Per Note				Total
Initial public offering price			100.00%				$200,000,000
Underwriting discounts and commissions			3.15%				$6,300,000
Proceeds, before expenses, to us(1)			96.85%				$193,700,000

	(1)	Expenses payable by us (other than underwriting discounts and commissions) are estimated to be approximately $685,000.

Citigroup	Wachovia Securities

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		Page
Prospectus Supplement
Specific Terms of the Notes and the Offering			S-1
Use of Proceeds			S-8
United States Federal Income Tax Consequences			S-9
Underwriting			S-12
Legal Matters			S-16
Recent Developments			S-17
Business			S-19
Risk Factors			S-35
Legal Proceedings			S-41
Management’s Discussion and Analysis of Financial Condition and Results of Operations			S-42
Consolidated Financial Statements			S-79
Prospectus
Summary			1
Selected Condensed Consolidated Financial Data			6
Where You Can Find Additional Information			8
Risk Factors			9
Use of Proceeds			19
Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Senior Securities			67
Business			71
Portfolio Companies			87
Determination of Net Asset Value			94
Management			97
Portfolio Management			103
Compensation of Executive Officers and Directors			106
Control Persons and Principal Holders of Securities			117
Certain Relationships and Related Party Transactions			120
Tax Status			121
Certain Government Regulations			122
Stock Trading Plans and Ownership Guidelines			126
Dividend Reinvestment Plan			127
Description of Capital Stock			128
Description of Notes			129
Special Considerations Under our Charter and Bylaws and Maryland Law			141
Plan of Distribution			146
Legal Matters			147
Custodians, Transfer and Dividend Paying Agent and Registrar			147
Brokerage Allocation and Other Practices			148
Independent Registered Public Accounting Firm			148
Notice Regarding Arthur Andersen LLP			148
Index to Consolidated Financial Statements			F-1

(i)

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Issuer		Allied Capital Corporation
Title of the securities		6.875% Notes due 2047
Initial aggregate principal amount being offered		$200,000,000
Initial public offering price		100% of the aggregate principal amount
Net proceeds to us		96.85% of the aggregate principal amount
Principal payable at maturity		100% of the aggregate principal amount; the principal amount of each Note will be payable on its stated maturity date at the office of the Paying Agent, Registrar and Transfer Agent for the Notes or at such other office in The City of New York as we may designate.
Type of Note		Fixed Rate Note
Markets		The Notes will be offered for sale in those jurisdictions in the United States, Europe and Asia where it is legal to make such offers. See “Underwriting.”
Listing		We intend to list the Notes on the New York Stock Exchange after the closing of this offering.
Interest rate		6.875% per year
Day count basis		360-day year of twelve 30-day months
Original issue date		March 28, 2007
Stated maturity date		April 15, 2047
Date interest starts accruing		March 28, 2007
Interest payment dates		Every January 15, April 15, July 15, and October 15, commencing July 15, 2007. If an interest payment date falls on a non-business day, the applicable interest payment will be made on the next business day and no additional interest will accrue as a result of such delayed payment.
Interest periods		The initial interest period will be the period from and including March 28, 2007, to, but excluding, the initial interest payment date, and the subsequent interest periods will be the periods from and including an interest payment date to, but excluding, the next interest payment date or the stated maturity date, as the case may be.
Regular record dates for interest		Every January 1, April 1, July 1, and October 1, commencing July 1, 2007
Specified currency		U.S. Dollars
Place of payment		New York City

S-1

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Ranking of Notes		The Notes will be our direct unsecured obligations and rank pari passu with our other outstanding and future unsecured indebtedness. The Notes will be subordinated to any secured indebtedness of ours as to assets securing such indebtedness.
Denominations		We will issue the Notes in denominations of $25 and integral multiples of $25.
Business day		Means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York City are authorized or required by law or executive order to close.
Optional redemption		The Notes may be redeemed in whole or in part at any time or from time to time at our option on or after April 15, 2012, upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price of $25 per security plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to the date fixed for redemption.
		The notice of our election to redeem the Notes required to be given, as described in the prospectus attached to this prospectus supplement, has been revised to provide that we must give written notice by mail upon not less than 30 days nor more than 60 days prior to the date fixed for redemption.
		Any exercise of our option to redeem the Notes will be done in compliance with the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder, to the extent applicable.
		If we redeem only some of the Notes, the Trustee will determine the method for selection of the particular Notes to be redeemed, in accordance with the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder, to the extent applicable. Unless we default in payment of the redemption price, on and after the date of redemption, interest will cease to accrue on the Notes called for redemption.
Sinking fund		The Notes will not be subject to any sinking fund.
Repayment at option of Holders		Holders will not have the option to have the Notes repaid prior to the stated maturity date.
Defeasance		The Notes are subject to defeasance by us.
Covenant defeasance		The Notes are subject to covenant defeasance by us.
Form of Notes		The Notes will be represented by global securities that will be deposited and registered in the name of The Depository Trust Company (DTC) or its nominee. This means that, except in limited circumstances, you will not receive certificates for the Notes. Beneficial interests in the Notes will be represented through book- entry accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC. Investors may elect to hold interests in the Notes through either DTC (in the United States), Clearstream Banking, société

S-2

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anonyme (Clearstream), or Euroclear Bank S.A./N.V. (Euroclear), as operator of the Euroclear System (outside of the United States), if they are participants in these systems, or indirectly through organizations which are participants in these systems. Cross-market transfers between persons holding directly or indirectly through DTC participants, on the one hand, and directly or indirectly through Clearstream or Euroclear participants, on the other hand, will be effected in accordance with DTC rules on behalf of the relevant international clearing system by its U.S. depositary.

Paying Agent, Registrar and Transfer Agent		The Bank of New York
CUSIP		01903Q 207
ISIN		US01903Q2075
Other covenants		In addition to the covenants described in the prospectus attached to this prospectus supplement, the following covenants shall apply to the Notes:
		• We agree that for the period of time during which the Notes are outstanding, we will not violate Section 18(a)(1)(A) as modified by Section 61(a)(1) of the Investment Company Act of 1940, as amended, or any successor provisions.

		• If, at any time, we are not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act to file any periodic reports with the SEC, we agree to furnish to you and the Trustee, for the period of time during which the Notes are outstanding, our audited annual consolidated financial statements, within 90 days of our fiscal year end, and unaudited interim consolidated financial statements, within 45 days of our fiscal quarter end. All such financial statements will be prepared, in all material respects, in accordance with applicable generally accepted accounting principles.
Modifications to events of default		The following event of default, as described in the prospectus attached to this prospectus supplement:
		• we fail to make any payment of principal of or any premium on any security when it is due at the maturity of the security, and we do not cure this default within five days;
		with respect to the Notes has been revised to read as follows:
		• we fail to make any payment of principal on any Note when it is due at maturity.
Information Concerning Euroclear and Clearstream		The following description of the operations and procedures of Euroclear and Clearstream are provided solely as a matter of convenience. These operations and procedures are solely within the control of the relevant settlement systems and are subject to changes by them. We take no responsibility for these operations

S-3

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		and procedures and urge investors to contact the systems or their participants directly to discuss these matters.
		We understand as follows with respect to Euroclear and Clearstream:
		Euroclear and Clearstream hold securities for participating organizations. They also facilitate the clearance and settlement of securities transactions between their respective participants through electronic book-entry changes in the accounts of such participants. Euroclear and Clearstream provide various services to their participants, including the safekeeping, administration, clearance, settlement, lending and borrowing of internationally traded securities. Euroclear and Clearstream interface with domestic securities markets. Euroclear and Clearstream participants are financial institutions such as underwriters, securities brokers and dealers, banks, trust companies and certain other organizations. Indirect access to Euroclear or Clearstream is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Euroclear or Clearstream participant, either directly or indirectly.
Global Clearance and Settlement Procedures		Interests in the Notes will trade in DTC’s Same Day Funds Settlement System, and any permitted secondary market trading activity in such notes will, therefore, be required by DTC to be settled in immediately available funds. Transfers of interests in the Notes between participants in Euroclear or Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures. Cross-market transfers with respect to interests in Notes between participants in DTC, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be done through DTC in accordance with DTC’s rules on behalf of each of Euroclear or Clearstream.
		Because of time-zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a Note from a DTC participant will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear or Clearstream) immediately following the settlement date of DTC. Cash received in Euroclear and Clearstream as a result of a sale of an interest in a Note by or through a Euroclear or Clearstream participant to a participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following DTC’s settlement date.
		Although DTC, Euroclear and Clearstream currently follow the foregoing procedures in order to facilitate transfers of interests in the Notes among participants in DTC, Euroclear and Clearstream, as the case may be, they are under no obligation to

S-4

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		perform or continue to perform such procedures, and such procedures may be discontinued or modified at any time. None of the issuer, the trustee or the paying agent will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants, of their respective obligations under the rules and procedures governing their operations.
Payment of Additional Amounts		We will, subject to the exceptions and limitations set forth below, pay as additional interest on the Notes such additional amounts as are necessary so that the net payment by us or a paying agent of the principal of and interest on the Notes to a person that is a non-U.S. holder (as defined under the heading “United States Federal Income Tax Consequences” below), after deduction for any present or future tax, assessment or governmental charge of the United States or a political subdivision or taxing authority thereof or therein, imposed by withholding with respect to the payment, will not be less than the amount that would have been payable in respect of the Notes had no withholding or deduction been required.
		Our obligation to pay additional amounts shall not apply:
		(1) to any tax, assessment or governmental charge that is imposed or withheld solely because the beneficial owner, or a fiduciary, settlor, beneficiary or member of the beneficial owner if the beneficial owner is an estate, trust or partnership, limited liability company, or other fiscally transparent entity, or a person holding a power over an estate or trust administered by a fiduciary holder:
		(a) is or was present or engaged in, or is or was treated as present or engaged in, a trade or business in the United States or has or had a permanent establishment in the United States;
		(b) has or had any connection (other than the mere fact of ownership of our Notes) with the United States, including, without limitation, being or having been a citizen or resident of the United States or being treated as being or having been a resident of the United States;
		(c) is or was a foreign or domestic personal holding company, a passive foreign investment company, a controlled foreign corporation with respect to the United States, a foreign tax exempt organization, or a corporation that has accumulated earnings to avoid United States federal income tax; or
		(d) owns or owned 10% or more of the total combined voting power of all classes of stock of the Company;
		(2) to any holder that is not the sole beneficial owner of our Notes, or a portion thereof, or that is a fiduciary, partnership, limited liability company, or other fiscally transparent entity, but only to the extent that the beneficial owner, a beneficiary or settlor with respect to the fiduciary, or a

S-5

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		member of the partnership, limited liability company, or other fiscally transparent entity, would not have been entitled to the payment of an additional amount had such beneficial owner, beneficiary, settlor or member received directly its beneficial or distributive share of the payment;
		(3) to any tax, assessment or governmental charge that is imposed or withheld solely because the beneficial owner or any other person failed to comply with certification, identification or information reporting requirements concerning the nationality, residence, identity or connection with the United States of the holder or beneficial owner of our Notes, (including the statement requirement of Section 871(h) or Section 881(c) of the Code) if compliance is required by statute, by regulation of the United States Treasury Department or by an applicable income tax treaty to which the United States is a party as a precondition to exemption from such tax, assessment or other governmental charge;
		(4) to any tax, assessment or governmental charge that is imposed other than by deduction or withholding by the Company or a paying agent from the payment;
		(5) to any tax, assessment or governmental charge that is imposed or withheld solely because of a change in law, regulation, or administrative or judicial interpretation that becomes effective after the day on which the payment becomes due or is duly provided for, whichever occurs later;
		(6) to an estate, inheritance, gift, sales, excise, transfer, wealth or personal property tax or any similar tax, assessment or governmental charge;
		(7) to any tax, assessment or other governmental charge any paying agent (which term may include us) must withhold from any payment of principal of or interest on any Note, if such payment can be made without such withholding by any other paying agent; or
		(8) in the case of any combination of the above items.
		Our Notes are subject in all cases to any tax, fiscal or other law or regulation or administrative or judicial interpretation applicable. Except as specifically provided under this heading “Payment of Additional Amounts” and under the heading “Redemption Upon a Tax Event,” we do not have to make any payment with respect to any tax, assessment or governmental charge imposed by any government or a political subdivision or taxing authority.
		In particular, we will not pay additional amounts on any Note
		• where withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Union Council Directive 2003/48/ EC of June 3, 2003, on the taxation of savings income in the form of interest payments, or

S-6

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		any law implementing or complying with, or introduced in order to conform to, that Directive; or
		• presented for payment by or on behalf of a beneficial owner who would have been able to avoid the withholding or deduction by presenting the relevant Note to another paying agent in a member state of the European Union.
Redemption Upon a Tax Event		We may redeem the Notes in whole, but not in part, upon not less than 30 days nor more than 60 days written notice by mail, at a redemption price equal to the principal amount thereof together with accrued interest, if any, to the date fixed for redemption if we determine that:
		(a) as a result of a change in or amendment to the tax laws of the United States or any political subdivision of the United States, or any change in official position regarding application or interpretation of such laws (including a holding by a court of competent jurisdiction in the United States), that is announced or becomes effective on or after the date of this prospectus supplement, we have or will become obligated to pay additional amounts with respect to any Note as described herein under the heading “Payment of Additional Amounts”, or
		(b) on or after the date of this prospectus supplement any action has been taken by a taxing authority of, or any decision has been rendered by a court of competent jurisdiction in, the United States or any political subdivision of the United States, including any of those actions specified above, whether or not such action was taken or decision was rendered with respect to us, or any change, amendment, application or interpretation shall be officially proposed, which, in any such case, in the written opinion of independent legal counsel of recognized standing, will result in a substantial probability that we will become obligated to pay additional amounts with respect to any Note,
		and in either such case we, in our business judgment, determine that such obligations cannot be avoided by the use of reasonable measures available to us.
		If we exercise our option to redeem the Notes, we will deliver to the trustee a certificate signed by an authorized officer stating that we are entitled to redeem the Notes and, in the case of (b) above, the required written opinion of independent legal counsel.
		Any exercise of our option to redeem the Notes will be done in compliance with the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder, to the extent applicable.

S-7

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S-8

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	Taxation of Note Holders

S-9

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S-10

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S-11

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		Underwriter		Principal Amount
		Merrill Lynch, Pierce, Fenner & Smith
		Incorporated		$	56,666,700
		Citigroup Global Markets Inc.		$	56,666,650
		Wachovia Capital Markets, LLC		$	56,666,650
		Banc of America Securities LLC		$	6,000,000
		Deutsche Bank Securities Inc.		$	6,000,000
		J.P. Morgan Securities Inc.		$	6,000,000
		RBC Dain Rauscher Inc.		$	6,000,000
		SunTrust Capital Markets, Inc.		$	6,000,000
		Total		$	200,000,000

S-12

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						Total				Total
		Per Note				Without Option				With Option
Public offering price			100.00%				$200,000,000				$230,000,000
Underwriting discount			3.15%				$6,300,000				$7,245,000
Proceeds, before expenses, to us			96.85%				$193,700,000				$222,755,000

S-13

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	•	to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;
	•	to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or
	•	in any other circumstances which do not require the publication by Allied Capital of a prospectus pursuant to Article 3 of the Prospectus Directive.

S-14

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	(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
	(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor,

S-15

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S-16

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S-17

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S-18

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S-19

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S-20

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• Buyouts		• Recapitalizations
• Acquisitions		• Note purchases
• Growth		• Other types of financings

	•	Management team with meaningful equity ownership
	•	Dominant or defensible market position
	•	High return on invested capital
	•	Stable operating margins
	•	Ability to generate free cash flow
	•	Well-constructed balance sheet

• Business Services		• Industrial Products
• Consumer Products		• Consumer Services
• Financial Services

S-21

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S-22

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				At December 31, 2006
($ in millions)
								Unrealized
Portfolio								Appreciation								Percentage of
Company		Company Information		Cost				(Depreciation)				Value				Total Assets
Mercury Air Centers, Inc. (1)		Owns and operates fixed base operations generally under long-term leases from local airport authorities, which consist of terminal and hangar complexes that service the needs of the general aviation community.		$	84.3			$	159.9			$	244.2				5.0%
Business Loan Express, LLC(1)		Originates, sells, and services primarily real estate secured loans, generally for businesses with financing needs of up to $5.0 million. Provides primarily real estate secured conventional small business loans, SBA 7(a) loans, and small investment real estate loans.		$	295.3			$	(84.6	)		$	210.7				4.3%
EarthColor, Inc.		Commercial printer focused on providing a one-stop printing solution of electronic pre-press, printing and finishing primarily for promotional products such as direct mail pieces, brochures, product information and free standing inserts.		$	195.0			$	—			$	195.0				4.0%
Norwesco, Inc.		Designs, manufactures and markets a broad assortment of polyethylene tanks primarily to the agricultural and septic tank markets.		$	120.5			$	45.0			$	165.5				3.4%
Advantage Sales & Marketing, Inc.(2)		Sales and marketing agency providing outsourced sales, merchandising, and marketing services to the consumer packaged goods industry.		$	151.6			$	11.0			$	162.6				3.3%
BenefitMall, Inc.		Insurance general agency providing brokers with products, tools, and services that make selling employee benefits to small businesses more efficient.		$	155.2			$	(2.0	)		$	153.2				3.1%
Financial Pacific Company		Specialized commercial finance company that leases business-essential equipment to small businesses nationwide.		$	96.5			$	56.0			$	152.5				3.1%
Driven Brands, Inc.		Business format franchisor in the car care sector of the automotive aftermarket industry and in the general car care services with approximately 1,100 locations worldwide operating primarily under the Meineke Car Care Centers ® and Econo Lube N’ Tune® brands.		$	149.1			$	(9.8	)		$	139.3				2.9%
Huddle House, Inc.		Franchisor of value-priced, full service family dining restaurants primarily in the Southeast.		$	119.8			$	—			$	119.8				2.5%
Hot Stuff Foods, LLC(3)		Provider of foodservice programs predominately to convenience stores. Manufactures and distributes branded food products for on-site preparation and sale through in-store Hot Stuff branded kitchens and “grab and go” service points.		$	185.6			$	(68.4	)		$	117.2				2.4%

(1)	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
(2)	On March 29, 2006, we sold our majority equity interest in Advantage. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
(3)	In the first quarter of 2007, we exercised our option to acquire a majority of the voting securities of Hot Stuff Foods, LLC at fair market value.

S-23

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			2006				2005
Industry
Business services				39	%			42	%
Consumer products				20				14
Financial services				9				14
Industrial products				9				10
Consumer services				6				6
Retail				6				3
Healthcare services				3				2
Energy services				2				2
Other(1)				6				7
	Total			100	%			100	%

(1)	Includes investments in senior debt CDO and CLO funds, which represented 3% of the private finance portfolio at value at both December 31, 2006 and 2005. These funds invest in senior debt representing a variety of industries.

S-24

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	•	Initial investment screening;
	•	Initial investment committee approval;
	•	Due diligence, structuring and negotiation;
	•	Internal review of diligence results, including peer review;
	•	Final investment committee approval;
	•	Approval by the Executive Committee of the Board of Directors (for all debt investments that represent a commitment equal to or greater than $20 million and every buyout transaction); and
	•	Funding of the investment (due diligence must be completed with final investment committee approval and Executive Committee approval, as needed, before funds are disbursed).

S-25

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S-26

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S-27

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	•	Our valuation process begins with each portfolio company or investment being initially valued by the investment professionals, led by the Managing Director or senior officer who is responsible for the portfolio company relationship (the Deal Team).
	•	The CVO and third-party valuation consultants, as applicable (see below), review the preliminary valuation documentation as prepared by the Deal Team.
	•	The CVO, members of the valuation team, and third-party consultants, as applicable, meet with each Managing Director or responsible senior officer to discuss the preliminary valuation determined and documented by the Deal Team for each of their respective investments.
	•	The CEO, COO, CFO and the Managing Directors meet with the CVO to discuss the preliminary valuation results.
	•	Valuation documentation is distributed to the members of the Board of Directors.

S-28

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	•	The Audit Committee of the Board of Directors meets separately from the full Board of Directors with the third-party consultants (see below) to discuss the assistance provided and results. The CVO attends this meeting.
	•	The CVO discusses and reviews the valuations with the Board of Directors.
	•	To the extent there are changes or if additional information is deemed necessary, a follow-up Board meeting may take place.
	•	The Board of Directors determines the fair value of the portfolio in good faith.

S-29

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S-30

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S-31

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	•	Securities purchased in transactions not involving any public offering, the issuer of which is an eligible portfolio company;
	•	Securities received in exchange for or distributed with respect to securities described in the bullet above or pursuant to the exercise of options, warrants or rights relating to such securities; and
	•	Cash, cash items, government securities or high quality debt securities (within the meaning of the 1940 Act), maturing in one year or less from the time of investment.

	•	does not have a class of securities with respect to which a broker may extend margin credit at the time the acquisition is made;
	•	is controlled by the business development company and has an affiliate of a business development company on its board of directors;
	•	does not have any class of securities listed on a national securities exchange; or
	•	meets such other criteria as may be established by the SEC.

S-32

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S-33

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	•	Our Chief Executive Officer and Chief Financial Officer certify the financial statements contained in our periodic reports through the filing of Section 302 certifications;
	•	Our periodic reports disclose our conclusions about the effectiveness of our disclosure controls and procedures;
	•	Our annual report on Form 10-K contains a report from our management on internal control over financial reporting, including a statement that our management is responsible for establishing and maintaining adequate internal control over financial reporting as well as our management’s assessment of the effectiveness of our internal control over financial reporting, which must be audited by our independent registered public accounting firm;

S-34

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	•	Our periodic reports disclose whether there were significant changes in our internal control over financial reporting or in other factors that could significantly affect our internal control over financial reporting subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses; and
	•	We may not make any loan to any director or executive officer and we may not materially modify any existing loans.

S-35

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S-36

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S-37

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S-38

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S-39

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	•	price and volume fluctuations in the overall stock market from time to time;
	•	significant volatility in the market price and trading volume of securities of business development companies or other financial services companies;
	•	volatility resulting from trading in derivative securities related to our common stock including puts, calls, long-term equity anticipation securities, or LEAPs, or short trading positions;
	•	changes in laws or regulatory policies or tax guidelines with respect to business development companies or regulated investment companies;
	•	actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the expectations of securities analysts;
	•	general economic conditions and trends;
	•	loss of a major funding source; or
	•	departures of key personnel.

S-40

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S-41

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	•	changes in the economy;
	•	risks associated with possible disruption in our operations due to terrorism;
	•	future changes in laws or regulations and conditions in our operating areas; and
	•	other risks and uncertainties as may be detailed from time to time in our public announcements and SEC filings.

		2006				2005				2004
Private finance			97	%			96	%			76	%
Commercial real estate finance(1)			3	%			4	%			24	%

(1)	On May 3, 2005, we completed the sale of our portfolio of non-investment grade commercial mortgage-backed securities and real estate related collateralized debt obligation bonds and preferred shares investments. Upon the completion of this transaction, our lending and investment activity has been focused primarily on private finance investments.

S-42

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		At and for the
		Years Ended December 31,
		2006				2005				2004
($ in millions)
Portfolio at value		$	4,496.1			$	3,606.4			$	3,013.4
Investments funded(1)		$	2,437.8			$	1,675.8			$	1,524.5
Change in accrued or reinvested interest and dividends(2)		$	11.3			$	6.6			$	52.2
Principal collections related to investment repayments or sales		$	1,055.3			$	1,503.4			$	909.2
Yield on interest-bearing investments(3)			11.8	%			12.8	%			14.0	%

(1)	Investments funded included investments acquired through the issuance of our common stock as consideration totaling $7.2 million and $3.2 million, respectively, for the years ended December 31, 2005 and 2004. See also “— Private Finance” below.
(2)	Includes changes in accrued or reinvested interest of $3.1 million for the year ended December 31, 2006, related to our investments in money market securities.
(3)	The weighted average yield on interest-bearing investments is computed as the (a) annual stated interest on accruing loans and debt securities plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities less the annual amortization of loan origination costs, divided by (b) total interest-bearing investments at value. The weighted average yield is computed as of the balance sheet date.

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					At and for the
					Years Ended December 31,
					2006								2005								2004
					Value				Yield(2)				Value				Yield(2)				Value				Yield(2)
($ in millions)
Portfolio at value:
	Loans and debt securities:
		Senior loans			$	405.2				8.4	%		$	239.8				9.5	%		$	234.6				8.5	%
		Unitranche debt				799.2				11.2	%			294.2				11.4	%			43.9				14.8	%
		Subordinated debt				1,980.8				12.9	%			1,560.9				13.8	%			1,324.4				14.9	%
			Total loans and debt securities			3,185.2				11.9	%			2,094.9				13.0	%			1,602.9				13.9	%
	Equity securities					1,192.7								1,384.4								699.2
Total portfolio					$	4,377.9							$	3,479.3							$	2,302.1
Investments funded(1)					$	2,423.4							$	1,462.3							$	1,140.8
Change in accrued or reinvested interest and dividends					$	7.2							$	24.6							$	45.6
Principal collections related to investment repayments or sales(3)					$	1,015.4							$	703.9							$	551.9

(1)	Investments funded for the years ended December 31, 2006 and 2004, included debt investments in certain portfolio companies received in conjunction with the sale of such companies. See “— Private Finance, Investments Funded” below.
(2)	The weighted average yield on loans and debt securities is computed as the (a) annual stated interest on accruing loans and debt securities plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities less the annual amortization of loan origination costs, divided by (b) total loans and debt securities at value. The weighted average yield is computed as of the balance sheet date.
(3)	Includes collections from the sale or repayment of senior loans totaling $322.7 million, $301.8 million, and $35.6 million for the years ended December 31, 2006, 2005, and 2004, respectively.

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			2006 Investments Funded
			Debt Investments								Buyout Investments								Total
							Weighted								Weighted								Weighted
							Average								Average								Average
			Amount				Yield(1)				Amount				Yield(1)				Amount				Yield(1)
($ in millions)
Loans and debt securities:
	Senior loans		$	245.4				9.4	%		$	239.8				8.9	%		$	485.2				9.2	%
	Unitranche debt(2)			471.7				10.7	%			146.5				12.9	%			618.2				11.3	%
	Subordinated debt(3)			510.7				13.0	%			423.8				14.4	%			934.5				13.6	%
Total loans and debt securities				1,227.8				11.4	%			810.1				12.5	%			2,037.9				11.9	%
Equity				91.4	(5)							294.1								385.5
	Total		$	1,319.2							$	1,104.2							$	2,423.4

			2005 Investments Funded
			Debt Investments								Buyout Investments								Total
							Weighted								Weighted								Weighted
							Average								Average								Average
			Amount				Yield(1)				Amount				Yield(1)				Amount				Yield(1)
($ in millions)
Loans and debt securities:
	Senior loans		$	76.8				10.0	%		$	250.2				6.4	%		$	327.0				7.2	%
	Unitranche debt(2)			259.5				10.5	%			—				—				259.5				10.5	%
	Subordinated debt			296.9	(4)			12.3	%			330.9				12.5	%			627.8				12.4	%
Total loans and debt securities				633.2				11.3	%			581.1				9.9	%			1,214.3				10.6	%
Equity				82.5	(5)							165.5								248.0
	Total		$	715.7							$	746.6							$	1,462.3

			2004 Investments Funded
			Debt Investments								Buyout Investments								Total
							Weighted								Weighted								Weighted
							Average								Average								Average
			Amount				Yield(1)				Amount				Yield(1)				Amount				Yield(1)
($ in millions)
Loans and debt securities:
	Senior loans		$	25.1				9.1	%		$	140.8				7.2	%		$	165.9				7.5	%
	Unitranche debt(2)			18.9				13.0	%			—				—				18.9				13.0	%
	Subordinated debt(3)			396.4				13.4	%			320.1				15.5	%			716.5				14.4	%
Total loans and debt securities				440.4				13.2	%			460.9				13.0	%			901.3				13.1	%
Equity				72.3	(5)							167.2								239.5
	Total		$	512.7							$	628.1							$	1,140.8

(1)	The weighted average yield on interest-bearing investments is computed as the (a) annual stated interest on accruing interest-bearing investments, divided by (b) total interest-bearing investments funded.
(2)	Unitranche debt is a single debt investment that is a blend of senior and subordinated debt terms. The yield on a unitranche investment reflects the blended yield of senior and subordinated debt combined.
(3)	Debt investments funded for the year ended December 31, 2006, included a $150 million subordinated debt investment in Advantage Sales & Marketing, Inc. received in conjunction with the sale of Advantage and a $30 million subordinated debt investment in STS Operating, Inc. received in conjunction with the sale of STS. Debt investments funded for the year ended December 31, 2004, included a $47.5 million subordinated debt investment in The Hillman Companies, Inc. received in conjunction with the sale of Hillman.
(4)	Subordinated debt investments for the year ended December 31, 2005, included $45.5 million in investments in the bonds of collateralized loan obligations (CLOs) and collateralized debt obligations (CDOs) that are managed by Callidus Capital Corporation (Callidus), a portfolio company controlled by us. These CLOs and CDOs primarily invest in senior debt.
(5)	Equity investments for the years ended December 31, 2006, 2005, and 2004, included $26.1 million, $47.9 million, and $23.6 million, respectively, in investments in the preferred shares/income notes of CLOs and CDOs that are managed by Callidus. These CDOs and CLOs primarily invest in senior debt.

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			Companies				Companies				Companies
			More Than				5% to 25%				Less Than
			25% Owned(1)				Owned				5% Owned				Total
($ in millions)
Senior loans			$	30.4			$	13.6			$	157.4			$	201.4	(2)
Subordinated debt				36.5				1.1				54.7				92.3
	Total loans and debt securities			66.9				14.7				212.1				293.7
Equity securities				69.6				16.1				46.6				132.3	(3)
	Total		$	136.5			$	30.8			$	258.7			$	426.0

	(1)	Includes various commitments to Callidus Capital Corporation (Callidus), a portfolio company controlled by us, which owns 80% (subject to dilution) of Callidus Capital Management, LLC, an asset management company that structures and manages collateralized debt obligations (CDOs), collateralized loan obligations (CLOs), and other related investments, as follows:

											Amount
			Committed				Amount				Available
			Amount				Drawn				to be Drawn
($ in millions)
Revolving line of credit for working capital			$	4.0			$	—			$	4.0
Subordinated debt to support warehouse facilities & warehousing activities(*)				36.0				—				36.0
Purchase of preferred equity in future CLO transactions				60.0				—				60.0
	Total		$	100.0			$	—			$	100.0

	(*)	Callidus has a secured warehouse credit facility with a third party for up to $240 million. The facility is used primarily to finance the acquisition of loans pending securitization through a CDO or CLO. In conjunction with this warehouse credit facility, we have agreed to designate our subordinated debt commitment for Callidus to draw upon to provide first loss capital as needed to support the warehouse facility.

	(2)	Includes $158.4 million in the form of revolving senior debt facilities to 33 companies.
	(3)	Includes $62.6 million to 17 private equity and venture capital funds, including $4.3 million in co-investment commitments to one private equity fund.

			2006				2005				2004
($ in millions)
Interest income			$	9.3			$	8.8			$	5.5
Fees and other income				0.6				0.7				1.9
	Total interest and related portfolio income		$	9.9			$	9.5			$	7.4

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			2006				2005				2004
($ in millions)
Interest income			$	11.9			$	14.3			$	23.2
Dividend income				—				14.0				14.8
Fees and other income				7.8				9.2				12.0
	Total interest and related portfolio income		$	19.7			$	37.5			$	50.0

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			At and for the Years Ended December 31,
			2006								2005								2004
			Value				Yield(1)				Value				Yield(1)				Value				Yield(1)
($ in millions)
Portfolio at value:
	CMBS bonds		$	—							$	—							$	373.8				14.6%
	CDO bonds and preferred shares			—								—								212.6				16.8%
	Commercial mortgage loans			71.9				7.5%				102.6				7.6%				95.0				6.8%
	Real estate owned			19.6								13.9								16.9
	Equity interests			26.7								10.6								13.0
Total portfolio			$	118.2							$	127.1							$	711.3
Investments funded			$	14.4							$	213.5							$	383.7
Change in accrued or reinvested interest			$	1.0							$	(18.0	)						$	6.6
Principal collections related to investment repayments or sales(2)			$	39.9							$	799.5							$	357.3

(1)	The weighted average yield on the interest-bearing investments is computed as the (a) annual stated interest on accruing loans plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing interest-bearing investments less the annual amortization of origination costs, divided by (b) total interest-bearing investments at value. The weighted average yield is computed as of the balance sheet date. Interest-bearing investments for the commercial real estate finance portfolio include all investments except for real estate owned and equity interests.
(2)	Principal collections related to investment repayments or sales for the year ended December 31, 2005, included $718.1 million related to the sale of our CMBS and CDO portfolio in May 2005.

			Face								Amount
			Amount				Discount				Funded
($ in millions)
For the Year Ended December 31, 2006
Commercial mortgage loans			$	8.0			$	—			$	8.0
Equity interests				6.4				—				6.4
	Total		$	14.4			$	—			$	14.4
For the Year Ended December 31, 2005
CMBS bonds(1)			$	211.5			$	(90.5	)		$	121.0
Commercial mortgage loans				88.5				(0.8	)			87.7
Equity interests				4.8				—				4.8
	Total		$	304.8			$	(91.3	)		$	213.5
For the Year Ended December 31, 2004
CMBS bonds			$	419.1			$	(183.7	)		$	235.4
CDO bonds and preferred shares				40.5				(0.1	)			40.4
Commercial mortgage loans				112.1				(8.2	)			103.9
Equity interests				4.0				—				4.0
	Total		$	575.7			$	(192.0	)		$	383.7

(1)	The CMBS bonds invested in during 2005, were sold on May 3, 2005.

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		2006								2005
		Portfolio				Percentage of				Portfolio				Percentage of
Grade		at Value				Total Portfolio				at Value				Total Portfolio
($ in millions)
1		$	1,307.3				29.1	%		$	1,643.0				45.6	%
2			2,672.3				59.4				1,730.8				48.0
3			308.1				6.9				149.1				4.1
4			84.2				1.9				26.5				0.7
5			124.2				2.7				57.0				1.6
		$	4,496.1				100.0	%		$	3,606.4				100.0	%

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				2006				2005
($ in millions)
Loans and debt securities in workout status (classified as Grade 4 or 5)(1)
	Private finance
		Companies more than 25% owned		$	51.1			$	15.6
		Companies 5% to 25% owned			4.0				—
		Companies less than 5% owned			31.6				11.4
	Commercial real estate finance				12.2				12.9
Loans and debt securities not in workout status
	Private finance
		Companies more than 25% owned			87.1				58.0
		Companies 5% to 25% owned			7.2				0.5
		Companies less than 5% owned			38.9				49.5
	Commercial real estate finance				6.7				7.9
		Total		$	238.8			$	155.8
		Percentage of total portfolio			5.3	%			4.3	%

(1)	Workout loans and debt securities exclude equity securities that are included in the total Grade 4 and 5 assets above.

			2006				2005
($ in millions)
Private finance			$	46.5			$	74.6
Commercial mortgage loans				1.9				6.1
	Total		$	48.4			$	80.7
	Percentage of total portfolio			1.1	%			2.2	%

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																Percent																Percent
				2006				2005				Change				Change				2005				2004				Change				Change
(in thousands, except per share amounts)
Interest and Related Portfolio Income
	Interest and dividends			$	386,427			$	317,153			$	69,274				22	%		$	317,153			$	319,642			$	(2,489	)			(1	)%
	Fees and other income				66,131				56,999				9,132				16	%			56,999				47,448				9,551				20	%
		Total interest and related portfolio income			452,558				374,152				78,406				21	%			374,152				367,090				7,062				2	%
Expenses
	Interest				100,600				77,352				23,248				30	%			77,352				75,650				1,702				2	%
	Employee				92,902				78,300				14,602				19	%			78,300				53,739				24,561				46	%
	Employee stock options				15,599				—				15,599				—				—				—				—				—
	Administrative				39,005				69,713				(30,708	)			(44	)%			69,713				34,686				35,027				10 1	%
		Total operating expenses			248,106				225,365				22,741				10	%			225,365				164,075				61,290				37	%
		Net investment income before income taxes			204,452				148,787				55,665				37	%			148,787				203,015				(54,228	)			(27	)%
		Income tax expense (benefit), including excise tax			15,221				11,561				3,660				32	%			11,561				2,057				9,504				462	%
		Net investment income			189,231				137,226				52,005				38	%			137,226				200,958				(63,732	)			(32	)%
Net Realized and Unrealized Gains (Losses)
	Net realized gains				533,301				273,496				259,805				95	%			273,496				117,240				156,256				133	%
	Net change in unrealized appreciation or depreciation				(477,409	)			462,092				(939,501	)			*				462,092				(68,712	)			530,804				*
	Total net gains (losses)				55,892				735,588				(679,696	)			*				735,588				48,528				687,060				*
		Net income		$	245,123			$	872,814			$	(627,691	)			(72	)%		$	872,814			$	249,486			$	623,328				250	%
Diluted earnings per common share				$	1.68			$	6.36			$	(4.68	)			(74	)%		$	6.36			$	1.88			$	4.48				238	%
Weighted average common shares outstanding — diluted					145,599				137,274				8,325				6	%			137,274				132,458				4,816				4	%

	*	Net change in unrealized appreciation or depreciation and net gains (losses) can fluctuate significantly from year to year.

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				2006				2005				2004
($ in millions)
Interest
	Private finance loans and debt securities			$	359.9			$	251.0			$	195.2
	CMBS and CDO portfolio				—				29.4				93.3
	Commercial mortgage loans				8.3				7.6				9.4
	Cash, U.S. Treasury bills, money market and other securities				14.0				9.4				3.1
		Total interest			382.2				297.4				301.0
Dividends					4.2				19.8				18.6
		Total interest and dividends		$	386.4			$	317.2			$	319.6

			2006								2005								2004
($ in millions)			Value				Yield(1)				Value				Yield(1)				Value				Yield(1)
Private finance loans and debt securities			$	3,185.2				11.9	%		$	2,094.9				13.0	%		$	1,602.9				13.9	%
CMBS and CDO				—				—				—				—				586.4				15.4	%
Commercial mortgage loans				71.9				7.5	%			102.6				7.6	%			95.0				6.8	%
	Total		$	3,257.1				11.8	%		$	2,197.5				12.8	%		$	2,284.3				14.0	%

(1)

The weighted average yield on loans and debt securities is computed as the (a) annual stated interest on accruing loans and debt securities plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities less the annual amortization of loan origination costs, divided by (b) total loans and debt securities at value. The weighted average yield is computed as of the balance sheet date.

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			2006				2005				2004
($ in millions)
Structuring and diligence			$	37.3			$	24.6			$	18.4
Management, consulting and other services provided to portfolio companies(1)				11.1				14.4				11.4
Commitment, guaranty and other fees from portfolio companies(2)				8.8				9.3				9.4
Loan prepayment premiums				8.8				6.3				5.5
Other income				0.1				2.4				2.7
	Total fees and other income(3)		$	66.1			$	57.0			$	47.4

(1)	2006 includes $1.8 million in management fees from Advantage prior to its sale on March 29, 2006. See “— Portfolio and Investment Activity” above for further discussion. 2005 and 2004 include $6.5 million and $3.1 million, respectively, in management fees from Advantage.
(2)	Includes guaranty and other fees from BLX of $6.1 million, $6.3 million, and $6.0 million for 2006, 2005, and 2004, respectively. See “— Private Finance, Business Loan Express, LLC” above.
(3)	Fees and other income related to the CMBS and CDO portfolio were $4.1 million and $6.2 million for 2005 and 2004, respectively. As noted above, we sold our CMBS and CDO portfolio on May 3, 2005.

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		2006				2005				2004
($ in millions)
Mercury		$	9.9			$	9.5			$	7.4
BLX		$	19.7			$	37.5			$	50.0
Advantage(1)		$	14.1			$	37.4			$	21.3

(1)	Includes income from the period we had a majority interest only. See “— Portfolio and Investment Activity” above for further discussion.

		2006				2005				2004
($ in millions)
Total outstanding debt		$	1,899.1			$	1,284.8			$	1,176.6
Average outstanding debt		$	1,491.0			$	1,087.1			$	985.6
Weighted average cost(1)			6.5	%			6.5	%			6.6	%

(1)	The weighted average annual interest cost is computed as the (a) annual stated interest rate on the debt plus the annual amortization of commitment fees, other facility fees and debt financing costs that are recognized into interest expense over the contractual life of the respective borrowings, divided by (b) debt outstanding on the balance sheet date.

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			2006				2005				2004
($ in millions)
Salaries and employee benefits			$	73.8			$	57.3			$	40.7
Individual performance award (IPA)				8.1				7.0				13.4
IPA mark to market expense (benefit)				2.9				2.0				(0.4	)
Individual performance bonus (IPB)				8.1				6.9				—
Transition compensation, net(1)				—				5.1				—
	Total employee expense		$	92.9			$	78.3			$	53.7
Number of employees at end of period				170				131				162

(1)

Transition compensation for the year ended December 31, 2005, included $3.1 million of costs under retention agreements and $3.1 million of transition services bonuses awarded to certain employees in the commercial real estate group as a result of the sale of the CMBS and CDO portfolio. Transition compensation costs were reduced by $1.1 million for salary reimbursements from CWCapital under a transition services agreement.

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				2006
($ in millions)
Employee Stock Option Expense:
	Previously awarded, unvested options as of January 1, 2006			$	13.2
	Options granted on or after January 1, 2006				2.4
		Total employee stock option expense		$	15.6

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			2006				2005				2004
($ in millions)
Administrative expenses			$	34.0			$	33.3			$	30.1
Investigation related costs				5.0				36.4				4.6
	Total administrative expenses		$	39.0			$	69.7			$	34.7

			2006				2005				2004
($ in millions)
Income tax expense (benefit)			$	0.1			$	5.4			$	1.1
Excise tax expense(1)				15.1				6.2				1.0
	Income tax expense (benefit), including excise tax		$	15.2			$	11.6			$	2.1

	(1)	2006 includes an accrual for estimated excise tax of $15.4 million for the year ended December 31, 2006, net of the reversal of over accrued estimated excise taxes related to 2005 of $0.3 million.

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		2006				2005				2004
($ in millions)
Realized gains		$	557.5			$	343.1			$	267.7
Realized losses			(24.2	)			(69.6	)			(150.5	)
Net realized gains		$	533.3			$	273.5			$	117.2

			2006				2005(1)				2004
($ in millions)
Reversal of previously recorded net unrealized appreciation associated with realized gains			$	(501.5	)		$	(108.0	)		$	(210.5	)
Reversal of previously recorded net unrealized depreciation associated with realized losses				22.5				68.0				151.8
	Total reversal		$	(479.0	)		$	(40.0	)		$	(58.7	)

	(1)	Includes the reversal of net unrealized appreciation of $6.5 million on the CMBS and CDO assets sold and the related hedges. The net unrealized appreciation recorded on these assets prior to their sale was determined on an individual security-by-security basis. The net gain realized upon the sale of $227.7 million reflects the total value received for the portfolio as a whole.

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2006
Portfolio Company			Amount
Private Finance:
Advantage Sales & Marketing, Inc.(1)			$	434.4
STS Operating, Inc.				94.8
Oriental Trading Company, Inc.				8.9
Advantage Sales & Marketing, Inc.(2)				4.8
United Site Services, Inc.				3.3
Component Hardware Group, Inc.				2.8
Opinion Research Corporation				1.9
Nobel Learning Communities, Inc.				1.5
MHF Logistical Solutions, Inc.				1.2
The Debt Exchange, Inc.				1.1
Other				1.5
	Total private finance			556.2
Commercial Real Estate:
Other				1.3
	Total commercial real estate			1.3
Total realized gains			$	557.5

2005
Portfolio Company			Amount
Private Finance:
Housecall Medical Resources, Inc.			$	53.7
Fairchild Industrial Products Company				16.2
Apogen Technologies Inc.				9.0
Polaris Pool Systems, Inc.				7.4
MasterPlan, Inc.				3.7
U.S. Security Holdings, Inc.				3.3
Ginsey Industries, Inc.				2.8
E-Talk Corporation				1.6
Professional Paint, Inc.				1.6
Oriental Trading Company, Inc.				1.0
Woodstream Corporation				0.9
Impact Innovations Group, LLC				0.8
DCS Business Services, Inc.				0.7
Other				3.4
	Total private finance			106.1
Commercial Real Estate:
CMBS/CDO assets, net(3)				227.7
Other				9.3
	Total commercial real estate			237.0
Total realized gains			$	343.1

2004
Portfolio Company			Amount
Private Finance:
The Hillman Companies, Inc.			$	150.3
CorrFlex Graphics, LLC				25.7
Professional Paint, Inc.				13.7
Impact Innovations Group, LLC				11.1
The Hartz Mountain Corporation				8.3
Housecall Medical Resources, Inc.				7.2
International Fiber Corporation				5.2
CBA-Mezzanine Capital Finance, LLC				4.1
United Pet Group, Inc.				3.8
Oahu Waste Services, Inc.				2.8
Grant Broadcasting Systems II				2.7
Matrics, Inc.				2.1
SmartMail, LLC				2.1
Other				7.6
	Total private finance			246.7
Commercial Real Estate:
CMBS/CDO assets, net(3)				17.4
Other				3.6
	Total commercial real estate			21.0
Total realized gains			$	267.7

(1)	Represents the realized gain on our majority equity investment only. See “—Private Finance” above.
(2)	Represents a realized gain on our minority equity investment only. See “—Private Finance” above.
(3)	Net of net realized losses from related hedges of $0.7 million and $3.8 million for the years ended December 31, 2005 and 2004, respectively.

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2006
Portfolio Company			Amount
Private Finance:
Staffing Partners Holding Company, Inc.			$	10.6
Acme Paging, L.P.				4.7
Cooper Natural Resources, Inc.				2.2
Aspen Pet Products, Inc.				1.6
Nobel Learning Communities, Inc.				1.4
Other				1.6
	Total private finance			22.1
Commercial Real Estate:
Other				2.1
	Total commercial real estate			2.1
Total realized losses			$	24.2

2005
Portfolio Company			Amount
Private Finance:
Norstan Apparel Shops, Inc.			$	18.5
Acme Paging, L.P.				13.8
E-Talk Corporation				9.0
Garden Ridge Corporation				7.1
HealthASPex, Inc.				3.5
MortgageRamp, Inc.				3.5
Maui Body Works, Inc.				2.7
Packaging Advantage Corporation				2.2
Other				3.7
	Total private finance			64.0
Commercial Real Estate:
Other				5.6
	Total commercial real estate			5.6
Total realized losses			$	69.6

2004
Portfolio Company				Amount
Private Finance:
American Healthcare Services, Inc.				$	32.9
The Color Factory, Inc.					24.5
Executive Greetings, Inc.					19.3
Sydran Food Services II, L.P.					18.2
Ace Products, Inc.					17.6
Prosperco Finanz Holding AG					7.5
Logic Bay Corporation					5.0
Sun States Refrigerated Services, Inc.					4.7
Chickasaw Sales & Marketing, Inc.					3.8
Sure-Tel, Inc.					2.3
Liberty-Pittsburgh Systems, Inc.					2.0
EDM Consulting, LLC					1.9
Pico Products, Inc.					1.7
Impact Innovations Group, LLC					1.7
Interline Brands, Inc.					1.3
Startec Global Communications Corporation					1.1
Other					2.7
	Total private finance				148.2
Commercial Real Estate:
Other					2.3
		Total commercial real estate			2.3
Total realized losses				$	150.5

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		2006																2005
		Q4				Q3				Q2				Q1				Q4				Q3				Q2				Q1
Number of private finance portfolio companies reviewed			81				105				78				78				80				89				72				36
Percentage of private finance portfolio reviewed at value			82.9	%			86.5	%			89.6	%			87.0	%			92.4	%			89.3	%			83.0	%			74.5	%

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			2006(1)				2005(1)				2004(1)
($ in millions)
Net unrealized appreciation or depreciation			$	1.6			$	502.1			$	(10.0	)
Reversal of previously recorded unrealized appreciation associated with realized gains				(501.5	)			(108.0	)			(210.5	)
Reversal of previously recorded unrealized depreciation associated with realized losses				22.5				68.0				151.8
	Net change in unrealized appreciation or depreciation		$	(477.4	)		$	462.1			$	(68.7	)

(1)	The net change in unrealized appreciation or depreciation can fluctuate significantly from year to year. As a result, annual comparisons may not be meaningful.

