x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Maryland (State or Jurisdiction of Incorporation or Organization)		52-1081052 (IRS Employer Identification No.)

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PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		Consolidated Balance Sheet as of September 30, 2006 (unaudited) and December 31, 2005		1
		Consolidated Statement of Operations (unaudited) — For the Three and Nine Months Ended September 30, 2006 and 2005		2
		Consolidated Statement of Changes in Net Assets (unaudited) — For the Nine Months Ended September 30, 2006 and 2005		3
		Consolidated Statement of Cash Flows (unaudited) — For the Nine Months Ended September 30, 2006 and 2005		4
		Consolidated Statement of Investments as of September 30, 2006 (unaudited)		5
		Consolidated Statement of Investments as of December 31, 2005		15
		Notes to Consolidated Financial Statements		25
		Report of Independent Registered Public Accounting Firm		53
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			58
	Item 3. Quantitative and Qualitative Disclosures About Market Risk			91
	Item 4. Controls and Procedures			91
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings			92
	Item 1A. Risk Factors			93
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			99
	Item 3. Defaults Upon Senior Securities			99
	Item 4. Submission of Matters to a Vote of Security Holders			100
	Item 5. Other Information			100
	Item 6. Exhibits			100
	Signatures			104

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					September 30,				December 31,
					2006				2005
(in thousands, except per share amounts)					(unaudited)
ASSETS
Portfolio at value:
	Private finance
		Companies more than 25% owned (cost: 2006-$1,464,190; 2005-$1,489,782)			$	1,401,877			$	1,887,651
		Companies 5% to 25% owned (cost: 2006-$413,374; 2005-$168,373)				417,455				158,806
		Companies less than 5% owned (cost: 2006-$2,217,811; 2005-$1,448,268)				2,168,484				1,432,833
			Total private finance (cost: 2006-$4,095,375; 2005-$3,106,423)			3,987,816				3,479,290
	Commercial real estate finance (cost: 2006-$125,454; 2005-$131,695)					131,810				127,065
			Total portfolio at value (cost: 2006-$4,220,829; 2005-$3,238,118)			4,119,626				3,606,355
U.S. Treasury bills (cost: 2006-$125,000; 2005-$100,000)						127,561				100,305
Investments in money market and other securities						116,855				121,967
Deposits of proceeds from sales of borrowed Treasury securities						17,733				17,666
Accrued interest and dividends receivable						61,012				60,366
Other assets						119,493				87,858
Cash						3,178				31,363
			Total assets		$	4,565,458			$	4,025,880
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
	Notes payable and debentures (maturing within one year: 2006-$150,000; 2005-$175,000)				$	1,590,699			$	1,193,040
	Revolving line of credit					—				91,750
	Obligations to replenish borrowed Treasury securities					17,733				17,666
	Accounts payable and other liabilities					133,145				102,878
			Total liabilities			1,741,577				1,405,334
Commitments and contingencies
Shareholders’ equity:
	Common stock, $0.0001 par value, 200,000 shares authorized; 145,722 and 136,697 shares issued and outstanding at September 30, 2006, and December 31, 2005, respectively					15				14
	Additional paid-in capital					2,430,410				2,177,283
	Common stock held in deferred compensation trust					(26,030	)			(19,460	)
	Notes receivable from sale of common stock					(2,863	)			(3,868	)
	Net unrealized appreciation (depreciation)					(117,617	)			354,325
	Undistributed earnings					539,966				112,252
			Total shareholders’ equity			2,823,881				2,620,546
			Total liabilities and shareholders’ equity		$	4,565,458			$	4,025,880
Net asset value per common share					$	19.38			$	19.17

1

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					For the Three								For the Nine
					Months Ended								Months Ended
					September 30,								September 30,
					2006				2005				2006				2005
(in thousands, except per share amounts)
					(unaudited)								(unaudited)
Interest and Related Portfolio Income:
	Interest and dividends
		Companies more than 25% owned			$	23,812			$	31,137			$	77,377			$	89,587
		Companies 5% to 25% owned				10,977				5,205				28,046				16,723
		Companies less than 5% owned				63,879				40,011				177,559				126,318
			Total interest and dividends			98,668				76,353				282,982				232,628
	Fees and other income
		Companies more than 25% owned				6,486				9,019				24,222				21,777
		Companies 5% to 25% owned				10				677				4,008				802
		Companies less than 5% owned				8,219				8,808				23,638				20,776
			Total fees and other income			14,715				18,504				51,868				43,355
			Total interest and related portfolio income			113,383				94,857				334,850				275,983
Expenses:
	Interest					26,109				17,929				72,455				57,483
	Employee					25,228				13,969				67,054				52,302
	Employee stock options					3,649				—				11,852				—
	Administrative					8,153				14,936				29,348				58,563
			Total operating expenses			63,139				46,834				180,709				168,348
Net investment income before income taxes						50,244				48,023				154,141				107,635
Income tax expense (benefit), including excise tax						1,586				1,889				13,988				7,482
Net investment income						48,658				46,134				140,153				100,153
Net Realized and Unrealized Gains (Losses):
	Net realized gains (losses)
		Companies more than 25% owned				394				64,677				528,793				47,192
		Companies 5% to 25% owned				93				(6	)			(324	)			4,702
		Companies less than 5% owned				9,429				6,043				14,522				236,601
			Total net realized gains			9,916				70,714				542,991				288,495
	Net change in unrealized appreciation or depreciation					19,312				(3,680	)			(471,942	)			156,026
			Total net gains (losses)			29,228				67,034				71,049				444,521
Net increase in net assets resulting from operations					$	77,886			$	113,168			$	211,202			$	544,674
Basic earnings per common share					$	0.54			$	0.84			$	1.50			$	4.06
Diluted earnings per common share					$	0.53			$	0.82			$	1.47			$	3.99
Weighted average common shares outstanding — basic						144,163				135,322				141,002				134,110
Weighted average common shares outstanding — diluted						147,112				138,058				144,030				136,669

2

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				For the Nine Months
				Ended September 30,
				2006				2005
(in thousands, except per share amounts)
				(unaudited)
Operations:
	Net investment income			$	140,153			$	100,153
	Net realized gains				542,991				288,495
	Net change in unrealized appreciation or depreciation				(471,942	)			156,026
		Net increase in net assets resulting from operations			211,202				544,674
Shareholder distributions:
	Common stock dividends				(255,430	)			(231,163	)
		Net decrease in net assets resulting from shareholder distributions			(255,430	)			(231,163	)
Capital share transactions:
	Sale of common stock				218,882				—
	Issuance of common stock for portfolio investments				—				7,200
	Issuance of common stock in lieu of cash distributions				11,050				7,456
	Issuance of common stock upon the exercise of stock options				11,108				57,805
	Stock option expense				12,088				—
	Net decrease in notes receivable from sale of common stock				1,005				1,332
	Purchase of common stock held in deferred compensation trust				(7,226	)			(6,034	)
	Distribution of common stock held in deferred compensation trust				656				1,756
	Other				—				4,182
		Net increase in net assets resulting from capital share transactions			247,563				73,697
		Total increase in net assets			203,335				387,208
Net assets at beginning of period					2,620,546				1,979,778
Net assets at end of period				$	2,823,881			$	2,366,986
Net asset value per common share				$	19.38			$	17.37
Common shares outstanding at end of period					145,722				136,289

3

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					For the Nine Months Ended
					September 30,
					2006				2005
(in thousands)
					(unaudited)
Cash flows from operating activities:
	Net increase in net assets resulting from operations				$	211,202			$	544,674
	Adjustments:
		Portfolio investments				(1,700,751	)			(1,320,611	)
		Principal collections related to investment repayments or sales				885,872				1,241,827
		Change in accrued or reinvested interest and dividends				1,820				(1,905	)
		Amortization of discounts and fees				(3,644	)			(3,339	)
		Redemption of (investments in) U.S. Treasury bills				(22,875	)			—
		Redemption of (investments in) money market securities				7,581				(21,620	)
		Stock option expense				12,088				—
		Changes in other assets and liabilities				33,897				33,399
		Depreciation and amortization				1,303				1,404
		Realized gains from the receipt of notes and other securities as consideration from sale of investments, net of collections				(209,049	)			(4,605	)
		Realized losses				7,063				50,661
		Net change in unrealized (appreciation) or depreciation				471,942				(156,026	)
			Net cash provided by (used in) operating activities			(303,551	)			363,859
Cash flows from financing activities:
	Sale of common stock					218,882				—
	Sale of common stock upon the exercise of stock options					11,108				57,805
	Collections of notes receivable from sale of common stock					1,005				1,332
	Borrowings under notes payable and debentures					450,000				—
	Repayments on notes payable and debentures					(53,500	)			(94,700	)
	Net borrowings under (repayments on) revolving line of credit					(91,750	)			(112,000	)
	Purchase of common stock held in deferred compensation trust					(7,226	)			(6,034	)
	Other financing activities					(4,674	)			(4,594	)
	Common stock dividends and distributions paid					(248,479	)			(226,367	)
			Net cash provided by (used in) financing activities			275,366				(384,558	)
Net increase (decrease) in cash						(28,185	)			(20,699	)
Cash at beginning of period						31,363				57,160
Cash at end of period					$	3,178			$	36,461

4

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					September 30, 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				27,002				—
	(Business Services)		Equity Interests							5,305				—
			Guaranty ($1,100)
Avborne, Inc.(7)			Preferred Stock (12,500 shares)							658				897
	(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%)			66,379				66,379				66,379
	(Financial Services)		Class B Equity Interests							119,436				114,562
			Class C Equity Interests							109,301				103,939
			Guaranty ($188,109 — See Note 3)
			Standby Letters of Credit ($29,500 —   See Note 3)
Calder Capital Partners, LLC(5)			Senior Loan (8.0%, Due 5/09)(6)			500				500				500
	(Financial Services)		Equity Interests							1,901				1,901
Callidus Capital Corporation			Subordinated Debt (18.0%, Due 10/08)			5,513				5,513				5,513
	(Financial Services)		Common Stock (10 shares)							2,058				17,665
Coverall North America, Inc.			Unitranche Debt (12.0%, Due 7/11)			36,500				36,324				36,324
	(Business Services)		Subordinated Debt (15.0%, Due 7/11)			6,000				5,971				5,971
			Common Stock (884,880 shares)							16,649				17,379
CR Brands, Inc.			Subordinated Debt (16.6%, Due 2/13)			39,232				39,054				39,054
	(Consumer Products)		Common Stock (37,200,551 shares)							33,321				32,574
Diversified Group Administrators, Inc.			Preferred Stock (1,000,000 shares)							700				742
	(Business Services)		Preferred Stock (1,451,380 shares)							841				841
			Common Stock (1,451,380 shares)							—				50
Financial Pacific Company			Subordinated Debt (17.4%, Due 2/12 – 8/12)			71,232				70,995				70,995
	(Financial Services)		Preferred Stock (10,964 shares)							10,276				15,183
			Common Stock (14,735 shares)							14,819				58,183
ForeSite Towers, LLC			Equity Interests							7,620				14,278
	(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.

