UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended June 30, 2009
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission File Number: 0-51459
 PATRIOT CAPITAL FUNDING, INC.
  Delaware
    
    74-3068511(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)274 Riverside AvenueWestport, CT
    
    06880(Address of principal executive office)
    
    (Zip Code)
 (203) 429-2700
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



PATRIOT CAPITAL FUNDING, INC.
 FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2009
 TABLE OF CONTENTS
 PART I
    
    FINANCIAL INFORMATION
    
    
    1Item 1.
    
    Financial Statements (Unaudited)
    
    
    1Consolidated Balance Sheets at June 30, 2009 and December 31, 2008
    
    
    1Consolidated Statements of Operations for the three and six months ended June 30, 2009 and 2008
    
    
    2Consolidated Statements of Changes in Net Assets for the six months ended June 30, 2009 and 2008
    
    
    3Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008
    
    
    4Consolidated Schedule of Investments as of June 30, 2009
    
    
    5Consolidated Schedule of Investments as of December 31, 2008
    
    
    11Notes to Consolidated Financial Statements
    
    
    18Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    42Item 4.
    
    Controls and Procedures
    
    
    42PART II
    
    OTHER INFORMATION
    
    
    43Item 1.
    
    Legal Proceedings
    
    
    43Item 1A.
    
    Risk Factors
    
    
    43Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    43Item 3.
    
    Defaults upon Senior Securities
    
    
    43Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    43Item 5.
    
    Other Information
    
    
    43Item 6.
    
    Exhibits
    
    
    44Signatures
    
    
    44




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##### 



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 Patriot Capital Funding, Inc.Consolidated Balance Sheets
(unaudited)
 June 30,
    
    December 31,2009
    
    2008ASSETSInvestments at fair value:Non-control/non-affiliate investments (cost of $227,017,180 - 2009,
$269,577,008 - 2008)
    
    $
    212,853,296
    
    
    $
    240,486,620Affiliate investments (cost of $52,239,570 - 2009,
$53,129,533 - 2008)
    
    
    47,373,445
    
    
    
    51,457,082Control
investments (cost of $65,124,177 - 2009, $43,192,484 - 2008)
    
    
    23,702,496
    
    
    
    30,427,046Total investments
    
    
    283,929,237
    
    
    
    322,370,748Cash and cash equivalents
    
    
    8,149,781
    
    
    
    6,449,454Restricted cash
    
    
    7,828,784
    
    
    
    22,155,073Interest receivable
    
    
    1,151,347
    
    
    
    1,390,285Other assets
    
    
    1,481,020
    
    
    
    1,897,086TOTAL ASSETS
    
    $
    302,540,169
    
    
    $
    354,262,646LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIESBorrowings
    
    $
    137,365,363
    
    
    $
    162,600,000Interest payable
    
    
    847,164
    
    
    
    514,125Dividends payable
    
    
    
    
    
    
    5,253,709Accounts payable, accrued expenses and other
    
    
    3,831,998
    
    
    
    5,777,642TOTAL LIABILITIES
    
    
    142,044,525
    
    
    
    174,145,476COMMITMENTSSTOCKHOLDERS EQUITYPreferred stock, $.01 par value, 1,000,000 shares authorized;
no shares issued and outstanding
    
    
    
    
    
    
    Common stock, $.01 par value, 49,000,000 shares authorized; 20,950,501
and 20,827,334 shares issued and outstanding at June 30, 2009,
and December 31, 2008, respectively
    
    
    209,506
    
    
    
    208,274Paid-in capital
    
    
    235,163,868
    
    
    
    234,385,063Accumulated net investment income (loss)
    
    
    3,949,409
    
    
    
    (1,912,061
    )Distributions in excess of net investment income
    
    
    
    
    
    
    (1,758,877
    )Net realized loss on investments
    
    
    (16,067,426
    )
    
    
    (4,053,953
    )Net unrealized depreciation on interest rate swaps
    
    
    (2,235,647
    )
    
    
    (3,097,384
    )Net unrealized depreciation on investments
    
    
    (60,524,066
    )
    
    
    (43,653,892
    )TOTAL STOCKHOLDERS EQUITY
    
    
    160,495,644
    
    
    
