of the inherent uncertainty of valuation, the determined values may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material.

Consolidation

The Company has certain wholly-owned subsidiaries, including subsidiaries that are not consolidated for U.S. federal income tax purposes, which hold certain portfolio investments of the Company. These subsidiaries are consolidated with the Company for accounting purposes, and the portfolio investments held by the subsidiaries are included in the Company’s consolidated financial statements as investments. All significant intercompany balances and transactions have been eliminated. The investments held through the subsidiaries are reflected in the Consolidated Schedule of Portfolio Investments in addition to any investments the Company holds directly. As provided under Regulation S-X and ASC 946, the Company will generally not consolidate its investment in a company other than a wholly-owned investment company or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the results of certain of its wholly-owned subsidiaries in its financial statements.

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

Valuation of Portfolio Investments

The FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. 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 or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments’ complexity.

Assets and liabilities recorded at fair value in the Company’s consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

Level 1 - Unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 - 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 at the measurement date for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Under ASC 820, the Company performs detailed valuations of its debt investments for which quotations are not readily available on an individual basis, using bond yield, market and income approaches as appropriate. In certain instances, the Company may use alternative methodologies, including recent purchase transactions, asset liquidation, expected recovery model or other alternative approaches to estimate the fair value.

Investments where market quotations for securities of the same issue are readily available on an exchange are marked-to-market at fair value at the closing price on the financial statement date. Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value.

Under the bond yield approach, the Company uses bond yield models to determine the present value of the future cash flow streams of its debt investments. The Company reviews various sources of transactional data, including private mergers and acquisitions involving debt investments with similar characteristics, and assesses the information in the valuation process.

Under the market approach, the Company estimates the enterprise value of the portfolio companies in which it invests. There is no one methodology to estimate enterprise value and, in fact, for any one portfolio company, enterprise value is best expressed as a range of fair values, from which the Company derives a single estimate of enterprise value. To estimate the enterprise value of a portfolio company, the Company analyzes various factors, including the portfolio company’s historical and projected financial results. Typically, private companies are valued based on multiples of EBITDA, cash flows, net income or revenues. The Company generally requires portfolio companies to provide annual audited and quarterly or monthly unaudited financial statements, as well as annual projections for the upcoming fiscal year.

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

Under the income approach, the Company generally prepares and analyzes discounted cash flow models based on projections of the future free cash flows of the business.

The fair value of the Company’s portfolio investments at June 30, 2018 and December 31, 2017 was determined in good faith by the Directors. The Directors are ultimately responsible for the valuation of the portfolio investments at fair value as determined in good faith pursuant to the Company’s valuation policy. Because of the inherent uncertainty of valuation, these estimated fair values do not necessarily represent amounts that might be ultimately realized and the differences could be material.

The following table summarizes the level of the Company’s assets measured at fair value as of June 30, 2018 and December 31, 2017:

	Assets at Fair Value as of June 30, 2018
	Level 1		Level 2		Level 3		Total

Senior Subordinated Notes	$	-	$	-	$	24,867,027	$	24,867,027
Term Notes		-		-		8,042,063		8,042,063
Money Market Fund		66,216		-		-		66,216
Total Portfolio Investments	$	66,216	$	-	$	32,909,090	$	32,975,306

	Assets at Fair Value as of December 31, 2017
	Level 1		Level 2		Level 3		Total

Senior Subordinated Notes	$	-	$	-	$	28,511,612	$	28,511,612
Term Notes		-		-		5,872,743		5,872,743
Money Market Fund		6,770,593		-		-		6,770,593
Total Portfolio Investments	$	6,770,593	$	-	$	34,384,355	$	41,154,948

At June 30, 2018 and December 31, 2017, 100% of the Company’s Portfolio Investments have been classified within Level 3, with the exception of the Money Market Fund. Assumptions used by the Company due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Company’s results of operations.

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

The following tables summarize the significant unobservable inputs the Company used to value investments categorized within Level 3. The below table is not intended to be all-inclusive, but instead captures the significant unobservable inputs relevant to the determination of fair values:

				Unobservable Input as of June 30, 2018
Investment Type	Fair Value¹		Primary Valuation Technique	Input	Range

Senior Subordinated Notes	$	14,389,554	Discounted Cash Flow	Discount Rate		10.0% - 14.0%

Term Notes		2,527,293	Discounted Cash Flow	Discount Rate		9.6% - 14.0%


Total	$	16,916,847

¹Not reflected in the table above are Level 3 investments that have been primarily valued based upon recent transactions totaling $15,992,243 as of June 30, 2018.

				Unobservable Input as of December 31, 2017
Investment Type	Fair Value¹		Primary Valuation Technique	Input	Range

Senior Subordinated Notes	$	20,987,560	Discounted Cash Flow	Discount Rate		10.0% - 14.0%

Term Notes		1,801,124	Discounted Cash Flow	Discount Rate		9.1% - 12.6%


Total	$	22,788,684

¹Not reflected in the table above are Level 3 investments that have been primarily valued based upon recent transactions totaling $11,595,671 as of December 31, 2017.

The following is a rollforward of the portfolio investments in which significant unobservable inputs (Level 3) were used in determining fair value:

	Fair Value Measurements using Significant Unobservable Inputs (Level 3)
	For the Three Months Ended June 30, 2018
	Beginning Balance		Purchases		Sales Proceeds			Distribution		Reallocations		Accretion/Payment- in-Kind Interest Income		Net Realized Gain/(Loss)		Ending Balance
Senior Subordinated Notes	$	20,897,150	$	3,923,565	$	-		$	-	$	-	$	46,312	$	-	$	24,867,027
Term Notes		5,065,154		2,975,049		(10,843	)		-		-		12,703		-		8,042,063
Total	$	25,962,304	$	6,898,614	$	(10,843	)	$	-	$	-	$	59,015	$	-	$	32,909,090

	For the Six Months Ended June 30, 2018
	Beginning Balance		Purchases		Sales Proceeds			Distribution			Reallocations		Accretion/Payment- in-Kind Interest Income		Net Realized Gain/(Loss)		Ending Balance
Senior Subordinated Notes	$	28,511,612	$	15,846,716	$	(2,105,927	)	$	(17,520,464	)	$	-	$	135,090	$	-	$	24,867,027
Term Notes		5,872,743		5,537,464		(1,297,965	)		(2,092,479	)		-		22,300		-		8,042,063
Total	$	34,384,355	$	21,384,180	$	(3,403,892	)	$	(19,612,943	)	$	-	$	157,390	$	-	$	32,909,090

	For the Three Months Ended June 30, 2017
	Beginning Balance		Purchases		Sales Proceeds			Distribution		Reallocations			Accretion/Payment- in-Kind Interest Income		Net Realized Gain/(Loss)		Ending Balance
Senior Subordinated Notes	$	29,810,363	$	146,277	$	(5,376,972	)	$	-	$	(59,160	)	$	98,852	$	85,684	$	24,705,044
Term Notes		-		1,678,113		-			-		-			107		-		1,678,220
Total	$	29,810,363	$	1,824,390	$	(5,376,972	)	$	-	$	(59,160	)	$	98,959	$	85,684	$	26,383,264

	For the Six Months Ended June 30, 2017
	Beginning Balance		Purchases		Sales Proceeds			Distribution		Reallocations		Accretion/Payment- in-Kind Interest Income		Net Realized Gain/(Loss)		Ending Balance
Senior Subordinated Notes	$	23,149,094	$	6,578,596	$	(5,376,972	)	$	-	$	136,831	$	131,811	$	85,684	$	24,705,044
Term Notes		-		1,678,113		-			-		-		107		-		1,678,220
Total	$	23,149,094	$	8,256,709	$	(5,376,972	)	$	-	$	136,831	$	131,918	$	85,684	$	26,383,264

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

Net change in unrealized gain/(loss) and net realized gain/(loss), if any, on Level 3 Portfolio Investments in the table above are included in the accompanying Consolidated Statement of Operations. For the periods ended June 30, 2018 and June 30, 2017, the Company has a net change in unrealized gain/(loss) of $0 on Level 3 portfolio investments still held by the Company as of the financial statement date.

Investments

Security transactions are accounted for on the trade date unless there are substantial conditions to the purchase. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment. Unrealized gains or losses primarily reflect the change in investment values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized. Realized gains or losses on the disposition of investments are calculated using the specific identification method.

Cash

Cash is comprised of deposit accounts held at one United States financial institution. During the period, the balances held at the financial institution may at times exceed federally insured limits.

Income and Expense

Interest income is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on investments when it is determined that interest is no longer collectible. Fees received upon closing a transaction generally are treated as a reduction in the cost basis of the investment. Any resulting discount, or closing fee received, from recording the loan or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan using the effective-yield method.

The Company has investments in debt securities which contain payment-in-kind (“PIK”) interest provisions. PIK interest is computed at the contractual rate specified in each investment agreement and added to the principal balance of the investment and recorded as interest income. The Company stops accruing PIK interest on investments when it is determined that PIK interest is no longer collectible.

Other income includes the estimated amount of the exit fee due to the Company in connection with the purchase of the NetFortris Operating Co., Inc. (“NetFortris”) term notes. The reallocation of other income as of March 31, 2018 is due to a portion of the exit fee and corresponding receivable being distributed to the Partnership on March 28, 2018. The reduction of other income as of June 30, 2018 is due to a portion of the exit fee being reduced as NetFortris repaid a portion of the outstanding principal balance as well as a reduction of the exit fee rate during the quarter.