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			2006				2005				2004
($ in millions)
			(ESTIMATED)(1)
Taxable income(2)			$	595.5			$	445.0			$	323.2
Taxable income earned in current year and carried forward for distribution in next year				(397.1	)			(156.5	)			(26.0	)
Taxable income earned in prior year and carried forward and distributed in current year				156.5				26.0				2.1
	Total dividends to common shareholders		$	354.9			$	314.5			$	299.3

(1)	Our taxable income for 2006 is an estimate and will not be finally determined until we file our 2006 tax return in September 2007. Therefore, the final taxable income and the taxable income earned in 2006 and carried forward for distribution in 2007 may be different than the estimate above. See “Risk Factors,” “Dividends and Distributions and Taxes” of our Notes to Consolidated Financial Statements included in the consolidated financial statements.
(2)	See Note 10, “Dividends and Distributions and Taxes” of our Notes to Consolidated Financial Statements included in the consolidated financial statements for further information on the differences between net income for book purposes and taxable income.

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($ in millions)		2006				2005
Liquidity portfolio (including money market and other securities: 2006-$201.8; 2005-$100.0)		$	201.8			$	200.3
Cash and investments in money market securities (including money market and other securities: 2006-$0.4; 2005-$22.0)		$	2.1			$	53.3
Total assets		$	4,887.5			$	4,025.9
Total debt outstanding		$	1,899.1			$	1,284.8
Total shareholders’ equity		$	2,841.2			$	2,620.5
Debt to equity ratio(1)			0.67				0.49
Asset coverage ratio(2)			250	%			309	%

(1)	The debt to equity ratio adjusted for the liquidity portfolio was 0.60 and 0.41 at December 31, 2006 and 2005, respectively, which is calculated as (a) total debt less the value of the liquidity portfolio divided by (b) total shareholders’ equity.
(2)	As a business development company, we are generally required to maintain a minimum ratio of 200% of total assets to total borrowings.

			2006				2005				2004
($ in millions)
Net cash provided by (used in) operating activities			$	(597.5	)		$	116.0			$	(179.3	)
Add: portfolio investments funded				2,257.8				1,668.1				1,472.4
	Total cash provided by operating activities before new investments		$	1,660.3			$	1,784.1			$	1,293.1

			2006								2005
			Value				Yield				Value				Yield
($ in millions)
U.S. Treasury bills			$	—				—			$	100.3				4.3	%
Money market securities				161.2				5.3	%			100.0				4.1	%
Certificate of Deposit(1)				40.6				5.6	%			—				—
	Total		$	201.8				5.3	%		$	200.3				4.2	%

(1)	The certificate of deposit matures in March 2007.

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				2006												2005
												Annual												Annual
				Facility				Amount				Interest				Facility				Amount				Interest
				Amount				Outstanding				Cost(1)				Amount				Outstanding				Cost(1)
($ in millions)
Notes payable and debentures:
	Privately issued unsecured notes payable			$	1,041.4			$	1,041.4				6.1	%		$	1,164.5			$	1,164.5				6.2	%
	Publicly issued unsecured notes payable				650.0				650.0				6.6	%			—				—				—
	SBA debentures(2)				—				—				—	%			28.5				28.5				7.5	%
		Total notes payable and debentures			1,691.4				1,691.4				6.3	%			1,193.0				1,193.0				6.3	%
Revolving line of credit(5)					922.5				207.7				6.4	%(3)			772.5				91.8				5.6	%(3)
		Total debt		$	2,613.9			$	1,899.1				6.5	%(4)		$	1,965.5			$	1,284.8				6.5	% (4)

(1)	The weighted average annual interest cost is computed as the (a) annual stated interest on the debt plus the annual amortization of commitment fees, other facility fees and the amortization of debt financing costs that are recognized into interest expense over the contractual life of the respective borrowings, divided by (b) debt outstanding on the balance sheet date.
(2)	The SBA debentures were repaid in full during 2006.
(3)	The annual interest cost reflects the interest rate payable for borrowings under the revolving line of credit. In addition to the current interest rate payable, there were annual costs of commitment fees, other facility fees and amortization of debt financing costs of $3.9 million and $3.3 million at December 31, 2006 and 2005, respectively.
(4)	The annual interest cost for total debt includes the annual cost of commitment fees and the amortization of debt financing costs on the revolving line of credit and other facility fees regardless of the amount outstanding on the facility as of the balance sheet date.
(5)	At December 31, 2006, $673.8 million remained unused and available on the revolving line of credit, net of amounts committed for standby letters of credit of $41.0 million issued under the credit facility.

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			Amount				Coupon				Maturity Date
($ in millions)
July 25, 2006			$	400.0				6.625	%			July 15, 2011
December 8, 2006				250.0				6.000	%			April 1, 2012
	Total		$	650.0

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							Payments Due By Year
																											After
			Total				2007				2008				2009				2010				2011				2011
($ in millions)
Unsecured notes payable			$	1,691.4			$	—			$	153.0			$	268.9			$	408.0			$	472.5			$	389.0
Revolving line of credit(1)				207.7				—				207.7				—				—				—				—
Operating leases				24.6				4.4				4.4				4.6				4.5				1.8				4.9
	Total contractual obligations		$	1,923.7			$	4.4			$	365.1			$	273.5			$	412.5			$	474.3			$	393.9

(1)	At December 31, 2006, $673.8 million remained unused and available on the revolving line of credit, net of amounts committed for standby letters of credit of $41.0 million issued under the credit facility.

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							Amount of Commitment Expiration Per Year
																											After
			Total				2007				2008				2009				2010				2011				2011
($ in millions)
Guarantees			$	202.1			$	0.6			$	3.0			$	192.2			$	—			$	4.4			$	1.9
Standby letters of credit(1)				41.0				4.0				37.0				—				—				—				—
	Total commitments(2)		$	243.1			$	4.6			$	40.0			$	192.2			$	—			$	4.4			$	1.9

(1)	Standby letters of credit are issued under our revolving line of credit that expires in September 2008. Therefore, unless a standby letter of credit is set to expire at an earlier date, we have assumed that the standby letters of credit will expire contemporaneously with the expiration of our line of credit in September 2008.
(2)	Our most significant commitments relate to our investment in Business Loan Express, LLC (BLX), which commitments totaled $214.7 million at December 31, 2006. At December 31, 2006, we guaranteed 50% of the outstanding total obligations on BLX’s revolving line of credit for a total guaranteed amount of $189.7 million and we had also provided four standby letters of credit totaling $25.0 million in connection with four term securitizations completed by BLX. See “— Private Finance, Business Loan Express, LLC” above for further discussion.

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					December 31,
					2006				2005
(in thousands, except per share amounts)
ASSETS
Portfolio at value:
	Private finance
		Companies more than 25% owned (cost: 2006-$1,578,822; 2005-$1,489,782)			$	1,490,180			$	1,887,651
		Companies 5% to 25% owned (cost: 2006-$438,560; 2005-$168,373)				449,813				158,806
		Companies less than 5% owned (cost: 2006-$2,479,981; 2005-$1,448,268)				2,437,908				1,432,833
			Total private finance (cost: 2006-$4,497,363; 2005-$3,106,423)			4,377,901				3,479,290
	Commercial real estate finance (cost: 2006-$103,546; 2005-$131,695)					118,183				127,065
			Total portfolio at value (cost: 2006-$4,600,909; 2005-$3,238,118)			4,496,084				3,606,355
U.S. Treasury bills (cost: 2006-$—; 2005-$100,000)						—				100,305
Investments in money market and other securities						202,210				121,967
Deposits of proceeds from sales of borrowed Treasury securities						—				17,666
Accrued interest and dividends receivable						64,566				60,366
Other assets						122,958				87,858
Cash						1,687				31,363
			Total assets		$	4,887,505			$	4,025,880
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
	Notes payable and debentures (maturing within one year: 2006-$—; 2005-$175,000)				$	1,691,394			$	1,193,040
	Revolving line of credit					207,750				91,750
	Obligations to replenish borrowed Treasury securities					—				17,666
	Accounts payable and other liabilities					147,117				102,878
			Total liabilities			2,046,261				1,405,334
Commitments and contingencies
Shareholders’ equity:
	Common stock, $0.0001 par value, 200,000 shares authorized; 148,575 and 136,697 shares issued and outstanding at December 31, 2006 and 2005, respectively					15				14
	Additional paid-in capital					2,493,335				2,177,283
	Common stock held in deferred compensation trust					(28,335	)			(19,460	)
	Notes receivable from sale of common stock					(2,850	)			(3,868	)
	Net unrealized appreciation (depreciation)					(123,084	)			354,325
	Undistributed earnings					502,163				112,252
			Total shareholders’ equity			2,841,244				2,620,546
			Total liabilities and shareholders’ equity			4,887,505			$	4,025,880
Net asset value per common share					$	19.12			$	19.17

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					For the Years Ended December 31,
					2006				2005				2004
(in thousands, except per share amounts)
Interest and Related Portfolio Income:
	Interest and dividends
		Companies more than 25% owned			$	102,636			$	122,450			$	91,710
		Companies 5% to 25% owned				39,754				21,924				25,702
		Companies less than 5% owned				244,037				172,779				202,230
			Total interest and dividends			386,427				317,153				319,642
	Fees and other income
		Companies more than 25% owned				29,606				27,365				29,774
		Companies 5% to 25% owned				4,447				124				2,383
		Companies less than 5% owned				32,078				29,510				15,291
			Total fees and other income			66,131				56,999				47,448
			Total interest and related portfolio income			452,558				374,152				367,090
Expenses:
	Interest					100,600				77,352				75,650
	Employee					92,902				78,300				53,739
	Employee stock options					15,599				—				—
	Administrative					39,005				69,713				34,686
			Total operating expenses			248,106				225,365				164,075
Net investment income before income taxes						204,452				148,787				203,015
Income tax expense, including excise tax						15,221				11,561				2,057
Net investment income						189,231				137,226				200,958
Net Realized and Unrealized Gains (Losses):
	Net realized gains (losses)
		Companies more than 25% owned				513,314				33,237				86,812
		Companies 5% to 25% owned				4,467				5,285				43,818
		Companies less than 5% owned				15,520				234,974				(13,390	)
			Total net realized gains			533,301				273,496				117,240
	Net change in unrealized appreciation or depreciation					(477,409	)			462,092				(68,712	)
			Total net gains			55,892				735,588				48,528
Net increase in net assets resulting from operations					$	245,123			$	872,814			$	249,486
Basic earnings per common share					$	1.72			$	6.48			$	1.92
Diluted earnings per common share					$	1.68			$	6.36			$	1.88
Weighted average common shares outstanding — basic						142,405				134,700				129,828
Weighted average common shares outstanding — diluted						145,599				137,274				132,458

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				For the Years Ended December 31,
				2006				2005				2004
(in thousands, except per share amounts)
Operations:
	Net investment income			$	189,231			$	137,226			$	200,958
	Net realized gains				533,301				273,496				117,240
	Net change in unrealized appreciation or depreciation				(477,409	)			462,092				(68,712	)
		Net increase in net assets resulting from operations			245,123				872,814				249,486
Shareholder distributions:
	Common stock dividends				(354,892	)			(314,509	)			(299,326	)
	Preferred stock dividends				(10	)			(10	)			(62	)
		Net decrease in net assets resulting from shareholder distributions			(354,902	)			(314,519	)			(299,388	)
Capital share transactions:
	Sale of common stock				295,769				—				70,251
	Issuance of common stock for portfolio investments				—				7,200				3,227
	Issuance of common stock in lieu of cash distributions				14,996				9,257				5,836
	Issuance of common stock upon the exercise of stock options				11,734				66,688				32,274
	Stock option expense				15,835				—				—
	Net decrease in notes receivable from sale of common stock				1,018				1,602				13,162
	Purchase of common stock held in deferred compensation trust				(9,855	)			(7,968	)			(13,687	)
	Distribution of common stock held in deferred compensation trust				980				2,011				184
	Other				—				3,683				3,856
		Net increase in net assets resulting from capital share transactions			330,477				82,473				115,103
		Total net increase in net assets			220,698				640,768				65,201
Net assets at beginning of year					2,620,546				1,979,778				1,914,577
Net assets at end of year				$	2,841,244			$	2,620,546			$	1,979,778
Net asset value per common share				$	19.12			$	19.17			$	14.87
Common shares outstanding at end of year					148,575				136,697				133,099

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					For the Years Ended December 31,
					2006				2005				2004
(in thousands)
Cash flows from operating activities:
	Net increase in net assets resulting from operations				$	245,123			$	872,814			$	249,486
	Adjustments:
		Portfolio investments				(2,257,828	)			(1,668,113	)			(1,472,396	)
		Principal collections related to investment repayments or sales				1,055,347				1,503,388				909,189
		Change in accrued or reinvested interest and dividends				(11,296	)			(6,594	)			(52,193	)
		Net collection (amortization) of discounts and fees				1,713				(1,564	)			(5,235	)
		Redemption of (investments in) U.S. Treasury bills				100,000				(100,000	)			—
		Redemption of (investments in) money market securities				(77,106	)			(121,967	)			—
		Stock option expense				15,835				—				—
		Changes in other assets and liabilities				36,418				33,023				18,716
		Depreciation and amortization				1,800				1,820				1,433
		Realized gains from the receipt of notes and other consideration from sale of investments, net of collections				(209,049	)			(4,293	)			(47,497	)
		Realized losses				24,169				69,565				150,462
		Net change in unrealized (appreciation) or depreciation				477,409				(462,092	)			68,712
			Net cash provided by (used in) operating activities			(597,465	)			115,987				(179,323	)
Cash flows from financing activities:
	Sale of common stock					295,769				—				70,251
	Sale of common stock upon the exercise of stock options					11,734				66,688				32,274
	Collections of notes receivable from sale of common stock					1,018				1,602				13,162
	Borrowings under notes payable					700,000				350,000				340,212
	Repayments on notes payable and debentures					(203,500	)			(219,700	)			(231,000	)
	Net borrowings under (repayments on) revolving line of credit					116,000				(20,250	)			112,000
	Redemption of preferred stock					—				—				(7,000	)
	Purchase of common stock held in deferred compensation trust					(9,855	)			(7,968	)			(13,687	)
	Other financing activities					(6,795	)			(8,333	)			(3,004	)
	Common stock dividends and distributions paid					(336,572	)			(303,813	)			(290,830	)
	Preferred stock dividends paid					(10	)			(10	)			(62	)
			Net cash provided by (used in) financing activities			567,789				(141,784	)			22,316
Net decrease in cash						(29,676	)			(25,797	)			(157,007	)
Cash at beginning of year						31,363				57,160				214,167
Cash at end of year					$	1,687			$	31,363			$	57,160

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					December 31, 2006
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Companies More Than 25% Owned
Alaris Consulting, LLC			Senior Loan (16.5%, Due 12/05 – 12/07)(6)		$	27,055			$	26,987			$	—
	(Business Services)		Equity Interests							5,305				—
			Guaranty ($1,100)
Avborne, Inc.(7)			Preferred Stock (12,500 shares)							610				918
	(Business Services)		Common Stock (27,500 shares)							—				—
Avborne Heavy Maintenance, Inc.(7)			Preferred Stock (1,568 shares)							2,401				—
	(Business Services)		Common Stock (2,750 shares)							—				—
			Guaranty ($2,401)							—				—
Border Foods, Inc.			Preferred Stock (100,000 shares)							12,721				—
	(Consumer Products)		Common Stock (148,838 shares)							3,848				—
Business Loan Express, LLC			Class A Equity Interests(25.0%)(6)			66,622				66,622				66,622
	(Financial Services)		Class B Equity Interests							119,436				79,139
			Class C Equity Interests							109,301				64,976
			Guaranty ($189,706 — See Note 3)
			Standby Letters of Credit ($25,000 —   See Note 3)
Calder Capital Partners, LLC(5)			Senior Loan (8.0%, Due 5/09)(6)			975				975				975
	(Financial Services)		Equity Interests							2,076				2,076
Callidus Capital Corporation			Subordinated Debt (18.0%, Due 10/08)			5,762				5,762				5,762
	(Financial Services)		Common Stock (100 shares)							2,058				22,550
Coverall North America, Inc.			Unitranche Debt (12.0%, Due 7/11)			36,500				36,333				36,333
	(Business Services)		Subordinated Debt (15.0%, Due 7/11)			6,000				5,972				5,972
			Common Stock (884,880 shares)							16,649				19,619
CR Brands, Inc.			Subordinated Debt (16.6%, Due 2/13)			39,573				39,401				39,401
	(Consumer Products)		Common Stock (37,200,551 shares)							33,321				25,738
Financial Pacific Company			Subordinated Debt (17.4%, Due 2/12 – 8/12)			71,589				71,362				71,362
	(Financial Services)		Preferred Stock (10,964 shares)							10,276				15,942
			Common Stock (14,735 shares)							14,819				65,186
ForeSite Towers, LLC			Equity Interests							7,620				12,290
	(Tower Leasing)
Global Communications, LLC			Senior Loan (10.7%, Due 9/02 – 11/07)(6)			15,957				15,957				15,957
	(Business Services)		Subordinated Debt (17.0%, Due 12/03 – 9/05)(6)			11,339				11,336				11,237
			Preferred Equity Interest							14,067				—
			Options							1,639				—
Gordian Group, Inc.			Senior Loan (10.0%, Due 6/06 – 12/08)(6)			11,792				11,803				—
	(Business Services)		Common Stock (1,000 shares)							6,762				—

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.
(7)		Avborne, Inc. and Avborne Heavy Maintenance, Inc. are affiliated companies.

S-84

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					December 31, 2006
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Healthy Pet Corp.			Senior Loan (9.9%, Due 8/10)		$	27,038			$	27,038			$	27,038
	(Consumer Services)		Subordinated Debt (15.0%, Due 8/10)			43,720				43,579				43,579
			Common Stock (30,142 shares)							30,142				28,921
HMT, Inc.			Preferred Stock (554,052 shares)							2,637				2,637
	(Energy Services)		Common Stock (300,000 shares)							3,000				8,664
			Warrants							1,155				3,336
Huddle House, Inc.			Senior Loan (8.9%, Due 12/11)			19,950				19,950				19,950
	(Retail)		Subordinated Debt (15.0%, Due 12/12)			58,484				58,196				58,196
			Common Stock (415,328 shares)							41,662				41,662
Impact Innovations Group, LLC			Equity Interests in Affiliate							—				873
	(Business Services)
Insight Pharmaceuticals Corporation			Subordinated Debt (16.1%, Due 9/12)			60,049				59,850				59,850
	(Consumer Products)		Preferred Stock (25,000 shares)							25,000				7,845
			Common Stock (620,000 shares)							6,325				—
Jakel, Inc.			Subordinated Debt (15.5%, Due 3/08)(6)			15,192				15,192				6,655
	(Industrial Products)		Preferred Stock (6,460 shares)							6,460				—
			Common Stock (158,061 shares)							9,347				—
Legacy Partners Group, LLC			Senior Loan (14.0%, Due 5/09)(6)			7,646				7,646				4,843
	(Financial Services)		Subordinated Debt (18.0%, Due 5/09)(6)			2,952				2,952				—
			Equity Interests							4,248				—
Litterer Beteiligungs-GmbH(4)			Subordinated Debt (8.0%, Due 3/07)			692				692				692
	(Business Services)		Equity Interest							1,809				1,199
Mercury Air Centers, Inc.			Subordinated Debt (16.0%, Due 4/09 –
	(Business Services)		11/12)			49,358				49,217				49,217
			Common Stock (57,970 shares)							35,053				195,019
			Standby Letters of Credit ($1,581)
MVL Group, Inc.			Senior Loan (12.0%, Due 6/09 – 7/09)			27,299				27,245				27,245
	(Business Services)		Subordinated Debt (14.5%, Due 6/09)			35,846				35,478				35,478
			Common Stock (648,661 shares)							643				—
Penn Detroit Diesel Allison, LLC			Subordinated Debt (15.5%, Due 8/13)			38,173				37,994				37,994
	(Business Services)		Equity Interests							21,128				25,949
Powell Plant Farms, Inc.			Senior Loan (15.0%, Due 12/07)(6)			35,040				26,192				26,192
	(Consumer Products)		Subordinated Debt (20.0%, Due 6/03)(6)			19,291				19,223				962
			Preferred Stock (1,483 shares)							—				—
			Warrants							—				—
Service Champ, Inc.			Subordinated Debt (15.5%, Due 4/12)			27,733				27,619				27,619
	(Business Services)		Common Stock (63,888 shares)							13,662				16,786

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.

S-85

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					December 31, 2006
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Staffing Partners Holding
	Company, Inc.		Subordinated Debt (13.5%, Due 1/07)(6)		$	540			$	540			$	486
	(Business Services)
Startec Global Communications
	Corporation		Senior Loan (10.0%, Due 5/07 – 5/09)			15,965				15,965				15,965
	(Telecommunications)		Common Stock (19,180,000 shares)							37,256				11,232
Sweet Traditions, LLC			Senior Loan (9.0%, Due 8/11)			39,022				35,172				35,172
	(Retail)		Equity Interests							450				450
			Standby Letter of Credit ($120)
Triview Investments, Inc.(8)			Senior Loan (9.6%, Due 6/07 – 12/07)			14,758				14,747				14,747
	(Broadcasting & Cable/Business		Subordinated Debt (16.0%, Due 9/11 – 7/12)			56,288				56,008				56,008
	Services/Consumer Products)		Subordinated Debt (7.9%, Due 11/07 – 7/08)(6)			4,327				4,327				4,342
			Common Stock (202 shares)							98,604				31,322
			Guaranty ($800)
			Standby Letter of Credit ($200)
Total companies more than 25% owned									$	1,578,822			$	1,490,180
Companies 5% to 25% Owned
Advantage Sales & Marketing, Inc.			Subordinated Debt (12.0%, Due 3/14)		$	152,320			$	151,648			$	151,648
	(Business Services)		Equity Interests							—				11,000
Air Medical Group Holdings LLC			Senior Loan (9.9%, Due 3/11)			1,828				1,763				1,763
	(Healthcare Services)		Subordinated Debt (14.0%, Due 11/12)			35,180				35,128				35,128
			Equity Interests							3,470				5,950
Alpine ESP Holdings, Inc.			Preferred Stock (622 shares)							622				602
	(Business Services)		Common Stock (13,513 shares)							14				—
Amerex Group, LLC			Subordinated Debt (12.0%, Due 1/13)			8,400				8,400				8,400
	(Consumer Products)		Equity Interests							3,546				13,823
BB&T Capital Partners/Windsor
	Mezzanine Fund, LLC (5)		Equity Interests							5,873				5,554
	(Private Equity Fund)
Becker Underwood, Inc.			Subordinated Debt (14.5%, Due 8/12)			24,244				24,163				24,163
	(Industrial Products)		Common Stock (5,073 shares)							5,813				3,700
BI Incorporated			Subordinated Debt (13.5%, Due 2/14)			30,269				30,135				30,135
	(Business Services)		Common Stock (40,000 shares)							4,000				4,100

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.
(8)		Triview Investments, Inc. holds investments in Longview Cable & Data, LLC (Broadcasting & Cable) with a cost of $67.3 million and a value of $7.5 million, Triax Holdings, LLC (Consumer Products) with a cost of $98.9 million and a value of $91.5 million, and Crescent Hotels & Resorts, LLC and affiliates (Business Services) with a cost of $7.5 million and a value of $7.3 million.

S-86

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					December 31, 2006
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
CitiPostal, Inc. and Affiliates			Senior Loan (11.1%, Due 8/13-11/14)		$	20,670			$	20,569			$	20,569
	(Business Services)		Equity Interests							4,447				4,700
Creative Group, Inc.			Subordinated Debt (12.0%, Due 9/13)			15,000				13,656				13,656
	(Business Services)		Warrant							1,387				1,387
Drew Foam Companies, Inc.			Preferred Stock (722 shares)							722				722
	(Business Services)		Common Stock (7,287 shares)							7				7
MedBridge Healthcare, LLC			Senior Loan (6.0%, Due 8/09)(6)			7,164				7,164				7,164
	(Healthcare Services)		Subordinated Debt (10.0%, Due 8/14)(6)			5,184				5,184				1,813
			Convertible Subordinated Debt (2.0%, Due 8/14)(6)			2,970				984				—
			Equity Interests							1,306				—
Multi-Ad Services, Inc.			Unitranche Debt (11.3%, Due 11/11)			20,000				19,879				19,879
	(Business Services)		Equity Interests							2,000				2,000
Nexcel Synthetics, LLC			Subordinated Debt (14.5%, Due 6/09)			10,998				10,978				10,978
	(Consumer Products)		Equity Interests							1,755				1,486
PresAir LLC			Senior Loan (7.5%, Due 12/10)(6)			5,810				5,492				2,206
	(Industrial Products)		Equity Interests							1,336				—
Progressive International
	Corporation		Subordinated Debt (16.0%, Due 12/09)			7,553				7,533				7,533
	(Consumer Products)		Preferred Stock (500 shares)							500				1,024
			Common Stock (197 shares)							13				2,300
			Warrants							—				—
Regency Healthcare Group, LLC			Senior Loan (11.1%, Due 6/12)			1,250				1,232				1,232
	(Healthcare Services)		Unitranche Debt (11.1%, Due 6/12)			20,000				19,908				19,908
			Equity Interests							1,500				1,616
SGT India Private Limited(4)			Common Stock (109,524 shares)							3,944				3,346
	(Business Services)
Soteria Imaging Services, LLC			Subordinated Debt (11.6%, Due 11/10)			18,500				17,569				17,569
	(Healthcare Services)		Equity Interests							2,163				2,541
Universal Environmental Services, LLC			Unitranche Debt (14.5%, Due 2/09)			10,989				10,962				10,211
	(Business Services)		Equity Interests							1,795				—
Total companies 5% to 25% owned									$	438,560			$	449,813
Companies Less Than 5% Owned
3SI Security Systems, Inc.			Subordinated Debt (14.5%, Due 8/13)		$	26,857			$	26,740			$	26,740
	(Consumer Products)
AgData, L.P.			Unitranche Debt (10.3%, Due 7/12)			11,330				11,269				11,269
	(Consumer Services)
Anthony, Inc.			Subordinated Debt (13.3%, Due 8/11 –
	(Industrial Products)		9/12)			14,818				14,768				14,768
Axium Healthcare Pharmacy, Inc.			Senior Loan (12.0%, Due 12/12)			200				161				161
	(Healthcare Services)		Unitranche Debt (12.0%, Due 12/12)			9,000				8,956				8,956
			Common Stock (26,500 shares)							2,650				2,650
Baird Capital Partners IV Limited Partnership(5) (Private Equity Fund)			Limited Partnership Interest							876				876

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.

S-87

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					December 31, 2006
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Bantek West, Inc.			Subordinated Debt (11.6%, Due 1/11)(6)		$	30,000			$	30,000			$	21,463
	(Business Services)
Benchmark Medical, Inc.			Warrants							18				—
	(Healthcare Services)
BenefitMall, Inc.			Unitranche Debt (13.3%, Due 8/12)			110,030				109,648				109,648
	(Business Services)		Common Stock (45,528,000 shares)(11)							45,528				43,578
			Warrants(11)							—				—
			Standby Letters of Credit ($9,981)
Breeze-Eastern Corporation(3)			Senior Loan (10.1%, Due 5/11)			10,000				10,000				10,000
	(Industrial Products)
Broadcast Electronics, Inc.			Senior Loan (9.1%, Due 7/12)			4,963				4,930				4,930
	(Business Services)
C&K Market, Inc.			Subordinated Debt (14.0%, Due 12/08)			27,819				27,738				27,738
	(Retail)
Callidus Debt Partners
	CDO Fund I, Ltd. (4)(9)		Class C Notes (12.9%, Due 12/13)			18,800				18,951				18,951
	(Senior Debt Fund)		Class D Notes (17.0%, Due 12/13)			9,400				9,476				9,476
Callidus Debt Partners
	CLO Fund III, Ltd.(4)(9) (Senior Debt Fund)		Preferred Shares (23,600,000 shares, 12.7%) (12)							23,285				23,010
Callidus Debt Partners
	CLO Fund IV, Ltd. (4)(9)		Income Notes (13.8%)(12)							12,986				12,986
	(Senior Debt Fund)
Callidus Debt Partners
	CLO Fund V, Ltd.(4)(9)		Income Notes (15.8%)(12)							13,769				13,769
	(Senior Debt Fund)
Callidus MAPS CLO Fund I LLC(9)			Class E Notes (10.9%, Due 12/17)			17,000				17,000				17,155
	(Senior Debt Fund)		Income Notes (15.9%)(12)							50,960				47,421
Camden Partners Strategic Fund II,
	L.P.(5)		Limited Partnership Interest							2,141				2,873
	(Private Equity Fund)
Carlisle Wide Plank Floors, Inc.			Unitranche Debt (10.5%, Due 6/11)			14,000				13,900				13,900
	(Consumer Products)		Preferred Stock (400,000 Shares)							400				400
Catterton Partners V, L.P.(5)			Limited Partnership Interest							3,306				3,412
	(Private Equity Fund)
Catterton Partners VI, L.P.(5)			Limited Partnership Interest							531				531
	(Private Equity Fund)
Centre Capital Investors IV, LP(5)			Limited Partnership Interest							1,991				1,889
	(Private Equity Fund)

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.
(9)		The fund is managed by Callidus Capital, a portfolio company of Allied Capital.
(11)		Common stock is non-voting. In addition to non-voting stock ownership, the Company has an option to acquire a majority of the voting securities of the portfolio company at fair market value.
(12)		Represents the effective yield earned on these preferred equity investments. The yield is included in interest income from companies less than 5% owned in the consolidated statement of operations.

S-88

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					December 31, 2006
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Commercial Credit Group, Inc.			Subordinated Debt (14.8%, Due 2/11)		$	5,000			$	4,959			$	4,959
	(Financial Services)		Preferred Stock (32,500 shares)							3,900				3,900
			Warrants							—				—
Community Education Centers, Inc.			Subordinated Debt (16.0%, Due 12/10)			34,158				34,067				34,067
	(Education Services)
Compass Group Diversified
	Holdings LLC(3)		Senior Loan (8.4%, Due 11/11)			8,500				8,375				8,375
	(Financial Services)
Component Hardware Group, Inc.			Subordinated Debt (13.5%, Due 1/13)			18,158				18,075				18,075
	(Industrial Products)
Cook Inlet Alternative Risk, LLC			Unitranche Debt (10.0%, Due 4/12)			67,500				67,146				67,146
	(Business Services)		Equity Interests							2,000				2,300
Cortec Group Fund IV, L.P.(5)			Limited Partnership Interest							1,137				1,137
	(Private Equity)
CSAV, Inc.			Subordinated Debt (11.9%, Due 6/13)			37,500				37,500				37,500
	(Business Services)
DCWV Acquisition Corporation			Senior Loan (8.9%, Due 7/12)			2,074				2,060				2,060
	(Consumer Products)		Unitranche Debt (11.0%, Due 7/12)			16,788				16,694				16,694
Deluxe Entertainment Services Group, Inc.			Subordinated Debt (13.6%, Due 7/11)			30,000				30,000				30,000
	(Business Services)
Distant Lands Trading Co.			Senior Loan (10.6%, Due 11/11)			2,700				2,656				2,656
	(Consumer Products)		Unitranche Debt (11.0%, Due 11/11)			54,375				54,130				54,130
			Common Stock (4,000 shares)							4,000				2,975
Drilltec Patents & Technologies
	Company, Inc.		Subordinated Debt (18.0%, Due 8/06)			4,119				4,119				4,119
	(Energy Services)		Subordinated Debt (16.5%, Due 8/06)(6)			10,994				10,918				9,121
Driven Brands, Inc.			Senior Loan (8.9%, Due 6/11)			37,070				36,918				36,918
	d/b/a Meineke and Econo Lube		Subordinated Debt (12.1%, Due 6/12 – 6/13)			83,000				82,684				82,684
	(Consumer Services)		Common Stock (11,675,331 shares)(11)							29,455				19,702
			Warrants(11)							—				—
Digital VideoStream, LLC			Unitranche Debt (11.0%, Due 2/12)			19,127				19,021				19,021
	(Business Services)		Convertible Subordinated Debt (10.0%, Due 2/16)			3,730				3,714				3,714
Dynamic India Fund IV(4)(5)			Equity Interests							3,850				3,850
	(Private Equity Fund)
EarthColor, Inc.			Senior Loan (7.4%, Due 11/11)			35,000				35,000				35,000
	(Business Services)		Subordinated Debt (15.0%, Due 11/13)			107,000				106,478				106,478
			Common Stock (53,540 shares)(11)							53,540				53,540
			Warrants(11)							—				—
eCentury Capital Partners, L.P.(5)			Limited Partnership Interest							6,274				2,090
	(Private Equity Fund)

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.
	(11)			Common stock is non-voting. In addition to non-voting stock ownership, the Company has an option to acquire a majority of the voting securities of the portfolio company at fair market value.

S-89

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					December 31, 2006
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Elexis Beta GmbH(4)			Options						$	426			$	50
	(Industrial Products)
Farley’s & Sathers Candy Company, Inc.			Subordinated Debt (11.4%, Due 3/11)		$	20,000				19,931				19,931
	(Consumer Products)
Frozen Specialties, Inc.			Warrants							435				320
	(Consumer Products)
Garden Ridge Corporation (Retail)			Subordinated Debt (7.0%, Due 5/12)(6)			22,500				22,500				22,500
Geotrace Technologies, Inc.			Subordinated Debt (10.0%, Due 6/09)			23,945				22,481				22,481
	(Energy Services)		Warrants							2,350				1,900
Ginsey Industries, Inc.			Subordinated Debt (12.5%, Due 3/07)			2,743				2,743				2,743
	(Consumer Products)
Grant Broadcasting Systems II			Subordinated Debt (5.0%, Due 6/11)			3,005				3,005				3,005
	(Broadcasting & Cable)
Grotech Partners, VI, L.P.(5)			Limited Partnership Interest							8,223				6,088
	(Private Equity Fund)
Havco Wood Products LLC			Unitranche Debt (11.1%, Due 8/11)			19,654				18,615				18,615
	(Industrial Products)		Equity Interests							1,049				3,000
Haven Eldercare of New England, LLC (10)			Subordinated Debt (12.0%, Due 8/09)			2,827				2,827				2,827
	(Healthcare Services)
Haven Healthcare Management, LLC(10)			Subordinated Debt (18.0%, Due 4/07)			140				140				140
	(Healthcare Services)
HealthASPex Services Inc.			Senior Loan (4.0%, Due 7/08)			500				500				500
	(Business Services)
The Hillman Companies, Inc.(3)			Subordinated Debt (10.0%, Due 9/11)			44,580				44,427				44,427
	(Consumer Products)
The Homax Group, Inc.			Senior Loan (9.2%, Due 10/12)			12,485				12,485				12,485
	(Consumer Products)		Subordinated Debt (12.0%, Due 4/14)			14,000				13,171				13,171
			Preferred Stock (89 shares)							89				89
			Common Stock (28 shares)							6				6
			Warrants							1,106				1,106
Hot Stuff Foods, LLC			Senior Loan (8.9%, Due 2/11-2/12)			48,580				48,351				48,351
	(Consumer Products)		Subordinated Debt (13.7%, Due 8/12 – 2/13)			60,606				60,353				60,353
			Subordinated Debt (16.0%, Due 2/13)(6)			20,841				20,749				8,460
			Common Stock (1,122,452 shares)(11)							56,186				—
			Warrants(11)							—				—
Ideal Snacks Corporation			Senior Loan (9.0%, Due 6/10)			5,850				5,815				5,815
	(Consumer Products)
Integrity Interactive Corporation			Unitranche Debt (10.5%, Due 2/12)			29,500				29,314				29,314
	(Business Services)
International Fiber Corporation			Subordinated Debt (14.0%, Due 6/12)			21,986				21,914				21,914
	(Industrial Products)		Preferred Stock (25,000 shares)							2,500				2,200

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.
	(10)			Haven Eldercare of New England, LLC and Haven Healthcare Management, LLC are affiliated companies.
	(11)			Common stock is non-voting. In addition to non-voting stock ownership, the Company has an option to acquire a majority of the voting securities of the portfolio company at fair market value.

S-90

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					December 31, 2006
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Kodiak Fund LP(5)			Equity Interests						$	4,700			$	4,656
	(Private Equity Fund)
Line-X, Inc.			Senior Loan (9.1%, Due 8/11)		$	2,000				1,981				1,981
	(Consumer Products)		Unitranche Debt (10.0% Due 8/11)			48,509				48,306				48,306
			Standby Letter of Credit ($1,500)
MedAssets, Inc.			Preferred Stock (227,865 shares)							2,049				3,623
	(Business Services)		Common Stock (50,000 shares)							—				250
MHF Logistical Solutions, Inc.			Subordinated Debt (11.5%, Due 6/12)			33,600				33,448				33,448
	(Business Services)		Subordinated Debt (18.0%, Due 6/13)(6)			11,211				11,155				8,719
			Common Stock (20,934 shares)(11)							20,942				—
			Warrants(11)							—				—
Mid-Atlantic Venture Fund IV, L.P.(5)			Limited Partnership Interest							6,974				3,221
	(Private Equity Fund)
Mogas Energy, LLC			Subordinated Debt (9.5%, Due 3/12 – 4/12)			16,336				15,100				16,318
	(Energy Services)		Warrants							1,774				6,250
Network Hardware Resale, Inc.			Unitranche Debt (10.5%, Due 12/11)			37,154				37,357				37,357
	(Business Services)		Convertible Subordinated Debt (9.8%, Due 12/15)			12,000				12,068				12,559
Norwesco, Inc.			Subordinated Debt (12.6%, Due 1/12 – 7/12)			82,486				82,172				82,172
	(Industrial Products)		Common Stock (559,603 shares)(11)							38,313				83,329
			Warrants(11)							—				—
Novak Biddle Venture Partners III, L.P.(5)			Limited Partnership Interest							1,834				1,947
	(Private Equity Fund)
Oahu Waste Services, Inc.			Stock Appreciation Rights							239				800
	(Business Services)
Odyssey Investment Partners Fund III,
	LP(5)		Limited Partnership Interest							1,883				1,744
	(Private Equity Fund)
Palm Coast Data, LLC			Senior Loan (8.9%, Due 8/10)			15,306				15,243				15,243
	(Business Services)		Subordinated Debt (15.5%, Due 8/12 – 8/15)			30,396				30,277				30,277
			Common Stock (21,743 shares)(11)							21,743				41,707
			Warrants(11)							—				—
Passport Health
	Communications, Inc.		Subordinated Debt (14.0%, Due 4/12)			10,145				10,101				10,101
	(Healthcare Services)		Preferred Stock (651,381 shares)							2,000				2,189
Performant Financial Corporation			Common Stock (478,816 shares)							734				—
	(Business Services)

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.
	(11)			Common stock is non-voting. In addition to non-voting stock ownership, the Company has an option to acquire a majority of the voting securities of the portfolio company at fair market value.

S-91

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					December 31, 2006
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Postle Aluminum Company, LLC			Unitranche Debt (11.0%, Due 10/12)		$	57,500			$	57,189			$	57,189
	(Industrial Products)		Equity Interests							2,500				2,500
Pro Mach, Inc.			Subordinated Debt (12.5%, Due 6/12)			14,471				14,402				14,402
	(Industrial Products)		Equity Interests							1,500				2,200
Promo Works, LLC			Unitranche Debt (10.3%, Due 12/11)			31,000				30,727				30,727
	(Business Services)		Guaranty ($1,200)
S.B. Restaurant Company			Unitranche Debt (9.8%, Due 4/11)			41,501				41,094				41,094
	(Retail)		Preferred Stock (54,125 shares)							135				135
			Warrants							619				1,200
			Standby Letters of Credit ($2,611)
SBBUT, LLC			Equity Interests							—				—
	(Consumer Products)
Service Center Metals, LLC			Subordinated Debt (15.5%, Due 9/11)			5,000				4,976				4,976
	(Industrial Products)		Equity Interests							312				318
Soff-Cut Holdings, Inc.			Preferred Stock (300 shares)							300				300
	(Industrial Products)		Common Stock (2,000 shares)							200				180
SPP Mezzanine Funding, L.P.(5)			Limited Partnership Interest							2,551				2,825
	(Private Equity Fund)
SPP Mezzanine Funding II, L.P.(5)			Limited Partnership Interest							326				326
	(Private Equity Fund)
Stag-Parkway, Inc.			Unitranche Debt (10.8%, Due 7/12)			63,000				62,711				62,711
	(Business Services)
STS Operating, Inc.			Subordinated Debt (15.0%, Due 1/13)			30,156				30,021				30,021
	(Industrial Products)
The Step2 Company, LLC			Unitranche Debt (10.5%, Due 4/12)			67,898				67,457				67,457
	(Consumer Products)		Equity Interests							2,000				1,763
Tradesmen International, Inc.			Subordinated Debt (12.0%, Due 12/09)			15,000				14,468				14,468
	(Business Services)		Warrants							710				3,300
TransAmerican Auto Parts, LLC			Subordinated Debt (14.0%, Due 11/12)			12,947				12,892				12,892
	(Consumer Products)		Equity Interests							1,190				747
Universal Air Filter Company			Unitranche Debt (11.0%, Due 11/11)			19,117				19,026				19,026
	(Industrial Products)
Updata Venture Partners II, L.P.(5)			Limited Partnership Interest							5,477				5,158
	(Private Equity Fund)
Venturehouse-Cibernet Investors, LLC			Equity Interest							42				42
	(Business Services)
Venturehouse Group, LLC(5)			Equity Interest							598				365
	(Private Equity Fund)
VICORP Restaurants, Inc.			Warrants							33				—
	(Retail)

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.

S-92

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					December 31, 2006
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Walker Investment Fund II, LLLP(5)			Limited Partnership Interest						$	1,329			$	458
	(Private Equity Fund)
Wear Me Apparel Corporation			Subordinated Debt (15.0%, Due 12/10)		$	40,000				39,407				39,407
	(Consumer Products)		Warrants							1,219				5,120
Wilton Industries, Inc.			Subordinated Debt (16.0%, Due 6/08)			2,400				2,400				2,400
	(Consumer Products)
Woodstream Corporation			Subordinated Debt (13.5%, Due 11/12 – 5/13)			53,114				52,989				52,989
	(Consumer Products)		Common Stock (180 shares)							673				3,885
			Warrants							—				2,815
York Insurance Services Group, Inc.			Subordinated Debt (14.5%, Due 1/14)			44,249				44,045				44,045
	(Business Services)		Common Stock (15,000 shares)							1,500				1,500
Other companies			Other debt investments(6)			223				223				218
			Other equity investments							8				—
Total companies less than 5% owned									$	2,479,981			$	2,437,908
Total private finance (145 portfolio companies)									$	4,497,363			$	4,377,901

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.

S-93

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Commercial Real Estate Finance
(in thousands, except number of loans)

											December 31, 2006
			Interest				Number of
			Rate Ranges				Loans				Cost				Value
Commercial Mortgage Loans
				Up to 6.99%				3			$	20,470			$	19,692
				7.00%–8.99%				9				24,092				24,073
				9.00%–10.99%				4				24,117				24,117
			15.00% and above					2				3,970				3,970
	Total commercial mortgage loans(13)							18			$	72,649			$	71,852
Real Estate Owned											$	15,708			$	19,660
Equity Interests(2) — Companies more than 25% owned (Guarantees — $6,871)											$	15,189			$	26,671
	Total commercial real estate finance										$	103,546			$	118,183
Total portfolio											$	4,600,909			$	4,496,084

				Yield				Cost				Value
Liquidity Portfolio
	American Beacon Money Market Select FD Fund(14)				5.3%			$	85,672			$	85,672
	Certificate of Deposit (Due March 2007)(14)				5.6%				40,565				40,565
	American Beacon Money Market Fund(14)				5.2%				40,384				40,384
	SEI Daily Income Tr Prime Obligation Fund(14)				5.2%				34,671				34,671
	Blackrock Liquidity Funds(14)				5.2%				476				476
		Total liquidity portfolio						$	201,768			$	201,768
Other Investments in Money Market Securities(14)
	Columbia Treasury Reserves Money Market Fund				5.2%			$	441			$	441
	Columbia Money Market Reserves				5.2%			$	1			$	1

(1)       Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for             a single issuer. The maturity dates represent the earliest and the latest maturity dates.

(2)       Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.

(3)       Public company.

(4)       Non-U.S. company or principal place of business outside the U.S.

(5)       Non-registered investment company.

(13)       Commercial mortgage loans totaling $18.9 million at value were on non-accrual status and therefore were considered non-income producing.

(14)       Included in investments in money market and other securities on the accompanying Consolidated Balance Sheet.

S-94

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Companies More Than 25% Owned
Acme Paging, L.P.(4)			Senior Loan (6.0%, Due 12/07)(6)		$	3,750			$	3,750			$	—
	(Telecommunications)		Subordinated Debt (10.0%, Due 1/08)(6)			881				881				—
			Common Stock (23,513 shares)							27				—
Advantage Sales & Marketing, Inc.			Subordinated Debt (10.5%, Due 9/09)			60,000				59,787				59,787
	(Business Services)		Subordinated Debt (18.5%, Due 12/09)			124,000				124,000				124,000
			Common Stock (18,924,976 shares)							73,932				476,578
Alaris Consulting, LLC			Senior Loan (15.8%, Due 12/05 – 12/07) (6)			27,055				27,050				—
	(Business Services)		Equity Interests							5,305				—
			Guaranty ($1,100)
American Healthcare Services, Inc.			Senior Loan (0.7%, Due 12/04 – 12/05) (6)			4,999				4,600				4,097
	and Affiliates
	(Healthcare Services)
Avborne, Inc.(7)			Preferred Stock (12,500 shares)							658				892
	(Business Services)		Common Stock (27,500 shares)							—				—
Avborne Heavy Maintenance, Inc.(7)			Preferred Stock (1,568 shares)							2,401				—
	(Business Services)		Common Stock (2,750 shares)							—				—
			Guaranty ($2,401)
Business Loan Express, LLC			Subordinated Debt (6.9%, Due 4/06)			10,000				10,000				10,000
	(Financial Services)		Class A Equity Interests			60,693				60,693				60,693
			Class B Equity Interests							119,436				146,910
			Class C Equity Interests							109,301				139,521
			Guaranty ($135,437 — See Note 3)
			Standby Letters of Credit ($34,050 —   See Note 3)
Callidus Capital Corporation			Senior Loan (12.0%, Due 12/06)			600				600				600
	(Financial Services)		Subordinated Debt (18.0%, Due 10/08)			4,832				4,832				4,832
			Common Stock (10 shares)							2,049				7,968
Diversified Group Administrators, Inc.			Preferred Stock (1,000,000 shares)							700				728
	(Business Services)		Preferred Stock (1,451,380 shares)							841				841
			Common Stock (1,451,380 shares)							—				502
Financial Pacific Company (Financial Services)			Subordinated Debt (17.4%, Due 2/12 – 8/12)			70,175				69,904				69,904
			Preferred Stock (10,964 shares)							10,276				13,116
			Common Stock (14,735 shares)							14,819				44,180
ForeSite Towers, LLC			Equity Interests							7,620				9,750
	(Tower Leasing)

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.
(7)		Avborne, Inc. and Avborne Heavy Maintenance, Inc. are affiliated companies.

S-95

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Global Communications, LLC			Senior Loan (10.7%, Due 9/02 – 11/07) (6)		$	15,957			$	15,957			$	15,957
	(Business Services)		Subordinated Debt (17.0%, Due 12/03 – 9/05)(6)			11,201				11,198				11,198
			Preferred Equity Interest							14,067				4,303
			Options							1,639				—
Gordian Group, Inc.			Senior Loan (10.0%, Due 6/06 – 12/08) (6)			11,392				11,421				4,161
	(Business Services)		Common Stock (1,000 shares)							6,542				—
Healthy Pet Corp.			Senior Loan (10.1%, Due 8/10)			4,086				4,086				4,086
	(Consumer Services)		Subordinated Debt (15.0%, Due 8/10)			38,716				38,535				38,535
			Common Stock (25,766 shares)							25,766				25,766
HMT, Inc.			Preferred Stock (554,052 shares)							2,637				2,637
	(Energy Services)		Common Stock (300,000 shares)							3,000				5,343
			Warrants							1,155				2,057
Impact Innovations Group, LLC (Business Services)			Equity Interests in Affiliate							—				742
Insight Pharmaceuticals Corporation			Subordinated Debt (16.1%, Due 9/12)			58,534				58,298				58,298
	(Consumer Products)		Preferred Stock (25,000 shares)							25,000				26,791
			Common Stock (6,200 shares)							6,325				236
Jakel, Inc.			Subordinated Debt (15.5%, Due 3/08)(6)			13,742				13,742				—
	(Industrial Products)		Preferred Stock (6,460 shares)							6,460				—
			Common Stock (158,061 shares)							9,347				—
Legacy Partners Group, LLC			Senior Loan (14.0%, Due 5/09)(6)			7,646				7,646				5,029
	(Financial Services)		Subordinated Debt (18.0%, Due 5/09)(6)			2,952				2,952				—
			Equity Interests							4,229				—
Litterer Beteiligungs-GmbH(4)			Subordinated Debt (8.0%, Due 3/07)			621				621				621
	(Business Services)		Equity Interest							1,810				2,226
Mercury Air Centers, Inc.			Senior Loan (10.0%, Due 4/09)			31,720				31,720				31,720
	(Business Services)		Subordinated Debt (16.0%, Due 4/09)			46,703				46,519				46,519
			Common Stock (57,970 shares)							35,053				88,898
			Standby Letters of Credit ($1,397)
MVL Group, Inc.			Senior Loan (12.1%, Due 7/09)			27,519				27,218				27,218
	(Business Services)		Subordinated Debt (14.4%, Due 7/09)			32,905				32,417				32,417
			Common Stock (648,661 shares)							643				3,211
Pennsylvania Avenue Investors, L.P. (5)			Equity Interests							2,576				1,864
	(Private Equity Fund)
Powell Plant Farms, Inc.			Senior Loan (15.0%, Due 12/05 - 12/06)			32,640				23,792				23,792
	(Consumer Products)		Subordinated Debt (20.0%, Due 6/03)(6)			19,291				19,224				7,364
			Preferred Stock (1,483 shares)							—				—
			Warrants							—				—

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.

