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 March 31, 2007 (unaudited) and December 31, 2006		1
		Consolidated Statement of Operations (unaudited) — For the Three Months Ended March 31, 2007 and 2006		2
		Consolidated Statement of Changes in Net Assets (unaudited) — For the Three Months Ended March 31, 2007 and 2006		3
		Consolidated Statement of Cash Flows (unaudited) — For the Three Months Ended March 31, 2007 and 2006		4
		Consolidated Statement of Investments as of March 31, 2007 (unaudited)		5
		Consolidated Statement of Investments as of December 31, 2006		16
		Notes to Consolidated Financial Statements		27
		Report of Independent Registered Public Accounting Firm		56
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			60
	Item 3. Quantitative and Qualitative Disclosures About Market Risk			94
	Item 4. Controls and Procedures			94
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings			95
	Item 1A. Risk Factors			96
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			102
	Item 3. Defaults Upon Senior Securities			102
	Item 4. Submission of Matters to a Vote of Security Holders			103
	Item 5. Other Information			103
	Item 6. Exhibits			103
	Signatures			107

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					March 31,				December 31,
					2007				2006
(in thousands, except per share amounts)					(unaudited)
ASSETS
Portfolio at value:
	Private finance
		Companies more than 25% owned (cost: 2007-$1,836,724; 2006-$1,578,822)			$	1,773,164			$	1,490,180
		Companies 5% to 25% owned (cost: 2007-$438,374; 2006-$438,560)				457,871				449,813
		Companies less than 5% owned (cost: 2007-$2,159,014; 2006-$2,479,981)				2,145,284				2,437,908
			Total private finance (cost: 2007-$4,434,112; 2006-$4,497,363)			4,376,319				4,377,901
	Commercial real estate finance (cost: 2007-$103,384; 2006-$103,546)					122,529				118,183
			Total portfolio at value (cost: 2007-$4,537,496; 2006-$4,600,909)			4,498,848				4,496,084
Investments in money market and other securities						271,170				202,210
Accrued interest and dividends receivable						67,690				64,566
Other assets						148,041				122,958
Cash						327				1,687
			Total assets		$	4,986,076			$	4,887,505
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
	Notes payable and debentures (maturing within one year: 2007-$—; 2006-$—)				$	1,891,516			$	1,691,394
	Revolving line of credit					—				207,750
	Accounts payable and other liabilities					116,283				147,117
			Total liabilities			2,007,799				2,046,261
Commitments and contingencies
Shareholders’ equity:
	Common stock, $0.0001 par value, 200,000 shares authorized; 152,124 and 148,575 shares issued and outstanding at March 31, 2007, and December 31, 2006, respectively					15				15
	Additional paid-in capital					2,595,936				2,493,335
	Common stock held in deferred compensation trust					(31,371	)			(28,335	)
	Notes receivable from sale of common stock					(2,715	)			(2,850	)
	Net unrealized appreciation (depreciation)					(57,164	)			(123,084	)
	Undistributed earnings					473,576				502,163
			Total shareholders’ equity			2,978,277				2,841,244
			Total liabilities and shareholders’ equity		$	4,986,076			$	4,887,505
Net asset value per common share					$	19.58			$	19.12

1

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					For the Three
					Months Ended
					March 31,
					2007				2006
(in thousands, except per share amounts)
					(unaudited)
Interest and Related Portfolio Income:
	Interest and dividends
		Companies more than 25% owned			$	27,157			$	30,146
		Companies 5% to 25% owned				11,861				5,650
		Companies less than 5% owned				62,965				53,085
			Total interest and dividends			101,983				88,881
	Fees and other income
		Companies more than 25% owned				3,989				12,087
		Companies 5% to 25% owned				28				2,716
		Companies less than 5% owned				1,952				7,327
			Total fees and other income			5,969				22,130
			Total interest and related portfolio income			107,952				111,011
Expenses:
	Interest					30,288				24,485
	Employee					21,928				21,428
	Employee stock options					3,661				3,606
	Administrative					13,224				11,334
			Total operating expenses			69,101				60,853
Net investment income before income taxes						38,851				50,158
Income tax expense (benefit), including excise tax						(649	)			8,858
Net investment income						39,500				41,300
Net Realized and Unrealized Gains (Losses):
	Net realized gains (losses)
		Companies more than 25% owned				(1,350	)			433,187
		Companies 5% to 25% owned				166				(343	)
		Companies less than 5% owned				28,850				(9	)
			Total net realized gains			27,666				432,835
	Net change in unrealized appreciation or depreciation					65,920				(374,548	)
			Total net gains			93,586				58,287
Net increase in net assets resulting from operations					$	133,086			$	99,587
Basic earnings per common share					$	0.89			$	0.72
Diluted earnings per common share					$	0.87			$	0.70
Weighted average common shares outstanding — basic						149,503				138,759
Weighted average common shares outstanding — diluted						152,827				141,738

2

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				For the Three Months
				Ended March 31,
				2007				2006
(in thousands, except per share amounts)
				(unaudited)
Operations:
	Net investment income			$	39,500			$	41,300
	Net realized gains				27,666				432,835
	Net change in unrealized appreciation or depreciation				65,920				(374,548	)
		Net increase in net assets resulting from operations			133,086				99,587
Shareholder distributions:
	Common stock dividends				(95,753	)			(82,518	)
		Net decrease in net assets resulting from shareholder distributions			(95,753	)			(82,518	)
Capital share transactions:
	Sale of common stock				93,784				82,970
	Issuance of common stock in lieu of cash distributions				4,266				3,640
	Issuance of common stock upon the exercise of stock options				1,366				3,935
	Stock option expense				3,661				3,606
	Net decrease in notes receivable from sale of common stock				135				130
	Purchase of common stock held in deferred compensation trust				(3,089	)			(2,121	)
	Distribution of common stock held in deferred compensation trust				53				38
	Other				(476	)			—
		Net increase in net assets resulting from capital share transactions			99,700				92,198
		Total increase in net assets			137,033				109,267
Net assets at beginning of period					2,841,244				2,620,546
Net assets at end of period				$	2,978,277			$	2,729,813
Net asset value per common share				$	19.58			$	19.50
Common shares outstanding at end of period					152,124				139,984

3

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					For the Three Months Ended
					March 31,
					2007				2006
(in thousands)
					(unaudited)
Cash flows from operating activities:
	Net increase in net assets resulting from operations				$	133,086			$	99,587
	Adjustments:
		Portfolio investments				(170,216	)			(647,851	)
		Principal collections related to investment repayments or sales				235,509				340,410
		Change in accrued or reinvested interest and dividends				(11,267	)			2,061
		Net collection (amortization) of discounts and fees				(1,844	)			(277	)
		Redemption of (investments in) money market securities				(66,335	)			(16,726	)
		Stock option expense				3,661				3,606
		Changes in other assets and liabilities				(40,453	)			2,797
		Depreciation and amortization				507				433
		Realized gains from the receipt of notes and other consideration from sale of investments, net of collections				(2,814	)			(179,987	)
		Realized losses				5,515				3,651
		Net change in unrealized (appreciation) or depreciation				(65,920	)			374,548
			Net cash provided by (used in) operating activities			19,429				(17,748	)
Cash flows from financing activities:
	Sale of common stock					93,784				82,970
	Sale of common stock upon the exercise of stock options					1,366				3,935
	Collections of notes receivable from sale of common stock					135				130
	Borrowings under notes payable					200,000				—
	Repayments on notes payable and debentures					—				(12,000	)
	Net borrowings under (repayments on) revolving line of credit					(207,750	)			1,250
	Purchase of common stock held in deferred compensation trust					(3,089	)			(2,121	)
	Other financing activities					(6,325	)			53
	Common stock dividends and distributions paid					(98,910	)			(82,976	)
			Net cash provided by (used in) financing activities			(20,789	)			(8,759	)
Net decrease in cash						(1,360	)			(26,507	)
Cash at beginning of period						1,687				31,363
Cash at end of period					$	327			$	4,856

4

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					March 31, 2007
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Companies More Than 25% Owned
Alaris Consulting, LLC			Senior Loan (16.5%, Due 12/05 – 12/07)(6)		$	27,055			$	26,987			$	—
	(Business Services)		Equity Interests							5,877				—
			Guaranty ($1,100)
Avborne, Inc.(7)			Preferred Stock (12,500 shares)							611				873
	(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)							3,847				—
Business Loan Express, LLC (Financial Services)			Class A Equity Interests(25.0% — See Note 3)(6)			85,822				85,822				85,822
			Class B Equity Interests							119,436				79,139
			Class C Equity Interests							109,301				64,976
			Guaranty ($182,392 — See Note 3)
			Standby Letters of Credit ($20,000 —   See Note 3)
Calder Capital Partners, LLC(5)			Senior Loan (8.0%, Due 5/09)(6)			1,326				1,326				1,326
	(Financial Services)		Equity Interests							2,154				2,154
Callidus Capital Corporation			Senior Loan (12.0%, Due 12/08)			1,150				1,150				1,150
	(Financial Services)		Subordinated Debt (18.0%, Due 10/08)			6,021				6,021				6,021
			Common Stock (100 shares)							2,067				24,493
Coverall North America, Inc.			Unitranche Debt (12.0%, Due 7/11)			35,054				34,896				34,896
	(Business Services)		Subordinated Debt (15.0%, Due 7/11)			6,000				5,974				5,974
			Common Stock (884,880 shares)							16,648				21,475
CR Holding, Inc.			Subordinated Debt (16.6%, Due 2/13)			39,917				39,752				39,752
	(Consumer Products)		Common Stock (37,200,551 shares)							33,321				30,880
Direct Capital Corporation			Subordinated Debt (16.0%, Due 3/13)			35,750				35,574				35,574
	(Financial Services)		Common Stock (2,097,234 shares)							19,250				19,250
Financial Pacific Company			Subordinated Debt (17.4%, Due 2/12 – 8/12)			71,947				71,732				71,732
	(Financial Services)		Preferred Stock (10,964 shares)							10,276				16,739
			Common Stock (14,735 shares)							14,819				67,540
ForeSite Towers, LLC			Equity Interests							—				557
	(Tower Leasing)
Global Communications, LLC			Senior Loan (10.7%, Due 9/02 – 11/07)(6)			15,957				15,957				15,957
	(Business Services)		Subordinated Debt (17.0%, Due 12/03 – 9/05)(6)			11,339				11,336				4,930
			Preferred Equity Interest							14,067				—
			Options							1,639				—
Gordian Group, Inc.			Senior Loan (10.0%, Due 6/06 – 12/08)(6)			11,792				11,798				—
	(Business Services)		Common Stock (1,000 shares)							6,942				—