5

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					September 30, 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				9,138
			Preferred Equity Interest							14,067				—
			Options							1,639				—
Gordian Group, Inc.			Senior Loan (10.0%, Due 6/06 – 12/08)(6)			11,792				11,807				—
	(Business Services)		Common Stock (1,000 shares)							6,762				—
Healthy Pet Corp.			Senior Loan (10.0%, Due 8/10)			18,638				18,638				18,638
	(Consumer Services)		Subordinated Debt (15.0%, Due 8/10)			43,503				43,352				43,352
			Common Stock (30,142 shares)							30,142				28,728
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
Impact Innovations Group, LLC			Equity Interests in Affiliate							—				872
	(Business Services)
Insight Pharmaceuticals Corporation			Subordinated Debt (16.1%, Due 9/12)			59,663				59,455				59,455
	(Consumer Products)		Preferred Stock (25,000 shares)							25,000				28,350
			Common Stock (620,000 shares)							6,325				208
Jakel, Inc.			Subordinated Debt (15.5%, Due 3/08)(6)			15,192				15,192				11,493
	(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				6,516
	(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)			665				665				665
	(Business Services)		Equity Interest							1,809				1,739
Mercury Air Centers, Inc.			Subordinated Debt (16.0%, Due 4/09 –
	(Business Services)		11/12)			48,858				48,702				48,702
			Common Stock (57,970 shares)							35,053				153,025
			Standby Letters of Credit ($1,581)
MVL Group, Inc.			Senior Loan (12.0%, Due 10/07 – 7/09)			26,498				26,392				26,392
	(Business Services)		Subordinated Debt (14.5%, Due 6/09)			34,571				34,166				34,166
			Common Stock (648,661 shares)							643				757
Penn Detroit Diesel Allison, LLC			Subordinated Debt (15.5%, Due 8/13)			37,983				37,798				37,798
	(Business Services)		Equity Interests							21,128				21,128
Powell Plant Farms, Inc.			Senior Loan (15.0%, Due 12/06)(6)			34,290				25,442				25,195
	(Consumer Products)		Subordinated Debt (20.0%, Due 6/03)(6)			19,291				19,223				—
			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.

6

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					September 30, 2006
Private Finance
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal (				unaudited)				Value
Service Champ, Inc.			Subordinated Debt (15.5%, Due 4/12)		$	27,557			$	27,438			$	27,438
	(Business Services)		Common Stock (63,888 shares)							13,662				13,388
Staffing Partners Holding			Subordinated Debt (13.5%, Due 1/07)(6)			5,987				5,987				—
	Company, Inc.		Preferred Stock (439,600 shares)							4,968				—
	(Business Services)		Common Stock (69,773 shares)							50				—
			Warrants							10				—
			Guaranty ($1,300)
Startec Global Communications
	Corporation		Senior Loan (10.0%, Due 5/07 – 5/09)			19,569				19,569				19,569
	(Telecommunications)		Common Stock (19,180,000 shares)							37,256				11,535
Sweet Traditions, LLC			Senior Loan (9.0%, Due 8/11)			40,000				35,940				35,940
	(Consumer Products)		Equity Interests							450				450
			Standby Letter of Credit ($120)
Triview Investments, Inc.(8)			Senior Loan (9.6%, Due 6/07)			14,325				14,308				14,308
	(Broadcasting & Cable/Business		Subordinated Debt (14.8%, Due 7/12 – 9/11)			40,288				40,086				40,086
	Services/Consumer Products)		Subordinated Debt (16.8%, Due 7/08 –
			7/12)(6)			19,600				19,520				19,520
			Common Stock (202 shares)							98,557				29,802
			Guaranty ($800)
			Standby Letter of Credit ($200)
Total companies more than 25% owned									$	1,464,190			$	1,401,877
Companies 5% to 25% Owned
Advantage Sales & Marketing, Inc.			Subordinated Debt (12.0%, Due 3/14)		$	151,546			$	150,850			$	150,850
	(Business Services)		Equity Interests							2,032				13,000
Air Medical Group Holdings LLC			Senior Loan (9.1%, Due 3/11)			671				602				602
	(Healthcare Services)		Subordinated Debt (14.0%, Due 11/12)			34,912				34,858				34,858
			Equity Interests							3,470				4,900
Alpine ESP Holdings, Inc.			Preferred Stock (622 shares)							622				622
	(Business Services)		Common Stock (13,513 shares)							14				14
Amerex Group, LLC			Subordinated Debt (12.0%, Due 1/13)			8,400				8,400				8,400
	(Consumer Products)		Equity Interests							3,546				8,047
BB&T Capital Partners/Windsor
	Mezzanine Fund, LLC (5)		Equity Interests							5,873				5,867
	(Private Equity Fund)
Becker Underwood, Inc.			Subordinated Debt (14.5%, Due 8/12)			24,090				24,005				24,005
	(Industrial Products)		Common Stock (5,073 shares)							5,813				3,200
BI Incorporated			Subordinated Debt (13.5%, Due 2/14)			30,154				30,015				30,015
	(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 $66.5 million and a value of $6.3 million, Triax Holdings, LLC (Consumer Products) with a cost of $98.9 million and a value of $90.4 million, and Crescent Hotels & Resorts, LLC and affiliates (Business Services) with a cost of $7.0 million and a value of $7.0 million.

7

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					September 30, 2006
Private Finance
Portfolio Company					(unaudited)
(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)		$	20,790			$	20,685			$	20,685
	(Business Services)		Equity Interests							4,447				4,447
Creative Group, Inc.			Subordinated Debt (12.0%, Due 9/13)			15,000				13,627				13,627
	(Business Services)		Warrant							1,387				1,387
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				443
			Convertible Subordinated Debt (2.0%, Due 8/14)(6)			2,970				984				—
			Equity Interests							1,306				—
Nexcel Synthetics, LLC			Subordinated Debt (14.5%, Due 6/09)			10,901				10,878				10,878
	(Consumer Products)		Equity Interests							1,755				1,866
Pres Air Trol LLC			Unitranche Debt (12.0%, Due 4/10)(6)			5,770				5,452				2,215
	(Industrial Products)		Equity Interests							1,361				—
Progressive International
	Corporation		Subordinated Debt (16.0%, Due 12/09)			7,514				7,494				7,494
	(Consumer Products)		Preferred Stock (500 shares)							500				1,002
			Common Stock (197 shares)							13				1,200
			Warrants							—				—
Regency Healthcare Group, LLC			Senior Loan (11.1%, Due 6/12)			1,250				1,230				1,230
	(Healthcare Services)		Unitranche Debt (11.1%, Due 6/12)			20,000				19,904				19,904
			Equity Interests							1,500				1,500
SGT India Private Limited(4)			Common Stock (109,524 shares)							3,944				3,944
	(Business Services)
Soteria Imaging Services, LLC			Subordinated Debt (11.7%, Due 11/10)			16,500				15,541				15,541
	(Healthcare Services)		Equity Interests							2,163				2,445
Universal Environmental Services, LLC			Unitranche Debt (13.5%, Due 2/09)			10,989				10,960				10,960
	(Business Services)		Equity Interests							1,795				1,043
Total companies 5% to 25% owned									$	413,374			$	417,455
Companies Less Than 5% Owned
3SI Security Systems, Inc. (Consumer Products)			Subordinated Debt (14.5%, Due 8/13)		$	26,612			$	26,491			$	26,491
AgData, L.P.			Unitranche Debt (10.3%, Due 7/12)			10,800				10,739				10,739
	(Consumer Services)
Anthony, Inc.			Subordinated Debt (13.3%, Due 8/11 –
	(Industrial Products)		9/12)			14,780				14,728				14,728
Bantek West, Inc.			Subordinated Debt (11.6%, Due 1/11)			30,000				30,000				23,884
	(Business Services)
Benchmark Medical, Inc.			Warrants							18				—
	(Healthcare Services)
BenefitMall, Inc.			Unitranche Debt (13.3%, Due 8/12)			110,030				109,631				109,631
	(Business Services)		Common Stock (45,528,000 shares)(11)							45,528				45,528
			Warrants							—				—
			Standby Letters of Credit ($9,981)
Broadcast Electronics, Inc.			Senior Loan (9.2%, Due 7/12)			4,975				4,941				4,941
	(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.

8

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					September 30, 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)		$	27,679			$	27,588			$	27,588
	(Retail)
Callidus Debt Partners
	CDO Fund I, Ltd.(4)(9)		Class C Notes (12.9%, Due 12/13)			18,800				18,957				18,957
	(Senior Debt Fund)		Class D Notes (17.0%, Due 12/13)			9,400				9,478				9,478
Callidus Debt Partners
	CLO Fund III, Ltd. (4)(9)		Preferred Shares (23,600,000 shares)							23,594				23,594
	(Senior Debt Fund)
Callidus Debt Partners
	CLO Fund IV, Ltd.(4)(9)		Income Notes							13,334				13,334
	(Senior Debt Fund)
Callidus MAPS CLO Fund I LLC(9)			Class E Notes (10.9%, Due 12/17)			17,000				17,000				17,000
	(Senior Debt Fund)		Income Notes							50,737				50,737
Camden Partners Strategic Fund II,
	L.P.(5)		Limited Partnership Interest							2,141				3,102
	(Private Equity Fund)
Carlisle Wide Plank Floors, Inc.			Unitranche Debt (10.5%, Due 6/11)			14,000				13,895				13,895
	(Consumer Products)		Preferred Stock (400,000 Shares)							400				400
Catterton Partners V, L.P.(5)			Limited Partnership Interest							3,034				3,171
	(Private Equity Fund)
Catterton Partners VI, L.P.(5)			Limited Partnership Interest							—				—
	(Private Equity)
Centre Capital Investors IV, LP(5)			Limited Partnership Interest							1,752				1,701
	(Private Equity Fund)
Commercial Credit Group, Inc.			Subordinated Debt (14.8%, Due 2/11)			5,000				4,957				4,957
	(Financial Services)		Preferred Stock (32,500 shares)							3,900				3,900
			Warrants							—				—
Community Education Centers, Inc.			Subordinated Debt (16.0%, Due 12/10)			33,898				33,801				33,801
	(Education Services)
Component Hardware Group, Inc.			Subordinated Debt (13.5%, Due 1/13)			18,100				18,013				18,013
	(Industrial Products)
Cook Inlet Alternative Risk, LLC			Unitranche Debt (10.5%, Due 4/12)			72,400				72,029				72,029
	(Business Services)		Equity Interests							2,000				2,000
Cortec Group Fund IV, L.P.(5)			Limited Partnership Interest							1,137				1,136
	(Private Equity)
CSAV, Inc.			Subordinated Debt (11.9%, Due 6/13)			37,500				37,500				37,500
	(Business Services)
DCWV Acquisition Corporation			Senior Loan (8.8%, Due 7/12)			1,274				1,259				1,259
	(Consumer Products)		Unitranche Debt (11.0%, Due 7/12)			16,788				16,690				16,690
Deluxe Entertainment Services Group, Inc.			Subordinated Debt (13.6%, Due 7/11)			30,000				30,000				30,000
	(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.
(9)		The fund is managed by Callidus Capital, a portfolio company of Allied Capital.