S-96

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Redox Brands, Inc.			Preferred Stock (2,726,444 shares)						$	7,903			$	12,097
	(Consumer Products)		Warrants							584				500
Service Champ, Inc.			Subordinated Debt (15.5%, Due 4/12)		$	27,041				26,906				26,906
	(Business Services)		Common Stock (63,888 shares)							13,662				13,319
Staffing Partners Holding			Subordinated Debt (13.5%, Due 1/07)(6)			6,343				6,343				6,343
	Company, Inc.		Preferred Stock (439,600 shares)							4,968				1,812
	(Business Services)		Common Stock (69,773 shares)							50				—
			Warrants							10				—
Startec Global Communications			Senior Loan (10.0%, Due 5/07 – 5/09)			25,226				25,226				21,685
	Corporation		Common Stock (19,180,000 shares)							37,255				—
	(Telecommunications)
STS Operating, Inc.			Subordinated Debt (15.3%, Due 3/12)			6,593				6,593				6,593
	(Industrial Products)		Common Stock (3,000,000 shares)							3,522				64,963
			Options							—				560
Triview Investments, Inc.(8)			Senior Loan (8.6%, Due 12/06)			7,449				7,449				7,449
	(Broadcasting & Cable/		Subordinated Debt (15.0%, Due 7/12)			31,000				30,845				30,845
	Consumer Products)		Subordinated Debt (16.8%, Due 7/08 –
			7/12)(6)			19,600				19,520				19,520
			Common Stock (202 shares)							93,889				29,171
			Guaranty ($800)
			Standby Letter of Credit ($200)
Total companies more than 25% owned									$	1,489,782			$	1,887,651
Companies 5% to 25% Owned
Air Evac Lifeteam			Subordinated Debt (13.8%, Due 7/10)		$	42,414			$	42,267			$	42,267
	(Healthcare Services)		Equity Interests							3,941				4,025
Aspen Pet Products, Inc.			Subordinated Debt (19.0%, Due 6/08)			20,051				19,959				19,959
	(Consumer Products)		Preferred Stock (2,935 shares)							2,154				1,638
			Common Stock (1,400 shares)							140				17
			Warrants							—				—
Becker Underwood, Inc.			Subordinated Debt (14.5%, Due 8/12)			23,639				23,543				23,543
	(Industrial Products)		Common Stock (5,073 shares)							5,813				2,200
The Debt Exchange Inc.			Preferred Stock (921,875 shares)							1,250				3,219
	(Business Services)

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.
(8)		Triview Investments, Inc. (formerly GAC Investments, Inc.) holds investments in Longview Cable & Data, LLC (Broadcasting & Cable) with a cost of $66.5 million and value of $16.0 million and Triax Holdings, LLC (Consumer Products) with a cost of $85.2 million and a value of $71.0 million. The guaranty and standby letter of credit relate to Longview Cable & Data, LLC.

S-97

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
MedBridge Healthcare, LLC			Senior Loan (4.0%, Due 8/09)		$	7,093			$	7,093			$	7,093
	(Healthcare Services)		Subordinated Debt (10.0%, Due 8/14)(6)			4,809				4,809				534
			Convertible Subordinated Debt (2.0%, Due 8/14)(6)			2,970				984				—
			Equity Interests							800				—
Nexcel Synthetics, LLC			Subordinated Debt (14.5%, Due 6/09)			10,617				10,588				10,588
	(Consumer Products)		Equity Interests							1,708				1,367
Pres Air Trol LLC			Unitranche Debt (12.0%, Due 4/10)			6,138				5,820				5,820
	(Industrial Products)		Equity Interests							1,356				318
Progressive International			Subordinated Debt (16.0%, Due 12/09)			7,401				7,376				7,376
	Corporation		Preferred Stock (500 shares)							500				884
	(Consumer Products)		Common Stock (197 shares)							13				13
			Warrants							—				—
Soteria Imaging Services, LLC			Subordinated Debt (11.8%, Due 11/10)			14,500				13,447				13,447
	(Healthcare Services)		Equity Interests							2,153				2,308
Universal Environmental Services, LLC			Unitranche Debt (15.5%, Due 2/09)			10,900				10,862				10,862
	(Business Services)		Equity Interests							1,797				1,328
Total companies 5% to 25% owned									$	168,373			$	158,806
Companies Less Than 5% Owned
Advanced Circuits, Inc.			Senior Loans (10.1%, Due 9/11 – 3/12)		$	18,732			$	18,642			$	18,642
	(Industrial Products)		Common Stock (40,000 shares)							1,000				1,000
Anthony, Inc. (Industrial Products)			Subordinated Debt (12.9%, Due 9/11 – 9/12)			14,670				14,610				14,610
Benchmark Medical, Inc.			Warrants							18				190
	(Healthcare Services)
BI Incorporated			Subordinated Debt (14.0%, Due 2/12)			16,203				16,133				16,133
	(Business Services)
Border Foods, Inc. (Consumer Products)			Subordinated Debt (13.0%, Due 12/10)(6)			13,428				12,721				—
			Preferred Stock (140,214 shares)							2,893				—
			Common Stock (1,810 shares)							45				—
			Warrants							910				—

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.

S-98

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
C&K Market, Inc.			Subordinated Debt (13.0%, Due 12/08)		$	14,694			$	14,638			$	14,638
	(Retail)
Callidus Debt Partners			Class C Notes (12.9%, Due 12/13)			18,800				18,973				18,973
	CDO Fund I, Ltd.(4)(9)		Class D Notes (17.0%, Due 12/13)			9,400				9,487				9,487
	(Senior Debt Fund)
Callidus Debt Partners			Preferred Shares (23,600,000 shares)							24,233				24,233
	CLO Fund III, Ltd. (4)(9)
	(Senior Debt Fund)
Callidus MAPS CLO Fund I LLC(9)			Class E Notes (9.7%, Due 12/17)			17,000				17,000				17,000
	(Senior Debt Fund)		Income Notes							48,108				48,108
Camden Partners Strategic Fund II, L.P.(5)			Limited Partnership Interest							2,142				2,726
	(Private Equity Fund)
Catterton Partners V, L.P.(5)			Limited Partnership Interest							2,650				2,691
	(Private Equity Fund)
CBS Personnel Holdings, Inc. (Business Services)			Subordinated Debt (14.5%, Due 12/09)			20,617				20,541				20,541
Community Education Centers, Inc.			Subordinated Debt (16.0%, Due 12/10)			32,852				32,738				32,738
	(Education Services)
Component Hardware Group, Inc.			Preferred Stock (18,000 shares)							2,605				2,783
	(Industrial Products)		Common Stock (2,000 shares)							200				700
Cooper Natural Resources, Inc.			Subordinated Debt (0%, Due 11/07)			840				840				840
	(Industrial Products)		Preferred Stock (6,316 shares)							1,424				20
			Warrants							830				—
Coverall North America, Inc.			Subordinated Debt (14.6%, Due 2/11)			27,309				27,261				27,261
	(Business Services)		Preferred Stock (6,500 shares)							6,500				6,866
			Warrants							2,950				3,100

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.
(9)		The fund is managed by Callidus Capital, a portfolio company of Allied Capital.

S-99

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Drilltec Patents & Technologies Company, Inc.			Subordinated Debt (17.0%, Due 8/06)(6)		$	1,500			$	1,500			$	1,500
	(Energy Services)		Subordinated Debt (10.0%, Due 8/06)(6)			10,994				10,918				9,792
eCentury Capital Partners, L.P.(5)			Limited Partnership Interest							5,649				83
	(Private Equity Fund)
Elexis Beta GmbH(4)			Options							426				50
	(Industrial Products)
Event Rentals, Inc.			Senior Loans (9.9%, Due 11/11)			18,341				18,244				18,244
	(Consumer Services)
Frozen Specialties, Inc.			Warrants							435				470
	(Consumer Products)
Garden Ridge Corporation (Retail)			Subordinated Debt (7.0%, Due 5/12)(6)			22,500				22,500				22,500
Geotrace Technologies, Inc.			Subordinated Debt (10.0%, Due 6/09)			25,618				23,875				23,875
(Energy Services)			Warrants							2,350				2,500
Ginsey Industries, Inc.			Subordinated Debt (12.5%, Due 3/07)			3,680				3,680				3,680
	(Consumer Products)
Grant Broadcasting Systems II			Subordinated Debt (5.0%, Due 6/09)			2,756				2,756				2,756
	(Broadcasting & Cable)
Grotech Partners, VI, L.P.(5)			Limited Partnership Interest							6,914				4,161
	(Private Equity Fund)
Havco Wood Products LLC			Unitranche Debt (10.4%, Due 8/11)			33,000				31,794				31,794
	(Industrial Products)		Equity Interests							1,048				1,048
Haven Eldercare of New England, LLC (10)			Subordinated Debt (12.0%, Due 8/09)(6)			4,320				4,320				4,320
	(Healthcare Services)
Haven Healthcare Management, LLC(10)			Subordinated Debt (18.0% Due 4/07)(6)			1,319				1,319				485
	(Healthcare Services)
HealthASPex Services Inc.			Senior Loans (4.0%, Due 7/08)			500				500				500
	(Business Services)
The Hillman Companies, Inc.(3)			Subordinated Debt (13.5%, Due 9/11)			44,000				43,815				43,815
	(Consumer Products)
Homax Holdings, Inc.			Subordinated Debt (12.0%, Due 8/11)			14,000				13,039				13,039
	(Consumer Products)		Preferred Stock (89 shares)							89				92
			Common Stock (28 shares)							6				6
			Warrants							1,106				1,492
Icon International, Inc.			Common Stock (25,707 shares)							76				16
	(Business Services)
International Fiber Corporation			Subordinated Debt (14.0%, Due 6/12)			21,546				21,460				21,460
	(Industrial Products)		Preferred Stock (25,000 shares)							2,500				1,900
Line-X, Inc.			Senior Loan (8.1%, Due 8/11)			4,134				4,111				4,111
	(Consumer Products)		Unitranche Debt (10.0% Due 8/11)			51,475				51,229				51,229
			Standby Letter of Credit ($1,500)

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.
	(10)			Haven Eldercare of New England, LLC and Haven Healthcare Management, LLC are affiliated companies.

S-100

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
MedAssets, Inc.			Preferred Stock (227,865 shares)						$	2,049			$	2,893
	(Business Services)		Warrants							136				180
Meineke Car Care Centers, Inc.			Senior Loan (8.0%, Due 6/11)		$	28,000				27,865				27,865
	(Consumer Services)		Subordinated Debt (11.9%, Due 6/12 – 6/13)			72,000				71,675				71,675
			Common Stock (10,696,308 shares)(11)							26,985				26,629
			Warrants							—				—
MHF Logistical Solutions, Inc.			Unitranche Debt (10.0%, Due 5/11)			22,281				22,177				22,177
	(Business Services)		Preferred Stock (431 shares)							431				455
			Common Stock (1,438 shares)							144				211
Mid-Atlantic Venture Fund IV, L.P. (5)			Limited Partnership Interest							6,600				3,339
	(Private Equity Fund)
Mogas Energy, LLC			Subordinated Debt (9.5%, Due 3/12 – 4/12)			16,855				15,472				15,472
	(Energy Services)		Warrants							1,774				3,550
Network Hardware Resale, Inc.			Unitranche Debt (10.5%, Due 12/11)			38,500				38,743				38,743
	(Business Services)		Convertible Subordinated Debt (9.8%, Due 12/15)			12,000				12,076				12,076
N.E.W. Customer Service Companies, Inc.			Subordinated Debt (11.0%, Due 7/12)			40,000				40,016				40,016
	(Business Services)
Nobel Learning Communities,			Preferred Stock (1,214,356 shares)							2,764				2,343
	Inc.(3)		Warrants							575				1,296
	(Education)
Norwesco, Inc. (Industrial Products)			Subordinated Debt (12.6%, Due 1/12 – 7/12)			82,061				81,683				81,683
			Common Stock (559,603 shares)(11)							38,313				38,313
			Warrants							—				—
Novak Biddle Venture Partners III, L.P.(5)			Limited Partnership Interest							1,669				1,809
	(Private Equity Fund)
Oahu Waste Services, Inc.			Stock Appreciation Rights							239				1,000
	(Business Services)
Opinion Research Corporation(3)			Warrants							996				45
	(Business Services)
Oriental Trading Company, Inc.			Common Stock (13,820 shares)							—				5,200
	(Consumer Products)
Palm Coast Data, LLC			Senior Loan (7.6%, Due 8/10)			16,100				16,024				16,024
	(Business Services)		Subordinated Debt (15.5%, Due 8/12 – 8/15)			29,600				29,461				29,461
			Common Stock (21,743 shares)(11)							21,743				21,743
			Warrants							—				—
Performant Financial Corporation			Common Stock (478,816 shares)							734				2,500
	(Business Services)
Pro Mach, Inc.			Subordinated Debt (13.8%, Due 6/12)			19,275				19,193				19,193
	(Industrial Products)		Equity Interests							1,500				1,200

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.
	(11)			Common stock is non-voting. In addition to non-voting stock ownership, the Company has an option to acquire a majority of the voting securities of the portfolio company at fair market value.

S-101

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Promo Works, LLC			Senior Loan (8.5%, Due 12/11)		$	900			$	851			$	851
	(Business Services)		Unitranche Debt (10.3%, Due 12/11)			31,000				30,728				30,728
			Guaranty ($1,650)
RadioVisa Corporation			Unitranche Debt (15.5%, Due 12/08)			27,093				26,993				26,993
	(Broadcasting & Cable)
Red Hawk Industries, LLC			Unitranche Debt (11.0%, Due 4/11)			56,343				56,063				56,063
	(Business Services)
S.B. Restaurant Company (Retail)			Subordinated Debt (14.6%, Due 11/08 – 12/09)			29,085				28,615				28,615
			Preferred Stock (54,125 shares)							135				135
			Warrants							619				700
SBBUT, LLC			Equity Interests							—				—
	(Consumer Products)
Soff-Cut Holdings, Inc.			Preferred Stock (300 shares)							300				300
	(Industrial Products)		Common Stock (2,000 shares)							200				37
SPP Mezzanine Fund, L.P.(5)			Limited Partnership Interest							3,007				2,969
	(Private Equity Fund)
Tradesmen International, Inc.			Subordinated Debt (12.0%, Due 12/09)			15,000				14,323				14,323
	(Business Services)		Warrants							710				1,700
TransAmerican Auto Parts, LLC			Subordinated Debt (14.0%, Due 11/12)			10,000				9,951				9,951
	(Consumer Products)		Equity Interests							889				889
United Site Services, Inc.			Subordinated Debt (12.4%, Due 8/11)			49,712				49,503				49,503
	(Business Services)		Common Stock (160,588 shares)							1,000				1,200
Universal Air Filter Company			Senior Loans (7.9%, Due 11/11)			400				390				390
	(Industrial Products)		Unitranche Debt (11.0%, Due 11/11)			19,867				19,768				19,768
Universal Tax Systems, Inc.			Subordinated Debt (14.5%, Due 7/11)			19,068				18,995				18,995
	(Business Services)
Updata Venture Partners II, L.P.(5)			Limited Partnership Interest							4,977				4,686
	(Private Equity Fund)
Venturehouse-Cibernet Investors, LLC			Equity Interest							42				42
	(Business Services)
Venturehouse Group, LLC(5)			Equity Interest							598				397
	(Private Equity Fund)
VICORP Restaurants, Inc.(3)			Warrants							33				691
	(Retail)
Walker Investment Fund II, LLLP(5)			Limited Partnership Interest							1,330				676
	(Private Equity Fund)

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.
	(11)			Common stock is non-voting. In addition to non-voting stock ownership, the Company has an option to acquire a majority of the voting securities of the portfolio company at fair market value.

S-102

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Wear Me Apparel Corporation			Subordinated Debt (15.0%, Due 12/10)		$	40,000			$	38,992			$	38,992
	(Consumer Products)		Warrants							1,219				2,000
Wilshire Restaurant Group, Inc. (Retail)			Subordinated Debt (20.0%, Due 6/07)(6)			22,471				21,930				21,930
			Warrants							735				538
Wilton Industries, Inc.			Subordinated Debt (19.3%, Due 6/08)			4,800				4,800				4,800
	(Consumer Products)
Woodstream Corporation (Consumer Products)			Subordinated Debt (13.2%, Due 11/12 – 5/13)			52,397				52,251				52,251
			Common Stock (180 shares)							673				3,336
			Warrants							—				2,365
Other companies			Other debt investments			382				382				382
			Other debt investments(6)			470				470				348
			Other equity investments							8				—
			Guaranty ($135)
Total companies less than 5% owned									$	1,448,268			$	1,432,833
Total private finance (118 portfolio companies)									$	3,106,423			$	3,479,290

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.

S-103

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Commercial Real Estate Finance
(in thousands, except number of loans)

											December 31, 2005
			Interest				Number of
			Rate Ranges				Loans				Cost				Value
Commercial Mortgage Loans
				Up to 6.99%				5			$	23,121			$	21,844
				7.00%–8.99%				24				48,156				48,156
				9.00%–10.99%				5				25,999				25,967
				11.00%–12.99%				1				338				338
				13.00%–14.99%				1				2,294				2,294
			15.00% and above					2				3,970				3,970
	Total commercial mortgage loans(12)							38			$	103,878			$	102,569
Real Estate Owned											$	14,240			$	13,932
Equity Interests(2) — Companies more than 25% owned (Guarantees — $7,054)											$	13,577			$	10,564
	Total commercial real estate finance										$	131,695			$	127,065
Total portfolio											$	3,238,118			$	3,606,355

				Yield				Cost				Value
Liquidity Portfolio
	U.S. Treasury bills (Due June 2006)				4.25%			$	100,000			$	100,305
	SEI Daily Income Tr Prime Obligation Fund(13)				4.11%				100,000				100,000
		Total liquidity portfolio						$	200,000			$	200,305
Other Investments in Money Market Securities(13)
	PNC Bank Corporate Money Market Deposit Account				4.15%			$	21,967			$	21,967

(1)       Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for             a single issuer. The maturity dates represent the earliest and the latest maturity dates.

(2)       Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.

(3)       Public company.

(4)       Non-U.S. company or principal place of business outside the U.S.

(5)       Non-registered investment company.

(12)       Commercial mortgage loans totaling $20.8 million at value were on non-accrual status and therefore were considered non-income producing.

(13)       Included in investments in money market securities on the accompanying Consolidated Balance Sheet.

S-104

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S-105

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	Valuation Of Portfolio Investments

	Loans and Debt Securities

S-106

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	Equity Securities

S-107

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	Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

	Fee Income

	Guarantees

	Financing Costs

	Dividends to Shareholders

	Stock Compensation Plans

S-108

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				2006
($ in millions, except per share amounts)
Employee Stock Option Expense:
	Previously awarded, unvested options as of January 1, 2006			$	13.2
	Options granted on or after January 1, 2006				2.4
		Total employee stock option expense		$	15.6
		Per basic share		$	0.11
		Per diluted share		$	0.11

			2005				2004
($ in millions, except per share amounts)
Net increase in net assets resulting from operations as reported			$	872.8			$	249.5
Less total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects				(12.7	)			(16.9	)
Pro forma net increase in net assets resulting from operations				860.1				232.6
Less preferred stock dividends				—				(0.1	)
Pro forma net income available to common shareholders			$	860.1			$	232.5
Basic earnings per common share:
	As reported		$	6.48			$	1.92
	Pro forma		$	6.39			$	1.79
Diluted earnings per common share:
	As reported		$	6.36			$	1.88
	Pro forma		$	6.27			$	1.76

S-109

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		2006				2005				2004
Expected term (in years)			5.0				5.0				5.0
Risk-free interest rate			4.8	%			4.1	%			2.9	%
Expected volatility			29.1	%			35.1	%			37.0	%
Dividend yield			9.0	%			9.0	%			8.8	%
Weighted average fair value per option		$	3.47			$	3.94			$	4.17

	Federal and State Income Taxes and Excise Tax

S-110

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	Per Share Information

	Use of Estimates in the Preparation of Financial Statements

	Recent Accounting Pronouncements

S-111

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	Private Finance

				2006												2005
				Cost				Value				Yield(1)				Cost				Value				Yield(1)
($ in millions)
Loans and debt securities:
	Senior loans			$	450.0			$	405.2				8.4	%		$	284.7			$	239.8				9.5	%
	Unitranche debt(2)				800.0				799.2				11.2	%			294.2				294.2				11.4	%
	Subordinated debt				2,038.3				1,980.8				12.9	%			1,610.2				1,560.9				13.8	%
		Total loans and debt securities (3)			3,288.3				3,185.2				11.9	%			2,189.1				2,094.9				13.0	%
Equity securities					1,209.1				1,192.7								917.3				1,384.4
		Total		$	4,497.4			$	4,377.9							$	3,106.4			$	3,479.3

(1)	The weighted average yield on loans and debt securities is computed as the (a) annual stated interest on accruing loans and debt securities plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities less the annual amortization of loan origination costs, divided by (b) total loans and debt securities at value. At December 31, 2006 and 2005, the cost and value of subordinated debt included the Class A equity interests in BLX and the guaranteed dividend yield on these equity interests was included in interest income. During the fourth quarter of 2006, the Class A equity interests were placed on non-accrual status. The weighted average yield is computed as of the balance sheet date.
(2)	Unitranche debt is a single debt investment that is a blend of senior and subordinated debt terms.
(3)	The total principal balance outstanding on loans and debt securities was $3,322.3 million and $2,216.3 million at December 31, 2006 and 2005, respectively. The difference between principal and cost is represented by unamortized loan origination fees and costs, original issue discounts, and market discounts totaling $34.0 million and $27.2 million at December 31, 2006 and 2005, respectively.

S-112

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			2006				2005				2004
($ in millions)
Interest income			$	9.3			$	8.8			$	5.5
Fees and other income				0.6				0.7				1.9
	Total interest and related portfolio income		$	9.9			$	9.5			$	7.4

S-113

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			2006				2005				2004
($ in millions)
Interest income on subordinated debt and Class A equity interests			$	11.9			$	14.3			$	23.2
Dividend income on Class B equity interests				—				14.0				14.8
Fees and other income				7.8				9.2				12.0
	Total interest and related portfolio income		$	19.7			$	37.5			$	50.0

S-114

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S-115

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S-116

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S-117

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			2006								2005
			Cost				Value				Cost				Value
($ in millions)
Callidus Debt Partners CDO Fund I, Ltd.			$	28.4			$	28.4			$	28.5			$	28.5
Callidus Debt Partners CLO Fund III, Ltd.				23.3				23.0				24.2				24.2
Callidus Debt Partners CLO Fund IV, Ltd.				13.0				13.0				—				—
Callidus MAPS CLO Fund I LLC				68.0				64.6				65.1				65.1
Callidus Debt Partners CLO Fund V, Ltd.				13.8				13.8				—				—
	Total		$	146.5			$	142.8			$	117.8			$	117.8

			2006				2005
($ in millions)
Bonds			$	245.4			$	230.7
Syndicated loans				1,769.9				704.0
Cash(1)				59.5				238.4
	Total underlying collateral assets		$	2,074.8			$	1,173.1

(1)	Includes undrawn liability amounts.

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				2006				2005
($ in millions)
Loans and debt securities in workout status
	Companies more than 25% owned			$	51.1			$	15.6
	Companies 5% to 25% owned				4.0				—
	Companies less than 5% owned				31.6				11.4
Loans and debt securities not in workout status
	Companies more than 25% owned				87.1				58.0
	Companies 5% to 25% owned				7.2				0.5
	Companies less than 5% owned				38.9				49.5
		Total		$	219.9			$	135.0

			2006				2005
Industry
Business services				39	%			42	%
Consumer products				20				14
Financial services				9				14
Industrial products				9				10
Consumer services				6				6
Retail				6				3
Healthcare services				3				2
Energy services				2				2
Other(1)				6				7
	Total			100	%			100	%
Geographic Region(2)
Mid-Atlantic				31	%			29	%
Midwest				30				21
Southeast				18				12
West				17				34
Northeast				4				4
	Total			100	%			100	%

(1)	Includes investments in senior debt CDO and CLO funds which represented 3% of the private finance portfolio at both December 31, 2006 and 2005. These funds invest in senior debt representing a variety of industries.
(2)	The geographic region for the private finance portfolio depicts the location of the headquarters for the Company’s portfolio companies. The portfolio companies may have a number of other locations in other geographic regions.

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	Commercial Real Estate Finance

			2006												2005
			Cost				Value				Yield(1)				Cost				Value				Yield(1)
($ in millions)
Commercial mortgage loans			$	72.6			$	71.9				7.5%			$	103.9			$	102.6				7.6%
Real estate owned				15.7				19.6								14.2				13.9
Equity interests				15.2				26.7								13.6				10.6
	Total		$	103.5			$	118.2							$	131.7			$	127.1

(1)

The weighted average yield on the commercial mortgage loans is computed as the (a) annual stated interest on accruing loans plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans less the annual amortization of origination costs, divided by (b) total interest-bearing investments at value. The weighted average yield is computed as of the balance sheet date.

			2006				2005
Property Type
Hospitality				45	%			37	%
Office				20				11
Retail				19				16
Housing				13				30
Other				3				6
	Total			100	%			100	%
Geographic Region
Southeast				36	%			25	%
Mid-Atlantic				35				31
Midwest				21				21
Northeast				8				5
West				—				18
	Total			100	%			100	%

S-120

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				2006												2005
												Annual												Annual
				Facility				Amount				Interest				Facility				Amount				Interest
				Amount				Drawn				Cost(1)				Amount				Drawn				Cost(1)
($ in millions)
Notes payable and debentures:
	Privately issued unsecured notes payable				$1,041.4				$1,041.4				6.1	%		$	1,164.5			$	1,164.5				6.2	%
	Publicly issued unsecured notes payable				650.0				650.0				6.6	%			—				—				—
	SBA debentures(2)				—				—				—	%			28.5				28.5				7.5	%
		Total notes payable and debentures			1,691.4				1,691.4				6.3	%			1,193.0				1,193.0				6.3	%
Revolving line of credit(5)					922.5				207.7				6.4	%(3)			772.5				91.8				5.6	%(3)
	Total debt				$2,613.9				$1,899.1				6.5	%(4)		$	1,965.5			$	1,284.8				6.5	%(4)

(1)	The weighted average annual interest cost is computed as the (a) annual stated interest on the debt plus the annual amortization of commitment fees, other facility fees and amortization of debt financing costs that are recognized into interest expense over the contractual life of the respective borrowings, divided by (b) debt outstanding on the balance sheet date.
(2)	The SBA debentures were repaid in full during 2006.
(3)	The annual interest cost reflects the interest rate payable for borrowings under the revolving line of credit. In addition to the current interest payable, there were annual costs of commitment fees, other facility fees and amortization of debt financing costs of $3.9 million and $3.3 million at December 31, 2006 and 2005, respectively.
(4)	The annual interest cost for total debt includes the annual cost of commitment fees, other facility fees and amortization of debt financing costs on the revolving line of credit regardless of the amount outstanding on the facility as of the balance sheet date.
(5)	At December 31, 2006, $673.8 million remained unused and available on the revolving line of credit, net of amounts committed for standby letters of credit of $41.0 million issued under the credit facility.

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			Amount				Coupon				Maturity Date
($ in millions)
July 25, 2006			$	400.0				6.625%				July 15, 2011
December 8, 2006				250.0				6.000%				April 1, 2012
	Total		$	650.0

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Year			Amount Maturing
			($ in millions)
2007			$	—
2008				153.0
2009				268.9
2010				408.0
2011				472.5
Thereafter				389.0
	Total		$	1,691.4

	Revolving Line of Credit

	Fair Value of Debt

	Covenant Compliance

S-123

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			Total				2007				2008				2009				2010				2011				After 2011
(in millions)
Guarantees			$	202.1			$	0.6			$	3.0			$	192.2			$	—			$	4.4			$	1.9
Standby letters of credit(1)				41.0				4.0				37.0				—				—				—				—
	Total(2)		$	243.1			$	4.6			$	40.0			$	192.2			$	—			$	4.4			$	1.9

(1)	Standby letters of credit are issued under the Company’s revolving line of credit that expires in September 2008. Therefore, unless a standby letter of credit is set to expire at an earlier date, it is assumed that the standby letters of credit will expire contemporaneously with the expiration of the Company’s line of credit in September 2008.
(2)	The Company’s most significant commitments relate to its investment in Business Loan Express, LLC (BLX), which commitments totaled $214.7 million at December 31, 2006. At December 31, 2006, the Company guaranteed 50% of the outstanding total obligations on BLX’s revolving line of credit for a total guaranteed amount of $189.7 million and had also provided four standby letters of credit totaling $25.0 million in connection with four term securitizations completed by BLX. See Note 3.

S-124

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			2006				2005(1)				2004
(in millions)
Number of common shares				10.9				—				3.0
Gross proceeds			$	310.2			$	—			$	75.0
Less costs, including underwriting fees				(14.4	)			—				(4.7	)
	Net proceeds		$	295.8			$	—			$	70.3

(1)	The Company did not sell any common stock during the year ended December 31, 2005.

		2006				2005				2004
(in millions, except per share amounts)
Shares issued			0.5				0.3				0.2
Average price per share		$	30.58			$	28.00			$	26.34

S-125

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		2006				2005				2004
(in millions, except per share amounts)
Net increase in net assets resulting from operations		$	245.1			$	872.8			$	249.5
Less preferred stock dividends			—				—				(0.1	)
Income available to common shareholders		$	245.1			$	872.8			$	249.4
Weighted average common shares outstanding — basic			142.4				134.7				129.8
Dilutive options outstanding			3.2				2.6				2.7
Weighted average common shares outstanding — diluted			145.6				137.3				132.5
Basic earnings per common share		$	1.72			$	6.48			$	1.92
Diluted earnings per common share		$	1.68			$	6.36			$	1.88

S-126

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			2006				2005				2004
($ in millions)
IPA contributions			$	8.1			$	7.0			$	13.4
IPA mark to market expense (benefit)				2.9				2.0				(0.4	)
	Total IPA expense		$	11.0			$	9.0			$	13.0

S-127

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S-128

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						Weighted				Weighted
						Average				Average
						Exercise				Contractual				Aggregate Intrinsic
						Price Per				Remaining				Value at
		Shares				Share				Term (Years)				December 31, 2006(1)
(in millions, except per share amounts)
Options outstanding at January 1, 2004			14.9			$	20.68
Granted			8.2			$	28.34
Exercised			(1.6	)		$	19.73
Forfeited			(1.1	)		$	26.07
Options outstanding at December 31, 2004			20.4			$	23.55
Granted			6.8			$	27.37
Exercised			(3.0	)		$	22.32
Forfeited			(1.9	)		$	27.83
Options outstanding at December 31, 2005			22.3			$	24.52
Granted			1.8			$	29.88
Exercised			(0.5	)		$	22.99
Forfeited			(0.4	)		$	27.67
Options outstanding at December 31, 2006			23.2			$	24.92				6.27			$	180.1
Exercisable at December 31, 2006			16.7			$	23.70				5.60			$	150.2
Exercisable and expected to be exercisable at December 31, 2006(2)			22.7			$	24.85				6.24			$	178.0

(1)	Represents the difference between the market value of the options at December 31, 2006, and the cost for the option holders to exercise the options.
(2)	The amount of options expected to be exercisable at December 31, 2006, is calculated based on an estimate of expected forfeitures.

S-129

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		Outstanding
														Exercisable
						Weighted
						Average				Weighted								Weighted
		Total				Remaining				Average				Total				Average
Range of		Number				Contractual Life				Exercise				Number				Exercise
Exercise Prices		Outstanding				(Years)				Price				Exercisable				Price
(in millions, except per share amounts and years)
$16.81 — $17.88			2.4				3.28			$	16.97				2.4			$	16.97
$19.00 — $21.38			1.8				1.04			$	21.30				1.8			$	21.30
$21.52			3.3				5.95			$	21.52				3.3			$	21.52
$21.59 — $24.98			2.6				5.49			$	22.43				2.4			$	22.23
$25.50 — $27.38			1.8				7.35			$	26.49				1.4			$	26.47
$27.51			5.2				8.59			$	27.51				1.7			$	27.51
$28.98			4.3				7.19			$	28.98				3.2			$	28.98
$29.23 — $30.52			1.8				7.18			$	29.88				0.5			$	29.77
			23.2				6.27			$	24.92				16.7			$	23.70

S-130

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			2006								2005								2004
			Total				Total Per				Total				Total Per				Total				Total Per
			Amount				Share				Amount				Share				Amount				Share
(in millions, except per share amounts)
First quarter			$	82.5			$	0.59			$	76.1			$	0.57			$	73.3			$	0.57
Second quarter				84.1				0.60				76.2				0.57				73.5				0.57
Third quarter				88.8				0.61				78.8				0.58				74.0				0.57
Fourth quarter				92.0				0.62				79.3				0.58				75.8				0.57
Extra dividend				7.5				0.05				4.1				0.03				2.7				0.02
	Total distributions to common shareholders		$	354.9			$	2.47			$	314.5			$	2.33			$	299.3			$	2.30

			2006								2005								2004
			Total				Total Per				Total				Total Per				Total				Total Per
			Amount				Share				Amount				Share				Amount				Share
(in millions, except per share amounts)
Ordinary income			$	177.4			$	1.23			$	157.3			$	1.17			$	145.3			$	1.12
Long-term capital gains				177.5				1.24				157.2				1.16				154.0				1.18
	Total distributions to common shareholders(1)		$	354.9			$	2.47			$	314.5			$	2.33			$	299.3			$	2.30

(1)	For the years ended December 31, 2006, 2005 and 2004, ordinary income included dividend income of approximately $0.04 per share, $0.03 per share, and $0.04 per share, respectively, that qualified to be taxed at the 15% maximum capital gains rate.
(2)	For certain eligible corporate shareholders, the dividend received deduction for 2006, 2005, and 2004, was $0.042 per share, $0.034 per share, and $0.038 per share, respectively.

S-131

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				2006				2005				2004
($ in millions)				(ESTIMATED)(1)
Financial statement net increase in net assets resulting from operations				$	245.1			$	872.8			$	249.5
Adjustments:
	Net change in unrealized appreciation or depreciation				477.4				(462.1	)			68.7
	Amortization of discounts and fees				(0.3	)			4.7				(5.4	)
	Interest- and dividend-related items				7.3				5.5				6.3
	Employee compensation-related items				18.1				3.0				7.7
	Nondeductible excise tax				15.1				6.2				1.0
	Realized gains recognized (deferred) through installment treatment(2)				(181.1	)			(5.9	)			(33.7	)
	Other realized gain or loss related items				11.5				18.6				5.5
	Net income (loss) from partnerships and limited liability companies(3)				(1.9	)			18.0				8.6
	Net loss from consolidated SBIC subsidiary				—				(8.4	)			15.2
	Net (income) loss from consolidated taxable subsidiary, net of tax				3.9				(5.0	)			(1.0	)
	Other				0.4				(2.4	)			0.8
		Taxable income		$	595.5			$	445.0			$	323.2

(1)	The Company’s taxable income for 2006 is an estimate and will not be finally determined until the Company files its 2006 tax return in September 2007. Therefore, the final taxable income may be different than this estimate.
(2)	2006 includes the deferral of long-term capital gains through installment treatment related to the Company’s sale of its control equity investment in Advantage and certain other portfolio companies.
(3)	Includes taxable income passed through to the Company from BLX in excess of interest and related portfolio income from BLX included in the financial statements totaling $3.7 million, $15.4 million, and $10.0 million for the years ended December 31, 2006, 2005 and 2004, respectively. See Note 3 for additional related disclosure.

S-132

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			2006				2005				2004
($ in millions)			(ESTIMATED)(1)
Taxable income			$	595.5			$	445.0			$	323.2
Taxable income earned in current year and carried forward for distribution in next year(2)				(397.1	)			(156.5	)			(26.0	)
Taxable income earned in prior year and carried forward and distributed in current year				156.5				26.0				2.1
	Total distributions to common shareholders		$	354.9			$	314.5			$	299.3

(1)	The Company’s taxable income for 2006 is an estimate and will not be finally determined until the Company files its 2006 tax return in September 2007. Therefore, the final taxable income and the taxable income earned in 2006 and carried forward for distribution in 2007 may be different than this estimate.
(2)	Estimated taxable income for 2006 includes undistributed income of $397.1 million that is being carried over for distribution in 2007, which represents approximately $120.6 million of ordinary income and approximately $276.5 million of net long-term capital gains.

S-133

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			2006				2005
($ in millions)
Cash			$	2.3			$	33.4
Less escrows held				(0.6	)			(2.0	)
	Total cash		$	1.7			$	31.4

	•	a note received as consideration from the sale of the Company’s equity investment in Advantage of $150.0 million;

S-134

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	•	a note received as consideration from the sale of the Company’s equity investment in STS Operating, Inc. of $30.0 million;
	•	the exchange of existing debt securities and accrued interest of S.B. Restaurant Company with a cost basis of $29.2 million for new debt securities;
	•	the exchange of existing debt securities, preferred stock and common stock of Border Foods, Inc. with a cost basis of $16.6 million for new preferred and common equity securities; and
	•	the exchange of existing preferred stock and common stock of Redox Brands, Inc. with a cost basis of $10.2 million for common stock in CR Brands, Inc.

	•	the exchange of existing subordinated debt securities and accrued interest of BLX with a cost basis of $44.8 million for additional Class B equity interests (see Note 3);
	•	the exchange of debt securities and accrued interest of Coverall North America, Inc. with a cost basis of $24.2 million for new debt securities and warrants with a total cost basis of $26.8 million;
	•	the exchange of debt securities of Garden Ridge Corporation with a cost basis of $25.0 million for a new loan with a cost basis of $22.5 million; and
	•	the contribution to capital of existing debt securities of GAC Investments, Inc. (“GAC”) with a cost basis of $11.0 million, resulting in a decrease in the Company’s debt cost basis and an increase in the Company’s common stock cost basis in GAC. During the third quarter of 2005, GAC changed its name to Triview Investments, Inc.

	•	notes or other securities received as consideration from the sale of investments of $56.6 million. Notes received included a note received for $47.5 million in conjunction with the sale of the Company’s investment in Hillman. During the second quarter of 2004, the Company sold a $5.0 million participation in its subordinated debt in Hillman to a third party, which reduced its investment, and no gain or loss resulted from the transaction;
	•	an exchange of $93.7 million of subordinated debt in certain predecessor companies of Advantage Sales & Marketing, Inc. for new subordinated debt in Advantage;
	•	an exchange of existing debt securities with a cost basis of $46.4 million for new debt and common stock in Startec Global Communications Corporation;
	•	an exchange of existing debt securities with a cost basis of $13.1 million for new debt of $11.3 million with the remaining cost basis attributed to equity in Fairchild Industrial Products Company;
	•	an exchange of existing loans with a cost basis of $11.1 million for a new loan and equity in Gordian Group, Inc.;
	•	the repayment in kind of $12.7 million of existing debt in American Healthcare Services, Inc. with $10.0 million of debt in MedBridge Healthcare, LLC and $2.7 million of debt and equity from other companies;
	•	an exchange of existing subordinated debt with a cost basis of $7.3 million for equity interests in an affiliate of Impact Innovations Group, LLC;

S-135

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	•	GAC acquired certain assets of Galaxy out of bankruptcy during the third quarter of 2004. The Company exchanged its $50.7 million outstanding debt in Galaxy for debt and equity in GAC to facilitate the asset acquisition; and
	•	$25.5 million of CMBS bonds and LLC interests received from the securitization of commercial mortgage loans.

($ in millions)
Description of Issue		2005
5-year Treasury securities, due April 2010		$	17.7

S-136

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				At and for the Years
				Ended December 31,
				2006				2005				2004
Per Common Share Data
Net asset value, beginning of year				$	19.17			$	14.87			$	14.94
	Net investment income(1)				1.30				1.00				1.52
	Net realized gains(1)(2)				3.66				1.99				0.88
		Net investment income plus net realized gains(1)			4.96				2.99				2.40
		Net change in unrealized appreciation or depreciation(1)(2)			(3.28	)			3.37				(0.52	)
Net increase in net assets resulting from operations (1)					1.68				6.36				1.88
Net decrease in net assets from shareholder distributions					(2.47	)			(2.33	)			(2.30	)
Net increase in net assets from capital share transactions(1)					0.74				0.27				0.35
Net asset value, end of year				$	19.12			$	19.17			$	14.87
Market value, end of year				$	32.68			$	29.37			$	25.84
Total return(3)					20.6	%			23.5	%			1.1	%
Ratios and Supplemental Data ($ and shares in millions, except per share amounts)
Ending net assets				$	2,841.2			$	2,620.5			$	1,979.8
Common shares outstanding at end of year					148.6				136.7				133.1
Diluted weighted average common shares outstanding					145.6				137.3				132.5
Employee, employee stock option and administrative expenses/average net assets					5.38	%			6.56	%			4.65	%
Total operating expenses/average net assets					9.05	%			9.99	%			8.53	%
Net investment income/average net assets					6.90	%			6.08	%			10.45	%
Net increase in net assets resulting from operations/ average net assets					8.94	%			38.68	%			12.97	%
Portfolio turnover rate					27.05	%			47.72	%			32.97	%
Average debt outstanding				$	1,491.0			$	1,087.1			$	985.6
Average debt per share(1)				$	10.24			$	7.92			$	7.44

(1)	Based on diluted weighted average number of common shares outstanding for the year.
(2)	Net realized gains and net change in unrealized appreciation or depreciation can fluctuate significantly from year to year.
(3)	Total return assumes the reinvestment of all dividends paid for the periods presented.