Expenses include investment management fees, legal fees, directors’ fees, audit and tax service expenses, interest expense amortization of deferred financing costs and other general and administrative expenses. Expenses are recognized on an accrual basis.

Reallocations

Additional Limited Partners may be admitted to the Partnership and existing Limited Partners may increase their Capital Commitments, with the consent of the General Partner at any time up to and including the Final Closing. Each Capital Commitment of such additional Limited Partner and each increased Capital Commitment, shall be treated as having been made, as of the Initial Closing date for all purposes of the Agreement.

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

Prior to the Final Closing, portfolio investments and items of income and expense are allocated according to the committed capital ownership percentages as of the latest Closing. Following the Final Closing, reallocation of portfolio investments and items of income and expense between the Company, the Partnership and the Parallel Partnership has occurred.

As a result, included in the Consolidated Statements of Operations for three and six month periods ended June 30, 2017 are reallocations of amounts previously included in the Consolidated Statements of Operations for the period ended December 31, 2015 and year ended December 31, 2016. As the Final Closing had already occurred, there were no reallocations included in the Consolidated Statements of Operations for three and six month periods ended June 30, 2018. Below is a summary of such adjustments:

	2016 As Reported			Reallocations to/(from) Parallel Partnership			2016 Adjusted
Investment Income
Non-Controlled, Non-Affiliated Investments:
Interest income	$	1,890,751		$	(49,105	)	$	1,841,646
Payment-in-kind interest income		157,660			(3,078	)		154,582
Total Investment Income		2,048,411			(52,183	)		1,996,228

Expenses
Investment Management Fee		295,764			(2,266	)		293,498
Professional fees		508,701			(50	)		508,651
Directors fees		172,500			-			172,500
Other general and administrative		8,832			7			8,839
Total Expenses		985,797			(2,309	)		983,488
Investment Management Fee Waived (Note 7)		(77,534	)		493			(77,041	)
Total Net Expenses		908,263			(1,816	)		906,447
Net Investment Income/(Loss) before income tax (benefit)/expense		1,140,148			(50,367	)		1,089,781
Income tax (benefit)/expense (Note 2)		392,221			-			392,221
Net Investment Income/(Loss) after income tax (benefit)/expense		747,927			(50,367	)		697,560
Net Increase/(Decrease) in Net Assets Resulting from Operations	$	747,927		$	(50,367	)	$	697,560

Net Investment Income/(Loss) and Net Increase/(Decrease) in Net Assets Resulting from Operations Per Share (Basic and Diluted)	$	7.48		$	(0.50	)	$	6.98
Weighted average shares outstanding		100,000			-			100,000

Distributions

On March 28, 2018, the Company distributed assets and corresponding liabilities to the Partnership, which was performed to enable the Company to be qualified as a regulated investment company for federal income tax purposes. Below is a summary of the assets and liabilities that were distributed from the Company to the Partnership:

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

Investment Name	Investment Type	Asset / Liabilities Classification	Balance Prior to Distribution			Distribution to Partnership			Balance Post Distribution
Audax AAMP Holdings, Inc.	Senior Subordinated Note	Portfolio Investments at Fair Value	$	5,282,779		$	-		$	5,282,779
Chairman’s Foods, LLC	Senior Subordinated Note	Portfolio Investments at Fair Value	$	4,539,347		$	(3,279,079	)	$	1,260,268
Earthlite, LLC	Senior Subordinated Note	Portfolio Investments at Fair Value	$	1,403,288		$	(143,288	)	$	1,260,000
Gatekeeper Systems, Inc.	Senior Subordinated Note	Portfolio Investments at Fair Value	$	2,742,648		$	(1,482,648	)	$	1,260,000
La Tavola, LLC	Senior Subordinated Note	Portfolio Investments at Fair Value	$	3,680,885		$	(2,420,885	)	$	1,260,000
Medsurant Holdings, LLC	Senior Subordinated Note	Portfolio Investments at Fair Value	$	4,029,624		$	(2,769,625	)	$	1,259,999
Northeastern Bus Rebuilders Inc.	Senior Subordinated Note	Portfolio Investments at Fair Value	$	5,534,107		$	-		$	5,534,107
S.R. Smith, LLC	Senior Subordinated Note	Portfolio Investments at Fair Value	$	2,622,136		$	(1,362,136	)	$	1,260,000
Schlotterbeck & Foss, LLC	Senior Subordinated Note	Portfolio Investments at Fair Value	$	4,918,564		$	(3,658,566	)	$	1,259,998
Trachte, LLC	Senior Subordinated Note	Portfolio Investments at Fair Value	$	3,664,236		$	(2,404,237	)	$	1,259,999
Arc Drilling, LLC	Term Note	Portfolio Investments at Fair Value	$	1,739,315		$	(476,901	)	$	1,262,414
Environmental Group Holdings, LLC	Term Note	Portfolio Investments at Fair Value	$	1,282,314		$	-		$	1,282,314
NetFortris Operating Co., Inc.	Term Note	Portfolio Investments at Fair Value	$	1,804,499		$	(541,813	)	$	1,262,686
Whitney, Bradley & Brown, Inc.	Term Note	Portfolio Investments at Fair Value	$	2,331,505		$	(1,073,765	)	$	1,257,740
N/A	N/A	Investor note credit facility	$	(24,450,000	)	$	11,427,775		$	(13,022,225	)
N/A	N/A	Deferred financing costs	$	53,788		$	(25,140	)	$	28,648
			$	21,179,035		$	(8,210,308	)	$	12,968,727

Income Taxes

As of January 1, 2018, the Company believes that it qualifies to be treated as a Regulated Investment Company (“RIC”) under subchapter M of the Internal Revenue Code (the “Code) and operates in a manner so as to qualify for the tax treatment applicable to RICs. It is the Company’s intention to make the election for treatment as a RIC in its tax filing for the year ended December 31, 2018. Prior to January 1, 2018, the Company was treated as a corporation for U.S. federal income tax purposes.

In order to qualify for favorable tax treatment as a RIC, the Company is required to distribute annually to its shareholder at least 90% of its investment company taxable income, as defined by the Code. To avoid federal excise taxes, the Company must distribute annually at least 98% of its ordinary income and 98.2% of net capital gains from the current year and any undistributed ordinary income and net capital gains from the preceding years. The Company, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. If the Company chooses to do so, all other things being equal, this would increase expenses and reduce the amount available to be distributed to the Partnership (its sole shareholder). The Company will accrue excise tax on estimated undistributed taxable income as required.

Dividends from net investment income and distributions from net realized capital gains are determined in accordance with U.S. federal income tax regulations, which may differ from those amounts determined in accordance with U.S. GAAP. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in-capital or accumulated net realized gain/(loss), as appropriate, in the period that the differences arise. Temporary and permanent differences are primarily attributable to differences in the tax treatment of certain loans and the tax characterization of income and non-deductible expenses. These differences are generally determined in conjunction with the preparation of the Company’s annual RIC tax return.

Book and tax basis differences relating to shareholder dividends and distributions and other permanent book and tax differences are reclassified among the Company’s capital accounts. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from U.S. GAAP. The Company may pay distributions in excess of its taxable net investment income. This excess would be a tax-free return of capital in the period and reduce the shareholder’s tax basis in its shares.

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

The Company records uncertain tax positions in accordance with FASB ASC 740, Income Taxes (“ASC 740”), on the basis of a two-step process whereby (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, it recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company has determined that there are no uncertain tax positions that would have a material impact to the financial statements of the Company, and therefore, no provisions are required to be recorded by the Company. The Company does not anticipate significant increases to uncertain tax positions in the next twelve months. The Company will recognize any interest and penalties, if applicable, for any uncertain tax positions as a component of income tax expense. No interest or penalties were recorded during the period ended June 30, 2018 and year ended December 31, 2017 or accrued for as of June 30, 2018 and December 31, 2017.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state, local and foreign jurisdictions, where applicable. At June 30, 2018, no examinations were being conducted by the Internal Revenue Service or any other taxing authority. Under the respective statute of limitations, tax years beginning in 2015 remain subject to examination by the various tax jurisdictions.

During the period prior to January 1, 2018, the Company did not qualify to be treated as a regulated investment company, or RIC, for federal income tax purposes. As such, the Company was treated as a corporation for U.S. federal income tax purposes. As a corporation for U.S. federal income tax purposes, the Company was taxed on its taxable income even if that income was distributed to the Partnership, and all distributions out of its earnings and profits were taxable as dividends to the investors of the Partnership; thus, such income was subject to two layers of tax (although corporate Limited Partners may be entitled to a dividends-received deduction).

Income taxes payable/(receivable) and prepaid taxes, including deferred benefits, consists of the following:

	For the Six Months Ended June 30, 2018		For the Year Ended December 31, 2017
Federal income taxes:
Current	$	-	$	8,615
Deferred		-		-
State income taxes:
Current		-		(18,446	)
Deferred		-		-
Total	$	-	$	(9,831	)

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

The provision for income taxes is composed of the following charges/(benefits):

Current:	For the Three Months Ended June 30, 2018		For the Six Months Ended June 30, 2018		For the Three Months Ended June 30, 2017		For the Six Months Ended June 30, 2017
Federal	$	-	$	-	$	269,952	$	414,517
State		-		-		36,931		59,595
Total Current		-		-		306,883		474,112
Deferred:
Federal		-		-		12,337		82,336
State		-		-		1,818		11,079
Total Deferred		-		-		14,155		93,415
Total Net (Benefit)/Expense	$	-	$	-	$	321,038	$	567,527

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The deferred tax assets and liabilities have been recognized in the Consolidated Statement of Assets and Liabilities as follows:

	For the Six Months Ended June 30, 2018		For the Year Ended December 31, 2017
Deferred Tax Assets:
Accrued Professional Fees	$	-	$	42,938
Organizational Expenses		-		74,324
Debt Issuance Costs		-		52,563
Total Deferred Tax Assets	$	-	$	169,825
Deferred Tax Liabilities:
Interest Income	$	-	$	39,635
Total Deferred Tax Liabilities	$	-	$	39,635
Valuation Allowance		-		(130,190	)
Net Deferred Income Taxes	$	-	$	-

The Company recognizes deferred tax assets to the extent that it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.