(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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					March 31, 2007
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Healthy Pet Corp.			Senior Loan (9.9%, Due 8/10)		$	32,338			$	32,338			$	32,338
	(Consumer Services)		Subordinated Debt (15.0%, Due 8/10)			43,939				43,807				43,807
			Common Stock (30,142 shares)							30,142				43,818
HMT, Inc.			Preferred Stock (554,052 shares)							2,637				2,637
	(Energy Services)		Common Stock (300,000 shares)							3,000				30,173
			Warrants							1,155				11,617
Hot Stuff Foods, LLC			Senior Loan (8.8%, Due 2/11-2/12)			49,770				49,549				49,549
	(Consumer Products)		Subordinated Debt (13.7%, Due 8/12 – 2/13)			60,606				60,361				57,254
			Subordinated Debt (16.0%, Due 2/13)(6)			20,841				20,749				—
			Common Stock (1,147,453 shares)							56,187				—
Huddle House, Inc.			Subordinated Debt (15.0%, Due 12/12)			58,515				58,239				58,239
(Retail)			Common Stock (415,328 shares)							41,533				43,078
Impact Innovations Group, LLC			Equity Interests in Affiliate							—				319
	(Business Services)
Insight Pharmaceuticals Corporation			Subordinated Debt (15.0%, Due 9/12)			44,257				44,116				44,116
	(Consumer Products)		Subordinated Debt (19.0%, Due 9/12)(6)			16,181				16,130				14,510
			Preferred Stock (25,000 shares)							25,000				—
			Common Stock (620,000 shares)							6,325				—
Jakel, Inc.			Subordinated Debt (15.5%, Due 3/08)(6)			15,692				15,692				—
	(Industrial Products)		Preferred Stock (6,460 shares)							6,460				—
			Common Stock (158,061 shares)							9,347				—
Legacy Partners Group, Inc.			Senior Loan (14.0%, Due 5/09)(6)			4,843				4,843				4,843
	(Financial Services)		Equity Interests							4,261				613
Litterer Beteiligungs-GmbH(4)			Subordinated Debt (8.0%, Due 3/07)			698				698				698
	(Business Services)		Equity Interest							1,809				1,980
Mercury Air Centers, Inc.			Subordinated Debt (16.0%, Due 4/09 –
	(Business Services)		11/12)			49,862				49,737				49,737
			Common Stock (57,970 shares)							35,053				251,709
			Standby Letters of Credit ($75)
MVL Group, Inc.			Senior Loan (12.0%, Due 6/09 – 7/09)			30,674				30,613				30,613
	(Business Services)		Subordinated Debt (14.5%, Due 6/09 – 7/09)			39,449				39,092				39,092
			Common Stock (648,661 shares)							643				1,333
Penn Detroit Diesel Allison, LLC			Subordinated Debt (15.5%, Due 8/13)			38,459				38,287				38,287
	(Business Services)		Equity Interests							21,128				23,965
Powell Plant Farms, Inc.			Senior Loan (15.0%, Due 12/07)(6)			38,990				30,142				30,142
	(Consumer Products)		Subordinated Debt (20.0%, Due 6/03)(6)			19,291				19,223				3,837
			Preferred Stock (1,483 shares)							—				—
			Warrants							—				—
Service Champ, Inc.			Subordinated Debt (15.5%, Due 4/12)			27,910				27,802				27,802
	(Business Services)		Common Stock (63,888 shares)							13,662				16,488

(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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					March 31, 2007
Private Finance					(unaudited)
Portfolio Company
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Staffing Partners Holding
	Company, Inc.		Subordinated Debt (13.5%, Due 1/07)(6)		$	541			$	541			$	540
	(Business Services)
Startec Global Communications
	Corporation		Senior Loan (10.0%, Due 5/07 – 5/09)			13,583				13,583				13,583
	(Telecommunications)		Common Stock (19,180,000 shares)							37,255				17,085
Sweet Traditions, Inc.			Senior Loan (9.0%, Due 8/11)			39,022				35,382				35,382
	(Retail)		Preferred Stock (961 Shares)							950				950
			Common Stock (10,000 Shares)							50				50
			Standby Letter of Credit ($120)
Triview Investments, Inc.(8)			Senior Loan (9.6%, Due 6/07 – 12/07)			14,758				14,754				14,754
	(Broadcasting & Cable/Business		Subordinated Debt (15.4%, Due 1/10 – 7/12)			63,455				63,142				63,142
	Services/Consumer Products)		Subordinated Debt (8.4%, Due 11/07 – 7/08)(6)			4,850				4,850				4,850
			Common Stock (202 shares)							102,755				39,024
			Guaranty ($800)
			Standby Letter of Credit ($200)
Total companies more than 25% owned									$	1,836,724			$	1,773,164
Companies 5% to 25% Owned
Advantage Sales & Marketing, Inc.			Subordinated Debt (12.0%, Due 3/14)		$	153,082			$	152,433			$	152,433
	(Business Services)		Equity Interests							—				11,000
Air Medical Group Holdings LLC			Senior Loan (9.0%, Due 3/11)			2,557				2,495				2,495
	(Healthcare Services)		Subordinated Debt (14.0%, Due 11/12)			35,183				35,133				35,133
			Equity Interests							3,470				6,900
Alpine ESP Holdings, Inc.			Preferred Stock (622 shares)							622				543
	(Business Services)		Common Stock (13,513 shares)							14				—
Amerex Group, LLC			Subordinated Debt (12.0%, Due 1/13)			8,400				8,400				8,400
	(Consumer Products)		Equity Interests							3,527				20,235
BB&T Capital Partners/Windsor
	Mezzanine Fund, LLC (5)		Equity Interests							5,873				5,554
	(Private Equity Fund)
Becker Underwood, Inc.			Subordinated Debt (14.5%, Due 8/12)			24,399				24,321				24,321
	(Industrial Products)		Common Stock(5,073 shares)							5,813				3,300
BI Incorporated			Subordinated Debt (13.5%, Due 2/14)			30,385				30,256				30,256
	(Business Services)		Common Stock (40,000 shares)							4,000				6,000

(1)		Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2)		Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3)		Public company.
(4)		Non-U.S. company or principal place of business outside the U.S.
(5)		Non-registered investment company.
(6)		Loan or debt security is on non-accrual status and therefore is considered non-income producing.
(8)		Triview Investments, Inc. holds investments in Longview Cable & Data, LLC (Broadcasting & Cable) with a cost of $67.8 million and a value of $7.8 million, Triax Holdings, LLC (Consumer Products) with a cost of $98.9 million and a value of $93.4 million, and Crescent Hotels & Resorts, LLC and affiliates (Business Services) with a cost of $18.8 million and a value of $20.6 million.

7

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					March 31, 2007
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)		$	20,423			$	20,326			$	20,326
	(Business Services)		Equity Interests							4,415				5,350
Creative Group, Inc.			Subordinated Debt (12.0%, Due 9/13)			15,000				13,686				13,686
	(Business Services)		Warrant							1,387				865
Drew Foam Companies, Inc.			Preferred Stock (722 shares)							722				688
	(Business Services)		Common Stock (7,287 shares)							7				—
MedBridge Healthcare, LLC			Senior Loan (6.0%, Due 8/09)(6)			7,164				7,164				7,164
	(Healthcare Services)		Subordinated Debt (10.0%, Due 8/14)(6)			5,184				5,184				2,408
			Convertible Subordinated Debt (2.0%, Due 8/14)(6)			2,970				984				—
			Equity Interests							1,416				—
Multi-Ad Services, Inc.			Unitranche Debt (11.3%, Due 11/11)			19,900				19,785				19,785
	(Business Services)		Equity Interests							2,000				1,777
Nexcel Synthetics, LLC			Subordinated Debt (14.5%, Due 6/09)			8,000				7,982				7,982
	(Consumer Products)		Equity Interests							1,755				759
PresAir LLC			Senior Loan (7.5%, Due 12/10)(6)			5,810				5,492				2,462
	(Industrial Products)		Equity Interests							1,341				—
Progressive International
	Corporation		Subordinated Debt (16.0%, Due 12/09)			7,591				7,574				7,574
	(Consumer Products)		Preferred Stock (500 shares)							500				1,046
			Common Stock (197 shares)							13				2,800
			Warrants							—				—
Regency Healthcare Group, LLC			Senior Loan (11.1%, Due 6/12)			1,250				1,232				1,232
	(Healthcare Services)		Unitranche Debt (11.1%, Due 6/12)			20,000				19,913				19,913
			Equity Interests							1,500				1,640
SGT India Private Limited(4)			Common Stock (109,524 shares)							4,093				3,040
	(Business Services)
Soteria Imaging Services, LLC			Subordinated Debt (11.6%, Due 11/10)			19,500				18,603				18,603
	(Healthcare Services)		Equity Interests							2,170				2,542
Universal Environmental Services, LLC			Unitranche Debt (15.5%, Due 2/09)			10,989				10,963				9,659
	(Business Services)		Equity Interests							1,810				—
Total companies 5% to 25% owned									$	438,374			$	457,871
Companies Less Than 5% Owned
3SI Security Systems, Inc.			Subordinated Debt (14.5%, Due 8/13)		$	27,111			$	26,999			$	26,999
	(Consumer Products)
AgData, L.P.			Unitranche Debt (10.3%, Due 7/12)			11,330				11,272				11,272
	(Consumer Services)
Axium Healthcare Pharmacy, Inc.			Unitranche Debt (12.0%, Due 12/12)			9,000				8,920				8,920
	(Healthcare Services)		Common Stock (26,500 shares)							2,650				1,800
Baird Capital Partners IV Limited Partnership(5) (Private Equity Fund)			Limited Partnership Interest							1,183				962

(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

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					March 31, 2007
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Benchmark Medical, Inc.			Warrants						$	18			$	—
	(Healthcare Services)
BenefitMall, Inc.			Unitranche Debt (13.3%, Due 8/12)		$	110,030				109,665				109,665
	(Business Services)		Common Stock (45,528,000 shares)(11)							45,528				46,755
			Warrants(11)							—				—
			Standby Letters of Credit ($9,981)
Breeze-Eastern Corporation(3)			Senior Loan (10.1%, Due 5/11)			9,975				9,975				9,975
	(Industrial Products)
Broadcast Electronics, Inc.			Senior Loan (9.1%, Due 7/12)			4,950				4,919				4,919
	(Business Services)
Callidus Debt Partners
	CDO Fund I, Ltd.(4)(9)		Class C Notes (12.9%, Due 12/13)			18,800				18,946				18,988
	(Senior Debt Fund)		Class D Notes (17.0%, Due 12/13)			9,400				9,473				9,494
Callidus Debt Partners
	CLO Fund III, Ltd. (4)(9) (Senior Debt Fund)		Preferred Shares (23,600,000 shares, 9.9%) (10)							22,702				22,514
Callidus Debt Partners
	CLO Fund IV, Ltd.(4)(9)		Income Notes (13.1%)(10)							12,795				12,795
	(Senior Debt Fund)
Callidus Debt Partners
	CLO Fund V, Ltd. (4)(9)		Income Notes (15.8%)(10)							14,320				14,320
	(Senior Debt Fund)
Callidus MAPS CLO Fund I LLC(9)			Class E Notes (10.9%, Due 12/17)			17,000				17,000				17,145
	(Senior Debt Fund)		Income Notes (13.3%)(10)							50,963				46,463
Camden Partners Strategic Fund II,
	L.P.(5)		Limited Partnership Interest							997				2,215
	(Private Equity Fund)
Carlisle Wide Plank Floors, Inc.			Unitranche Debt (10.5%, Due 6/11)			14,000				13,906				13,906
	(Consumer Products)		Preferred Stock (400,000 Shares)							400				400
Catterton Partners V, L.P.(5)			Limited Partnership Interest							3,760				4,016
	(Private Equity Fund)
Catterton Partners VI, L.P.(5)			Limited Partnership Interest							1,072				987
	(Private Equity Fund)
Centre Capital Investors IV, LP(5)			Limited Partnership Interest							1,801				1,501
	(Private Equity Fund)