		2006
($ in millions, except per share amounts)		Qtr. 1				Qtr. 2				Qtr. 3				Qtr. 4
Total interest and related portfolio income		$	111.0			$	110.5			$	113.4			$	117.7
Net investment income		$	41.3			$	50.2			$	48.7			$	49.1
Net increase in net assets resulting from operations		$	99.6			$	33.7			$	77.9			$	33.9
Basic earnings per common share		$	0.72			$	0.24			$	0.54			$	0.23
Diluted earnings per common share		$	0.70			$	0.24			$	0.53			$	0.23

S-137

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		2005
		Qtr. 1				Qtr. 2				Qtr. 3				Qtr. 4
Total interest and related portfolio income		$	94.9			$	86.2			$	94.9			$	98.2
Net investment income		$	38.8			$	15.3			$	46.1			$	37.1
Net increase in net assets resulting from operations		$	119.6			$	311.9			$	113.2			$	328.1
Basic earnings per common share		$	0.90			$	2.33			$	0.84			$	2.40
Diluted earnings per common share		$	0.88			$	2.29			$	0.82			$	2.36

S-138

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S-139

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S-140

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					Amount of Interest or
					Dividends
PRIVATE FINANCE
Portfolio Company					Credited								December 31, 2005				Gross				Gross				December 31, 2006
(in thousands)			Investment(1)		to Income(6)				Other(2)				Value				Additions(3)				Reductions(4)				Value
Companies More Than 25% Owned
Acme Paging, L.P.			Senior Loan(5)		$	(176	)						$	—			$	3,750			$	(3,750	)		$	—
	(Telecommunications)		Subordinated Debt(5)			(3	)							—				881				(881	)			—
			Common Stock											—				27				(27	)			—
Advantage Sales &			Subordinated Debt			1,712								59,787				213				(60,000	)			—
	Marketing, Inc.(7)		Subordinated Debt			5,555								124,000				374				(124,374	)			—
	(Business Services)		Common Stock											476,578				—				(476,578	)			—
Alaris Consulting, LLC			Senior Loan(5)			(63	)							—				—				—				—
	(Business Services)		Equity Interests											—				—				—				—
American Healthcare			Senior Loan(5)						$	1				4,097				502				(4,599	)			—
	Services, Inc. and Affiliates
	(Healthcare Services)
Avborne, Inc.			Preferred Stock											892				73				(47	)			918
	(Business Services)		Common Stock											—				—				—				—
Avborne Heavy Maintenance,   Inc.			Preferred Stock											—				—				—				—
	(Business Services)		Common Stock											—				—				—				—
Border Foods, Inc.			Preferred Stock											—				—				—				—
	(Consumer Products)		Common Stock											—				—				—				—
Business Loan Express, LLC			Subordinated Debt			38								10,000				15,000				(25,000	)			—
	(Financial Services)		Class A Equity
			Interests(5)			11,889								60,693				5,929				—				66,622
			Class B Equity Interests											146,910				—				(67,771	)			79,139
			Class C Equity Interests											139,521				—				(74,545	)			64,976
Calder Capital Partners, LLC			Senior Loan(5)											—				975				—				975
	(Financial Services)		Equity Interests											—				2,076				—				2,076
Callidus Capital Corporation			Senior Loan			441								600				8,705				(9,305	)			—
	(Financial Services)		Subordinated Debt			972								4,832				930				—				5,762
			Common Stock											7,968				14,582				—				22,550
Coverall North America, Inc.			Unitranche Debt			1,926								—				36,333				—				36,333
	(Business Services)		Subordinated Debt			395								—				5,972				—				5,972
			Common Stock											—				19,729				(110	)			19,619
			Warrants											—				—				—				—
CR Brands, Inc.			Senior Loan			1,109								—				37,219				(37,219	)			—
	(Consumer Products)		Subordinated Debt			5,700								—				39,401				—				39,401
			Common Stock											—				33,321				(7,583	)			25,738
Diversified Group			Preferred Stock			87								728				—				(728	)			—
	Administrators, Inc.		Preferred Stock											841				—				(841	)			—
	(Business Services)		Common Stock			68								502				—				(502	)			—
Financial Pacific Company			Subordinated Debt			12,415								69,904				1,458				—				71,362
	(Financial Services)		Preferred Stock											13,116				2,826				—				15,942
			Common Stock											44,180				21,006				—				65,186
ForeSite Towers, LLC			Equity Interests			329								9,750				2,540				—				12,290
	(Tower Leasing)
Global Communications, LLC			Senior Loan(5)											15,957				—				—				15,957
	(Business Services)		Subordinated Debt(5)											11,198				138				(99	)			11,237
			Preferred Equity
			Interest											4,303				—				(4,303	)			—
			Options											—				—				—				—
Gordian Group, Inc.			Senior Loan(5)			(18	)							4,161				392				(4,553	)			—
	(Business Services)		Common Stock											—				220				(220	)			—
Healthy Pet Corp.			Senior Loan			1,746								4,086				24,252				(1,300	)			27,038
	(Consumer Services)		Subordinated Debt			6,549								38,535				5,230				(186	)			43,579
			Common Stock											25,766				4,500				(1,345	)			28,921
HMT, Inc.			Preferred Stock											2,637				—				—				2,637
	(Energy Services)		Common Stock											5,343				3,321				—				8,664
			Warrants											2,057				1,279				—				3,336

S-141

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					Amount of Interest or
					Dividends
PRIVATE FINANCE
Portfolio Company					Credited								December 31, 2005				Gross				Gross				December 31, 2006
(in thousands)			Investment(1)		to Income(6)				Other(2)				Value				Additions(3)				Reductions(4)				Value
Huddle House, Inc.			Senior Loan		$	59							$	—			$	19,950			$	—			$	19,950
	(Retail)		Subordinated Debt			296								—				58,196				—				58,196
			Common Stock											—				41,662				—				41,662
Impact Innovations Group, LLC			Equity Interests in
	(Business Services)		Affiliate											742				131				—				873
Insight Pharmaceuticals			Subordinated Debt			9,724								58,298				1,552				—				59,850
	Corporation		Preferred Stock											26,791				—				(18,946	)			7,845
	(Consumer Products)		Common Stock											236				—				(236	)			—
Jakel, Inc.			Subordinated Debt(5)											—				6,655				—				6,655
	(Industrial Products)		Preferred Stock											—				—				—				—
			Common Stock											—				—				—				—
Legacy Partners Group, LLC			Senior Loan (5)											5,029				—				(186	)			4,843
	(Financial Services)		Subordinated Debt(5)											—				—				—				—
			Equity Interests											—				18				(18	)			—
Litterer Beteiligungs-GmbH			Subordinated Debt			43								621				71				—				692
	(Business Services)		Equity Interest											2,226				—				(1,027	)			1,199
Mercury Air Centers, Inc.			Senior Loan			1,231								31,720				4,000				(35,720	)			—
	(Business Services)		Subordinated Debt			8,076								46,519				5,698				(3,000	)			49,217
			Common Stock											88,898				106,121				—				195,019
MVL Group, Inc.			Senior Loan			3,605								27,218				1,000				(973	)			27,245
	(Business Services)		Subordinated Debt			5,052								32,417				3,061				—				35,478
			Common Stock											3,211				—				(3,211	)			—
Penn Detroit Diesel Allison, LLC			Subordinated Debt			2,473								—				37,994				—				37,994
	(Business Services)		Equity Interests											—				25,949				—				25,949
Pennsylvania Avenue
	Investors, L.P.		Equity Interests											1,864				1,193				(3,057	)			—
	(Private Equity Fund)
Powell Plant Farms, Inc.			Senior Loan(5)			2,394								23,792				10,625				(8,225	)			26,192
	(Consumer Products)		Subordinated Debt(5)											7,364				—				(6,402	)			962
			Preferred Stock											—				—				—				—
			Warrants											—				—				—				—
Redox Brands, Inc.			Preferred Stock			363								12,097				1,708				(13,805	)			—
	(Consumer Products)		Warrants											500				84				(584	)			—
Service Champ, Inc.			Subordinated Debt			4,339								26,906				713				—				27,619
	(Business Services)		Common Stock											13,319				3,467				—				16,786
Staffing Partners Holding			Subordinated Debt(5)						$	355				6,343				—				(5,857	)			486
	Company, Inc.		Preferred Stock											1,812				3,156				(4,968	)			—
	(Business Services)		Common Stock											—				60				(60	)			—
			Warrants											—				—				—				—
Startec Global Communications
	Corporation		Senior Loan			2,165								21,685				3,540				(9,260	)			15,965
	(Telecommunications)		Common Stock											—				11,232				—				11,232
STS Operating, Inc.			Subordinated Debt			328								6,593				123				(6,716	)			—
	(Industrial Products)		Common Stock											64,963				—				(64,963	)			—
			Options											560				—				(560	)			—
Sweet Traditions, LLC			Senior Loan			1,755								—				36,150				(978	)			35,172
	(Consumer Products)		Equity Interests											—				450				—				450
Triview Investments, Inc.			Senior Loan			1,302								7,449				7,298				—				14,747
	(Broadcasting & Cable/		Subordinated Debt			8,692								30,845				25,163				—				56,008
	Consumer Products/		Subordinated Debt(5)											19,520				742				(15,920	)			4,342
	Business Services)		Common Stock			68								29,171				11,516				(9,365	)			31,322
Total companies more than 25% owned					$	102,636							$	1,887,651											$	1,490,180
Companies 5% to 25% Owned
Advantage Sales &			Subordinated Debt		$	14,050							$	—			$	151,648			$	—			$	151,648
	Marketing, Inc.(7)		Equity Interests											—				15,272				(4,272	)			11,000
	(Business Services)
Air Medical Group Holdings LLC			Senior Loan			3,298								—				8,097				(6,334	)			1,763
	(Healthcare Services)		Subordinated Debt			2,145								42,267				35,488				(42,627	)			35,128
			Equity Interests			1,694								4,025				3,393				(1,468	)			5,950
Alpine ESP Holdings, Inc.			Preferred Stock											—				622				(20	)			602
	(Business Services)		Common Stock											—				14				(14	)			—

S-142

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					Amount of Interest or
					Dividends
PRIVATE FINANCE
Portfolio Company					Credited								December 31, 2005				Gross				Gross				December 31, 2006
(in thousands)			Investment(1)		to Income(6)				Other(2)				Value				Additions(3)				Reductions(4)				Value
Amerex Group, LLC			Subordinated Debt		$	669							$	—			$	8,400			$	—			$	8,400
	(Consumer Products)		Equity Interests											—				13,860				(37	)			13,823
Aspen Pet Products, Inc.			Subordinated Debt			1,130								19,959				399				(20,358	)			—
	(Consumer Products)		Preferred Stock			29								1,638				516				(2,154	)			—
			Common Stock											17				123				(140	)			—
			Warrants											—				—				—				—
BB&T Capital
	Partners/Windsor
	Mezzanine Fund, LLC		Equity Interests											—				5,867				(313	)			5,554
	(Private Equity Fund)
Becker Underwood, Inc.			Subordinated Debt			3,545								23,543				620				—				24,163
	(Industrial Products)		Common Stock											2,200				1,500				—				3,700
BI Incorporated			Senior Loan			125								—				15,000				(15,000	)			—
	(Business Services)		Subordinated Debt			3,484								—				30,135				—				30,135
			Common Stock											—				4,100				—				4,100
CitiPostal, Inc. and Affiliates			Senior Loan			1,061								—				20,689				(120	)			20,569
	(Business Services)		Common Stock											—				4,700				—				4,700
Creative Group, Inc.			Subordinated Debt			583								—				13,656				—				13,656
	(Business Services)		Warrants											—				1,387				—				1,387
Drew Foam Companies, Inc.			Preferred Stock											—				722				—				722
	(Business Services)		Common Stock											—				7				—				7
The Debt Exchange Inc.			Preferred Stock											3,219				—				(3,219	)			—
	(Business Services)
MedBridge Healthcare, LLC			Senior Loan(5)											7,093				71				—				7,164
	(Healthcare Services)		Subordinated Debt(5)											534				1,279				—				1,813
			Convertible
			Subordinated Debt(5)											—				—				—				—
			Equity Interests											—				501				(501	)			—
Multi-Ad Services, Inc.			Unitranche Debt			348								—				19,879				—				19,879
	(Business Services)		Equity Interests											—				2,000				—				2,000
Nexcel Synthetics, LLC			Subordinated Debt			1,604								10,588				390				—				10,978
	(Consumer Products)		Equity Interests											1,367				119				—				1,486
PresAir LLC			Senior Loan(5)						$	261				—				5,492				(3,286	)			2,206
	(Industrial Products)		Unitranche Debt(5)											5,820				328				(6,148	)			—
			Equity Interests											318				5				(323	)			—
Progressive International
	Corporation		Subordinated Debt			1,223								7,376				157				—				7,533
	(Consumer Products)		Preferred Stock											884				140				—				1,024
			Common Stock											13				2,287				—				2,300
			Warrants											—				—				—				—
Regency Healthcare Group, LLC			Senior Loan			72								—				1,232				—				1,232
	(Healthcare Services)		Unitranche Debt			1,152								—				19,908				—				19,908
			Equity Interests											—				1,616				—				1,616
SGT India Private Limited			Common Stock											—				3,944				(598	)			3,346
	(Business Services)
Soteria Imaging Services, LLC			Subordinated Debt			2,013								13,447				4,122				—				17,569
	(Healthcare Services)		Equity Interests											2,308				233				—				2,541
Universal Environmental
	Services, LLC		Unitranche Debt			1,529								10,862				101				(752	)			10,211
	(Business Services)		Equity Interests											1,328				13				(1,341	)			—
Total companies 5% to 25% owned					$	39,754							$	158,806											$	449,813

(1)	Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted. The principal amount for loans and debt securities and the number of shares of common stock and preferred stock is shown in the consolidated statement of investments as of December 31, 2006 and 2005.
(2)	Other includes interest, dividend, or other income which was applied to the principal of the investment and therefore reduced the total investment. These reductions are also included in the Gross Reductions for the investment, as applicable.

S-143

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(3)	Gross additions include increased in the cost basis of investments resulting from new portfolio investments, paid-in-kind interest or dividends, the amortization of discounts and closing fees, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation.
(4)	Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation.
(5)	Loan or debt security is on non-accrual status at December 31, 2006, and is therefore considered non-income producing. Loans or debt securities on non-accrual status at the end of the period may or may not have been on non-accrual status for the full period.
(6)	Represents the total amount of interest or dividends credited to income for the portion of the year an investment was included in the companies more than 25% owned or companies 5% to 25% owned categories, respectively.
(7)	Included in the companies more than 25% owned category while the Company held a majority equity interest. On March 29, 2006, the Company sold its majority equity interest in Advantage. The Company’s investment in Advantage after the sale transaction is included in the companies 5% to 25% owned category. See Note 3 to the consolidated financial statements for further information.

S-144

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		Page
Summary			1
Selected Condensed Consolidated Financial Data			6
Where You Can Find Additional Information			8
Risk Factors			9
Use of Proceeds			19
Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Senior Securities			67
Business			71
Portfolio Companies			87
Determination of Net Asset Value			94
Management			97
Portfolio Management			103
Compensation of Executive Officers and Directors			106
Control Persons and Principal Holders of Securities			117
Certain Relationships and Related Party Transactions			120
Tax Status			121
Certain Government Regulations			122
Stock Trading Plans and Ownership Guidelines			126
Dividend Reinvestment Plan			127
Description of Capital Stock			128
Description of Notes			129
Special Considerations Under our Charter and Bylaws and Maryland Law			141
Plan of Distribution			146
Legal Matters			147
Custodians, Transfer and Dividend Paying Agent and Registrar			147
Brokerage Allocation and Other Practices			148
Independent Registered Public Accounting Firm			148
Notice Regarding Arthur Andersen LLP			148
Index to Consolidated Financial Statements			F-1

(i)

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1

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2

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3

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4

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5

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6

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7

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8

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9

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10

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11

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		-20%				-10%				-5%				0%				5%				10%				20%
Corresponding return to shareholder			-33.23%				-18.13%				-10.58%				-3.03%				4.51%				12.06%				27.16%

12

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13

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14

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	•	price and volume fluctuations in the overall stock market from time to time;
	•	significant volatility in the market price and trading volume of securities of business development companies or other financial services companies;
	•	volatility resulting from trading in derivative securities related to our common stock including puts, calls, long-term equity anticipation securities, or LEAPs, or short trading positions;
	•	changes in laws or regulatory policies or tax guidelines with respect to business development companies or regulated investment companies;
	•	actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the expectations of securities analysts;
	•	general economic conditions and trends;
	•	loss of a major funding source; or
	•	departures of key personnel.

	•	the time remaining to the maturity of these debt securities;
	•	the outstanding principal amount of debt securities with terms identical to these debt securities;
	•	the supply of debt securities trading in the secondary market, if any;
	•	the redemption or repayment features, if any, of these debt securities;

15

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	•	the level, direction and volatility of market interest rates generally; and
	•	market rates of interest higher or lower than rates borne by the debt securities.

16

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		Three Months
		Ended March 31,				Year Ended December 31,
		2006(1)				2005				2004				2003				2002				2001
Earnings to Fixed Charges*			5.4				12.4				4.3				3.4				4.2				4.0

	*	Earnings include the net change in unrealized appreciation or depreciation. Net change in unrealized appreciation or depreciation can vary substantially from year to year. Excluding the net change in unrealized appreciation or depreciation, the earnings to fixed charges ratio would be 20.6 for the three months ended March 31, 2006(1), and 6.4, 5.2, 4.4, 4.2 and 3.7 for the five years ended December 31, 2005, respectively.

(1)	The results for the three months ended March 31, 2006, are not necessarily indicative of the operating results to be expected for the full year.

17

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	•	changes in the economy and general economic conditions;
	•	risks associated with possible disruption in our operations due to terrorism;
	•	future changes in laws or regulations and conditions in our operating areas; and
	•	other risks and uncertainties as may be detailed from time to time in our public announcements and SEC filings.

18

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19

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							Closing Sales								Premium				Premium
							Price								of High				of Low
															Sales Price				Sales Price				Declared
			NAV(1)				High				Low				to NAV(2)				to NAV(2)				Dividends
Year ending December 31, 2004
	First Quarter		$	14.60			$	30.85			$	27.15				211	%			186	%		$	0.57
	Second Quarter		$	14.77			$	30.25			$	23.06				205	%			156	%		$	0.57
	Third Quarter		$	14.90			$	25.80			$	22.22				173	%			149	%		$	0.57
	Fourth Quarter		$	14.87			$	28.47			$	24.46				191	%			164	%		$	0.57
	Extra Dividend																						$	0.02
Year ended December 31, 2005
	First Quarter		$	15.22			$	27.84			$	24.89				183	%			164	%		$	0.57
	Second Quarter		$	17.01			$	29.29			$	25.83				172	%			152	%		$	0.57
	Third Quarter		$	17.37			$	29.17			$	26.92				168	%			155	%		$	0.58
	Fourth Quarter		$	19.17			$	30.80			$	26.11				161	%			136	%		$	0.58
	Extra Dividend																						$	0.03
Year ended December 31, 2006
	First Quarter		$	19.50			$	30.68			$	28.51				157	%			146	%		$	0.59
	Second Quarter (through June 20, 2006)			*			$	31.32			$	29.36				*				*			$	0.60

(1)	Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low sales prices. The net asset values shown are based on outstanding shares at the end of each period.
(2)	Calculated as the respective high or low closing sales price divided by NAV.

*	Not determinable at the time of filing.

20

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	•	changes in the economy and general economic conditions;
	•	risks associated with possible disruption in our operations due to terrorism;
	•	future changes in laws or regulations and conditions in our operating areas; and
	•	other risks and uncertainties as may be detailed from time to time in our public announcements and SEC filings.

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		March 31,								December 31,
		2006				2005				2005				2004				2003
Private finance			96	%			74	%			96	%			76	%			74	%
Commercial real estate finance			4	%			26	%			4	%			24	%			26	%

22

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		At and for the
		Three Months								At and for the
		Ended March 31,								Year Ended December 31,
		2006				2005				2005				2004				2003
($ in millions)
Portfolio at value		$	3,691.0			$	3,195.0			$	3,606.4			$	3,013.4			$	2,584.6
Investments funded(1)		$	797.9			$	265.6			$	1,675.8			$	1,524.5			$	931.5
Change in accrued or reinvested interest and dividends (2)		$	(2.1	)		$	10.5			$	6.6			$	52.2			$	45.0
Principal collections related to investment repayments or sales		$	340.4			$	158.3			$	1,503.4			$	909.2			$	788.3
Yield on interest-bearing investments(3)			12.3	%			13.6	%			12.8	%			14.0	%			14.7	%

(1)	Investments funded for the three months ended March 31, 2006, included a $150 million subordinated debt investment in Advantage Sales & Marketing, Inc. received in conjunction with the sale of Advantage as discussed below.
(2)	Includes a change in accrued or reinvested interest of $1.1 million for the three months ended March 31, 2006, related to our investments in money market securities.
(3)	The weighted average yield on interest-bearing investments is computed as the (a) annual stated interest plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing interest-bearing investments less the annual amortization of loan origination costs, divided by (b) total interest-bearing investments at value. The weighted average yield is computed as of the balance sheet date.

					At and for the
					Three Months Ended																At and for the
					March 31,																Year Ended December 31,
					2006								2005								2005								2004								2003
					Value				Yield(2)				Value				Yield(2)				Value				Yield(2)				Value				Yield(2)				Value				Yield(2)
($ in millions)
Portfolio at value:
	Loans and debt securities:
		Senior loans			$	420.1				9.3	%		$	253.5				8.6	%		$	239.8				9.5	%		$	234.6				8.5	%		$	165.5				9.2	%
		Unitranche debt				362.7				11.1	%			44.2				14.8	%			294.2				11.4	%			43.9				14.8	%			24.9				15.6	%
		Subordinated debt				1,747.2				13.6	%			1,258.7				14.9	%			1,560.9				13.8	%			1,324.4				14.9	%			1,024.5				16.0	%
			Total loans and debt securities		$	2,530.0				12.5	%		$	1,556.4				13.8	%		$	2,094.9				13.0	%		$	1,602.9				13.9	%		$	1,214.9				15.0	%
	Equity securities					1,031.6								822.1								1,384.4								699.2								687.8
Total portfolio					$	3,561.6							$	2,378.5							$	3,479.3							$	2,302.1							$	1,902.7
Investments funded(1)					$	795.9							$	168.2							$	1,462.3							$	1,140.8							$	498.0
Change in accrued or reinvested interest and dividends					$	(4.2	)						$	7.9							$	24.6							$	45.6							$	41.8
Principal collections related to investment repayments or sales					$	336.6							$	151.2							$	703.9							$	551.9							$	318.6

(1)	Investments funded for the three months ended March 31, 2006, included a $150 million subordinated debt investment in Advantage Sales & Marketing, Inc. received in conjunction with the sale of Advantage as discussed below.
(2)	The weighted average yield on loans and debt securities is computed as the (a) annual stated interest plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities less the annual amortization of loan origination costs, divided by (b) total loans and debt securities at value. The weighted average yield is computed as of the balance sheet date.

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				For the Three Months Ended March 31, 2006
				Debt Investments								Buyout Investments								Total
								Weighted								Weighted								Weighted
								Average								Average								Average
				Amount				Yield(1)				Amount				Yield(1)				Amount				Yield(1)
($ in millions)
Loans and debt securities:
	Senior loans			$	85.0				9.1	%		$	117.8				8.9	%		$	202.8				9.0	%
	Unitranche debt(2)				75.0				10.6	%			—				—				75.0				10.6	%
	Subordinated debt(3)				279.3				12.5	%			145.4				13.9	%			424.7				13.0	%
		Total loans and debt securities			439.3				11.5	%			263.2				11.6	%			702.5				11.6	%
Equity					24.6								68.8								93.4
	Total			$	463.9							$	332.0							$	795.9

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			2005 Investments Funded
			Debt Investments								Buyout Investments								Total
							Weighted								Weighted								Weighted
							Average								Average								Average
			Amount				Yield(1)				Amount				Yield(1)				Amount				Yield(1)
($ in millions)
Loans and debt securities:
	Senior loans(4)		$	76.8				10.0	%		$	250.2				6.4	%		$	327.0				7.2	%
	Unitranche debt(2)			259.5				10.5	%			—				—				259.5				10.5	%
	Subordinated debt			296.9				12.3	%			330.9				12.5	%			627.8				12.4	%
Total loans and debt securities				633.2				11.3	%			581.1				9.9	%			1,214.3				10.6	%
Equity				82.5								165.5								248.0
	Total		$	715.7							$	746.6							$	1,462.3

			2004 Investments Funded
			Debt Investments								Buyout Investments								Total
							Weighted								Weighted								Weighted
							Average								Average								Average
			Amount				Yield(1)				Amount				Yield(1)				Amount				Yield(1)
($ in millions)
Loans and debt securities:
	Senior loans		$	25.1				9.1	%		$	140.8				7.2	%		$	165.9				7.5	%
	Unitranche debt(2)			18.9				13.0	%			—				—				18.9				13.0	%
	Subordinated debt			396.4				13.4	%			320.1				15.5	%			716.5				14.4	%
Total loans and debt securities				440.4				13.2	%			460.9				13.0	%			901.3				13.1	%
Equity				72.3								167.2								239.5
	Total		$	512.7							$	628.1							$	1,140.8

			2003 Investments Funded
			Debt Investments								Buyout Investments								Total
							Weighted								Weighted								Weighted
							Average								Average								Average
			Amount				Yield(1)				Amount				Yield(1)				Amount				Yield(1)
($ in millions)
Loans and debt securities:
	Senior loans		$	44.6				9.4	%		$	28.6				2.6	%		$	73.2				6.7	%
	Unitranche debt(2)			25.0				15.5	%			—				—				25.0				15.5	%
	Subordinated debt			354.8				14.6	%			1.2				25.0	%			356.0				14.6	%
Total loans and debt securities				424.4				14.1	%			29.8				3.5	%			454.2				13.4	%
Equity				15.6								28.2								43.8
	Total		$	440.0							$	58.0							$	498.0

(1)	The weighted average yield on interest-bearing investments is computed as the (a) annual stated interest on accruing interest-bearing investments, divided by (b) total interest-bearing investments funded.
(2)	Unitranche debt is a single debt investment that is a blend of senior and subordinated debt. The yield on a unitranche investment reflects the blended yield of senior and subordinated debt combined.
(3)	Debt investments for the three months ended March 31, 2006, included a $150 million, 12.0% subordinated debt investment in Advantage Sales & Marketing, Inc. received in conjunction with the sale of Advantage as discussed below.
(4)	Buyout senior loans funded include $174.9 million which was repaid during the year.

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	•	$33.3 million in the form of debt to Promo Works, LLC.
	•	$30.0 million in the form of debt to Business Loan Express, LLC.
	•	$29.9 million in the form of equity to eleven private equity and venture capital funds.
	•	$14.0 million in the form of debt to S.B. Restaurant Company.
	•	$14.0 million in the form of debt to Integrity Interactive Corp.
	•	$9.6 million in the form of debt to 3SI Security Systems Inc.
	•	$8.3 million in the form of debt to Hot Stuff Foods, LLC.
	•	$7.8 million in the form of debt to Mercury Air Centers, Inc.
	•	$6.5 million in co-investment commitments to Pine Creek Equity Partners, LLC.
	•	We have various commitments to Callidus Capital Corporation (Callidus), which owns 80% (subject to dilution) of Callidus Capital Management, LLC, an asset

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		management company that structures and manages collateralized debt obligations (CDOs), collateralized loan obligations (CLOs), and other related investments. Our commitment to Callidus consisted of the following at March 31, 2006:

											Amount
			Committed				Amount				Available
			Amount				Drawn				to be Drawn
($ in millions)
Subordinated debt to support warehouse facilities & warehousing activities(1)			$	40.0			$	—			$	40.0
Revolving line of credit facility to support warehousing activities(2)				50.0				3.7				46.3
Revolving line of credit for working capital				4.0				3.8				0.2
	Total		$	94.0			$	7.5			$	86.5

	(1)	Callidus has a secured warehouse credit facilities with a third party for up to $400 million. The facility is used primarily to finance the acquisition of loans pending securitization through a CDO or CLO. In conjunction with this warehouse credit facility, we have agreed to designate our $40 million subordinated debt commitment for Callidus to draw upon to provide first loss capital as needed to support the warehouse facility.
	(2)	This facility supports Callidus’ purchase of middle market senior loans pending the sale of such loans to its warehouse credit facilities.

	In addition, at March 31, 2006, we had a commitment to Callidus to purchase preferred equity in future CLO transactions of $32.4 million.

			Three Months
			Ended March 31,								Year Ended December 31,
			2006				2005				2005				2004				2003
($ in millions)
Interest income			$	3.9			$	3.4			$	14.3			$	23.2			$	21.9
Dividend income				—				2.0				14.0				14.8				7.8
Loan prepayment premiums				—				—				—				—				0.1
Fees and other income				2.2				2.4				9.2				12.0				16.9
	Total		$	6.1			$	7.8			$	37.5			$	50.0			$	46.7

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			Three Months
			Ended								Year Ended
			March 31,								December 31,
			2006				2005				2005				2004
($ in millions)
Interest income			$	7.3			$	7.7			$	30.9			$	15.5
Loan prepayment premiums				5.0				—				—				—
Fees and other income				1.8				1.5				6.5				5.8
	Total interest and related portfolio income		$	14.1			$	9.2			$	37.4			$	21.3

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			At and for the
			Three Months Ended March 31,																At and for the Years Ended December 31,
			2006								2005								2005								2004								2003
			Value				Yield(1)				Value				Yield(1)				Value				Yield(1)				Value				Yield(1)				Value				Yield(1)
($ in millions)
Portfolio at value:
	CMBS bonds		$	—							$	466.1				13.0%			$	—							$	373.8				14.6%			$	394.0				14.1%
	CDO bonds and preferred shares			—								227.1				15.8%				—								212.6				16.8%				186.6				16.7%
	Commercial mortgage loans			102.7				7.6%				89.7				6.4%				102.6				7.6%				95.0				6.8%				83.6				8.6%
	Real estate owned			15.0								18.4								13.9								16.9								12.8
	Equity interests			11.7								15.2								10.6								13.0								4.9
Total portfolio			$	129.4							$	816.5							$	127.1							$	711.3							$	681.9
Investments funded			$	2.0							$	97.4							$	213.5							$	383.7							$	433.5
Change in accrued or reinvested interest (2)			$	1.0							$	2.6							$	(18.0	)						$	6.6							$	3.2
Principal collections related to investment repayments or sales(2)			$	3.8							$	7.1							$	799.5							$	357.3							$	469.7

(1)	The weighted average yield on the interest-bearing investments is computed as the (a) annual stated interest plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing interest-bearing investments less the annual amortization of origination costs, divided by (b) total interest-bearing investments at value. The weighted average yield is computed as of the balance sheet date. Interest-bearing investments for the commercial real estate finance portfolio include all investments except for real estate owned and equity interests.
(2)	Principal collections related to investment repayments or sales for the year ended December 31, 2005, included $718.1 million related to the sale of our CMBS and CDO portfolio in May 2005. Change in accrued or reinvested interest for the year ended December 31, 2005, included the collection of $21.7 million related to the sale of this portfolio.

			Face								Amount
			Amount				Discount				Funded
($ in millions)
For the Three Months Ended March 31, 2006
Commercial mortgage loans			$	0.6			$	—			$	0.6
Equity interests				1.4				—				1.4
	Total		$	2.0			$	—			$	2.0
For the Year Ended December 31, 2005
CMBS bonds (4 new issuances)(2)			$	211.5			$	(90.5	)		$	121.0
Commercial mortgage loans				88.5				(0.8	)			87.7
Equity interests				4.8				—				4.8
	Total		$	304.8			$	(91.3	)		$	213.5
For the Year Ended December 31, 2004
CMBS bonds (13 new issuances(1))			$	419.1			$	(183.7	)		$	235.4
CDO bonds and preferred shares (3 issuances)				40.5				(0.1	)			40.4
Commercial mortgage loans				112.1				(8.2	)			103.9
Equity interests				4.0				—				4.0
	Total		$	575.7			$	(192.0	)		$	383.7

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			Face								Amount
			Amount				Discount				Funded
($ in millions)
For the Year Ended December 31, 2003
CMBS bonds (15 new issuances(1))			$	508.5			$	(225.9	)		$	282.6
CDO bonds and preferred shares (3 issuances)				145.8				(0.4	)			145.4
Commercial mortgage loans				3.0				—				3.0
Equity interests				2.5				—				2.5
	Total		$	659.8			$	(226.3	)		$	433.5

(1)	CMBS investments also include investments in issuances in which we have previously purchased CMBS bonds.
(2)	The CMBS bonds invested in during the year ended December 31, 2005, were sold on May 3, 2005.

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				2006				2005				2004
($ in millions)
Private finance				$	47.5			$	58.7			$	59.8
Commercial real estate finance
	CMBS and CDO bonds				—				—				18.9
	Commercial mortgage loans and other				2.5				1.7				0.8
		Total		$	50.0			$	60.4			$	79.5

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		2006								2005								2004
		Portfolio				Percentage of				Portfolio				Percentage of				Portfolio				Percentage of
Grade		at Value				Total Portfolio				at Value				Total Portfolio				at Value(1)				Total Portfolio
($ in millions)
1		$	1,287.9				34.9	%		$	1,643.0				45.6	%		$	952.5				31.6	%
2			2,183.2				59.2				1,730.8				48.0				1,850.5				61.4
3			89.1				2.4				149.1				4.1				121.2				4.0
4			64.5				1.7				26.5				0.7				11.7				0.4
5			66.3				1.8				57.0				1.6				77.5				2.6
		$	3,691.0				100.0	%		$	3,606.4				100.0	%		$	3,013.4				100.0	%

	(1)	The value of the CMBS and CDO assets sold on May 3, 2005, was $586.4 million at December 31, 2004, and this value was included in Grade 2 assets. See “Commercial Real Estate Finance” above.

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				2006				2005				2004
($ in millions)
Loans and debt securities in workout status (classified as Grade 4 or 5)(1)
	Private finance
		Companies more than 25% owned		$	29.0			$	15.6			$	34.4
		Companies 5% to 25% owned			5.6				—				—
		Companies less than 5% owned			51.8				11.4				16.5
	Commercial real estate finance				12.6				12.9				5.6
Loans and debt securities not in workout status
	Private finance
		Companies more than 25% owned			40.6				58.0				29.4
		Companies 5% to 25% owned			5.1				0.5				0.7
		Companies less than 5% owned			4.4				49.5				15.8
	Commercial real estate finance				8.6				7.9				12.5
		Total		$	157.7			$	155.8			$	114.9
		Percentage of total portfolio			4.3%				4.3%				3.8%

(1)	Workout loans and debt securities exclude equity securities that are included in the total Grade 4 and 5 assets above.

				2006				2005				2004
($ in millions)
Private finance				$	82.6			$	74.6			$	73.5
Commercial real estate finance
	CMBS bonds				—				—				49.0
	Commercial mortgage loans				6.0				6.1				10.1
		Total		$	88.6			$	80.7			$	132.6
		Percentage of total portfolio			2.4%				2.2%				4.4%

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				For the Three Months
				Ended March 31,
																Percentage
				2006				2005				Change				Change
($ in thousands, except per share amounts)
				(unaudited)
Interest and Related Portfolio Income
	Interest and dividends			$	88,881			$	84,945			$	3,936				5	%
	Loan prepayment premiums				5,286				1,677				3,609				215	%
	Fees and other income				16,844				8,297				8,547				103	%
		Total interest and related portfolio income			111,011				94,919				16,092				17	%
Expenses
	Interest				24,300				20,225				4,075				20	%
	Employee				21,428				15,456				5,972				39	%
	Stock options				3,606				—				3,606				100	%
	Administrative				11,519				20,754				(9,235	)			(44	)%
		Total operating expenses			60,853				56,435				4,418				8	%
Net investment income before income taxes					50,158				38,484				11,674				30	%
Income tax expense (benefit), including excise tax					8,858				(268	)			9,126				**
Net investment income					41,300				38,752				2,548				7	%
Net Realized and Unrealized Gains (Losses)
	Net realized gains				432,835				10,285				422,550				*
	Net change in unrealized appreciation or depreciation				(374,548	)			70,584				(445,132	)			*
		Total net gains			58,287				80,869				(22,582	)			*
Net income				$	99,587			$	119,621			$	(20,034	)			(17	)%
Diluted earnings per common share				$	0.70			$	0.88			$	(0.18	)			(20	)%
Weighted average common shares outstanding — diluted					141,738				135,579				6,159				5	%

*	Net realized gains (losses) and net change in unrealized appreciation or depreciation can fluctuate significantly from period to period. As a result, quarterly comparisons may not be meaningful.
**	Percentage change is not meaningful.

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				2006				2005
($ in millions)
Interest
	Private finance loans and debt securities			$	82.6			$	56.8
	CMBS and CDO portfolio				—				22.1
	Commercial mortgage loans				2.8				1.5
	Cash and cash equivalents and other				2.9				0.4
		Total interest			88.3				80.8
Dividends					0.6				4.1
		Total interest and dividends		$	88.9			$	84.9

			2006								2005
							Weighted								Weighted
							Average								Average
			Value				Yield(1)				Value				Yield(1)
($ in millions)
Private finance loans and debt securities			$	2,530.0				12.5	%		$	1,556.4				13.8	%
CMBS and CDO portfolio				—				—				693.2				13.9	%
Commercial mortgage loans				102.7				7.6	%			89.7				6.4	%
	Total		$	2,632.7				12.3	%		$	2,339.3				13.6	%

(1)

The weighted average yield on loans and debt securities is computed as the (a) annual stated interest plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities less the annual amortization of loan origination costs, divided by (b) total loans and debt securities at value. The weighted average yield is computed as of the balance sheet date.

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			2006				2005
($ in millions)
Structuring and diligence			$	11.0			$	1.3
Transaction and other services provided to portfolio companies				0.1				1.2
Management, consulting and other services provided to portfolio companies and guaranty fees				5.7				4.8
Other income				—				1.0
	Total fees and other income		$	16.8			$	8.3

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		2006				2005
($ in millions)
Advantage(1)		$	14.1			$	9.2
BLX		$	6.1			$	7.8

(1)	Includes income from the period we held a majority equity interest only. See “—Portfolio and Investment Activity” above for further discussion.

		At and for the
		Three Months Ended
		March 31,
		2006				2005
($ in millions)
Total outstanding debt		$	1,274.2			$	1,296.4
Average outstanding debt		$	1,491.5			$	1,125.0
Weighted average cost(1)			6.5	%			6.4	%

(1)	The weighted average annual interest cost is computed as the (a) annual stated interest rate on the debt plus the annual amortization of commitment fees and other facility fees that are recognized into interest expense over the contractual life of the respective borrowings, divided by (b) debt outstanding on the balance sheet date.

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			2006				2005
($ in millions)
Salaries and employee benefits(1)			$	17.3			$	12.0
Individual performance award (IPA)				1.7				1.9
IPA mark to market expense (benefit)				1.0				0.1
Individual performance bonus (IPB)				1.4				1.5
	Total employee expense		$	21.4			$	15.5
Number of employees at end of period				155				158

(1)	Salaries and employee benefits included accrued bonuses of $7.9 million and $3.7 million for the three months ended March 31, 2006 and 2005, respectively.

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			2006				2005
($ in millions)
Administrative expenses, excluding investigation related costs			$	8.6			$	8.5
Investigation related costs				2.9				12.3
	Total administrative expenses		$	11.5			$	20.8

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			2006				2005
($ in millions)
Income tax expense (benefit)			$	0.5			$	(0.3	)
Excise tax expense				8.4				—
	Income tax expense (benefit), including excise tax		$	8.9			$	(0.3	)

		For the Three
		Months Ended
		March 31,
		2006				2005
($ in millions)
Realized gains		$	436.5			$	14.7
Realized losses			(3.7	)			(4.4	)
Net realized gains		$	432.8			$	10.3

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			For the Three
			Months Ended
			March 31,
($ in millions)			2006				2005
Reversal of previously recorded unrealized appreciation associated with realized gains			$	(393.6	)		$	(9.9	)
Reversal of previously recorded unrealized depreciation associated with realized losses				2.7				4.8
	Total reversal		$	(390.9	)		$	(5.1	)

2006
Portfolio Company			Amount
Private Finance:
Advantage Sales & Marketing, Inc.			$	433.1
Nobel Learning Communities, Inc.				1.5
The Debt Exchange Inc.				1.1
Other				0.2
	Total private finance			435.9
Commercial Real Estate:
Other				0.6
	Total commercial real estate			0.6
Total gross realized gains			$	436.5

2005
Portfolio Company			Amount
Private Finance:
Polaris Pool Systems, Inc.			$	7.4
U.S. Security Holdings, Inc.				3.3
Oriental Trading Company, Inc.				1.0
Woodstream Corporation				0.9
DCS Business Services, Inc.				0.7
Other				0.9
	Total private finance			14.2
Commercial Real Estate:
Other				0.5
	Total commercial real estate			0.5
Total gross realized gains			$	14.7

2006
Portfolio Company				Amount
Private Finance:
Aspen Pet Products, Inc.				$	1.5
Nobel Learning Communities, Inc.					1.4
Other					0.5
	Total private finance				3.4
Commercial Real Estate:
Other					0.3
		Total commercial real estate			0.3
Total gross realized losses				$	3.7

2005
Portfolio Company			Amount
Private Finance:
Alderwoods Group, Inc.			$	0.8
Other				0.3
	Total private finance			1.1
Commercial Real Estate:
Other				3.3
	Total commercial real estate			3.3
Total gross realized losses			$	4.4

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		2006				2005
Number of private finance portfolio companies reviewed:
Duff & Phelps(1)			76				35
Houlihan Lokey			2				1
Total number of private finance portfolio companies reviewed			78				36
Percentage of private finance portfolio reviewed at value:
Duff & Phelps(1)			82.2	%			59.6	%
Houlihan Lokey			4.8	%			14.9	%
Percentage of private finance portfolio reviewed at value			87.0	%			74.5	%

(1)	During the third quarter of 2005, S&P Corporate Value Consulting merged with Duff & Phelps, LLC, a financial advisory and investment banking firm. The merged company operates under the name of Duff & Phelps, LLC.

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		2006(1)				2005(1)
($ in millions)
Net unrealized appreciation or depreciation		$	16.4			$	75.7
Reversal of previously recorded unrealized appreciation associated with realized gains			(393.6	)			(9.9	)
Reversal of previously recorded unrealized depreciation associated with realized losses			2.7				4.8
Net change in unrealized appreciation or depreciation		$	(374.5	)		$	70.6

(1)	The net change in unrealized appreciation or depreciation can fluctuate significantly from period to period. As a result, quarterly comparisons may not be meaningful.

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																Percent																Percent
				2005				2004				Change				Change				2004				2003				Change				Change
(in thousands, except per share amounts)
Interest and Related Portfolio Income
	Interest and dividends			$	317,153			$	319,642			$	(2,489	)			(1	)%		$	319,642			$	290,719			$	28,923				10	%
	Loan prepayment premiums				6,250				5,502				748				14	%			5,502				8,172				(2,670	)			(33	)%
	Fees and other income				50,749				41,946				8,803				21	%			41,946				30,338				11,608				38	%
		Total interest and related portfolio income			374,152				367,090				7,062				2	%			367,090				329,229				37,861				11	%
Expenses
	Interest				76,798				75,650				1,148				2	%			75,650				77,233				(1,583	)			(2	)%
	Employee				78,300				53,739				24,561				46	%			53,739				36,945				16,794				45	%
	Administrative				70,267				34,686				35,581				103	%			34,686				22,387				12,299				55	%
		Total operating expenses			225,365				164,075				61,290				37	%			164,075				136,565				27,510				20	%
		Net investment income before income taxes			148,787				203,015				(54,228	)			(27	)%			203,015				192,664				10,351				5	%
		Income tax expense (benefit), including excise tax			11,561				2,057				9,504				**				2,057				(2,466	)			4,523				**
		Net investment income			137,226				200,958				(63,732	)			(32	)%			200,958				195,130				5,828				3	%
Net Realized and Unrealized Gains (Losses)
	Net realized gains				273,496				117,240				156,256				133	%			117,240				75,347				41,893				56	%
	Net change in unrealized appreciation or depreciation				462,092				(68,712	)			530,804				*				(68,712	)			(78,466	)			9,754				*
		Total net gains (losses)			735,588				48,528				687,060				*				48,528				(3,119	)			51,647				*
		Net income		$	872,814			$	249,486			$	623,328				250	%		$	249,486			$	192,011			$	57,475				30	%
Diluted earnings per common share				$	6.36			$	1.88			$	4.48				238	%		$	1.88			$	1.62			$	0.26				16	%
Weighted average common shares outstanding — diluted					137,274				132,458				4,816				4	%			132,458				118,351				14,107				12	%

	*	Net change in unrealized appreciation or depreciation and net gains (losses) can fluctuate significantly from year to year.

**	Percentage change is not meaningful.

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				2005				2004				2003
($ in millions)
Interest
	Private finance loans and debt securities			$	251.0			$	195.2			$	177.3
	CMBS and CDO portfolio				29.4				93.3				86.2
	Commercial mortgage loans				7.6				9.4				9.0
	Cash and cash equivalents and other				9.4				3.1				2.8
		Total interest			297.4				301.0				275.3
Dividends					19.8				18.6				15.4
		Total interest and dividends		$	317.2			$	319.6			$	290.7

		2005				2004				2003
($ in millions)
Interest-bearing portfolio at value		$	2,211.4			$	2,301.2			$	1,891.9
Portfolio yield			12.8	%			14.0	%			14.7	%

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			2005				2004				2003
($ in millions)
Structuring and diligence			$	24.6			$	18.4			$	6.1
Transaction and other services provided to portfolio companies				2.9				3.2				4.5
Management, consulting and other services provided to portfolio companies and guaranty fees				20.8				17.4				18.7
Other income				2.4				2.9				1.0
	Total fees and other income		$	50.7			$	41.9			$	30.3

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		2005				2004				2003
($ in millions)
Advantage(1)(2)		$	37.4			$	21.3			$	—
BLX		$	37.5			$	50.0			$	46.7
Hillman(1)		$	—			$	2.5			$	9.7

(1)	Includes income from our controlled investments only.
(2)	In March 2006, we sold our majority interest in Advantage. See “Management Discussion and Analysis” above.

		2005				2004				2003
($ in millions)
Total outstanding debt		$	1,284.8			$	1,176.6			$	954.2
Average outstanding debt		$	1,087.1			$	985.6			$	943.5
Weighted average cost(1)			6.5	%			6.6	%			7.5	%

(1)	The weighted average annual interest cost is computed as the (a) annual stated interest rate on the debt plus the annual amortization of commitment fees and other facility fees that are recognized into interest expense over the contractual life of the respective borrowings, divided by (b) debt outstanding on the balance sheet date.

			2005				2004				2003
($ in millions)
Salaries and employee benefits			$	57.3			$	40.7			$	28.3
Individual performance award (IPA)				7.0				13.4				—
IPA mark to market expense (benefit)				2.0				(0.4	)			—
Individual performance bonus (IPB)				6.9				—				—
Transition compensation, net				5.1				—				—
Retention award				—				—				8.6
	Total employee expense		$	78.3			$	53.7			$	36.9
Number of employees at end of period				131				162				125

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			2005				2004				2003
($ in millions)
Administrative expenses, excluding investigation related costs			$	33.9			$	30.1			$	22.4
Investigation related costs				36.4				4.6				—
	Total administrative expenses		$	70.3			$	34.7			$	22.4

	•	a net increase in accounting, consulting, and other fees of $1.7 million. This increase is primarily attributable to fees associated with the implementation of the requirements under the Sarbanes-Oxley Act of 2002 (including Section 404) and valuation assistance,
	•	an increase in deal costs related to evaluating potential new investments of $1.6 million. Costs related to mezzanine lending are generally paid by the borrower, however, costs related to buyout investments are generally funded by us. Accordingly, if a prospective deal does not close, we incur expenses that are not recoverable,
	•	an increase in expenses related to portfolio development and workout activities of $1.5 million,
	•	an increase in rent of $1.4 million associated with the opening of an office in Los Angeles, CA and expanding our office space in Chicago, IL and New York, NY, and
	•	an increase in other expenses, including stock record expense, insurance premiums and directors’ fees of $1.1 million, and travel expenses of $0.8 million.

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			2005				2004				2003
($ in millions)
Income tax expense (benefit)			$	5.4			$	1.1			$	(2.5	)
Excise tax expense				6.2				1.0				—
	Income tax expense (benefit), including excise tax		$	11.6			$	2.1			$	(2.5	)

		2005				2004				2003
($ in millions)
Realized gains		$	343.1			$	267.7			$	94.3
Realized losses			(69.6	)			(150.5	)			(19.0	)
Net realized gains		$	273.5			$	117.2			$	75.3

			2005(1)				2004				2003
($ in millions)
Reversal of previously recorded net unrealized appreciation associated with realized gains			$	(108.0	)		$	(210.5	)		$	(78.5	)
Reversal of previously recorded net unrealized depreciation associated with realized losses				68.0				151.8				20.3
	Total reversal		$	(40.0	)		$	(58.7	)		$	(58.2	)

	(1)	Includes the reversal of net unrealized appreciation of $6.5 million on the CMBS and CDO assets sold and the related hedges. The net unrealized appreciation recorded on these assets prior to their sale was determined on an individual security-by-security basis. The net gain realized upon the sale of $227.7 million reflects the total value received for the portfolio as a whole.

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2005
Portfolio Company			Amount
Private Finance:
Housecall Medical Resources, Inc.			$	53.7
Fairchild Industrial Products Company				16.2
Apogen Technologies Inc.				9.0
Polaris Pool Systems, Inc.				7.4
MasterPlan, Inc.				3.7
U.S. Security Holdings, Inc.				3.3
Ginsey Industries, Inc.				2.8
E-Talk Corporation				1.6
Professional Paint, Inc.				1.6
Oriental Trading Company, Inc.				1.0
Woodstream Corporation				0.9
Impact Innovations Group, LLC				0.8
DCS Business Services, Inc.				0.7
Other				3.4
	Total private finance			106.1
Commercial Real Estate:
CMBS/CDO assets, net(1)				227.7
Other				9.3
	Total commercial real estate			237.0
Total gross realized gains			$	343.1

2004
Portfolio Company			Amount
Private Finance:
The Hillman Companies, Inc.			$	150.3
CorrFlex Graphics, LLC				25.7
Professional Paint, Inc.				13.7
Impact Innovations Group, LLC				11.1
The Hartz Mountain Corporation				8.3
Housecall Medical Resources, Inc.				7.2
International Fiber Corporation				5.2
CBA-Mezzanine Capital Finance, LLC				4.1
United Pet Group, Inc.				3.8
Oahu Waste Services, Inc.				2.8
Grant Broadcasting Systems II				2.7
Matrics, Inc.				2.1
SmartMail, LLC				2.1
Other				7.6
	Total private finance			246.7
Commercial Real Estate:
CMBS/CDO assets, net(1)				17.4
Other				3.6
	Total commercial real estate			21.0
Total gross realized gains			$	267.7

2003
Portfolio Company			Amount
Private Finance:
Blue Rhino Corporation			$	12.6
CyberRep				9.6
Morton Grove Pharmaceuticals, Inc.				8.5
Warn Industries, Inc.				8.0
Woodstream Corporation				6.6
Kirkland’s Inc.				3.0
Julius Koch USA, Inc.				2.8
GC-Sun Holdings II, LP				2.5
Interline Brands, Inc.				1.7
WyoTech Acquisition Corporation				1.3
Advantage Mayer, Inc.				1.2
Other				3.2
	Total private finance			61.0
Commercial Real Estate:
CMBS/CDO assets, net(1)				31.6
Other				1.7
	Total commercial real estate			33.3
Total gross realized gains			$	94.3

(1)	Net of net realized losses from related hedges of $0.7 million, $3.8 million, and $2.9 million for the years ended December 31, 2005, 2004, and 2003, respectively.

2005
Portfolio Company			Amount
Private Finance:
Norstan Apparel Shops, Inc.			$	18.5
Acme Paging, L.P.				13.8
E-Talk Corporation				9.0
Garden Ridge Corporation				7.1
HealthASPex, Inc.				3.5
MortgageRamp, Inc.				3.5
Maui Body Works, Inc.				2.7
Packaging Advantage Corporation				2.2
Other				3.7
	Total private finance			64.0
Commercial Real Estate:
Other				5.6
	Total commercial real estate			5.6
Total gross realized losses			$	69.6

2004
Portfolio Company				Amount
Private Finance:
American Healthcare Services, Inc.				$	32.9
The Color Factory, Inc.					24.5
Executive Greetings, Inc.					19.3
Sydran Food Services II, L.P.					18.2
Ace Products, Inc.					17.6
Prosperco Finanz Holding AG					7.5
Logic Bay Corporation					5.0
Sun States Refrigerated Services, Inc.					4.7
Chickasaw Sales & Marketing, Inc.					3.8
Sure-Tel, Inc.					2.3
Liberty-Pittsburgh Systems, Inc.					2.0
EDM Consulting, LLC					1.9
Pico Products, Inc.					1.7
Impact Innovations Group, LLC					1.7
Interline Brands, Inc.					1.3
Startec Global Communications Corporation					1.1
Other					2.7
	Total private finance				148.2
Commercial Real Estate:
Other					2.3
		Total commercial real estate			2.3
Total gross realized losses				$	150.5

2003
Portfolio Company			Amount
Private Finance:
Allied Office Products, Inc.			$	7.7
Candlewood Hotel Company				2.7
North American Archery, LLC				2.1
Other				0.5
	Total private finance			13.0
Commercial Real Estate:
Other				6.0
	Total commercial real estate			6.0
Total gross realized losses			$	19.0

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		2005																2004
		Q1				Q2				Q3				Q4				Q1				Q2				Q3				Q4
Number of private finance portfolio companies reviewed:
Duff & Phelps(1)			35				72				88				78				22				33				28				22
Houlihan Lokey(2)			1				1				3				3				—				—				—				—
Total number of private finance portfolio companies reviewed (3)			36				72				89				80				22				33				28				22
Percentage of private finance portfolio reviewed at value:
Duff & Phelps(1)			59.6	%			83.0	%			86.6	%			87.9	%			19.9	%			21.6	%			26.6	%			42.2	%
Houlihan Lokey(2)			14.9	%			14.9	%			18.9	%			23.5	%			—				—				—				—
Percentage of private finance portfolio reviewed at value (3)			74.5	%			83.0	%			89.3	%			92.4	%			19.9	%			21.6	%			26.6	%			42.2	%

(1)	During the third quarter of 2005, S&P Corporate Value Consulting merged with Duff & Phelps, LLC, a financial advisory and investment banking firm. The merged company operates under the name of Duff & Phelps, LLC.
(2)	Houlihan Lokey was initially engaged in the first quarter of 2005.
(3)	Duff & Phelps and Houlihan Lokey both reviewed Advantage Sales & Marketing, Inc. in Q2, Q3 and Q4 2005. In addition, Duff & Phelps and Houlihan Lokey both reviewed one other portfolio company in Q3 2005.