As of December 31, 2017, the Company concluded that it was more likely than not that an amount of the deferred tax assets, relating to the period after RIC qualification, would not be utilized. Therefore, the Company recorded a valuation allowance of $130,190 against its net deferred tax assets, for the year ending December 31, 2017 representing the portion of net deferred tax assets for which the Company was not expected to realize a benefit after the Company meets RIC qualification. If the Company determined that it would be able to realize net deferred tax assets in the future in excess of their net recorded amount, it would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

As of June 30, 2018 and December 31, 2017, the Company had no federal or state net operating loss carryforwards.

The effective tax rate varied from the statutory federal income tax rates. The effective tax rate is affected by a number of factors, the most significant of which has been the state income taxes, changes in tax law and valuation allowance related to our deferred tax assets.

	For the Six Months Ended June 30, 2018			For the Year Ended December 31, 2017
Computed “Expected” Tax Rate		-	%		34.00	%
Permanent Differences		-	%		0.05	%
State Income Taxes, Net of Federal Income Tax Benefit		-	%		3.27	%
Effect of Changes in Tax Law, Rates		-	%		2.00	%
Deferred Tax Asset Valuation Allowance Impact		-	%		(1.20	)%
Effective Tax Rate		-	%		38.12	%

On December 22, 2017, H.R. 1, also known as the Tax Cuts and Jobs Act (the “Tax Act”), was enacted, which significantly revised U.S. corporate income tax by, lowering corporate income tax rates. ASC 740, requires the re-measurement of U.S. deferred tax assets and liabilities that existed as of December 22, 2017, to the new federal income tax rate of 21% as well as any federal impact associated with state and local deferred income taxes. As of December 31, 2017, the Company accounted for the effects of the Tax Act by recording a decrease to its net deferred tax assets of $67,645 and a corresponding decrease of $67,645 to the valuation allowance. As a result, there was a gross impact to the tax provision from the re-measurement of U.S. deferred tax assets at lower enacted tax rates. However, since there was a full valuation allowance being recorded by the Company against its net deferred tax assets as of December 31, 2017, there was no impact on the Company’s tax provision for the year ended December 31, 2017, as a result of the Tax Act.

Other Receivable

Included in other receivable is the estimated amount of the exit fee due to the Company in connection with the purchase of the NetFortris term notes. The exit fee rate is 2.75% per year of the outstanding principal balance of the term notes through the fiscal quarter ending June 30, 2018. Thereafter, the exit fee rate is 2.75% per year of the outstanding principal balance of the term notes if the senior leverage ratio of the portfolio investment is greater than or equal to 3.50x, 1.25% per year of the outstanding principal balance of the term notes if the senior leverage ratio of the portfolio investment is less than 3.50x and greater than or equal to 3.00x or 0.25% per year of the outstanding principal balance of the term notes if the senior leverage ratio of the portfolio investment is less than 3.00x. The exit fee accrues monthly and will be repaid in addition to the principal at the maturity date, or if repaid earlier. On March 28, 2018, the Company reallocated a portion of the other receivable and corresponding other income correlated to the asset distribution to the Partnership to be qualified as a regulated investment company for federal income tax purposes (see Note 2). The reduction of other receivable is due to a portion of the exit fee being reduced as NetFortris repaid a portion of the outstanding principal balance as well as a reduction of the exit fee rate during the quarter.

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

Investor Note Credit Facility

On August 8, 2017, the Company, Partnership and Parallel Partnership entered into a credit facility of short term borrowings (the “Credit Facility”) in the amount of $10,000,000 collateralized by the unfunded Committed Equity Capital of the Limited Partners of the Partnership and Parallel Partnership. On December 15, 2017, the Credit Facility was amended and increased to $40,000,000. The Credit Facility is intended to fund the operations of the Company, Partnership and Parallel Partnership and is scheduled to expire on August 8, 2018, subject to extension. In consideration for establishing the Credit Facility, the Partnership and Parallel Partnership paid a Facility Fee in the amount of 0.25% times the maximum commitment amount. The Credit Facility is stated at its outstanding principal amount and bears interest on the outstanding principal amount at a rate per annum equal to LIBOR plus 1.55%. In addition, an unused commitment fee equal to 0.25% per annum times the difference between the total commitment amount and the average daily outstanding amount of principal is incurred as an expense. On March 28, 2018, the Company distributed a portion of the outstanding Credit Facility balance correlated to the asset distribution to the Partnership to be qualified as a regulated investment company for federal income tax purposes (see Note 2). From the date of the first drawdown through June 30, 2018, the Credit Facility held an outstanding balance of $33,102,225 of which the Company’s portion was $20,429,580 at a rate between 2.78% and 3.64%. The weighted average interest rate for the period ending June 30, 2018 was 3.36%. The balance presented on the Consolidated Statement of Assets and Liabilities approximates its fair value, which would be categorized as Level 3 within the fair value hierarchy.

The Company is required to maintain a minimum asset coverage ratio (total assets-to-debt outstanding) of 2.00 under the 1940 Act. As of June 30, 2018, the Company had an asset coverage ratio of 1.89, which is below the minimum required ratio. The Company has subsequently called capital to reduce the outstanding balance of the Credit Facility and to bring the Company’s asset coverage ratio above the minimum requirement. The Company has determined there was no impact to its ability to use the Credit Facility to fund the operations of the Company and no regulatory effects under the 1940 Act that would impact its day-to-day operations (such as making investments and distributions to Company investors) as a result of falling below the minimum required ratio. The Company has made enhancements to its control procedures to monitor its minimum asset coverage ratio, specifically, performing a review of the asset coverage ratio in advance of each expected drawdown from the Credit Facility.

Deferred Financing Costs

Deferred financing costs consist of fees and expenses paid in connection with the closing of and amendment to the Company’s Credit Facility. These costs are amortized using the straight-line method over the term of the Credit Facility. Deferred financing costs related to the Credit Facility are presented on the Company’s Consolidated Statement of Assets and Liabilities. On March 28, 2018, the Company distributed a portion of the deferred financing costs correlated to the asset distribution to the Partnership to be qualified as a regulated investment company for federal income tax purposes (see Note 2).

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). Under ASU 2014-09, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, which clarifies the guidance in ASU 2014-09 and has the same effective date as the original standard. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, an update on identifying performance obligations and accounting for licenses of intellectual property. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which includes amendments for enhanced clarification of the guidance. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Revenue from Contracts with Customers (Topic 606), the amendments in this update are of a similar nature to the items typically addressed in the technical corrections and improvements project. Additionally, in February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, an update clarifying that a financial asset is within the scope of Subtopic 610-20 if it is deemed an “in-substance non-financial asset.” The Company has adopted ASU 2014-09 and there has not been a material impact on the Consolidated Financial Statements.

3.	Portfolio Investments

The terms and conditions of the portfolio investments, including restrictions on resale, are subject to the terms of the companies’ purchase and sale agreements, limited partnership agreements, private placement memoranda and other governing documents.

Purchases of investments for the period ended June 30, 2018 totaled $21,384,180. Sales of investments for the period ended June 30, 2018 totaled $10,108,268. On March 28, 2018, there was also $19,612,943 of portfolio investments distributed to the Partnership in order for the Company to be qualified as a regulated investment company for federal income tax purposes. Purchases of investments for the period ended June 30, 2017 totaled $8,436,918 with an additional $136,831 being reallocated from the Parallel Partnership due to the reallocation of Portfolio Investments (see Note 2). Sales of investments for the period ended June 30, 2017 totaled $5,376,972.

At June 30, 2018 and December 31, 2017, the cost of portfolio investments for federal income tax purposes was $33,174,960 and $30,498,160, respectively. There was no aggregate or net unrealized appreciation/(depreciation) of portfolio investments for federal income tax purposes.

The Company’s investment holdings are illiquid, with the exception of the Money Market Fund, and are subject to redemption/resale restrictions in accordance with their respective agreements.

The Company’s investments are subject to general economic, political and market risk. These factors may affect the level and volatility of prices and the liquidity of Portfolio Investments, which could adversely affect the Company’s profitability or result in losses.

In addition, the Company is subject to credit risk (the risk that an issuer or borrower will default in the payment of principal and/or interest on an instrument), interest rate risk (the risks associated with market changes in interest rates), illiquidity risk/risks of investing in smaller and lower middle market size companies (the risk that the value of Portfolio Investment will decline sharply after its purchase, whether because of adverse developments affecting that security or a general withdrawal of capital from the small and lower middle market) and concentration/lack of diversification risk (various factors, including prevailing market conditions, available investment opportunities, regulatory constraints, constraints imposed by certain portfolio companies, and the timing of investments, may prevent the Investment Manager from diversifying the Company’s portfolio or may result in the Company’s portfolio not being as diversified as the Investment Manager may otherwise prefer).