9

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					September 30, 2006
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Distant Lands Trading Co.			Unitranche Debt (10.3%, Due 1/11)		$	25,000			$	24,873			$	24,873
	(Consumer Products)		Common Stock (1,500 shares)							1,500				1,079
Drilltec Patents & Technologies
	Company, Inc.		Subordinated Debt (18.0%, Due 8/06)			4,119				4,119				4,119
	(Energy Services)		Subordinated Debt (10.0%, Due 8/06)(6)			10,994				10,918				11,115
Driven Brands, Inc.			Senior Loan (8.9%, Due 6/11)			37,070				36,909				36,909
	d/b/a Meineke and Econo Lube		Subordinated Debt (12.1%, Due 6/12 – 6/13)			83,000				82,667				82,667
	(Consumer Services)		Common Stock (11,675,331 shares)(11)							29,455				23,977
			Warrants							—				—
Digital VideoStream, LLC			Unitranche Debt (11.0%, Due 2/12)			19,578				19,467				19,467
	(Business Services)		Convertible Subordinated Debt (10.0%, Due 2/16)			3,639				3,623				3,623
Dynamic India Fund IV(4)(5)			Equity Interests							3,850				3,850
	(Private Equity Fund)
eCentury Capital Partners, L.P.(5)			Limited Partnership Interest							5,649				858
	(Private Equity Fund)
Elexis Beta GmbH(4)			Options							426				50
	(Industrial Products)
Event Rentals, Inc. (Consumer Services)			Senior Loan (10.8%, Due 11/11)			25,313				25,190				25,190
Farley’s & Sathers Candy Company, Inc.			Subordinated Debt (11.6%, Due 3/11)			20,000				19,926				19,926
	(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				13,630
Geotrace Technologies, Inc.			Subordinated Debt (10.0%, Due 6/09)			24,394				22,857				22,857
	(Energy Services)		Warrants							2,350				1,800
Ginsey Industries, Inc.			Subordinated Debt (12.5%, Due 3/07)			2,988				2,988				2,988
	(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							8,451				5,959
	(Private Equity Fund)
Guren Capital Partners, L.P.(5)			Limited Partnership Interest							21				—
	(Private Equity)
Havco Wood Products LLC			Senior Loan (11.3%, Due 8/11)			2,200				2,180				2,180
	(Industrial Products)		Unitranche Debt (11.1%, Due 8/11)			21,054				19,992				19,992
			Equity Interests							1,049				2,300
Haven Eldercare of New England, LLC(10)			Subordinated Debt (12.0%, Due 8/09)(6)			3,162				3,162				3,162
	(Healthcare Services)
Haven Healthcare Management, LLC(10)			Subordinated Debt (18.0%, Due 4/07)(6)			—				—				—
	(Healthcare 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.
	(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.

10

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					September 30, 2006
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
HealthASPex Services Inc.			Senior Loan (4.0%, Due 7/08)		$	500			$	500			$	309
	(Business Services)
The Hillman Companies, Inc.(3)			Subordinated Debt (10.0%, Due 9/11)			44,580				44,419				44,419
	(Consumer Products)
Homax Holdings, Inc.			Subordinated Debt (12.0%, Due 8/11)			14,000				13,147				13,147
	(Consumer Products)		Preferred Stock (89 shares)							89				64
			Common Stock (28 shares)							6				6
			Warrants							1,106				1,054
Hot Stuff Foods, LLC			Senior Loan (8.8%, Due 2/11-2/12)			46,970				46,970				46,970
	(Consumer Products)		Subordinated Debt (13.7%, Due 8/12 – 2/13)			60,374				60,107				60,107
			Subordinated Debt (16.0%, Due 2/13)(6)			13,341				13,287				6,577
			Common Stock (375,000 shares)(11)							37,500				—
			Warrants							—				—
Integrity Interactive Corporation			Unitranche Debt (10.5%, Due 2/12)			30,000				29,804				29,804
	(Business Services)
International Fiber Corporation			Subordinated Debt (14.0%, Due 6/12)			21,874				21,799				21,799
	(Industrial Products)		Preferred Stock (25,000 shares)							2,500				2,100
Jones Stephens Corporation			Senior Loan (9.1%, Due 9/12)			2,400				2,400				2,400
	(Consumer Products)
Kodiak Fund LP(5)			Equity Interests							4,875				4,875
	(Private Equity Fund)
Line-X, Inc.			Senior Loan (9.1%, Due 8/11)			2,600				2,580				2,580
	(Consumer Products)		Unitranche Debt (10.0% Due 8/11)			49,600				49,387				49,387
			Standby Letter of Credit ($1,500)
MedAssets, Inc.			Preferred Stock (227,865 shares)							2,049				3,555
	(Business Services)		Warrants							—				200
MHF Logistical Solutions, Inc.			Subordinated Debt (11.5%, Due 6/12)			33,600				33,441				33,441
	(Business Services)		Subordinated Debt (18.0%, Due 6/13)(6)			11,211				11,154				8,323
			Common Stock (20,934 shares)(11)							20,942				—
			Warrants							—				—
Mid-Atlantic Venture Fund IV, L.P.(5)			Limited Partnership Interest							6,600				2,845
	(Private Equity Fund)
Mogas Energy, LLC			Subordinated Debt (9.5%, Due 3/12 – 4/12)			16,455				15,180				15,180
	(Energy Services)		Warrants							1,774				2,900
Network Hardware Resale, Inc.			Unitranche Debt (10.5%, Due 12/11)			37,607				37,820				37,820
	(Business Services)		Convertible Subordinated Debt (9.8%, Due 12/15)			12,000				12,070				12,070
Norwesco, Inc.			Subordinated Debt (12.6%, Due 1/12 – 7/12)			82,377				82,047				82,047
	(Industrial Products)		Common Stock (559,603 shares)(11)							38,313				64,889
			Warrants							—				—
Novak Biddle Venture Partners III, L.P.(5)			Limited Partnership Interest							1,744				1,830
	(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.

11

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					September 30, 2006
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Oahu Waste Services, Inc.			Stock Appreciation Rights						$	239			$	800
	(Business Services)
Odyssey Investment Partners Fund III,
	LP(5)		Limited Partnership Interest							1,882				1,669
	(Private Equity Fund)
Opinion Research Corporation(3)			Warrants							996				2,682
	(Business Services)
Palm Coast Data, LLC			Senior Loan (9.0%, Due 8/10)		$	15,288				15,224				15,224
	(Business Services)		Subordinated Debt (15.5%, Due 8/12 – 8/15)			30,126				30,003				30,003
			Common Stock (21,743 shares)(11)							21,743				30,732
			Warrants							—				—
Passport Health
	Communications, Inc.		Subordinated Debt (14.0%, Due 4/12)			10,067				10,022				10,022
	(Healthcare Services)		Preferred Stock (651,381 shares)							2,000				2,000
Performant Financial Corporation			Common Stock (478,816 shares)							734				—
	(Business Services)
Pro Mach, Inc.			Subordinated Debt (13.8%, Due 6/12)			14,444				14,372				14,372
	(Industrial Products)		Equity Interests							1,500				2,200
Promo Works, LLC			Unitranche Debt (10.3%, Due 12/11)			31,000				30,716				30,716
	(Business Services)		Guaranty ($1,200)
Red Hawk Industries, LLC			Unitranche Debt (11.0%, Due 4/11)			56,483				56,242				56,242
	(Business Services)
S.B. Restaurant Company			Unitranche Debt (10.3%, Due 4/11)			35,501				35,101				35,101
	(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				4,975				4,975
	(Industrial Products)		Equity Interests							313				313
Soff-Cut Holdings, Inc.			Preferred Stock (300 shares)							300				300
	(Industrial Products)		Common Stock (2,000 shares)							200				148
SPP Mezzanine Fund, L.P.(5)			Limited Partnership Interest							2,551				2,775
	(Private Equity Fund)
Stag-Parkway, Inc.			Unitranche Debt (10.8%, Due 7/12)			63,000				62,698				62,698
	(Business Services)
STS Operating, Inc.			Subordinated Debt (15.0%, Due 1/13)			30,158				30,017				30,017
	(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.

12

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					September 30, 2006
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
The Step2 Company, LLC			Senior Loan (9.0%, Due 4/12)		$	2,000			$	1,849			$	1,849
	(Consumer Products)		Unitranche Debt (10.5%, Due 4/12)			68,149				67,838				67,838
			Equity Interests							2,000				2,000
Tradesmen International, Inc.			Subordinated Debt (12.0%, Due 12/09)			15,000				14,430				14,430
	(Business Services)		Warrants							710				3,300
TransAmerican Auto Parts, LLC			Subordinated Debt (14.0%, Due 11/12)			12,882				12,826				12,826
	(Consumer Products)		Equity Interests							1,190				993
TransTechnology Corporation(3)			Senior Loan (10.2%, Due 5/11)			10,000				10,000				10,000
	(Industrial Products)
Universal Air Filter Company			Unitranche Debt (11.0%, Due 11/11)			19,367				19,272				19,272
	(Industrial Products)
Universal Tax Systems, Inc.			Subordinated Debt (14.5%, Due 10/13)			19,432				19,368				19,368
	(Business Services)
Updata Venture Partners II, L.P.(5)			Limited Partnership Interest							5,077				4,779
	(Private Equity Fund)
Venturehouse-Cibernet Investors, LLC			Equity Interest							42				42
	(Business Services)
Venturehouse Group, LLC(5)			Equity Interest							598				399
	(Private Equity Fund)
VICORP Restaurants, Inc.(3)			Warrants							33				—
	(Retail)
Walker Investment Fund II, LLLP(5)			Limited Partnership Interest							1,330				516
	(Private Equity Fund)
Wear Me Apparel Corporation			Subordinated Debt (15.0%, Due 12/10)			40,000				39,296				39,296
	(Consumer Products)		Warrants							1,219				2,900
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)			52,934				52,804				52,804
	(Consumer Products)		Common Stock (180 shares)							673				3,885
			Warrants							—				2,815
York Insurance Services Group, Inc.			Subordinated Debt (14.5%, Due 1/14)			44,067				43,855				43,855
	(Business Services)		Common Stock (15,000 shares)							1,500				1,500
Other companies			Other debt investments(6)			467				467				315
			Other equity investments							8				—
			Guaranty ($118)
Total companies less than 5% owned									$	2,217,811			$	2,168,484
Total private finance (143 portfolio companies)									$	4,095,375			$	3,987,816

	(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.

13

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

											September 30, 2006
			Interest				Number of				(unaudited)
			Rate Ranges				Loans				Cost				Value
Commercial Mortgage Loans
				Up to 6.99%				3			$	20,286			$	19,481
				7.00%–8.99%				25				48,965				48,991
				9.00%–10.99%				3				21,993				21,993
			15.00% and above					2				3,970				3,970
	Total commercial mortgage loans(12)							33			$	95,214			$	94,435
Real Estate Owned											$	13,236			$	15,253
Equity Interests(2) — Companies more than 25% owned (Guarantees — $6,871)											$	17,004			$	22,122
	Total commercial real estate finance										$	125,454			$	131,810
Total portfolio											$	4,220,829			$	4,119,626

				Yield				Cost				Value
Liquidity Portfolio
	U.S. Treasury bills (Due October 2006)				4.9%			$	100,004			$	102,163
	U.S. Treasury bills (Due December 2006)				4.9%				24,996				25,398
	SEI Daily Income Tr Prime Obligation Fund(13)				5.2%				34,003				34,003
	Certificate of Deposit (Due December 2006)(13)				5.6%				40,000				40,000
		Total liquidity portfolio						$	199,003			$	201,564
Other Investments in Money Market Securities(13)
	Columbia Treasury Reserves Money Market Fund				5.2%			$	2,809			$	2,809
	Columbia Money Market Reserves				5.2%			$	34,583			$	34,583
	M & T Investment Group Commercial Paper				5.2%			$	5,025			$	5,029
	AIM Premier Portfolio Money Market Fund				5.3%			$	431			$	431

(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 $20.4 million at value were on non-accrual status and therefore were considered non-income producing.