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		2005(1)				2004(1)				2003(1)
($ in millions)
Net unrealized appreciation or depreciation		$	502.1			$	(10.0	)		$	(20.3	)
Reversal of previously recorded unrealized appreciation associated with realized gains			(108.0	)			(210.5	)			(78.5	)
Reversal of previously recorded unrealized depreciation associated with realized losses			68.0				151.8				20.3
Net change in unrealized appreciation or depreciation		$	462.1			$	(68.7	)		$	(78.5	)

(1)	The net change in unrealized appreciation or depreciation can fluctuate significantly from year to year. As a result, annual comparisons may not be meaningful.

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			2005				2004				2003
($ in millions)
Net cash provided by (used in) operating activities			$	116.0			$	(179.3	)		$	80.3
Add: portfolio investments funded				1,668.1				1,472.4				930.6
	Total cash provided by operating activities before new investments		$	1,784.1			$	1,293.1			$	1,010.9

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($ in millions)		2006				2005				2004
Liquidity portfolio (including money market securities: 2006-$101.1; 2005-$100.0; 2004-$0)		$	202.4			$	200.3			$	—
Cash and investments in money market securities (including money market securities: 2006-$38.7; 2005-$22.0; 2004-$0)		$	43.5			$	53.3			$	57.2
Total assets		$	4,121.2			$	4,025.9			$	3,261.0
Total debt outstanding		$	1,274.2			$	1,284.8			$	1,176.6
Total shareholders’ equity		$	2,729.8			$	2,620.5			$	1,979.8
Debt to equity ratio			0.47				0.49				0.59
Asset coverage ratio(1)			317	%			309	%			280	%

(1)	As a business development company, we are generally required to maintain a minimum ratio of 200% of total assets to total borrowings.

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				2006																2005
																Annual																Annual
																Return to																Return to
												Annual				Cover												Annual				Cover
				Facility				Amount				Interest				Interest				Facility				Amount				Interest				Interest
				Amount				Outstanding				Cost(1)				Payments(2)				Amount				Outstanding				Cost(1)				Payments(2)
($ in millions)
Notes payable and debentures:
	Unsecured notes payable			$	1,164.7			$	1,164.7				6.2	%			1.8	%		$	1,164.5			$	1,164.5				6.2	%			1.8	%
	SBA debentures				16.5				16.5				7.4	%			0.0	%			28.5				28.5				7.5	%			0.1	%
		Total notes payable and debentures			1,181.2				1,181.2				6.2	%			1.8	%			1,193.0				1,193.0				6.3	%			1.9	%
Revolving line of credit					772.5				93.0				6.2	%(2)			0.2	%			772.5				91.8				5.6	%(3)			0.2	%
		Total debt		$	1,953.7			$	1,274.2				6.5	%(3)			2.0	%		$	1,965.5			$	1,284.8				6.5	%(4)			2.1	%

(1)	The weighted average annual interest cost is computed as the (a) annual stated interest on the debt plus the annual amortization of commitment fees and other facility fees that are recognized into interest expense over the contractual life of the respective borrowings, divided by (b) debt outstanding on the balance sheet date.
(2)	The annual portfolio return to cover interest payments is calculated as the March 31, 2006, and December 31, 2005, annualized cost of debt per class of financing outstanding divided by total assets at March 31, 2006, and December 31, 2005.
(3)	The annual interest cost reflects the interest rate payable for borrowings under the revolving line of credit. In addition to the current interest rate payable, there were annual costs of commitment fees and other facility fees of $3.3 million at both March 31, 2006, and December 31, 2005.
(4)	The annual interest cost for total debt includes the annual cost of commitment fees and other facility fees on the revolving line of credit regardless of the amount outstanding on the facility as of the balance sheet date.

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								Payments Due By Year
																												After
				Total				2006				2007				2008				2009				2010				2010
($ in millions)
Notes payable and debentures:
	Unsecured long-term notes payable			$	1,164.7			$	175.0			$	—			$	153.0			$	267.2			$	408.0			$	161.5
	SBA debentures				16.5				—				—				—				—				—				16.5
Revolving line of credit(1)					93.0				—				—				93.0				—				—				—
Operating leases					27.9				3.3				4.4				4.5				4.7				4.4				6.6
		Total contractual obligations		$	1,302.1			$	178.3			$	4.4			$	250.5			$	271.9			$	412.4			$	184.6

(1)	At March 31, 2006, $641.8 million remained unused and available, net of amounts committed for standby letters of credit of $37.7 million issued under the credit facility.

							Amount of Commitment Expiration Per Year
																											After
			Total				2006				2007				2008				2009				2010				2010
($ in millions)
Guarantees			$	154.0			$	1.3			$	0.6			$	3.0			$	143.6			$	—			$	5.5
Standby letters of credit(1)				37.7				0.1				—				37.6				—				—				—
	Total commitments		$	191.7			$	1.4			$	0.6			$	40.6			$	143.6			$	—			$	5.5

(1)	Standby letters of credit are issued under our revolving line of credit that expires in September 2008. Therefore, unless a standby letter of credit is set to expire at an earlier date, we have assumed that the standby letters of credit will expire contemporaneously with the expiration of our line of credit in September 2008.

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65

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		Total Amount
		Outstanding								Involuntary
		Exclusive of				Asset				Liquidating				Average
		Treasury				Coverage				Preference				Market Value
Class and Year		Securities(1)				Per Unit(2)				Per Unit(3)				Per Unit(4)
Unsecured Long-term Notes Payable
1996		$	0			$	0			$	—				N/A
1997			0				0				—				N/A
1998			180,000,000				2,734				—				N/A
1999			419,000,000				2,283				—				N/A
2000			544,000,000				2,445				—				N/A
2001			694,000,000				2,453				—				N/A
2002			694,000,000				2,704				—				N/A
2003			854,000,000				3,219				—				N/A
2004			981,368,000				2,801				—				N/A
2005			1,164,540,000				3,086				—				N/A
2006 (as of March 31, unaudited)			1,164,745,000				3,170				—				N/A
Small Business Administration Debentures (5)
1996		$	61,300,000			$	2,485			$	—				N/A
1997			54,300,000				2,215				—				N/A
1998			47,650,000				2,734				—				N/A
1999			62,650,000				2,283				—				N/A
2000			78,350,000				2,445				—				N/A
2001			94,500,000				2,453				—				N/A
2002			94,500,000				2,704				—				N/A
2003			94,500,000				3,219				—				N/A
2004			77,500,000				2,801				—				N/A
2005			28,500,000				3,086				—				N/A
2006 (as of March 31, unaudited)			16,500,000				3,170				—				N/A
Overseas Private Investment   Corporation Loan
1996		$	8,700,000			$	2,485			$	—				N/A
1997			8,700,000				2,215				—				N/A
1998			5,700,000				2,734				—				N/A
1999			5,700,000				2,283				—				N/A
2000			5,700,000				2,445				—				N/A
2001			5,700,000				2,453				—				N/A
2002			5,700,000				2,704				—				N/A
2003			5,700,000				3,219				—				N/A
2004			5,700,000				2,801				—				N/A
2005			0				0				—				N/A
2006 (as of March 31, unaudited)			0				0				—				N/A

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		Total Amount
		Outstanding								Involuntary
		Exclusive of				Asset				Liquidating				Average
		Treasury				Coverage				Preference				Market Value
Class and Year		Securities(1)				Per Unit(2)				Per Unit(3)				Per Unit(4)
Revolving Lines of Credit
1996		$	45,099,000			$	2,485			$	—				N/A
1997			38,842,000				2,215				—				N/A
1998			95,000,000				2,734				—				N/A
1999			82,000,000				2,283				—				N/A
2000			82,000,000				2,445				—				N/A
2001			144,750,000				2,453				—				N/A
2002			204,250,000				2,704				—				N/A
2003			0				0				—				N/A
2004			112,000,000				2,801				—				N/A
2005			91,750,000				3,086				—				N/A
2006 (as of March 31, unaudited)			93,000,000				3,170				—				N/A
Auction Rate Reset Note
1996		$	0			$	0			$	—				N/A
1997			0				0				—				N/A
1998			0				0				—				N/A
1999			0				0				—				N/A
2000			76,598,000				2,445				—				N/A
2001			81,856,000				2,453				—				N/A
2002			0				0				—				N/A
2003			0				0				—				N/A
2004			0				0				—				N/A
2005			0				0				—				N/A
2006 (as of March 31, unaudited)			0				0				—				N/A
Master Repurchase Agreement and Master Loan and Security Agreement
1996		$	85,775,000			$	2,485			$	—				N/A
1997			225,821,000				2,215				—				N/A
1998			6,000,000				2,734				—				N/A
1999			23,500,000				2,283				—				N/A
2000			0				0				—				N/A
2001			0				0				—				N/A
2002			0				0				—				N/A
2003			0				0				—				N/A
2004			0				0				—				N/A
2005			0				0				—				N/A
2006 (as of March 31, unaudited)			0				0				—				N/A
Senior Note Payable(6)
1996		$	20,000,000			$	2,485			$	—				N/A
1997			20,000,000				2,215				—				N/A
1998			0				0				—				N/A
1999			0				0				—				N/A
2000			0				0				—				N/A
2001			0				0				—				N/A
2002			0				0				—				N/A
2003			0				0				—				N/A
2004			0				0				—				N/A
2005			0				0				—				N/A
2006 (as of March 31, unaudited)			0				0				—				N/A

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		Total Amount
		Outstanding								Involuntary
		Exclusive of				Asset				Liquidating				Average
		Treasury				Coverage				Preference				Market Value
Class and Year		Securities(1)				Per Unit(2)				Per Unit(3)				Per Unit(4)
Bonds Payable
1996		$	54,123,000			$	2,485			$	—				N/A
1997			0				0				—				N/A
1998			0				0				—				N/A
1999			0				0				—				N/A
2000			0				0				—				N/A
2001			0				0				—				N/A
2002			0				0				—				N/A
2003			0				0				—				N/A
2004			0				0				—				N/A
2005			0				0				—				N/A
2006 (as of March 31, unaudited)			0				0				—				N/A
Redeemable Cumulative   Preferred Stock(5)(7)
1996		$	1,000,000			$	242			$	100				N/A
1997			1,000,000				217				100				N/A
1998			1,000,000				267				100				N/A
1999			1,000,000				225				100				N/A
2000			1,000,000				242				100				N/A
2001			1,000,000				244				100				N/A
2002			1,000,000				268				100				N/A
2003			1,000,000				319				100				N/A
2004			0				0				—				N/A
2005			0				0				—				N/A
2006 (as of March 31, unaudited)			0				0				—				N/A
Non-Redeemable Cumulative Preferred Stock(5)
1996		$	6,000,000			$	242			$	100				N/A
1997			6,000,000				217				100				N/A
1998			6,000,000				267				100				N/A
1999			6,000,000				225				100				N/A
2000			6,000,000				242				100				N/A
2001			6,000,000				244				100				N/A
2002			6,000,000				268				100				N/A
2003			6,000,000				319				100				N/A
2004			0				0				—				N/A
2005			0				0				—				N/A
2006 (as of March 31, unaudited)			0				0				—				N/A

(1)	Total amount of each class of senior securities outstanding at the end of the period presented.
(2)	The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the Asset Coverage Per Unit. The asset coverage ratio for a class of senior securities that is preferred stock is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by senior securities representing indebtedness, plus the involuntary liquidation preference of the preferred stock (see footnote 3). The Asset Coverage Per Unit for preferred stock is expressed in terms of dollar amounts per share.
(3)	The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it.
(4)	Not applicable, as senior securities are not registered for public trading.

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(5)	Issued by our small business investment company subsidiary to the Small Business Administration. These categories of senior securities are not subject to the asset coverage requirements of the 1940 Act. See “Certain Government Regulations — Small Business Administration Regulations.”
(6)	We were the obligor on $15 million of the senior notes. Our small business investment company subsidiary was the obligor on the remaining $5 million, which is not subject to the asset coverage requirements of the 1940 Act.
(7)	The Redeemable Cumulative Preferred Stock was reclassified to Other Liabilities on the accompanying financial statements during 2003 in accordance with SFAS No. 150.

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• Buyouts		• Recapitalizations
• Acquisitions		• Note purchases
• Growth		• Other types of financings

	•	Management team with meaningful equity ownership
	•	Dominant or defensible market position
	•	High return on invested capital
	•	Stable operating margins
	•	Ability to generate free cash flow
	•	Well-constructed balance sheet

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• Business Services		• Healthcare Services
• Financial Services		• Energy Services
• Consumer Products

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				At March 31, 2006
($ in millions)												Percentage of
Portfolio Company		Company Information		Cost				Value				Total Assets
Business Loan Express, LLC(1)		Originates, sells, and services primarily real estate secured small business loans specifically for businesses with financing needs of up to $4.0 million. Provides SBA 7(a) loans, conventional small business loans and small investment real estate loans. Nationwide non-bank preferred lender in the SBA’s 7(a) guaranteed loan program.		$	291.3			$	326.2				7.9%
Mercury Air Centers, Inc.		Owns and operates fixed base operations under long-term leases from local airport authorities, which generally consist of terminal and hangar complexes that service the needs of the general aviation community.		$	121.5			$	180.0				4.4%
Advantage Sales & Marketing, Inc. (1)(2)		Sales and marketing agency providing outsourced sales, merchandising, and marketing services to the consumer packaged goods industry.		$	151.3			$	164.3				4.0%
Hot Stuff Foods, LLC		Provider of food service programs predominately to convenient stores. Manufactures and distributes a broad line of branded food products for on-site preparation and sales through in-store Hot Stuff branded kitchens and “grab and go” service points.		$	155.3			$	155.3				3.8%
Financial Pacific Company		Specialized commercial finance company that leases business-essential equipment to small businesses nationwide.		$	95.4			$	127.7				3.1%
Norwesco, Inc.		Designs, manufactures and markets a broad assortment of polyethylene tanks primarily to the agricultural and septic tank markets.		$	120.1			$	126.5				3.1%
Meineke Car Care Centers, Inc.		Business format franchisor in the car care sector of the automotive aftermarket industry with approximately 900 locations worldwide.		$	126.5			$	125.7				3.0%
CR Brands, Inc.		Manufactures and markets consumer branded and private label household cleaning and laundry products.		$	109.1			$	113.2				2.7%

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				At March 31, 2006
($ in millions)												Percentage of
Portfolio Company		Company Information		Cost				Value				Total Assets
STS Operating, Inc.(3)		Distributes systems, components and engineering services for hydraulic, pneumatic, electronic and filtration systems.		$	10.1			$	104.4				2.5%
Healthy Pet Corp.		Veterinary hospitals offering medical and surgical services, specialized treatments, diagnostic services, pharmaceutical products, as well as routine health exams and vaccinations.		$	90.1			$	90.8				2.2%

(1)	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
(2)	In March 2006, we sold our majority interest in Advantage. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further detail.
(3)	In May 2006, we announced the completion of the sale of STS Operating, Inc. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further detail.

			2006				2005
Industry
Business services				33	%			45	%
Consumer products				25				14
Financial services				14				15
Industrial products				11				10
Retail				3				3
Healthcare services				2				2
Energy services				2				2
Broadcasting and cable				1				1
Other(1)				9				8
	Total			100	%			100	%

(1)	Includes investments in senior debt CDO and CLO funds. These funds invest in senior debt representing a variety of industries.

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	•	Initial investment screening;
	•	Initial investment committee approval;
	•	Due diligence, structuring and negotiation;
	•	Internal review of diligence results;
	•	Final investment committee approval;
	•	Approval by the Executive Committee of the Board of Directors (for all debt investments that represent a commitment equal to or greater than $20 million and every buyout transaction); and
	•	Funding of the investment (due diligence must be completed with final investment committee approval and Executive Committee approval, as needed, before funds are disbursed).

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	•	Our valuation process begins with each portfolio company or investment being initially valued by the deal team, led by the Managing Director or senior officer who is responsible for the portfolio company relationship.
	•	The CVO reviews the preliminary valuation as determined by the deal team.
	•	The CVO, members of the valuation team, and third-party consultants, as applicable (see below), meet with each Managing Director or responsible senior officer to discuss the preliminary valuation determined and documented by the deal team for each of their respective investments.
	•	The CEO, COO, CFO and the managing directors meet with the CVO to discuss the preliminary valuation results.
	•	Valuation documentation is distributed to the members of the Board of Directors.
	•	The Audit Committee of the Board of Directors meets with the third-party consultants (see below) to discuss the assistance provided and results.
	•	The Board of Directors and the CVO meet to discuss and review valuations.
	•	To the extent there are changes or if additional information is deemed necessary, a follow-up Board meeting may take place.
	•	The Board of Directors determines the fair value of the portfolio in good faith.

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							Percentage
Name and Address			Nature of its		Title of Securities		of Class
of Portfolio Company			Principal Business		Held by the Company		Held
PRIVATE FINANCE
Companies More Than 25% Owned
Acme Paging, L.P.(1)			Paging Services		Common Stock in Affiliate			80.0%
	6080 SW 40th Street, Suite 3
	Miami, FL 33155
Alaris Consulting, LLC(1)(2)			Consulting Firm		Equity Interests			100.0%
	360 W. Butterfield Road
	Suite 400
	Elmhurst, IL 60126
Avborne, Inc.(1)(6)			Aviation Services		Series B Preferred Stock			23.8%
	c/o Trivest, Inc.				Common Stock			27.2%
	7500 NW 26th Street
	Miami, FL 33122
Avborne Heavy Maintenance, Inc.(1)(6)			Aviation Services		Series A Preferred Stock			27.5%
	c/o Trivest, Inc.				Common Stock			27.5%
	7500 26th Street N.W.
	Miami, FL 33122
Business Loan Express, LLC(1)			Small Business Lender		Class A Equity Interests			100.0%
	1633 Broadway				Class B Equity Interests			100.0%
	New York, NY 10019				Class C Equity Interests			94.9%
					Equity Interest in BLX
					Subsidiary(3)			20.0%
Callidus Capital Corporation(1)(4)			Asset Manager and		Common stock			100.0%
	520 Madison Avenue		Finance Company
	New York, NY 10022
CR Brands, Inc.(1)			Household Cleaning		Common Stock			78.2%
	141 Venture Boulevard		Products
	Spartanburg, SC 29306

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							Percentage
Name and Address			Nature of its		Title of Securities		of Class
of Portfolio Company			Principal Business		Held by the Company		Held
Diversified Group Administrators, Inc.			Third Party		Series B Preferred Stock			64.7%
	201 Johnson Rd Building #1		Administrator for		Series A Preferred Stock			69.9%
	Houston, PA 15342		Self-funded Health		Common Stock			45.8%
			Benefit Plan
Financial Pacific Company(1)			Commercial Finance		Series A Preferred Stock			99.4%
	3455 South 344th Way, Suite 300		Leasing		Common Stock			99.4%
	Federal Way, WA 98001
ForeSite Towers, LLC(1)			Tower Leasing		Series A Preferred
	22 Iverness Center Parkway				Equity Interest			100.0%
	Suite 50				Series B Preferred
	Birmingham, AL 35242				Equity Interest			100.0%
					Series E Preferred Equity Interest			100.0%
					Common Equity Interest			77.3%
Global Communications, LLC(1)			Muzak Franchisee		Preferred Equity Interest			77.8%
	1000 North Dixie Highway				Options for Common
	West Palm Beach, FL 33401				Equity Interest			59.3%
Gordian Group, Inc.(1)			Financial Advisory Services		Common Stock			100.0%
	499 Park Avenue
	New York, NY 10022
Healthy Pet Corp.(1)			Comprehensive Veterinary		Common Stock			98.7%
	1720 Post Road		Services
	Fairfield, CT 06430
HMT, Inc.			Storage Tank		Class B Preferred Stock			33.5%
	4422 FM 1960 West		Maintenance &		Common Stock			25.0%
	Suite 350		Repair		Warrants to Purchase
	Houston, TX 77068				Common Stock			9.7%
Impact Innovations Group, LLC			Information Technology		Equity Interest in
	12 Piedmont Center, Suite 210		Services Provider		Affiliate(5)			50.0%
	Atlanta, GA 30305
Insight Pharmaceuticals Corporation(1)			Marketer of Over-The-		Preferred Stock			91.2%
	550 Township Line Road, Suite 300		Counter Pharmaceuticals		Common Stock			91.2%
	Blue Bell, PA 19422
Jakel, Inc.(1)			Manufacturer of Electric		Series A-1 Preferred Stock			32.3%
	400 Broadway		Motors and Blowers		Class B Common Stock			100.0%
	Highlands, IL 62249
Legacy Partners Group, LLC(1)			Merger and Acquisition		Equity Interests			100.0%
	520 Madison Avenue, 27th Floor		Advisor
	New York, NY 10022
Litterer Beteiligungs-GmbH			Scaffolding Company		Equity Interest			25.0%
	Uhlandstrasse 1
	69493 Hirschberg
	Germany
Mercury Air Centers, Inc.(1)			Fixed Base Operations		Series A Common Stock			100.0%
	1951 Airport Road				Common Stock			95.0%
	Atlanta, GA 30341
MVL Group, Inc.(1)			Market Research		Common Stock			64.9%
	1061 E. Indiantown Road		Services
	Suite 300
	Jupiter, FL 33477
Powell Plant Farms, Inc.(1)			Plant Producer &		Preferred Stock			100.0%
	Route 3, Box 1058		Wholesaler		Warrants to Purchase
	Troup, TX 75789				Common Stock			83.5%
Service Champ, Inc.(1)			Wholesale Distributor of		Common Stock			63.9%
	180 New Britain Boulevard		Auto Parts
	Chalfont, PA 18914

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							Percentage
Name and Address			Nature of its		Title of Securities		of Class
of Portfolio Company			Principal Business		Held by the Company		Held
Staffing Partners Holding
	Company, Inc.(1)		Temporary Employee		Series B Preferred Stock			71.4%
	104 Church Lane, #100		Services		Redeemable Preferred Stock			48.3%
	Baltimore, MD 21208				Class A-1 Common Stock			50.0%
					Class A-2 Common Stock			24.4%
					Class B Common Stock			48.8%
					Warrants to purchase
					Class B Common Stock			30.3%
Startec Global Communications
	Corporation(1)		Telecommunications		Common Stock			68.5%
	7631 Calhoun Drive		Services
	Rockville, MD 20850
STS Operating, Inc.
	(d/b/a SunSource Technology
	Services, Inc.)(1)(11)		Industrial Distribution		Common Stock			77.1%
	2301 Windsor Court				Options to Purchase
	Addison, IL 60101				Common Stock			1.0%
Triview Investments, Inc.(1)(10)			Multi-system Cable		Common Stock			99.5%
	1919 Pennsylvania Ave, N.W.		Operator and
	Washington, DC 20006		Pharmaceutical Marketer
Companies 5% to 25% Owned
Advantage Sales & Marketing, Inc.(1)			Sales and Marketing		Class A Equity Units			4.0%
	19100 Von Karman Avenue Suite 600		Agency
	Irvine, CA 92612
Air Evac Lifeteam LLC			Air Ambulance Service		Series A Preferred
	1448 W. Eighth Street				Equity Interest			6.6%
	West Plains, MO 65775				Series B Preferred Equity
					Interest			6.2%
BB&T Capital Partners/ Windsor
	Mezzanine Fund, LLC		Private Equity Fund		Class A Equity Interests			7.5%
	200 West Second Street, 4th Floor				Class A-1 Equity Interests			100.0%
	Winston-Salem, NC 27101
Becker Underwood, Inc.			Speciality Chemical		Common Stock			6.1%
	801 Dayton Avenue		Manufacturer
	Ames, IA 50010
BI Incorporated			Electronic Monitoring		Common Stock			7.1%
	1 North Franklin Street		Equipment
	Chicago, IL 60606
MedBridge Healthcare, LLC(1)			Sleep Diagnostic Facilities		Debt Convertible
	110 West North Street, Suite 100				into Equity Interests			75.0%
	Greenville, SC 29601				Class C Equity Interests			100.0%
Nexcel Synthetics, LLC			Manufacturer of Carpet		Class A Equity Interest			6.8%
	6076 Southern Industrial Drive		Backing		Class B Equity Interest			6.8%
	Birmingham, AL 35235
Pres Air Trol LLC			Pressure Switch		Class A Equity Interests			32.8%
	1009 W. Boston Post Road		Manufacturer
	Mamaroneck, NY 10543
Progressive International
	Corporation		Retail Kitchenware		Series A Redeemable
	6111 S. 228th Street				Preferred Stock			12.5%
	Kent, WA 98064				Class A Common Stock			1.0%
					Warrants to Purchase
					Class A Common Stock			42.0%
Soteria Imaging Services, LLC			Diagnostic Imaging		Class A Preferred Equity
	6009 Brownsboro Park Blvd., Suite H		Facilities Operator		Interest			10.8%
	Louisville, KY 40207

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							Percentage
Name and Address			Nature of its		Title of Securities		of Class
of Portfolio Company			Principal Business		Held by the Company		Held
Universal Environmental Services,
	LLC		Used Oil Recycling		Class A Preferred Equity
	411 Dividend Drive				Interests			15.0%
	Peachtree City, GA 30269				Class B Preferred Equity
					Interests			15.0%
Companies Less Than 5% Owned
Advanced Circuits, Inc.			Printed Circuit Boards		Common Stock			3.0%
	30 South Wacker Drive, Suite 3700		Manufacturer
	Chicago, IL 60606
Amerex Group, LLC			Supplier of Outerwear		Class B Equity Interests			100.0%
	1500 Rahway Avenue		Apparel
	Avenal, NJ 07001
Benchmark Medical, Inc.			Outpatient Physical		Warrant to Purchase
	101 Lindin Drive, Suite 420		Therapy Services		Common Stock			2.5%
	Malvern, PA 19355
Border Foods, Inc.			Mexican Ingredient & Food		Series A Preferred Stock			9.4%
	1750 Valley View Lane, Suite 350		Product Manufacturer		Series B-2 Preferred Stock			100.0%
	Farmer’s Branch, TX 75234				Warrants to Purchase
					Series B-2 Preferred Stock			100.0%
					Common Stock			12.4%
					Warrants to Purchase
					Common Stock			73.8%
Callidus Debt Partners CLO Fund III,
	Ltd.(7)		Senior Debt Fund		Preferred Shares			68.4%
	135 Lasalle Street
	Chicago, IL 60694
Camden Partners Strategic Fund II, L.P.			Private Equity Fund		Limited Partnership
	One South Street				Interest			3.9%
	Suite 2150
	Baltimore, MD 21202
Catterton Partners V, L.P.			Private Equity Fund		Limited Partnership
	7 Greenwich Office Park				Interest			0.8%
	Greenwich, CT 06830
Centre Capital Investors IV, LP			Private Equity Fund		Limited Partnership
	30 Rockefeller Plaza, 50th Floor				Interest			0.6%
	New York, NY 10020
Commercial Credit Group, Inc.			Equipment Finance		Series C Preferred Stock			100.0%
	212 South Tyron Street, Suite 1400		and Leasing		Warrants to Purchase
	Charlotte, NC 28281				Common Stock			28.5%
Component Hardware Group, Inc.			Designer & Developer		Class A Preferred Stock			7.4%
	1890 Swarthmore Ave.		of Hardware		Class B Common Stock			13.5%
	Lakewood, NJ 08701		Components
Cooper Natural Resources, Inc.			Sodium Sulfate Producer		Series A Convertible
	P.O. Box 1477				Preferred Stock			100.0%
	Seagraves, TX 79360				Warrants to Purchase
					Series A Convertible
					Preferred Stock			36.8%
					Warrants to Purchase
					Common Stock			6.5%
Coverall North America, Inc.			Contract Cleaning Services		Preferred Stock			100.0%
	5201 Congress Avenue, Suite 275				Warrant to Purchase
	Boca Raton, FL 33487				Common Stock			21.4%
Distant Lands Trading Co.			Provider of Premium		Class A Common Stock			4.4%
	11754 State Highway 64 West		Coffee and Coffee Beans
	Tyler, TX 75704
DVS VideoStream, LLC			Media Technical Post-		Debt Convertible into
	2600 West Olive Avenue		Production Service Provider		Equity Interests			20.8%
	Burbank, CA 91505

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							Percentage
Name and Address			Nature of its		Title of Securities		of Class
of Portfolio Company			Principal Business		Held by the Company		Held
Dynamic India Fund IV			Private Equity Fund		Equity Interests			2.4%
	3rd Floor, Les Cascades Edith
	Cavell Street
	Port Luis Mauritius
eCentury Capital Partners, L.P.			Private Equity Fund		Limited Partnership
	8270 Greensboro Drive				Interest			25.0%
	Suite 1025
	McLean, VA 22102
Elexis Beta GmbH			Distance Measurement		Options to Purchase
	Ulmenstraße 22		Device		Shares			9.8%
	60325 Frankfurt am Main		Manufacturer
	Germany
Frozen Specialties, Inc.			Private Label Frozen		Warrants to Purchase
	720 Barre Road		Food Manufacturer		Class A Common Stock			2.7%
	Archbold, OH 43502
Geotrace Technologies, Inc.			Oil and Gas Reservoir		Warrant to Purchase
	1011 Highway 6 South, Suite 220		Analysis		Preferred Stock			8.4%
	Houston, TX 77077				Warrant to Purchase
					Common Stock			8.4%
Grotech Partners, VI, L.P.			Private Equity Fund		Limited Partnership
	c/o Grotech Capital Group				Interest			2.4%
	9690 Deereco Road
	Suite 800
	Timonium, MD 21093
Havco Wood Products LLC			Hardwood Flooring		Equity Interests			4.5%
	P.O. BOX 1342		Products Manufacturer
	Cape Girardeau, MO 63702
Homax Holdings, Inc.			Supplier of Branded		Preferred Stock			0.1%
	468 West Horton Road		Consumer Products		Common Stock			0.1%
	Bellingham, WA 98226				Warrant to Purchase
					Preferred Stock			1.1%
					Warrant to Purchase
					Common Stock			1.1%
Hot Stuff Foods, LLC			Food services to		Class B Common Stock (9)			100.0%
	2930 W Maple Street, Box 85210		Convenience Stores		Warrants to Purchase
	Sioux Falls, SD 57118				Common Stock			51.0%
International Fiber Corporation			Cellulose and Fiber		Series A Preferred Stock			4.7%
	50 Bridge Street		Producer
	North Tonawanda, NY 14120
Kodiak Fund LP			Private Equity Fund		Limited Partnership
	2107 Wilson Boulevard, Suite 410				Interests			4.0%
	Arlington, VA 22201
MedAssets, Inc.			Healthcare Outsourcing		Series B Convertible
	100 Northpoint Center				Preferred Stock			7.8%
	East #150				Warrants to Purchase
	Alpharetta, GA 30022				Common Stock			0.6%
Meineke Car Care Centers, Inc.			Franchisor of Car Care		Class B Common
	128 South Tryon Street		Centers		Stock(9)			99.6%
	Suite 900				Warrant to Purchase
	Charlotte, NC 28202				Class A Common Stock			51.0%
MHF Logistical Solutions, Inc.			Third-Party		Series A Preferred Stock			3.6%
	800 Cranberry Woods Drive		Environmental Logistics		Common Stock			3.6%
	Suite 450
	Cranberry Township, PA 16066
Mid-Atlantic Venture Fund IV, L.P.			Private Equity Fund		Limited Partnership
	128 Goodman Drive				Interest			6.7%
	Bethlehem, PA 18015
Mogas Energy, LLC			Natural Gas Pipeline		Warrants to Purchase
	13137 Thunderhead Falls Lane		Operator		Equity Interests			20.0%
	Rapid City, SD 57702

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							Percentage
Name and Address			Nature of its		Title of Securities		of Class
of Portfolio Company			Principal Business		Held by the Company		Held
Network Hardware Resale, Inc.			Provider of Pre-Owned		Debt Convertible into
	26 Castilian Drive, Suite A		Networking Equipment		Common Stock			21.8%
	Santa Barbara, CA 93117
Norwesco, Inc.			Polyethylene Tanks		Class B Nonvoting
	P.O. BOX 439		Manufacturer		Common Stock(9)			96.3%
	4365 Steiner St.				Warrants to Purchase
	St. BoniFacius, MN 55375				Class A Common Stock			50.2%
Novak Biddle Venture Partners III, L.P.			Private Equity Fund		Limited Partnership
	7501 Wisconsin Avenue				Interest			2.5%
	East Tower, Suite 1380
	Bethesda, MD 20814
Odyssey Investment Partners Fund III LP			Private Equity Fund		Limited Partnership
	280 Park Avenue, 38th Floor				Interest			0.7%
	West Tower
	New York, NY 10017
Opinion Research Corporation			Corporate Marketing		Warrants to Purchase
	P.O. Box 183		Research Firm		Common Stock			6.4%
	Princeton, NJ 08542
Oriental Trading Company, Inc.			Direct Marketer		Class A Common Stock			1.7%
	108th Street, 4206 South		of Toys
	Omaha, NE 68137
Palm Coast Data, LLC			Magazines and		Class B Common Stock(9)			100.0%
	11 Commerce Blvd		Subscribers Relationship		Warrants to Purchase
	Palm Coast, FL 32164		Management		Class A Common Stock			56.9%
Performant Financial Corporation			Collections and		Common Stock			2.9%
	333 N. Canyon Pkwy Suite 100		Default Prevention
	Livermore, CA 94551		Services
Pro Mach, Inc.			Packaging Machinery		Equity Interests			2.3%
	1000 Abernathy Road, Suite 1110		Manufacturer
	Atlanta, GA 30328
S.B. Restaurant Company
	(d/b/a Elephant Bar)		Restaurants		Series B Convertible
	6326-A Lindmar Drive				Preferred Stock			2.5%
	Goleta, CA 93117				Warrant to Purchase
					Series A Common Stock			13.1%
SBBUT, LLC			Holding Company		Equity Interests in
	52 River Road				Affiliate Company			10.4%
	Stowe, VT 05672
Soff-Cut Holdings, Inc.			Concrete Sawing		Series A Preferred Stock			14.3%
	1112 Olympic Drive		Equipment Manufacturer		Common Stock			2.7%
	Corona, CA 91719
SPP Mezzanine Fund, L.P.			Private Equity Fund		Limited Partnership
	330 Madison Avenue, 28th Floor				Interest			35.7%
	New York, NY 10017
Tradesmen International, Inc.			Outsourced Skilled		Warrant to Purchase
	9760 Shepard Road		Construction Craftsmen		Common Stock			4.5%
	Macedonia, OH 44056
TransAmerican Auto Parts, LLC			Auto Parts and		Preferred Equity Interests			1.4%
	801 West Artesia Blvd		Accessories Retailer		Common Equity Interests			1.4%
	Compton, CA 90220		and Wholesaler
United Site Services, Inc.			Portable Rest Room		Common Stock			1.3%
	200 Friberg Parkway, Suite 4000		Services
	Westborough, MA 01582
Updata Venture Partners II, L.P.			Private Equity Fund		Limited Partnership
	11600 Sunrise Valley Drive				Interest			15.0%
	Reston, VA 20191
Venturehouse-Cibernet Investors, LLC			Third-Party Billing		Equity Interest			3.3%
	509 Seventh Street, NW
	Washington, DC 20004

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							Percentage
Name and Address			Nature of its		Title of Securities		of Class
of Portfolio Company			Principal Business		Held by the Company		Held
Venturehouse Group, LLC			Private Equity Fund		Common Equity Interest			3.1%
	1780 Tysons Boulevard, Suite 400
	McLean, VA 22102
VICORP Restaurants, Inc.			Restaurants		Warrant to Purchase
	400 W. 48th Avenue				Preferred Stock			1.0%
	Denver, CO 80216				Warrant to Purchase
					Common Stock			3.4%
Walker Investment Fund II, LLLP			Private Equity Fund		Limited Partnership
	3060 Washington Road				Interest			5.1%
	Suite 200
	Glenwood, MD 21738
Wear Me Apparel Corporation			Marketer of Children’s		Warrant to Purchase
	31 West 34th Street		Apparel		Common Stock			2.0%
	New York, NY 10001
Woodstream Corporation			Pest Control		Common Stock			4.4%
	69 North Locust Street		Manufacturer		Warrants to Purchase
	Lititz, PA 17543				Common Stock			3.7%
COMMERCIAL REAL ESTATE FINANCE(8)
8830 Macon Highway Holding Company,
	LLC(1)		Mobile Home Park		Equity Interests			100.0%
	1919 Pennsylvania Ave, N.W.
	Washington, DC 20006
WSALD-CEH, LLC(1)			Commercial Real		Equity Interest			50.0%
	1919 Pennsylvania Ave, N.W.		Estate Developer
	Washington, DC 20006
NPH, Inc.(1)			Commercial Real		Common Stock			100.0%
	1919 Pennsylvania Ave, N.W.		Estate Developer
	Washington, DC 20006
Stemmons Freeway Hotel, LLC(1)			Hotel		Equity Interests			100.0%
	1919 Pennsylvania Ave, N.W.
	Washington, DC 20006
Timarron Capital, Inc.(1)			Commercial Real		Common Stock			100.0%
	804 Worthington Court		Estate Loan Origination
	Southlake, TX 76092		and Securitization
WSA Commons LLC			Residential Real		Equity Interests			50.0%
	421 East 4th Street		Estate Development
	Cincinnati, OH 45202
Van Ness Hotel, Inc.(1)			Hotel		Common Stock			100.0%
	1919 Pennsylvania Ave, N.W.
	Washington, DC 20006

(1)	The portfolio company is deemed to be an affiliated person under the 1940 Act because we hold one or more seats on the portfolio company’s board of directors, are the general partner, or are the managing member.
(2)	Alaris Consulting, LLC owns 95% of Alaris Consulting, Inc.
(3)	Included in Class C Equity Interests in the Consolidated Statement of Investments.
(4)	Callidus Capital Corporation owns 80% of Callidus Capital Management, LLC.
(5)	The affiliate holds subordinated debt issued by Impact Innovations Group, LLC. We made an investment in and exchanged our existing subordinated debt for equity interests in the affiliate.
(6)	Avborne, Inc. and Avborne Heavy Maintenance, Inc. are affiliated companies.
(7)	Callidus Capital Management, LLC is the manager of the fund (see Note 4 above).
(8)	These portfolio companies are included in the Commercial Real Estate Finance — Equity Interests in the Consolidated Statement of Investments.
(9)	Common stock is non-voting. In addition to non-voting stock ownership, we have an option to acquire a majority of the voting securities of the portfolio company at fair market value.

(10)	Triview Investments Inc. holds investments in Longview Cable & Data, LLC and Triax Holdings, LLC.
(11)	In May 2006, we announced the completion of the sale of STS Operating, Inc. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further detail.

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94

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95

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96

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								Director				Expiration
Name		Age				Position		Since(1)				of Term
Interested Directors
William L. Walton			56			Chairman, Chief Executive Officer and President			1986				2007
Joan M. Sweeney			46			Chief Operating Officer			2004				2007
Robert E. Long			75			Director			1972				2007
Independent Directors
Ann Torre Bates			48			Director			2003				2009
Brooks H. Browne			56			Director			1990				2007
John D. Firestone			62			Director			1993				2008
Anthony T. Garcia			49			Director			1991				2008
Edwin L. Harper			64			Director			2006				2009
Lawrence I. Hebert			59			Director			1989				2008
John I. Leahy			75			Director			1994				2009
Alex J. Pollock			63			Director			2003				2009
Marc F. Racicot			57			Director			2005				2008
Guy T. Steuart II			74			Director			1984				2009
Laura W. van Roijen			54			Director			1992				2008

(1)	Includes service as a director of any of the predecessor companies of Allied Capital.

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Name		Age				Position
William L. Walton			56			Chairman, Chief Executive Officer and President
Joan M. Sweeney			46			Chief Operating Officer
Kelly A. Anderson			52			Executive Vice President and Treasurer
Scott S. Binder			51			Chief Valuation Officer
Michael J. Grisius			42			Managing Director
Jeri J. Harman			48			Managing Director
Thomas C. Lauer			39			Managing Director
Robert D. Long			49			Managing Director
Justin S. Maccarone			47			Managing Director
Diane E. Murphy			52			Executive Vice President and Director of Human Resources
Penni F. Roll			40			Chief Financial Officer
Daniel L. Russell			41			Managing Director
John M. Scheurer			53			Managing Director
John D. Shulman			43			Managing Director
Suzanne V. Sparrow			40			Chief Compliance Officer, Executive Vice President and Secretary

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99

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100

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101

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102

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103

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104

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105

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										Pension or
										Retirement
										Benefits
		Aggregate				Securities				Accrued as				Directors
		Compensation				Underlying				Part of				Fees Paid
		from the				Options/				Company				by the
Name		Company (1,2)				SARs (3)				Expenses (1)				Company (4)
Interested Directors:
William L. Walton, Chairman & CEO		$	7,381,605				—			$	—			$	—
Joan M. Sweeney, Chief Operating Officer			4,119,587				—				—
Robert E. Long, Director			84,000				5,000				—				84,000
Independent Directors:
Ann Torre Bates, Director			88,500				5,000				—				88,500
Brooks H. Browne, Director			113,500				5,000				—				113,500
John D. Firestone, Director			66,000				5,000				—				66,000
Anthony T. Garcia, Director			107,000				5,000				—				107,000
Lawrence I. Hebert, Director			101,000				5,000				—				101,000
John I. Leahy, Director			112,500				5,000				—				112,500
Alex J. Pollock, Director			73,500				5,000				—				73,500
Marc F. Racicot, Director			50,000				10,000				—				50,000
Guy T. Steuart II, Director			83,500				5,000				—				83,500
Laura W. van Roijen, Director			92,000				5,000				—				92,000
Executive Officers:
John M. Scheurer, Managing Director			4,167,568				50,000				—				—

(1)	The following table provides detail as to aggregate compensation paid for 2005 to our three highest paid executive officers, including the Chief Executive Officer:

																		Other
		Salary				Bonus (5)				IPA				IPB				Benefits
Mr. Walton		$	1,528,846			$	2,750,000			$	1,475,000			$	1,475,000			$	152,759
Ms. Sweeney			1,019,231				1,500,000				750,000				750,000				100,356
Mr. Scheurer			611,538				2,350,000				550,000				550,000				106,030

For 2005, the Company established individual performance awards (IPA) and individual performance bonuses (IPB). See also “Individual Performance Award” and “Individual Performance Bonus”. Included for each executive officer in “Other Benefits” is, among other things, an employer contribution to the 401(k) Plan, a contribution to the Deferred Compensation Plan I, amounts attributed to travel of non-employee family members when they have accompanied a Compensated Person on a business trip, and health and dental insurance. See also “Employment Agreements.”

(2)	Messrs. Walton, Pollock and Scheurer and Ms. Sweeney deferred $1.6 million, $28 thousand, $0.6 million, and $0.8 million, respectively, of the compensation earned during the year ended December 31, 2005.
(3)	See “— Stock Option Awards” for terms of options granted in 2005.
(4)	Consists only of directors’ fees paid by Allied Capital for 2005. Such fees are also included in the column titled “Aggregate Compensation from the Company”.
(5)	Mr. Scheurer’s 2005 bonus included two one-time lump sum bonuses totaling $1,500,000. See “Retention Agreements” for further discussion.

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																						Potential Realizable
																						Value at Assumed
																						Annual Rates
		Number of																				of Stock Price
		Securities				Percent of																Appreciation
		Underlying				Total Options				Exercise												Over 10-Year Term (2)
		Options				Granted in				Price Per				Market				Expiration
Name		Granted				2005 (1)				Share				Value				Date				5%				10%
Interested Directors:
William L. Walton(3)			—				—				—				—				—				—				—
Joan M. Sweeney(3)			—				—				—				—				—				—				—
Robert E. Long(4)			5,000				0.07	%		$	26.80			$	26.80				5/17/2015			$	84,272			$	213,561
Independent Directors:
Ann Torre Bates(4)			5,000				0.07				26.80				26.80				5/17/2015				84,272				213,561
Brooks H. Browne(4)			5,000				0.07				26.80				26.80				5/17/2015				84,272				213,561
John D. Firestone(4)			5,000				0.07				26.80				26.80				5/17/2015				84,272				213,561
Anthony T. Garcia(4)			5,000				0.07				26.80				26.80				5/17/2015				84,272				213,561
Lawrence I. Hebert(4)			5,000				0.07				26.80				26.80				5/17/2015				84,272				213,561
John I. Leahy(4)			5,000				0.07				26.80				26.80				5/17/2015				84,272				213,561
Alex J. Pollock(4)			5,000				0.07				26.80				26.80				5/17/2015				84,272				213,561
Marc F. Racicot(4)			10,000				0.15				26.80				26.80				5/17/2015				168,544				427,123
Guy T. Steuart, II(4)			5,000				0.07				26.80				26.80				5/17/2015				84,272				213,561
Laura W. van Roijen(4)			5,000				0.07				26.80				26.80				5/17/2015				84,272				213,561
Executive Officer:
John M. Scheurer(5)			50,000				0.73				27.51				27.51				8/3/2015				865,045				2,192,193

(1)	In 2005, we granted stock options to purchase a total of 6,815,000 shares.
(2)	Potential realizable value is calculated on 2005 stock options granted, and is net of the option exercise price but before any tax liabilities that may be incurred. These amounts represent certain assumed rates of appreciation, as mandated by the Commission. Actual gains, if any, on stock option exercises are dependent on the future performance of the shares, overall market conditions, and the continued employment by Allied Capital of the option holder. The potential realizable value will not necessarily be realized.
(3)	In 2005, the Compensation Committee accepted Mr. Walton’s and Ms. Sweeney’s voluntary waiver to receive stock option grants so that there would be sufficient stock option reserves to make market competitive stock option grants to other officers.
(4)	The options granted vest immediately.
(5)	The options granted vest ratably over a three-year period. In the event of a change of control, all outstanding options will become fully vested and exercisable as of the change of control.

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										Number of Securities								Value of Unexercised In-the-
										Underlying Unexercised								Money Options as of
		Shares								Options as of 12/31/05								12/31/05 (3)
		Acquired on				Value
Name		Exercise				Realized (1)				Exercisable				Unexercisable				Exercisable				Unexercisable
Interested Directors:
William L. Walton(2)			16,821			$	139,255				2,623,280				200,000			$	23,264,055			$	78,000
Joan M. Sweeney			0				0				1,478,220				150,000				12,304,665				58,500
Robert E. Long			5,000				48,650				35,000				0				199,270				0
Independent Directors:
Ann Torre Bates			0				0				20,000				0				115,000				0
Brooks H. Browne			0				0				40,000				0				258,620				0
John D. Firestone			0				0				40,000				0				258,620				0
Anthony T. Garcia			0				0				40,000				0				258,620				0
Lawrence I. Hebert			0				0				40,000				0				258,620				0
John I Leahy			2,500				25,125				37,500				0				228,945				0
Alex J. Pollock			1,000				4,380				9,000				0				32,570				0
Marc F. Racicot			0				0				10,000				0				25,700				0
Guy T. Steuart II			0				0				40,000				0				258,620				0
Laura W. van Roijen			0				0				40,000				0				258,620				0
Executive Officer:
John M. Scheurer			109,393				1,152,293				923,670				125,000				6,890,617				122,250

(1)	Value realized is calculated as the closing market price on the preceding date prior to the date of exercise, net of option exercise price, but before any tax liabilities or transaction costs. This is the deemed market value, which may actually be realized only if the shares are sold at that price.
(2)	Mr. Walton did not sell any of the shares he received upon the exercise of stock options.
(3)	Value of unexercised options is calculated as the closing market price on December 30, 2005, ($29.37), net of the option exercise price, but before any tax liabilities or transaction costs. “In-the-Money Options” are options with an exercise price that is less than the market price as of December 30, 2005.

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110

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111

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112

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			2006
			Individual
Name and Position			Performance Award(1)
William L. Walton, Chief Executive Officer			$	1,475,000
Joan M. Sweeney, Chief Operating Officer				750,000
John M. Scheurer, Managing Director				550,000
All Executive Officers as a Group (excluding the Compensated Persons)				2,690,500
All Non-Executive Officers as a Group				2,617,500
	Total		$	8,083,000

(1)	Represents IPAs expected to be expensed for financial reporting purposes for 2006 for these officers, assuming each participant remains employed by us throughout the year. These amounts are subject to change if there is a change in the composition of the pool of award recipients during the year, or if the Compensation Committee determines that a change to an individual award is needed.