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

Lastly, the Company is subject to subordination of interest risk. Portfolio Investments may be in subordinated loans, structurally subordinated loans, mezzanine loans and other structured investments and preferred equity interests or equity interests of an issuer. These Portfolio Investments will be subordinated to the senior obligations of the property or issuer, either contractually, structurally or inherently due to the nature of the securities. Greater credit risks are usually attached to these subordinated investments than to investments in senior obligations. In addition, these securities may not be protected by financial or other covenants, such as limitations upon additional indebtedness, typically protecting the senior debt, and may have limited liquidity.

The Company’s risk of loss related to any one investment is generally limited to its aggregate investment in such Portfolio Investment.

4.	Capital Stock

The Company is owned entirely by the Partnership, to which the Company sold 100,000 shares (“Initial Shares”), at a price of $0.25 per share in an offering exempt from the registration requirements of the Securities Act of 1933, as amended (“1933 Act”) pursuant to Section 4(a)(2) and Regulation D (“Regulation D”) thereof. The Partnership offers and sells limited partnership interests (the “Interests”) to investors (the “Limited Partners”) in an offering exempt from the registration requirements of the 1933 Act pursuant to Regulation D, and will sell its Interests in offerings solely to persons that are both “accredited investors”, as that term is defined in Regulation D, and “qualified purchasers” within the meaning of the 1940 Act. To the extent called for by the Company, the Partnership, subject to its approval of the need for such funds, may make further contributions to the capital of the Company to the extent of the Limited Partners’ capital commitment to the Partnership (“Committed Equity Capital”). Total Committed Equity Capital of the Partnership is $112,960,000. Total contributed capital to the Partnership through June 30, 2018 was $64,613,120, of which $34,331,057 was contributed to the Company.

Two Limited Partners of the Partnership have Committed Equity Capital in excess of ten percent of the total Committed Equity Capital of the Partnership, which cumulatively represent approximately 29% of the total Committed Equity Capital of the Partnership. The concentration of these partners’ Committed Equity Capital could have a material effect on the Partnership and the Company in the event of default or other actions by these partners.

As of June 30, 2018 and December 31, 2017, there were 10,000,000 shares of $0.001 par value common stock authorized, and 100,000 shares issued and outstanding.

5.	Distributions

Distributions are declared at the sole discretion of the Directors. On February 16, 2018, the Company declared and paid a distribution to the Partnership in the amount of $4,383,035 or $43.83 per share. Additionally, on March 28, 2018, the Company distributed assets totaling $19,638,083 and liabilities totaling $11,427,775 to the Partnership, which was performed to enable the Company to be qualified as a regulated investment company for federal income tax purposes (see Note 2). From inception through June 30, 2018, the Company has distributed $19,904,785 or $199.05 per share to the Partnership.

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

6.	Related Party Transactions

The Company has a Board of Directors, a majority of whom are directors that are not “interested persons” of the Company, as defined in the 1940 Act (the “Independent Directors”). During the three and six month periods ended June 30, 2018, the Independent Directors received compensation from the Company aggregating to $44,250 and $86,500, respectively. During the three and six month periods ended June 30, 2017, the Independent Directors received compensation from the Company aggregating to $44,250 and $85,500, respectively.

The General Partner of the Partnership and Parallel Partnership has committed $10,000 each to the Partnership and Parallel Partnership, and Affiliates of the General Partner have committed $300,000 and $12,030,000 to the Partnership and Parallel Partnership, respectively.

Pursuant to the Partnership Agreement, the General Partner of the Partnership and Parallel Partnership shall bear all costs related to the organization, offering, distribution and placement of the partnership interests in the Partnership and Parallel Partnership that exceed $1,500,000 or 0.40% of the Aggregate Capital Commitments. As of June 30, 2018, the General Partner incurred a total of $149,960 of expenses over this threshold related to the Partnership and Parallel Partnership. For the period ended June 30, 2018, the Company did not incur any expenses that were over this threshold.

Due to/from Affiliate(s) represents amounts paid by or on behalf of the Company by the Partnership and Parallel Partnership in connection with the purchase of underlying investments and income and expenses paid or received on behalf of the Company.

On March 28, 2018, the Company sold $2,148,905 of senior subordinated notes in Chairman’s Foods, LLC and $1,307,355 of term notes in Environmental Group Holdings, LLC to an affiliated entity.

7.	Fees and Expenses

As compensation for its services, the Investment Manager will receive an investment management fee from the Company (the “Investment Management Fee”). For the period from October 13, 2015 (commencement of operations) through November 8, 2016, the Investment Management Fee was paid by the Company quarterly in arrears in an amount equal to 1.75% per annum of the Company’s Invested Capital, as measured as of the close of business on the last business day of such quarterly period. “Invested Capital” means the cost basis of the portfolio investments of the Company (excluding cash and cash equivalents) that have not been written off or disposed of, including portfolio investments acquired with borrowed funds. On March 29, 2016, the Investment Manager voluntarily reduced the Investment Management Fee to 1.25% per annum (effective as of the commencement of the Company’s operations). The Investment Manager has no ability to claw back any Investment Management Fees waived. On November 9, 2016, the Independent Directors amended the Investment Management Agreement reducing the Investment Management Fee from 1.75% to 1.25% per annum of the Company’s Invested Capital, as measured as of the close of business on the last business day of such quarterly period.

For the three and six months ended June 30, 2017, the amended Investment Management Fee rate of 1.25% was in effect and as such, the amount of Investment Management Fees waived during the periods were charged as a result of reallocations (see Note 2). Offset Fees have been applied to reduce payments of the Management Fees paid by the Company for the period ended June 30, 2018.

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

The General Partner of the Partnership and Parallel Partnership also receives from the Partnership a share of any profits derived from the investments held by the Partnership and Parallel Partnership, including those of the Company.

8.	Contingencies

In the normal course of business, the Company enters into contracts that contain a variety of representations and warranties which provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Company that have not yet occurred. However, based on experience, the Investment Manager expects the risk of loss to be remote.

9.	Financial Highlights

The following per share data and ratios have been derived from information provided in the consolidated financial statements. The following is a schedule of consolidated financial highlights for a common share outstanding for the periods ended June 30, 2018 and June 30, 2017.

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

	For the Six Months Ended June 30, 2018			For the Six Months Ended June 30, 2017

Total Return¹		6.17	%		4.63	%

Per Share Amounts:
Net Asset Value, Beginning of Period	$	293.33		$	179.09
Net Investment Income/(Loss) after income tax (benefit)/expense		13.43			9.78
Net Realized Gain/(Loss) on Portfolio Investments		-			0.86
Net Increase/(Decrease) in Net Assets Resulting from Operations		13.43			10.64
Contributions from Stockholder		-			84.69
Paid-in capital distributed to stockholder		(123.02	)		-
Distributions from net investment income/(loss)		(2.26	)		-
Distributions from net realized gain/(loss)		(0.66	)		-
Net Asset Value, End of Period	$	180.82		$	274.42

Net Assets, End of Period	$	18,082,219		$	27,441,614
Average Net Assets	$	22,092,091		$	22,429,436

Ratios / Supplemental Data:
Ratio of net investment income/(loss) after income tax (benefit)/expense to average net assets		6.08	%		4.36	%
Ratio of total expenses to average net assets before Investment Management Fee Waived		3.90	%		1.67	%
Ratio of total expenses to average net assets after Investment Management Fee Waived		3.90	%		1.68	%
Common Shares Outstanding, End of Period		100,000			100,000
Portfolio Turnover Rate		10.08	%		20.28	%
Average Outstanding Borrowings²	$	17,708,709		$	-
Asset Coverage Ratio		1.89			-

¹Given the Company’s similarities to a non-registered close-ended fund, the Company calculated total return as the change in the Company’s capital over the period ended, and adjusted for stockholder contributions and distributions during the period. The Company noted that the total return calculated under the typical method for a registered investment company resulted in a total return of 4.58% as of June 30, 2018 (not annualized) and 53.23% as of June 30, 2017 (not annualized). The Company determined that the June 30, 2017 total return did not appropriately represent the performance of the Company, and thus calculated the total return based on the change in value of a theoretical investment at the beginning of the year by geometrically linking the cash flows, which is a method more commonly used by non-registered funds.

²The average outstanding borrowings has been calculated for the periods ended June 30, 2018 and June 30, 2017.

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Siguler Guff Small Business Credit Opportunities Fund, Inc.

Notes to Consolidated Financial Statements

June 30, 2018 (Unaudited)

10.	Subsequent Events

On July 19, 2018, July 23, 2018 and August 9, 2018, the Company purchased an additional $579,108, $264,846 and $247,565 of term notes in Environmental Group Holdings, LLC, respectively. On August 9, 2018, the Company entered into a delayed draw term note in which the Company will commit up to an additional $903,700 to Environmental Group Holdings, LLC. Environmental Group Holdings, LLC can draw down on the delayed draw term note as needed until the maturity date.

On July 31, 2018, the Company distributed $3,603,591 or $36.04 per share to the Partnership, bringing total distributions to the Partnership since inception to $23,508,376 or $235.08 per share.

On July 31, 2018, the Partnership called $2,824,000 and on August 7, 2018 the Partnership called $7,681,280 due August 16, 2018, from its Partners which will bring the total amount called from Partners to $75,118,400 (66.50% of Capital Commitments). The Partnership is planning to contribute an additional $3,770,000 to the Company, which will bring total contributed capital from the Partnership to $38,101,057. The additional capital contributed by the Partnership will be used to reduce the outstanding balance of the Credit Facility to bring the Company’s asset coverage ratio above the minimum requirement.

On August 8, 2018, the Company purchased an additional $323,855 of senior subordinated notes in S.R. Smith, LLC.

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ITEM 2.

