IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON                     , 2019 

This Proxy Statement is available free of charge on the Internet athttp://www.           /specialproxymaterials

PROXY STATEMENT

SPECIAL MEETING OF THE SHAREHOLDERS OF

MILL CITY VENTURES III, LTD.

328 Barry Avenue South #210

Wayzata, MN 55391

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD DECEMBER 19, 2014

TO THE SHAREHOLDERS OF MILL CITY VENTURES III, LTD.:

Please take notice thatThis Proxy Statement contains information about the annualspecial meeting of shareholdersShareholders of Mill City Ventures III, Ltd. (“Mill City,” the “Company,” “we,” “our” and “us”).

Forward-Looking Statements 

All statements contained herein that are not historical facts, including but not limited to statements regarding anticipated activity, are forward-looking in nature and involve a number of risks and uncertainties. We caution you that forward-looking statements are not guarantees. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, our actual results could differ materially from those set forth in the forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time unless otherwise required by law. You are advised to consult any additional disclosures that we may make directly to you or through reports that we file with the SEC in the future, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

QUESTIONS AND ANSWERS
ABOUT THE SPECIAL MEETING AND VOTING

Our Board of Directors has approved a plan for Mill City to withdraw its election to be treated and regulated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”), and to immediately thereafter qualify for an exemption from the registration requirements under that Act applicable to investment companies by virtue of a reverse stock split. This plan is generically referred to in this Proxy Statement as the “Plan.”

After the full implementation of the Plan, Mill City will (a) remain a publicly reporting company that files reports with the SEC pursuant to the Securities Exchange Act of 1934 (and may have a ticker on the OTC Markets or otherwise), (b) no longer be a BDC, and (c) will not be an investment company. In addition, but subject to shareholder approval of the proposal to withdraw our BDC election, the Board of Directors is seeking to change the nature of the business of the Company in order to ensure that, in the future, the Company will not be an “investment company.”

In furtherance of the Plan, Mill City is proposing that its shareholders approve the withdrawal of the Company’s election to be regulated as a BDC under the 1940 Act. In addition, we are seeking your approval of an amendment to our certificate of incorporation to effect a 1- for        reverse stock split of our outstanding common stock, par value $0.001 per share, as discussed further in this Proxy Statement.

Our Board of Directors is furnishing this Proxy Statement to you to solicit proxies on its behalf to be voted on these matters at the special meeting on                     at         .m., Central Time, at 1907 Wayzata Boulevard, Suite 205, Wayzata, Minnesota 55391. The proxies also may be voted at any adjournments or postponements of the meeting.

This Proxy Statement contains important information about the special meeting and the proposals to be voted on at that meeting. You should read this Proxy Statement and the exhibits hereto carefully and in their entirety. By submitting a proxy, the enclosed voting materials allow you to have your shares voted at the special meeting without attending in person.

All properly executed written proxies, and all properly completed proxies submitted by telephone, by the Internet or by mail that are delivered pursuant to this solicitation will be held, pursuantvoted at the special meeting in accordance with the directions given in the proxy, unless the proxy is revoked before the completion of voting at the special meeting.

Mill City intends to due calleffect the Plan through (1) implementation of the reverse stock split and, once the reverse stock split has been effected, (2) withdrawal of Mill City’s BDC election through a filing to be made with the SEC.

In the reverse stock split, the outstanding shares of Mill City common stock will be combined on a 1-for [7,500] basis so that each Mill City shareholder will own one share of Mill City common stock for every [7,500] shares owned prior to the reverse stock split. Fractional shares resulting from the reverse stock split will not be issued, and shareholders will instead be paid for their fractional shares in cash as permitted under state law. For more information about how fractional shares will be treated, please see Proposal 2 below.

In addition and as explained elsewhere in this Proxy Statement, the Board of Directors is seeking to change the nature of the business of the Company. This will most likely take the form of the Company becoming a holding company or pursuing a new specific line of business. Changing the nature of the Company’s business will ensure that the Company will not be (or inadvertently become) an “investment company” even if the number of beneficial owners of the Company’s common stock were to increase, after effecting the reverse stock split, in such a way as to prevent the Company from otherwise qualifying for an exemption under the 1940 Act. At this time, no specific new line of business for the Company has been determined.

Our Board of Directors has determined that the Plan is in the best interests of Mill City and its shareholders because it will provide the following key benefits: 

Our Board of Directors does not intend to bring other matters before the special meeting except items incidental to the conduct of the meeting.

It is your legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. Each of Douglas M. Polinsky and Joseph A. Geraci, II, have been designated as proxies by the Board of Directors of the company, at the company’s office at 328 Barry Avenue South, #210, Wayzata, Minnesota 55391, at 9:00 a.m. local time, or at any adjournments thereof, for the purpose of considering and taking action on the following proposals:special meeting.

Pursuant to action ofThe record date for the special meeting is             (the “record date”). The record date is established by the Board of Directors and only shareholders of record at the close of business on November 10, 2014, will bethe record date are entitled toto: (a) receive notice of the meeting; and (b) vote at the meeting and any adjournments or postponements thereof.

Important Notice Regardingof the Availabilitymeeting. Each shareholder of Proxy Materials for the

Shareholder Meeting to be Held on December 19, 2014

The Proxy Statement for the annual meeting, the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and Quarterly Report on Form 10-Q for the period ended September 30, 2014, are included with this notice and are available to yourecord on the Internet. We encourage yourecord date is entitled to review allone vote for each share of our common stock held. On the important information contained in the included materials before voting. To view the Proxy Statement on the Internet, please visit https://materials.proxyvote.com/59982U.

By Orderrecord date, there were             shares of the Board of Directors

Douglas M. Polinsky,Chief Executive Officer

December 1, 2014

PROXY STATEMENT

Mill City Ventures III, Ltd.

328 Barry Avenue South #210

Wayzata, MN 55391

Annual Meeting of Shareholders

to be held

December 19, 2014

VOTING BY PROXY AND REVOCATION OF PROXIES

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Mill City Ventures III, Ltd. for use at the 2014 Annual Meeting of Shareholders to be held at the company’s executive office at 328 Barry Avenue South #210, Wayzata, Minnesota 55391, at 9:00 a.m. local time, for the purpose of consideringour common stock issued and taking appropriate action with respect to the following:legally outstanding.

The approximate dateIf your shares of stock are registered in your name on which this Proxy Statementthe books and records of our transfer agent, you are a shareholder of record. If you are a shareholder of record you may provide a proxy to vote your shares and may attend the accompanying proxy were first sent or given to shareholders was December 1, 2014.special meeting in person and vote your shares at the special meeting.

PROXIES AND VOTINGIf your shares of stock are held for you through an intermediary in the name of your broker, bank or other nominee, your shares are held in street name and you are a beneficial owner, not a shareholder of record. Shares beneficially owned through an intermediary in the name of your broker, bank or other nominee may be voted only by the record holder, so you will need to provide voting instructions to the record holder as to how your shares are to be voted at the special meeting. While the holders of shares in street name can attend the special meeting with proper identification as described below, such holders may not vote at the special meeting unless they have a proxy from the record holder to vote at the special meeting.

Registered shareholdersIt is important that you vote your shares or submit a proxy if you are a shareholder of record and, if you hold shares in street name, that you provide appropriate voting instructions to your broker, bank or other nominee as discussed in the answer to Question 12 below.

You may submit your proxy or vote in oneyour shares of three ways:our common stock by completing and returningany of the enclosed proxy card via regular mail,following methods:

By Telephone or by voting via the Internet—Shareholders can have their shares voted by submitting a proxy via telephone or by telephone. Specific instructions for using these methods are set forth on the enclosed proxy card.Internet. The Internettelephone and telephoneInternet procedures are designed to authenticate thea shareholder’s identity, and to allow shareholders to vote their shares and to confirm that their instructions have been properly recorded.

The BoardBy Mail—A shareholder who receives a paper proxy card or voting instruction form or requests a paper proxy card or voting instruction form by telephone or Internet may elect to submit a proxy by mail and should complete, sign and date the proxy card or voting instruction form and mail it in the pre-addressed envelope that accompanies the delivery of Directors has set the closeproxy card or voting instruction form. For shareholders of business on November 10, 2014record, proxy cards submitted by mail must be received by the date and time of the special meeting. For shareholders who hold their shares through an intermediary, such as a broker, bank or other nominee, the voting instruction form submitted by mail must be mailed by the deadline imposed by your broker, bank or other nominee for your shares to be voted.

In Person—Shares held in your name as the “record date” for the annual meeting. Only holdersshareholder of the company’s common stock as ofrecord on the record date or their duly appointed proxies, are entitled to notice of and willmay be entitled to votevoted by you in person at the annual meeting or any adjournments thereof. Onspecial meeting. Shares held beneficially by you in street name on the record date there were 12,161,939sharesmay be voted by you in person at the special meeting only if you obtain a legal proxy from the broker, bank or other nominee that holds your shares giving you the right to vote the shares and bring that proxy to the meeting. 

Shareholders should specify their voting choice for each matter on the accompanying proxy. If no specific choice is made for one or more matters, proxies that are signed and returned will be voted “FOR” each of companythe proposals that are not marked.

It means that you have multiple accounts with brokers and/or our transfer agent. Please submit proxies with respect to all of these shares. 

We recommend that you contact your broker and/or our transfer agent to consolidate as many accounts as possible under the same name and address. Our transfer agent is Pacific Stock Transfer. Pacific Stock Transfer’s address is 6725 Via Austi Parkway, Suite 300, Las Vegas, Nevada 89119; you can reach Pacific Stock Transfer at 1-800-785-7782. 

Shareholders of Record: If you are a shareholder of record (see Question 8 above), your shares of common stock issued and outstanding. Each such share entitles the holder thereof to onewill not be voted if you do not provide your proxy unless you vote upon each matter to be presentedin person at the annual meeting.  A quorum, consisting of a majority of the issued and outstandingIt is important that your shares of company common stock entitled to vote at the annual meeting, must be presentare voted in person or represented by proxy before actionproxy.

Street Name Holders: If your shares are held in street name (see Question 8 above) and you do not provide your signed and dated voting instruction form to your broker, bank or other nominee, your shares of common stock may not be takenvoted by your broker, bank or other nominee because none of the proposals to be voted upon at the annual meeting.special meeting is considered “routine” under applicable rules. It is, therefore, important that you vote your shares. 

Each proxy returned to us will be voted in accordance with the instructions indicated thereon. If a shareholder gives no direction, the shares will be voted as recommended by our Board of Directors. If any nominee for the Board of Directors should withdraw or otherwise become unavailable for reasons not presently known, the proxies that would have otherwise been voted for such nominee will be voted for such substitute nominee as may be selected by the Board of Directors. If a shareholder abstains from voting on any matter, the abstention will be counted for purposes of determining whether a quorum is present at the meeting for the transaction of business as well as shares entitled to vote on that matter. On matters other than the election of directors, an action of the shareholders generally requires the affirmative vote of a majority of shares present in person or represented by proxy at the annual meeting and entitled to vote on the matter. Accordingly, an abstention on any matter other than the election of directors

Abstentions will have the same effect as a vote against that matter. A non-vote occurs when a nominee holdingthe proposals at the special meeting. Because none of these proposals are considered “routine” matters for which brokers, banks or other nominees may vote uninstructed shares, for a beneficial owner votes on one proposal, but does not vote on another proposal because the nominee does not have discretionary voting power and has not received instructions from the beneficial owner. Broker non-votes on a matter are counted as present for purposes of establishing a quorum for the meeting, but are not considered entitled to vote on that particular matter. Consequently, non-votes generally do not have the same effect as a negative vote on the matter.there will be no broker non-votes. 