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

9

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					March 31, 2007
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Commercial Credit Group, Inc.			Subordinated Debt (14.8%, Due 2/11)		$	10,000			$	9,962			$	9,962
	(Financial Services)		Preferred Stock (32,500 shares)							3,900				3,900
			Warrants							—				—
Community Education Centers, Inc.			Subordinated Debt (16.0%, Due 12/10)			34,420				34,334				34,334
	(Education Services)
Compass Group Diversified
	Holdings LLC(3)		Senior Loan (8.4%, Due 11/11)			9,069				8,952				8,952
	(Financial Services)
Component Hardware Group, Inc.			Subordinated Debt (13.5%, Due 1/13)			18,226				18,146				18,146
	(Industrial Products)
Cook Inlet Alternative Risk, LLC			Unitranche Debt (10.0%, Due 4/12)			60,000				59,663				59,663
	(Business Services)		Equity Interests							2,000				2,700
Cortec Group Fund IV, L.P.(5)			Limited Partnership Interest							1,712				1,226
	(Private Equity)
CSAV, Inc.			Subordinated Debt (11.8%, Due 6/13)			37,500				37,500				37,500
	(Business Services)
DCWV Acquisition Corporation			Senior Loan (8.8%, Due 7/12)			3,700				3,687				3,687
	(Consumer Products)		Unitranche Debt (11.0%, Due 7/12)			16,575				16,485				16,485
Deluxe Entertainment Services Group, Inc.			Subordinated Debt (13.6%, Due 7/11)			30,000				30,000				30,000
	(Business Services)
Distant Lands Trading Co.			Senior Loan (10.1%, Due 11/11)			5,450				5,408				5,408
	(Consumer Products)		Unitranche Debt (11.0%, Due 11/11)			54,375				54,144				54,144
			Common Stock (4,000 shares)							4,000				3,194
Drilltec Patents & Technologies
	Company, Inc.		Subordinated Debt (18.0%, Due 8/06)			4,119				4,119				4,119
	(Energy Services)		Subordinated Debt (16.5%, Due 8/06)(6)			10,994				10,918				10,994
Driven Brands, Inc.			Senior Loan (8.9%, Due 6/11)			37,070				36,926				36,926
	d/b/a Meineke and Econo Lube		Subordinated Debt (12.1%, Due 6/12 – 6/13)			83,000				82,701				82,701
	(Consumer Services)		Common Stock (11,675,331 shares)(11)							29,455				19,935
			Warrants(11)							—				—
Digital VideoStream, LLC			Unitranche Debt (11.0%, Due 2/12)			17,838				17,737				17,737
	(Business Services)		Convertible Subordinated Debt
			(10.0%, Due 2/16)			3,824				3,808				3,808
Dynamic India Fund IV(4)(5)			Equity Interests							3,850				3,850
	(Private Equity Fund)
EarthColor, Inc.			Subordinated Debt (15.0%, Due 11/13)			107,000				106,497				106,497
	(Business Services)		Common Stock (53,540 shares)(11)							53,540				51,796
			Warrants(11)							—				—
eCentury Capital Partners, L.P.(5)			Limited Partnership Interest							6,274				2,738
	(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.

10

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					March 31, 2007
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Elexis Beta GmbH(4)			Options						$	426			$	50
	(Industrial Products)
Farley’s & Sathers Candy Company, Inc.			Subordinated Debt (11.4%, Due 3/11)		$	20,000				19,935				19,935
	(Consumer Products)
Frozen Specialties, Inc.			Warrants							435				270
	(Consumer Products)
Garden Ridge Corporation (Retail)			Subordinated Debt (7.0%, Due 5/12)(6)			22,500				22,500				22,500
Geotrace Technologies, Inc.			Subordinated Debt (10.0%, Due 6/09)			23,495				22,105				22,105
	(Energy Services)		Warrants							2,350				2,100
Ginsey Industries, Inc.			Subordinated Debt (12.5%, Due 5/07)			2,489				2,489				2,489
	(Consumer Products)
Grant Broadcasting Systems II			Subordinated Debt (5.0%, Due 6/11)			3,005				3,005				3,005
	(Broadcasting & Cable)
Grotech Partners, VI, L.P.(5)			Limited Partnership Interest							8,223				6,139
	(Private Equity Fund)
Havco Wood Products LLC			Senior Debt (9.9%, Due 8/11)			2,000				1,982				1,982
	(Industrial Products)		Unitranche Debt (11.5%, Due 8/11)			13,600				12,707				12,707
			Equity Interests							1,055				3,000
Haven Eldercare of New England, LLC			Subordinated Debt (12.0%, Due 8/09)			2,527				2,527				2,527
	(Healthcare Services)
HealthASPex Services Inc.			Senior Loan (4.0%, Due 7/08)			500				500				500
	(Business Services)
The Hillman Companies, Inc.(3)			Subordinated Debt (10.0%, Due 9/11)			44,580				44,434				44,434
	(Consumer Products)
The Homax Group, Inc.			Senior Loan (9.2%, Due 10/12)			12,550				12,550				12,550
	(Consumer Products)		Subordinated Debt (12.0%, Due 4/14)			14,000				13,189				13,189
			Preferred Stock (89 shares)							89				80
			Common Stock (28 shares)							6				—
			Warrants							1,106				993
Ideal Snacks Corporation			Senior Loan (9.0%, Due 6/10)			5,850				5,818				5,818
	(Consumer Products)
Integrity Interactive Corporation			Unitranche Debt (10.5%, Due 2/12)			29,000				28,823				28,823
	(Business Services)
International Fiber Corporation			Subordinated Debt (14.0%, Due 6/12)			22,098				22,029				22,029
	(Industrial Products)		Preferred Stock (25,000 shares)							2,500				2,200

	(1)			Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
	(2)			Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
	(3)			Public company.
	(4)			Non-U.S. company or principal place of business outside the U.S.
	(5)			Non-registered investment company.
	(6)			Loan or debt security is on non-accrual status and therefore is considered non-income producing.
	(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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					March 31, 2007
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Kodiak Fund LP(5)			Equity Interests						$	9,513			$	9,460
	(Private Equity Fund)
Line-X, Inc.			Senior Loan (12.0%, Due 8/11)		$	2,200				2,182				2,182
	(Consumer Products)		Unitranche Debt (12.0% Due 8/11)			47,884				47,692				46,224
			Standby Letter of Credit ($1,500)
MedAssets, Inc.			Preferred Stock (227,865 shares)							2,049				3,670
	(Business Services)		Common Stock (50,000 shares)							—				150
MHF Logistical Solutions, Inc.			Subordinated Debt (11.5%, Due 6/12)(6)			33,600				33,448				27,518
(Business Services)			Subordinated Debt (18.0%, Due 6/13)(6)			11,211				11,154				—
			Common Stock (20,934 shares)(11)							20,942				—
			Warrants(11)							—				—
Mid-Atlantic Venture Fund IV, L.P.(5)			Limited Partnership Interest							6,975				3,037
	(Private Equity Fund)
Mogas Energy, LLC			Subordinated Debt (9.5%, Due 8/08)			16,285				15,086				15,086
	(Energy Services)
NetShape Technologies, Inc.			Senior Debt (8.6%, Due 2/13)			8,991				8,957				8,957
	(Industrial Products)
Network Hardware Resale, Inc.			Unitranche Debt (10.5%, Due 12/11)			36,701				36,893				36,893
	(Business Services)		Convertible Subordinated Debt (9.8%, Due 12/15)			13,242				13,307				13,599
Norwesco, Inc.			Subordinated Debt (12.6%, Due 1/12 – 7/12)			82,595				82,297				82,297
	(Industrial Products)		Common Stock (559,603 shares)(11)							38,313				81,086
			Warrants(11)							—				—
Novak Biddle Venture Partners III, L.P.(5)			Limited Partnership Interest							1,835				1,883
	(Private Equity Fund)
Oahu Waste Services, Inc.			Stock Appreciation Rights							239				800
	(Business Services)
Odyssey Investment Partners Fund III,
	LP(5)		Limited Partnership Interest							2,462				2,310
	(Private Equity Fund)
Passport Health
	Communications, Inc.		Subordinated Debt (14.0%, Due 4/12)			10,222				10,181				10,181
	(Healthcare Services)		Preferred Stock (651,381 shares)							2,000				2,255
Pendum, Inc.			Subordinated Debt (17.0%, Due 1/11)(6)			34,028				34,028				26,676
	(Business Services)		Preferred Stock (82,715 shares)							—				—
			Warrants							—				—
Performant Financial Corporation			Common Stock (478,816 shares)							734				—
	(Business Services)