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

Siguler Guff Small Business Credit Opportunities Fund, Inc. (“SBCOF” or the “Fund”) is a non-diversified closed-end management investment company electing status as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). The Fund is a wholly-owned subsidiary of Siguler Guff Small Business Credit Opportunities Fund, LP, a Delaware limited partnership (the “Partnership”). The Partnership is the Fund’s sole direct shareholder and makes capital contributions to the Fund as needed for the Fund to make investments or pay its expenses, to the extent that the Partnership has available capital and in accordance with the Partnership’s governing documents. The Fund’s investment objective is to achieve attractive risk-adjusted returns by generating current income from debt investments and capital appreciation from equity investments.

The Fund is a specialty finance investment company providing financing and advisory services to carefully selected companies in the lower middle market, which Siguler Guff Advisers (the “Investment Manager”) defines as privately-owned companies with between $2 million to $15 million of earnings before income tax, depreciation and amortization (“EBITDA”), and between $10 million to $100 million of revenue. The Fund’s investments generally take the form of mezzanine debt, “unitranche” loans with a first lien on the company’s assets, as well as second lien loans. The Partnership generally seeks to purchase equity securities alongside the Fund’s investments into those same companies, generally with an aggregate cost of up to 20% of the value of the investment. The Partnership also may extend mezzanine financing in forms other than subordinated loans, such as convertible loans and preferred stock. The Fund commenced investment operations on October 13, 2015, and its portfolio as of June 30, 2018 (excluding the Money Market Fund) consisted of investments held in healthcare services, manufacturing, business equipment, business services, commercial retail, consumer and sporting goods, electronic equipment, general contracting, technical services, security and protection services, telecommunications, processed and packaged goods, and staffing and outsourcing services.

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On March 28, 2018, the Fund distributed $8,210,308 of net assets consisting of $17,520,464 of senior subordinated notes, $2,092,479 of term notes, $25,140 of deferred financing costs and $11,427,775 of the investor note credit facility to the Partnership. This distribution was completed to enable the Fund to begin meeting the requirements, including diversification, gross income, and distribution requirements, to qualify for the special-pass through status available to RICs under the Internal Revenue Code.

CRITICAL ACCOUNTING POLICIES

The Investment Manager has identified the most critical accounting estimates upon which the financial statements depend and determined the critical accounting estimates by considering accounting policies that involve the most complex or subjective decisions or assessments. The critical accounting policies relate to the valuation of investments, the recognition of income and expense, and income taxes.

Valuation of Portfolio Investments

The Financial Accounting Standards Board Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. 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 or reliable, fair valuation techniques are applied. These techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments’ complexity.

Assets and liabilities recorded at fair value in the Fund’s consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs used in the fair valuation of these assets and liabilities, are as follows:

Level 1 - Unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 3 - Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the fair valuation technique and the risk inherent in the inputs to the model.

Under ASC 820, the Fund performs detailed valuations of its debt investments for which quotations are not readily available on an individual basis, using bond yield, market and income approaches as appropriate. In certain instances, the Fund may use alternative methodologies, including recent purchase transactions, asset liquidation, expected recovery model or other alternative approaches to estimate the fair value.

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Investments where market quotations for securities of the same issue are readily available on an exchange are marked to market at fair value at the closing price on the financial statement date. Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value.

Under the bond yield approach, the Fund uses bond yield models to determine the present value of the future cash flow streams of its debt investments. The Fund reviews various sources of transactional data, including private mergers and acquisitions involving debt investments with similar characteristics, and assesses the information in the valuation process.

Under the market approach, the Fund estimates the enterprise value of the portfolio companies in which it invests. There is no one methodology to estimate enterprise value and, in fact, for any one portfolio company, enterprise value is best expressed as a range of fair values, from which the Fund derives a single estimate of enterprise value. To estimate the enterprise value of a portfolio company, the Fund analyzes various factors, including the portfolio company’s historical and projected financial results. Typically, private companies are valued based on multiples of EBITDA, cash flows, net income or revenues. The Fund generally requires portfolio companies to provide annual audited and quarterly or monthly unaudited financial statements, as well as annual projections for the upcoming fiscal year.

Under the income approach, the Fund generally prepares and analyzes discounted cash flow models based on projections of the future free cash flows of the business.

The fair value of the Fund’s portfolio investments at June 30, 2018 and December 31, 2017 was determined in good faith by the Fund’s Board of Directors. The Board of Directors is ultimately and solely responsible for the valuation of the portfolio investments at fair value as determined in good faith pursuant to the Fund’s valuation policy and a consistently applied valuation process.

The following table summarizes the level of the Fund’s assets measured at fair value as of June 30, 2018 and December 31, 2017.

	Assets at Fair Value as of June 30, 2018
	Level 1		Level 2		Level 3		Total

Senior Subordinated Notes	$	-	$	-	$	24,867,027	$	24,867,027
Term Notes		-		-		8,042,063		8,042,063
Money Market Fund		66,216		-		-		66,216
Total Portfolio Investments	$	66,216	$	-	$	32,909,090	$	32,975,306

	Assets at Fair Value as of December 31, 2017
	Level 1		Level 2		Level 3		Total

Senior Subordinated Notes	$	-	$	-	$	28,511,612	$	28,511,612
Term Notes		-		-		5,872,743		5,872,743
Money Market Fund		6,770,593		-		-		6,770,593
Total Portfolio Investments	$	6,770,593	$	-	$	34,384,355	$	41,154,948

At June 30, 2018 and December 31, 2017, 100% of the Fund’s portfolio investments have been classified within Level 3, with the exception of the Money Market Fund. Assumptions used by the Fund due to the lack of observable inputs may significantly impact fair value determinations and therefore the Fund’s results of operations. The following table summarizes the significant unobservable inputs the Fund used to value investments categorized within Level 3. The below table is not intended to be all-inclusive, but instead captures the significant unobservable inputs relevant to the determination of fair values:

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				Unobservable Input as of June 30, 2018
Investment Type	Fair Value¹		Primary Valuation Technique	Input	Range

Senior Subordinated Notes	$	14,389,554	Discounted Cash Flow	Discount Rate		10.0% - 14.0%

Term Notes		2,527,293	Discounted Cash Flow	Discount Rate		9.6% - 14.0%


Total	$	16,916,847

¹Not reflected in the table above are Level 3 investments that have been primarily based upon recent transactions totaling $15,992,243 as of June 30, 2018.

				Unobservable Input as of December 31, 2017
Investment Type	Fair Value¹		Primary Valuation Technique	Input	Range

Senior Subordinated Notes	$	20,987,560	Discounted Cash Flow	Discount Rate		10.0% - 14.0%

Term Notes		1,801,124	Discounted Cash Flow	Discount Rate		9.1% - 12.6%


Total	$	22,788,684

¹Not reflected in the table above are Level 3 investments that have been primarily based upon recent transactions totaling $11,595,671 as of December 31, 2017.

Critical factors in determining the fair value of investments include payment history, collateral position, financial strength of borrower, financial performance relative to covenants, likelihood of sale or acquisition of the borrower, and length of expected holding period of the loan, as well as the general interest rate environment. The actual value realized from investments may differ from management’s estimates and such differences could be material. In addition, such differences would impact the carrying value of investments presented in the financial statements, as well as, the Fund’s change in net assets resulting from operations.

Income and Expense

Interest income is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Fund stops accruing interest on investments when it is determined that interest is no longer collectible. Fees received upon closing a transaction generally are treated as a reduction in the cost basis of the investment. Any resulting discount, or closing fee received, from recording the loan or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan using the effective-yield method.

The Fund has investments in debt securities which contain payment-in-kind (“PIK”) interest provisions. PIK interest is computed at the contractual rate specified in each investment agreement and added to the principal balance of the investment and recorded as income. The Fund stops accruing PIK interest on investments when it is determined that PIK interest is no longer collectible.

Other income includes the estimated amount of the exit fee due in connection with the purchase of the NetFortris Operating Co., Inc. (“NetFortris”) term notes. The reallocation of other income for the three months ended March 31, 2018 is due to a portion of the exit fee and corresponding receivable being distributed to the Partnership on March 28, 2018. The reduction of other income for the three and six months ended June 30, 2018 is due to a portion of the exit fee being reduced as NetFortris repaid a portion of the outstanding principal balance as well as a reduction of the exit fee rate during the quarter.

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Expenses include investment management fees, legal fees, directors’ fees, audit and tax service expenses, interest expense, amortization of deferred financing costs and other general and administrative expenses. Expenses are recognized on an accrual basis.

Income Taxes

As of January 1, 2018, the Fund believes that it qualifies to be treated as RIC under subchapter M of the Internal Revenue Code (the “Code) and operates in a manner so as to qualify for the tax treatment applicable to RICs. It is the Fund’s intention to make the election for treatment as a RIC in its tax filing for the year ended December 31, 2018. Prior to January 1, 2018 the Fund was treated as a corporation for U.S. federal income tax purposes.

In order to qualify for favorable tax treatment as a RIC, the Fund is required to distribute annually to its shareholder at least 90% of its investment company taxable income, as defined by the Code. To avoid federal excise taxes, the Fund must distribute annually at least 98% of its ordinary income and 98.2% of net capital gains from the current year and any undistributed ordinary income and net capital gains from the preceding years. The Fund, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. If the Fund chooses to do so, all other things being equal, this would increase expenses and reduce the amount available to be distributed to the Partnership (its sole shareholder). The Fund will accrue excise tax on estimated undistributed taxable income as required.