A shareholder giving a

The enclosed proxy may revoke itis solicited on behalf of the Board of Directors and is revocable at any time before it is exercised by (i) giving written notice of revocationprior to an executive officerthe voting of the company, (ii) deliveringproxy at the special meeting, by the filing of an instrument revoking it, or a duly executed proxy bearing a later date, with our corporate office, addressed to our principal executive offices at 1907 Wayzata Boulevard, Suite 205, Wayzata, Minnesota 55391. If you are a holder of record, in the event that you attend the special meeting, you may

revoke your proxy and cast your vote personally. Simply attending the special meeting will not revoke a prior proxy.

The cost of this solicitation of proxies will be paid by Mill City. In addition to the use of mail, our officers and employees may solicit proxies by telephone or (iii) votingfacsimile. Upon request, we will reimburse brokers, dealers, banks, and trustees, or their nominees, for reasonable expenses incurred by them in forwarding our proxy materials to beneficial owners of our common stock.

In order for us to conduct the special meeting, holders representing a majority of our outstanding shares of common stock entitled to vote as of         , must be present in person or by proxy at the annualspecial meeting. A shareholder’s mere presenceThis is referred to as a quorum. Your shares are counted as present at the annual meeting if you attend the meeting in person or if you properly return a proxy by Internet, telephone or mail.

Abstentions and shares of record held by a broker, bank or other nominee that are instructed to be voted on any matter are included in determining the number of shares present. However, because no routine discretionary matters for which broker non-votes may be submitted will be considered at the special meeting, broker non-votes, if any, will not be treated as present at the special meeting or entitled to vote and will not be included in determining whether a quorum is present.

Shareholders whose total shareholdings will be reduced, as a result of the reverse stock split, to less than one whole share will have the right to dissent from the proposed reverse stock split and demand payment in cash equal to the fair value of the shares as determined under Minnesota law. For a detailed description of the dissenters’ rights, see “Proposal 2 — Approval of an Amendment to our Certificate of Incorporation to Effect a Reverse Stock Split.”

PROPOSAL 1

APPROVAL OF THE WITHDRAWAL OF OUR

ELECTION TO BE REGULATED AS A BUSINESS DEVELOPMENT COMPANY

UNDER THE INVESTMENT COMPANY ACT OF 1940

Introduction 

In February 2013, we elected to be regulated under the 1940 Act as a BDC. At that time, we operated as a closed-end investment company primarily engaged in the business of making loans to and investing in small- and medium-sized private U.S. companies and small- and micro-cap public companies. We have operated as a BDC since that time.

Following an evaluation of our operations and resources, our Board of Directors has determined that it is in the best interest of our Company and our shareholders to cease operating as a BDC and to avoid the additional regulation and compliance-related efforts and expenses required under 1940 Act. In sum, the Board of Directors has concluded that the Company lacks the proper resources, staffing and expertise to effectively ensure compliance with the various requirements under the 1940 Act. This conclusion was not reached arbitrarily. The Company’s management and legal counsel have had discussions with the SEC’s Office of Compliance and Inspections (which office is primarily responsible for conducting periodic examinations for compliance by companies subject to regulation under the 1940 Act) as part of this evaluation and consideration, and legal counsel (including special counsel experienced in matters relating to the 1940 Act) have recommended that the Company seek to withdraw its election to be treated as a BDC. As a consequence, our Board of Directors has recommended the approval of a proposal to withdraw our election to be regulated as a BDC. Pursuant to the 1940 Act, such election cannot be withdrawn without the approval of the holders of a “majority” of our outstanding voting securities, as such term is defined in the 1940 Act.  For an explanation of how the 1940 Act defines the word “majority,” please see Question 18 above.

We have undertaken several steps to prepare for the withdrawal of our election to be regulated as a BDC. Among these steps, we (i) have prepared the proposal sets forth below (Proposal 2) to effect a reverse stock split so as to ensure that we will be entitled to an exemption from the registration requirements under 1940 Act immediately after we withdraw our election to be treated as a BDC, (ii) have consulted with legal counsel as to the requirements for withdrawing our election as a BDC, and (iii) are considering other business pursuits to undertake so as to ensure that we will not be classified as an “investment company” under the 1940 Act even if we were to have too many beneficial owners of our common stock to permit us to qualify for an exemption from the registration requirements of the 1940 Act. In this latter regard, we have not yet formalized a definitive plan to undertake a new business, or to dispose of particular investments in order to obtain a specific mix of assets.

If our shareholders approve this proposal, and if they similarly approve Proposal 2 described below, we anticipate withdrawing our election to be regulated as a BDC by filing a Form N-54C with the SEC. This filing would be made shortly after the consummation of the reverse stock split described in Proposal 2. Following our withdrawal of the BDC election, we will continue to be a reporting company under the Exchange Act, but we will have a limited number of beneficial owners. As explained throughout this Proxy Statement, we intend to dispose of certain of our assets (i.e., investment holdings), and to select a new line of business, so that we will not again become subject to the provisions of the 1940 Act.

Effect on the Company and Shareholders 

Upon the withdrawal of our election to be treated as a BDC, we will no longer be subject to regulation under the 1940 Act, which is generally designed to protect the interests of investors in investment companies. Specifically, our shareholders would no longer have the following protections that are contained within the 1940 Act or the regulations issued thereunder: 

The following table outlines certain key similarities and differences in our structure and governance if the proposal is approved: 

Effect on Financial Statements and Tax Status 

Our change in business so as not to be an investment company and our election to withdraw as a BDC under the 1940 Act will result in a significant change in our required method of accounting.

Our BDC financial statements are presented and accounted for under the specialized method of accounting applicable to investment companies, which requires us to recognize our investments, including controlled investments, at fair value. As a BDC, we are precluded from consolidating any entity other than another investment company that acts as an extension of our investment operations and facilitates the execution of our investment strategy or an investment in a controlled operating company that provides substantially all of its services to us. Operating companies are required to account for investments based on the degree of control or influence they can exert over the entity and therefore are required to consolidate controlled entities and use either the equity method of accounting, fair value option or historical cost method of accounting for the financial statement presentation and accounting of other securities held. Following implementation of the Plan, we expect to elect the fair value option for our investments in other securities. Accordingly, the change in our accounting method could have a material impact on the presentation of our financial statements commencing on the day we withdraw our BDC election.

We do not believe that the withdrawal of our election to be treated as a BDC will have any impact on our federal income-tax status, since we are currently not treated as a “registered investment company” or “RIC” under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), but rather are subject to corporate-level federal-income tax on our income (without regard to any distributions we make to our shareholders) as a “regular” corporation under Subchapter C of the Code.

Anticipated Timeline

If this proposal is approved at the special meeting, along with Proposals 2 and upon consummation of the Plan, the withdrawal will become effective upon receipt by the SEC of the filing of our “Notification of Withdrawal” on Form N-54C. As of the date hereof, the Board of Directors believes that we will meet the requirements for filing the notification to withdraw our election to be regulated as a BDC following the receipt of the approval of our shareholders. After the Notification of Withdrawal of our BDC election is filed with the SEC, we will no longer be subject to the regulatory provisions of the 1940 Act applicable to BDCs generally, including regulations related to insurance, custody, composition of its board of directors, affiliated transactions and any compensation arrangements.

Vote Not Contingent Upon Proposal 2

Our shareholders’ approval of this proposal is not contingent upon their approval of Proposal 2. This is because, as we explain elsewhere in this Proxy Statement, we intend over time to dispose of a sufficient number and amount of investments and to identify a new line of business, which would permit us to no longer be classified as an “investment company” under the 1940 Act. Therefore, if the shareholders approve this proposal without approving Proposal 2, we would most likely elect to file our Notification of Withdrawal only after we had identified a new business pursuit and had taken steps to ensure that the mix of our assets would not cause us to be regulated as an “investment company” under the 1940 Act.

Vote Required

Under the 1940 Act, approval of the withdrawal of our election to be regulated as a BDC requires an affirmative vote of a “majority” of all of the Company’s outstanding voting securities, regardless of whether the holders of such shares are present and entitled to vote at the special meeting.

Under the 1940 Act, a “majority” of the outstanding voting securities means the vote of (i) 67% or more of the shares present at the special meeting, if the holders of 50% or more of our outstanding shares of common stock are present or represented by proxy, or (ii) more than 50% of our outstanding shares of common stock, whichever is less. Abstentions will not count as affirmative votes and will therefore count against the proposal.

Recommendation

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE WITHDRAWAL OF OUR ELECTION TO BE REGULATED AS A BUSINESS DEVELOPMENT COMPANY UNDER THE 1940 ACT.

PROPOSAL 2

APPROVAL OF AN AMENDMENT TO OUR
CERTIFICATE OF INCORPORATION TO EFFECT A
SHARE COMBINATION (REVERSE STOCK SPLIT),
SUBJECT TO THE ULTIMATE DISCRETION
OF OUR BOARD OF DIRECTORS

Introduction 

In connection with the Plan, our Board of Directors is recommending that our shareholders approve an amendment to our Certificate of Incorporation (an “Amendment”) to effect a 1-for [7,500] reverse stock split of the issued and outstanding shares of our common stock so that each Mill City shareholder will own one share of Mill City common stock for every [7,500] shares owned immediately prior to the reverse stock split, at any time prior to the one-year anniversary of the date of the special meeting (the “Expiration Date”).

We will not issue fractional shares in connection with the reverse stock split. Instead, shareholders entitled to less than a full share of common stock as a result of the reverse stock split will receive a cash payment, as permitted under state law. For more information, please see the “Fractional Shares” caption below.

Those shareholders with less than one whole share resulting from the reverse stock split (i.e., those holding fewer than [7,500] shares immediately prior to the reverse stock split) will receive only cash in lieu of any resulting fractions, and thus will have their ownership in the Company eliminated.

The reverse stock split will reduce the number of outstanding shares of our common stock by combining all outstanding shares of our common stock into a proportionately fewer number of shares of common stock. This action would also result in a relative increase in the available number of authorized but unissued shares of our common stock because the number of shares authorized for issuance is not being changed by the reverse stock split. Our authorized capital stock currently consists of 250,000,000 shares of capital stock, par value $0.001 per share. The Amendment will be in the form attached asExhibit A hereto.