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

14

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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.

15

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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.

16

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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.

17

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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.

18

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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.

19

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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.

20

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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.

21

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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.

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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.

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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.

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25

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	Valuation Of Portfolio Investments

	Loans and Debt Securities

26

---

 

	Equity Securities

27

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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

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	Guarantees

	Financing Costs

	Dividends to Shareholders

	Stock Compensation Plans

				For the Three				For the Nine
				Months Ended				Months Ended
				September 30,				September 30,
				2006				2006
($ in millions, except per share amounts)
Employee Stock Option Expense:
	Previously awarded, unvested options as of January 1, 2006			$	3.2			$	9.9
	Options granted on or after January 1, 2006				0.4				2.0
		Total employee stock option expense		$	3.6			$	11.9
		Per basic share		$	0.03			$	0.08
		Per diluted share		$	0.02			$	0.08

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			For the Three				For the Nine
			Months Ended				Months Ended
			September 30,				September 30,
			2005				2005
($ in millions, except per share amounts)
Net increase in net assets resulting from operations as reported			$	113.2			$	544.7
Less total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects				(2.6	)			(9.5	)
Pro forma net increase in net assets resulting from operations available to common shareholders			$	110.6			$	535.2
Basic earnings per common share:
	As reported		$	0.84			$	4.06
	Pro forma		$	0.82			$	3.99
Diluted earnings per common share:
	As reported		$	0.82			$	3.99
	Pro forma		$	0.80			$	3.92

		For the Three								For the Nine
		Months Ended								Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Expected term (in years)			5.0				5.0				5.0				5.0
Risk-free interest rate			4.7	%			4.1	%			4.8	%			4.1	%
Expected volatility			26.8	%			35.0	%			29.1	%			35.1	%
Dividend yield			9.0	%			9.0	%			9.0	%			9.0	%
Weighted average fair value per option		$	3.12			$	3.96			$	3.47			$	3.94

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	Federal and State Income Taxes and Excise Tax

	Per Share Information

31

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	Use of Estimates in the Preparation of Financial Statements

	Recent Accounting Pronouncements

32

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	Private Finance

				2006												2005
				Cost				Value				Yield(1)				Cost				Value				Yield(1)
($ in thousands)
Loans and debt securities:
	Senior loans			$	386,721			$	342,441				8.7	%		$	284,680			$	239,838				9.5	%
	Unitranche debt(2)				748,993				745,756				11.2	%			294,201				294,201				11.4	%
	Subordinated debt				1,882,017				1,817,022				13.7	%			1,610,228				1,560,851				13.8	%
		Total loans and debt securities(3)			3,017,731				2,905,219				12.5	%			2,189,109				2,094,890				13.0	%
Equity securities					1,077,644				1,082,597								917,314				1,384,400
		Total		$	4,095,375			$	3,987,816							$	3,106,423			$	3,479,290

(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 September 30, 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 $3,051.3 million and $2,216.3 million at September 30, 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 $33.6 million and $27.2 million at September 30, 2006, and December 31, 2005, respectively.

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			For the Three								For the Nine
			Months Ended								Months Ended
			September 30,								September 30,
			2006				2005				2006				2005
($ in millions)
Interest income on subordinated debt and Class A equity interests			$	4.1			$	3.6			$	11.9			$	10.5
Dividend income on Class B equity interests				—				4.0				—				9.0
Fees and other income				2.0				2.3				6.3				7.0
	Total interest and related portfolio income		$	6.1			$	9.9			$	18.2			$	26.5

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35

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36

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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.				23.6				23.6				24.2				24.2
Callidus Debt Partners CLO Fund IV, Ltd.				13.3				13.3				—				—
Callidus MAPS CLO Fund I LLC				67.7				67.7				65.1				65.1
	Total		$	133.0			$	133.0			$	117.8			$	117.8

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			2006				2005
($ in millions)
Bonds			$	240.5			$	230.7
Syndicated Loans				1,354.9				704.0
Cash(1)				77.8				238.4
	Total underlying collateral assets		$	1,673.2			$	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			$	52,342			$	15,622
	Companies 5% to 25% owned				2,658				—
	Companies less than 5% owned				24,835				11,417
Loans and debt securities not in workout status
	Companies more than 25% owned				35,977				58,047
	Companies 5% to 25% owned				7,164				534
	Companies less than 5% owned				18,286				49,458
		Total		$	141,262			$	135,078

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			2006				2005
Industry
Business services				38	%			42	%
Consumer products				22				14
Financial services				12				14
Industrial products				9				10
Consumer services				7				6
Healthcare services				2				2
Retail				2				3
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 September 30, 2006, and December 31, 2005. These funds invest in senior debt representing a variety of industries.

			2006				2005
Geographic Region(1)
Mid-Atlantic				31	%			29	%
Midwest				30				21
West				18				34
Southeast				17				12
Northeast				4				4
	Total			100	%			100	%

(1)	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			$	95,214			$	94,435				7.7%			$	103,878			$	102,569				7.6%
Real estate owned				13,236				15,253								14,240				13,932
Equity interests				17,004				22,122								13,577				10,564
	Total		$	125,454			$	131,810							$	131,695			$	127,065

(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.

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			2006				2005
Property Type
Hospitality				36	%			37	%
Housing				28				30
Office				18				11
Retail				15				16
Other				3				6
	Total			100	%			100	%
Geographic Region
Mid-Atlantic				32	%			31	%
Southeast				31				25
West				16				18
Midwest				15				21
Northeast				6				5
	Total			100	%			100	%

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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:
	Privately issued unsecured notes payable			$	1,190,699			$	1,190,699				6.2	%		$	1,164,540			$	1,164,540				6.2	%
	Publicly issued unsecured notes payable				400,000				400,000				6.8	%			—				—				—
	SBA debentures				—				—				—				28,500				28,500				7.5	%
		Total notes payable and debentures			1,590,699				1,590,699				6.4	%			1,193,040				1,193,040				6.3	%
Revolving line of credit					922,500				—				—	(2)			772,500				91,750				5.6	%(2)
	Total debt			$	2,513,199			$	1,590,699				6.6	%(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, 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)	There were no amounts drawn on the revolving line of credit at September 30, 2006. The annual interest cost for total debt includes the annual costs of commitment fees, other facility fees and amortization of debt financing costs on the revolving line of credit regardless of the amount drawn on the balance sheet date. The annual cost of commitment fees, other facility fees and amortization of debt financing costs was $3.9 million and $3.3 million at September 30, 2006, and December 31, 2005, respectively.
(3)	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.

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Year			Amount Maturing
			($ in thousands)
2006			$	150,000	(1)
2007				—
2008				153,000
2009				268,199
2010				408,000
Thereafter				611,500
	Total		$	1,590,699

(1)	The company repaid this debt in October 2006.

	Revolving Line of Credit

42

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	Covenant Compliance

43

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			Total				2006				2007				2008				2009				2010				After 2010
(in millions)
Guarantees			$	201.9			$	2.1			$	0.7			$	3.0			$	190.6			$	—			$	5.5
Standby letters of credit(1)				45.5				0.1				3.9				41.5				—				—				—
	Total		$	247.4			$	2.2			$	4.6			$	44.5			$	190.6			$	—			$	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.

			2006				2005(1)
(in thousands)
Number of common shares				8,175				—
Gross proceeds			$	229,804			$	—
Less costs, including underwriting fees				(10,922	)			—
	Net proceeds		$	218,882			$	—

(1)	The Company did not sell any common stock during the nine months ended September 30, 2005.

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		For the Nine Months
		Ended September 30,
		2006				2005
(in thousands, except per share amounts)
Shares issued			369				268
Average price per share		$	29.95			$	27.82

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2006				2005				2006				2005
(in thousands, except per share amounts)
Net increase in net assets resulting from operations available to common shareholders		$	77,886			$	113,168			$	211,202			$	544,674
Weighted average common shares outstanding — basic			144,163				135,322				141,002				134,110
Dilutive options outstanding			2,949				2,736				3,028				2,559
Weighted average common shares outstanding — diluted			147,112				138,058				144,030				136,669
Basic earnings per common share		$	0.54			$	0.84			$	1.50			$	4.06
Diluted earnings per common share		$	0.53			$	0.82			$	1.47			$	3.99

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			For the Three								For the Nine
			Months Ended								Months Ended
			September 30,								September 30,
			2006				2005				2006				2005
($ in millions)
IPA contributions			$	2.1			$	1.7			$	6.0			$	5.5
IPA mark to market expense (benefit)				1.2				(0.4	)			0.6				1.5
	Total IPA expense		$	3.3			$	1.3			$	6.6			$	7.0

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						Weighted				Weighted
						Average				Average
						Exercise				Contractual				Aggregate Intrinsic
						Price Per				Remaining				Value at
		Shares				Share				Term (Years)				September 30, 2006(1)
(in thousands, except per share amounts)
Options outstanding at January 1, 2006			22,259			$	24.52
Granted			1,805			$	29.88
Exercised			(481	)		$	23.07
Forfeited			(304	)		$	27.67
Outstanding at September 30, 2006			23,279			$	24.92				6.53			$	123,217
Exercisable at September 30, 2006			16,752			$	23.70				5.85			$	109,114
Exercisable and expected to be exercisable at September 30, 2006(2)			22,686			$	24.84				6.48			$	121,958

(1)	Represents the difference between the market value of the options at September 30, 2006, and the cost for the option holders to exercise the options.
(2)	The amount of options expected to be exercisable at September 30, 2006, is calculated based on an estimate of expected forfeitures.

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

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($ in thousands)
Description of Issue		2006				2005
5-year Treasury securities, due April 2010		$	17,733			$	17,666

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			At and for the								At and for the
			Nine Months Ended								Year Ended
			September 30,								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)			0.97				0.73				1.00
	Net realized gains(2)(3)			3.77				2.11				1.99
	Net investment income plus net realized gains(2)			4.74				2.84				2.99
	Net change in unrealized appreciation or depreciation (2)(3)			(3.27	)			1.15				3.37
Net increase in net assets resulting from operations (2)				1.47				3.99				6.36
Net decrease in net assets from shareholder distributions				(1.80	)			(1.72	)			(2.33	)
Net increase in net assets from capital share transactions(2)				0.54				0.23				0.27
Net asset value, end of period			$	19.38			$	17.37			$	19.17
Market value, end of period			$	30.21			$	28.63			$	29.37
Total return(4)				9.2	%			17.9	%			23.5	%
Ratios and Supplemental Data ($ and shares in thousands, except per share amounts)
Ending net assets			$	2,823,881			$	2,366,986			$	2,620,546
Common shares outstanding at end of period				145,722				136,289				136,697
Diluted weighted average common shares outstanding				144,030				136,669				137,274
Employee, employee stock option and administrative expenses/average net assets				3.99	%			5.14	%			6.58	%
Total operating expenses/average net assets				6.65	%			7.77	%			9.99	%
Net investment income/average net assets				5.16	%			4.63	%			6.08	%
Net increase in net assets resulting from operations/ average net assets				7.78	%			25.15	%			38.68	%
Portfolio turnover rate				23.61	%			40.89	%			47.72	%
Average debt outstanding			$	1,433,452			$	1,058,420			$	1,087,118
Average debt per share(2)			$	9.95			$	7.74			$	7.92

(1)	The results for the nine months ended September 30, 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.