Dividends from net investment income and distributions from net realized capital gains are determined in accordance with U.S. federal income tax regulations, which may differ from those amounts determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in-capital or accumulated net realized gain (loss), as appropriate, in the period that the differences arise. Temporary and permanent differences are primarily attributable to differences in the tax treatment of certain loans and the tax characterization of income and non-deductible expenses. These differences are generally determined in conjunction with the preparation of the Fund’s annual RIC tax return.

Book and tax basis differences relating to shareholder dividends and distributions and other permanent book and tax differences are reclassified among the Fund’s capital accounts. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP. The Fund may pay distributions in excess of its taxable net investment income. This excess would be a tax-free return of capital in the period and reduce the shareholder’s tax basis in its shares.

The Fund records uncertain tax positions in accordance with Financial Accounting Standards Board ASC 740, Income Taxes on the basis of a two-step process whereby (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, it recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Fund has determined that there are no uncertain tax positions that would have a material impact to the financial statements of the Fund, and therefore, no provisions are required to be recorded by the Fund. The Fund does not anticipate significant increases to uncertain tax positions in the next twelve months. The Fund will recognize any interest and penalties, if applicable, for any uncertain tax positions as a component of income tax expense. No interest or penalties were recorded during the period ended June 30, 2018 or year ended December 31, 2017, or accrued for as of June 30, 2018 and December 31, 2017.

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The Fund files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Fund is subject to examination by federal, state, local and foreign jurisdictions, where applicable. At June 30, 2018, no examinations were being conducted by the Internal Revenue Service or any other taxing authority. Under the respective statute of limitations, tax years beginning in 2015 remain subject to examination by the various tax jurisdictions.

Results of Operations – For the three months ended June 30, 2018 and 2017 and six months ended June 30, 2018 and 2017

Total investment income for the three months ended June 30, 2018 decreased to $870,741, as compared to $1,172,553 for the three months ended June 30, 2017, which primarily consisted of interest income on investments held during the reporting period. The decrease in investment income during the quarter is due to the fact that the entire portion of the exit fee in relation to the NetFortris term notes was accrued for during the three and six months ended June 30, 2017. The exit fee was reduced during the three and six months ended June 30, 2018, as NetFortris repaid a portion of the outstanding principal balance as well as a reduction of the exit fee rate during the quarter. Additionally, there was a prepayment fee from the sale of Rudy’s Food Products, Inc. during the three and six months ended June 30, 2017, which caused a reduction in investment income. Total investment income for the six months ended June 30, 3018 increased to $2,205,086, as compared to $1,921,617 for the six months ended June 30, 2017, which primarily consisted of interest income on investments held during the reporting period. The average outstanding principal amount of loans made by the Fund (calculated on a monthly basis) during the three months ended June 30, 2018 decreased to $28,440,746, as compared to $29,985,665 for the three months ended June 30, 2017. The average outstanding principal amount of loans made by the Fund (calculated on a monthly basis) during the six months ended June 30, 2018 increased to $34,279,010, as compared to $27,261,389 for the six months ended June 30, 2017.

During the three and six months ended June 30, 2018 and the three and six months ended June 30, 2017, all senior subordinated note investments held by the Fund had fixed interest rates. The weighted average interest rate on the outstanding senior subordinated notes that had fixed interest rates was 12.42% for the three and six months ended June 30, 2018, and 11.95% for the three and six months ended June 30, 2017. For the three and six months ended June 30, 2018, all term note investments (other than McVeigh Global Meetings and Events, LLC, “McVeigh”) held by the Fund had floating interest rates. The fixed interest rate for McVeigh was 12.00% for the three and six months ended June 30, 2018. The weighted average interest rate on outstanding term notes that had floating interest rates was 11.94% as of June 30, 2018. The weighted average interest rate on outstanding term notes that had floating interest rates was 9.48% for the three and six months ended June 30, 2017. Interest is calculated using the effective interest method, and rates earned by the Fund will fluctuate based on factors including, but not limited to, pre-payments of outstanding loans, defaults or uncollectibility of payments, and changes in interest rates.

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Total fund expenses for the three months ended June 30, 2018 increased to $425,347, as compared to $207,901 for the three months ended June 30, 2017. For the three months ended June 30, 2018, fund expenses consisted of interest expense of $132,176, investment management fees of $101,163, professional fees of $122,462, directors’ fees of $44,250, amortization of deferred financing costs of $20,054 and other general and administrative expenses of $5,242. For the three months ended June 30, 2017, fund expenses consisted of investment management fees of $95,253 (gross fees of $94,760 plus waived fees reallocated of $493), professional fees of $61,170, directors’ fees of $44,250, and other general and administrative expenses of $7,228. Total fund expenses for the six months ended June 30, 2018 increased to $862,028, as compared to $375,806 for the six months ended June 30, 2017. For the six months ended June 30, 2018, fund expenses consisted of interest expense of $304,672, investment management fees of $179,838, professional fees of $199,772, directors’ fees of $86,500, amortization of deferred financing costs of $57,292, and other general and administrative expenses of $33,954. For the six months ended June 30, 2017, fund expenses consisted of investment management fees of $186,308 (gross fees of $185,815 plus waived fees reallocated of $493), professional fees of $94,907, directors’ fees of $85,500, and other general and administrative expenses of $9,091. There was no income tax expense for the six months ended June 30, 2018 due to the Fund qualifying for RIC status as compared the income tax expense of $567,527 for the six months ended June 30, 2017 and $321,038 for the three months ended June 30, 2017.

The Fund’s investment management fee for the three and six months ended June 30, 2018 was computed and paid quarterly in arrears in an amount equal to 1.25% per annum of the Fund’s Invested Capital, as measured as of the close of business on the last business day of each quarterly period. On November 9, 2016, the Independent Directors of the Fund’s Board approved amendments to the Investment Management Agreement, including the reduction of the management fee from 1.75% to 1.25% of Invested Capital. Prior to the Independent Director approval of the management fee reduction, the Investment Manager elected to voluntarily waive all management fees greater than 1.25% per annum of the Fund’s invested capital, retroactive to the inception of the Fund. The Fund’s investment management fee for the three months ended June 30, 2018 amounted to $101,163, and for the three months ended June 30, 2017 amounted to $95,253 (gross fees of $94,760 plus waived fees reallocated of $493). The Fund’s investment management fee for the six months ended June 30, 2018 amounted to $179,838, and for the six months ended June 30, 2017 amounted to $186,308 (gross fees of $185,815 plus waived fees reallocated of $493). “Invested Capital” means the cost basis of the Fund’s portfolio investments (excluding cash and cash equivalents) that have not been written off or disposed of, including portfolio investments acquired with borrowed funds.

The Fund’s professional fees for the three and six months ended June 30, 2018 and three and six months ended June 30, 2017 were comprised of legal, audit, tax and other professional fees. Other general and administrative expenses included miscellaneous other expenses related to the operation of the Fund.

Net investment income for the three months ended June 30, 2018 was $445,394, as compared to $643,614 for the three months ended June 30, 2017. Net investment income for the six months ended June 30, 2018 was $1,343,058, as compared to $978,284 for the six months ended June 30, 2017. The change in investment income during the quarter is due to the fact that the entire portion of the exit fee in relation to the NetFortris term notes was accrued for during the three and six months ended June 30, 2017. The exit fee was reduced during the three and six months ended June 30, 2018, as NetFortris repaid a portion of the outstanding principal balance as well as a reduction of the exit fee rate during the quarter. Additionally, there was a prepayment fee from the sale of Rudy’s Food Products, Inc. during the three and six months ended June 30, 2017, which caused a reduction in investment income. The Fund continues to make investments in income-producing assets.

There were no net realized gain/(loss) from investments during the three and six months ended June 30, 2018 as compared to a net realized gain/(loss) of $85,684 during the three and six months ended June 30, 2017. Net increase in net assets resulting from operations for the three months ended June 30, 2018 was $445,394, as compared to $729,298 for the three months ended June 30, 2017. Net increase in net assets resulting from operations for the six months ended June 30, 2018 was $1,343,058, as compared to $1,063,968 for the six months ended June 30, 2017.

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Due to additional commitments received in 2017 by the Partnership and Parallel Partnership, portfolio investments and items of income and expense have been reallocated between the Fund, the Partnership and the Parallel Partnership to reflect committed capital ownership percentages as of the final closing, which occurred on September 29, 2017. Prior to the final closing, portfolio investments and items of income and expense were allocated according to the committed capital ownership percentages as of the latest closing. Following the latest closing as of June 30, 2017, reallocation of portfolio investments and items of income and expense between the Fund, the Partnership and the Parallel Partnership had occurred. As a result, included in the 2017 Consolidated Statements of Operations for the three and six month periods ended June 30, 2017 were reallocations of $50,367 (reallocations of investment income totaling $52,183 and reallocations of expenses totaling $1,816) which equaled amounts previously included in the Consolidated Statements of Operations for the period ended December 31, 2015 and the year ended December 31, 2016.

On March 28, 2018, the Fund distributed assets and corresponding liabilities to the Partnership, which was performed to enable the Fund to be qualified as a RIC for federal income tax purposes. The Fund distributed $17,520,464 of senior subordinated notes, $2,092,479 of term notes, $25,140 of deferred financing costs and $11,427,775 of the investor note credit facility to the Partnership.

Financial Condition, Liquidity, and Capital Resources

During the three months ended June 30, 2018 and June 30, 2017, the Fund was wholly owned by the Partnership. The Partnership is expected, but not required, to make further contributions of capital to the Fund in an aggregate amount that will not exceed the Partnership’s limited partners’ capital commitments to the Partnership. As of June 30, 2018, the Partnership (excluding the Parallel Partnership) had received commitments of capital in the amount of $112,960,000, of which $64,613,120 had been called and of which $34,331,057 was contributed to the Fund. As of June 30, 2018, $48,346,880 of capital remained uncalled by the Partnership.