In determining the reverse stock split ratio, the Board of Directors has primarily considered the important question of ensuring that, immediately after the filing of the Company’s withdrawal of its BDC election, the Company will have an exemption available to it from the registration requirements of the 1940 Act. In this regard, Section 3(c)(1) of the 1940 Act provides an exemption from the registration requirements of that Act for any company having 100 or fewer beneficial owners. As a result, the reverse stock split ratio chosen by the Board is large, so as to ensure that, after the effectiveness of the reverse stock split, the Company will have 100 or fewer beneficial owners.  More specifically, the Company estimates that after the reverse stock split is effected the Company will have approximately [60] beneficial owners of its common stock.

If the shareholders approve the Amendment, the Board of Directors will have the authority to file the Amendment with the Minnesota Secretary of State. The reverse stock split will become effective upon the filing of the Amendment with the Minnesota Secretary of State (the “Effective Time”). After the Effective Time, the number of issued and outstanding shares of our common stock would be reduced proportionately to the 1-for [7,500] reverse stock split ratio. We will also obtain a new CUSIP number for our common stock as of the Effective Time. 

If our shareholders approve this proposal, but our Board of Directors does not alone, revoke a proxy previously signed and deliveredaffect the reverse stock split prior to the Expiration Date, the authority granted by our shareholders’ approval of this proposal would terminate automatically.

Other Reasons for the Reverse Stock Split

The primary purpose for effecting the proposed Amendment is to decrease the number of beneficial owners of our common stock so that shareholder. Instead, that shareholder must announce any revocationwe can qualify for an exemption from the investment company registration requirements under the 1940 Act. Nevertheless, in determining to recommend the reverse stock split to our shareholders for their approval, the Board of Directors also considered other benefits of the proxyreverse stock split, including reducing—on a relative basis—the high transaction costs and commissions incurred by our shareholders due to the low per-share trading price of our common stock. Trading commissions are often set at a fixed price, and tend to have a negative impact on holders of lower-priced securities because the brokerage commissions on a sale of lower-priced securities generally represent a higher percentage of the transaction prices than the commissions on relatively higher-priced issues, which may discourage trading in such lower-priced securities. In addition, many brokerage firms no longer accept securities that constitute “penny stocks” due to the increased regulatory burden associated with transacting in those securities. As a consequence of this fact, low liquidity, and the relatively high transaction costs, it is often impractical, or at the very least considerably difficult, for shareholders to sell their shares publicly.

Material Effects of a Reverse Stock Split 

If our shareholders approve this proposal and our Board of Directors files the Amendment to effect a reverse stock split, the issued and outstanding shares of our common stock would decrease in accordance with the reverse stock split ratio. Thus, the number of issued and outstanding shares of our common stock as of           2019, would decrease from              to             .

A reverse stock split would affect all of our shareholders. However, some of our shareholders will be affected differently than others due to the treatment of fractional shares, discussed below.Those shareholders with less than one whole share resulting from the reverse stock split will have their ownership in the Company eliminated. All shareholders who remain after the reverse stock split will own a fewer number of shares than they currently own (a number equal to the number of shares owned immediately prior to the Effective Time divided by [7,500] and rounded down to the nearest whole number). Although we expect that a reverse stock split would result in an increase in the per-share price of our common stock, there can be no assurance that this will be the case, and the history of similar reverse stock splits for companies in similar circumstances is varied. Even if the stock price were to increase, the increase per share may not be in proportion to the reduction in the number of shares of our common stock outstanding. Furthermore, there is no guarantee that any increase would be permanent, since our stock price is dependent on many factors that may be unrelated to the number of shares outstanding. In addition, the reverse stock split contemplated in this proposal would reduce the proportion of shares owned by our shareholders relative to the number of shares authorized for issuance, since there will be no change in the number of authorized shares of our common stock. This would effectively increase the authorized shares available for issuance and we may in the future determine it to be in the best interests of us and our shareholders to enter into transactions that may include the issuance of shares of our common stock, although we have no current plans to do so. 

A reverse stock split would not affect our securities law reporting and disclosure obligations under the Exchange Act. A reverse stock split may also result in some shareholders owning “odd lots” of fewer than 100 shares of our common stock. Brokerage commissions and other transaction costs in odd-lots are generally higher than the transaction costs in “round lots” of even multiples of 100 shares. Overall, however, the total number of shareholders owning “odd lots” of fewer than 100 shares will be less after the reverse stock split than before.

Certain U.S. Federal Income-Tax Consequences 

The discussion below is only a summary of certain U.S. federal income-tax consequences relating to the reverse stock split and does not purport to be a complete discussion of all possible tax consequences to our shareholders. This summary assumes that those shareholders who hold their pre-reverse stock split shares of common stock as “capital assets,” as defined in the Code, will also hold the post-reverse split shares of common stock as capital assets. This discussion does not address all U.S. federal income-tax considerations that may be relevant to particular shareholders in light of their individual circumstances or to shareholders that are subject to special rules, such as financial institutions, tax-exempt organizations, insurance companies, dealers in securities, foreign shareholders, partnerships, limited liability companies and other pass-through entities, broker-dealers, shareholders subject to the alternative minimum tax provisions of the Code, shareholders who hold their stock as part of a hedge, wash sale, appreciated financial position, straddle, conversion transaction, synthetic security or other risk reduction transaction or integrated investment. The following summary is based upon the current provisions of the Code, applicable Treasury Regulations thereunder, judicial decisions and administrative rulings, all of which are subject to change, possibly on a retroactive basis, and such a change could alter or modify the statements set forth herein. This description does not address tax consequences under state, local, foreign, and other laws. Each shareholder should consult his, her or its own tax advisor as to the particular facts and circumstances that may be unique to such shareholder and also as to any estate, gift, state, local or foreign tax considerations arising out of the reverse stock split. A reverse stock split will qualify as a recapitalization for U.S. federal income tax purposes. As a result: 

The above discussion of U.S. federal tax issues is not intended or written to be used, and cannot be used by each proxy willany person, for the purpose of avoiding penalties that may be votedimposed under the Code. It was written solely in connection with preparing the proposal on a reverse stock split of our common stock for approval by our shareholders at the annual meeting and at any adjournments thereof. No dissenters’ rights of appraisal exist with respect to any matter to be voted upon at thespecial meeting.

NOTICE TO BENEFICIAL OWNERS OF SHARES HELD IN BROKER ACCOUNTSProcedure for Effecting a Reverse Stock Split and Exchange of Stock Certificates 

If this proposal is approved by our shareholders at the special meeting, our Board of Directors, in its sole discretion, expects to file the Amendment with the Minnesota Secretary of State within a three to four weeks of the special meeting (assuming that Proposal 1 is also approved by our shareholders). Upon the filing of the Amendment, and without any further action by us or our shareholders, the issued and outstanding shares of our common stock held by shareholders of record as of the Effective Time would be converted and reclassified into a lesser number of shares of our common stock calculated in accordance with the above reverse stock split ratio.

Certificated Shares 

After the Effective Time, our transfer agent will act as our exchange agent and assist holders of our common stock in exchanging their pre-split common stock (“Old Shares”) by sending them a letter of transmittal that will contain instructions on how a shareholder should surrender any certificates representing Old Shares to the exchange agent in exchange for the appropriate number of post-split common stock (“New York Stock Exchange Rule 452 prohibits NYSE member organizations from givingShares”). No New Shares will be issued to a proxyshareholder until such shareholder has surrendered any Old Share certificates in their account, together with a properly completed and executed letter of transmittal to vote with respect to an electionour exchange agent. From and after the Effective Time, certificates previously representing Old Shares will evidence the number of directors (Proposal One) without receiving voting instructions from a beneficial owner. Because NYSE Rule 452 applies to all brokersshares of common stock into which the Old Shares previously represented by such certificate were combined in the reverse stock split, and any Old Shares that are memberssubmitted for transfer, whether pursuant to a sale, disposition or otherwise, will, if properly presented, be exchanged for New Shares. As a result,SHAREHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) TO US OR OUR TRANSFER AGENT UNTIL REQUESTED TO DO SO.

Fractional Shares

We will not issue fractional shares in connection with the reverse stock split. Instead, shareholders who would be entitled to a fraction of a share as a result of the NYSE, this prohibition appliesreverse stock split will instead be entitled to receive a cash payment from the Company equal to the product of (i) the number of common shares held by the shareholder that would otherwise have been exchanged for the fractional share interest, multiplied by (ii) the volume-weighted average price per share over the ten trading days immediately preceding the Effective Time; provided, that if there is no trading in our annual meeting even thoughcommon stock on any of ten trading days immediately preceding the company’sEffective Time, then the most recent closing sales price of our common stock will be substituted for the “volume-weighted average price per share.”

Our transfer agent will coordinate the payment of cash in lieu of fractional shares are not listed onpromptly after the New York Stock Exchange. Therefore, brokersEffective Time. Shareholders will not be entitled to votereceive interest for the period of time between the Effective Time of the reverse stock split and the date payment is made for their fractional share interest in our common stock. You should also be aware that, under the escheat laws of certain jurisdictions, sums due for fractional interests that are not timely claimed after the funds are made available may be required to be paid to the designated agent for each such jurisdiction. Thereafter, shareholders otherwise entitled to receive such funds may have to obtain the funds directly from the jurisdiction to which they were paid.

Interests of Directors and Executive Officers 

Our directors and executive officers do not have direct or indirect substantial interests in the matters set forth in this proposal, except to the extent of their ownership of shares of our common stock.

Dissenters’ Rights

Action Creating Right

Section 302A.471(f) of the Minnesota Business Corporation Act (“MBCA”) grants any shareholder of record of the Company, and any beneficial owner of shares of the Company, as of the record date of                  , 2019, whose shareholdings are reduced to a fraction of a share, the right to dissent and obtain payment from the Company for the fair value of their shares at the annual meetingEffective Time. The Board of Directors reserves the right to abandon the reverse stock split in the event that shareholders holding 0.25% or more of the Company’s outstanding shares (pre-split) exercise their right to dissent. Only shareholders whose shareholdings in the Company will effectively be eliminated by virtue of the reverse stock split will have the right to dissent described herein.

Requirements for Exercising Right to Dissent

TO BE ENTITLED TO PAYMENT, THE DISSENTING SHAREHOLDER MUST FILE WITH THE COMPANY, BEFORE THE VOTE FOR THE REVERSE STOCK SPLIT OCCURS, A WRITTEN NOTICE OF INTENT TO DEMAND PAYMENT OF THE FAIR VALUE OF THE SHARES OWNED BY THE DISSENTING SHAREHOLDER AND MUST NOT VOTE SUCH SHARES IN FAVOR OF THE REVERSE STOCK SPLIT. THIS DEMAND WILL BE OF NO FORCE AND EFFECT IF THE REVERSE STOCK SPLIT IS NOT EFFECTED. The notice must be submitted in writing to the Company at 1907 Wayzata Boulevard, Suite 205, Wayzata, Minnesota 55391, Attention: Chief Financial Officer, and must be received before the vote for the reverse stock split at the special meeting. A vote against the reverse stock split is not necessary for the shareholder to exercise dissenters’ rights. Nevertheless, a vote against the reverse stock split will not be sufficient to satisfy the notice requirements of state law. Any shareholder contemplating the exercise of these dissenters’ rights should review carefully the provisions of Sections 302A.471 and 302A.473 of the MBCA, particularly the procedural steps required to perfect such rights. YOUR DISSENTERS’ RIGHTS WILL BE LOST IF THE PROCEDURAL REQUIREMENTS OF SECTIONS 302A.471 AND 302A.473 ARE NOT FULLY AND PRECISELY SATISFIED. A COPY OF SECTIONS 302A.471 AND 302A.473 IS ATTACHED ASEXHIBIT B TO THIS PROXY STATEMENT.