			2006
			Individual
Name and Position			Performance Bonus(1)
William L. Walton, Chief Executive Officer			$	1,475,000
Joan M. Sweeney, Chief Operating Officer				750,000
John M. Scheurer, Managing Director				550,000
All Executive Officers as a Group (excluding the Compensated Persons)				2,690,500
All Non-Executive Officers as a Group				2,617,500
	Total		$	8,083,000

(1)	Represents IPBs expected to be expensed for financial reporting purposes for 2006 for these officers, assuming each recipient remains employed by us throughout the year. These amounts are subject to change if there is a change in the composition of the pool of award recipients during the year or if the Compensation Committee determines that a change to an individual award is needed.

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114

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115

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116

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Dollar Range of

Number of

Equity Securities

Name of

Shares Owned

Percentage

Beneficially Owned

Beneficial Owner

Beneficially(1)

of Class(2)

by Directors(3)

Capital Research and Management Company

7,646,020

(4)

5.1

%

333 South Hope Street, 55th Floor

Los Angeles, CA 90071-1447

Interested Directors:

William L. Walton

3,590,569

(5,6,7)

2.5

%

over $100,000

Joan M. Sweeney

1,964,504

(5)

1.4

%

over $100,000

Robert E. Long

56,111

(8)

*

over $100,000

Independent Directors:

Ann Torre Bates

29,250

(7,8)

*

over $100,000

Brooks H. Browne

88,713

(7,8)

*

over $100,000

John D. Firestone

77,426

(7,8)

*

over $100,000

Anthony T. Garcia

103,512

(8)

*

over $100,000

Edwin L. Harper

10,400

(8,15)

*

over $100,000

Lawrence I. Hebert

57,800

(8,14)

*

over $100,000

John I. Leahy

62,318

(8)

*

over $100,000

Alex J. Pollock

32,265

(7,8,9)

*

over $100,000

Marc F. Racicot

15,000

(8)

*

over $100,000

Guy T. Steuart II

369,144

(8,10)

*

over $100,000

Laura W. van Roijen

78,925

(7,8)

*

over $100,000

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										Dollar Range of
		Number of								Equity Securities
Name of		Shares Owned				Percentage				Beneficially Owned
Beneficial Owner		Beneficially(1)				of Class(2)				by Directors(3)
Executive Officers:
Kelly A. Anderson			339,362	(5)			*
Scott S. Binder			781,975	(5,7,11)			*
Michael J. Grisius			781,994	(5,7)			*
Jeri J. Harman			301,861	(5)			*
Thomas C. Lauer			158,880	(5,7)			*
Robert D. Long			985,860	(5,7,12)			*
Justin S. Maccarone			281,154	(5)			*
Diane E. Murphy			349,049	(5)			*
Penni F. Roll			813,669	(5)			*
Daniel L. Russell			435,872	(5)			*
John M. Scheurer			1,356,265	(5)			*
John D. Shulman			998,195	(5)			*
Suzanne V. Sparrow			535,904	(5,6)			*
All directors and executive officers as a group (27 in number)			14,343,294	(13)			9.5	%

	(1)	Beneficial ownership has been determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934.
	(2)	Based on a total of 139,984,212 shares of our common stock issued and outstanding on June 6, 2006, and the number of shares of our common stock issuable upon the exercise of stock options exercisable within 60 days held by each executive officer and non-officer director, which totals 11,414,605 in the aggregate.
	(3)	Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) of the Securities Exchange Act of 1934.
	(4)	Information regarding share ownership was obtained from the Schedule 13F-HR that Capital Research and Management Company filed with the SEC on May 12, 2006.
	(5)	Share ownership for the following directors and executive officers includes:

						Owned
						Through				Options
						Deferred				Exercisable
		Owned				Compensation				Within 60 Days				Allocated to
		Directly				Plans(16)				of June 6, 2006				401(k) Plan
Interested Directors:
William L. Walton			467,264				191,568				2,718,634				7,662
Joan M. Sweeney			298,966				95,789				1,553,220				16,529
Executive Officers:
Kelly A. Anderson			112,182				9,204				211,706				6,270
Scott S. Binder			91,260				45,975				642,717				2,023
Michael J. Grisius			68,938				35,525				658,387				19,144
Jeri J. Harman			—				10,194				291,667				—
Thomas C. Lauer			4,421				3,558				150,246				655
Robert D. Long			21,000				38,328				922,354				4,178
Justin S. Maccarone			8,400				6,087				266,667				—
Diane E. Murphy			6,244				18,520				324,272				13
Penni F. Roll			96,472				31,297				674,751				11,149
Daniel L. Russell			1,060				18,966				415,846				—
John M. Scheurer			266,497				72,312				977,837				39,619
John D. Shulman			4,799				36,294				957,102				—
Suzanne V. Sparrow			80,963				9,139				232,699				27,087

118

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	(6)	Includes 213,103 shares held by the 401(k) Plan, of which Mr. Walton and Ms. Sparrow are sub-trustees of the fund holding our shares. The sub-trustees disclaim beneficial ownership of such shares.
	(7)	Includes certain shares held in IRA or Keogh accounts: Walton — 12,015 shares; Bates — 4,250 shares; Browne — 12,280 shares; Firestone — 3,415 shares; Pollock — 1,000 shares; van Roijen — 8,469 shares; Binder — 273 shares; Grisius — 1,171 shares; Lauer — 500 shares; and R.D. Long — 17,000 shares.
	(8)	Beneficial ownership for these non-officer directors includes exercisable options to purchase 45,000 shares, except with respect to Ms. Bates who has exercisable options to purchase 25,000 shares, Mr. Leahy who has exercisable options to purchase 42,500 shares, Mr. Pollock who has exercisable options to purchase 14,000 shares, Mr. Racicot who has exercisable options to purchase 15,000 shares and Mr. Harper who has exercisable options to purchase 10,000 shares.
	(9)	Includes 4,065 shares held in the Deferred Compensation Plans for Mr. Pollock.

(10)	Includes 276,691 shares held by a corporation for which Mr. Steuart serves as an executive officer.
(11)	Includes 20,000 shares held in a charitable remainder trust.
(12)	Includes 4,000 shares held by a trust for the benefit of Mr. Long’s children.
(13)	Includes a total of 11,414,605 shares underlying stock options exercisable within 60 days of June 6, 2006, which are assumed to be outstanding for the purpose of calculating the group’s percentage ownership, and 213,103 shares held by the 401(k) Plan.
(14)	Includes 9,000 shares held in a revocable trust.
(15)	Includes 400 shares held in a revocable trust.
(16)	See “Individual Performance Award” and “The 2005 Deferred Compensation Award II” for a discussion of shares owned through the deferred compensation plans.

119

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						Range of
		Highest Amount				Interest Rates										Amount
		Outstanding														Outstanding at
Name and Position with Company		During 2005				High						Low				June 6, 2006
Executive Officers:
Kelly A. Anderson, Executive Vice President and Treasurer		$	496,225				5.96%			–			3.91%			$	496,225
Michael J. Grisius, Managing Director			230,727				4.68%			–			3.91%				224,728
Penni F. Roll, Chief Financial Officer			1,224,833				6.24%			–			4.45%				531,525
John M. Scheurer, Managing Director			167,453				4.73%			–			4.73%				—
John D. Shulman, Managing Director			99,991				2.85%			–			2.85%				—
Suzanne V. Sparrow, Executive Vice President and Secretary			626,309				6.18%			–			4.45%				409,328
Joan M. Sweeney, Chief Operating Officer and Director(1)			399,962				4.45%			–			4.45%				399,962

(1)	Ms. Sweeney is an interested director. Interested directors are “interested persons” as defined by the Investment Company Act of 1940.

120

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121

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	•	Securities purchased in transactions not involving any public offering, the issuer of which is an eligible portfolio company;
	•	Securities received in exchange for or distributed with respect to securities described in the bullet above or pursuant to the exercise of options, warrants or rights relating to such securities; and
	•	Cash, cash items, government securities or high quality debt securities (within the meaning of the 1940 Act), maturing in one year or less from the time of investment.

122

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	•	does not have a class of securities with respect to which a broker may extend margin credit at the time the acquisition is made;
	•	is actively controlled by the business development company and has an affiliate of a business development company on its board of directors; or
	•	meets such other criteria as may be established by the SEC.

123

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124

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	•	Our Chief Executive Officer and Chief Financial Officer certify the financial statements contained in our periodic reports through the filing of Section 302 certifications;
	•	Our periodic reports disclose our conclusions about the effectiveness of our disclosure controls and procedures;

125

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	•	Our annual report on Form 10-K contains a report from our management on internal control over financial reporting, including a statement that our management is responsible for establishing and maintaining adequate internal control over financial reporting as well as our management’s assessment of the effectiveness of our internal control over financial reporting, which must be audited by our independent registered public accounting firm;
	•	Our periodic reports disclose whether there were significant changes in our internal control over financial reporting or in other factors that could significantly affect our internal control over financial reporting subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses; and
	•	We may not make any loan to any director or executive officer and we may not materially modify any existing loans.

126

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127

---

 

(4)

(3)

Amount

Amount Held

Outstanding

(2)

by Us

Exclusive of

(1)

Amount

or for Our

Amounts Shown

Title of Class

Authorized

Account

Under(3)

Allied Capital Corporation

Common Stock

200,000,000

—

139,984,212

128

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	•	First, the trustee can enforce your rights against us if we default. There are, however, some limitations on the extent to which the trustee acts on your behalf, described later under “— Events of Default — Remedies if an Event of Default Occurs”.
	•	Second, the trustee performs administrative duties for us, such as sending you interest and principal payments, transferring your securities to new buyers and sending you notices.

	•	the title and series of the debt securities;
	•	any limit on the aggregate principal amount of the debt securities, and whether or not such series may be reopened for additional securities of that series and on what terms;

129

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	•	the purchase price of the debt securities, expressed as a percentage of the principal amount;
	•	the person to whom any interest on the debt security shall be payable, if other than to the registered holder at the close of business on the regular record date, and the extent to which, or the manner in which, any interest will be paid on a temporary global security;
	•	the date or dates on which the principal of, and any premium, if any, on the debt securities will be payable or the method for determining the date or dates of maturity;
	•	if the debt securities will bear interest, the interest rate or rates or the method by which the rate or rates will be determined, as well as the date or dates from which any interest will accrue, or the method by which such date or dates shall be determined, the interest payment dates, the record dates for those interest payments and the basis upon which interest shall be calculated or the method by which such date or dates shall be determined;
	•	if the debt securities will be issued at a discount, the amount of original issue discount, the method by which the accreted value of the securities will be determined and the dates from and to which original issue discount will accrue;
	•	if other than the location specified in this prospectus, the place or places where payments on the debt securities will be made and where the debt securities may be surrendered for registration of transfer or exchange;
	•	if we have the option to redeem all or any portion of the debt securities before their final maturity, the terms and conditions upon which the debt securities may be redeemed;
	•	our obligation, if any, to redeem, repay or purchase any securities pursuant to any sinking fund or analogous provisions, or at the holder’s option, and the period or periods within which or the date or dates on which, the price or prices at which, the currency or currencies in which, and the terms and conditions upon which any securities shall be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation;
	•	the currency or currencies in which the debt securities are denominated and payable if other than U.S. dollars and the manner for determining the equivalent thereof;
	•	whether the amount of any payments on the debt securities may be determined with reference to an index, a financial or economic measure or pursuant to a formula and the manner in which such amounts are to be determined;
	•	if a payment on the securities is due, at either our or the holder’s election, in a currency other than the currency in which the securities are denominated, the currency in which the payment shall be made, the periods within which and the terms and conditions upon which such election is to be made and the amount so payable (or the manner in which such amount shall be determined), and the time and manner of determining the exchange rate between the currency in which such securities are denominated and the currency in which such securities are to be paid;

130

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	•	if other than the entire principal amount, the portion of the principal amount of any securities that shall be payable upon declaration of acceleration of the maturity thereof or the method by which such portion shall be determined;
	•	if the principal amount payable at maturity of any debt securities will not be determinable as of any date prior to maturity, the amount that will be deemed to be the principal amount of the debt securities as of any such date for any purpose under the indenture, including the principal amount that will be due and payable upon any maturity date or that will be deemed outstanding as of any date prior to maturity;
	•	whether the debt securities are to be issued in a form other than global form and any provisions relating thereto;
	•	the identity of the security registrar and paying agent for the debt securities if other than the trustee;
	•	any deletions from, modifications of or additions to the events of default, covenants or other provisions in the indenture;
	•	the applicability of the defeasance and covenant defeasance provisions of the indenture; and
	•	any other terms of the debt securities that do not conflict with the provisions of the indenture that cannot otherwise be changed or be inconsistent with the requirements of the Trust Indenture Act of 1939, as amended.

	•	only in registered form without coupons; and
	•	in denominations that are even multiples of $1,000.

131

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132

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	•	if we do not survive such transaction or we convey, transfer or lease our properties and assets substantially as an entirety, the acquiring company must be a corporation, limited liability company, partnership or trust, or other corporate form, organized under the laws the United States of America, any country comprising the European Union, the United Kingdom or Japan and such company must agree to be legally responsible for our debt securities, and, if not already subject to the jurisdiction of the United States of America, the new company must submit to such jurisdiction for all purposes with respect to this offering and appoint an agent for service of process;
	•	alternatively, we must be the surviving company;
	•	immediately after the transaction no event of default will exist; and

133

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	•	we have delivered to the trustee a certificate of an officer and an opinion of counsel, each stating that the transaction complies with the indenture and that all conditions precedent to the transaction set forth in the indenture have been satisfied.

	•	change the due date of the principal of, or any installment of interest on, any security;
	•	reduce the principal amount of, or rate of interest on, any security, including the amount payable upon acceleration of the maturity of that security;
	•	change the place or currency of any payment on any security;
	•	impair the right to institute suit for enforcement of any payment on or with respect to any security;
	•	reduce the percentage of outstanding securities that must consent to a modification or amendment of the indenture;
	•	reduce the percentage of outstanding securities that must consent to a waiver of compliance with certain provisions of the indenture, including provisions relating to quorum or voting or for waiver of certain defaults;
	•	make any change to this list of changes that requires your specific approval.

134

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	•	to defease and be discharged from, subject to some limitations, all of our obligations with respect to those debt securities; or
	•	to be released from our obligations to comply with certain covenants relating to those debt securities.

	•	to indemnify the trustee;
	•	to pay additional amounts, if any, upon the occurrence of some events;
	•	to register the transfer or exchange of those debt securities;
	•	to replace some of those debt securities;
	•	to maintain an office or agency relating to those debt securities; or
	•	to hold moneys for payment in trust.

	•	will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the defeasance or covenant defeasance; and
	•	will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the defeasance or covenant defeasance had not occurred. In the case of defeasance, the opinion of counsel must be based upon a ruling of the IRS or a change in applicable U.S. federal income tax law occurring after the date of the applicable indenture.

135

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	•	we fail to make any interest payment on a security when it is due, and we do not cure this default within 30 days;
	•	we fail to make any payment of principal when it is due at the maturity of any security, and we do not cure this default within 5 days;
	•	we fail to deposit a sinking fund payment when due, and we do not cure this default within 5 days;
	•	we fail to comply with the indenture, and after we have been notified of the default by the trustee or holders of 25% in principal amount of the series, we do not cure the default within 60 days;
	•	we file for bankruptcy, or other events in bankruptcy, insolvency or reorganization occur and remain undischarged or unstayed for a period of 60 days;
	•	on the last business day of each of twenty-four consecutive calendar months, we have an asset coverage of less than 100 per centum, or
	•	any other event of default described as being applicable to any particular series of debt securities.

136

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	•	you must give the trustee written notice that an event of default has occurred and remains uncured;
	•	the holders of 25% in principal amount of all outstanding securities must make a written request that the trustee take action because of the default, and must offer reasonable indemnity to the trustee against the costs, expenses and other liabilities of taking that action;
	•	the trustee must not have taken action for 60 days after receipt of the above notice and offer of indemnity; and
	•	during the 60-day period, the holders of a majority in principal amount of the securities of that series do not give the trustee a direction inconsistent with the request.

137

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	•	duly and punctually pay the principal of and any premium and interest on the debt securities of each series in accordance with the terms of the debt securities and the indenture;
	•	maintain an office or agency where your debt securities may be presented or surrendered for payment, registration of transfer or exchange, and where notices and demands to or upon us regarding the securities and the indenture may be served. We will give prompt written notice to the trustee of the location, and any change in the location, of such office or agency;
	•	if we act as our own paying agent at any time, segregate and hold in trust, for the benefit of the holders, an amount of money, in the currency in which the securities are payable, sufficient to pay the principal and any premium or interest due on the securities of any series on or before the due date for such payment;
	•	do all things necessary to preserve and keep in full force and effect our existence, rights (charter and statutory) and franchises unless failure to do so would not disadvantage the Holders in any material respect;
	•	deliver an officers’ certificate to the trustee, within 120 calendar days after the end of each fiscal year, stating whether or not, to the best knowledge of the persons signing the officers’ certificate, we are in default in the performance and observance of any of the terms, provisions and conditions of the indenture and, if we are, specifying all such defaults and the nature and status thereof of which we may have knowledge;
	•	maintain, preserve, and keep our material properties that are used in the conduct of our business in good repair, condition and working order, ordinary wear and tear excepted; and
	•	pay or discharge when due all taxes, assessments and governmental charges levied or imposed upon us or our income, profits or property, as well as all lawful claims for labor, materials and supplies that, if unpaid, might by law become a lien upon our property, except those contested in good faith or that would not have a material adverse effect on us.

138

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139

---

 

140

---

 

141

---

 

142

---

 

143

---

 

144

---

 

	(1)	one-tenth or more but less than one-third;
	(2)	one-third or more but less than a majority; or
	(3)	a majority of all voting power.

	(1)	gives a written undertaking and, if required by the directors of the issuing corporation, posts a bond for the cost of the meeting; and
	(2)	submits definitive financing agreements for the acquisition of the control shares to the extent that financing is not provided by the acquiring person.

	(1)	there is a shareholder vote and the grant of voting rights is not approved; or
	(2)	an “acquiring person statement” is not delivered to the target within 10 days following a control share acquisition.

145

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146

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147

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148

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		Page
Report of Independent Registered Public Accounting Firm			F-2
Consolidated Balance Sheet — December 31, 2005 and 2004			F-3
Consolidated Statement of Operations — For the Years Ended December 31, 2005, 2004, and 2003			F-4
Consolidated Statement of Changes in Net Assets — For the Years Ended December 31, 2005, 2004, and 2003			F-5
Consolidated Statement of Cash Flows — For the Years Ended December 31, 2005, 2004, and 2003			F-6
Consolidated Statement of Investments — December 31, 2005			F-7
Notes to Consolidated Financial Statements			F-17
Report of Independent Registered Public Accounting Firm			F-52
Schedule 12-14 — Investments in and Advances to Affiliates for the Year Ended December 31, 2005			F-53
Report of Independent Registered Public Accounting Firm			F-57
Consolidated Balance Sheet as of March 31, 2006 (unaudited) and December 31, 2005			F-58
Consolidated Statement of Operations (unaudited) — For the Three Months Ended March 31, 2006 and 2005			F-59
Consolidated Statement of Changes in Net Assets (unaudited) — For the Three Months Ended March 31, 2006 and 2005			F-60
Consolidated Statement of Cash Flows (unaudited) — For the Three Months Ended March 31, 2006 and 2005			F-61
Consolidated Statement of Investments as of March 31, 2006 (unaudited)			F-62
Notes to Consolidated Financial Statements			F-72
Schedule 12-14 — Investments in and Advances to Affiliates for the Three Months Ended March 31, 2006			F-97

F-1

---

 

F-2

---

 

					December 31,				December 31,
					2005				2004
(in thousands, except per share amounts)
ASSETS
Portfolio at value:
	Private finance
		Companies more than 25% owned (cost: 2005-$1,489,782; 2004-$1,389,342)			$	1,887,651			$	1,359,641
		Companies 5% to 25% owned (cost: 2005-$168,373; 2004-$194,750)				158,806				188,902
		Companies less than 5% owned (cost: 2005-$1,448,268; 2004-$800,828)				1,432,833				753,543
			Total private finance (cost: 2005-$3,106,423; 2004-$2,384,920)			3,479,290				2,302,086
	Commercial real estate finance (cost: 2005-$131,695; 2004-$722,612)					127,065				711,325
			Total portfolio at value (cost: 2005-$3,238,118; 2004-$3,107,532)			3,606,355				3,013,411
U.S. Treasury bills						100,305				—
Investments in money market securities						121,967				—
Deposits of proceeds from sales of borrowed Treasury securities						17,666				38,226
Accrued interest and dividends receivable						60,366				79,489
Other assets						87,858				72,712
Cash						31,363				57,160
			Total assets		$	4,025,880			$	3,260,998
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
	Notes payable and debentures (maturing within one year: 2005-$175,000; 2004-$169,000)				$	1,193,040			$	1,064,568
	Revolving line of credit					91,750				112,000
	Obligations to replenish borrowed Treasury securities					17,666				38,226
	Accounts payable and other liabilities					102,878				66,426
			Total liabilities			1,405,334				1,281,220
Commitments and contingencies
Shareholders’ equity:
	Common stock, $0.0001 par value, 200,000 shares authorized; 136,697 and 133,099 shares issued and outstanding at December 31, 2005 and 2004, respectively					14				13
	Additional paid-in capital					2,177,283				2,094,421
	Common stock held in deferred compensation trust					(19,460	)			(13,503	)
	Notes receivable from sale of common stock					(3,868	)			(5,470	)
	Net unrealized appreciation (depreciation) on portfolio					354,325				(107,767	)
	Undistributed (distributions in excess of) earnings					112,252				12,084
			Total shareholders’ equity			2,620,546				1,979,778
			Total liabilities and shareholders’ equity		$	4,025,880			$	3,260,998
Net asset value per common share					$	19.17			$	14.87

F-3

---

 

					For the Years Ended
					December 31,
					2005				2004				2003
(in thousands, except per share amounts)
Interest and Related Portfolio Income:
	Interest and dividends
		Companies more than 25% owned			$	122,450			$	91,710			$	62,563
		Companies 5% to 25% owned				21,924				25,702				25,727
		Companies less than 5% owned				172,779				202,230				202,429
			Total interest and dividends			317,153				319,642				290,719
	Loan prepayment premiums
		Companies more than 25% owned				692				—				141
		Companies 5% to 25% owned				—				765				685
		Companies less than 5% owned				5,558				4,737				7,346
			Total loan prepayment premiums			6,250				5,502				8,172
	Fees and other income
		Companies more than 25% owned				26,673				29,774				18,862
		Companies 5% to 25% owned				124				1,618				629
		Companies less than 5% owned				23,952				10,554				10,847
			Total fees and other income			50,749				41,946				30,338
			Total interest and related portfolio income			374,152				367,090				329,229
Expenses:
	Interest					76,798				75,650				77,233
	Employee					78,300				53,739				36,945
	Administrative					70,267				34,686				22,387
			Total operating expenses			225,365				164,075				136,565
Net investment income before income taxes						148,787				203,015				192,664
Income tax expense (benefit), including excise tax						11,561				2,057				(2,466	)
Net investment income						137,226				200,958				195,130
Net Realized and Unrealized Gains (Losses)
	Net realized gains (losses)
		Companies more than 25% owned				33,237				86,812				1,302
		Companies 5% to 25% owned				5,285				43,818				19,975
		Companies less than 5% owned				234,974				(13,390	)			54,070
			Total net realized gains			273,496				117,240				75,347
	Net change in unrealized appreciation or depreciation					462,092				(68,712	)			(78,466	)
			Total net gains (losses)			735,588				48,528				(3,119	)
Net increase in net assets resulting from operations					$	872,814			$	249,486			$	192,011
Basic earnings per common share					$	6.48			$	1.92			$	1.64
Diluted earnings per common share					$	6.36			$	1.88			$	1.62
Weighted average common shares outstanding — basic						134,700				129,828				116,747
Weighted average common shares outstanding — diluted						137,274				132,458				118,351

F-4

---

 

				For the Years Ended December 31,
				2005				2004				2003
(in thousands, except per share amounts)
Operations
	Net investment income			$	137,226			$	200,958			$	195,130
	Net realized gains				273,496				117,240				75,347
	Net change in unrealized appreciation or depreciation				462,092				(68,712	)			(78,466	)
		Net increase in net assets resulting from operations			872,814				249,486				192,011
Shareholder distributions
	Common stock dividends				(314,509	)			(299,326	)			(267,838	)
	Preferred stock dividends				(10	)			(62	)			(210	)
		Net decrease in net assets resulting from shareholder distributions			(314,519	)			(299,388	)			(268,048	)
Capital share transactions
	Sale of common stock				—				70,251				422,005
	Issuance of common stock for portfolio investments				7,200				3,227				884
	Issuance of common stock upon the exercise of stock options				66,688				32,274				8,571
	Issuance of common stock in lieu of cash distributions				9,257				5,836				6,598
	Net decrease in notes receivable from sale of common stock				1,602				13,162				6,072
	Purchase of common stock held in deferred compensation trust				(7,968	)			(13,687	)			—
	Distribution of common stock held in deferred compensation trust				2,011				184				—
	Other				3,683				3,856				413
		Net increase in net assets resulting from capital share transactions			82,473				115,103				444,543
		Total net increase in net assets			640,768				65,201				368,506
Net assets at beginning of year					1,979,778				1,914,577				1,546,071
Net assets at end of year				$	2,620,546			$	1,979,778			$	1,914,577
Net asset value per common share				$	19.17			$	14.87			$	14.94
Common shares outstanding at end of year					136,697				133,099				128,118

F-5

---

 

					For the Years Ended December 31,
					2005				2004				2003
(in thousands)
Cash flows from operating activities
	Net increase in net assets resulting from operations				$	872,814			$	249,486			$	192,011
	Adjustments
		Portfolio investments				(1,668,113	)			(1,472,396	)			(930,566	)
		Principal collections related to investment repayments or sales				1,503,388				909,189				788,328
		Change in accrued or reinvested interest and dividends				(6,594	)			(52,193	)			(44,952	)
		Amortization of discounts and fees				(1,564	)			(5,235	)			(12,514	)
		Change in U.S. Treasury bills				(100,000	)			—				—
		Change in investments in money market securities				(121,967	)			—				—
		Changes in other assets and liabilities				33,023				18,716				(9,352	)
		Depreciation and amortization				1,820				1,433				1,638
		Realized gains from the receipt of notes and other securities as consideration from sale of investments, net of collections				(4,293	)			(47,497	)			(1,668	)
		Realized losses				69,565				150,462				18,958
		Net change in unrealized (appreciation) or depreciation				(462,092	)			68,712				78,466
			Net cash provided by (used in) operating activities			115,987				(179,323	)			80,349
Cash flows from financing activities
	Sale of common stock					—				70,251				422,005
	Sale of common stock upon the exercise of stock options					66,688				32,274				8,571
	Collections of notes receivable from sale of common stock					1,602				13,162				6,072
	Borrowings under notes payable and debentures					350,000				340,212				300,000
	Repayments on notes payable and debentures					(219,700	)			(231,000	)			(140,000	)
	Net borrowings under (repayments on) revolving line of credit					(20,250	)			112,000				(204,250	)
	Redemption of preferred stock					—				(7,000	)			—
	Purchase of common stock held in deferred compensation trust					(7,968	)			(13,687	)			—
	Other financing activities					(8,333	)			(3,004	)			(5,137	)
	Common stock dividends and distributions paid					(303,813	)			(290,830	)			(264,419	)
	Preferred stock dividends paid					(10	)			(62	)			(210	)
			Net cash provided by (used in) financing activities			(141,784	)			22,316				122,632
Net increase (decrease) in cash						(25,797	)			(157,007	)			202,981
Cash at beginning of year						57,160				214,167				11,186
Cash at end of year					$	31,363			$	57,160			$	214,167

F-6

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Companies More Than 25% Owned
Acme Paging, L.P.(4)			Senior Loan (6.0%, Due 12/07)(6)		$	3,750			$	3,750			$	—
	(Telecommunications)		Subordinated Debt (10.0%, Due 1/08)(6)			881				881				—
			Common Stock (23,513 shares)							27				—
Advantage Sales & Marketing, Inc.			Subordinated Debt (10.5%, Due 9/09)			60,000				59,787				59,787
	(Business Services)		Subordinated Debt (18.5%, Due 12/09)			124,000				124,000				124,000
			Common Stock (18,924,976 shares)							73,932				476,578
Alaris Consulting, LLC			Senior Loan (15.8%, Due 12/05 – 12/07) (6)			27,055				27,050				—
	(Business Services)		Equity Interests							5,305				—
			Guaranty ($1,100)
American Healthcare Services, Inc.			Senior Loan (0.7%, Due 12/04 – 12/05) (6)			4,999				4,600				4,097
	and Affiliates
	(Healthcare Services)
Avborne, Inc.(7)			Preferred Stock (12,500 shares)							658				892
	(Business Services)		Common Stock (27,500 shares)							—				—
Avborne Heavy Maintenance, Inc.(7)			Preferred Stock (1,568 shares)							2,401				—
	(Business Services)		Common Stock (2,750 shares)							—				—
			Guaranty ($2,401)
Business Loan Express, LLC			Subordinated Debt (6.9%, Due 4/06)			10,000				10,000				10,000
	(Financial Services)		Class A Equity Interests			60,693				60,693				60,693
			Class B Equity Interests							119,436				146,910
			Class C Equity Interests							109,301				139,521
			Guaranty ($135,437 — See Note 3)
			Standby Letters of Credit ($34,050 —   See Note 3)
Callidus Capital Corporation			Senior Loan (12.0%, Due 12/06)			600				600				600
	(Financial Services)		Subordinated Debt (18.0%, Due 10/08)			4,832				4,832				4,832
			Common Stock (10 shares)							2,049				7,968
Diversified Group Administrators, Inc.			Preferred Stock (1,000,000 shares)							700				728
	(Business Services)		Preferred Stock (1,451,380 shares)							841				841
			Common Stock (1,451,380 shares)							—				502
Financial Pacific Company (Financial Services)			Subordinated Debt (17.4%, Due 2/12 – 8/12)			70,175				69,904				69,904
			Preferred Stock (10,964 shares)							10,276				13,116
			Common Stock (14,735 shares)							14,819				44,180
ForeSite Towers, LLC			Equity Interests							7,620				9,750
	(Tower Leasing)

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.
(7)		Avborne, Inc. and Avborne Heavy Maintenance, Inc. are affiliated companies.

F-7

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Global Communications, LLC			Senior Loan (10.7%, Due 9/02 – 11/07) (6)		$	15,957			$	15,957			$	15,957
	(Business Services)		Subordinated Debt (17.0%, Due 12/03 – 9/05)(6)			11,201				11,198				11,198
			Preferred Equity Interest							14,067				4,303
			Options							1,639				—
Gordian Group, Inc.			Senior Loan (10.0%, Due 6/06 – 12/08) (6)			11,392				11,421				4,161
	(Business Services)		Common Stock (1,000 shares)							6,542				—
Healthy Pet Corp.			Senior Loan (10.1%, Due 8/10)			4,086				4,086				4,086
	(Consumer Services)		Subordinated Debt (15.0%, Due 8/10)			38,716				38,535				38,535
			Common Stock (25,766 shares)							25,766				25,766
HMT, Inc.			Preferred Stock (554,052 shares)							2,637				2,637
	(Energy Services)		Common Stock (300,000 shares)							3,000				5,343
			Warrants							1,155				2,057
Impact Innovations Group, LLC (Business Services)			Equity Interests in Affiliate							—				742
Insight Pharmaceuticals Corporation			Subordinated Debt (16.1%, Due 9/12)			58,534				58,298				58,298
	(Consumer Products)		Preferred Stock (25,000 shares)							25,000				26,791
			Common Stock (6,200 shares)							6,325				236
Jakel, Inc.			Subordinated Debt (15.5%, Due 3/08)(6)			13,742				13,742				—
	(Industrial Products)		Preferred Stock (6,460 shares)							6,460				—
			Common Stock (158,061 shares)							9,347				—
Legacy Partners Group, LLC			Senior Loan (14.0%, Due 5/09)(6)			7,646				7,646				5,029
	(Financial Services)		Subordinated Debt (18.0%, Due 5/09)(6)			2,952				2,952				—
			Equity Interests							4,229				—
Litterer Beteiligungs-GmbH(4)			Subordinated Debt (8.0%, Due 3/07)			621				621				621
	(Business Services)		Equity Interest							1,810				2,226
Mercury Air Centers, Inc.			Senior Loan (10.0%, Due 4/09)			31,720				31,720				31,720
	(Business Services)		Subordinated Debt (16.0%, Due 4/09)			46,703				46,519				46,519
			Common Stock (57,970 shares)							35,053				88,898
			Standby Letters of Credit ($1,397)
MVL Group, Inc.			Senior Loan (12.1%, Due 7/09)			27,519				27,218				27,218
	(Business Services)		Subordinated Debt (14.4%, Due 7/09)			32,905				32,417				32,417
			Common Stock (648,661 shares)							643				3,211
Pennsylvania Avenue Investors, L.P. (5)			Equity Interests							2,576				1,864
	(Private Equity Fund)
Powell Plant Farms, Inc.			Senior Loan (15.0%, Due 12/05 - 12/06)			32,640				23,792				23,792
	(Consumer Products)		Subordinated Debt (20.0%, Due 6/03)(6)			19,291				19,224				7,364
			Preferred Stock (1,483 shares)							—				—
			Warrants							—				—

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.

F-8

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Redox Brands, Inc.			Preferred Stock (2,726,444 shares)						$	7,903			$	12,097
	(Consumer Products)		Warrants							584				500
Service Champ, Inc.			Subordinated Debt (15.5%, Due 4/12)		$	27,041				26,906				26,906
	(Business Services)		Common Stock (63,888 shares)							13,662				13,319
Staffing Partners Holding			Subordinated Debt (13.5%, Due 1/07)(6)			6,343				6,343				6,343
	Company, Inc.		Preferred Stock (439,600 shares)							4,968				1,812
	(Business Services)		Common Stock (69,773 shares)							50				—
			Warrants							10				—
Startec Global Communications			Senior Loan (10.0%, Due 5/07 – 5/09)			25,226				25,226				21,685
	Corporation		Common Stock (19,180,000 shares)							37,255				—
	(Telecommunications)
STS Operating, Inc.			Subordinated Debt (15.3%, Due 3/12)			6,593				6,593				6,593
	(Industrial Products)		Common Stock (3,000,000 shares)							3,522				64,963
			Options							—				560
Triview Investments, Inc.(8)			Senior Loan (8.6%, Due 12/06)			7,449				7,449				7,449
	(Broadcasting & Cable/		Subordinated Debt (15.0%, Due 7/12)			31,000				30,845				30,845
	Consumer Products)		Subordinated Debt (16.8%, Due 7/08 –
			7/12)(6)			19,600				19,520				19,520
			Common Stock (202 shares)							93,889				29,171
			Guaranty ($800)
			Standby Letter of Credit ($200)
Total companies more than 25% owned									$	1,489,782			$	1,887,651
Companies 5% to 25% Owned
Air Evac Lifeteam			Subordinated Debt (13.8%, Due 7/10)		$	42,414			$	42,267			$	42,267
	(Healthcare Services)		Equity Interests							3,941				4,025
Aspen Pet Products, Inc.			Subordinated Debt (19.0%, Due 6/08)			20,051				19,959				19,959
	(Consumer Products)		Preferred Stock (2,935 shares)							2,154				1,638
			Common Stock (1,400 shares)							140				17
			Warrants							—				—
Becker Underwood, Inc.			Subordinated Debt (14.5%, Due 8/12)			23,639				23,543				23,543
	(Industrial Products)		Common Stock (5,073 shares)							5,813				2,200
The Debt Exchange Inc.			Preferred Stock (921,875 shares)							1,250				3,219
	(Business Services)

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.
(8)		Triview Investments, Inc. (formerly GAC Investments, Inc.) holds investments in Longview Cable & Data, LLC (Broadcasting & Cable) with a cost of $66.5 million and value of $16.0 million and Triax Holdings, LLC (Consumer Products) with a cost of $85.2 million and a value of $71.0 million. The guaranty and standby letter of credit relate to Longview Cable & Data, LLC.

F-9

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
MedBridge Healthcare, LLC			Senior Loan (4.0%, Due 8/09)		$	7,093			$	7,093			$	7,093
	(Healthcare Services)		Subordinated Debt (10.0%, Due 8/14)(6)			4,809				4,809				534
			Convertible Subordinated Debt (2.0%, Due 8/14)(6)			2,970				984				—
			Equity Interests							800				—
Nexcel Synthetics, LLC			Subordinated Debt (14.5%, Due 6/09)			10,617				10,588				10,588
	(Consumer Products)		Equity Interests							1,708				1,367
Pres Air Trol LLC			Unitranche Debt (12.0%, Due 4/10)			6,138				5,820				5,820
	(Industrial Products)		Equity Interests							1,356				318
Progressive International			Subordinated Debt (16.0%, Due 12/09)			7,401				7,376				7,376
	Corporation		Preferred Stock (500 shares)							500				884
	(Consumer Products)		Common Stock (197 shares)							13				13
			Warrants							—				—
Soteria Imaging Services, LLC			Subordinated Debt (11.8%, Due 11/10)			14,500				13,447				13,447
	(Healthcare Services)		Equity Interests							2,153				2,308
Universal Environmental Services, LLC			Unitranche Debt (15.5%, Due 2/09)			10,900				10,862				10,862
	(Business Services)		Equity Interests							1,797				1,328
Total companies 5% to 25% owned									$	168,373			$	158,806
Companies Less Than 5% Owned
Advanced Circuits, Inc.			Senior Loans (10.1%, Due 9/11 – 3/12)		$	18,732			$	18,642			$	18,642
	(Industrial Products)		Common Stock (40,000 shares)							1,000				1,000
Anthony, Inc. (Industrial Products)			Subordinated Debt (12.9%, Due 9/11 – 9/12)			14,670				14,610				14,610
Benchmark Medical, Inc.			Warrants							18				190
	(Healthcare Services)
BI Incorporated			Subordinated Debt (14.0%, due 2/12)			16,203				16,133				16,133
	(Business Services)
Border Foods, Inc. (Consumer Products)			Subordinated Debt (13.0%, Due 12/10)(6)			13,428				12,721				—
			Preferred Stock (140,214 shares)							2,893				—
			Common Stock (1,810 shares)							45				—
			Warrants							910				—

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.

F-10

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
C&K Market, Inc.			Subordinated Debt (13.0%, Due 12/08)		$	14,694			$	14,638			$	14,638
	(Retail)
Callidus Debt Partners			Class C Notes (12.9%, Due 12/13)			18,800				18,973				18,973
	CDO Fund I, Ltd.(4)(9)		Class D Notes (17.0%, Due 12/13)			9,400				9,487				9,487
	(Senior Debt Fund)
Callidus Debt Partners			Preferred Shares (23,600,000 shares)							24,233				24,233
	CLO Fund III, Ltd. (4)(9)
	(Senior Debt Fund)
Callidus MAPS CLO Fund I LLC(9)			Class E Notes (9.7%, Due 12/17)			17,000				17,000				17,000
	(Senior Debt Fund)		Income Notes							48,108				48,108
Camden Partners Strategic Fund II, L.P.(5)			Limited Partnership Interest							2,142				2,726
	(Private Equity Fund)
Catterton Partners V, L.P.(5)			Limited Partnership Interest							2,650				2,691
	(Private Equity Fund)
CBS Personnel Holdings, Inc. (Business Services)			Subordinated Debt (14.5%, Due 12/09)			20,617				20,541				20,541
Community Education Centers, Inc.			Subordinated Debt (16.0%, Due 12/10)			32,852				32,738				32,738
	(Education Services)
Component Hardware Group, Inc.			Preferred Stock (18,000 shares)							2,605				2,783
	(Industrial Products)		Common Stock (2,000 shares)							200				700
Cooper Natural Resources, Inc.			Subordinated Debt (0%, Due 11/07)			840				840				840
	(Industrial Products)		Preferred Stock (6,316 shares)							1,424				20
			Warrants							830				—
Coverall North America, Inc.			Subordinated Debt (14.6%, Due 2/11)			27,309				27,261				27,261
	(Business Services)		Preferred Stock (6,500 shares)							6,500				6,866
			Warrants							2,950				3,100

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.
(9)		The fund is managed by Callidus Capital Corporation, a portfolio company of Allied Capital.

F-11

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Drilltec Patents & Technologies Company, Inc.			Subordinated Debt (17.0%, Due 8/06)(6)		$	1,500			$	1,500			$	1,500
	(Energy Services)		Subordinated Debt (10.0%, Due 8/06)(6)			10,994				10,918				9,792
eCentury Capital Partners, L.P.(5)			Limited Partnership Interest							5,649				83
	(Private Equity Fund)
Elexis Beta GmbH(4)			Options							426				50
	(Industrial Products)
Event Rentals, Inc.			Senior Loans (9.9%, Due 11/11)			18,341				18,244				18,244
	(Consumer Services)
Frozen Specialties, Inc.			Warrants							435				470
	(Consumer Products)
Garden Ridge Corporation (Retail)			Subordinated Debt (7.0%, Due 5/12)(6)			22,500				22,500				22,500
Geotrace Technologies, Inc.			Subordinated Debt (10.0%, Due 6/09)			25,618				23,875				23,875
(Energy Services)			Warrants							2,350				2,500
Ginsey Industries, Inc.			Subordinated Debt (12.5%, Due 3/07)			3,680				3,680				3,680
	(Consumer Products)
Grant Broadcasting Systems II			Subordinated Debt (5.0%, Due 6/09)			2,756				2,756				2,756
	(Broadcasting & Cable)
Grotech Partners, VI, L.P.(5)			Limited Partnership Interest							6,914				4,161
	(Private Equity Fund)
Havco Wood Products LLC			Unitranche Debt (10.4%, Due 8/11)			33,000				31,794				31,794
	(Industrial Products)		Equity Interests							1,048				1,048
Haven Eldercare of New England, LLC(10)			Subordinated Debt (12.0%, Due 8/09)(6)			4,320				4,320				4,320
	(Healthcare Services)
Haven Healthcare Management, LLC(10)			Subordinated Debt (18.0% Due 4/07)(6)			1,319				1,319				485
	(Healthcare Services)
HealthASPex Services Inc.			Senior Loans (4.0%, Due 7/08)			500				500				500
	(Business Services)
The Hillman Companies, Inc.(3)			Subordinated Debt (13.5%, Due 9/11)			44,000				43,815				43,815
	(Consumer Products)
Homax Holdings, Inc.			Subordinated Debt (12.0%, Due 8/11)			14,000				13,039				13,039
	(Consumer Products)		Preferred Stock (89 shares)							89				92
			Common Stock (28 shares)							6				6
			Warrants							1,106				1,492
Icon International, Inc.			Common Stock (25,707 shares)							76				16
	(Business Services)
International Fiber Corporation			Subordinated Debt (14.0%, Due 6/12)			21,546				21,460				21,460
	(Industrial Products)		Preferred Stock (25,000 shares)							2,500				1,900
Line-X, Inc.			Senior Loan (8.1%, Due 8/11)			4,134				4,111				4,111
	(Consumer Products)		Unitranche Debt (10.0% Due 8/11)			51,475				51,229				51,229
			Standby Letter of Credit ($1,500)

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.
	(10)			Haven Eldercare of New England, LLC and Haven Healthcare Management, LLC are affiliated companies.

F-12

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
MedAssets, Inc.			Preferred Stock (227,865 shares)						$	2,049			$	2,893
	(Business Services)		Warrants							136				180
Meineke Car Care Centers, Inc.			Senior Loan (8.0%, Due 6/11)		$	28,000				27,865				27,865
	(Business Services)		Subordinated Debt (11.9%, Due 6/12 – 6/13)			72,000				71,675				71,675
			Common Stock (10,696,308 shares)(11)							26,985				26,629
			Warrants							—				—
MHF Logistical Solutions, Inc.			Unitranche Debt (10.0%, Due 5/11)			22,281				22,177				22,177
	(Business Services)		Preferred Stock (431 shares)							431				455
			Common Stock (1,438 shares)							144				211
Mid-Atlantic Venture Fund IV, L.P. (5)			Limited Partnership Interest							6,600				3,339
	(Private Equity Fund)
Mogas Energy, LLC			Subordinated Debt (9.5%, Due 3/12 – 4/12)			16,855				15,472				15,472
	(Energy Services)		Warrants							1,774				3,550
Network Hardware Resale, Inc.			Unitranche Debt (10.5%, Due 12/11)			38,500				38,743				38,743
	(Business Services)		Convertible Subordinated Debt (9.8%, Due 12/15)			12,000				12,076				12,076
N.E.W. Customer Service Companies, Inc.			Subordinated Debt (11.0%, Due 7/12)			40,000				40,016				40,016
	(Business Services)
Nobel Learning Communities,			Preferred Stock (1,214,356 shares)							2,764				2,343
	Inc.(3)		Warrants							575				1,296
	(Education)
Norwesco, Inc. (Industrial Products)			Subordinated Debt (12.6%, Due 1/12 – 7/12)			82,061				81,683				81,683
			Common Stock (559,603 shares)(11)							38,313				38,313
			Warrants							—				—
Novak Biddle Venture Partners III, L.P.(5)			Limited Partnership Interest							1,669				1,809
	(Private Equity Fund)
Oahu Waste Services, Inc.			Stock Appreciation Rights							239				1,000
	(Business Services)
Opinion Research Corporation(3)			Warrants							996				45
	(Business Services)
Oriental Trading Company, Inc.			Common Stock (13,820 shares)							—				5,200
	(Consumer Products)
Palm Coast Data, LLC			Senior Loan (7.6%, Due 8/10)			16,100				16,024				16,024
	(Business Services)		Subordinated Debt (15.5%, Due 8/12 – 8/15)			29,600				29,461				29,461
			Common Stock (21,743 shares)(11)							21,743				21,743
			Warrants							—				—
Performant Financial Corporation			Common Stock (478,816 shares)							734				2,500
	(Business Services)
Pro Mach, Inc.			Subordinated Debt (13.8%, Due 6/12)			19,275				19,193				19,193
	(Industrial Products)		Equity Interests							1,500				1,200

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.
	(11)			Common stock is non-voting. In addition to non-voting stock ownership, the Company has an option to acquire a majority of the voting securities of the portfolio company at fair market value.

F-13

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Promo Works, LLC			Senior Loan (8.5%, Due 12/11)		$	900			$	851			$	851
	(Business Services)		Unitranche Debt (10.3%, Due 12/11)			31,000				30,728				30,728
			Guaranty ($1,650)
RadioVisa Corporation			Unitranche Debt (15.5%, Due 12/08)			27,093				26,993				26,993
	(Broadcasting & Cable)
Red Hawk Industries, LLC			Unitranche Debt (11.0%, Due 4/11)			56,343				56,063				56,063
	(Business Services)
S.B. Restaurant Company (Retail)			Subordinated Debt (14.6%, Due 11/08 – 12/09)			29,085				28,615				28,615
			Preferred Stock (54,125 shares)							135				135
			Warrants							619				700
SBBUT, LLC			Equity Interests							—				—
	(Consumer Products)
Soff-Cut Holdings, Inc.			Preferred Stock (300 shares)							300				300
	(Industrial Products)		Common Stock (2,000 shares)							200				37
SPP Mezzanine Fund, L.P.(5)			Limited Partnership Interest							3,007				2,969
	(Private Equity Fund)
Tradesmen International, Inc.			Subordinated Debt (12.0%, Due 12/09)			15,000				14,323				14,323
	(Business Services)		Warrants							710				1,700
TransAmerican Auto Parts, LLC			Subordinated Debt (14.0%, Due 11/12)			10,000				9,951				9,951
	(Consumer Products)		Equity Interests							889				889
United Site Services, Inc.			Subordinated Debt (12.4%, Due 8/11)			49,712				49,503				49,503
	(Business Services)		Common Stock (160,588 shares)							1,000				1,200
Universal Air Filter Company			Senior Loans (7.9%, Due 11/11)			400				390				390
	(Industrial Products)		Unitranche Debt (11.0%, Due 11/11)			19,867				19,768				19,768
Universal Tax Systems, Inc.			Subordinated Debt (14.5%, Due 7/11)			19,068				18,995				18,995
	(Business Services)
Updata Venture Partners II, L.P.(5)			Limited Partnership Interest							4,977				4,686
	(Private Equity Fund)
Venturehouse-Cibernet Investors, LLC			Equity Interest							42				42
	(Business Services)
Venturehouse Group, LLC(5)			Equity Interest							598				397
	(Private Equity Fund)
VICORP Restaurants, Inc.(3)			Warrants							33				691
	(Retail)
Walker Investment Fund II, LLLP(5)			Limited Partnership Interest							1,330				676
	(Private Equity Fund)

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.
	(11)			Common stock is non-voting. In addition to non-voting stock ownership, the Company has an option to acquire a majority of the voting securities of the portfolio company at fair market value.