At June 30, 2018, the Fund had adequate resources consisting of cash on hand, a Money Market Fund and expected future capital contributions from the Partnership that could be used to fund future obligations. The Fund, based upon the investments held at June 30, 2018, expects to receive approximately $3,930,000 in scheduled interest payments over the next year. The future capital contributions and scheduled interest payments are sufficient to meet the requirements of anticipated investments and operational expenses of the Fund over the next year.

As of June 30, 2018, 28.3% of the Fund’s net assets consisted of cash, and for the year ended December 31, 2017, 14.8% of the Fund’s net assets consisted of cash. During the six months ended June 30, 2018 and the year ended December 31, 2017, the Fund invested in senior subordinated and term notes. On February 16, 2018, the Fund made a cash distribution to the Partnership in the amount of $4,383,035 or $43.83 per share. Additionally, on March 28, 2018, the Fund distributed in-kind $8,210,308 or $82.10 per share of net assets ($17,520,464 of senior subordinated notes, $2,092,479 of term notes, and $25,140 of deferred financing costs and $11,427,775 of the investor note credit facility) to the Partnership. Since inception, the Fund has distributed $19,904,785 or $199.05 per share to the Partnership. The principal balance and fair value of loans in the Fund’s investment portfolio at June 30, 2018 and December 31, 2017 was $33,420,632 and $32,909,090, and $34,877,049 and $34,384,355, respectively.

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The Fund’s consolidated financial statements include portfolio investments held at a fair value of $32,975,306 at June 30, 2018 and $41,154,948 at December 31, 2017. The portfolio investments represent approximately 182% of net assets at June 30, 2018 and approximately 140% of net assets at December 31, 2017 and their fair values have been determined in good faith by the Fund’s Board of Directors. Because of the inherent uncertainty of fair valuation, the determined values may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material. Because the Fund’s investments consist of privately negotiated transactions, investments in these assets are considered to be illiquid.

With respect to leverage, on August 8, 2017, the Fund, the Partnership, and Parallel Partnership, entered into a credit facility of short term borrowings (the “Credit Facility”) to fund the operations of the Fund, Partnership, and Parallel Partnership. Please see Contractual Obligations below for additional information about the Credit Facility.

On March 28, 2018, the Fund distributed $8,210,308 of net assets ($17,520,464 of senior subordinated notes, $2,092,479 of term notes, $25,140 of deferred financing costs and $11,427,775 of the Credit Facility) to the Partnership. This distribution was completed to allow the Fund to begin meeting the requirements, including diversification, gross income, and distribution requirements, to qualify for the special-pass through status available to RICs under the Internal Revenue Code.

The Fund is required to maintain a minimum asset coverage ratio (total assets-to-debt outstanding) of 2.00 under the 1940 Act. As of June 30, 2018, the Fund had an asset coverage ratio of 1.89, which is below the minimum required ratio. The Fund has subsequently called capital to reduce the outstanding balance of the Credit Facility and to bring the Fund’s asset coverage ratio above the minimum requirement. The Fund has determined there was no impact to its ability to use the Credit Facility to fund the operations of the Fund and no regulatory effects under the 1940 Act that would impact its day-to-day operations (such as making investments and distributions to Fund investors) as a result of falling below the minimum required ratio. The Fund has made enhancements to its control procedures to monitor its minimum asset coverage ratio, specifically, performing a review of the asset coverage ratio in advance of each expected drawdown from the Credit Facility.

Contractual Obligations

The Fund has entered into certain contracts under which it has future commitments. Payments under the Investment Management Agreement, pursuant to which Siguler Guff Advisers has agreed to serve as the Fund’s investment adviser, are equal to a percentage of the invested capital of the Fund, including assets acquired with borrowed funds, if any. The Investment Management Agreement will continue in effect until June 8, 2019. Thereafter, regardless of the dissolution of the Fund, the Investment Management Agreement shall continue automatically for successive periods of a year each June, if not terminated. Either party may terminate the Investment Management Agreement without penalty on least 60 days’ written notice to the other party. The Fund has also entered into a Custodian Agreement, pursuant to which Citi Private Bank has agreed to serve as the Fund’s custodian (the “Custodian”). The Fund pays the Custodian such fees as have been agreed between the Fund and the Custodian, as described in the Custodian Agreement which the Fund has determined are commercially reasonable in its sole discretion.

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On August 8, 2017 and amended on December 15, 2017, the Fund, Partnership, and Parallel Partnership, entered into a credit facility of short term borrowings (the “Credit Facility”) in the amount of $10,000,000 collateralized by the unfunded Committed Equity Capital of the Limited Partners of the Partnership and Parallel Partnership. On December 15, 2017, the Credit Facility was amended and increased to $40,000,000. The Credit Facility is intended to fund the operations of the Fund, Partnership, and Parallel Partnership, and is scheduled to expire on August 8, 2018, subject to extension. In consideration for establishing the Credit Facility, the Partnership and Parallel Partnership paid a Facility Fee in the amount of 0.25% times the maximum commitment amount. The Credit Facility is stated at its outstanding principal amount and bears interest on the outstanding principal amount at a rate per annum equal to LIBOR plus 1.55%. In addition, an unused commitment fee equal to 0.25% per annum times the difference between the total commitment amount and the average daily outstanding amount of principal is incurred as an expense. From the date of the first drawdown through June 30, 2018, the Credit Facility held an outstanding balance of $33,102,225, of which the Fund’s portion was $20,429,580 at a rate between 2.78% and 3.64%.

As mentioned in the previous paragraph, the Fund does bear interest on its outstanding principal amount and is subject to certain fees and costs that could affect its liquidity and cash flows. As of June 30, 2018, the Fund had incurred financing obligations with respect to interest on borrowings, undrawn fees or unused commitment fees that could have an impact on liquidity cash flows.

Taxation of the Fund as a RIC

Consequences of Converting From an Ordinary Corporation to a RIC. In order to qualify as a RIC, the Fund must, at the end of the first year in which it so qualifies, have no accumulated earnings and profits from years in which it was not taxed as a RIC. To meet this requirement, the Fund must, before the end of the first year in which it qualifies as a RIC, distribute as dividends all of its accumulated earnings and profits. In addition to the foregoing, pursuant to the Treasury regulations, the Fund must either (i) recognize gain on the disposition of any asset during the subsequent recognition period (generally 10 years) (the “Recognition Period”) beginning on the first day of the first taxable year for which the Fund qualifies for pass-through status as a RIC that is held by the Fund as of the beginning of such Recognition Period, to the extent of the excess of (a) the fair market value of such asset as of the beginning of such Recognition Period over (b) the Fund’s adjusted tax basis in such asset as of the beginning of such Recognition Period (such excess, hereinafter, “built-in gain”), taxable at the highest regular corporate rates or (ii) elect to immediately recognize and pay tax on any such built-in gain with respect to any of its portfolio holdings and, as described above, distribute the earnings and profits from such deemed sales. As a RIC, the Fund generally would not be able to use any net operating loss carryforwards relating to periods prior to the first year in which the Fund qualifies as a RIC.

RIC Qualification Requirements. In order to qualify as a RIC under Subchapter M of the Code, the Fund must, among other things, (1) at all times during the taxable year, have a valid and effective election to be a BDC under Sections 6(f) and 54 of the 1940 Act; (2) derive at least 90% of its gross income for each taxable year from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including gains from options, futures and forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and net income derived from an interest in a qualified publicly traded partnership (as defined in Section 851(h) of the Code); (3) diversify its holdings so that, at the end of each quarter of each taxable year: (a) at least 50% of the value of the Fund’s total assets is represented by (i) cash and cash items, U.S. government securities, and securities of other RICs, and (ii) other securities (counting each investment in such other securities only if the value of such securities does not exceed 5% of the value of the Fund’s total assets and the Fund does not own more than 10% of the outstanding voting securities of the issuer of such securities), and (b) not more than 25% of the value of the Fund’s total assets is invested in (i) the securities (other than U.S. government securities and securities of other RICs) of any one issuer, (ii) the securities (other than securities of other RICs) of two or more issuers that the Fund controls (defined as 20% or more of the voting power) and that are engaged in the same, similar, or related trades or businesses, or (iii) the securities of one or more qualified publicly traded partnerships; and (4) file an election to be a RIC.

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As a RIC, the Fund must properly distributes to its shareholders each taxable year an amount equal to or exceeding the sum of (1) 90% of its “investment company taxable income” as that term is defined in the Code (which includes, among other things, dividends, taxable interest, and the excess of any net short-term capital gains over net long-term capital losses, as reduced by certain deductible expenses) without regard to the deduction for dividends paid and (2) 90% of the excess of its gross tax-exempt interest, if any, over certain disallowed deductions, the Fund generally will not be subject to U.S. federal income tax on any income of the fund, including “net capital gain” (the excess of net long-term capital gain over net short-term capital loss), distributed to the shareholders. However, if the Fund meets such distribution requirements and, thus, is eligible for pass-through status, but chooses to retain some portion of its investment company taxable income or net capital gain, it generally will be subject to U.S. federal income tax at regular corporate income tax rates on the amount retained. A distribution of warrants or equity investments to its shareholders will be treated as a sale by the Fund of such assets with the excess of the fair market value of those assets over their tax basis being the amount of the income or gain to the Fund arising from the distribution.