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

12

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					March 31, 2007
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Postle Aluminum Company, LLC			Unitranche Debt (11.0%, Due 10/12)		$	62,250			$	61,927			$	61,927
	(Industrial Products)		Equity Interests							2,500				2,600
Pro Mach, Inc.			Subordinated Debt (12.5%, Due 6/12)			14,471				14,406				14,406
	(Industrial Products)		Equity Interests							1,500				2,200
Promo Works, LLC			Unitranche Debt (10.3%, Due 12/11)			31,000				30,739				30,739
	(Business Services)		Guaranty ($900)
S.B. Restaurant Company			Unitranche Debt (9.8%, Due 4/11)			41,501				41,118				41,118
	(Retail)		Preferred Stock (54,125 shares)							135				135
			Warrants							619				1,600
			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				4,978				4,978
	(Industrial Products)		Equity Interests							313				325
Soff-Cut Holdings, Inc.			Preferred Stock (300 shares)							300				300
	(Industrial Products)		Common Stock (2,000 shares)							200				200
SPP Mezzanine Funding, L.P.(5)			Limited Partnership Interest							2,825				3,159
	(Private Equity Fund)
SPP Mezzanine Funding II, L.P.(5)			Limited Partnership Interest							1,105				846
	(Private Equity Fund)
Stag-Parkway, Inc.			Unitranche Debt (10.8%, Due 7/12)			63,000				62,724				62,724
	(Business Services)
STS Operating, Inc.			Subordinated Debt (11.0%, Due 1/13)			30,386				30,256				30,256
	(Industrial Products)
The Step2 Company, LLC			Unitranche Debt (10.5%, Due 4/12)			64,348				64,064				64,064
	(Consumer Products)		Equity Interests							2,000				1,991
Tradesmen International, Inc.			Subordinated Debt (12.0%, Due 12/09)			9,136				8,629				8,629
	(Business Services)
TransAmerican Auto Parts, LLC			Subordinated Debt (14.0%, Due 11/12)			13,011				12,960				12,960
	(Consumer Products)		Equity Interests							1,198				845
Universal Air Filter Company			Unitranche Debt (11.0%, Due 11/11)			18,867				18,781				18,781
	(Industrial Products)
Updata Venture Partners II, L.P.(5)			Limited Partnership Interest							4,627				5,047
	(Private Equity Fund)
Venturehouse-Cibernet Investors, LLC			Equity Interest							42				42
	(Business Services)
Venturehouse Group, LLC(5)			Equity Interest							598				901
	(Private Equity Fund)
VICORP Restaurants, Inc.			Warrants							33				—
	(Retail)

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

13

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					March 31, 2007
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Walker Investment Fund II, LLLP(5)			Limited Partnership Interest						$	1,330			$	458
	(Private Equity Fund)
Wear Me Apparel Corporation			Subordinated Debt (15.0%, Due 12/10)		$	39,990				39,509				39,990
	(Consumer Products)		Warrants							1,219				5,120
Webster Capital II, L.P.(5)			Limited Partnership Interest							75				75
	(Private Equity Fund)
Wilton Industries, Inc.			Subordinated Debt (16.0%, Due 6/08)			2,400				2,400				2,400
	(Consumer Products)
Woodstream Corporation			Subordinated Debt (13.5%, Due 11/12 – 5/13)			53,293				53,174				53,174
	(Consumer Products)		Common Stock (180 shares)							673				3,885
			Warrants							—				2,815
York Insurance Services Group, Inc.			Subordinated Debt (14.5%, Due 1/14)			44,471				44,274				44,274
	(Business Services)		Common Stock (15,000 shares)							1,500				2,000
Other companies			Other debt investments(6)			223				223				218
			Other equity investments							8				—
Total companies less than 5% owned									$	2,159,014			$	2,145,284
Total private finance (144 portfolio companies)									$	4,434,112			$	4,376,319

	(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.

14

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

											March 31, 2007
			Interest				Number of				(unaudited)
			Rate Ranges				Loans				Cost				Value
Commercial Mortgage Loans
				Up to 6.99%				3			$	20,443			$	19,693
				7.00%–8.99%				9				24,034				24,269
				9.00%–10.99%				4				24,316				24,316
			15.00% and above					2				3,970				3,970
	Total commercial mortgage loans(13)							18			$	72,763			$	72,248
Real Estate Owned											$	15,657			$	20,969
Equity Interests(2) — Companies more than 25% owned (Guarantees — $6,871)											$	14,964			$	29,312
	Total commercial real estate finance										$	103,384			$	122,529
Total portfolio											$	4,537,496			$	4,498,848

				Yield				Cost				Value
Liquidity Portfolio(14)
	American Beacon Money Market Select FD Fund				5.3%			$	87,789			$	87,789
	Certificate of Deposit (Due June 2007)				5.5%				41,143				41,143
	American Beacon Money Market Fund				5.2%				40,904				40,904
	SEI Daily Income Tr Prime Obligation Fund				5.2%				35,113				35,113
	Blackrock Liquidity Funds				5.2%				10				10
		Total liquidity portfolio						$	204,959			$	204,959
Other Investments in Money Market Securities(14)
	Columbia Treasury Reserves Money Market Fund				5.2%			$	64,998			$	64,998
	Blackrock Liquidity Funds				5.2%			$	1,213			$	1,213

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

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

(3)       Public company.

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

(5)       Non-registered investment company.

(13)       Commercial mortgage loans totaling $19.2 million at value were on non-accrual status and therefore were considered non-income producing.

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

15

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

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

16

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

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

17

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

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

18

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

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

19

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

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

20

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

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

21

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

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

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

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

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

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

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

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

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

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

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

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

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

(3)       Public company.

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

(5)       Non-registered investment company.

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

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

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27

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	Valuation of Portfolio Investments

	Loans and Debt Securities

28

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	Equity Securities

29

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

	Fee Income

30

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	Guarantees

	Financing Costs

	Dividends to Shareholders

	Stock Compensation Plans

				2007				2006
($ in millions, except per share amounts)
Employee Stock Option Expense:
	Previously awarded, unvested options as of January 1, 2006			$	3.2			$	3.4
	Options granted on or after January 1, 2006				0.5				0.2
		Total employee stock option expense		$	3.7			$	3.6
		Per basic share		$	0.02			$	0.03
		Per diluted share		$	0.02			$	0.03

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		2007(1)				2006
Expected term (in years)			—				5.0
Risk-free interest rate			—	%			4.3	%
Expected volatility			—	%			29.6	%
Dividend yield			—	%			9.0	%
Weighted average fair value per option		$	—			$	3.35

	(1)	The Company did not grant any options during the three months ended March 31, 2007.

	Federal and State Income Taxes and Excise Tax

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	Per Share Information

	Use of Estimates in the Preparation of Financial Statements

	Recent Accounting Pronouncements

33

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	Private Finance

				2007												2006
				Cost				Value				Yield(1)				Cost				Value				Yield(1)
($ in millions)
Loans and debt securities:
	Senior loans			$	406.8			$	365.0				8.4	%		$	450.0			$	405.2				8.4	%
	Unitranche debt(2)				783.0				780.2				11.4	%			800.0				799.2				11.2	%
	Subordinated debt				2,036.2				1,946.1				12.5	%			2,038.3				1,980.8				12.9	%
		Total loans and debt securities (3)			3,226.0				3,091.3				11.7	%			3,288.3				3,185.2				11.9	%
Equity securities					1,208.1				1,285.0								1,209.1				1,192.7
		Total		$	4,434.1			$	4,376.3							$	4,497.4			$	4,377.9

(1)	The weighted average yield on loans and debt securities is computed as the (a) annual stated interest on accruing loans and debt securities plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities less the annual amortization of loan origination costs, divided by (b) total loans and debt securities at value. At March 31, 2007, and December 31, 2006, the cost and value of subordinated debt included the Class A equity interests in BLX and the guaranteed dividend yield on these equity interests was included in interest income. During the fourth quarter of 2006, the Class A equity interests were placed on non-accrual status. The weighted average yield is computed as of the balance sheet date.
(2)	Unitranche debt is a single debt investment that is a blend of senior and subordinated debt terms.
(3)	The total principal balance outstanding on loans and debt securities was $3,258.7 million and $3,322.3 million at March 31, 2007, and December 31, 2006, respectively. The difference between principal and cost is represented by unamortized loan origination fees and costs, original issue discounts, and market discounts totaling $32.7 million and $34.0 million at March 31, 2007, and December 31, 2006, respectively.

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35

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			For the Three
			Months Ended
			March 31,
			2007				2006
($ in millions)
Interest income			$	2.0			$	2.9
Fees and other income				0.1				0.2
	Total interest and related portfolio income		$	2.1			$	3.1

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			For the Three
			Months Ended
			March 31,
			2007				2006
($ in millions)
Interest income on subordinated debt and Class A equity interests			$	—			$	3.9
Fees and other income				1.4				2.2
	Total interest and related portfolio income		$	1.4			$	6.1

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38

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39

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40

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				2007												2006
				Cost				Value				Yield(1)				Cost				Value				Yield(1)
($ in millions)
Bonds(2):
Callidus Debt Partners CDO Fund I, Ltd.				$	28.4			$	28.5				14.3%			$	28.4			$	28.4				14.3%
Callidus MAPS CLO Fund I LLC					17.0				17.1				10.9%				17.0				17.2				10.9%
	Total bonds				45.4				45.6				13.0%				45.4				45.6				13.0%
Preferred Shares/ Income Notes(3):
Callidus Debt Partners CLO Fund III, Ltd.					22.7				22.5				9.9%				23.3				23.0				12.7%
Callidus Debt Partners CLO Fund IV, Ltd.					12.8				12.8				13.1%				13.0				13.0				13.8%
Callidus Debt Partners CLO Fund V, Ltd.					14.3				14.3				15.8%				13.8				13.8				15.8%
Callidus MAPS CLO Fund I LLC					51.0				46.5				13.3%				51.0				47.4				15.9%
	Total preferred shares/ income notes				100.8				96.1				12.8%				101.1				97.2				14.8%
		Total		$	146.2			$	141.7							$	146.5			$	142.8

(1)	The yield on these securities is included in interest and dividend income in the accompanying statement of operations.
(2)	These securities are included in private finance subordinated debt.
(3)	These securities are included in private finance equity securities.

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			2007				2006
($ in millions)
Bonds			$	272.9			$	245.4
Syndicated loans				1,758.7				1,769.9
Cash(1)				16.2				59.5
	Total underlying collateral assets		$	2,047.8			$	2,074.8

(1)	Includes undrawn liability amounts.

				2007				2006
($ in millions)
Loans and debt securities in workout status
	Companies more than 25% owned			$	45.5			$	51.1
	Companies 5% to 25% owned				4.9				4.0
	Companies less than 5% owned				61.0				31.6
Loans and debt securities not in workout status
	Companies more than 25% owned				121.2				87.1
	Companies 5% to 25% owned				7.2				7.2
	Companies less than 5% owned				26.9				38.9
		Total		$	266.7			$	219.9

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			2007				2006
Industry
Business services				37	%			39	%
Consumer products				20				20
Financial services				12				9
Industrial products				9				9
Consumer services				6				6
Retail				5				6
Healthcare services				3				3
Energy services				2				2
Other(1)				6				6
	Total			100	%			100	%
Geographic Region(2)
Mid-Atlantic				31	%			31	%
Midwest				32				30
Southeast				15				18
West				16				17
Northeast				6				4
	Total			100	%			100	%

(1)	Includes investments in senior debt CDO and CLO funds which represented 3% of the private finance portfolio at both March 31, 2007, and December 31, 2006. These funds invest in senior debt representing a variety of industries.
(2)	The geographic region for the private finance portfolio depicts the location of the headquarters for the Company’s portfolio companies. The portfolio companies may have a number of other locations in other geographic regions.