51

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52

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53

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					Amount of Interest or
					Dividends
PRIVATE FINANCE
Portfolio Company					Credited								December 31, 2005				Gross				Gross				September 30, 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)			(48	)							—				48				(48	)			—
	(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				5				—				897
	(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			11,890								60,693				5,686				—				66,379
			Class B Equity Interests											146,910				—				(32,348	)			114,562
			Class C Equity Interests											139,521				—				(35,582	)			103,939
Calder Capital Partners, LLC			Senior Loan(5)											—				500				—				500
	(Financial Services)		Equity Interests											—				1,901				—				1,901
Callidus Capital Corporation			Senior Loan			441								600				8,705				(9,305	)			—
	(Financial Services)		Subordinated Debt			713								4,832				681				—				5,513
			Common Stock											7,968				9,697				—				17,665
Coverall North America, Inc.			Unitranche Debt			797								—				36,324				—				36,324
	(Business Services)		Subordinated Debt			164								—				5,971				—				5,971
			Common Stock											—				17,489				(110	)			17,379
			Warrants											—				—				—				—
CR Brands, Inc.			Senior Loan			1,109								—				37,219				(37,219	)			—
	(Consumer Products)		Subordinated Debt			4,013								—				39,054				—				39,054
			Common Stock											—				33,321				(747	)			32,574
Diversified Group			Preferred Stock			33								728				14				—				742
	Administrators, Inc.		Preferred Stock											841				—				—				841
	(Business Services)		Common Stock			68								502				—				(452	)			50
Financial Pacific Company			Subordinated Debt			9,287								69,904				1,091				—				70,995
	(Financial Services)		Preferred Stock											13,116				2,067				—				15,183
			Common Stock											44,180				14,003				—				58,183
ForeSite Towers, LLC			Equity Interests			244								9,750				4,528				—				14,278
	(Tower Leasing)
Global Communications, LLC			Senior Loan(5)											15,957				—				—				15,957
	(Business Services)		Subordinated Debt(5)											11,198				138				(2,198	)			9,138
			Preferred Equity
			Interest											4,303				—				(4,303	)			—
			Options											—				—				—				—
Gordian Group, Inc.			Senior Loan(5)			(13	)							4,161				396				(4,557	)			—
	(Business Services)		Common Stock											—				220				(220	)			—
Healthy Pet Corp.			Senior Loan			1,203								4,086				15,752				(1,200	)			18,638
	(Consumer Services)		Subordinated Debt			4,899								38,535				5,003				(186	)			43,352
			Common Stock											25,766				4,500				(1,538	)			28,728

54

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					Amount of Interest or
					Dividends
PRIVATE FINANCE
Portfolio Company					Credited								December 31, 2005				Gross				Gross				September 30, 2006
(in thousands)			Investment(1)		to Income(6)				Other(2)				Value				Additions(3)				Reductions(4)				Value
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
Impact Innovations Group, LLC			Equity Interests in											742				130				—				872
	(Business Services)		Affiliate
Insight Pharmaceuticals			Subordinated Debt		$	7,248								58,298				1,157				—				59,455
	Corporation		Preferred Stock											26,791				1,559				—				28,350
	(Consumer Products)		Common Stock											236				—				(28	)			208
Jakel, Inc.			Subordinated Debt(5)											—				11,493				—				11,493
	(Industrial Products)		Preferred Stock											—				—				—				—
			Common Stock											—				—				—				—
Legacy Partners Group, LLC			Senior Loan (5)											5,029				1,487				—				6,516
	(Financial Services)		Subordinated Debt(5)											—				—				—				—
			Equity Interests											—				18				(18	)			—
Litterer Beteiligungs-GmbH			Subordinated Debt			32								621				44				—				665
	(Business Services)		Equity Interest											2,226				—				(487	)			1,739
Mercury Air Centers, Inc.			Senior Loan			1,231								31,720				4,000				(35,720	)			—
	(Business Services)		Subordinated Debt			6,041								46,519				5,183				(3,000	)			48,702
			Common Stock											88,898				64,127				—				153,025
MVL Group, Inc.			Senior Loan			2,688								27,218				147				(973	)			26,392
	(Business Services)		Subordinated Debt			3,735								32,417				1,749				—				34,166
			Common Stock											3,211				—				(2,454	)			757
Penn Detroit Diesel Allison, LLC			Subordinated Debt			986								—				37,798				—				37,798
	(Business Services)		Equity Interests											—				21,128				—				21,128
Pennsylvania Avenue			Equity Interests											1,864				1,193				(3,057	)			—
	Investors, L.P.
	(Private Equity Fund)
Powell Plant Farms, Inc.			Senior Loan			2,394								23,792				9,875				(8,472	)			25,195
	(Consumer Products)		Subordinated Debt(5)											7,364				—				(7,364	)			—
			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			3,235								26,906				532				—				27,438
	(Business Services)		Common Stock											13,319				69				—				13,388
Staffing Partners Holding			Subordinated Debt(5)						$	355				6,343				—				(6,343	)			—
	Company, Inc.		Preferred Stock											1,812				—				(1,812	)			—
	(Business Services)		Common Stock											—				—				—				—
			Warrants											—				—				—				—
Startec Global Communications
	Corporation		Senior Loan			1,717								21,685				3,540				(5,656	)			19,569
	(Telecommunications)		Common Stock											—				11,535				—				11,535
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			641								—				35,940				—				35,940
	(Consumer Products)		Equity Interests											—				450				—				450
Triview Investments, Inc.			Senior Loan			945								7,449				6,859				—				14,308
	(Broadcasting & Cable/		Subordinated Debt			3,688								30,845				9,241				—				40,086
	Consumer Products)		Subordinated Debt(5)											19,520				—				—				19,520
			Common Stock											29,171				10,319				(9,688	)			29,802
Total companies more than 25% owned					$	77,377							$	1,887,651											$	1,401,877

55

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					Amount of Interest or
					Dividends
PRIVATE FINANCE
Portfolio Company					Credited								December 31, 2005				Gross				Gross				September 30, 2006
(in thousands)			Investment(1)		to Income(6)				Other(2)				Value				Additions(3)				Reductions(4)				Value
Companies 5% to 25% Owned
Advantage Sales &			Subordinated Debt		$	9,379							$	—			$	150,850			$	—			$	150,850
	Marketing, Inc.(7)		Equity Interests											—				15,000				(2,000	)			13,000
	(Business Services)
Air Medical Group Holdings LLC			Senior Loan			2,016								—				6,400				(5,798	)			602
	(Healthcare Services)		Subordinated Debt			2,145								42,267				35,218				(42,627	)			34,858
			Equity Interests			1,694								4,025				2,343				(1,468	)			4,900
Alpine ESP Holdings, Inc.			Preferred Stock											—				622				—				622
	(Business Services)		Common Stock											—				14				—				14
Amerex Group, LLC			Subordinated Debt			412								—				8,400				—				8,400
	(Consumer Products)		Equity Interests											—				8,084				(37	)			8,047
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		Equity Interests											—				5,867				—				5,867
	Mezzanine Fund, LLC
	(Private Equity Fund)
Becker Underwood, Inc.			Subordinated Debt			2,643								23,543				462				—				24,005
	(Industrial Products)		Common Stock											2,200				1,000				—				3,200
BI Incorporated			Senior Loan			125								—				15,000				(15,000	)			—
	(Business Services)		Subordinated Debt			2,435								—				30,015				—				30,015
			Common Stock											—				4,100				—				4,100
CitiPostal, Inc. and Affiliates			Senior Loan			491								—				20,685				—				20,685
	(Business Services)		Common Stock											—				4,447				—				4,447
Creative Group, Inc.			Subordinated Debt			104								—				13,627				—				13,627
	(Business Services)		Common Stock											—				1,387				—				1,387
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				380				(471	)			443
			Convertible
			Subordinated Debt(5)											—				—				—				—
			Equity Interests											—				501				(501	)			—
Nexcel Synthetics, LLC			Subordinated Debt			1,195								10,588				290				—				10,878
	(Consumer Products)		Equity Interests											1,367				499				—				1,866
Pres Air Trol LLC			Unitranche Debt(5)						$	261				5,820				10				(3,615	)			2,215
	(Industrial Products)		Equity Interests											318				5				(323	)			—
Progressive International
	Corporation		Subordinated Debt			912								7,376				118				—				7,494
	(Consumer Products)		Preferred Stock											884				118				—				1,002
			Common Stock											13				1,187				—				1,200
			Warrants											—				—				—				—
Regency Healthcare Group, LLC			Senior Loan			36								—				1,230				—				1,230
	(Healthcare Services)		Unitranche Debt			579								—				19,904				—				19,904
			Equity Interests											—				1,500				—				1,500
SGT India Private Limited			Common Stock											—				3,944				—				3,944
	(Business Services)
Soteria Imaging Services, LLC			Subordinated Debt			1,480								13,447				2,094				—				15,541
	(Healthcare Services)		Equity Interests											2,308				137				—				2,445
Universal Environmental
	Services, LLC		Unitranche Debt			1,241								10,862				98				—				10,960
	(Business Services)		Equity Interests											1,328				13				(298	)			1,043
Total companies 5% to 25% owned					$	28,046							$	158,806											$	417,455

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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 September 30, 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 September 30, 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.

57

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

	•	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.

58

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		September 30,
										December 31,
		2006				2005				2005
Private finance			97	%			96	%			96	%
Commercial real estate finance			3	%			4	%			4	%

		At and for the								At and for the								At and for the
		Three Months Ended								Nine Months Ended								Year Ended
		September 30,								September 30,								December 31,
		2006				2005				2006				2005				2005
($ in millions)
Portfolio at value		$	4,119.6			$	3,223.8			$	4,119.6			$	3,223.8			$	3,606.4
Investments funded(1)		$	629.5			$	673.4			$	1,880.8			$	1,328.2			$	1,675.8
Change in accrued or reinvested interest and dividends(2)		$	7.2			$	5.5			$	(1.8	)		$	1.9			$	6.6
Principal collections related to investment repayments or sales		$	116.3			$	151.0			$	885.9			$	1,241.8			$	1,503.4
Yield on interest-bearing investments(3)			12.3	%			12.6	%			12.3	%			12.6	%			12.8	%

(1)	Investments funded for the nine months ended September 30, 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. See discussion below. Investments funded also include investments acquired through the issuance of our common stock as consideration totaling zero and $7.2 million for the nine months ended September 30, 2006 and 2005, respectively, and $7.2 million for the year ended December 31, 2005.
(2)	Includes changes in accrued or reinvested interest of $1.3 million and $3.0 million for the three and nine months ended September 30, 2006, respectively, 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.