After initially qualifying as a RIC, if the Fund fails to qualify as a RIC that is eligible for pass-through status for any taxable year, it will be treated as a U.S. corporation subject to U.S. federal income tax, thereby subjecting any income earned by the Fund to tax at the corporate level and to a further tax at the shareholder level when such income is distributed. In such a case, there may be substantial tax and other costs associated with re-qualifying as a RIC.

After the Fund qualifies as a RIC, the Fund will be subject to a nondeductible 4% excise tax (“Excise Tax”) to the extent it fails to distribute by the end of any calendar year at least 98% of its ordinary income for such calendar year and 98.2% of its capital gain net income for the one-year period ending on October 31 of such calendar year, plus certain other undistributed amounts. For these purposes, any taxable income retained by the Fund, and on which it pays federal income tax, will be treated as having been distributed.

The Fund currently intends to distribute in each year for which it qualifies as a RIC substantially all of its net investment income and capital gain net income so as not to be subject to either federal income tax or Excise Tax.

Tax Status. The Fund must meet a number of requirements, described above under the caption “Taxation” to qualify for the pass-through status as a RIC and, if qualified, to continue to so qualify. If the Fund experiences difficulty in meeting the diversification requirement for any fiscal quarter of its taxable year, it may accelerate capital calls or, if available, borrowings in order to increase the portion of the Fund’s total assets represented by cash, cash items and U.S. government securities as of the close of the following fiscal quarter and thus attempt to meet the diversification requirement. The Fund, however, would incur additional interest and other expenses in connection with any such accelerated borrowings, and increased investments by the Fund in cash, cash items and U.S. government securities (whether the funds to make such investments are derived from called equity capital or from accelerated borrowings) are likely to reduce the Fund’s return. Furthermore, there can be no assurance that the Fund would be able to meet the diversification requirements through such actions. Failure to qualify as a RIC would deny the Fund pass-through status and, in a year in which the Fund has taxable income, would have a significant adverse effect on the returns of the Fund.

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When the Fund elects to convert its status from that of an ordinary, or C, corporation to that of a RIC, it must choose either to (i) pay tax whenever an asset is sold during the subsequent “conversion period” (generally, ten years) following the conversion on the amount of gain which would have been realized had the asset been sold on the conversion date, or (ii) treat the entire amount of “built-in gain” as income at the time of conversion.

Effect of Certain Investments and Investment Practices. The Fund’s activities generally may be unlike the typical activities engaged in by most investment companies that seek to qualify as RICs for federal income tax purposes. Certain aspects of these activities may at times make it more difficult for the Fund to satisfy the requirements for qualifying as a RIC than is the case for other investment companies. For example, because the Fund generally will call capital from the Partnership on an “as needed” basis and will have relatively few investments in its early period of operations, the Fund will not be holding substantial amounts of “cash and cash items” that could be counted towards the Fund’s RIC diversification requirements. As noted above under Income Taxes, as of January 1, 2018, the Fund believes that it qualifies to be treated as a RIC under subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Fund is subject to financial market risks, including changes in interest rates. Changes in interest rates may affect both the cost of funding and our interest income from portfolio investments. The Fund’s risk management processes and procedures are designed to identify and analyze risk, to set appropriate policies and limits and to continually monitor these risks and limits by means of administrative and information systems and other policies and programs. Our investment income will be affected by changes in various interest rates, including LIBOR and prime rates, to the extent our debt investments include floating interest rates. In addition, our investments are carried at fair value as determined in good faith by our Board of Directors. Our valuation methodology utilizes discount rates in part in valuing our investments, and changes in those discount rates may have an impact on the valuation of our investments.

The Fund’s business activities entail various elements of risk. The Fund considers the principal types of market risk to be interest rate risk, credit risk and valuation risk. Accordingly, the Fund’s risk management procedures are designed to identify and analyze the Fund’s risks, to set appropriate policies and limits and to continually monitor these.

The Fund intends to manage its risk by maintaining a portfolio that is diverse by industry, size of investment, and borrowers. The Fund has limited exposure to public market price fluctuations as the Fund invests in the debt of private business enterprises. The equity investment accompanying most debt investments (which, if it becomes publicly-traded, is subject to enhanced market risk) is generally made by the Partnership.

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The Fund’s sensitivity to changes in interest rates is regularly monitored and analyzed by measuring the characteristics of assets and liabilities. The Fund uses various methods to assess interest rate risk in terms of the potential effect on interest income and investment valuation. The Fund’s valuation methodology utilizes discount rates as part of valuing its investments and changes in those discount rates, and interest rates in general, would be expected to have an impact on the valuation of investments. Assuming no changes in investment and capital structure, a hypothetical increase in interest rates of 100 basis points would decrease the Fund’s net assets resulting from operations by an estimated $1,080,000.

As previously discussed in Item 2 of this 10-Q, the Fund, the Partnership, and Parallel Partnership entered into a Credit Facility agreement on August 8, 2017 and amended on December 15, 2017, and as of June 30, 2018, held an outstanding balance of $20,429,580. Because the Fund has elected to use leverage in the form of a Credit Facility, its sensitivity to changes in interest rates and other risks could be substantially greater. Assuming no changes in the Credit Facility structure, a hypothetical increase in discount rates of 100 basis points would decrease the Fund’s net assets resulting from operations by an estimated $120,000.

The Fund intends to manage credit risk through diversification, and continually monitors the financial condition of its borrowers and reports thereon to the Fund’s Board of Directors.

ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

At the end of the period covered by this report, Management carried out an evaluation under the supervision and with the participation of its President and the Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, the President and Chief Financial Officer concluded that the Fund’s disclosure controls and procedures were effective in ensuring that information required to be disclosed was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and in providing reasonable assurance that information required to be disclosed by the Fund in such reports was accumulated and communicated to the Fund’s management, including its President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

During the three months ended June 30, 2018, there were no changes in the Fund’s internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Fund’s internal control over financial reporting. Subsequent to June 30, 2018, the Fund made enhancements to its internal control procedures to monitor the Fund’s minimum asset coverage requirement, specifically, performing a review of the asset coverage ratio in advance of each expected drawdown from the Credit Facility (as described above in Item 2, Financial Condition, Liquidity, and Capital Resources).

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PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

The Fund is not currently a party to any legal proceedings.

ITEM 1A.

RISK FACTORS.

The risks described in the Annual Report on Form 10-K and Quarterly 10-Q are not the only risks facing the Fund. Additional risks and uncertainties not currently known to the Fund or the Investment Manager or that the Fund or the Investment Manager currently believe to be insignificant may materially affect the Fund’s business and financial condition in the future.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Prior to the Fund’s commencement of operations on October 13, 2015, the Fund sold 100,000 shares to the Fund’s sole shareholder, the Partnership, for $25,000 on September 19, 2014. No other shares of the Fund have been sold; however, the Fund received paid in capital during the period from October 13, 2015, commencement of operations, through June 30, 2018, which is expected to be used for fund investments and operations. The Fund may receive additional paid in capital from the Partnership in the future.

Purchases of Equity Securities

This table provides certain information with respect to purchases of securities registered under Section 12 of the Exchange Act made by the Fund or its affiliates during the second fiscal quarter of 2018:

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Period	Total Number of Shares (or Units) Purchased	Average Price Paid Per Share (or Unit)	Total Number of Shares (or Units) Purchases as Part of Publicly Announced Plans or Programs	Maximum Number (or approximate dollar value) of Shares That May Yet Be Purchases Under the Plan
April 1, 2018 through April 30, 2018	No purchases of publicly traded equities were made.	No purchases of publicly traded equities were made.	No purchases of publicly traded equities were made.	No purchases of publicly traded equities were made.
May 1, 2018 through May 31, 2018	No purchases of publicly traded equities were made.	No purchases of publicly traded equities were made.	No purchases of publicly traded equities were made.	No purchases of publicly traded equities were made.
June 1, 2018 through June 30, 2018	No purchases of publicly traded equities were made.	No purchases of publicly traded equities were made.	No purchases of publicly traded equities were made.	No purchases of publicly traded equities were made.

The Fund held its final close on September 29, 2017 (as referenced in Item 5 Other Information), and as of June 30, 2018, the Fund had cumulative distributions of $19,904,785 to the Partnership.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4.

MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5.

OTHER INFORMATION.

(a)	No material changes have been made to the procedures with respect to the recommendation and nomination of members to the Fund’s Board of Directors.

(b)	On September 29, 2017, the Partnership held its final close and will no longer be accepting or seeking additional commitments from investors.

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ITEM 6.

EXHIBITS.

Exhibit	Description
3(i)	Articles of Incorporation of the Fund as filed with the Maryland Secretary of State on July 7, 2014, incorporated by reference to the Fund’s Form 10 filed with the SEC on July 21, 2014.

3(ii)	Bylaws of the Fund, incorporated by reference to the Fund’s Form 10 filed with the SEC on July 21, 2014.

31.1-31.2	Certifications pursuant to Section 302 of The Sarbanes-Oxley Act of 2002, filed herewith.

32.1-32.2	Certifications pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, filed herewith.

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SIGNATURES

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

	SIGULER GUFF SMALL BUSINESS CREDIT OPPORUNITIES FUND, INC.

August 14, 2018	By:	/s/ Jun Isoda
	Name:	Jun Isoda
	Title:	Chief Financial Officer

August 14, 2018	By:	/s/ Sean Greene
	Name:	Sean Greene
	Title:	President

SIGULER GUFF SMALL BUSINESS CREDIT OPPORTUNITIES FUND, INC 10-Q