	Commercial Real Estate Finance

			2007												2006
			Cost				Value				Yield(1)				Cost				Value				Yield(1)
($ in millions)
Commercial mortgage loans			$	72.8			$	72.2				7.5%			$	72.6			$	71.9				7.5%
Real estate owned				15.6				21.0								15.7				19.6
Equity interests				15.0				29.3								15.2				26.7
	Total		$	103.4			$	122.5							$	103.5			$	118.2

(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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			2007				2006
Property Type
Hospitality				45	%			45	%
Office				20				20
Retail				19				19
Housing				13				13
Other				3				3
	Total			100	%			100	%
Geographic Region
Southeast				36	%			36	%
Mid-Atlantic				34				35
Midwest				23				21
Northeast				7				8
West				—				—
	Total			100	%			100	%

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				2007												2006
												Annual												Annual
				Facility				Amount				Interest				Facility				Amount				Interest
				Amount				Drawn				Cost(1)				Amount				Drawn				Cost(1)
($ in millions)
Notes payable and debentures:
	Privately issued unsecured notes payable				$1,041.5				$1,041.5				6.1%				$1,041.4				$1,041.4				6.1%
	Publicly issued unsecured notes payable				850.0				850.0				6.7%				650.0				650.0				6.6%
		Total notes payable and debentures			1,891.5				1,891.5				6.3%				1,691.4				1,691.4				6.3%
Revolving line of credit(4)					922.5				—				—%	(2)			922.5				207.7				6.4%	(2)
	Total debt				$2,814.0				$1,891.5				6.5%	(3)			$2,613.9				$1,899.1				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 March 31, 2007. The annual interest cost at December 31, 2006, reflects the interest rate payable for borrowings under the revolving line of credit. In addition to the current interest payable, there were annual costs of commitment fees, other facility fees and amortization of debt financing costs of $3.8 million and $3.9 million at March 31, 2007, and December 31, 2006, 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.
(4)	At March 31, 2007, $888.0 million remained unused and available on the revolving line of credit, net of amounts committed for standby letters of credit of $34.5 million issued under the credit facility.

			Amount				Maturity Date
($ in millions)
6.625% Notes due 2011			$	400.0				July 15, 2011
6.000% Notes due 2012				250.0				April 1, 2012
6.875% Notes due 2047				200.0				April 15, 2047
	Total		$	850.0

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Year			Amount Maturing
			($ in millions)
2007			$	—
2008				153.0
2009				269.0
2010				408.0
2011				472.5
Thereafter				589.0
	Total		$	1,891.5

	Revolving Line of Credit

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	Covenant Compliance

47

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			Total				2007				2008				2009				2010				2011				After 2011
(in millions)
Guarantees			$	194.5			$	0.3			$	3.0			$	184.9			$	—			$	4.4			$	1.9
Standby letters of credit(1)				34.5				4.0				30.5				—				—				—				—
	Total(2)		$	229.0			$	4.3			$	33.5			$	184.9			$	—			$	4.4			$	1.9

(1)	Standby letters of credit are issued under the Company’s revolving line of credit that expires in September 2008. Therefore, unless a standby letter of credit is set to expire at an earlier date, it is assumed that the standby letters of credit will expire contemporaneously with the expiration of the Company’s line of credit in September 2008.
(2)	The Company’s most significant commitments relate to its investment in Business Loan Express, LLC (BLX), which commitments totaled $202.4 million at March 31, 2007. At March 31, 2007, the Company guaranteed 50% of the outstanding total obligations on BLX’s revolving line of credit for a total guaranteed amount of $179.4 million and had also provided four standby letters of credit totaling $20.0 million in connection with four term securitizations completed by BLX. In addition, the Company has agreed to purchase the $3.0 million of Class A equity interests purchased by the chief executive officer of BLX at fair value in the event that BLX amends or otherwise restructures its existing senior credit facility or he is terminated for any reason. See Note 3.

			2007				2006
(in millions)
Number of common shares				3,325				3,000
Gross proceeds			$	97,256			$	87,750
Less costs, including underwriting fees				3,472				4,780
	Net proceeds		$	93,784			$	82,970

48

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		For the Three
		Months Ended
		March 31,
		2007				2006
(in millions, except per share amounts)
Shares issued			0.1				0.1
Average price per share		$	29.23			$	30.29

		For the Three
		Months Ended
		March 31,
		2007				2006
(in millions, except per share amounts)
Net increase in net assets resulting from operations		$	133.1			$	99.6
Weighted average common shares outstanding — basic			149.5				138.7
Dilutive options outstanding			3.3				3.0
Weighted average common shares outstanding — diluted			152.8				141.7
Basic earnings per common share		$	0.89			$	0.72
Diluted earnings per common share		$	0.87			$	0.70

49

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50

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			2007				2006
($ in millions)
IPA contributions			$	2.5			$	1.7
IPA mark to market expense (benefit)				(4.0	)			1.0
	Total IPA expense (benefit)		$	(1.5	)		$	2.7

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						Weighted				Weighted
						Average				Average				Aggregate
						Exercise				Contractual				Intrinsic
						Price Per				Remaining				Value at
		Shares				Share				Term (Years)				March 31, 2007(1)
(in millions, except per share amounts)
Options outstanding at January 1, 2007			23.2			$	24.92
Granted			—			$	—
Exercised			(0.1	)		$	17.46
Forfeited			(0.3	)		$	29.08
Options outstanding at March 31, 2007			22.8			$	24.89				6.01			$	92.0
Exercisable at March 31, 2007			16.6			$	23.73				5.36			$	85.6
Exercisable and expected to be exercisable at March 31, 2007(2)			22.5			$	24.85				5.98			$	91.7

(1)	Represents the difference between the market value of the options at March 31, 2007, and the cost for the option holders to exercise the options.
(2)	The amount of options expected to be exercisable at March 31, 2007, is calculated based on an estimate of expected forfeitures.

52

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53

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				At and for the								At and for the
				Three Months Ended								Year Ended
				March 31,								December 31,
				2007(1)				2006				2006
Per Common Share Data
Net asset value, beginning of period				$	19.12			$	19.17			$	19.17
	Net investment income(2)				0.26				0.29				1.30
	Net realized gains(2)(3)				0.18				3.05				3.66
		Net investment income plus net realized gains(2)			0.44				3.34				4.96
		Net change in unrealized appreciation or depreciation(2)(3)			0.43				(2.64	)			(3.28	)
Net increase in net assets resulting from operations (2)					0.87				0.70				1.68
Net decrease in net assets from shareholder distributions					(0.63	)			(0.59	)			(2.47	)
Net increase in net assets from capital share transactions(2)					0.22				0.22				0.74
Net asset value, end of period				$	19.58			$	19.50			$	19.12
Market value, end of period				$	28.81			$	30.60			$	32.68
Total return(4)					(9.9	)%			6.2	%			20.6	%
Ratios and Supplemental Data ($ and shares in thousands, except per share amounts)
Ending net assets				$	2,978.3			$	2,729.8			$	2,841.2
Common shares outstanding at end of period					152.1				140.0				148.6
Diluted weighted average common shares outstanding					152.8				141.7				145.6
Employee, employee stock option and administrative expenses/average net assets(5)					1.33	%			1.36	%			5.38	%
Total operating expenses/average net assets(5)					2.37	%			2.27	%			9.05	%
Net investment income/average net assets(5)					1.36	%			1.54	%			6.90	%
Net increase in net assets resulting from operations/average net assets(5)					4.57	%			3.72	%			8.94	%
Portfolio turnover rate(5)					3.78	%			9.33	%			27.05	%
Average debt outstanding				$	1,841.2			$	1,491.5			$	1,491.0
Average debt per share(2)				$	12.05			$	10.52			$	10.24

(1)	The results for the three months ended March 31, 2007, 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.
(5)	The ratios for the three months ended March 31, 2007 and 2006, do not represent annualized results.

54

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55

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56

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					Amount of Interest or
					Dividends
PRIVATE FINANCE													December 31,
Portfolio Company					Credited								2006				Gross				Gross				March 31, 2007
(in thousands)			Investment(1)		to Income(6)				Other(2)				Value				Additions(3)				Reductions(4)				Value
Companies More Than 25% Owned
Alaris Consulting, LLC			Senior Loan(5)										$	—			$	572			$	(572	)		$	—
	(Business Services)		Equity Interests											—				—				—				—
Avborne, Inc.			Preferred Stock											918				—				(45	)			873
	(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			Class A Equity
	(Financial Services)		Interests(5)											66,622				19,200				—				85,822
			Class B Equity Interests											79,139				—				—				79,139
			Class C Equity Interests											64,976				—				—				64,976
Calder Capital Partners, LLC			Senior Loan(5)						$	49				975				400				(49	)			1,326
	(Financial Services)		Equity Interests											2,076				78				—				2,154
Callidus Capital Corporation			Senior Loan		$	17								—				2,100				(950	)			1,150
	(Financial Services)		Subordinated Debt			271								5,762				259				—				6,021
			Common Stock											22,550				1,943				—				24,493
Coverall North America, Inc.			Unitranche Debt			1,084								36,333				9				(1,446	)			34,896
	(Business Services)		Subordinated Debt			227								5,972				2				—				5,974
			Common Stock											19,619				1,856				—				21,475
CR Holding, Inc.			Subordinated Debt			1,664								39,401				351				—				39,752
	(Consumer Products)		Common Stock											25,738				5,142				—				30,880
Direct Capital Corporation			Subordinated Debt			479								—				35,574				—				35,574
	(Financial Services)		Common Stock											—				19,250				—				19,250
Financial Pacific Company			Subordinated Debt			3,142								71,362				370				—				71,732
	(Financial Services)		Preferred Stock											15,942				797				—				16,739
			Common Stock											65,186				2,354				—				67,540
ForeSite Towers, LLC			Equity Interests			1,269								12,290				—				(11,733	)			557
	(Tower Leasing)
Global Communications, LLC			Senior Loan(5)											15,957				—				—				15,957
	(Business Services)		Subordinated Debt (5)											11,237				—				(6,307	)			4,930
			Preferred Equity
			Interest											—				—				—				—
			Options											—				—				—				—
Gordian Group, Inc.			Senior Loan(5)			(4	)							—				176				(176	)			—
	(Business Services)		Common Stock											—				—				—				—
Healthy Pet Corp.			Senior Loan			764								27,038				5,350				(50	)			32,338
	(Consumer Services)		Subordinated Debt			1,657								43,579				228				—				43,807
			Common Stock											28,921				14,897				—				43,818
HMT, Inc.			Preferred Stock											2,637				—				—				2,637
	(Energy Services)		Common Stock											8,664				21,509				—				30,173
			Warrants											3,336				8,281				—				11,617
Hot Stuff Foods, LLC(7)			Senior Loan			848								—				49,659				(110	)			49,549
	(Consumer Products)		Subordinated Debt			804								—				60,361				(3,107	)			57,254
			Subordinated Debt (5)											—				8,460				(8,460	)			—
			Common Stock											—				—				—				—
Huddle House, Inc.			Senior Loan			426								19,950				—				(19,950	)			—
	(Retail)		Subordinated Debt			2,205								58,196				221				(178	)			58,239
			Common Stock											41,662				1,545				(129	)			43,078
Impact Innovations Group, LLC			Equity Interests in
	(Business Services)		Affiliate											873				—				(554	)			319