Notice of Procedure

If and when the proposed reverse stock split is approved by shareholders, and if the reverse stock split is not then abandoned by the Board of Directors, the Company will deliver to all shareholders who have properly dissented pursuant to the provision of Sections 302A.471 and 302A.473 of the MBCA from the reverse stock split a written notice that: (1) lists the address to which demand for payment and certificates for shares must be sent to obtain payment for such shares and the date by which such certificates must be received; (2) describes any restriction on transfer of uncertificated shares that will apply after the demand for payment is received; (3) encloses a form to demand payment and to be used to certify the date on which the shareholder, or the beneficial owner on whose behalf the shareholder dissents, acquired the shares or an interest in them; and (4) encloses a copy of Sections 302A.471 and 302A.473 of the MBCA and a brief description of the procedures to be followed to dissent and obtain payment of fair value.

Demand for Payment and Submission of Share Certificates

To receive the fair value of his, her, or its shares, a dissenting shareholder must demand payment using the form described above and deposit his, her or its share certificates within 30 days after the notice described above is delivered by the Company, but the dissenting shareholder retains all other rights of a shareholder until the proposed action (i.e., the reverse stock split) takes effect. Under Minnesota law, notice by mail is made by the Company when deposited in the United States mail. A shareholder who fails to make demand for payment and fails to deposit certificates will lose the right to receive the fair value of the shares notwithstanding the timely filing of such shareholder’s notice of intent to demand payment.

Purchase of Dissenting Shares

After the Effective Time, or after the Company receives a valid demand for payment, whichever comes later, the Company shall remit to the dissenting shareholders who have complied with the above-described procedures the amount the Company estimates to be the fair value of the shares held by such shareholders, plus interest accompanied by certain financial information about the Company, an estimate of the fair value of the shares and the method used and a copy of Sections 302A.471 and 302A.473 of the MBCA, and a brief description of the procedure to be followed to demand supplemental payment.

Acceptance or Settlement of Demand

If a dissenting shareholder believes that the amount remitted by the Company is less than the fair value of the shares, with interest, then the dissenting shareholder may give written notice to the Company of his or her estimate of fair value, with interest, within 30 days after the Company mails such remittance and must demand payment of the difference. UNLESS A SHAREHOLDER MAKES SUCH A DEMAND WITHIN SUCH 30-DAY PERIOD, THE SHAREHOLDER WILL BE ENTITLED ONLY TO THE AMOUNT REMITTED BY THE COMPANY. Within 60 days after the Company receives such a demand from a shareholder, it will be required either to pay the shareholder the amount demanded (or agreed to after discussion between the shareholder and the Company) or to file in court a petition requesting that the court determine the fair value of the shares, with interest.

Court Determination

All shareholders who have demanded payment for their shares, but have not reached agreement with the Company, will be made parties to such court proceeding. The court will then determine whether the dissenting shareholders have fully complied with the provisions of Section 302A.473 of the MBCA and will determine the fair value of the shares, taking into account any and all factors the court finds relevant (including the recommendation of any appraisers appointed by the court), computed by any method that the court, in its discretion, sees fit to use, whether or not such method was used by the Company or a shareholder. The expenses of the court proceeding will be assessed against the Company, except that the court may assess part or all of those costs and expenses against a shareholder whose action in demanding payment is found to be arbitrary, vexatious, or not in good faith. The fair value of the Company’s shares means the fair value of the shares immediately before the Effective Time. Under Section 302A.471 of the MBCA, a shareholder of the Company has no right at law or equity to set aside the effect of the reverse stock split, except if such consummation is fraudulent with respect to Proposal One without instructions bysuch shareholder or the beneficial ownerCompany. Any shareholder making a demand for payment of fair value for his or her shares may withdraw the demand at any time before the determination of the shares.AS A RESULT, BENEFICIAL OWNERS OF SHARES HELD IN BROKER ACCOUNTS ARE ADVISED THAT, IF THEY DO NOT TIMELY PROVIDE INSTRUCTIONS TO THEIR BROKER, THEIR SHARES WILL NOT BE VOTED IN CONNECTION WITH THE ELECTION OF DIRECTORS.fair value of the shares by filing with the Company written notice of such withdrawal.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Reservation of Right to Not Implement Reverse Stock Split 

WeAs explained above, even if this proposal is approved by our shareholders at the special meeting, our Board of Directors will have one classdiscretion to implement the reverse stock split (prior to the Expiration Date) or abandon it. Our Board of voting securitiesDirectors would consider abandoning the Amendment and the reverse stock split if it were to deem such action to not be in the best interests of our Company and our shareholders. To be clear, the Board of Directors may determine to abandon the reverse stock split in its discretion, for any reason, including any situation in which holders of more than 0.25% of the Company’s issued and outstanding common stock $0.001 par value,(before the reverse stock split) exercise their right to dissent. By voting in favor of which 12,161,939this proposal to authorize our Board of Directors to file the Amendment to effect the reverse stock split prior to the Expiration Date, you are also expressly authorizing the Board of Directors to not implement the reverse stock split by abandoning the Amendment if the Board of Directors in its sole discretion should determine that such action is in the best interests of us and our shareholders.

Vote Not Contingent Upon Proposal 1

Our shareholders’ approval of this proposal is not contingent upon their approval of Proposal 1 above. Therefore, if the shareholders approve this proposal without approving Proposal 1, our Board of Directors may still determine to implement or abandon the Amendment as described herein.

Vote Required 

The affirmative vote by the holders of a majority of the votes of all outstanding shares were issued and outstandingof our common stock as of the closerecord date is necessary for approval of business onthis proposal. Abstentions will not count as votes cast and will therefore count against the record date. Each shareproposal.

Recommendation

The Board of commonDirectors believes that it is in our best interests and in the best interests of the shareholders to provide our Board of Directors with discretionary authority to amend our Certificate of Incorporation to effect a reverse stock is entitledsplit at any time prior to one vote on all matters put to a votethe Expiration Date, as described in this proposal.

THEREFORE, THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT. 

INFORMATION REGARDING COMPANY COMMON STOCK

Security Ownership of shareholders.Management and Certain Beneficial Owners 

The following table sets forth as of                     November 13, 2014,, 2019 (unless otherwise indicated), the beneficial ownership of each current director, each nominee for director,of our named executive officers, each person known to us to beneficially own 5% or more of the outstanding shares of our common stock, and the executive officers and directors as a group.group, and each shareholder known to management to own beneficially more than 5% of the issued and outstanding shares of our common stock. Unless otherwise indicated, we believe that the beneficial owners set forth in the table or its footnotes,below have sole voting and investment power, and the business address of each of the following persons or entities is 328 Barry Avenue S.1907 Wayzata Blvd., #210,Suite 205, Wayzata, Minnesota 55391, and each such person or entity has sole voting and investment power with respect to the shares of common stock set forth opposite their respective name.55391.

PROPOSAL ONE – ELECTION OF DIRECTORS

Section 16(a) Beneficial Ownership Reporting Compliance 

We currently have fiveSection 16(a) of the Exchange Act and the disclosure requirements of Item 405 of SEC Regulation S-K require that our directors serving on our board. Eachand executive officers, and any persons holding more than 10% of any class of our current directors has been nominated for re-election atequity securities report their ownership of such equity securities and any subsequent changes in that ownership to the annual meeting. If elected, each nominee has consented to serve as a directorSEC and to hold office untilus. Based on a review of the next annual shareholders’ meeting, until his successor is electedwritten statements and shall have qualified, or until his earlier death, resignation, removal or disqualification.copies of such reports furnished to us by our executive officers, directors and greater-than-10% beneficial owners, we believe that during fiscal year 2018 all Section 16(a) filing requirements applicable to the executive officers, directors and shareholders were timely satisfied.

The following paragraphs provide information as of the date of this Proxy Statement about each nominee. The information presented includes information that each nominee has given us about his age, all positions he holds with the company, his principal occupation and business experience for the past five years, and the names of other publicly held companies of which he currently serves as a director or has served as a director during the past five years.

When considering whether directors and nominees have the experience, qualifications, attributes and skills to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of the our business and structure, the Board of Directors focuses primarily on the industry and transactional experience, and other background, in addition to any unique skills or attributes associated with a director. With regard to Messrs. Polinsky and Geraci, the Board of Directors considered their significant experience, expertise and background with regard to investing in general and the company in particular. With regard to Mr. Larson, the Board of Directors considered his background and experience with the public securities markets and his former employment and experience in operational and financial capacities, as both a Chief Executive and Chief Financial Officer. With regard to Mr. Liszt, the Board of Directors considered his experience on other boards of public companies, his past experience in the communications and advertising fields, and his organizational experience. With regard to Mr. Zipkin, the Board of Directors considered his knowledge, experience and skills in the finance, public securities and investment banking fields.

Of the directors presently serving on the board and the nominees, Messrs. Larson, Liszt and Zipkin are “independent” as that term is defined in Section 5205(a) of Nasdaq listing rules, and not “interested persons” as that term is defined in the Investment Company Act of 1940. Our company is not, however, subject to the Nasdaq listing rules because its common stock is not listed for trading on any Nasdaq market.OTHER MATTERS

Vote Required

Directors are elected by a plurality of the votes of the holders of shares present in person or represented by proxy and entitled to vote on the election of directors. The nominees receiving the highest number of affirmative votes will be elected. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the five nominees named above. If you do not vote for a particular nominee, or you withhold authority for one or all nominees, your vote will not count either “for” or “against” the nominee, although it will be counted for purposes of determining whether there is a quorum. If any director-nominee should withdraw or otherwise become unavailable for reasons not presently known, the proxies which would have otherwise been voted for that director nominee may be voted for a substitute director nominee selected by the our Board of Directors.

The Board of Directors recommends that you vote FOR the election of

each of the above-identified director-nominees.

PROPOSAL TWO –Ratification of

Appointment of Independent Registered Public Accounting Firm

Our Board of Directors and management are committed to the quality, integrity and transparency of the company’s financial reports. In accordance with the duties set forth in its written charter, the board’s Audit Committee has appointed Baker Tilly Virchow Krause, LLP as the company’s independent registered public accounting firm for the 2014 fiscal year. A representative of Baker Tilly Virchow Krause, LLP is expected to attend this year’s annual meeting and be available to respond to appropriate questions from shareholders, and will have the opportunity to make a statement if he or she desires to do so.

Fees Billed to Company by Its Independent Registered Public Accounting Firm

The following table presents aggregate fees billed by Baker Tilly Virchow Krause, LLP for professional audit services rendered during fiscal years 2013 and 2012:

The Audit Committee has reviewed the services provided by Baker Tilly Virchow Krause, LLP during fiscal year 2013 and 2014 and the fees billed for such services. After consideration, the Audit Committee has determined that the receipt of these fees by Baker Tilly Virchow Krause, LLP is compatible with the provision of independent audit services. The Audit Committee discussed these services and fees with Baker Tilly Virchow Krause, LLP and management to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by the SEC to implement the Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified Public Accountants.