    180,117,170TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    302,540,169
    
    
    $
    354,262,646NET ASSET VALUE PER COMMON SHARE
    
    $
    7.66
    
    
    $
    8.65
  1




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##### 



Patriot Capital Funding, Inc.Consolidated Statements of Operations
(unaudited)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008INVESTMENT INCOMEInterest and dividends:Non-control/non-affiliate investments
    
    $
    6,248,628
    
    
    $
    7,133,671
    
    
    $
    12,439,390
    
    
    $
    15,432,004Affiliate investments
    
    
    1,407,606
    
    
    
    2,498,499
    
    
    
    2,739,165
    
    
    
    5,012,922Control investments
    
    
    113,447
    
    
    
    499,659
    
    
    
    950,077
    
    
    
    678,125Total interest and dividend income
    
    
    7,769,681
    
    
    
    10,131,829
    
    
    
    16,128,632
    
    
    
    21,123,051Fees:Non-control/non-affiliate investments
    
    
    137,100
    
    
    
    69,389
    
    
    
    247,817
    
    
    
    238,086Affiliate investments
    
    
    116,835
    
    
    
    37,787
    
    
    
    138,723
    
    
    
    76,448Control investments
    
    
    33,613
    
    
    
    35,000
    
    
    
    68,158
    
    
    
    41,250Total fee income
    
    
    287,548
    
    
    
    142,176
    
    
    
    454,698
    
    
    
    355,784Other investment income:Non-control/non-affiliate investments
    
    
    
    
    
    
    242,388
    
    
    
    8,804
    
    
    
    282,243Control investments
    
    
    
    
    
    
    138,026
    
    
    
    
    
    
    
    138,026Total other investment income
    
    
    
    
    
    
    380,414
    
    
    
    8,804
    
    
    
    420,269Total Investment Income
    
    
    8,057,229
    
    
    
    10,654,419
    
    
    
    16,592,134
    
    
    
    21,899,104EXPENSESCompensation expense
    
    
    838,840
    
    
    
    1,107,324
    
    
    
    1,759,961
    
    
    
    2,605,499Interest expense
    
    
    2,777,370
    
    
    
    1,925,230
    
    
    
    4,363,807
    
    
    
    3,984,753Professional fees
    
    
    1,017,706
    
    
    
    408,204
    
    
    
    1,346,626
    
    
    
    670,731General and administrative expense
    
    
    920,700
    
    
    
    794,963
    
    
    
    1,501,394
    
    
    
    1,433,523Total Expenses
    
    
    5,554,616
    
    
    
    4,235,721
    
    
    
    8,971,788
    
    
    
    8,694,506Net Investment Income
    
    
    2,502,613
    
    
    
    6,418,698
    
    
    
    7,620,346
    
    
    
    13,204,598NET REALIZED GAIN (LOSS) AND NET UNREALIZED
APPRECIATION (DEPRECIATION)Net realized gain (loss) on investments  non-control/non-affiliate
    
    
    (412,709
    )
    
    
    5,783
    
    
    
    (412,709
    )
    
    
    (83,767
    )Net realized loss on investments  control
    
    
    
    
    
    
    (350,000
    )
    
    
    (11,600,764
    )
    
    
    (350,000
    )Net unrealized depreciation on investments -
non-control/non-affiliate
    
    
    (4,966,838
    )
    
    
    (2,218,615
    )
    
    
    (4,957,308
    )
    
    
    (8,629,899
    )Net unrealized depreciation on investments  affiliate
    
    
    (1,682,348
    )
    
    
    (3,070,018
    )
    
    
    (3,193,649
    )
    
    
    (5,662,008
    )Net unrealized appreciation (depreciation) on investments  control
    
    
    (6,064,547
    )
    
    
    1,920,398
    
    
    
    (8,719,217
    )
    
    
    1,072,398Net unrealized appreciation on interest rate swaps
    
    
    678,888
    
    
    
    969,634
    
    
    
    861,737
    
    
    
    216,783Net Realized Gain (Loss) and Net Unrealized Appreciation
(Depreciation)
    
    
    (12,447,554
    )
    
    
    (2,742,818
    )
    
    
    (28,021,910
    )
    