59

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					At and for the																At and for the																At and for the
					Three Months Ended																Nine Months Ended																Year Ended
					September 30,																September 30,																December 31,
					2006								2005								2006								2005								2005
					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			$	342.4				8.7	%		$	255.9				8.6	%		$	342.4				8.7	%		$	255.9				8.6	%		$	239.8				9.5	%
		Unitranche debt				745.8				11.2	%			197.2				11.8	%			745.8				11.2	%			197.2				11.8	%			294.2				11.4	%
		Subordinated debt				1,817.0				13.7	%			1,586.5				13.8	%			1,817.0				13.7	%			1,586.5				13.8	%			1,560.9				13.8	%
			Total loans and debt securities		$	2,905.2				12.5	%		$	2,039.6				13.0	%		$	2,905.2				12.5	%		$	2,039.6				13.0	%		$	2,094.9				13.0	%
	Equity securities					1,082.6								1,041.4								1,082.6								1,041.4								1,384.4
Total portfolio					$	3,987.8							$	3,081.0							$	3,987.8							$	3,081.0							$	3,479.3
Investments funded(1)					$	629.2							$	665.7							$	1,866.6							$	1,131.9							$	1,462.3
Change in accrued or reinvested interest and dividends					$	5.8							$	5.9							$	(5.4	)						$	20.4							$	24.6
Principal collections related to investment repayments or sales					$	115.6							$	146.5							$	868.0							$	476.5							$	703.9

(1)	Investments funded for the nine months ended September 30, 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. See discussion 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.

60

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				For the Nine Months Ended September 30, 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(4)			$	202.4				9.4	%		$	167.3				8.8	%		$	369.7				9.1	%
	Unitranche debt(2)				348.7				10.6	%			146.5				12.9	%			495.2				11.3	%
	Subordinated debt(3)				508.0				13.1	%			250.8				13.9	%			758.8				13.3	%
		Total loans and debt securities			1,059.1				11.5	%			564.6				12.1	%			1,623.7				11.8	%
Equity					62.9								180.0								242.9
	Total			$	1,122.0							$	744.6							$	1,866.6

				For the Nine Months Ended September 30, 2005
				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			$	50.7				10.6	%		$	186.8				6.0	%		$	237.5				7.0	%
	Unitranche debt(2)				154.9				10.5	%			—				—				154.9				10.5	%
	Subordinated debt				239.0				12.6	%			313.9				12.6	%			552.9				12.6	%
		Total loans and debt securities			444.6				11.7	%			500.7				10.2	%			945.3				10.9	%
Equity					23.9								162.7								186.6
	Total			$	468.5							$	663.4							$	1,131.9

(1)	The weighted average yield on loans and debt securities is computed as the (a) annual stated interest on accruing loans and debt securities, divided by (b) total loans and debt securities 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 for the nine months ended September 30, 2006, included a $150 million, 12.0% subordinated debt investment in Advantage Sales & Marketing, Inc. received in conjunction with the sale of Advantage and a $30 million, 15.0% subordinated debt investment in STS Operating, Inc. received in conjunction with the sale of STS. See discussion below.
(4)	Senior loans funded for the nine months ended September 30, 2006, included $192.2 million that was repaid during the nine months ended September 30, 2006.

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				For the Year Ended December 31, 2005
				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(3)			$	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

(1)	The weighted average yield on loans and debt securities is computed as the (a) annual stated interest on accruing loans and debt securities, divided by (b) total loans and debt securities 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)	Buyout senior loans funded included $174.9 million that was repaid during 2005 and $14.1 million that was repaid during the nine months ended September 30, 2006.

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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			$	19.6			$	12.6			$	93.3			$	125.5	(2)
Unitranche debt				—				—				85.8				85.8
Subordinated debt				36.6				3.1				6.8				46.5
	Total loans and debt securities			56.2				15.7				185.9				257.8
Equity securities				86.7				11.7				43.3				141.7	(3)
	Total		$	142.9			$	27.4			$	229.2			$	399.5

	(1)	Includes various commitments to Callidus Capital Corporation (Callidus), 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)
Subordinated debt to support warehouse facilities & warehousing activities(*)			$	36.0			$	—			$	36.0
Revolving line of credit for working capital				4.0				—				4.0
Purchase of preferred equity in future CLO transactions				77.0				—				77.0
	Total		$	117.0			$	—			$	117.0

	(*)	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 $36 million subordinated debt commitment for Callidus to draw upon to provide first loss capital as needed to support the warehouse facility.

	(2)	Includes $114.3 million in the form of revolving senior debt facilities to 22 companies.
	(3)	Includes $55.0 million to 16 private equity and venture capital funds, including $5.9 million in co-investment commitments to Pine Creek Equity Partners, LLC.

			2006				2005
($ in millions)
Interest income			$	11.9			$	10.5
Dividend income				—				9.0
Fees and other income				6.3				7.0
	Total interest and related portfolio income		$	18.2			$	26.5

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			At and for the																At and for the
			Three Months Ended																Nine Months Ended
			September 30,																September 30,																At and for
																																			the Year Ended
																																			December 31,
			2006								2005								2006								2005								2005
			Value				Yield(1)				Value				Yield(1)				Value				Yield(1)				Value				Yield(1)				Value				Yield(1)
($ in millions)
Portfolio at value:
	Commercial mortgage loans		$	94.4				7.7%			$	121.2				6.6%			$	94.4				7.7%			$	121.2				6.6%			$	102.6				7.6%
	Real estate owned			15.3								15.1								15.3								15.1								13.9
	Equity interests			22.1								6.5								22.1								6.5								10.6
Total portfolio			$	131.8							$	142.8							$	131.8							$	142.8							$	127.1
Investments funded			$	0.3							$	7.7							$	14.2							$	196.3							$	213.5
Change in accrued or reinvested interest			$	0.1							$	(0.4	)						$	0.6							$	(18.5	)						$	(18.0	)
Principal collections related to investment repayments or sales (2)			$	0.7							$	4.5							$	17.9							$	765.3							$	799.5

(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.
(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 Nine Months Ended September 30, 2006
Commercial mortgage loans			$	7.7			$	—			$	7.7
Equity interests				6.5				—				6.5
	Total		$	14.2			$	—			$	14.2
For the Nine Months Ended September 30, 2005
CMBS bonds (4 new issuances)(1)			$	211.5			$	(90.5	)		$	121.0
Commercial mortgage loans				73.5				(0.9	)			72.6
Equity interests				2.7				—				2.7
	Total		$	287.7			$	(91.4	)		$	196.3
For the Year Ended December 31, 2005
CMBS bonds (4 new issuances)(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

(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		$	1,082.1				26.3	%		$	1,643.0				45.6	%
2			2,767.1				67.2				1,730.8				48.0
3			153.4				3.7				149.1				4.1
4			57.9				1.4				26.5				0.7
5			59.1				1.4				57.0				1.6
		$	4,119.6				100.0	%		$	3,606.4				100.0	%

				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		$	52.3			$	15.6
		Companies 5% to 25% owned			2.7				—
		Companies less than 5% owned			24.8				11.4
	Commercial real estate finance				6.7				12.9
Loans and debt securities not in workout status
	Private finance
		Companies more than 25% owned			36.0				58.0
		Companies 5% to 25% owned			7.2				0.5
		Companies less than 5% owned			18.3				49.5
	Commercial real estate finance				13.7				7.9
		Total		$	161.7			$	155.8
		Percentage of total portfolio			3.9%				4.3%

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

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			2006				2005
($ in millions)
Private finance			$	41.2			$	74.6
Commercial mortgage loans				3.7				6.1
	Total		$	44.9			$	80.7
	Percentage of total portfolio			1.1%				2.2%

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				For the Three Months																For the Nine Months
				Ended September 30,																Ended September 30,
																Percentage																Percentage
				2006				2005				Change				Change				2006				2005				Change				Change
($ in thousands, except per share amounts)
				(unaudited)																(unaudited)
Interest and Related Portfolio Income
	Interest and dividends			$	98,668			$	76,353			$	22,315				29	%		$	282,982			$	232,628			$	50,354				22	%
	Fees and other income				14,715				18,504				(3,789	)			(20	)%			51,868				43,355				8,513				20	%
		Total interest and related portfolio income			113,383				94,857				18,526				20	%			334,850				275,983				58,867				21	%
Expenses
	Interest				26,109				17,929				8,180				46	%			72,455				57,483				14,972				26	%
	Employee				25,228				13,969				11,259				81	%			67,054				52,302				14,752				28	%
	Employee stock options				3,649				—				3,649				100	%			11,852				—				11,852				100	%
	Administrative				8,153				14,936				(6,783	)			(45	)%			29,348				58,563				(29,215	)			(50	)%
		Total operating expenses			63,139				46,834				16,305				35	%			180,709				168,348				12,361				7	%
Net investment income before income taxes					50,244				48,023				2,221				5	%			154,141				107,635				46,506				43	%
Income tax expense (benefit), including excise tax					1,586				1,889				(303	)			(16	)%			13,988				7,482				6,506				87	%
Net investment income					48,658				46,134				2,524				5	%			140,153				100,153				40,000				40	%
Net Realized and Unrealized Gains (Losses)
	Net realized gains				9,916				70,714				(60,798	)			*				542,991				288,495				254,496				*
	Net change in unrealized appreciation or depreciation				19,312				(3,680	)			22,992				*				(471,942	)			156,026				(627,968	)			*
		Total net gains			29,228				67,034				(37,806	)			*				71,049				444,521				(373,472	)			*
Net income				$	77,886			$	113,168			$	(35,282	)			(31	)%		$	211,202			$	544,674			$	(333,472	)			(61	)%
Diluted earnings per common share				$	0.53			$	0.82			$	(0.29	)			(35	)%		$	1.47			$	3.99			$	(2.52	)			(63	)%
Weighted average common shares outstanding — diluted					147,112				138,058				9,054				7	%			144,030				136,669				7,361				5	%

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

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				For the Three								For the Nine
				Months Ended								Months Ended
				September 30,								September 30,
				2006				2005				2006				2005
($ in millions)
Interest
	Private finance loans and debt securities			$	90.9			$	67.4			$	262.1			$	177.2
	CMBS and CDO portfolio				—				—				—				29.4
	Commercial mortgage loans				1.7				1.7				6.5				5.2
	Cash and cash equivalents, U.S. Treasury bills and other				5.0				2.0				10.9				6.1
		Total interest			97.6				71.1				279.5				217.9
Dividends					1.1				5.3				3.5				14.7
		Total interest and dividends		$	98.7			$	76.4			$	283.0			$	232.6

			2006								2005
			Value				Yield(1)				Value				Yield(1)
($ in millions)
Private finance loans and debt securities			$	2,905.2				12.5	%		$	2,039.6				13.0	%
Commercial mortgage loans				94.4				7.7	%			121.2				6.6	%
	Total		$	2,999.6				12.3	%		$	2,160.8				12.6	%

(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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			For the Three								For the Nine
			Months Ended								Months Ended
			September 30,								September 30,
			2006				2005				2006				2005
($ in millions)
Structuring and diligence			$	9.3			$	10.2			$	28.4			$	19.1
Management, consulting and other services provided to portfolio companies				2.6				4.0				9.1				10.8
Commitment, guaranty, transaction and other fees from portfolio companies				2.1				1.7				6.7				6.5
Loan prepayment premiums				0.7				2.1				7.7				4.6
Other income				—				0.5				—				2.4
	Total fees and other income		$	14.7			$	18.5			$	51.9			$	43.4

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		For the Three								For the Nine
		Months Ended								Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
($ in millions)
BLX		$	6.1			$	9.9			$	18.2			$	26.5
Advantage(1)		$	—			$	9.6			$	14.1			$	28.2

(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								At and for the
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
($ in millions)
Total outstanding debt		$	1,590.7			$	968.3			$	1,590.7			$	968.3
Average outstanding debt		$	1,507.5			$	980.8			$	1,433.5			$	1,058.4
Weighted average cost(1)			6.6	%			6.8	%			6.6	%			6.8	%