Pre-Approval Policy

Our Audit Committee or the entire Board of Directors endeavors to approve in advance all services provided by our independent registered public accounting firm. All engagements of our independent registered public accounting firm in years ended 2012 and 2013 were approved by the Audit Committee. The Audit Committee did not pre-approve the rendering of services during 2014, but approved such services in a December 2014 meeting held prior to the annual meeting of shareholders.

Vote Required

The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the annual meeting will be required to ratify the appointment of Baker Tilly Virchow Krause, LLP as the company’s independent registered public accounting firm for fiscal 2014. If the shareholders do not ratify the appointment of Baker Tilly Virchow Krause, LLP, the Audit Committee may reconsider its selection, but is not required to do so. Notwithstanding the proposed ratification of the appointment of Baker Tilly Virchow Krause, LLP by the shareholders, the Audit Committee, in its discretion, may direct the appointment of new independent auditors at any time during the year without notice to, or the consent of, the shareholders, if the Audit Committee determines that such a change would be in the best interests of the company and its shareholders.

The Board of Directors recommends that you vote FOR the ratification of Baker Tilly Virchow Krause, LLP

as the company’s independent registered public accounting firm for fiscal 2014.

PROPOSALTHREE – Approval of Amendment TO Bylaws

The Board of Directors is recommending an amendment to the company’s bylaws to ensure that the composition of the Board of Directors complies with certain requirements of the Investment Company Act of 1940. The proposed amendment provides that, subject to the exceptions set forth in Section 56(b) of the Investment Company Act of 1940, a majority of the directors comprising the Board of Directors must not be “interested persons” as that term is defined in the Investment Company Act of 1940. In this regard, Section 2(a)(19) of the Investment Company Act of 1940, in pertinent part, defines an “interested person” of our company as follows:

The Board of Directors believesis of the view that shareholders’ best interests are served by approvingmanagement is primarily responsible for all communications on behalf of Mill City with shareholders and the proposed amendmentpublic at large.

Shareholders who wish to the bylaws. If adopted, the company does not anticipate that the newly adopted bylaw would have any impact oncommunicate with the Board of Directors as presently composed, and as proposedor with a particular director may send a letter to be composed under Proposal One above.

The text of the proposed amendment, which is to be added as a new sentence to Section 4.1our any of our bylaws, is set forth below:

“At all times during which the corporation shall have an effective election to be a “business development company” under Section 54 of the Investment Company Act of 1940, a majority of directors serving on the Board shall not be “interested persons” of the corporation, as such term is defined in the Investment Company Act of 1940, subject, however, to the permitted exceptions to the requirement under such Act that a majority of directors not be “interested persons” of the corporation (which exceptions are set forth in Section 56(b) of such Act).”

Section 56(b) of the Investment Company Act of 1940 presently contains the following requirements and exceptions:

“If, by reason of the death, disqualification, or bona fide resignation of any director or general partner, a business development company does not meet the requirements of subsection (a) of this section [that a majority of its directors be persons other than interested persons], or the requirements of section 15(f)(1) of this title with respect to directors, the operation of such provisions shall be suspended for a period of 90 days or for such longer period as the Commission may prescribe, upon its own motion or by order upon application, as not inconsistent with the protection of investors.”

Vote Required

The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the annual meeting will be required to approve the proposed amendment to the company’s bylaws. If approved, the amendment will be effective immediately.

The Board of Directors recommends that you vote FOR the proposed amendment to the bylaws.

PROPOSAL FOUR –Advisory Vote on Executive Compensation

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, our shareholders are entitled to vote to approve, on an advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with applicable SEC rules. We refer to this advisory vote as the “say-on-pay” vote. This “say-on-pay” vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the compensation philosophy, policies and practices of our company described in this Proxy Statement.

Consistent with this right to give an advisory “say-on-pay” vote, we are asking shareholders to indicate their support at the annual meeting for the compensation of our named executive officers as described in this Proxy Statement by casting an advisory vote “FOR” the following resolution:

“RESOLVED, that the shareholders approve the compensation of the “named executive officers” of Mill City Ventures III, Ltd., as disclosed in the section entitled “Executive Compensation” in the Proxy Statement for such company’s 2014 annual meeting of shareholders pursuant1907 Wayzata Boulevard, Suite 205, Wayzata, Minnesota 55391. Any communication should clearly specify that it is intended to be made to the SEC’s compensation disclosure rules.”

The compensation of our named executive officers is disclosed in the section entitled “Executive Compensation” below, including the tabular and narrative disclosures set forth in such section.

Vote Required

The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the annual meeting will be required to approve, on an advisory basis, the compensation of our named executive officers as described herein. Because the vote is advisory, it will not be binding on the company, ourentire Board of Directors or the Compensation Committee. Nevertheless, the views expressed byto one or more particular director(s).

Under this process, our shareholders, whether through this vote or otherwise, are importantofficers review all such correspondence and will forward to us and, accordingly, the Board of Directors a summary of all such correspondence and the Compensation Committee intend to consider the resultscopies of this vote in making determinations in the future regarding executive compensation arrangements.

The Board recommendsall correspondence that you vote FOR the proposal to approve the compensation of our

named executive officers, as described in this Proxy Statement.

PROPOSAL FIVE –Advisory Vote on the

Frequency of Advisory Votes on Executive Compensation

The Dodd-Frank Act also enables our shareholders to indicate how frequently we should seek an advisory vote on the compensation of our named executive officers, as disclosed in accordancedeals with the SEC’s compensation disclosure rules, such as Proposal Four. In particular, we are asking whether the advisory vote should occur every three years, every two years, or every year.

The optimal frequency of the advisory vote on executive compensation depends on a balancing of the benefits and burdens of more or less frequent votes. Some observers (not of our company in particular, but of the general requirement under the Dodd-Frank Act to obtain an advisory say-on-pay vote) have expressed a belief that less frequent votes are appropriate as they enable shareholders to focus on a company’s overall compensation program design, as opposed to short-term decisions, and provide sufficient time to evaluate how a company’s compensation programs drive longer-term performance and the creation of longer-term shareholder value. Many also believe that a less frequent voting cycle will give companies sufficient time to respond thoughtfully to shareholder views and to implement any necessary changes to executive compensation programs and allow shareholders to evaluate the results of these changes before the next shareholder advisory vote.

On the other hand, other observers believe more frequent shareholder votes are better since they provide shareholders with the opportunity to react promptly to emerging trends in compensation and to provide rapid feedback to companies with respect to their views on the effectiveness and appropriateness of their executive compensation programs. According to this view, more frequent feedback would provide our Board of Directors and Compensation Committee with the opportunity to evaluate individual compensation decisions each year in light of the shareholder feedback and to better incorporate current shareholder views into companies’ compensation programs.

At this time, our Board of Directors believes that the most appropriate outcome at this time is to have a shareholder advisory vote on compensation every three years, to best enable shareholders to evaluate the effect of our compensation on company performance and shareholder value.

You may cast your vote on your preferred voting frequency by choosing the option of three years, two years, one year, or abstain from voting when you vote on this proposal.

Vote Required

The option of three years, two years, or one year that receives the highest number of votes cast by shareholders will be the frequency for the advisory vote on executive compensation selected by shareholders. As with your vote on Proposal Four, your vote on this Proposal Five is advisory, and therefore not binding on the company, the Compensation Committee, or our Board of Directors, and the Board of Directors may decide that it is in the best interests of our shareholders and the company to hold an advisory vote on executive compensation more or less frequently than the option approved by our shareholders. However, our Board of Directors and our Compensation Committee value the opinions of our shareholders and we will take our shareholders’ preferences into account in making determinations regarding the frequency of the say-on-pay vote.

The Board of Directors recommends that shareholders vote for a frequency of “THREE YEARS”

for future advisory shareholders votes on executive compensation.

OTHER MATTERS

The Board of Directors is not aware of any matter to be presented for action at the annual meeting other than the proposals described above. Although the Board of Directors knows of no other matters to be presented at the annual meeting, all proxies returned to us will be voted on any such matter in accordance with the judgment of the proxy holders.

EXECUTIVE OFFICERS AND DIRECTORS

Each of our current directors has been nominated for reelection at the annual meeting. We currently have five directors, three of whom—Messrs. Liszt, Larson and Zipkin—are “independent” as that term is defined in Section 5605(a) of the Nasdaq listing rules. None of our independent directors are “interested persons” as that term is defined in the Investment Company Act of 1940. We are not subject to Nasdaq listing rules, however, because our common stock is not listed for trading on a Nasdaq market. Based upon information requested from each such director concerning his background, employment and affiliations, our Board of Directors has affirmatively determined that none of the independent directors has a material business or professional relationship with the company, other than in his capacity as a director.

CORPORATE GOVERNANCE; BOARD LEADERSHIP STRUCTURE

Our business, property and affairs are managed under the direction of our Board of Directors. Members of our Board of Directors are kept informed of our business through discussions with our Chairman and Chief Executive Officer, Chief Financial Officer, our Chief Compliance Officer and any other officers and employees, and by reviewing materials provided to them and participating in meetings of our Board of Directors and its committees. Under our bylaws, directors serve for indefinite terms expiring upon the next annual meeting of our shareholders.

Our Board of Directors currently combines the role of Chairmanfunctions of the Board of Directors withor committees thereof or that the role of Chief Executive Officer. Our Board of Directors believes this provides an efficient and effective leadership model for our company. Combining these roles fosters clear accountability, effective decision-making, and alignment on corporate strategy. Since 2006, Mr. Polinsky has served as both our Chairman and Chief Executive Officer. Mr. Polinsky is an “interested person” as that term is defined inofficers otherwise determine requires their attention. Concerns relating to accounting, internal controls or auditing matters are immediately brought to the Investment Company Act of 1940.

During 2013, our Board of Directors held two full board meetings and acted by written consent on approximately 14 occasions. Allattention of the directors attended both of the full board meetings. In addition, each committee of the Board of Directors acted by written consent during 2013. Each director makes a diligent effort to attend all board and committee meetings, as well as our annual meeting of shareholders. In furtherance of this effort and expectation, our board has adopted a Board Meeting Policy affirmatively encouraging directors to attend or participate in meetings of the board and applicable committees whenever possible, and requiring directors to cause the company to comply with the requirements under Section 32(a) of the Investment Company Act of 1940.

Board Oversight of Risk

While risk management is primarily the responsibility of our management team, our Board of Directors is responsible for oversight of the material risks faced by us at both the full board level and at the committee level. Our board’s Audit Committee has oversight responsibility not only for financial reporting with respect to our major financial exposures and the steps management has taken to monitor and control such exposures, but also for the effectiveness of management’s enterprise risk management process that monitors and manages key business risks facing our company. In addition, the other committees of our Board of Directors consider the risks within their areas of responsibility. For example, the board’s Compensation Committee considers the risks that may be implicated by our executive compensation program. Finally, management provides regular updates throughout the year to our Board of Directors regarding the management of the risks they oversee at each regular board meeting.