F-14

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					December 31, 2005
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Wear Me Apparel Corporation			Subordinated Debt (15.0%, Due 12/10)		$	40,000			$	38,992			$	38,992
	(Consumer Products)		Warrants							1,219				2,000
Wilshire Restaurant Group, Inc. (Retail)			Subordinated Debt (20.0%, Due 6/07)(6)			22,471				21,930				21,930
			Warrants							735				538
Wilton Industries, Inc.			Subordinated Debt (19.3%, Due 6/08)			4,800				4,800				4,800
	(Consumer Products)
Woodstream Corporation (Consumer Products)			Subordinated Debt (13.2%, Due 11/12 – 5/13)			52,397				52,251				52,251
			Common Stock (180 shares)							673				3,336
			Warrants							—				2,365
Other companies			Other debt investments			382				382				382
			Other debt investments(6)			470				470				348
			Other equity investments							8				—
			Guaranty ($135)
Total companies less than 5% owned									$	1,448,268			$	1,432,833
Total private finance (118 portfolio companies)									$	3,106,423			$	3,479,290

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.

F-15

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Commercial Real Estate Finance
(in thousands, except number of loans)

											December 31, 2005
			Interest				Number of
			Rate Ranges				Loans				Cost				Value
Commercial Mortgage Loans
				Up to 6.99%				5			$	23,121			$	21,844
				7.00%–8.99%				24				48,156				48,156
				9.00%–10.99%				5				25,999				25,967
				11.00%–12.99%				1				338				338
				13.00%–14.99%				1				2,294				2,294
			15.00% and above					2				3,970				3,970
	Total commercial mortgage loans(12)							38			$	103,878			$	102,569
Real Estate Owned											$	14,240			$	13,932
Equity Interests(2) — Companies more than 25% owned (Guarantees — $7,054)											$	13,577			$	10,564
	Total commercial real estate finance										$	131,695			$	127,065
Total portfolio											$	3,238,118			$	3,606,355

				Yield				Cost				Value
Liquidity Portfolio
	U.S. Treasury bills (Due June 2006)				4.25%			$	100,000			$	100,305
	SEI Daily Income Tr Prime Obligation Fund(13)				4.11%				100,000				100,000
		Total liquidity portfolio						$	200,000			$	200,305
Other Investments in Money Market Securities(13)
	PNC Bank Corporate Money Market Deposit Account				4.15%			$	21,967			$	21,967

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(12)		Commercial mortgage loans totaling $20.8 million at value were on non-accrual status and therefore were considered non-income producing.
(13)		Included in investments in money market securities on the accompanying Consolidated Balance Sheet.

F-16

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F-17

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	Valuation Of Portfolio Investments

	Loans and Debt Securities

F-18

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	Equity Securities

	Commercial Mortgage-Backed Securities (“CMBS”), Collateralized Debt Obligations (“CDO”) and Collateralized Loan Obligations (“CLO”)

F-19

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	Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

	Fee Income

	Guarantees

	Financing Costs

F-20

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	Dividends to Shareholders

	Stock Compensation Plans

			2005				2004				2003
(in thousands, except per share amounts)
Net increase in net assets resulting from operations as reported			$	872,814			$	249,486			$	192,011
Less total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects				(12,717	)			(16,908	)			(12,294	)
Pro forma net increase in net assets resulting from operations				860,097				232,578				179,717
Less preferred stock dividends				(10	)			(62	)			(210	)
Pro forma net income available to common shareholders			$	860,087			$	232,516			$	179,507
Basic earnings per common share:
	As reported		$	6.48			$	1.92			$	1.64
	Pro forma		$	6.39			$	1.79			$	1.54
Diluted earnings per common share:
	As reported		$	6.36			$	1.88			$	1.62
	Pro forma		$	6.27			$	1.76			$	1.52

		2005				2004				2003
Risk-free interest rate			4.1	%			2.9	%			2.8	%
Expected life			5.0				5.0				5.0
Expected volatility			35.1	%			37.0	%			38.4	%
Dividend yield			9.0	%			8.8	%			8.9	%
Weighted average fair value per option		$	3.94			$	4.17			$	3.47

F-21

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	Federal and State Income Taxes and Excise Tax

	Per Share Information

	Use of Estimates in the Preparation of Financial Statements

F-22

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	Recent Accounting Pronouncements

F-23

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	Private Finance

				2005												2004
				Cost				Value				Yield(1)				Cost				Value				Yield(1)
($ in thousands)
Loans and debt securities:
	Senior loans			$	284,680			$	239,838				9.5	%		$	260,342			$	234,628				8.5	%
	Unitranche debt(2)				294,201				294,201				11.4	%			43,900				43,900				14.8	%
	Subordinated debt				1,610,228				1,560,851				13.8	%			1,375,613				1,324,341				14.9	%
		Total loans and debt securities(3)			2,189,109				2,094,890				13.0	%			1,679,855				1,602,869				13.9	%
Equity securities					917,314				1,384,400								705,065				699,217
		Total		$	3,106,423			$	3,479,290							$	2,384,920			$	2,302,086

(1)	The weighted average yield on loans and debt securities is computed as the (a) annual stated interest plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities less the annual amortization of loan origination costs, divided by (b) total loans and debt securities at value. At December 31, 2005 and 2004, the cost and value of loans and debt securities include the Class A equity interests in BLX and the guaranteed dividend yield on these equity interests is included in interest income. The weighted average yield is computed as of the balance sheet date.
(2)	Unitranche debt is a single debt investment that is a blend of senior and subordinated debt.
(3)	The total principal balance outstanding on loans and debt securities was $2,216.3 million and $1,709.6 million at December 31, 2005 and 2004, respectively. The difference between principal and cost is represented by unamortized loan origination fees and costs, original issue discounts, and market discounts totaling $27.2 million and $29.8 million at December 31, 2005 and 2004, respectively.

F-24

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			2005				2004
($ in millions)
Interest income			$	30.9			$	15.5
Fees and other income				6.5				5.8
	Total interest and related portfolio income		$	37.4			$	21.3

F-25

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			2005				2004				2003
($ in millions)
Interest income on subordinated debt and Class A equity interests			$	14.3			$	23.2			$	21.9
Dividend income on Class B equity interests				14.0				14.8				7.8
Loan prepayment premiums				—				—				0.1
Fees and other income				9.2				12.0				16.9
	Total interest and related portfolio income		$	37.5			$	50.0			$	46.7

F-26

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F-27

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			2005				2004
($ in millions)
Bonds			$	230.7			$	—
Syndicated Loans				704.0				377.0
Cash(1)				238.4				12.7
	Total underlying collateral assets		$	1,173.1			$	389.7

(1)	Includes undrawn liability amounts.

F-28

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				2005				2004
($ in thousands)
Loans and debt securities in workout status (classified as Grade 4 or 5)
	Companies more than 25% owned			$	15,622			$	34,374
	Companies less than 5% owned				11,417				16,550
Loans and debt securities not in workout status
	Companies more than 25% owned				58,047				29,368
	Companies 5% to 25% owned				534				678
	Companies less than 5% owned				49,458				15,864
		Total		$	135,078			$	96,834

			2005				2004
Industry
Business services				45	%			32	%
Financial services				15				21
Consumer products				14				20
Industrial products				10				8
Retail				3				2
Healthcare services				2				8
Energy services				2				2
Broadcasting and cable				1				2
Other(1)				8				5
	Total			100	%			100	%
Geographic Region(2)
West				34	%			27	%
Mid-Atlantic				29				40
Midwest				21				15
Southeast				12				14
Northeast				4				4
	Total			100	%			100	%

(1)	Includes investments in senior debt CDO and CLO funds. These funds invest in senior debt representing a variety of industries.

(2)	The geographic region for the private finance portfolio depicts the location of the headquarters for the Company’s portfolio companies. The portfolio companies may have a number of other locations in other geographic regions.

F-29

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	Commercial Real Estate Finance

			2005												2004
			Cost				Value				Yield(1)				Cost				Value				Yield(1)
($ in thousands)
CMBS bonds			$	—			$	—							$	383,310			$	373,805				14.6%
CDO bonds and preferred shares				—				—								212,590				212,573				16.8%
Commercial mortgage loans				103,878				102,569				7.6%				99,373				95,056				6.8%
Real estate owned				14,240				13,932								16,170				16,871
Equity interests				13,577				10,564								11,169				13,020
	Total		$	131,695			$	127,065							$	722,612			$	711,325

(1)

The weighted average yield on the interest-bearing investments is computed as the (a) annual stated interest plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing interest-bearing investments less the annual amortization of origination costs, divided by (b) total interest-bearing investments at value. The weighted average yield is computed as of the balance sheet date. Interest-bearing investments for the commercial real estate finance portfolio include all investments except for real estate owned and equity interests.

F-30

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		2004
($ in thousands)
Face		$	1,043,688
Original issue discount			(660,378	)
Cost		$	383,310
Value		$	373,805

			2004
											Percentage
											of Total
			Cost				Value				Value
($ in thousands)
AA			$	4,669			$	4,658				1.2	%
A				4,549				4,539				1.2
BBB-				9,029				9,016				2.4
BB+				7,195				7,695				2.1
BB				5,940				5,952				1.6
BB-				7,490				7,676				2.1
B+				13,123				15,318				4.1
B				61,767				62,582				16.7
B-				89,341				88,099				23.6
CCC+				22,506				18,585				5.0
CCC				24,078				20,306				5.4
CCC-				—				—				—
CC				998				610				0.2
Unrated				132,625				128,769				34.4
	Total		$	383,310			$	373,805				100.0	%

F-31

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		2004
($ in millions)
Approximate number of loans and REO properties(1)			6,200
Total outstanding principal balance			$42,759
Loans over 30 days delinquent or classified as REO properties(2)			1.6%(3)

(1)	Includes approximately 39 REO properties obtained through the foreclosure of commercial mortgage loans at December 31, 2004.
(2)	As a percentage of total outstanding principal balance.
(3)	At December 31, 2004, the Company’s investments included bonds in the first loss, unrated bond class in 43 separate CMBS issuances. For these issuances, loans over 30 days delinquent or classified as REO properties were 1.7% of the total outstanding principal balance at December 31, 2004.

F-32

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($ in millions)			2004
Investment grade REIT debt(1)				$1,532.5
Investment grade CMBS bonds(2)				918.8
Non-investment grade CMBS bonds(3)				1,636.4
Other collateral				355.8
	Total collateral			$4,443.5

(1)	Issued by 44 REITs for the period presented.
(2)	Issued in 121 transactions for the period presented.
(3)	Issued in 109 transactions for the period presented.

F-33

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			2005				2004
Property Type
Hospitality				37	%			49	%
Housing				30				5
Retail				16				21
Office				11				17
Other				6				8
	Total			100	%			100	%
Geographic Region
Mid-Atlantic				31	%			20	%
Southeast				25				26
Midwest				21				30
West				18				16
Northeast				5				8
	Total			100	%			100	%

				2005												2004
												Annual												Annual
				Facility				Amount				Interest				Facility				Amount				Interest
				Amount				Drawn				Cost(1)				Amount				Drawn				Cost(1)
($ in thousands)
Notes payable and debentures:
	Unsecured notes payable			$	1,164,540			$	1,164,540				6.2	%		$	981,368			$	981,368				6.5	%
	SBA debentures				28,500				28,500				7.5	%			84,800				77,500				8.2	%
	OPIC loan				—				—				—				5,700				5,700				6.6	%
		Total notes payable and debentures			1,193,040				1,193,040				6.3	%			1,071,868				1,064,568				6.6	%
Revolving line of credit					772,500				91,750				5.6	%(2)			552,500				112,000				4.7	%(2)
	Total debt			$	1,965,540			$	1,284,790				6.5	%(3)		$	1,624,368			$	1,176,568				6.6	%(3)

(1)	The weighted average annual interest cost is computed as the (a) annual stated interest on the debt plus the annual amortization of commitment fees and other facility fees that are recognized into interest expense over the contractual life of the respective borrowings, divided by (b) debt outstanding on the balance sheet date.
(2)	The annual interest cost reflects the interest rate payable for borrowings under the revolving line of credit. In addition to the current interest rate payable, there were annual costs of commitment fees and other facility fees of $3.3 million and $1.8 million at December 31, 2005 and 2004, respectively.
(3)	The annual interest cost for total debt includes the annual cost of commitment fees and other facility fees regardless of the amount outstanding on the facility as of the balance sheet date.

F-34

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F-35

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Year			Amount Maturing
			($ in thousands)
2006			$	175,000
2007				—
2008				153,000
2009				267,040
2010				408,000
Thereafter				190,000
	Total		$	1,193,040

	Revolving Line of Credit

F-36

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	Fair Value of Debt

	Covenant Compliance

			Total				2006				2007				2008				2009				2010				After 2010
(in millions)
Guarantees			$	148.6			$	1.3			$	136.2			$	3.1			$	2.5			$	—			$	5.5
Standby letters of credit(1)				37.1				0.1				—				37.0				—				—				—
	Total		$	185.7			$	1.4			$	136.2			$	40.1			$	2.5			$	—			$	5.5

(1)	Standby letters of credit are issued under the Company’s revolving line of credit that expires in September 2008. Therefore, unless a standby letter of credit is set to expire at an earlier date, it is assumed that the standby letters of credit will expire contemporaneously with the expiration of the Company’s line of credit in September 2008.

F-37

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			2005(1)				2004				2003
(in thousands)
Number of common shares				—				3,000				18,700
Gross proceeds			$	—			$	75,000			$	442,680
Less costs, including underwriting fees				—				(4,749	)			(20,675	)
	Net proceeds		$	—			$	70,251			$	422,005

(1)	The Company did not sell any common stock during the year ended December 31, 2005.

F-38

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		2005				2004				2003
(in thousands, except per share amounts)
Shares issued			331				222				279
Average price per share		$	28.00			$	26.34			$	23.60

		2005				2004				2003
(in thousands, except per share amounts)
Net increase in net assets resulting from operations		$	872,814			$	249,486			$	192,011
Less preferred stock dividends			(10	)			(62	)			(210	)
Income available to common shareholders		$	872,804			$	249,424			$	191,801
Weighted average common shares outstanding — basic			134,700				129,828				116,747
Dilutive options outstanding to officers			2,574				2,630				1,604
Weighted average common shares outstanding — diluted			137,274				132,458				118,351
Basic earnings per common share		$	6.48			$	1.92			$	1.64
Diluted earnings per common share		$	6.36			$	1.88			$	1.62

F-39

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F-40

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			2005				2004
($ in millions)
IPA contributions			$	7.0			$	13.4
IPA mark to market expense (benefit)				2.0				(0.4	)
	Total IPA expense		$	9.0			$	13.0

	The Option Plan

F-41

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						Weighted
						Average
						Exercise Price
		Shares				Per Share
(in thousands, except per share amounts)
Options outstanding at January 1, 2003			14,689			$	20.57
Granted			1,045			$	22.74
Exercised			(408	)		$	21.01
Forfeited			(442	)		$	21.66
Options outstanding at December 31, 2003			14,884			$	20.68
Granted			8,170			$	28.34
Exercised			(1,635	)		$	19.73
Forfeited			(1,059	)		$	26.07
Options outstanding at December 31, 2004			20,360			$	23.55
Granted			6,815			$	27.37
Exercised			(2,988	)		$	22.32
Forfeited			(1,928	)		$	27.83
Options outstanding at December 31, 2005			22,259			$	24.52

F-42

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		Outstanding
														Exercisable
						Weighted
						Average				Weighted								Weighted
		Total				Remaining				Average				Total				Average
Range of		Number				Contractual Life				Exercise				Number				Exercise
Exercise Prices		Outstanding				(Years)				Price				Exercisable				Price
(in thousands, except per share amounts and years)
$16.81 — $17.75			2,244				4.36			$	16.92				2,244			$	16.92
$17.88 — $21.38			2,056				2.23			$	20.99				2,056			$	20.99
$21.52			3,423				6.95			$	21.52				3,423			$	21.52
$21.59 — $24.15			2,334				6.17			$	22.07				2,072			$	21.92
$24.44 — $26.80			1,965				8.45			$	26.14				1,023			$	26.16
$27.00 — $27.38			240				8.17			$	27.12				125			$	27.15
$27.51			5,575				9.59			$	27.51				—			$	—
$28.98			4,422				8.19			$	28.98				2,205			$	28.98
			22,259				7.22			$	24.52				13,148			$	22.38

F-43

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			2005								2004								2003
			Total				Total Per				Total				Total Per				Total				Total Per
			Amount				Share				Amount				Share				Amount				Share
(in thousands, except per share amounts)
First quarter			$	76,100			$	0.57			$	73,357			$	0.57			$	62,971			$	0.57
Second quarter				76,229				0.57				73,465				0.57				64,503				0.57
Third quarter				78,834				0.58				74,010				0.57				68,685				0.57
Fourth quarter				79,247				0.58				75,833				0.57				71,679				0.57
Extra dividend				4,099				0.03				2,661				0.02				—				—
	Total distributions to common shareholders		$	314,509			$	2.33			$	299,326			$	2.30			$	267,838			$	2.28

			2005								2004								2003
			Total				Total Per				Total				Total Per				Total				Total Per
			Amount				Share				Amount				Share				Amount				Share
(in thousands, except per share amounts)
Ordinary income			$	157,255			$	1.17			$	145,365			$	1.12			$	212,272			$	1.81
Long-term capital gains				157,254				1.16				153,961				1.18				55,566				0.47
	Total distributions to common shareholders(1)(2)(3)		$	314,509			$	2.33			$	299,326			$	2.30			$	267,838			$	2.28

(1)	For the years ended December 31, 2005, 2004 and 2003, ordinary income included dividend income of approximately $0.03 per share, $0.04 per share, and $0.05 per share, respectively, that qualified to be taxed at the 15% maximum capital gains rate. For the year ended December 31, 2005, capital gain income subject to the 25% rate on unrecognized Code section 1250 gains was $0.0097 per share.
(2)	For the year ended December 31, 2005, ordinary income that was classified as excess inclusion was $0.0063 per share.
(3)	For certain eligible corporate shareholders, the dividend received deduction for 2005, 2004 and 2003 was $0.034 per share, $0.038 per share, and $0.044 per share, respectively.

F-44

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				2005				2004				2003
($ in thousands)				(ESTIMATED)(1)
Financial statement net increase in net assets resulting from operations				$	872,814			$	249,486			$	192,011
Adjustments:
	Net change in unrealized appreciation or depreciation				(462,092	)			68,712				78,466
	Amortization of discounts and fees				17,527				(5,420	)			948
	Interest- and dividend-related items				1,084				6,277				(2,400	)
	Employee compensation-related items				2,449				7,081				2,902
	Net income (loss) from partnerships and limited liability companies(2)				24,753				8,646				(1,316	)
	Realized gains recognized (deferred) through installment treatment(3)				954				(33,733	)			—
	Net loss from consolidated SBIC subsidiary				(10,677	)			15,223				—
	Net (income) loss from consolidated taxable subsidiary, net of tax				(5,022	)			(1,008	)			3,864
	Other, including excise tax				10,520				7,913				(8,160	)
		Taxable income		$	452,310			$	323,177			$	266,315

(1)	The Company’s taxable income for 2005 is an estimate and will not be finally determined until the Company files its 2005 tax return in September 2006. Therefore, the final taxable income may be different than this estimate.
(2)	Includes taxable income passed through to the Company from Business Loan Express, LLC in excess of interest and related portfolio income from BLX included in the financial statements totaling $15.4 million, $10.0 million, and $3.4 million for the years ended December 31, 2005, 2004 and 2003, respectively. See Note 3 for additional related disclosure.
(3)	2004 includes the deferral of long-term capital gains through installment treatment related to the Company’s sale of its control equity investment in Hillman.

F-45

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($ in thousands)			2005				2004				2003
			(ESTIMATED)(1)
Taxable income			$	452,310			$	323,177			$	266,315
Taxable income earned in current year and carried forward for distribution in next year(2)				(163,810	)			(26,009	)			(2,158	)
Taxable income earned in prior year and carried forward and distributed in current year				26,009				2,158				3,681
	Total distributions to common shareholders		$	314,509			$	299,326			$	267,838

(1)	The Company’s taxable income for 2005 is an estimate and will not be finally determined until the Company files its 2005 tax return in September 2006. Therefore, the final taxable income and the taxable income earned in 2005 and carried forward for distribution in 2006 may be different than this estimate.
(2)	Estimated taxable income for 2005 includes undistributed income of $163.8 million that is being carried over for distribution in 2006, which included approximately $72.4 million of ordinary income and $91.4 million of net long-term capital gains. Taxable income for 2004 included undistributed income of $26.0 million that was carried over for distribution in 2005, which included $5.6 million of ordinary income and $20.4 million of net long-term capital gains.

F-46

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			2005				2004
($ in thousands)
Cash			$	33,436			$	57,576
Less escrows held				(2,073	)			(416	)
	Total cash		$	31,363			$	57,160

	•	the exchange of existing subordinated debt securities and accrued interest of BLX with a cost basis of $44.8 million for additional Class B equity interests (see Note 3);
	•	the exchange of debt securities and accrued interest of Coverall North America, Inc. with a cost basis of $24.2 million for new debt securities and warrants with a total cost basis of $26.8 million;
	•	the exchange of debt securities of Garden Ridge Corporation with a cost basis of $25.0 million for a new loan with a cost basis of $22.5 million; and

F-47

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	•	the contribution to capital of existing debt securities of GAC Investments, Inc. (“GAC”) with a cost basis of $11.0 million, resulting in a decrease in the Company’s debt cost basis and an increase in the Company’s common stock cost basis in GAC. During the third quarter of 2005, GAC changed its name to Triview Investments, Inc.

	•	notes or other securities received as consideration from the sale of investments of $56.6 million. The notes received for the year ended December 31, 2004, included a note received for $47.5 million in conjunction with the sale of the Company’s investment in Hillman. During the second quarter of 2004, the Company sold a $5.0 million participation in its subordinated debt in Hillman to a third party, which reduced its investment, and no gain or loss resulted from the transaction;
	•	an exchange of $93.7 million of subordinated debt in certain predecessor companies of Advantage Sales & Marketing, Inc. for new subordinated debt in Advantage;
	•	an exchange of existing debt securities with a cost basis of $46.4 million for new debt and common stock in Startec Global Communications Corporation;
	•	an exchange of existing debt securities with a cost basis of $13.1 million for new debt of $11.3 million with the remaining cost basis attributed to equity in Fairchild Industrial Products Company;
	•	an exchange of existing loans with a cost basis of $11.1 million for a new loan and equity in Gordian Group, Inc.;
	•	the repayment in kind of $12.7 million of existing debt in American Healthcare Services, Inc. with $10.0 million of debt in MedBridge Healthcare, LLC and $2.7 million of debt and equity from other companies;
	•	an exchange of existing subordinated debt with a cost basis of $7.3 million for equity interests in an affiliate of Impact Innovations Group, LLC;
	•	GAC acquired certain assets of Galaxy out of bankruptcy during the third quarter of 2004. The Company exchanged its $50.7 million outstanding debt in Galaxy for debt and equity in GAC to facilitate the asset acquisition; and
	•	$25.5 million of CMBS bonds and LLC interests received from the securitization of commercial mortgage loans.

F-48

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($ in thousands)
Description of Issue			2005				2004
5-year Treasury securities, due December 2009			$	—			$	533
5-year Treasury securities, due April 2010				17,666				—
10-year Treasury securities, due February 2013				—				3,908
10-year Treasury securities, due February 2014				—				4,709
10-year Treasury securities, due August 2014				—				14,743
10-year Treasury securities, due November 2014				—				14,333
	Total		$	17,666			$	38,226

F-49

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				At and for the Years
				Ended December 31,
				2005				2004				2003
Per Common Share Data(1)
Net asset value, beginning of year				$	14.87			$	14.94			$	14.22
	Net investment income(1)				1.00				1.52				1.65
	Net realized gains(1)(2)				1.99				0.88				0.63
		Net investment income plus net realized gains(1)			2.99				2.40				2.28
		Net change in unrealized appreciation or depreciation(1)(2)			3.37				(0.52	)			(0.66	)
Net increase in net assets resulting from operations (1)					6.36				1.88				1.62
Net decrease in net assets from shareholder distributions					(2.33	)			(2.30	)			(2.28	)
Net increase in net assets from capital share transactions(1)					0.27				0.35				1.38
Net asset value, end of year				$	19.17			$	14.87			$	14.94
Market value, end of year				$	29.37			$	25.84			$	27.88
Total return(3)					23.5	%			1.1	%			40.5	%
Ratios and Supplemental Data ($ and shares in thousands, except per share amounts)
Ending net assets				$	2,620,546			$	1,979,778			$	1,914,577
Common shares outstanding at end of year					136,697				133,099				128,118
Diluted weighted average common shares outstanding					137,274				132,458				118,351
Employee and administrative expenses/average net assets					6.58	%			4.65	%			3.50	%
Total operating expenses/average net assets					9.99	%			8.53	%			8.06	%
Net investment income/average net assets					6.08	%			10.45	%			11.51	%
Net increase in net assets resulting from operations/ average net assets					38.68	%			12.97	%			11.33	%
Portfolio turnover rate					47.72	%			32.97	%			31.12	%
Average debt outstanding				$	1,087,118			$	985,616			$	943,507
Average debt per share(1)				$	7.92			$	7.44			$	7.97

(1)	Based on diluted weighted average number of common shares outstanding for the year.
(2)	Net realized gains and net change in unrealized appreciation or depreciation can fluctuate significantly from year to year.
(3)	Total return assumes the reinvestment of all dividends paid for the periods presented.

		2005
($ in thousands, except per share amounts)		Qtr. 1				Qtr. 2				Qtr. 3				Qtr. 4
Total interest and related portfolio income		$	94,919			$	86,207			$	94,857			$	98,169
Net investment income		$	38,752			$	15,267			$	46,134			$	37,073
Net increase in net assets resulting from operations		$	119,621			$	311,885			$	113,168			$	328,140
Basic earnings per common share		$	0.90			$	2.33			$	0.84			$	2.40
Diluted earnings per common share		$	0.88			$	2.29			$	0.82			$	2.36

F-50

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		2004
		Qtr. 1				Qtr. 2				Qtr. 3				Qtr. 4
Total interest and related portfolio income		$	81,765			$	87,500			$	96,863			$	100,962
Net investment income		$	44,545			$	48,990			$	52,745			$	54,678
Net increase in net assets resulting from operations		$	20,308			$	95,342			$	85,999			$	47,837
Basic earnings per common share		$	0.16			$	0.74			$	0.67			$	0.36
Diluted earnings per common share		$	0.15			$	0.73			$	0.66			$	0.35

F-51

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F-52

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					Amount of Interest or
					Dividends
PRIVATE FINANCE
Portfolio Company					Credited								December 31, 2004				Gross				Gross				December 31, 2005
(in thousands)			Investment(1)		to Income(7)				Other(2)				Value				Additions(3)				Reductions(4)				Value
Companies More Than 25% Owned
Acme Paging, L.P.			Senior Loan(5)										$	—			$	—			$	—			$	—
	(Telecommunications)		Subordinated Debt(5)											—				—				—				—
			Equity Interests											1,230				—				(1,230	)			—
			Common Stock											—				—				—				—
Advantage Sales &			Subordinated Debt		$	7,205								59,729				58				—				59,787
	Marketing, Inc.		Subordinated Debt			23,647								125,498				3,361				(4,859	)			124,000
	(Business Services)		Common Stock											97,724				378,854				—				476,578
Alaris Consulting, LLC			Senior Loan(5)			(64	)							4,663				3,530				(8,193	)			—
	(Business Services)		Equity Interests											—				140				(140	)			—
American Healthcare Services,   Inc. and Affiliates			Senior Loan(5)			(1	)		$	1				4,225				123				(251	)			4,097
	(Healthcare Services)
Avborne, Inc.			Subordinated Debt			(78	)							1,092				—				(1,092	)			—
	(Business Services)		Preferred Stock											7,320				7,052				(13,480	)			892
			Common Stock											—				—				—				—
Avborne Heavy Maintenance,   Inc.			Preferred Stock											—				2,401				(2,401	)			—
	(Business Services)		Common Stock											—				—				—				—
Business Loan Express, LLC			Subordinated Debt			15								—				10,000				—				10,000
	(Financial Services)		Subordinated Debt			1								44,615				160				(44,775	)			—
			Class A Equity Interests			14,282								53,862				6,831				—				60,693
			Class B Equity Interests *			13,999								98,741				48,169				—				146,910
			Class C Equity Interests											137,988				1,533				—				139,521
Callidus Capital Corporation			Senior Loan			1,996								42,213				138,300				(180,513	)			—
	(Financial Services)		Senior Loan			113								66				3,201				(2,667	)			600
			Subordinated Debt			819								4,051				781				—				4,832
			Common Stock											3,600				4,368				—				7,968
Diversified Group			Preferred Stock											—				728				—				728
	Administrators, Inc.		Preferred Stock											—				841				—				841
	(Business Services)		Common Stock											—				502				—				502
Fairchild Industrial Products Company			Senior Loan			316								7,038				—				(7,038	)			—
	(Industrial Products)		Subordinated Debt			255								3,833				—				(3,833	)			—
			Common Stock											2,123				—				(2,123	)			—
Financial Pacific Company			Subordinated Debt			12,168								68,473				1,431				—				69,904
	(Financial Services)		Preferred Stock											10,448				2,668				—				13,116
			Common Stock											14,819				29,361				—				44,180
ForeSite Towers, LLC			Equity Interests*			2,450								21,511				3,574				(15,335	)			9,750
	(Tower Leasing)
Global Communications, LLC			Senior Loan(5)			361								13,990				2,320				(353	)			15,957
	(Business Services)		Subordinated Debt(5)			472								10,472				726				—				11,198
			Preferred Equity
			Interest											14,609				—				(10,306	)			4,303
			Options											2,161				—				(2,161	)			—
Gordian Group, Inc.			Senior Loan(5)			(3	)							7,381				2,000				(5,220	)			4,161
	(Business Services)		Common Stock											—				722				(722	)			—
HealthASPex, Inc.			Preferred Stock											700				—				(700	)			—
	(Business Services)		Preferred Stock											1,753				—				(1,753	)			—
			Common Stock											—				—				—				—

F-53

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					Amount of Interest or
					Dividends
PRIVATE FINANCE
Portfolio Company					Credited								December 31, 2004				Gross				Gross				December 31, 2005
(in thousands)			Investment(1)		to Income(7)				Other(2)				Value				Additions(3)				Reductions(4)				Value
Healthy Pet Corp.			Senior Loan		$	96							$	—			$	4,100			$	(14	)		$	4,086
	(Consumer Services)		Subordinated Debt			1,964								—				38,535				—				38,535
			Common Stock											—				25,766				—				25,766
HMT, Inc.			Subordinated Debt			531								9,314				686				(10,000	)			—
	(Energy Services)		Preferred Stock											2,537				149				(49	)			2,637
			Common Stock											3,610				1,733				—				5,343
			Warrants											1,390				667				—				2,057
Housecall Medical Resources, Inc.			Subordinated Debt			1,463								15,610				326				(15,936	)			—
	(Healthcare Services)		Common Stock											31,898				—				(31,898	)			—
Impact Innovations Group, LLC			Equity Interests in
	(Business Services)		Affiliate											772				—				(30	)			742
Insight Pharmaceuticals Corporation			Senior Loan			3,917								66,115				355				(66,470	)			—
	(Consumer Products)		Subordinated Debt			7,156								57,213				58,876				(57,791	)			58,298
			Preferred Stock											25,000				1,791				—				26,791
			Common Stock											6,325				—				(6,089	)			236
Jakel, Inc.			Subordinated Debt(5)											13,742				—				(13,742	)			—
	(Industrial Products)		Preferred Stock											836				—				(836	)			—
			Common Stock											—				—				—				—
Legacy Partners Group, LLC			Senior Loan (5)											6,647				1,000				(2,618	)			5,029
	(Financial Services)		Subordinated Debt(5)											1,896				—				(1,896	)			—
			Equity Interests											—				1,500				(1,500	)			—
Litterer Beteiligungs-GmbH			Subordinated Debt			42								715				—				(94	)			621
	(Business Services)		Equity Interest											2,596				54				(424	)			2,226
Maui Body Works, Inc.			Common Stock											1,080				155				(1,235	)			—
	(Healthcare Services)
Mercury Air Centers, Inc.			Senior Loan			2,383								20,000				11,720				—				31,720
	(Business Services)		Subordinated Debt			6,374								34,613				12,011				(105	)			46,519
			Common Stock											31,214				57,684				—				88,898
MVL Group, Inc.			Senior Loan			2,954								15,080				13,892				(1,754	)			27,218
	(Business Services)		Subordinated Debt			4,050								18,102				14,315				—				32,417
			Common Stock											9,800				—				(6,589	)			3,211
Pennsylvania Avenue Investors, L.P.			Equity Interests											792				1,549				(477	)			1,864
	(Private Equity Fund)
Powell Plant Farms, Inc.			Senior Loan			4,442								23,192				8,850				(8,250	)			23,792
	(Consumer Products)		Subordinated Debt(5)											10,588				—				(3,224	)			7,364
			Preferred Stock											—				—				—				—
			Warrants											—				—				—				—
Redox Brands, Inc.			Subordinated Debt			168								3,325				60				(3,385	)			—
	(Consumer Products)		Subordinated Debt			528								10,672				570				(11,242	)			—
			Preferred Stock											11,664				433				—				12,097
			Warrants											584				—				(84	)			500
Service Champ, Inc.			Subordinated Debt			2,956								—				26,906				—				26,906
	(Business Services)		Common Stock											—				13,662				(343	)			13,319
Staffing Partners Holding			Subordinated Debt(5)						$	741				7,084				—				(741	)			6,343
	Company, Inc.		Preferred Stock											1,961				—				(149	)			1,812
	(Business Services)		Common Stock											—				—				—				—
			Warrants											—				—				—				—

F-54

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					Amount of Interest or
					Dividends
PRIVATE FINANCE
Portfolio Company					Credited								December 31, 2004				Gross				Gross				December 31, 2005
(in thousands)			Investment(1)		to Income(7)				Other(2)				Value				Additions(3)				Reductions(4)				Value
Startec Global
	Communications		Senior Loan		$	2,080							$	16,521			$	8,800			$	(3,636	)		$	21,685
	Corporation		Common Stock											7,800				—				(7,800	)			—
	(Telecommunications)
STS Operating, Inc.			Subordinated Debt			1,365								6,276				8,662				(8,345	)			6,593
	(Industrial Products)		Common Stock											9,632				55,331				—				64,963
			Options											—				560				—				560
Triview Investments, Inc.			Senior Loan			20								—				7,749				—				7,449
	(Broadcasting & Cable/		Subordinated Debt			2,008								—				30,845				—				30,845
	Consumer Products)		Subordinated Debt(5)											7,517				23,003				(11,000	)			19,520
			Common Stock											—				50,766				(21,595	)			29,171
Total companies more than 25% owned					$	122,450																			$	1,887,651
Companies 5% to 25% Owned
Air Evac Lifeteam			Subordinated Debt		$	5,647							$	39,964			$	2,303			$	—			$	42,267
	(Healthcare Services)		Equity Interests											1,092				2,933				—				4,025
Aspen Pet Products, Inc.			Subordinated Debt			3,789								18,784				1,175				—				19,959
	(Consumer Products)		Preferred Stock											897				741				—				1,638
			Common Stock											—				17				—				17
			Warrants											—				—				—				—
Becker Underwood, Inc.			Subordinated Debt			3,468								22,939				604				—				23,543
	(Industrial Products)		Common Stock											5,000				812				(3,612	)			2,200
The Debt Exchange Inc.			Preferred Stock											1,457				1,762				—				3,219
	(Business Services)
MasterPlan, Inc.			Subordinated Debt			48								1,204				—				(1,204	)			—
	(Business Services)		Common Stock											3,300				—				(3,300	)			—
MedBridge Healthcare, LLC			Senior Loan			200								7,000				93				—				7,093
	(Healthcare Services)		Subordinated Debt(5)			225								4,311				499				(4,276	)			534
			Convertible
			Subordinated Debt(5)			(1	)		$	30				678				—				(678	)			—
			Equity Interests											—				800				(800	)			—
MortgageRamp, Inc.			Common Stock											903				—				(903	)			—
	(Business Services)
Nexcel Synthetics, LLC			Subordinated Debt			1,554								10,211				377				—				10,588
	(Consumer Products)		Equity Interests											687				693				(13	)			1,367
Packaging Advantage
	Corporation		Subordinated Debt			808								14,731				2,480				(17,211	)			—
	(Business Services)		Common Stock											1,479				—				(1,479	)			—
			Warrants											597				23				(620	)			—
Pres Air Trol LLC			Unitranche Debt			762								6,021				11				(212	)			5,820
	(Industrial Products)		Equity Interests											900				34				(616	)			318
Progressive International
	Corporation		Subordinated Debt			1,202								7,221				155				—				7,376
	(Consumer Products)		Preferred Stock											586				298				—				884
			Common Stock											13				—				—				13
			Warrants											—				—				—				—
Soteria Imaging Services, LLC			Subordinated Debt			1,467								8,340				5,107			$	—				13,447
	(Healthcare Services)		Equity Interests											2,114				194				—				2,308
Universal Environmental
	Services, LLC		Unitranche Debt			1,875								12,099				13				(1,250	)			10,862
	(Business Services)		Equity Interests											1,864				328				(864	)			1,328
Total companies 5% to 25% owned																									$	158,806
Companies less than 5% owned(6)
Border Foods, Inc.			Subordinated Debt(5)			880								12,510				211				(12,721	)			—
	(Consumer Products)		Preferred Stock											2,000				893				(2,893	)			—
			Common Stock											—				—				—				—
			Warrants											—				245				(245	)			—
Total					$	21,924

F-55

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(1)	Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted. The principal amount for loans and debt securities and the number of shares of common stock and preferred stock is shown in the consolidated statement of investments as of December 31, 2005.
(2)	Other includes interest, dividend, or other income which was applied to the principal of the investment and therefore reduced the total investment. These reductions are also included in the Gross Reductions for the investment, as applicable.
(3)	Gross additions include increases in the cost basis of investments resulting from new portfolio investments, paid-in-kind interest or dividends, the amortization of discounts and closing fees, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation.
(4)	Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales and the exchange of one or more existing securities for one or more new securities. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation.
(5)	Loan or debt security is on non-accrual status at December 31, 2005, and is therefore considered non-income producing. Loans or debt securities on non-accrual status at the end of the year may or may not have been on non-accrual status for the full year ended December 31, 2005.
(6)	Data is included for these companies less than 5% owned at December 31, 2005, as these companies were included in the companies 5% to 25% owned category during the past year, however, due to changes in affiliation status were classified in the less than 5% owned category at December 31, 2005.
(7)	Represents the total amount of interest or dividends credited to income for the portion of the year an investment was included in the companies more than 25% owned or companies 5% to 25% owned categories, respectively.

*	All or a portion of the dividend income on this investment was or will be paid in the form of additional securities. Dividends paid-in-kind are also included in the Gross Additions for the investment, as applicable.

F-56

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F-57

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					March 31,				December 31,
					2006				2005
(in thousands, except per share amounts)					(unaudited)
ASSETS
Portfolio at value:
	Private finance
		Companies more than 25% owned (cost: 2006-$1,379,842; 2005-$1,489,782)			$	1,388,855			$	1,887,651
		Companies 5% to 25% owned (cost: 2006-$342,144; 2005-$168,373)				341,645				158,806
		Companies less than 5% owned (cost: 2006-$1,845,529; 2005-$1,448,268)				1,831,133				1,432,833
			Total private finance (cost: 2006-$3,567,515; 2005-$3,106,423)			3,561,633				3,479,290
	Commercial real estate finance (cost: 2006-$129,564; 2005-$131,695)					129,369				127,065
			Total portfolio at value (cost: 2006-$3,697,079; 2005-$3,238,118)			3,691,002				3,606,355
U.S. Treasury bills						101,289				100,305
Investments in money market securities						139,764				121,967
Deposits of proceeds from sales of borrowed Treasury securities						17,534				17,666
Accrued interest and dividends receivable						50,034				60,366
Other assets						116,746				87,858
Cash						4,856				31,363
			Total assets		$	4,121,225			$	4,025,880
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
	Notes payable and debentures (maturing within one year: 2006-$175,000; 2005-$175,000)				$	1,181,245			$	1,193,040
	Revolving line of credit					93,000				91,750
	Obligations to replenish borrowed Treasury securities					17,534				17,666
	Accounts payable and other liabilities					99,633				102,878
			Total liabilities			1,391,412				1,405,334
Commitments and contingencies
Shareholders’ equity:
	Common stock, $0.0001 par value, 200,000 shares authorized; 139,984 and 136,697 shares issued and outstanding at March 31, 2006, and December 31, 2005, respectively					14				14
	Additional paid-in capital					2,271,434				2,177,283
	Common stock held in deferred compensation trust					(21,543	)			(19,460	)
	Notes receivable from sale of common stock					(3,738	)			(3,868	)
	Net unrealized appreciation (depreciation)					(20,223	)			354,325
	Undistributed earnings					503,869				112,252
			Total shareholders’ equity			2,729,813				2,620,546
			Total liabilities and shareholders’ equity		$	4,121,225			$	4,025,880
Net asset value per common share					$	19.50			$	19.17

F-58

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					For the Three Months
					Ended March 31,
					2006				2005
(in thousands, except per share amounts)
					(unaudited)
Interest and Related Portfolio Income:
	Interest and dividends
		Companies more than 25% owned			$	30,146			$	28,251
		Companies 5% to 25% owned				5,650				5,921
		Companies less than 5% owned				53,085				50,773
			Total interest and dividends			88,881				84,945
	Loan prepayment premiums
		Companies more than 25% owned				4,960				—
		Companies 5% to 25% owned				—				—
		Companies less than 5% owned				326				1,677
			Total loan prepayment premiums			5,286				1,677
	Fees and other income
		Companies more than 25% owned				7,127				4,881
		Companies 5% to 25% owned				2,716				70
		Companies less than 5% owned				7,001				3,346
			Total fees and other income			16,844				8,297
			Total interest and related portfolio income			111,011				94,919
Expenses:
	Interest					24,300				20,225
	Employee					21,428				15,456
	Stock options					3,606				—
	Administrative					11,519				20,754
			Total operating expenses			60,853				56,435
Net investment income before income taxes						50,158				38,484
Income tax expense (benefit), including excise tax						8,858				(268	)
Net investment income						41,300				38,752
Net Realized and Unrealized Gains (Losses):
	Net realized gains (losses)
		Companies more than 25% owned				433,187				399
		Companies 5% to 25% owned				(343	)			(3	)
		Companies less than 5% owned				(9	)			9,889
			Total net realized gains			432,835				10,285
	Net change in unrealized appreciation or depreciation					(374,548	)			70,584
			Total net gains (losses)			58,287				80,869
Net increase in net assets resulting from operations					$	99,587			$	119,621
Basic earnings per common share					$	0.72			$	0.90
Diluted earnings per common share					$	0.70			$	0.88
Weighted average common shares outstanding — basic						138,759				133,283
Weighted average common shares outstanding — diluted						141,738				135,579

F-59

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				For the Three Months
				Ended March 31,
				2006				2005
(in thousands, except per share amounts)
				(unaudited)
Operations:
	Net investment income			$	41,300			$	38,752
	Net realized gains				432,835				10,285
	Net change in unrealized appreciation or depreciation				(374,548	)			70,584
		Net increase in net assets resulting from operations			99,587				119,621
Shareholder distributions:
	Common stock dividends				(82,518	)			(76,100	)
		Net decrease in net assets resulting from shareholder distributions			(82,518	)			(76,100	)
Capital share transactions:
	Sale of common stock				82,970				—
	Issuance of common stock for portfolio investments				—				7,200
	Issuance of common stock in lieu of cash distributions				3,640				1,418
	Issuance of common stock upon the exercise of stock options				3,935				2,618
	Stock option expense				3,606				—
	Net decrease in notes receivable from sale of common stock				130				50
	Purchase of common stock held in deferred compensation trust				(2,121	)			(1,886	)
	Distribution of common stock held in deferred compensation trust				38				—
	Other				—				449
		Net increase in net assets resulting from capital share transactions			92,198				9,849
		Total increase (decrease) in net assets			109,267				53,370
Net assets at beginning of period					2,620,546				1,979,778
Net assets at end of period				$	2,729,813			$	2,033,148
Net asset value per common share				$	19.50			$	15.22
Common shares outstanding at end of period					139,984				133,563

F-60

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					For the Three Months
					Ended March 31,
					2006				2005
(in thousands)
					(unaudited)
Cash flows from operating activities:
	Net increase in net assets resulting from operations				$	99,587			$	119,621
	Adjustments
		Portfolio investments				(647,851	)			(257,957	)
		Principal collections related to investment repayments or sales				340,410				158,262
		Change in accrued or reinvested interest and dividends				2,061				(10,534	)
		Amortization of discounts and fees				(277	)			(1,772	)
		Change in investments in money market securities				(16,726	)			—
		Stock option expense				3,606				—
		Changes in other assets and liabilities				2,797				8,158
		Depreciation and amortization				433				486
		Realized gains from the receipt of notes and other securities as consideration from sale of investments, net of collections				(179,987	)			152
		Realized losses				3,651				4,418
		Net change in unrealized (appreciation) or depreciation				374,548				(70,584	)
			Net cash provided by (used in) operating activities			(17,748	)			(49,750	)
Cash flows from financing activities:
	Sale of common stock					82,970				—
	Sale of common stock upon the exercise of stock options					3,935				2,618
	Collections of notes receivable from sale of common stock					130				50
	Borrowings under notes payable and debentures					—				—
	Repayments on notes payable and debentures					(12,000	)			(31,000	)
	Net borrowings under (repayments on) revolving line of credit					1,250				151,250
	Purchase of common stock held in deferred compensation trust					(2,121	)			(1,886	)
	Other financing activities					53				(12	)
	Common stock dividends and distributions paid					(82,976	)			(77,343	)
			Net cash provided by (used in) financing activities			(8,759	)			43,677
Net increase (decrease) in cash						(26,507	)			(6,073	)
Cash at beginning of period						31,363				57,160
Cash at end of period					$	4,856			$	51,087

F-61

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					March 31, 2006
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Companies More Than 25% Owned
Acme Paging, L.P.(4)			Senior Loan (6.0%, Due 12/07)(6)		$	3,750			$	3,750			$	—
	(Telecommunications)		Subordinated Debt (10.0%, Due 1/08)(6)			881				881				—
			Common Stock (23,513 shares)							27				—
Alaris Consulting, LLC			Senior Loan (16.5%, Due 12/05 – 12/07) (6)			27,055				27,034				—
	(Business Services)		Equity Interests							5,305				—
			Guaranty ($1,100)
American Healthcare Services, Inc.			Senior Loan (0.7%, Due 12/04 – 12/05) (6)			4,998				4,600				4,002
	and Affiliates
	(Healthcare Services)
Avborne, Inc.(7)			Preferred Stock (12,500 shares)							658				892
	(Business Services)		Common Stock (27,500 shares)							—				—
Avborne Heavy Maintenance, Inc.(7)			Preferred Stock (1,568 shares)							2,401				—
	(Business Services)		Common Stock (2,750 shares)							—				—
			Guaranty ($2,401)
Business Loan Express, LLC			Class A Equity Interests			62,532				62,532				62,532
	(Financial Services)		Class B Equity Interests							119,436				136,090
			Class C Equity Interests							109,301				127,619
			Guaranty ($141,118 — See Note 3)
			Standby Letters of Credit ($34,050 —   See Note 3)
Callidus Capital Corporation			Senior Loan (9.6%, Due 4/06 – 12/06)			7,480				7,480				7,480
	(Financial Services)		Subordinated Debt (18.0%, Due 10/08)			5,049				5,049				5,049
			Common Stock (10 shares)							2,058				10,355
CR Brands, Inc.			Senior Loan (8.1%, Due 2/07)			37,219				37,048				37,048
	(Consumer Products)		Subordinated Debt (16.6%, Due 2/13)			38,898				38,705				38,705
			Common Stock (37,200,551 shares)							33,321				37,431
Diversified Group Administrators, Inc.			Preferred Stock (1,000,000 shares)							700				714
	(Business Services)		Preferred Stock (1,451,380 shares)							841				841
			Common Stock (1,451,380 shares)							—				571
Financial Pacific Company (Financial Services)			Subordinated Debt (17.4%, Due 2/12 – 8/12)			70,525				70,266				70,266
			Preferred Stock (10,964 shares)							10,276				13,771
			Common Stock (14,735 shares)							14,819				43,669
ForeSite Towers, LLC			Equity Interests							7,620				11,294
	(Tower Leasing)

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.
(7)		Avborne, Inc. and Avborne Heavy Maintenance, Inc. are affiliated companies.