(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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			For the Three								For the Nine
			Months Ended								Months Ended
			September 30,								September 30,
			2006				2005				2006				2005
($ in millions)
Salaries and employee benefits			$	19.6			$	11.0			$	54.6			$	34.5
Transition compensation, net				—				(0.1	)			—				5.4
Individual performance award (IPA)				2.1				1.7				6.0				5.5
IPA mark to market expense (benefit)				1.2				(0.4	)			0.6				1.5
Individual performance bonus (IPB)				2.3				1.8				5.9				5.4
	Total employee expense		$	25.2			$	14.0			$	67.1			$	52.3
Number of employees at end of period				168				127				168				127

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				For the Three				For the Nine
				Months Ended				Months Ended
				September 30,				September 30,
				2006				2006
($ in millions)
Employee Stock Option Expense:
	Previously awarded, unvested options as of January 1, 2006			$	3.2			$	9.9
	Options granted on or after January 1, 2006				0.4				2.0
		Total employee stock option expense		$	3.6			$	11.9

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			For the Three								For the Nine
			Months Ending								Months Ending
			September 30,								September 30,
			2006				2005				2006				2005
($ in millions)
Administrative expenses			$	7.6			$	8.0			$	25.3			$	25.9
Investigation related costs				0.6				6.9				4.0				32.7
	Total administrative expenses		$	8.2			$	14.9			$	29.3			$	58.6

			For the Three								For the Nine
			Months Ended								Months Ended
			September 30,								September 30,
			2006				2005				2006				2005
($ in millions)
Income tax expense (benefit), net			$	(0.6	)		$	0.6			$	0.2			$	2.2
Excise tax expense(1)				2.2				1.3				13.8				5.3
	Income tax expense (benefit), including excise tax		$	1.6			$	1.9			$	14.0			$	7.5

(1)	Includes an accrual for the 2006 estimated excise tax of $2.5 million and $14.1 million for the three and nine months ended September 30, 2006, respectively, net of the reversal of over accrued excise taxes related to 2005 of $0.3 million for both the three and nine months ended September 30, 2006.

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		For the Three								For the Nine
		Months Ended								Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
($ in millions)
Realized gains		$	12.6			$	79.8			$	550.1			$	339.2
Realized losses			(2.7	)			(9.1	)			(7.1	)			(50.7	)
Net realized gains		$	9.9			$	70.7			$	543.0			$	288.5

			For the Three								For the Nine
			Months Ended								Months Ended
			September 30,								September 30,
($ in millions)			2006				2005				2006				2005
Reversal of previously recorded unrealized appreciation associated with realized gains			$	(10.2	)		$	(80.5	)		$	(499.4	)		$	(107.0	)
Reversal of previously recorded unrealized depreciation associated with realized losses				2.2				7.4				5.4				49.3
	Total reversal		$	(8.0	)		$	(73.1	)		$	(494.0	)		$	(57.7	)

2006
Portfolio Company			Amount
Private Finance:
Oriental Trading Company, Inc.			$	8.9
Component Hardware Group, Inc.				2.8
Advantage Sales & Marketing, Inc.				0.7
Other				0.2
	Total private finance			12.6
Total gross realized gains			$	12.6

2005
Portfolio Company			Amount
Private Finance:
Housecall Medical Resources, Inc.			$	52.0
Fairchild Industrial Products Company				16.2
Apogen Technologies, Inc.				9.0
Other				0.8
	Total private finance			78.0
Commercial Real Estate:
Other				1.8
	Total commercial real estate			1.8
Total gross realized gains			$	79.8

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2006
Portfolio Company			Amount
Private Finance:
Cooper Natural Resources, Inc.			$	2.2
Other				0.5
	Total private finance			2.7
Total gross realized losses			$	2.7

2005
Portfolio Company			Amount
Private Finance:
HealthASPex, Inc.			$	3.5
MortgageRamp, Inc.				3.5
Other				2.1
	Total private finance			9.1
Total gross realized losses			$	9.1

2006
Portfolio Company			Amount
Private Finance:
Advantage Sales & Marketing, Inc.			$	434.4
STS Operating, Inc.				94.8
Oriental Trading Company, Inc.				8.9
United Site Services, Inc.				3.3
Component Hardware Group, Inc.				2.8
Nobel Learning Communities, Inc.				1.5
MHF Logisitical Solutions, Inc.				1.2
The Debt Exchange, Inc.				1.1
Other				1.5
	Total private finance			549.5
Commercial Real Estate:
Other				0.6
	Total commercial real estate			0.6
Total gross realized gains			$	550.1

2005
Portfolio Company			Amount
Private Finance:
Housecall Medical Resources, Inc.			$	52.0
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.				1.0
Oriental Trading Company, Inc.				1.0
Other				4.2
	Total private finance			102.2
Commercial Real Estate:
CMBS/CDO assets, net(1)				227.7
Other				9.3
	Total commercial real estate			237.0
Total gross realized gains			$	339.2

(1)	Net of net realized losses from related hedges of $0.7 million for the nine months ended September 30, 2005.

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2006
Portfolio Company				Amount
Private Finance:
Cooper Natural Resources, Inc.				$	2.2
Aspen Pet Products, Inc.					1.6
Nobel Learning Communities, Inc.					1.4
Other					1.0
	Total private finance				6.2
Commercial Real Estate:
Other					0.9
		Total commercial real estate			0.9
Total gross realized losses				$	7.1

2005
Portfolio Company			Amount
Private Finance:
Norstan Apparel Shops, Inc.			$	18.5
E-Talk Corporation				9.0
Garden Ridge Corporation				7.1
MortgageRamp, Inc.				3.5
HealthASPex, Inc.				3.5
Other				3.5
	Total private finance			45.1
Commercial Real Estate:
Other				5.6
	Total commercial real estate			5.6
Total gross realized losses			$	50.7

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		2006												2005
		Q1				Q2				Q3				Q1				Q2				Q3
Number of private finance portfolio companies reviewed			78				78				105				36				72				89
Percentage of private finance portfolio reviewed at value			87.0	%			89.6	%			86.5	% (1)			74.5	%			83.0	%			89.3	%

(1)	Of the remaining 13.5% of the private finance portfolio at value at September 30, 2006, 10.9% represented deals closed during the quarter ended September 30, 2006.

		For the Three								For the Nine
		Months Ended								Months Ended
		September 30,								September 30,
		2006(1)				2005(1)				2006(1)				2005(1)
($ in millions)
Net unrealized appreciation or depreciation		$	27.3			$	69.4			$	22.1			$	213.7
Reversal of previously recorded unrealized appreciation associated with realized gains			(10.2	)			(80.5	)			(499.4	)			(107.0	)
Reversal of previously recorded unrealized depreciation associated with realized losses			2.2				7.4				5.4				49.3
Net change in unrealized appreciation or depreciation		$	19.3			$	(3.7	)		$	(471.9	)		$	156.0

(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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($ in millions)		2006				2005
Liquidity portfolio (including money market and other securities: 2006-$74.0; 2005-$100.0)		$	201.6			$	200.3
Cash and investments in money market and other securities (including money market and other securities: 2006-$42.9; 2005-$22.0)		$	46.0			$	53.3
Total assets		$	4,565.5			$	4,025.9
Total debt outstanding		$	1,590.7			$	1,284.8
Total shareholders’ equity		$	2,823.9			$	2,620.5
Debt to equity ratio(1)			0.56				0.49
Asset coverage ratio(2)			278	%			309	%

(1)	The debt to equity ratio adjusted for the liquidity portfolio is 0.49 and 0.41 at September 30, 2006, and December 31, 2005, 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
($ in millions)			Value				Yield				Value				Yield
U.S. Treasury bills(1)			$	127.6				4.9%			$	100.3				4.3%
Money market securities				34.0				5.2%				100.0				4.1%
Certificate of Deposit(1)				40.0				5.6%				—				—
	Total		$	201.6				5.1%			$	200.3				4.2%

(1)	The Treasury bills and certificate of deposit mature in 2006.

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												Annual
				Facility				Amount				Interest
				Amount				Outstanding				Cost(1)
($ in millions)
Notes payable and debentures:
	Privately issued unsecured notes payable			$	1,190.7			$	1,190.7				6.2%
	Publicly issued unsecured notes payable				400.0				400.0				6.8%
	SBA debentures(2)				—				—				—
		Total notes payable and debentures			1,590.7				1,590.7				6.4%
Revolving line of credit					922.5				—				—	(3)
		Total debt		$	2,513.2			$	1,590.7				6.6%	(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 the third quarter of 2006.
(3)	There were no amounts drawn on the revolving line of credit at September 30, 2006. The annual interest cost for total debt includes the annual costs of commitment fees, other facility fees and the amortization of debt financing costs on the revolving line of credit regardless of the amount drawn on the balance sheet date. The annual cost of commitment fees, other facility fees and amortization of debt financing costs was $3.9 million at September 30, 2006.
(4)	The annual interest cost for total debt includes the annual cost of commitment fees, other facility fees and the 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.

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								Payments Due By Year
																												After
				Total				2006				2007				2008				2009				2010				2010
($ in millions)
Notes payable and debentures:
	Unsecured notes payable(2)			$	1,590.7			$	150.0			$	—			$	153.0			$	268.2			$	408.0			$	611.5
Revolving line of credit(1)					—				—				—				—				—				—				—
Operating leases					25.6				1.1				4.4				4.5				4.6				4.4				6.6
		Total contractual obligations		$	1,616.3			$	151.1			$	4.4			$	157.5			$	272.8			$	412.4			$	618.1

(1)	At September 30, 2006, $877.0 million remained unused and available, net of amounts committed for standby letters of credit of $45.5 million issued under the credit facility.
(2)	The unsecured notes payable of $150.0 million maturing in 2006 were repaid on October 16, 2006.

							Amount of Commitment Expiration Per Year
																											After
			Total				2006				2007				2008				2009				2010				2010
($ in millions)
Guarantees			$	201.9			$	2.1			$	0.7			$	3.0			$	190.6			$	—			$	5.5
Standby letters of credit(1)				45.5				0.1				3.9				41.5				—				—				—
	Total commitments		$	247.4			$	2.2			$	4.6			$	44.5			$	190.6			$	—			$	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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	Federal and State Income Taxes and Excise Tax

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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.

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			Total Number
			of Shares				Average Price
			Purchased				Paid Per Share
2005 DCP I(1)
	7/1/2006 to 7/31/2006			84			$	28.99
	8/1/2006 to 8/31/2006			—			$	—
	9/1/2006 to 9/30/2006			—			$	—
2005 DCP II(2)
	7/1/2006 to 7/31/2006			16,454			$	28.99
	8/1/2006 to 8/31/2006			—			$	—
	9/1/2006 to 9/30/2006			68,075			$	30.82
Total				84,613			$	30.46

(1)	The 2005 DCP I is an unfunded plan, as defined by the Internal Revenue Code of 1986, that provides for the deferral of compensation by our directors, employees, and consultants. In addition, we may make contributions to 2005 DCP I on compensation deemed ineligible for a 401(k) contribution. Our directors, employees, or consultants are eligible to participate in the plan at such time and for such period as designated by the Board of Directors. The 2005 DCP I is administered through a trust by a third-party trustee, and we fund this plan through cash contributions. Directors may choose to defer director’s fees through the 2005 DCP I, and may choose to invest such deferred income in shares of our common stock. To the extent a director elects to invest in our common stock, the trustee of the 2005 DCP I will be required to use such deferred director’s fees to purchase shares of our common stock in the market.
(2)	We have established a long-term incentive compensation program whereby we will generally determine an individual performance award for certain officers annually at the beginning of each year. The Compensation Committee may adjust the individual performance awards as needed, or make new awards as new officers are hired. In conjunction with the program, we instituted the 2005 DCP II, which is an unfunded plan as defined by the Internal Revenue Code of 1986 that is administered through a trust by a third-party trustee. The individual performance awards are deposited in the trust in four equal installments, generally on a quarterly basis in the form of cash and the 2005 DCP II requires the trustee to use the cash exclusively to purchase shares of our common stock in the market. In addition, cash dividends received on the Allied Capital shares held in the trust are used by the trustee to purchase shares of our common stock in the open market.