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					Amount of Interest or
					Dividends
PRIVATE FINANCE													December 31,
Portfolio Company					Credited								2006				Gross				Gross				March 31, 2007
(in thousands)			Investment(1)		to Income(6)				Other(2)				Value				Additions(3)				Reductions(4)				Value
Insight Pharmaceuticals			Subordinated Debt		$	1,445							$	43,884			$	232			$	—			$	44,116
	Corporation		Subordinated Debt (5)											15,966				164				(1,620	)			14,510
	(Consumer Products)		Preferred Stock											7,845				—				(7,845	)			—
			Common Stock											—				—				—				—
Jakel, Inc.			Subordinated Debt (5)											6,655				500				(7,155	)			—
	(Industrial Products)		Preferred Stock											—				—				—				—
			Common Stock											—				—				—				—
Legacy Partners Group, Inc.			Senior Loan (5)											4,843				—				—				4,843
	(Financial Services)		Subordinated Debt											—				—				—				—
			Equity Interests											—				613				—				613
Litterer Beteiligungs-GmbH			Subordinated Debt			10								692				6				—				698
	(Business Services)		Equity Interest											1,199				781				—				1,980
Mercury Air Centers, Inc.			Subordinated Debt			2,010								49,217				520				—				49,737
	(Business Services)		Common Stock											195,019				56,690				—				251,709
MVL Group, Inc.			Senior Loan			1,410								27,245				3,368				—				30,613
	(Business Services)		Subordinated Debt			877								35,478				3,614				—				39,092
			Common Stock											—				1,333				—				1,333
Penn Detroit Diesel Allison, LLC			Subordinated Debt			1,497								37,994				293				—				38,287
	(Business Services)		Equity Interests											25,949				—				(1,984	)			23,965
Powell Plant Farms, Inc.			Senior Loan(5)											26,192				3,950				—				30,142
	(Consumer Products)		Subordinated Debt (5)											962				2,875				—				3,837
			Preferred Stock											—				—				—				—
			Warrants											—				—				—				—
Service Champ, Inc.			Subordinated Debt			1,087								27,619				183				—				27,802
	(Business Services)		Common Stock											16,786				—				(298	)			16,488
Staffing Partners Holding
	Company, Inc.		Subordinated Debt (5)											486				54				—				540
	(Business Services)
Startec Global Communications
	Corporation		Senior Loan			367								15,965				—				(2,382	)			13,583
	(Telecommunications)		Common Stock											11,232				5,853				—				17,085
Sweet Traditions, Inc.			Senior Loan			1,088								35,172				210				—				35,382
	(Retail)		Preferred Stock											400				550				—				950
			Common Stock											50				—				—				50
Triview Investments, Inc.			Senior Loan			455								14,747				7				—				14,754
	(Broadcasting & Cable/		Subordinated Debt			1,414								56,008				7,134				—				63,142
	Business Services/		Subordinated Debt (5)			637								4,342				508				—				4,850
	Consumer Products)		Common Stock			7								31,322				7,983				(281	)			39,024
Total companies more than 25% owned					$	27,157							$	1,490,180											$	1,773,164
Companies 5% to 25% Owned
Advantage Sales &
	Marketing, Inc.		Subordinated Debt		$	4,593							$	151,648			$	785			$	—			$	152,433
	(Business Services)		Equity Interests											11,000				—				—				11,000
Air Medical Group Holdings LLC			Senior Loan			61								1,763				1,782				(1,050	)			2,495
	(Healthcare Services)		Subordinated Debt			1,234								35,128				5				—				35,133
			Equity Interests											5,950				950				—				6,900
Alpine ESP Holdings, Inc.			Preferred Stock											602				—				(59	)			543
	(Business Services)		Common Stock											—				—				—				—
Amerex Group, LLC			Subordinated Debt			252								8,400				—				—				8,400
	(Consumer Products)		Equity Interests											13,823				6,431				(19	)			20,235
BB&T Capital
	Partners/Windsor
	Mezzanine Fund, LLC		Equity Interests											5,554				—				—				5,554
	(Private Equity Fund)
Becker Underwood, Inc.			Subordinated Debt			889								24,163				158				—				24,321
	(Industrial Products)		Common Stock											3,700				—				(400	)			3,300
BI Incorporated			Subordinated Debt			1,030								30,135				121				—				30,256
	(Business Services)		Common Stock											4,100				1,900				—				6,000
CitiPostal, Inc. and Affiliates			Senior Loan			571								20,569				4				(247	)			20,326
	(Business Services)		Common Stock											4,700				682				(32	)			5,350
Creative Group, Inc.			Subordinated Debt			480								13,656				30				—				13,686
	(Business Services)		Warrants											1,387				—				(522	)			865

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					Amount of Interest or
					Dividends
PRIVATE FINANCE													December 31,
Portfolio Company					Credited								2006				Gross				Gross				March 31, 2007
(in thousands)			Investment(1)		to Income(6)				Other(2)				Value				Additions(3)				Reductions(4)				Value
Drew Foam Companies, Inc.			Preferred Stock										$	722			$	—			$	(34	)		$	688
	(Business Services)		Common Stock											7				—				(7	)			—
MedBridge Healthcare, LLC			Senior Loan(5)											7,164				—				—				7,164
	(Healthcare Services)		Subordinated Debt (5)											1,813				595				—				2,408
			Convertible
			Subordinated Debt (5)											—				—				—				—
			Equity Interests											—				110				(110	)			—
Multi-Ad Services, Inc.			Unitranche Debt		$	567								19,879				6				(100	)			19,785
	(Business Services)		Equity Interests											2,000				—				(223	)			1,777
Nexcel Synthetics, LLC			Subordinated Debt			332								10,978				101				(3,097	)			7,982
	(Consumer Products)		Equity Interests											1,486				—				(727	)			759
PresAir LLC			Senior Loan(5)											2,206				256				—				2,462
	(Industrial Products)		Equity Interests											—				5				(5	)			—
Progressive International
	Corporation		Subordinated Debt			305								7,533				41				—				7,574
	(Consumer Products)		Preferred Stock											1,024				22				—				1,046
			Common Stock											2,300				500				—				2,800
			Warrants											—				—				—				—
Regency Healthcare Group, LLC			Senior Loan			36								1,232				—				—				1,232
	(Healthcare Services)		Unitranche Debt			560								19,908				5				—				19,913
			Equity Interests											1,616				24				—				1,640
SGT India Private Limited			Common Stock											3,346				149				(455	)			3,040
	(Business Services)
Soteria Imaging Services, LLC			Subordinated Debt			580								17,569				1,034				—				18,603
	(Healthcare Services)		Equity Interests											2,541				7				(6	)			2,542
Universal Environmental
	Services, LLC		Unitranche Debt			371								10,211				—				(552	)			9,659
	(Business Services)		Equity Interests											—				15				(15	)			—
Total companies 5% to 25% owned					$	11,861							$	449,813											$	457,871

(1)	Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted. The principal amount for loans and debt securities and the number of shares of common stock and preferred stock is shown in the consolidated statement of investments as of March 31, 2007.
(2)	Other includes interest, dividend, or other income which was applied to the principal of the investment and therefore reduced the total investment. These reductions are also included in the Gross Reductions for the investment, as applicable.
(3)	Gross additions include increases in the cost basis of investments resulting from new portfolio investments, paid-in-kind interest or dividends, the amortization of discounts and closing fees, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation.
(4)	Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation.
(5)	Loan or debt security is on non-accrual status at March 31, 2007, 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)	In the first quarter of 2007, the Company exercised its option to acquire a majority of the voting securities of Hot Stuff Foods, LLC at fair market value. Therefore, Hot Stuff Foods, LLC was reclassified to companies more than 25% owned.

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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.

		March 31,								December 31,
		2007				2006				2006
Private finance			97%				96%				97%
Commercial real estate finance			3%				4%				3%

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		At and for the
		Three Months Ended								At and for the
		March 31,								Year Ended
										December 31,
		2007				2006				2006
($ in millions)
Portfolio at value		$	4,498.8			$	3,691.0			$	4,496.1
Investments funded		$	170.2			$	797.9			$	2,437.8
Change in accrued or reinvested interest and dividends (1)		$	11.3			$	(2.1	)		$	11.3
Principal collections related to investment repayments or sales		$	235.5			$	340.4			$	1,055.3
Yield on interest-bearing portfolio investments(2)			11.6	%			12.3	%			11.8	%

(1)	Includes changes in accrued or reinvested interest related to our investments in money market securities of $2.6 million, $1.1 million, and $3.1 million, respectively, for the three months ended March 31, 2007 and 2006, and for the year ended December 31, 2006.
(2)	The weighted average yield on interest-bearing investments is computed as the (a) annual stated interest on accruing loans and debt securities plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities less the annual amortization of loan origination costs, divided by (b) total interest-bearing investments at value. The weighted average yield is computed as of the balance sheet date.

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					At and for Three Months
					Ended March 31,
																					At and for the Year
																					Ended December 31,
					2007								2006								2006
					Value				Yield(2)				Value				Yield(2)				Value				Yield(2)
($ in millions)
Portfolio at value:
	Loans and debt securities:
		Senior loans			$	365.0				8.4	%		$	420.1				9.3	%		$	405.2				8.4	%
		Unitranche debt				780.2				11.4	%			362.7				11.1	%			799.2				11.2	%
		Subordinated debt				1,946.1				12.5	%			1,747.2				13.6	%			1,980.8				12.9	%
			Total loans and debt securities			3,091.3				11.7	%			2,530.0				12.5	%			3,185.2				11.9	%
	Equity securities					1,285.0								1,031.6								1,192.7
Total portfolio					$	4,376.3							$	3,561.6							$	4,377.9
Investments funded(1)					$	170.2							$	795.9							$	2,423.4
Change in accrued or reinvested interest and dividends					$	9.1							$	(4.2	)						$	7.2
Principal collections related to investment repayments or sales(3)					$	235.1							$	336.6							$	1,015.4

(1)	Investments funded for the three months ended March 31, 2006, and for the year ended December 31, 2006, included debt investments in certain portfolio companies received in conjunction with the sale of such companies. See “— Private Finance, Investments Funded” below.
(2)	The weighted average yield on loans and debt securities is computed as the (a) annual stated interest on accruing loans and debt securities plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities less the annual amortization of loan origination costs, divided by (b) total loans and debt securities at value. The weighted average yield is computed as of the balance sheet date.
(3)	Includes collections from the sale or repayment of senior loans totaling $94.7 million, $13.2 million, and $322.7 million for the three months ended March 31, 2007 and 2006, and for the year ended December 31, 2006, respectively.