Board Committees

Our Board of Directors has established an Audit Committee, a Compensation Committee and a Valuation Committee. A brief description of each committee is included in this proxy statement and the charters of the Audit and Compensation Committees are available on the Investor Relations section of our website athttp://www.millcityventures3.com/investor-relations/.

Audit Committee

The membersChairman of the Audit Committee are Laurence S. Zipkin, Christopher M. Larson and Howard P. Liszt, each of whom is independent for purposesValuation Committee. A copy of the Securities Exchange Act of 1934committee charters and not “interested persons” for purposes of the Investment Company Act of 1940. Mr. Zipkin currently serves as chair of the Audit Committee.

The Audit Committee (which must include a majority of the independent directors who are not “interested persons” serving on board in order to comply with applicable requirements under the Investment Company Act of 1940) is responsible for approving our independent accountants and submission to the shareholders for ratification, if any, reviewing with its independent accountants the plans and results of the audit engagement, approving professional services provided by its independent accountants, reviewing the independence of its independent accountants and reviewing the adequacy of its internal accounting controls. The Audit Committee is also responsible for discussing with management the company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the company’s risk assessment and risk management policies. The Board of Directors has determined that Mr. Zipkin is an “audit committee financial expert” within the meaning of the rules of the Securities and Exchange Commission. Mr. Zipkin’s relevant experience is detailed in his biography above. The board has determined that each of the Audit Committee members is able to read and understand fundamental financial statements and that at least one member of the Audit Committee has past employment experience in finance or accounting.

Compensation Committee

The members of the Compensation Committee are Messrs. Larson, Zipkin and Liszt, each of whom is independent for purposes of the Securities Exchange Act of 1934 and not “interested persons” for purposes of the 1940 Act. Mr. Zipkin currently serves as chair of the Compensation Committee. The Compensation Committee is responsible for approving our compensation arrangements with executive management, including bonus-related decisions and employment agreements with respect to such individuals. The committee has a Compensation Committee Charter, the purpose of which is to assist the committee and the board in fulfilling its oversight responsibilities related to our compensation and compensation structure, including equity compensation, if any, paid by us.

Our processes and procedures for consideration and determination of executive and director compensation include:

Valuation Committee

The members of the Valuation Committee are Messrs. Larson, Zipkin and Liszt, each of whom is independent for purposes of the Securities Exchange Act of 1934 and not “interested persons” for purposes of the Investment Company Act of 1940. Mr. Liszt currently serves as chair of the Valuation Committee. The Valuation Committee is responsible for approving the fair value of debt and equity securities comprising our investment portfolio, pursuant to our written valuation policy and related procedures.

Code of Ethics

On August 5, 2008, our Board of Directors adopted a Code of Ethics, which covers our principal executive and financial officers, or persons performing similar functions, as required by Sections 406 and 407 of the Sarbanes-Oxley Act of 2002. Our Code of Ethics is available at our website, web site atwww.millcityventures3.com or without charge to any shareholder upon written request made to Mill City Ventures III, Ltd., Attention: Chief Executive Officer, 328 Barry Ave. S., Suite 210, Wayzata, MN 55391. We adopted a new Code of Ethics in March, 2013 in connection with our election to become a business development company. The new Code of Ethics was prepared in order to comply with the requirements applicable to business development companies under Section 17 of the Investment Company Act of 1940. In this regard, we have also implemented procedures designed to help foster compliance with the provisions of the new Code of Ethics..

Director Nomination Procedures

Our Board of Directors does not have a nominating committee. Nevertheless, each of our directors participates in our director-nomination process, except with respect to each of hisShareholder proposals or her own nomination. When considering whether directors and nominees have the experience, qualifications, attributes and skills to enablefor the Board of Directors to satisfy its oversight responsibilities effectivelymust be made in light of our business and structure, the Board of Directors focuses primarily on the industry and transactional experience, and other background, in addition to any unique skills or attributes associatedaccordance with a particular director or nominee. We have not had any material changes to the procedures for shareholder nominations of candidates to serve ondescribed in the following question. 

Proposals received from shareholders in accordance with Rule 14a-8 under the Exchange Act are given careful consideration by our Board of Directors during the fiscal year ended December 31, 2013.

Related-Party Transaction Policy

The Board of Directors has adopted a written Conflict of Interest and Related-Party Transaction Policy. That policy governs the approval of all related-party transactions, subject only to certain customary exceptions (e.g., compensation, certain charitable donations, transactions made available to all employees generally, etc.). The policy contains a minimum dollar threshold of $5,000.

The entire Board of Directors administers the policy and approves any related-party transactions, subject to conflicting or additional requirements under the Investment Company Act of 1940, our written Code of Ethics, or our other written policies and procedures. In general, after full disclosure of all material facts, review and discussion, the Board of Directors approves or disapproves related-party transactions by a vote of a majority of the directors who have no interest in such transaction, direct or indirect. Procedurally, no director is allowed to vote in any approval of a related-party transaction for which he is the related party, except that such a director may otherwise participate in a related discussion and shall provide to the Board of Directors all material information concerning the related-party transaction and the director’s interest therein.Directors. If a related-party transaction will be ongoing, the Board of Directors may establish guidelines for management to follow in its ongoing dealings with the related party.

Potential Conflicts of Interest

The Board of Directors has recently amended its Conflict of Interest and Related-Party Transaction Policy to require disclosure in the company’s periodic SEC filings of any potential conflicts of interest—e.g., investments by our management or our directors, directly or indirectly, in any of our portfolio companies—that are more thande minimis in nature or amount.

Communication with the Board

We believe that communications between our Board of Directors, our shareholders and other interested parties are an important part of our corporate governance process. Shareholders with questions about our company are encouraged to contact us. If shareholders believe that their questions have not been addressed, they may communicate with our Board of Directors by sending their communications to Mill City Ventures III, Ltd., Attention: Chief Executive Officer, 328 Barry Avenue South #210, Wayzata, MN 55391.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and beneficial owners of more than 10% of our common stock to file with the SEC certain reports regarding their ownership of common stock or any changes in such ownership. Based on our own review, we believe that each of the following persons made late filings with respect to events or transactions occurring during 2013, as follows: Joseph D. Hammer’s initial filing on Form 3 relating to his appointment to our Board of Directors was due on March 11, 2013, but not filed until May 9, 2013; and Neal Linnihan’s and Scott Zbikowski’s Form 3s relating to their respective acquisitions of our common stock in a private placement were due on March 18, 2013, but not filed until March 20, 2013.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the total compensation paid by us during our two most recent fiscal years ended December 31, 2013 and 2012 to those persons who served as our President or Chief Executive Officer and Chief Financial Officer during such periods (collectively, the “named executives”).

Employment Agreements with Executives

We have employment agreements with each of Messrs. Polinsky and Geraci. The material terms and conditions of employment agreements are summarized below.

Mr. Polinsky’s Employment Agreement

Mr. Polinsky is employed as our Chief Executive Officer and co-manager of the investment portfolio of the company for a three-year term expiring on March 25, 2016, and receives an annual base salary of $50,000, which may be increased by our board’s Compensation Committee on an annual basis. Mr. Polinsky is also eligible for an annual cash bonus at the conclusion of each fiscal year up to Mr. Polinsky’s base salary, as approved by the Compensation Committee. Mr. Polinsky will also receive an amount of our net income each fiscal year which, when aggregated with the foregoing base salary and annual bonuses, if any, paid with respect to such fiscal year, and any other perquisites or benefits paid to Mr. Polinsky during such fiscal year, together with all compensation (including any perquisites and benefits) paid to all other officers and employees of the company, equals 20% of our net income after taxes for such fiscal year (such amount being referred to as “Profit-Sharing Compensation”). Profit-Sharing Compensation is calculated based upon our completed audited financials for the applicable fiscal year and paid as soon as practicable following the completion of such audit. Our officers and employees eligible to receive any Profit-Sharing Compensation will, among themselves, determine the manner in which they will participate in such compensation. At this time Messrs. Polinsky and Geraci are the only two officers or employees of the company entitled to any Profit-Sharing Compensation. Mr. Polinsky will also be entitled to reimbursements for all reasonable and appropriate business expenses incurred in connection with the performance of his duties. In our employment agreement with Mr. Polinsky, we agreed that if the company should fail to qualify as a regulated investment company for any reason under the Internal Revenue Code, our net income for purposes of the Profit-Sharing Compensation will be calculated as if we were at all times qualified as a regulated investment company.

Upon termination of Mr. Polinsky’s employment agreement, Mr. Polinsky will be entitled to receive the foregoing compensation through the date of termination, and reimbursement for any expenses incurred by Mr. Polinsky through the date of such termination. If we terminate Mr. Polinsky’s employment agreement for cause, we may offset against such payments any damages sustained by us as a result of the conduct constituting such cause.

Mr. Polinsky is prohibited from disclosing our confidential information, and has agreed not to solicit any of our employees during the term of the employment agreement and for a period of 12 months thereafter. Mr. Polinsky’s agreement contains other customary terms and conditions.

Mr. Geraci’s Employment Agreement

Mr. Geraci is employed as our Chief Financial Officer and co-manager of our investment portfolio for a three-year term expiring on March 25, 2016. Mr. Geraci receives an annual base salary of $100,000, which may be increased by our board’s Compensation Committee on an annual basis. Mr. Geraci is also eligible for an annual cash bonus at the conclusion of each fiscal year up to Mr. Geraci’s base salary, as approved by the Compensation Committee. Mr. Geraci will also receive an amount of our net income each fiscal year which, when aggregated with the foregoing base salary and annual bonuses, if any, paid with respect to such fiscal year, and any other perquisites or benefits paid to Mr. Geraci during such fiscal year, together with all compensation (including any perquisites and benefits) paid to all of our other officers and employees, equals 20% of our net income after taxes for such fiscal year (such amount being referred to as the “Profit-Sharing Compensation”). Profit-Sharing Compensation is calculated based upon our completed audited financials for the applicable fiscal year and paid as soon as practicable following the completion of such audit. Our officers and employees eligible to receive any Profit-Sharing Compensation will, among themselves, determine the manner in which they will participate in such compensation. At this time Messrs. Polinsky and Geraci are the only two officers or employees entitled to any Profit-Sharing Compensation. Mr. Geraci will also be entitled to reimbursements for all reasonable and appropriate business expenses incurred in connection with the performance of his duties. In our employment agreement with Mr. Geraci, we agreed that if the company should fail to qualify as a regulated investment company for any reason under the Internal Revenue Code, our net income for purposes of the Profit-Sharing Compensation will be calculated as if we were at all times qualified as a regulated investment company.

Upon termination of Mr. Geraci’s employment agreement, Mr. Geraci shall be entitled to receive the foregoing compensation through the date of termination, and reimbursement for any expenses incurred by Mr. Geraci through the date of such termination. If we terminate Mr. Geraci’s employment agreement for cause, we may offset against such payments any damages sustained by us as a result of the conduct constituting such cause.