F-62

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					March 31, 2006
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Global Communications, LLC			Senior Loan (10.7%, Due 9/02 – 11/07) (6)		$	15,957			$	15,957			$	15,957
	(Business Services)		Subordinated Debt (17.0%, Due 12/03 – 9/05)(6)			11,339				11,336				11,336
			Preferred Equity Interest							14,067				554
			Options							1,639				—
Gordian Group, Inc.			Senior Loan (10.0%, Due 6/06 – 12/08) (6)			11,567				11,591				—
	(Business Services)		Common Stock (1,000 shares)							6,762				—
Healthy Pet Corp.			Senior Loan (10.5%, Due 8/10)			16,738				16,738				16,738
	(Consumer Services)		Subordinated Debt (15.0%, Due 8/10)			43,257				43,086				43,086
			Common Stock (30,266 shares)							30,266				30,940
HMT, Inc.			Preferred Stock (554,052 shares)							2,637				2,637
	(Energy Services)		Common Stock (300,000 shares)							3,000				5,920
			Warrants							1,155				2,280
Impact Innovations Group, LLC (Business Services)			Equity Interests in Affiliate							—				869
Insight Pharmaceuticals Corporation			Subordinated Debt (16.1%, Due 9/12)			58,912				58,685				58,685
	(Consumer Products)		Preferred Stock (25,000 shares)							25,000				24,776
			Common Stock (620,000 shares)							6,325				—
Jakel, Inc.			Subordinated Debt (15.5%, Due 3/08)(6)			14,442				14,442				1,066
	(Industrial Products)		Preferred Stock (6,460 shares)							6,460				—
			Common Stock (158,061 shares)							9,347				—
Legacy Partners Group, LLC			Senior Loan (14.0%, Due 5/09)(6)			7,646				7,646				5,122
	(Financial Services)		Subordinated Debt (18.0%, Due 5/09)(6)			2,952				2,952				—
			Equity Interests							4,248				—
Litterer Beteiligungs-GmbH(4)			Subordinated Debt (8.0%, Due 3/07)			633				633				633
	(Business Services)		Equity Interest							1,810				2,989
Mercury Air Centers, Inc.			Senior Loan (10.0%, Due 4/09)			35,720				35,720				35,720
	(Business Services)		Subordinated Debt (16.0%, Due 4/09)			50,872				50,684				50,684
			Common Stock (57,970 shares)							35,053				93,600
			Standby Letters of Credit ($1,998)
MVL Group, Inc.			Senior Loan (12.1%, Due 7/09)			27,525				27,286				27,286
	(Business Services)		Subordinated Debt (14.4%, Due 7/09)			33,114				32,653				32,653
			Common Stock (648,661 shares)							643				2,033
Powell Plant Farms, Inc.			Senior Loan (15.0%, Due 12/06)			38,715				29,867				29,867
	(Consumer Products)		Subordinated Debt (20.0%, Due 6/03)(6)			19,291				19,224				8,457
			Preferred Stock (1,483 shares)							—				—
			Warrants							—				—

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.

F-63

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					March 31, 2006
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Service Champ, Inc.			Subordinated Debt (15.5%, Due 4/12)		$	27,214			$	27,084			$	27,084
	(Business Services)		Common Stock (63,888 shares)							13,662				15,565
Staffing Partners Holding			Subordinated Debt (13.5%, Due 1/07)(6)			5,987				5,987				4,170
	Company, Inc.		Preferred Stock (439,600 shares)							4,968				—
	(Business Services)		Common Stock (69,773 shares)							50				—
			Warrants							10				—
Startec Global Communications			Senior Loan (10.0%, Due 5/07 – 5/09)			24,283				24,283				22,987
	Corporation		Common Stock (19,180,000 shares)							37,255				—
	(Telecommunications)
STS Operating, Inc.			Subordinated Debt (15.3%, Due 3/12)			6,593				6,593				6,593
	(Industrial Products)		Common Stock (3,000,000 shares)							3,522				97,002
			Options							—				852
Triview Investments, Inc.(8)			Senior Loan (8.9%, Due 6/07)			14,325				14,295				14,295
	(Broadcasting & Cable/		Subordinated Debt (15.0%, Due 7/12)			37,877				37,687				37,687
	Consumer Products)		Subordinated Debt (16.8%, Due 7/08 –
			7/12)(6)			19,600				19,520				19,520
			Common Stock (202 shares)							93,906				30,883
			Guaranty ($800)
			Standby Letter of Credit ($200)
Total companies more than 25% owned									$	1,379,842			$	1,388,855
Companies 5% to 25% Owned
Advantage Sales & Marketing, Inc.			Subordinated Debt (12.0%, Due 3/14)		$	150,000			$	149,258			$	149,258
	(Business Services)		Equity Interests							2,048				15,000
Air Evac Lifeteam LLC			Subordinated Debt (13.9%, Due 7/10)			42,627				42,488				42,488
	(Healthcare Services)		Equity Interests							3,941				5,400
BB&T Capital Partners/Windsor			Equity Interests							5,867				5,867
	Mezzanine Fund, LLC (5)
	(Private Equity Fund)
Becker Underwood, Inc.			Subordinated Debt (14.5%, Due 8/12)			23,790				23,698				23,698
	(Industrial Products)		Common Stock (5,073 shares)							5,813				1,500
BI Incorporated			Senior Loan (8.1%, Due 2/13)			5,000				4,891				4,891
	(Business Services)		Subordinated Debt (13.5%, Due 2/14)			30,000				29,852				29,852
			Common Stock (40,000 shares)							4,000				4,000

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.
(8)		Triview Investments, Inc. holds investments in Longview Cable & Data, LLC (Broadcasting & Cable) with a cost of $66.5 million and value of $15.8 million and Triax Holdings, LLC (Consumer Products) with a cost of $98.9 million and a value of $86.6 million. The guaranty and standby letter of credit relate to Longview Cable & Data, LLC.

F-64

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					March 31, 2006
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
MedBridge Healthcare, LLC			Senior Loan (4.0%, Due 8/09)(6)		$	7,164			$	7,164			$	5,154
	(Healthcare Services)		Subordinated Debt (10.0%, Due 8/14)(6)			5,184				5,184				—
			Convertible Subordinated Debt (2.0%, Due 8/14)(6)			2,970				984				—
			Equity Interests							1,302				—
Nexcel Synthetics, LLC			Subordinated Debt (14.5%, Due 6/09)			10,711				10,685				10,685
	(Consumer Products)		Equity Interests							1,708				1,482
Pres Air Trol LLC			Unitranche Debt (12.0%, Due 4/10)(6)			5,911				5,583				5,583
	(Industrial Products)		Equity Interests							1,361				328
Progressive International			Subordinated Debt (16.0%, Due 12/09)			7,439				7,415				7,415
	Corporation		Preferred Stock (500 shares)							500				902
	(Consumer Products)		Common Stock (197 shares)							13				300
			Warrants							—				—
Soteria Imaging Services, LLC			Subordinated Debt (11.8%, Due 11/10)			14,500				13,480				13,480
	(Healthcare Services)		Equity Interests							2,159				2,354
Universal Environmental Services, LLC			Unitranche Debt (15.5%, Due 2/09)			10,975				10,940				10,940
	(Business Services)		Equity Interests							1,810				1,068
Total companies 5% to 25% owned									$	342,144			$	341,645
Companies Less Than 5% Owned
3SI Security Systems, Inc.			Senior Loan (8.4%, Due 2/12 – 2/13)		$	48,400			$	47,685			$	47,685
	(Consumer Products)		Subordinated Debt (14.4%, Due 8/13)			26,300				26,170				26,170
Advanced Circuits, Inc.			Senior Loan (10.5%, Due 9/11 – 3/12)			17,821				17,735				17,735
	(Industrial Products)		Common Stock (40,000 shares)							1,000				1,400
Amerex Group, LLC			Subordinated Debt (12.0%, Due 1/13)			8,400				8,400				8,400
	(Consumer Products)		Equity Interests							3,600				3,600
Anthony, Inc. (Industrial Products)			Subordinated Debt (13.0%, Due 8/11 – 9/12)			14,707				14,650				14,650
Benchmark Medical, Inc.			Warrants							18				30
	(Healthcare Services)
Border Foods, Inc. (Consumer Products)			Subordinated Debt (13.0%, Due 12/10)(6)			13,428				12,721				—
			Preferred Stock (140,214 shares)							2,893				—
			Common Stock (1,810 shares)							45				—
			Warrants							910				—
Broadcast Electronics, Inc.			Senior Loan (10.3%, Due 7/12)			5,000				4,963				4,963
	(Business Services)

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.

F-65

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					March 31, 2006
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
C&K Market, Inc.			Subordinated Debt (14.0%, Due 12/08)		$	25,638			$	25,536			$	25,536
	(Retail)
Callidus Debt Partners			Class C Notes (12.9%, Due 12/13)			18,800				18,968				18,968
	CDO Fund I, Ltd.(4)(9)		Class D Notes (17.0%, Due 12/13)			9,400				9,484				9,484
	(Senior Debt Fund)
Callidus Debt Partners			Preferred Shares (23,600,000 shares)							24,106				24,106
	CLO Fund III, Ltd. (4)(9)
	(Senior Debt Fund)
Callidus MAPS CLO Fund I LLC(9)			Class E Notes (10.2%, Due 12/17)			17,000				17,000				17,000
	(Senior Debt Fund)		Income Notes							49,836				49,836
Camden Partners Strategic Fund II, L.P.(5)			Limited Partnership Interest							2,142				3,149
	(Private Equity Fund)
Catterton Partners V, L.P.(5)			Limited Partnership Interest							2,650				2,748
	(Private Equity Fund)
CBS Personnel Holdings, Inc. (Business Services)			Subordinated Debt (14.5%, Due 12/09)			20,749				20,677				20,677
Centre Capital Investors IV, LP(5)			Limited Partnership Interest							1,752				1,639
	(Private Equity Fund)
Commercial Credit Group, Inc.			Subordinated Debt (14.8%, Due 2/11)			5,000				4,952				4,952
	(Financial Services)		Preferred Stock (32,500 shares)							3,900				3,900
			Warrants							—				—
Community Education Centers, Inc.			Subordinated Debt (16.0%, Due 12/10)			33,392				33,284				33,284
	(Education Services)
Component Hardware Group, Inc.			Preferred Stock (18,000 shares)							2,605				2,881
	(Industrial Products)		Common Stock (2,000 shares)							200				900
Cooper Natural Resources, Inc.			Subordinated Debt (0%, Due 11/07)			675				675				675
	(Industrial Products)		Preferred Stock (6,316 shares)							1,424				20
			Warrants							830				—
Coverall North America, Inc.			Subordinated Debt (14.6%, Due 2/11)			27,488				27,443				27,443
	(Business Services)		Preferred Stock (6,500 shares)							6,500				6,969
			Warrants							2,950				3,100
Deluxe Entertainment Services Group, Inc.			Subordinated Debt (13.2%, Due 7/11)			30,000				30,000				30,000
	(Business Services)
Distant Lands Trading Co.			Senior Loan (8.6%, Due 1/11)			1,000				976				976
	(Consumer Products)		Unitranche Debt (10.3% Due 1/11)			25,000				24,881				24,881
			Common Stock (1,500 shares)							1,500				1,500

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.
(9)		The fund is managed by Callidus Capital Corporation, a portfolio company of Allied Capital.

F-66

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					March 31, 2006
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Drilltec Patents & Technologies			Subordinated Debt (17.5%, Due 8/06)		$	3,952			$	3,952			$	3,952
	Company, Inc. (Energy Services)		Subordinated Debt (10.0%, Due 8/06)(6)			10,994				10,918				13,116
DVS VideoStream, LLC			Unitranche Debt (11.0%, Due 2/12)			20,000				19,879				19,879
	(Business Services)		Convertible Subordinated Debt
			(10.0%, Due 2/16)			3,500				3,483				3,483
Dynamic India Fund IV (4)(5)			Equity Interests							1,650				1,650
	(Private Equity Fund)
eCentury Capital Partners, L.P.(5)			Limited Partnership Interest							5,649				82
	(Private Equity Fund)
Elexis Beta GmbH(4)			Options							426				50
	(Industrial Products)
Event Rentals, Inc. (Consumer Services)			Senior Loans (9.9%, Due 11/11)			18,341				18,248				18,248
Farley’s & Sathers Candy Company, Inc.			Subordinated Debt (11.0%, Due 3/11)			20,000				19,900				19,900
	(Consumer Products)
Frozen Specialties, Inc.			Warrants							435				470
	(Consumer Products)
Garden Ridge Corporation (Retail)			Subordinated Debt (7.0%, Due 5/12)(6)			22,500				22,500				15,369
Geotrace Technologies, Inc.			Subordinated Debt (10.0%, Due 6/09)			25,293				23,617				23,617
(Energy Services)			Warrants							2,350				2,500
Ginsey Industries, Inc.			Subordinated Debt (12.5%, Due 3/07)			3,455				3,455				3,455
	(Consumer Products)
Grant Broadcasting Systems II			Subordinated Debt (5.0%, Due 6/09)			2,896				2,896				2,896
	(Broadcasting & Cable)
Grotech Partners, VI, L.P.(5)			Limited Partnership Interest							7,645				5,000
	(Private Equity Fund)
Havco Wood Products LLC			Unitranche Debt (10.8%, Due 8/11)			28,376				27,210				27,210
	(Industrial Products)		Equity Interests							1,048				1,400
Haven Eldercare of New England, LLC(10)			Subordinated Debt (12.0%, Due 8/09)(6)			4,020				4,020				4,020
	(Healthcare Services)
Haven Healthcare Management, LLC(10)			Subordinated Debt (18.0% Due 4/07)(6)			508				620				125
	(Healthcare Services)
HealthASPex Services Inc.			Senior Loan (4.0%, Due 7/08)			500				500				500
	(Business Services)
The Hillman Companies, Inc.(3)			Subordinated Debt (13.5%, Due 9/11)			44,247				44,070				44,070
	(Consumer Products)
Homax Holdings, Inc.			Subordinated Debt (12.0%, Due 8/11)			14,000				13,074				13,074
	(Consumer Products)		Preferred Stock (89 shares)							89				85
			Common Stock (28 shares)							6				6
			Warrants							1,106				1,384

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.
	(10)			Haven Eldercare of New England, LLC and Haven Healthcare Management, LLC are affiliated companies.

F-67

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					March 31, 2006
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Hot Stuff Foods, LLC			Senior Loan (8.2%, Due 2/11-2/12)		$	45,690			$	45,690			$	45,690
	(Consumer Products)		Subordinated Debt (13.9%, Due 8/12 – 2/13)			72,500				72,148				72,148
			Common Stock (375,000 shares)(11)							37,500				37,500
			Warrants							—				—
Integrity Interactive Corporation			Unitranche Debt (10.5%, Due 2/12)			30,000				29,786				29,786
	(Business Services)
International Fiber Corporation			Subordinated Debt (14.0%, Due 6/12)			21,656				21,574				21,574
	(Industrial Products)		Preferred Stock (25,000 shares)							2,500				1,900
Kodiak Fund LP(5)			Equity Interests							5,000				5,000
	(Private Equity Fund)
Line-X, Inc.			Senior Loan (8.4%, Due 8/11)			4,134				4,111				4,111
	(Consumer Products)		Unitranche Debt (10.0% Due 8/11)			50,225				49,990				49,990
			Standby Letter of Credit ($1,500)
MedAssets, Inc.			Preferred Stock (227,865 shares)							2,049				3,417
	(Business Services)		Warrants							136				55
Meineke Car Care Centers, Inc.			Senior Loan (8.4%, Due 6/11)			28,000				27,871				27,871
	(Business Services)		Subordinated Debt (11.9%, Due 6/12 – 6/13)			72,000				71,690				71,690
			Common Stock (10,696,308 shares)(11)							26,985				26,130
			Warrants							—				—
MHF Logistical Solutions, Inc.			Unitranche Debt (10.0%, Due 5/11)			21,922				21,823				21,823
	(Business Services)		Preferred Stock (431 shares)							431				465
			Common Stock (1,438 shares)							144				750
Mid-Atlantic Venture Fund IV, L.P.(5)			Limited Partnership Interest							6,600				3,002
	(Private Equity Fund)
Mogas Energy, LLC (Energy Services)			Subordinated Debt (9.5%, Due 3/12 – 4/12)			16,703				15,355				15,355
			Warrants							1,774				4,000
Network Hardware Resale, Inc.			Unitranche Debt (10.5%, Due 12/11)			38,500				38,739				38,739
	(Business Services)		Convertible Subordinated Debt (9.8%, Due 12/15)			12,000				12,074				12,074
N.E.W. Customer Service Companies, Inc.			Subordinated Debt (11.0%, Due 7/12)			40,000				40,014				40,014
	(Business Services)
Norwesco, Inc. (Industrial Products)			Subordinated Debt (12.6%, Due 1/12 – 7/12)			82,167				81,805				81,805
			Common Stock (559,603 shares)(11)							38,313				44,659
			Warrants							—				—
Novak Biddle Venture Partners III, L.P.(5)			Limited Partnership Interest							1,594				1,703
	(Private Equity Fund)
Oahu Waste Services, Inc.			Stock Appreciation Rights							239				1,120
	(Business Services)

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.
	(11)			Common stock is non-voting. In addition to non-voting stock ownership, the Company has an option to acquire a majority of the voting securities of the portfolio company at fair market value.

F-68

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					March 31, 2006
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Odyssey Investment Partners Fund III, LP(5)			Limited Partnership Interest						$	1,552			$	1,418
	(Private Equity Fund)
Opinion Research Corporation(3)			Warrants							996				175
	(Business Services)
Oriental Trading Company, Inc.			Common Stock (13,820 shares)							—				5,200
	(Consumer Products)
Palm Coast Data, LLC			Senior Loan (8.0%, Due 8/10)		$	15,850				15,778				15,778
	(Business Services)		Subordinated Debt (15.5%, Due 8/12 – 8/15)			29,865				29,731				29,731
			Common Stock (21,743 shares)(11)							21,743				19,019
			Warrants							—				—
Performant Financial Corporation			Common Stock (478,816 shares)							734				600
	(Business Services)
Pro Mach, Inc.			Subordinated Debt (13.8%, Due 6/12)			19,359				19,281				19,281
	(Industrial Products)		Equity Interests							1,500				1,500
Promo Works, LLC			Senior Loan (8.9%, Due 12/11)			900				853				853
	(Business Services)		Unitranche Debt (10.3%, Due 12/11)			31,000				30,739				30,739
			Guaranty ($1,500)
RadioVisa Corporation			Unitranche Debt (15.5%, Due 12/08)			27,405				27,308				27,308
	(Broadcasting & Cable)
Red Hawk Industries, LLC			Unitranche Debt (11.0%, Due 4/11)			56,328				56,060				56,060
	(Business Services)
S.B. Restaurant Company (Retail)			Subordinated Debt (14.7%, Due 11/08 – 12/09)			29,188				28,758				28,758
			Preferred Stock (54,125 shares)							135				135
			Warrants							619				1,200
SBBUT, LLC			Equity Interests							—				—
	(Consumer Products)
Soff-Cut Holdings, Inc.			Preferred Stock (300 shares)							300				300
	(Industrial Products)		Common Stock (2,000 shares)							200				72
SPP Mezzanine Fund, L.P.(5)			Limited Partnership Interest							2,993				3,021
	(Private Equity Fund)
Tradesmen International, Inc.			Subordinated Debt (12.0%, Due 12/09)			15,000				14,357				14,357
	(Business Services)		Warrants							710				1,950
TransAmerican Auto Parts, LLC			Senior Loan (8.2%, Due 11/11)			8,944				8,944				8,944
	(Consumer Products)		Subordinated Debt (14.0%, Due 11/12)			12,780				12,719				12,719
			Equity Interests							1,190				1,190
United Site Services, Inc.			Subordinated Debt (12.6%, Due 8/11)			49,712				49,515				49,515
	(Business Services)		Common Stock (160,588 shares)							1,000				1,200
Universal Air Filter Company			Unitranche Debt (11.0%, Due 11/11)			19,867				19,763				19,763
	(Industrial Products)

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.
	(11)			Common stock is non-voting. In addition to non-voting stock ownership, the Company has an option to acquire a majority of the voting securities of the portfolio company at fair market value.

F-69

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					March 31, 2006
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Universal Tax Systems, Inc.			Subordinated Debt (14.5%, Due 10/13)		$	19,190			$	19,120			$	19,120
	(Business Services)
Updata Venture Partners II, L.P.(5)			Limited Partnership Interest							5,277				4,809
	(Private Equity Fund)
Venturehouse-Cibernet Investors, LLC			Equity Interest							42				42
	(Business Services)
Venturehouse Group, LLC(5)			Equity Interest							598				419
	(Private Equity Fund)
VICORP Restaurants, Inc.(3)			Warrants							33				250
	(Retail)
Walker Investment Fund II, LLLP(5)			Limited Partnership Interest							1,330				548
	(Private Equity Fund)
Wear Me Apparel Corporation			Subordinated Debt (15.0%, Due 12/10)			40,000				39,088				39,088
	(Consumer Products)		Warrants							1,219				2,400
Wilshire Restaurant Group, Inc. (Retail)			Subordinated Debt (20.0%, Due 6/07)(6)			23,707				23,166				23,166
Wilton Industries, Inc.			Subordinated Debt (16.0%, Due 6/08)			4,800				4,800				4,800
	(Consumer Products)
Woodstream Corporation (Consumer Products)			Subordinated Debt (13.3%, Due 11/12 – 5/13)			52,573				52,432				52,432
			Common Stock (180 shares)							673				3,336
			Warrants							—				2,365
Other companies			Other debt investments			55				55				55
			Other debt investments(6)			468				468				348
			Other equity investments							8				—
			Guaranty ($104)
Total companies less than 5% owned									$	1,845,529			$	1,831,133
Total private finance (126 portfolio companies)									$	3,567,515			$	3,561,633

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.

F-70

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Commercial Real Estate Finance
(in thousands, except number of loans)

											March 31, 2006
			Interest				Number of				(unaudited)
			Rate Ranges				Loans				Cost				Value
Commercial Mortgage Loans
				Up to 6.99%				4			$	22,779			$	21,920
				7.00%–8.99%				25				48,564				48,695
				9.00%–10.99%				4				25,816				25,816
				11.00%–14.99%				1				2,293				2,293
			15.00% and above					2				3,970				3,970
	Total commercial mortgage loans(12)							36			$	103,422			$	102,694
Real Estate Owned											$	13,002			$	15,006
Equity Interests(2) — Companies more than 25% owned (Guarantees — $7,004)											$	13,140			$	11,669
	Total commercial real estate finance										$	129,564			$	129,369
Total portfolio											$	3,697,079			$	3,691,002

				Yield				Cost				Value
Liquidity Portfolio
	U.S. Treasury bills (Due June 2006)				4.2%			$	100,000			$	101,289
	SEI Daily Income Tr Prime Obligation Fund(13)				4.6%				101,072				101,072
		Total liquidity portfolio						$	201,072			$	202,361
Other Investments in Money Market Securities(13)
	PNC Bank Corporate Money Market Deposit Account				4.5%			$	29,318			$	29,318
	Columbia Treasury Reserves Money Market Fund				4.5%			$	9,374			$	9,374

(1)      Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for             a single issuer. The maturity dates represent the earliest and the latest maturity dates.

(2)      Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.

(3)      Public company.

(4)      Non-U.S. company or principal place of business outside the U.S.

(5)      Non-registered investment company.

(12)      Commercial mortgage loans totaling $21.2 million at value were on non-accrual status and therefore were considered non-income producing.

(13)      Included in investments in money market securities on the accompanying Consolidated Balance Sheet.

F-71

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F-72

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	Valuation Of Portfolio Investments

	Loans and Debt Securities

F-73

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	Equity Securities

F-74

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	Collateralized Debt Obligations (“CDO”) and Collateralized Loan Obligations (“CLO”)

	Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

	Fee Income

F-75

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	Guarantees

	Financing Costs

	Dividends to Shareholders

	Stock Compensation Plans

F-76

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			For the Three
			Months Ended
			March 31,
			2005
(in thousands, except per share amounts)
Net increase in net assets resulting from operations as reported			$	119,621
Less total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects				(2,856	)
Pro forma net increase in net assets resulting from operations available to common shareholders			$	116,765
Basic earnings per common share:
	As reported		$	0.90
	Pro forma		$	0.88
Diluted earnings per common share:
	As reported		$	0.88
	Pro forma		$	0.86

		For the Three
		Months Ended
		March 31,
		2006				2005(1)
Risk-free interest rate			4.3	%			—	%
Expected life			5.0				—
Expected volatility			29.6	%			—	%
Dividend yield			9.0	%			—	%
Weighted average fair value per option		$	3.35			$	—

(1)	The Company did not grant any options during the three months ended March 31, 2005.

F-77

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	Federal and State Income Taxes and Excise Tax

	Per Share Information

	Use of Estimates in the Preparation of Financial Statements

F-78

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	Private Finance

				2006												2005
				Cost				Value				Yield(1)				Cost				Value				Yield(1)
($ in thousands)
Loans and debt securities:
	Senior loans			$	468,987			$	420,065				9.3	%		$	284,680			$	239,838				9.5	%
	Unitranche debt(2)				362,726				362,726				11.1	%			294,201				294,201				11.4	%
	Subordinated debt				1,801,347				1,747,235				13.6	%			1,610,228				1,560,851				13.8	%
		Total loans and debt securities(3)			2,633,060				2,530,026				12.5	%			2,189,109				2,094,890				13.0	%
Equity securities					934,455				1,031,607								917,314				1,384,400
		Total		$	3,567,515			$	3,561,633							$	3,106,423			$	3,479,290

(1)	The weighted average yield on loans and debt securities is computed as the (a) annual stated interest plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities less the annual amortization of loan origination costs, divided by (b) total loans and debt securities at value. At March 31, 2006, and December 31, 2005, the cost and value of subordinated debt include the Class A equity interests in BLX and the guaranteed dividend yield on these equity interests is included in interest income. The weighted average yield is computed as of the balance sheet date.
(2)	Unitranche debt is a single debt investment that is a blend of senior and subordinated debt terms.
(3)	The total principal balance outstanding on loans and debt securities was $2,662.5 million and $2,216.3 million at March 31, 2006, and December 31, 2005, respectively. The difference between principal and cost is represented by unamortized loan origination fees and costs, original issue discounts, and market discounts totaling $29.4 million and $27.2 million at March 31, 2006, and December 31, 2005, respectively.

F-79

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F-80

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			2006				2005
($ in millions)
Interest income on subordinated debt and Class A equity interests			$	3.9			$	3.4
Dividend income on Class B equity interests				—				2.0
Fees and other income				2.2				2.4
	Total interest and related portfolio income		$	6.1			$	7.8

F-81

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F-82

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			2006				2005
($ in millions)
Interest income			$	7.3			$	7.7
Loan prepayment premiums				5.0				—
Fees and other income				1.8				1.5
	Total interest and related portfolio income		$	14.1			$	9.2

F-83

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			2006				2005
($ in millions)
Bonds			$	228.9			$	230.7
Syndicated Loans				758.9				704.0
Cash(1)				185.0				238.4
	Total underlying collateral assets		$	1,172.8			$	1,173.1

(1)	Includes undrawn liability amounts.

				2006				2005
($ in thousands)
Loans and debt securities in workout status (classified as Grade 4 or 5)
	Companies more than 25% owned			$	29,030			$	15,622
	Companies 5% to 25% owned				5,583				—
	Companies less than 5% owned				51,776				11,417
Loans and debt securities not in workout status
	Companies more than 25% owned				40,599				58,047
	Companies 5% to 25% owned				5,154				534
	Companies less than 5% owned				4,369				49,458
		Total		$	136,511			$	135,078

F-84

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			2006				2005
Industry
Business services				33	%			45	%
Consumer products				25				14
Financial services				14				15
Industrial products				11				10
Retail				3				3
Healthcare services				2				2
Energy services				2				2
Broadcasting and cable				1				1
Other(1)				9				8
	Total			100	%			100	%
Geographic Region(2)
Mid-Atlantic				30	%			29	%
Midwest				28				21
West				21				34
Southeast				16				12
Northeast				5				4
	Total			100	%			100	%

(1)	Includes investments in senior debt CDO and CLO funds. These funds invest in senior debt representing a variety of industries.
(2)	The geographic region for the private finance portfolio depicts the location of the headquarters for the Company’s portfolio companies. The portfolio companies may have a number of other locations in other geographic regions.

	Commercial Real Estate Finance

			2006												2005
			Cost				Value				Yield(1)				Cost				Value				Yield(1)
($ in thousands)
Commercial mortgage loans			$	103,422			$	102,694				7.6%			$	103,878			$	102,569				7.6%
Real estate owned				13,002				15,006								14,240				13,932
Equity interests				13,140				11,669								13,577				10,564
	Total		$	129,564			$	129,369							$	131,695			$	127,065

(1)

The weighted average yield on the interest-bearing investments is computed as the (a) annual stated interest plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing interest-bearing investments less the annual amortization of origination costs, divided by (b) total interest-bearing investments at value. The weighted average yield is computed as of the balance sheet date. Interest-bearing investments for the commercial real estate finance portfolio include all investments except for real estate owned and equity interests.

F-85

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			2006				2005
Property Type
Hospitality				40	%			37	%
Housing				29				30
Retail				16				16
Office				11				11
Other				4				6
	Total			100	%			100	%
Geographic Region
Mid-Atlantic				31	%			31	%
Southeast				24				25
Midwest				21				21
West				18				18
Northeast				6				5
	Total			100	%			100	%

F-86

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				2006												2005
												Annual												Annual
				Facility				Amount				Interest				Facility				Amount				Interest
				Amount				Drawn				Cost(1)				Amount				Drawn				Cost(1)
($ in thousands)
Notes payable and debentures:
	Unsecured notes payable			$	1,164,745			$	1,164,745				6.2	%		$	1,164,540			$	1,164,540				6.2	%
	SBA debentures				16,500				16,500				7.4	%			28,500				28,500				7.5	%
		Total notes payable and debentures			1,181,245				1,181,245				6.2	%			1,193,040				1,193,040				6.3	%
Revolving line of credit					772,500				93,000				6.2	%(2)			772,500				91,750				5.6	%(2)
	Total debt			$	1,953,745			$	1,274,245				6.5	%(3)		$	1,965,540			$	1,284,790				6.5	%(3)

(1)	The weighted average annual interest cost is computed as the (a) annual stated interest on the debt plus the annual amortization of commitment fees and other facility fees that are recognized into interest expense over the contractual life of the respective borrowings, divided by (b) debt outstanding on the balance sheet date.
(2)	The annual interest cost reflects the interest rate payable for borrowings under the revolving line of credit. In addition to the current interest rate payable, there were annual costs of commitment fees and other facility fees of $3.3 million at both March 31, 2006, and December 31, 2005.
(3)	The annual interest cost for total debt includes the annual cost of commitment fees and other facility fees on the revolving line of credit regardless of the amount outstanding on the facility as of the balance sheet date.

F-87

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Year			Amount Maturing
			($ in thousands)
2006			$	175,000
2007				—
2008				153,000
2009				267,245
2010				408,000
Thereafter				178,000
	Total		$	1,181,245

	Revolving Line of Credit

	Covenant Compliance

F-88

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			Total				2006				2007				2008				2009				2010				After 2010
(in millions)
Guarantees			$	154.0			$	1.3			$	0.6			$	3.0			$	143.6			$	—			$	5.5
Standby letters of credit(1)				37.7				0.1				—				37.6				—				—				—
	Total		$	191.7			$	1.4			$	0.6			$	40.6			$	143.6			$	—			$	5.5

(1)	Standby letters of credit are issued under the Company’s revolving line of credit that expires in September 2008. Therefore, unless a standby letter of credit is set to expire at an earlier date, it is assumed that the standby letters of credit will expire contemporaneously with the expiration of the Company’s line of credit in September 2008.

F-89

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			2006				2005(1)
(in thousands)
Number of common shares				3,000				—
Gross proceeds			$	87,750			$	—
Less costs, including underwriting fees				4,780				—
	Net proceeds		$	82,970			$	—

(1)	The Company did not sell any common stock during the three months ended March 31, 2005.

		For the Three
		Months
		Ended March 31,
		2006				2005
(in thousands, except per share amounts)
Shares issued			120				55
Average price per share		$	30.29			$	25.65

F-90

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		For the Three Months
		Ended March 31,
		2006				2005
(in thousands, except per share amounts)
Net increase in net assets resulting from operations available to common shareholders		$	99,587			$	119,621
Weighted average common shares outstanding — basic			138,759				133,283
Dilutive options outstanding to officers			2,979				2,296
Weighted average common shares outstanding — diluted			141,738				135,579
Basic earnings per common share		$	0.72			$	0.90
Diluted earnings per common share		$	0.70			$	0.88

F-91

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			2006				2005
($ in millions)
IPA contributions			$	1.7			$	1.9
IPA mark to market expense				1.0				0.1
	Total IPA expense		$	2.7			$	2.0

F-92

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						Weighted				Weighted
						Average				Average				Aggregate
						Exercise				Contractual				Intrinsic Value
						Price Per				Remaining				at March 31,
		Shares				Share				Term (Years)				2006(1)
(in thousands, except per share amounts)
Options outstanding at January 1, 2006			22,259			$	24.52
Granted			515			$	29.23
Exercised			(167	)		$	23.53
Forfeited			(251	)		$	27.70
Outstanding at March 31, 2006			22,356			$	24.60				7.02			$	134,213
Exercisable at March 31, 2006			12,982			$	22.37				5.63			$	106,892
Exercisable and expected to be exercisable at March 31, 2006(2)			21,572			$	24.48				6.95			$	131,930

(1)	Represents the difference between the market value of the options at March 31, 2006, and the cost for the option holders to exercise the options.
(2)	The amount of options expected to be exercisable at March 31, 2006, is calculated based on an estimate of expected forfeitures.

F-93

---

 

	•	a note received as consideration from the sale of the Company’s investment in Advantage of $150.0 million; and
	•	the exchange of existing preferred stock and common stock of Redox Brands, Inc. for common stock in CR Brands, Inc. with a cost basis of $10.2 million.

	•	the exchange of existing subordinated debt securities and accrued interest of BLX with a cost basis of $44.8 million for additional Class B equity interests;
	•	the exchange of debt securities and accrued interest of Coverall North America, Inc. with a cost basis of $24.2 million for new debt securities and warrants with a total cost basis of $26.8 million, and;
	•	the contribution to capital of existing debt securities of GAC Investments, Inc. (GAC) with a cost basis of $11.0 million, resulting in a decrease in the Company’s debt cost basis and an increase in the Company’s common stock cost basis in GAC. During the third quarter of 2005, GAC changed its name to Triview Investments, Inc.

F-94

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($ in thousands)
Description of Issue		2006				2005
5-year Treasury securities, due April 2010		$	17,534			$	17,666

			At and for the
			Three Months Ended								At and for the
			March 31,								Year Ended
											December 31,
			2006(1)				2005				2005
Per Common Share Data
Net asset value, beginning of period			$	19.17			$	14.87			$	14.87
	Net investment income(2)			0.29				0.29				1.00
	Net realized gains(2)(3)			3.05				0.07				1.99
	Net investment income plus net realized gains(2)			3.34				0.36				2.99
	Net change in unrealized appreciation or depreciation (2)(3)			(2.64	)			0.52				3.37
Net increase in net assets resulting from operations (2)				0.70				0.88				6.36
Net decrease in net assets from shareholder distributions				(0.59	)			(0.57	)			(2.33	)
Net increase in net assets from capital share transactions(2)				0.22				0.04				0.27
Net asset value, end of period			$	19.50			$	15.22			$	19.17
Market value, end of period			$	30.60			$	26.10			$	29.37
Total return(4)				6.2	%			3.3	%			23.5	%

F-95

---

 

		At and for the
		Three Months Ended								At and for the
		March 31,								Year Ended
										December 31,
		2006(1)				2005				2005
Ratios and Supplemental Data ($ and shares in thousands, except per share amounts)
Ending net assets		$	2,729,813			$	2,033,148			$	2,620,546
Common shares outstanding at end of period			139,984				133,563				136,697
Diluted weighted average common shares outstanding			141,738				135,579				137,274
Employee, stock option and administrative expenses/average net assets			1.37	%			1.80	%			6.58	%
Total operating expenses/average net assets			2.27	%			2.81	%			9.99	%
Net investment income/average net assets			1.54	%			1.93	%			6.08	%
Net increase in net assets resulting from operations/ average net assets			3.72	%			5.96	%			38.68	%
Portfolio turnover rate			9.33	%			5.10	%			47.72	%
Average debt outstanding		$	1,491,513			$	1,125,007			$	1,087,118
Average debt per share(2)		$	10.52			$	8.30			$	7.92

(1)	The results for the three months ended March 31, 2006, are not necessarily indicative of the operating results to be expected for the full year.
(2)	Based on diluted weighted average number of common shares outstanding for the period.
(3)	Net realized gains and net change in unrealized appreciation or depreciation can fluctuate significantly from period to period. As a result, quarterly comparisons may not be meaningful.
(4)	Total return assumes the reinvestment of all dividends paid for the periods presented.

F-96

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					Amount of Interest or
					Dividends
PRIVATE FINANCE
Portfolio Company					Credited								December 31, 2005				Gross				Gross				March 31, 2006
(in thousands)			Investment(1)		to Income(6)				Other(2)				Value				Additions(3)				Reductions(4)				Value
Companies More Than 25% Owned
Acme Paging, L.P.			Senior Loan(5)										$	—			$	—			$	—			$	—
	(Telecommunications)		Subordinated Debt(5)											—				—				—				—
			Common Stock											—				—				—				—
Advantage Sales &			Subordinated Debt		$	1,712								59,787				213				(60,000	)			—
	Marketing, Inc.(7)		Subordinated Debt			5,555								124,000				374				(124,374	)			—
	(Business Services)		Common Stock											476,578				—				(476,578	)			—
Alaris Consulting, LLC			Senior Loan(5)			(16	)							—				16				(16	)			—
	(Business Services)		Equity Interests											—				—				—				—
American Healthcare Services,   Inc. and Affiliates			Senior Loan(5)											4,097				—				(95	)			4,002
	(Healthcare Services)
Avborne, Inc.			Preferred Stock											892				—				—				892
	(Business Services)		Common Stock											—				—				—				—
Avborne Heavy Maintenance,   Inc.			Preferred Stock											—				—				—				—
	(Business Services)		Common Stock											—				—				—				—
Business Loan Express, LLC			Subordinated Debt			38								10,000				15,000				(25,000	)			—
	(Financial Services)		Class A Equity
			Interests			3,845								60,693				1,839				—				62,532
			Class B Equity Interests *											146,910				—				(10,820	)			136,090
			Class C Equity Interests											139,521				—				(11,902	)			127,619
Callidus Capital Corporation			Senior Loan			284								600				6,880				—				7,480
	(Financial Services)		Subordinated Debt			227								4,832				217				—				5,049
			Common Stock											7,968				2,387				—				10,355
CR Brands, Inc.			Senior Loan			341								—				37,048				—				37,048
	(Consumer Products)		Subordinated Debt			702								—				38,705				—				38,705
			Common Stock											—				37,431				—				37,431
Diversified Group			Preferred Stock			33								728				—				(14	)			714
	Administrators, Inc.		Preferred Stock											841				—				—				841
	(Business Services)		Common Stock			68								502				69				—				571
Financial Pacific Company			Subordinated Debt			3,080								69,904				362				—				70,266
	(Financial Services)		Preferred Stock											13,116				655				—				13,771
			Common Stock											44,180				—				(511	)			43,669
ForeSite Towers, LLC			Equity Interests			80								9,750				1,544				—				11,294
	(Tower Leasing)
Global Communications, LLC			Senior Loan(5)											15,957				—				—				15,957
	(Business Services)		Subordinated Debt(5)											11,198				138				—				11,336
			Preferred Equity
			Interest											4,303				—				(3,749	)			554
			Options											—				—				—				—
Gordian Group, Inc.			Senior Loan(5)			(5	)							4,161				175				(4,336	)			—
	(Business Services)		Common Stock											—				220				(220	)			—
Healthy Pet Corp.			Senior Loan			386								4,086				12,652				—				16,738
	(Consumer Services)		Subordinated Debt			1,623								38,535				4,551				—				43,086
			Common Stock											25,766				5,174				—				30,940
HMT, Inc.			Preferred Stock											2,637				—				—				2,637
	(Energy Services)		Common Stock											5,343				577				—				5,920
			Warrants											2,057				223				—				2,280
Impact Innovations Group, LLC			Equity Interests in
	(Business Services)		Affiliate											742				127				—				869

F-97

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					Amount of Interest or
					Dividends
PRIVATE FINANCE
Portfolio Company					Credited								December 31, 2005				Gross				Gross				March 31, 2006
(in thousands)			Investment(1)		to Income(6)				Other(2)				Value				Additions(3)				Reductions(4)				Value
Insight Pharmaceuticals			Subordinated Debt		$	2,374							$	58,298			$	387			$	—			$	58,685
	Corporation		Preferred Stock											26,791				—				(2,015	)			24,776
	(Consumer Products)		Common Stock											236				—				(236	)			—
Jakel, Inc.			Subordinated Debt(5)											—				1,066				—				1,066
	(Industrial Products)		Preferred Stock											—				—				—				—
			Common Stock											—				—				—				—
Legacy Partners Group, LLC			Senior Loan (5)											5,029				93				—				5,122
	(Financial Services)		Subordinated Debt(5)											—				—				—				—
			Equity Interests											—				18				(18	)			—
Litterer Beteiligungs-GmbH			Subordinated Debt			10								621				12				—				633
	(Business Services)		Equity Interest											2,226				763				—				2,989
Mercury Air Centers, Inc.			Senior Loan			864								31,720				4,000				—				35,720
	(Business Services)		Subordinated Debt			2,007								46,519				4,165				—				50,684
			Common Stock											88,898				4,702				—				93,600
MVL Group, Inc.			Senior Loan			884								27,218				68				—				27,286
	(Business Services)		Subordinated Debt			1,223								32,417				236				—				32,653
			Common Stock											3,211				—				(1,178	)			2,033
Pennsylvania Avenue			Equity Interests											1,864				1,193				(3,057	)			—
	Investors, L.P.
	(Private Equity Fund)
Powell Plant Farms, Inc.			Senior Loan			1,157								23,792				6,075				—				29,867
	(Consumer Products)		Subordinated Debt(5)											7,364				1,093				—				8,457
			Preferred Stock											—				—				—				—
			Warrants											—				—				—				—
Redox Brands, Inc.			Preferred Stock			363								12,097				1,708				(13,805	)			—
	(Consumer Products)		Warrants											500				84				(584	)			—
Service Champ, Inc.			Subordinated Debt			1,060								26,906				178				—				27,084
	(Business Services)		Common Stock											13,319				2,246				—				15,565
Staffing Partners Holding			Subordinated Debt(5)						$	355				6,343				—				(2,173	)			4,170
	Company, Inc.		Preferred Stock											1,812				—				(1,812	)			—
	(Business Services)		Common Stock											—				—				—				—
			Warrants											—				—				—				—
Startec Global
	Communications		Senior Loan			623								21,685				2,244				(942	)			22,987
	Corporation		Common Stock											—				—				—				—
	(Telecommunications)
STS Operating, Inc.			Subordinated Debt			251								6,593				—				—				6,593
	(Industrial Products)		Common Stock											64,963				32,039				—				97,002
			Options											560				292				—				852
Triview Investments, Inc.			Senior Loan			246								7,449				6,846				—				14,295
	(Broadcasting & Cable/		Subordinated Debt			1,131								30,845				6,842				—				37,687
	Consumer Products)		Subordinated Debt(5)											19,520				—				—				19,520
			Common Stock											29,171				1,854				(142	)			30,883
Total companies more than 25% owned					$	30,146																			$	1,388,855
Companies 5% to 25% Owned
Advantage Sales &			Subordinated Debt		$	158							$	—			$	149,258			$	—			$	149,258
	Marketing, Inc.(7)		Equity Interests											—				15,000				—				15,000
	(Business Services)
Air Evac Lifeteam LLC			Subordinated Debt			1,477								42,267				221				—				42,488
	(Healthcare Services)		Equity Interests											4,025				1,375				—				5,400
Aspen Pet Products, Inc.			Subordinated Debt			1,130								19,959				399				(20,358	)			—
	(Consumer Products)		Preferred Stock			29								1,638				516				(2,154	)			—
			Common Stock											17				123				(140	)			—
			Warrants											—				—				—				—
BB&T Capital			Equity Interests											—				5,867				—				5,867
	Partners/Windsor
	Mezzanine Fund, LLC
	(Private Equity Fund)
Becker Underwood, Inc.			Subordinated Debt			866								23,543				155				—				23,698
	(Industrial Products)		Common Stock											2,200				—				(700	)			1,500

F-98

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					Amount of Interest or
					Dividends
PRIVATE FINANCE
Portfolio Company					Credited								December 31, 2005				Gross				Gross				March 31, 2006
(in thousands)			Investment(1)		to Income(6)				Other(2)				Value				Additions(3)				Reductions(4)				Value
BI Incorporated			Senior Loan		$	60							$	—			$	14,891			$	(10,000	)		$	4,891
	(Business Services)		Subordinated Debt			361								—				29,852				—				29,852
			Subordinated Debt											16,133				153				(16,286	)			—
			Common Stock											—				4,000				—				4,000
The Debt Exchange Inc.			Preferred Stock											3,219				—				(3,219	)			—
	(Business Services)
MedBridge Healthcare, LLC			Senior Loan(5)											7,093				71				(2,010	)			5,154
	(Healthcare Services)		Subordinated Debt(5)											534				375				(909	)			—
			Convertible
			Subordinated Debt(5)											—				—				—				—
			Equity Interests											—				501				(501	)			—
Nexcel Synthetics, LLC			Subordinated Debt			390								10,588				97				—				10,685
	(Consumer Products)		Equity Interests											1,367				115				—				1,482
Pres Air Trol LLC			Unitranche Debt(5)			(10	)		$	184				5,820				—				(237	)			5,583
	(Industrial Products)		Equity Interests											318				10				—				328
Progressive International
	Corporation		Subordinated Debt			299								7,376				39				—				7,415
	(Consumer Products)		Preferred Stock											884				18				—				902
			Common Stock											13				287				—				300
			Warrants											—				—				—				—
Soteria Imaging Services, LLC			Subordinated Debt			462								13,447				33				—				13,480
	(Healthcare Services)		Equity Interests											2,308				46				—				2,354
Universal Environmental
	Services, LLC		Unitranche Debt			428								10,862				78				—				10,940
	(Business Services)		Equity Interests											1,328				18				(278	)			1,068
Total companies 5% to 25% owned					$	5,650																			$	341,645

(1)	Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted. The principal amount for loans and debt securities and the number of shares of common stock and preferred stock is shown in the consolidated statement of investments as of March 31, 2006.
(2)	Other includes interest, dividend, or other income which was applied to the principal of the investment and therefore reduced the total investment. These reductions are also included in the Gross Reductions for the investment, as applicable.
(3)	Gross additions include increases in the cost basis of investments resulting from new portfolio investments, paid-in-kind interest or dividends, the amortization of discounts and closing fees, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation.
(4)	Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation.
(5)	Loan or debt security is on non-accrual status at March 31, 2006, and is therefore considered non-income producing. Loans or debt securities on non-accrual status at the end of the period may or may not have been on non-accrual status for the full period.
(6)	Represents the total amount of interest or dividends credited to income for the portion of the year an investment was included in the companies more than 25% owned or companies 5% to 25% owned categories, respectively.
(7)	Included in the companies more than 25% owned category while the Company held a majority equity interest. On March 29, 2006, the Company sold its majority equity interest in Advantage. The Company’s investment in Advantage after the sale transaction is included in the companies 5% to 25% owned category. See Note 3 to the consolidated financial statements for further information.

	*	All or a portion of the dividend income on this investment was or will be paid in the form of additional securities. Dividends paid-in-kind are also included in the Gross Additions for the investment, as applicable.

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