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Exhibit
Number				Description
	3	.1		Restated Articles of Incorporation. (Incorporated by reference to Exhibit a.1 filed with Allied Capital’s Post-Effective Amendment No. 2 to registration statement on Form N-2 (File No. 333-67336) filed on March 22, 2002).
	3	.2		Amended and Restated Bylaws. (Incorporated by reference to Exhibit 3.1. filed with Allied Capital’s Form 8-K on January 24, 2006).
	4	.1		Specimen Certificate of Allied Capital’s Common Stock, par value $0.0001 per share. (Incorporated by reference to Exhibit d. filed with Allied Capital’s registration statement on Form N-2 (File No. 333-51899) filed on May 6, 1998).
	4	.3		Form of Note under the Indenture relating to the issuance of debt securities. (Contained in Exhibit 4.4). (Incorporated by reference to Exhibit d.1 filed with Allied Capital’s Form N-2/ A (File No. 333-133755) filed on June 21, 2006).
	4	.4		Indenture by and between Allied Capital Corporation and The Bank of New York, dated June 16, 2006. (Incorporated by reference to Exhibit d.2 filed with Allied Capital’s Form N-2/ A (File No. 333-133755) filed on June 21, 2006).
	4	.5		Statement of Eligibility of Trustee on Form T-1. (Incorporated by reference to Exhibit d.3 filed with Allied Capital’s Form N-2 (File No. 333-133755) filed on May 3, 2006).
	4	.6		Form of First Supplemental Indenture by and between Allied Capital Corporation and the Bank of New York, dated as of July 25, 2006.(Incorporated by reference to Exhibit d.4 filed with Allied Capital’s Form N-2/A (File No. 333-133755) filed on July 25, 2006).
	4	.7		Form of 6.625% Note due 2011. (Incorporated by reference to Exhibit d.4 filed with Allied Capital’s Form N-2/A (File No. 333-133755) filed on July 25, 2006).
	10	.1		Dividend Reinvestment Plan, as amended. (Incorporated by reference to Exhibit e. filed with Allied Capital’s registration statement on Form N-2 (File No. 333-87862) filed on May 8, 2002).
	10	.2		Credit Agreement, dated September 30, 2005. (Incorporated by reference to Exhibit 10.1 filed with Allied Capital’s Form 8-K on October 3, 2005).
	10	.2(a)		First Amendment to Credit Agreement, dated November 4, 2005. (Incorporated by reference to Exhibit 10.2(a) filed with Allied Capital’s Form 10-Q for the period ended September 30, 2005).
	10	.2(b)		Second Amendment to Credit Agreement, dated May 11, 2006.(Incorporated by reference to Exhibit 10.1 filed with Allied Capital’s Form 8-K filed on May 12, 2006).

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Exhibit
Number				Description
	10	.2(c)		Third Amendment to Credit Agreement, dated May 19, 2006. (Incorporated by reference to Exhibit 10.1 filed with Allied Capital’s Form 8-K filed on May 23, 2006).
	10	.3		Note Agreement, dated October 13, 2005. (Incorporated by reference to Exhibit 10.1 filed with Allied Capital’s Form 8-K on October 14, 2005).
	10	.4		Note Agreement, dated May 1, 2006. (Incorporated by reference to Exhibit 10.1 filed with Allied Capital’s Form 8-K on May 1, 2006).
	10	.13		Note Agreement, dated as of October 15, 2001. (Incorporated by reference to Exhibit f.10 filed with Allied Capital’s Post-Effective Amendment No. 1 to registration statement on Form N-2 (File No. 333-67336) filed on November 14, 2001).
	10	.15		Control Investor Guaranty Agreement, dated as of March 17, 2006, between Allied Capital and CitiBank, N.A. and Business Loan Express, LLC. (Incorporated by reference to Exhibit 10.1 filed with Allied Capital’s Post-Effective Amendment No. 3 to registration statement on Form 8-K filed on March 23, 2006).
	10	.17		The 2005 Allied Capital Corporation Non-Qualified Deferred Compensation Plan II. (Incorporated by reference to Exhibit 10.2 filed with Allied Capital’s Form 8-K filed on December 21, 2005).
	10	.17(a)		Amendment to The 2005 Allied Capital Corporation Non-Qualified Deferred Compensation Plan II, dated January 20, 2006. (Incorporated by reference to Exhibit 10.17(a) filed with Allied Capital’s Form 10-K for the year ended December 31, 2005).
	10	.18		The 2005 Allied Capital Corporation Non-Qualified Deferred Compensation Plan. (Incorporated by reference to Exhibit 10.1 filed with Allied Capital’s Form 8-K filed on December 21, 2005).
	10	.18(a)		Amendment to The 2005 Allied Capital Corporation Non-Qualified Deferred Compensation Plan, dated January 20, 2006. (Incorporated by reference to Exhibit 10.18(a) filed with Allied Capital’s Form 10-K for the year ended December 31, 2005).
	10	.19		Amended Stock Option Plan. (Incorporated by reference to Exhibit B of Allied Capital’s definitive proxy statement for Allied Capital’s 2004 Annual Meeting of Stockholders filed on March 30, 2004).
	10	.20(a)		Allied Capital Corporation 401(k) Plan, dated September 1, 1999. (Incorporated by reference to Exhibit 4.4 filed with Allied Capital’s registration statement on Form S-8 (File No. 333-88681) filed on October 8, 1999).
	10	.20(b)		Amendment to Allied Capital Corporation 401(k) Plan, dated April 15, 2004. (Incorporated by reference to Exhibit 10.20(b) filed with Allied Capital’s Form 10-Q for the period ended June 30, 2004).
	10	.20(c)		Amendment to Allied Capital Corporation 401(k) plan, dated November 1, 2005. (Incorporated by reference to Exhibit 10.20(c) filed with Allied Capital’s Form 10-Q for the quarter ended September 30, 2005).
	10	.20(d)		Amendment to Allied Capital Corporation 401(k) plan, dated April 21, 2006. (Incorporated by reference to Exhibit i.4(c) filed with Allied Capital’s Form N-2 (File No. 333-133755) filed on May 3, 2006).
	10	.21		Employment Agreement, dated January 1, 2004, between Allied Capital and William L. Walton. (Incorporated by reference to Exhibit 10.21 filed with Allied Capital’s Form 10-K for the year ended December 31, 2003).

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Exhibit
Number				Description
	10	.22		Employment Agreement, dated January 1, 2004, between Allied Capital and Joan M. Sweeney. (Incorporated by reference to Exhibit 10.22 filed with Allied Capital’s Form 10-K for the year ended December 31, 2003).
	10	.23		Recission of Retention Agreement, dated October 27, 2005, between Allied Capital and John M. Scheurer. (Incorporated by reference to Exhibit 10.1 filed with Allied Capital’s current report on Form 8-K filed on November 1, 2005).
	10	.25		Form of Custody Agreement with Riggs Bank N.A., which was assumed by PNC Bank through merger. (Incorporated by reference to Exhibit j.1 filed with Allied Capital’s registration statement on Form N-2 (File No. 333-51899) filed on May 6, 1998).
	10	.26		Custodian Agreement with Chevy Chase Trust. (Incorporated by reference to Exhibit 10.26 filed with Allied Capital’s Form 10-K for the year ended December 31, 2005).
	10	.27		Custodian Agreement with Bank of America. (Incorporated by reference to Exhibit 10.27 filed with Allied Capital’s Form 10-K for the year ended December 31, 2005).
	10	.28		Code of Ethics. (Incorporated by reference to Exhibit 10.28 filed with Allied Capital’s Form 10-K for the year ended December 31, 2005).
	10	.29		Custodian Agreement with Union Bank of California. (Incorporated by reference to Exhibit 10.29 filed with Allied Capital’s Form 10-Q for the quarter ended June 30, 2006).
	10	.30		Custodian Agreement with M&T Bank. (Incorporated by reference to Exhibit 10.30 filed with Allied Capital’s Form 10-Q for the quarter ended June 30, 2006).
	10	.31		Note Agreement, dated as of May 14, 2003. (Incorporated by reference to Exhibit 10.31 filed with Allied Capital’s Form 10-Q for the quarter ended March 31, 2003).
	10	.36		Amendment, dated as of April 30, 2003, to Note Agreement, dated as of October 15, 2001. (Incorporated by reference to Exhibit 10.36 filed with Allied Capital’s Form 10-Q for the period ended March 31, 2003).
	10	.37		Form of Indemnification Agreement between Allied Capital and its directors and certain officers. (Incorporated by reference to Exhibit 10.37 filed with Allied Capital’s Form 10-K for the year ended December 31, 2003).
	10	.38		Note Agreement, dated as of March 25, 2004. (Incorporated by reference to Exhibit 10.38 filed with Allied Capital’s Form 10-Q for the period ended March 31, 2004.)
	10	.39		Note Agreement, dated as of November 15, 2004. (Incorporated by reference to Exhibit 99.1 filed with Allied Capital’s current report on Form 8-K filed on November 18, 2004.)
	10	.40		Real Estate Securities Purchase Agreement. (Incorporated by reference to Exhibit 2.1 filed with Allied Capital’s Form 8-K filed on May 4, 2005.)
	10	.41		Platform Assets Purchase Agreement. (Incorporated by reference to Exhibit 2.2 filed with Allied Capital’s Form 8-K filed on May 4, 2005.)
	10	.42		Transition Services Agreement. (Incorporated by reference to Exhibit 10.1 filed with Allied Capital’s Form 8-K filed on May 4, 2005.)
	11			Statement regarding computation of per share earnings is included in Note 7 to Allied Capital’s Notes to the Consolidated Financial Statements.
	15	.*		Letter regarding Unaudited Interim Financial Information

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Exhibit
Number				Description
	31	.1*		Certification of Chief Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.
	31	.2*		Certification of Chief Financial Officer Pursuant Rule 13a-14 of the Securities Exchange Act of 1934.
	32	.1*		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
	32	.2*		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

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	ALLIED CAPITAL CORPORATION
	(Registrant)

Dated: November 8, 2006		/s/ William L. Walton   William L. Walton Chairman and Chief Executive Officer
		/s/ Penni F. Roll   Penni F. Roll Chief Financial Officer

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Exhibit
Number				Description
	15	.*		Letter regarding Unaudited Interim Financial Information
	31	.1*		Certification of Chief Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.
	31	.2*		Certification of Chief Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.
	32	.1*		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
	32	.2*		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.