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			For the Three Months Ended March 31, 2007
			Debt Investments								Buyout Investments								Total
			Amount				Yield(1)				Amount				Yield(1)				Amount				Yield(1)
($ in millions)
Loans and debt securities:
	Senior loans		$	41.2				8.8	%		$	12.7				10.4	%		$	53.9				9.2	%
	Unitranche debt(2)			5.3				11.0	%			—				—				5.3				11.0	%
	Subordinated debt			14.4				9.3	%			62.1				10.5	%			76.5				10.3	%
Total loans and debt securities				60.9				9.1	%			74.8				10.5	%			135.7				9.9	%
Equity				9.7								24.8								34.5
	Total		$	70.6							$	99.6							$	170.2

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

			For the Year Ended December 31, 2006
			Debt Investments								Buyout Investments								Total
			Amount				Yield(1)				Amount				Yield(1)				Amount				Yield(1)
($ in millions)
Loans and debt securities:
	Senior loans		$	245.4				9.4	%		$	239.8				8.9	%		$	485.2				9.2	%
	Unitranche debt(2)			471.7				10.7	%			146.5				12.9	%			618.2				11.3	%
	Subordinated debt(3)			510.7				13.0	%			423.8				14.4	%			934.5				13.6	%
Total loans and debt securities				1,227.8				11.4	%			810.1				12.5	%			2,037.9				11.9	%
Equity				91.4	(4)							294.1								385.5
	Total		$	1,319.2							$	1,104.2							$	2,423.4

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

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			Companies				Companies				Companies
			More Than				5% to 25%				Less Than
			25% Owned(1)				Owned				5% Owned				Total
($ in millions)
Senior loans			$	18.7			$	15.7			$	90.3			$	124.7	(2)
Unitranche				—				—				60.2				60.2
Subordinated debt				44.2				0.1				—				44.3
	Total loans and debt securities			62.9				15.8				150.5				229.2
Equity securities				83.0				16.0				73.7				172.7	(3)
	Total		$	145.9			$	31.8			$	224.2			$	401.9

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

											Amount
			Committed				Amount				Available
			Amount				Drawn				to be Drawn
($ in millions)
Revolving line of credit for working capital			$	4.0			$	(1.1	)		$	2.9
Subordinated debt to support warehouse facilities & warehousing activities(*)				44.0				—				44.0
Purchase of preferred equity in future CLO transactions				73.2				—				73.2
	Total		$	121.2			$	(1.1	)		$	120.1

	(*)	Callidus has a secured warehouse credit facility with a third party for up to $360 million. The facility is used primarily to finance the acquisition of loans pending securitization through a CDO or CLO. In addition, Callidus has a synthetic credit facility with a third party for up to $50 million. In conjunction with these facilities, we have agreed to designate our subordinated debt commitment for Callidus to draw upon to provide first loss capital as needed to support the facilities.

	(2)	Includes $105.6 million in the form of revolving senior debt facilities to 29 companies.
	(3)	Includes $89.8 million to 19 private equity and venture capital funds, including $4.3 million in co-investment commitments to one private equity fund.

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			2007				2006
($ in millions)
Interest income			$	2.0			$	2.9
Fees and other income				0.1				0.2
	Total interest and related portfolio income		$	2.1			$	3.1

			2007				2006
($ in millions)
Interest income on subordinated debt and Class A equity interests			$	—			$	3.9
Fees and other income				1.4				2.2
	Total interest and related portfolio income		$	1.4			$	6.1

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			At and for the
			Three Months Ended March 31,																At and for the
																			Year Ended
																			December 31,
			2007								2006								2006
			Value				Yield(1)				Value				Yield(1)				Value				Yield(1)
($ in millions)
Portfolio at value:
	Commercial mortgage loans		$	72.2				7.5%			$	102.7				7.6%			$	71.9				7.5%
	Real estate owned			21.0								15.0								19.6
	Equity interests			29.3								11.7								26.7
Total portfolio			$	122.5							$	129.4							$	118.2
Investments funded			$	—							$	2.0							$	14.4
Change in accrued or reinvested interest			$	(0.4	)						$	1.0							$	1.0
Principal collections related to investment repayments or sales			$	0.4							$	3.8							$	39.9

(1)

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

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		2007								2006
		Portfolio				Percentage of				Portfolio				Percentage of
Grade		at Value				Total Portfolio				at Value				Total Portfolio
($ in millions)
1		$	1,468.8				32.6	%		$	1,307.3				29.1	%
2			2,457.6				54.6				2,672.3				59.4
3			339.7				7.6				308.1				6.9
4			99.3				2.2				84.2				1.9
5			133.4				3.0				124.2				2.7
		$	4,498.8				100.0	%		$	4,496.1				100.0	%

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				2007				2006
($ in millions)
Loans and debt securities in workout status (classified as Grade 4 or 5)(1)
	Private finance
		Companies more than 25% owned		$	45.5			$	51.1
		Companies 5% to 25% owned			4.9				4.0
		Companies less than 5% owned			61.0				31.6
	Commercial real estate finance				4.9				12.2
Loans and debt securities not in workout status
	Private finance
		Companies more than 25% owned			121.2				87.1
		Companies 5% to 25% owned			7.2				7.2
		Companies less than 5% owned			26.9				38.9
	Commercial real estate finance				14.3				6.7
		Total		$	285.9			$	238.8
		Percentage of total portfolio			6.4	%			5.3	%

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

			2007				2006
($ in millions)
Private finance			$	161.4			$	46.5
Commercial mortgage loans				17.9				1.9
	Total		$	179.3			$	48.4
	Percentage of total portfolio			4.0	%			1.1	%

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				For the Three Months
				Ended March 31,
																Percent
				2007				2006				Change				Change
(in thousands, except per share amounts)
				(unaudited)
Interest and Related Portfolio Income
	Interest and dividends			$	101,983			$	88,881			$	13,102				15	%
	Fees and other income				5,969				22,130				(16,161	)			(73	)%
		Total interest and related portfolio income			107,952				111,011				(3,059	)			(3	)%
Expenses
	Interest				30,288				24,485				5,803				24	%
	Employee				21,928				21,428				500				2	%
	Employee stock options				3,661				3,606				55				2	%
	Administrative				13,224				11,334				1,890				17	%
		Total operating expenses			69,101				60,853				8,248				14	%
		Net investment income before income taxes			38,851				50,158				(11,307	)			(23	)%
	Income tax expense (benefit), including excise tax				(649	)			8,858				(9,507	)			(107	)%
		Net investment income			39,500				41,300				(1,800	)			(4	)%
Net Realized and Unrealized Gains (Losses)
	Net realized gains				27,666				432,835				(405,169	)			*
	Net change in unrealized appreciation or depreciation				65,920				(374,548	)			440,468				*
	Total net gains (losses)				93,586				58,287				35,299				*
		Net income		$	133,086			$	99,587			$	33,499				34	%
Diluted earnings per common share				$	0.87			$	0.70			$	0.17				24	%
Weighted average common shares outstanding — diluted					152,827				141,738				11,089				8	%

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

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				2007				2006
($ in millions)
Interest
	Private finance loans and debt securities			$	96.6			$	82.6
	Commercial mortgage loans				1.3				2.8
	Cash, U.S. Treasury bills, money market and other securities				2.8				2.9
		Total interest			100.7				88.3
Dividends					1.3				0.6
		Total interest and dividends		$	102.0			$	88.9

			2007								2006
($ in millions)			Value				Yield(1)				Value				Yield(1)
Private finance loans and debt securities			$	3,091.3				11.7	%		$	2,530.0				12.5	%
Commercial mortgage loans				72.2				7.5	%			102.7				7.6	%
	Total		$	3,163.5				11.6	%		$	2,632.7				12.3	%

(1)

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

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			2007				2006
($ in millions)
Structuring and diligence			$	1.8			$	11.0
Management, consulting and other services provided to portfolio companies(1)				1.8				4.1
Commitment, guaranty and other fees from portfolio companies(2)				2.0				1.7
Loan prepayment premiums				0.3				5.3
Other income				0.1				—
	Total fees and other income		$	6.0			$	22.1

(1)	2006 includes $1.8 million in management fees from Advantage prior to its sale on March 29, 2006. See “— Portfolio and Investment Activity” above for further discussion.
(2)	Includes guaranty and other fees from BLX of $1.4 million and $1.6 million for 2007 and 2006, respectively. See “— Private Finance, Business Loan Express, LLC” above.

		2007				2006
($ in millions)
Mercury		$	2.1			$	3.1
BLX		$	1.4			$	6.1

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		2007				2006
($ in millions)
Total outstanding debt		$	1,891.5			$	1,274.2
Average outstanding debt		$	1,841.2			$	1,491.5
Weighted average cost(1)			6.5	%			6.5	%

(1)	The weighted average annual interest cost is computed as the (a) annual stated interest rate on the debt plus the annual amortization of commitment fees, 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.