Mr. Geraci is prohibited from disclosing our confidential information, and agreed not to solicit any of our employees during the term of the employment agreement and for a period of 12 months thereafter. Mr. Geraci’s agreement contains other customary terms and conditions.

Outstanding Equity Awards at Fiscal Year End

We had no outstanding options, warrants, unvested stock awards or equity incentive plan awards as of December 31, 2013 held by any named executive. In addition, we have no options, warrants, unvested stock awards or equity incentive plan awards outstanding and held by any named executive as of the date of this filing.

DIRECTOR COMPENSATION

In 2013, we paid a total of $33,400 in director fees to our independent directors, none of whom are “interested persons” under the Investment Company Act of 1940. Presently, each such director receives an annualized fee of $20,000.

SHAREHOLDER PROPOSALS

A shareholder who intends to present a proposal at our 2015next annual meeting of shareholders pursuant to the SEC’s Rule 14a-8 must submitunder the proposal to us in writing at our address in Wayzata, Minnesota, and we must receive the proposal on or before 120 days prior to the date of our 2015 annual meeting,Exchange Act, in order for thesuch shareholder proposal to be considered for inclusion in our proxy statement for that meeting. We expect that the 2015 annual meeting will be held in June 2015, but the exact date, time, and location of such meeting have yet to be determined. The submission of a proposal does not guarantee its inclusion in our proxy statement or presentation at the 2015 annual meeting of shareholders.

Except as noted below, to be timely, proposals and nominations with respect to the 2015 annual meeting of shareholders must be delivered to us no later than 5:00 p.m., Central Time, on the 120th day prior to the first anniversary of the date of the mailing of the notice for the preceding year’s annual meeting. If the date of the annual meeting has been changed by more than 30 calendar days from the first anniversary of the date of the preceding year’s annual meeting, shareholder proposals or director nominations must be so received no later than 5:00 p.m., Central Time, on the later of the 120th day prior to the date of such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made.

Notices of business proposals or a nomination(s) of individuals for election as a director at the 2015 annual meeting, other than shareholder proposals to be included in our proxy statement pursuant to Rule 14a-8, shouldProxy Statement for that meeting, the proposal must be addressed to Chief Executive Officer,received by us at Mill City Ventures III, Ltd., 328 Barry Avenue South #210,1907 Wayzata Boulevard, Suite 205, Wayzata, Minnesota 55391. We reserve55391, a reasonable amount of time prior to that meeting.  If such proposal is in compliance with all of the rightrequirements of Rule 14a-8 under the Exchange Act, the proposal will be included in our Proxy Statement and proxy card relating to reject, rule out of order, or take other appropriate action with respectsuch meeting. Nothing in the response to this question shall be deemed to require us to include any shareholder proposal that does not comply with these and other applicable requirements.meet all the requirements for such inclusion established by the SEC in effect at that time. 

Rule 14a-4 promulgated under the Securities Exchange Act of 1934 governs the use of discretionary proxy voting authority with respect toIn order for a shareholder proposal thatsubmitted outside of Rule 14a-8, including any nominations for the shareholder hasBoard of Directors made by shareholders, to be considered at our next annual meeting of shareholders, such proposal must be made by written notice and received by us not sought to includeless than 60 days in our proxy statement. Rule 14a-4 provides that if a proponentadvance of a proposal fails to notify us at least 45 days prior to the month and day of mailing of the prior year’s proxy statement, management proxies will be allowed to use their discretionary voting authority when the proposal is raised at the meeting, without any discussion of the matter.

Due to the complexity of the respective rights of the shareholders and the company in this area, any shareholder desiring to propose such an action is advised to consult with his or her legal counsel with respect to such rights. We suggest that any such proposalannual meeting.  Such proposals should be submitted by certified mail, return-receipt requested.

SOLICITATION

Our 2018 Annual Report on Form 10-K containing audited financial statements, and Quarterly Report on Form 10-Q for the periods ended March 31 and June 30, 2019, are available both on our website atwww.millcityventures3.com and at the SEC’s website at www.sec.gov. Additional copies of those reports (without exhibits, unless otherwise requested) are available in print, free of charge, to shareholders requesting a copy by writing to: Mill City Ventures III, Ltd., Investor Relations, 1907 Wayzata Boulevard, Suite 205, Wayzata, Minnesota 55391, or by calling us at (952) 479-1920.

We will bear the cost of preparing, assembling and mailing the proxy, Proxy Statement, Quarterly Report, Annual Report and other material which may be sent to the shareholders in connection with this solicitation. Brokerage houses and other custodians, nominees and fiduciaries may be requested to forward soliciting material to the beneficial owners of stock, in which case they may be reimbursed by us for their expenses in doing so. Proxies are being solicited primarily by mail. Nevertheless, our officers and employees may solicit proxies personally, by telephone, by special letter, or via the Internet.

The Board of Directors does not intend to presentbring other matters before the special meeting except items incidental to the meeting any other matter not referred to above and does not presently knowconduct of any matters that may be presented to the meeting by others. If, however,meeting. However, on all other matters comeproperly brought before the meeting, it isor any adjournments or postponements thereof, by the intentBoard of Directors or others, the persons named as proxies in the enclosedaccompanying proxy, toor their substitutes, will vote the proxy in accordance with their best judgment.discretion.

Exhibit A

FORM OF CERTIFICATE OF AMENDMENT

ARTICLES OF AMENDMENT

OF MILL CITY VENTURES III, LTD.

The Undersigned,                 Officer of Mill City Ventures III, Ltd., a Minnesota corporation (the “Corporation”), hereby certifies that the following Articles of Amendment have been duly adopted by the Corporation’s Board of Directors and shareholders pursuant to the provisions of the Minnesota Business Corporation Act (the “Act”):

1.            The name of the Corporation is: Mill City Ventures III, Ltd.

2.            Article 3 of the Corporation’s Articles of Incorporation, as amended, is hereby amended by adding a new paragraph “E” as follows:

E.       Effective upon the filing of the Articles of Amendment approved by the shareholders of the Corporation at a special meeting held on                       , 2019 (the “Effective Time”), the issued and outstanding common stock of the Corporation shall be combined on a 1-for-[•] basis such that, at the Effective Time, every [•] shares of common stock outstanding immediately prior to the Effective Time shall be combined into one share of common stock. This share combination will be effected through the exchange and replacement of certificates representing issued and outstanding shares of common stock as of the Effective Time, together with immediate book-entry adjustments to the stock register of the Corporation maintained in accordance with the Act. If the share combination would result in a shareholder being entitled to receive less than a full share of common stock, that shareholder will receive a cash payment from the Company, in lieu of any fractional share interest, in an amount equal to the product of (i) the number of common shares held by the shareholder that would otherwise have been exchanged for the fractional share interest, multiplied by (ii) the volume-weighted average price per share over the ten trading days immediately preceding the Effective Time; provided, that if there is no trading in our common stock on any of ten trading days immediately preceding the Effective Time, then the most recent closing sales price of our common stock will be substituted for the “volume-weighted average price per share.”. The par value of each share of issued and outstanding common stock shall not be affected by the share combination.

3.             These Articles of Amendment were adopted pursuant to the Act.

In Witness Whereof, the undersigned has set his hand as of [•], 2019.

Exhibit B

302A.471 RIGHTS OF DISSENTING SHAREHOLDERS.

Subdivision 1.Actions creating rights.

A shareholder of a corporation may dissent from, and obtain payment for the fair value of the shareholder's shares in the event of, any of the following corporate actions:

(a) unless otherwise provided in the articles, an amendment of the articles that materially and adversely affects the rights or preferences of the shares of the dissenting shareholder in that it:

(1) alters or abolishes a preferential right of the shares;

(2) creates, alters, or abolishes a right in respect of the redemption of the shares, including a provision respecting a sinking fund for the redemption or repurchase of the shares;

(3) alters or abolishes a preemptive right of the holder of the shares to acquire shares, securities other than shares, or rights to purchase shares or securities other than shares;

(4) excludes or limits the right of a shareholder to vote on a matter, or to cumulate votes, except as the right may be excluded or limited through the authorization or issuance of securities of an existing or new class or series with similar or different voting rights; except that an amendment to the articles of an issuing public corporation that provides that section 302A.671 does not apply to a control share acquisition does not give rise to the right to obtain payment under this section; or

(5) eliminates the right to obtain payment under this subdivision;

(b) a sale, lease, transfer, or other disposition of property and assets of the corporation that requires shareholder approval under section 302A.661, subdivision 2, but not including a disposition in dissolution described in section 302A.725, subdivision 2, or a disposition pursuant to an order of a court, or a disposition for cash on terms requiring that all or substantially all of the net proceeds of disposition be distributed to the shareholders in accordance with their respective interests within one year after the date of disposition;

(c) a plan of merger, whether under this chapter or under chapter 322C, to which the corporation is a constituent organization, except as provided in subdivision 3, and except for a plan of merger adopted under section 302A.626;

(d) a plan of exchange, whether under this chapter or under chapter 322C, to which the corporation is a party as the corporation whose shares will be acquired by the acquiring organization, except as provided in subdivision 3;

(e) a plan of conversion is adopted by the corporation and becomes effective;

(f) an amendment of the articles in connection with a combination of a class or series under section 302A.402 that reduces the number of shares of the class or series owned by the shareholder to a fraction of a share if the corporation exercises its right to repurchase the fractional share so created under section 302A.423; or

(g) any other corporate action taken pursuant to a shareholder vote with respect to which the articles, the bylaws, or a resolution approved by the board directs that dissenting shareholders may obtain payment for their shares.

Subd. 2.Beneficial owners.

(a) A shareholder shall not assert dissenters' rights as to less than all of the shares registered in the name of the shareholder, unless the shareholder dissents with respect to all the shares that are beneficially owned by another person but registered in the name of the shareholder and discloses the name and address of each beneficial owner on whose behalf the shareholder dissents. In that event, the rights of the dissenter shall be determined as if the shares as to which the shareholder has dissented and the other shares were registered in the names of different shareholders.

(b) A beneficial owner of shares who is not the shareholder may assert dissenters' rights with respect to shares held on behalf of the beneficial owner, and shall be treated as a dissenting shareholder under the terms of this section and section 302A.473, if the beneficial owner submits to the corporation at the time of or before the assertion of the rights a written consent of the shareholder.

Subd. 3.Rights not to apply.

(a) Unless the articles, the bylaws, or a resolution approved by the board otherwise provide, the right to obtain payment under this section does not apply to a shareholder of (1) the surviving corporation in a merger with respect to shares of the shareholder that are not entitled to be voted on the merger and are not canceled or exchanged in the merger or (2) the corporation whose shares will be acquired by the acquiring organization in a plan of exchange with respect to shares of the shareholder that are not entitled to be voted on the plan of exchange and are not exchanged in the plan of exchange.

(b) If a date is fixed according to section 302A.445, subdivision 1, for the determination of shareholders entitled to receive notice of and to vote on an action described in subdivision 1, only shareholders as of the date fixed, and beneficial owners as of the date fixed who hold through shareholders, as provided in subdivision 2, may exercise dissenters' rights.