			2007				2006
($ in millions)
Salaries and employee benefits			$	21.4			$	17.3
Individual performance award (IPA)				2.5				1.7
IPA mark to market expense (benefit)				(4.0	)			1.0
Individual performance bonus (IPB)				2.0				1.4
	Total employee expense		$	21.9			$	21.4
Number of employees at end of period				170				155

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				2007				2006
($ in millions)
Employee Stock Option Expense:
	Previously awarded, unvested options as of January 1, 2006			$	3.2			$	3.4
	Options granted on or after January 1, 2006				0.5				0.2
		Total employee stock option expense		$	3.7			$	3.6

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			2007				2006
($ in millions)
Administrative expenses			$	9.9			$	8.4
Investigation related costs				3.3				2.9
	Total administrative expenses		$	13.2			$	11.3

			2007				2006
($ in millions)
Income tax expense (benefit)			$	(4.2	)		$	0.5
Excise tax expense				3.6				8.4
	Income tax expense (benefit), including excise tax		$	(0.6	)		$	8.9

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		2007				2006
($ in millions)
Realized gains		$	33.2			$	436.5
Realized losses			(5.5	)			(3.7	)
Net realized gains		$	27.7			$	432.8

($ in millions)			2007				2006
Reversal of previously recorded net unrealized appreciation associated with realized gains			$	(32.1	)		$	(393.6	)
Reversal of previously recorded net unrealized depreciation associated with realized losses				5.8				2.7
	Total reversal		$	(26.3	)		$	(390.9	)

2007
Portfolio Company		Amount
Private Finance:
Palm Coast Data, LLC		$	20.0
Mogas Energy, LLC			4.5
Tradesmen International, Inc.			3.8
ForeSite Towers, LLC			3.8
Other			1.1
Total realized gains		$	33.2

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

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2007
Portfolio Company		Amount
Private Finance:
Legacy Partners Group, LLC		$	5.8
Other			(0.3	)
Total realized losses		$	5.5

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

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		2007				2006
		Q1				Q1
Number of private finance portfolio companies reviewed			88				78
Percentage of private finance portfolio reviewed at value			91.8	%			87.0	%

			2007(1)				2006(1)
($ in millions)
Net unrealized appreciation (depreciation)			$	92.2			$	16.4
Reversal of previously recorded unrealized appreciation associated with realized gains				(32.1	)			(393.6	)
Reversal of previously recorded unrealized depreciation associated with realized losses				5.8				2.7
	Net change in unrealized appreciation or depreciation		$	65.9			$	(374.5	)

(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)		2007				2006
Liquidity portfolio (includes money market and other securities)		$	205.0			$	201.8
Cash and investments in money market securities (including money market and other securities: 2007-$66.2; 2006-$0.4)		$	66.5			$	2.1
Total assets		$	4,986.1			$	4,887.5
Total debt outstanding		$	1,891.5			$	1,899.1
Total shareholders’ equity		$	2,978.3			$	2,841.2
Debt to equity ratio(1)			0.64				0.67
Asset coverage ratio(2)			257	%			250	%

(1)	The debt to equity ratio adjusted for the liquidity portfolio was 0.57 and 0.60 at March 31, 2007, and December 31, 2006, respectively, which is calculated as (a) total debt less the value of the liquidity portfolio divided by (b) total shareholders’ equity.
(2)	As a business development company, we are generally required to maintain a minimum ratio of 200% of total assets to total borrowings.

			2007				2006
($ in millions)
Net cash provided by (used in) operating activities			$	19.4			$	(17.7	)
Add: portfolio investments funded				170.2				647.9
	Total cash provided by operating activities before new investments		$	189.6			$	630.2

			2007								2006
			Value				Yield				Value				Yield
($ in millions)
Money market securities			$	163.8				5.3	%		$	161.2				5.3	%
Certificate of Deposit(1)				41.2				5.5	%			40.6				5.6	%
	Total		$	205.0				5.3	%		$	201.8				5.3	%

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

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				2007												2006
												Annual												Annual
				Facility				Amount				Interest				Facility				Amount				Interest
				Amount				Outstanding				Cost(1)				Amount				Outstanding				Cost(1)
($ in millions)
Notes payable and debentures:
	Privately issued unsecured notes payable			$	1,041.5			$	1,041.5				6.1	%		$	1,041.4			$	1,041.4				6.1	%
	Publicly issued unsecured notes payable				850.0				850.0				6.7	%			650.0				650.0				6.6	%
		Total notes payable and debentures			1,891.5				1,891.5				6.3	%			1,691.4				1,691.4				6.3	%
Revolving line of credit(4)					922.5				—				—	%(2)			922.5				207.7				6.4	%(2)
		Total debt		$	2,814.0			$	1,891.5				6.5	%(3)		$	2,613.9			$	1,899.1				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 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)	There were no amounts drawn on the revolving line of credit at March 31, 2007. The annual interest cost at December 31, 2006, reflects the interest rate payable for borrowings under the revolving line of credit. In addition to the current interest rate payable, there were annual costs of commitment fees, other facility fees and amortization of debt financing costs of $3.8 million and $3.9 million at March 31, 2007, and December 31, 2006, respectively.
(3)	The annual interest cost for total debt includes the annual cost of commitment fees and the amortization of debt financing costs on the revolving line of credit and other facility fees regardless of the amount outstanding on the facility as of the balance sheet date.
(4)	At March 31, 2007, $888.0 million remained unused and available on the revolving line of credit, net of amounts committed for standby letters of credit of $34.5 million issued under the credit facility.

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			Amount				Maturity Date
($ in millions)
6.625% Notes due 2011			$	400.0				July 15, 2011
6.000% Notes due 2012				250.0				April 1, 2012
6.875% Notes due 2047				200.0				April 15, 2047
	Total		$	850.0

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							Payments Due By Year
																											After
			Total				2007				2008				2009				2010				2011				2011
($ in millions)
Unsecured notes payable			$	1,891.5			$	—			$	153.0			$	269.0			$	408.0			$	472.5			$	589.0
Revolving line of credit(1)				—				—				—				—				—				—				—
Operating leases				23.5				3.3				4.5				4.6				4.5				1.8				4.8
	Total contractual obligations		$	1,915.0			$	3.3			$	157.5			$	273.6			$	412.5			$	474.3			$	593.8

(1)	At March 31, 2007, $888.0 million remained unused and available on the revolving line of credit, net of amounts committed for standby letters of credit of $34.5 million issued under the credit facility.

							Amount of Commitment Expiration Per Year
																											After
			Total				2007				2008				2009				2010				2011				2011
($ in millions)
Guarantees			$	194.5			$	0.3			$	3.0			$	184.9			$	—			$	4.4			$	1.9
Standby letters of credit(1)				34.5				4.0				30.5				—				—				—				—
	Total commitments(2)		$	229.0			$	4.3			$	33.5			$	184.9			$	—			$	4.4			$	1.9

(1)	Standby letters of credit are issued under our revolving line of credit that expires in September 2008. Therefore, unless a standby letter of credit is set to expire at an earlier date, we have assumed that the standby letters of credit will expire contemporaneously with the expiration of our line of credit in September 2008.
(2)	Our most significant commitments relate to our investment in Business Loan Express, LLC (BLX), which commitments totaled $202.4 million at March 31, 2007. At March 31, 2007, we guaranteed 50% of the outstanding total obligations on BLX’s revolving line of credit for a total guaranteed amount of $179.4 million and we had also provided four standby letters of credit totaling $20.0 million in connection with four term securitizations completed by BLX. In addition, we have agreed to purchase the $3.0 million of Class A equity interests purchased by the chief executive officer of BLX at fair value in the event that BLX amends or otherwise restructures its existing senior credit facility or he is terminated for any reason. See “— Private Finance, Business Loan Express, LLC” above for further discussion.

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95

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96

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97

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98

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99

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100

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

	•	the time remaining to the maturity of these debt securities;
	•	the outstanding principal amount of debt securities with terms identical to these debt securities;
	•	the supply of debt securities trading in the secondary market, if any;
	•	the redemption or repayment features, if any, of these debt securities;
	•	the level, direction and volatility of market interest rates generally; and
	•	market rates of interest higher or lower than rates borne by the debt securities.

101

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			Total Number
			of Shares				Average Price
			Purchased				Paid Per Share
2005 DCP I(1)
	1/1/2007 to 1/31/2007			87			$	32.31
	2/1/2007 to 2/28/2007			705			$	28.32
	3/1/2007 to 3/31/2007			—			$	—
2005 DCP II(2)
	1/1/2007 to 1/31/2007			19,526			$	32.26
	2/1/2007 to 2/28/2007			—			$	—
	3/1/2007 to 3/31/2007			84,325			$	28.90
Total				104,643			$	29.52

(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 managed 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 managed 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, dividends received on the Allied Capital shares held in the trust are reinvested in our common stock.

102

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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 registration statement on 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 registration statement on 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 registration statement on 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 Post-Effective Amendment No. 1 to the registration statement on 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.5 filed with Allied Capital’s Post-Effective Amendment No. 1 to the registration statement on Form N-2/A (File No. 333-133755) filed on July 25, 2006).
	4	.8		Form of Second Supplemental Indenture by and between Allied Capital Corporation and The Bank of New York, dated as of December 8, 2006. (Incorporated by reference to Exhibit d.6 filed with Allied Capital’s Post-Effective Amendment No. 2 to the registration statement on Form N-2/A (File No. 333-133755) filed on December 8, 2006).
	4	.9		Form of 6.000% Notes due 2012. (Incorporated by reference to Exhibit d.7 filed with Allied Capital’s Post-Effective Amendment No. 2 to the registration statement on Form N-2/A (File No. 333-133755) filed on December 8, 2006).
	4	.10		Form of Third Supplemental Indenture by and between Allied Capital Corporation and The Bank of New York, dated as of March 28, 2007.(Incorporated by reference to Exhibit d.8 filed with Allied Capital’s Post-Effective Amendment No. 3 to the registration statement on Form N-2/A (File No. 333-133755) filed on March 28, 2007).
	4	.11		Form of 6.875% Notes due 2047. (Incorporated by reference to Exhibit d.9 filed with Allied Capital’s Post-Effective Amendment No. 3 to the registration statement on Form N-2/A (File No. 333-133755) filed on March 28, 2007).

103

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Exhibit
Number				Description
	4	.11(a)		Form of 6.875% Notes due 2047. (Incorporated by reference to Exhibit d.9(a) filed with Allied Capital’s Post-Effective Amendment No. 4 to the registration statement on Form N-2/A (File No. 333-133755) filed on April 2, 2007).
	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).
	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	.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 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).

104

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Exhibit
Number				Description
	10	.20(e)		Amendment to Allied Capital Corporation 401(k) plan, adopted December 18, 2006. (Incorporated by reference to Exhibit 10.20(e) filed with Allied Capital’s Form 10-K for the year ended December 31, 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).
	10	.21(a)		Amendment to Employment Agreement, dated March 29, 2007, between Allied Capital and William L. Walton. (Incorporated by reference to Exhibit 10.1 filed with Allied Capital’s Form 8-K filed on April 3, 2007).
	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	.22(a)		Amendment to Employment Agreement, dated March 29, 2007, between Allied Capital and Joan M. Sweeney. (Incorporated by reference to Exhibit 10.2 filed with Allied Capital’s Form 8-K filed on April 3, 2007).
	10	.23		Employment Agreement, dated January 1, 2004, between Allied Capital and Penelope F. Roll. (Incorporated by reference to Exhibit 10.23 filed with Allied Capital’s Form 10-K for the year ended December 31, 2006).
	10	.23(a)		Amendment to Employment Agreement, dated March 29, 2007, between Allied Capital and Penelope F. Roll. (Incorporated by reference to Exhibit 10.3 filed with Allied Capital’s Form 8-K filed on April 3, 2007).
	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, 2006).
	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	.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.)

105

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

*	Filed herewith.

106

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	ALLIED CAPITAL CORPORATION
	(Registrant)

Dated: May 8, 2007		/s/ William L. Walton   William L. Walton Chairman and Chief Executive Officer
		/s/ Penni F. Roll   Penni F. Roll Chief Financial Officer

107

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

108