(c) Notwithstanding subdivision 1, the right to obtain payment under this section, other than in connection with a plan of merger adopted under section 302A.613, subdivision 4, or 302A.621, is limited in accordance with the following provisions:

(1) The right to obtain payment under this section is not available for the holders of shares of any class or series of shares that is listed on the New York Stock Exchange, NYSE MKT LLC, the Nasdaq Global Market, the NASDAQ Global Select Market, the Nasdaq Capital Market, or any successor to any such market.

(2) The applicability of clause (1) is determined as of:

(i) the record date fixed to determine the shareholders entitled to receive notice of, and to vote at, the meeting of shareholders to act upon the corporate action described in subdivision 1; or

(ii) the day before the effective date of corporate action described in subdivision 1 if there is no meeting of shareholders.

(3) Clause (1) is not applicable, and the right to obtain payment under this section is available pursuant to subdivision 1, for the holders of any class or series of shares who are required by the terms of the corporate action described in subdivision 1 to accept for such shares anything other than shares, or cash in lieu of fractional shares, of any class or any series of shares of a domestic or foreign corporation, or any other ownership interest of any other organization, that satisfies the standards set forth in clause (1) at the time the corporate action becomes effective.

Subd. 4.Other rights.

The shareholders of a corporation who have a right under this section to obtain payment for their shares, or who would have the right to obtain payment for their shares absent the exception set forth in paragraph (c) of subdivision 3, do not have a right at law or in equity to have a corporate action described in subdivision 1 set aside or rescinded, except when the corporate action is fraudulent with regard to the complaining shareholder or the corporation.

302A.473 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.

Subdivision 1.Definitions.

(a) For purposes of this section, the terms defined in this subdivision have the meanings given them.

(b) "Corporation" means the issuer of the shares held by a dissenter before the corporate action referred to in section 302A.471, subdivision 1 or the successor by merger of that issuer.

(c) "Fair value of the shares" means the value of the shares of a corporation immediately before the effective date of the corporate action referred to in section 302A.471, subdivision 1.

(d) "Interest" means interest commencing five days after the effective date of the corporate action referred to in section 302A.471, subdivision 1, up to and including the date of payment, calculated at the rate provided in section 549.09, subdivision 1, paragraph (c), clause (1).

Subd. 2.Notice of action.

(a) If a corporation calls a shareholder meeting at which any action described in section 302A.471, subdivision 1 is to be voted upon, the notice of the meeting shall inform each shareholder of the right to dissent and shall include a copy of section 302A.471 and this section and a brief description of the procedure to be followed under these sections.

(b) In connection with a qualified offer as described in section 302A.613, subdivision 4, the constituent corporation subject to the offer may, but is not required to, send to all shareholders a written notice informing each shareholder of the right to dissent and must include a copy of this section and section 302A.471 and a brief description of the procedure to be followed under these sections. To be effective, the notice must be sent as promptly as practicable at or following the commencement of the offer, but in any event at least ten days before the consummation of the offer.

Subd. 3.Notice of dissent.

If the proposedaction must be approved by the shareholders and the corporation holds a shareholder meeting, a shareholder who is entitled to dissent under section 302A.471 and who wishes to exercise dissenters' rights must file with the corporation before the vote on the proposed action a written notice of intent to demand the fair value of the shares owned by the shareholder and must not vote the shares in favor of the proposed action. If the proposed action is to be effected pursuant to section 302A.613, subdivision 4, and the corporation has elected to send a notice of action in accordance with subdivision 2, paragraph (b), a shareholder who is entitled to dissent under section 302A.471 and who wishes to exercise dissenters' rights must not tender the shares owned by the shareholder in response to the offer and must file with the corporation a written notice of intent to demand the fair value of the shares owned by the shareholder. Written notice must be filed with the corporation before the consummation of the offer.

Subd. 4.Notice of procedure; deposit of shares.

(a) After the proposed action has been approved by the board and, if necessary, the shareholders, the corporation shall send (i) in any case where subdivision 3 is applicable, to all shareholders who have complied with subdivision 3, (ii) in any case where a written action of shareholders gave effect to the action creating the right to obtain payment under section 302A.471, to all shareholders who did not sign or consent to a written action that gave effect to the action creating the right to obtain payment under section 302A.471, and (iii) in any other case, to all shareholders entitled to dissent, a notice that contains:

(1) the address to which a demand for payment and certificates of certificated shares must be sent in order to obtain payment and the date by which they must be received;

(2) any restrictions on transfer of uncertificated shares that will apply after the demand for payment is received;

(3) a form to be used to certify the date on which the shareholder, or the beneficial owner on whose behalf the shareholder dissents, acquired the shares or an interest in them and to demand payment; and

(4) a copy of section 302A.471 and this section and a brief description of the procedures to be followed under these sections.

(b) In order to receive the fair value of the shares, a dissenting shareholder must demand payment and deposit certificated shares or comply with any restrictions on transfer of uncertificated shares within 30 days after the notice required by paragraph (a) was given, but the dissenter retains all other rights of a shareholder until the proposed action takes effect.

Subd. 5.Payment; return of shares.

(a) After the corporate action takes effect, or after the corporation receives a valid demand for payment, whichever is later, the corporation shall remit to each dissenting shareholder who has complied with subdivisions 3 and 4 the amount the corporation estimates to be the fair value of the shares, plus interest, accompanied by:

(1) the corporation's closing balance sheet and statement of income for a fiscal year ending not more than 16 months before the effective date of the corporate action, together with the latest available interim financial statements;

(2) an estimate by the corporation of the fair value of the shares and a brief description of the method used to reach the estimate; and

(3) a copy of section 302A.471 and this section, and a brief description of the procedure to be followed in demanding supplemental payment.

(b) The corporation may withhold the remittance described in paragraph (a) from a person who was not a shareholder on the date the action dissented from was first announced to the public or who is dissenting on behalf of a person who was not a beneficial owner on that date. If the dissenter has complied with subdivisions 3 and 4, the corporation shall forward to the dissenter the materials described in paragraph (a), a statement of the reason for withholding the remittance, and an offer to pay to the dissenter the amount listed in the materials if the dissenter agrees to accept that amount in full satisfaction. The dissenter may decline the offer and demand payment under subdivision 6. Failure to do so entitles the dissenter only to the amount offered. If the dissenter makes demand, subdivisions 7 and 8 apply.

(c) If the corporation fails to remit payment within 60 days of the deposit of certificates or the imposition of transfer restrictions on uncertificated shares, it shall return all deposited certificates and cancel all transfer restrictions. However, the corporation may again give notice under subdivision 4 and require deposit or restrict transfer at a later time.

Subd. 6.Supplemental payment; demand.

If a dissenter believes that the amount remitted under subdivision 5 is less than the fair value of the shares plus interest, the dissenter may give written notice to the corporation of the dissenter's own estimate of the fair value of the shares, plus interest, within 30 days after the corporation mails the remittance under subdivision 5, and demand payment of the difference. Otherwise, a dissenter is entitled only to the amount remitted by the corporation.

Subd. 7.Petition; determination.

If the corporation receives a demand under subdivision 6, it shall, within 60 days after receiving the demand, either pay to the dissenter the amount demanded or agreed to by the dissenter after discussion with the corporation or file in court a petition requesting that the court determine the fair value of the shares, plus interest. The petition shall be filed in the county in which the registered office of the corporation is located, except that a surviving foreign corporation that receives a demand relating to the shares of a constituent domestic corporation shall file the petition in the county in this state in which the last registered office of the constituent corporation was located. The petition shall name as parties all dissenters who have demanded payment under subdivision 6 and who have not reached agreement with the corporation. The corporation shall, after filing the petition, serve all parties with a summons and copy of the petition under the Rules of Civil Procedure. Nonresidents of this state may be served by registered or certified mail or by publication as provided by law. Except as otherwise provided, the Rules of Civil Procedure apply to this proceeding. The jurisdiction of the court is plenary and exclusive. The court may appoint appraisers, with powers and authorities the court deems proper, to receive evidence on and recommend the amount of the fair value of the shares. The court shall determine whether the shareholder or shareholders in question have fully complied with the requirements of this section, and shall determine the fair value of the shares, taking into account any and all factors the court finds relevant, computed by any method or combination of methods that the court, in its discretion, sees fit to use, whether or not used by the corporation or by a dissenter. The fair value of the shares as determined by the court is binding on all shareholders, wherever located. A dissenter is entitled to judgment in cash for the amount by which the fair value of the shares as determined by the court, plus interest, exceeds the amount, if any, remitted under subdivision 5, but shall not be liable to the corporation for the amount, if any, by which the amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair value of the shares as determined by the court, plus interest.

Subd. 8.Costs; fees; expenses.

(a) The court shall determine the costs and expenses of a proceeding under subdivision 7, including the reasonable expenses and compensation of any appraisers appointed by the court, and shall assess those costs and expenses against the corporation, except that the court may assess part or all of those costs and expenses against a dissenter whose action in demanding payment under subdivision 6 is found to be arbitrary, vexatious, or not in good faith.

(b) If the court finds that the corporation has failed to comply substantially with this section, the court may assess all fees and expenses of any experts or attorneys as the court deems equitable. These fees and expenses may also be assessed against a person who has acted arbitrarily, vexatiously, or not in good faith in bringing the proceeding, and may be awarded to a party injured by those actions.

(c) The court may award, in its discretion, fees and expenses to an attorney for the dissenters out of the amount awarded to the dissenters, if any.

MILL CITY VENTURES III, LTD.

PROXY FOR ANNUALSPECIAL MEETING OF SHAREHOLDERS
Friday, December 19, 2014                        , 2019
9:00      :      a.m.

328 Barry Avenue S., #210

1907 Wayzata Boulevard, Suite 205, Wayzata, MN 55391

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned, a shareholder of Mill City Ventures III, Ltd.Ltd.., hereby appoints Douglas M. Polinsky and Joseph A. Geraci, II, and each of them, as proxies, with full power of substitution and re-substitution, to vote on behalf of the undersigned the number of shares which the undersigned is then entitled to vote at the annualspecial meeting of shareholders of the company to be held at 328 Barry Avenue. S., Suite 210, Wayzata, MN 55391, on Friday, December 19, 2014, at 9:00 a.m.,the address and time indicated above, and at any and all adjournments thereof.

Seesee reverse for voting instructions.

PROPOSALS: The Board of Directors recommends a voteFOR all nominees listed and FOR Proposals Two, Three1 and Four.2.

1.     Approval of the withdrawal of the company’s election to be regulated as a business development company under the Investment Company Act of 1940

2.     Approval of an amendment to the company’s certificate of incorporation to effect a share combination (reverse stock split) on a 1-for-basis, subject to the ultimate discretion of the Board of Directors to effect such share combination

Note: the Board of Directors recommends you vote 3 YEARS on this proposal

The undersigned hereby revokes all previous proxies relating to the shares covered hereby and acknowledges receipt of the Notice and Proxy Statement relating to the annualspecial meeting of shareholders. When properly executed, this proxy will be voted on the proposal set forth herein as directed by the shareholder. The undersigned authorizes the proxies to vote in their discretion upon such other business as may properly come before the meeting.