    
    (13,436,493
    )NET INCOME (LOSS)
    
    $
    (9,944,941
    )
    
    $
    3,675,880
    
    
    $
    (20,401,564
    )
    
    $
    (231,895
    )Earnings (loss) per share, basic and diluted
    
    $
    (0.47
    )
    
    $
    0.18
    
    
    $
    (0.97
    )
    
    $
    (0.01
    )Weighted average shares outstanding, basic and diluted
    
    
    20,950,501
    
    
    
    20,693,337
    
    
    
    20,940,294
    
    
    
    20,671,896
  2




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##### 



Patriot Capital Funding, Inc.Consolidated Statements of Changes in Net Assets
(unaudited)
 Six Months EndedJune 30,2009
    
    2008Operations:Net investment income
    
    $
    7,620,346
    
    
    $
    13,204,598Net realized loss on investments
    
    
    (12,013,473
    )
    
    
    (433,767
    )Net unrealized depreciation on investments
    
    
    (16,870,174
    )
    
    
    (13,219,509
    )Net unrealized appreciation on interest rate swaps
    
    
    861,737
    
    
    
    216,783Net decrease in net assets from operations
    
    
    (20,401,564
    )
    
    
    (231,895
    )Stockholder transactions:Distributions to stockholders from net investment income
    
    
    
    
    
    
    (13,204,598
    )Distributions in excess of net investment income
    
    
    
    
    
    
    (441,872
    )Net decrease in net assets from stockholder distributions
    
    
    
    
    
    
    (13,646,470
    )Capital share transactions:Common stock listing fees
    
    
    
    
    
    
    (23,585
    )Issuance of common stock under dividend reinvestment plan
    
    
    359,500
    
    
    
    540,064Stock option compensation
    
    
    420,538
    
    
    
    385,828Net increase in net assets from capital share transactions
    
    
    780,038
    
    
    
    902,307Total decrease in net assets
    
    
    (19,621,526
    )
    
    
    (12,976,058
    )Net assets at beginning of period
    
    
    180,117,170
    
    
    
    221,597,684Net assets at end of period
    
    $
    160,495,644
    
    
    $
    208,621,626Net asset value per common share
    
    $
    7.66
    
    
    $
    10.08Common shares outstanding at end of period
    
    
    20,950,501
    
    
    
    20,702,485
  3




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##### 



Patriot Capital Funding, Inc.Consolidated Statements of Cash Flows
(unaudited)
 Six Months EndedJune 30,2009
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (20,401,564
    )
    
    $
    (231,895
    )Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:Depreciation and amortization
    
    
    328,351
    
    
    
    268,963Change in interest receivable
    
    
    238,938
    
    
    
    401,391Realized loss on sale of investments
    
    
    12,013,473
    
    
    
    433,767Unrealized depreciation on investments
    
    
    16,870,174
    
    
    
    13,219,509Unrealized appreciation on interest rate swaps
    
    
    (861,737
    )
    
    
    (216,783
    )Payment-in-kind interest and dividends
    
    
    (2,218,782
    )
    
    
    (2,899,860
    )Stock-based compensation expense
    
    
    420,538
    
    
    
    385,828Change in unearned income
    
    
    (443,572
    )
    
    
    (633,242
    )Change in interest payable
    
    
    333,039
    
    
    
    (353,126
    )Change in other assets
    
    
    87,716
    
    
    
    (17,370
    )Change in accounts payable, accrued expenses and other
    
    
    (1,083,907
    )
    
    
    (1,713,757
    )Net cash provided by operating activities
    
    
    5,282,667
    
    
    
    8,643,425CASH FLOWS FROM INVESTING ACTIVITIES:Funded investments
    
    
    (10,273,464
    )
    
    
    (9,691,406
    )Principal repayments on investments
    
    
    21,116,671
    
    
    
    51,532,552Proceeds from sale of investments
    
    
    1,377,011
    
    
    
    10,353,733Purchases of furniture and equipment
    
    
    
    
    
    
    (6,295
    )Net cash provided by investing activities
    
    
    12,220,218
    
    
    
    52,188,584CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings
    
    
    7,500,000
    
    
    
    9,052,500Repayments on borrowings
    
    
    (32,734,637
    )
    
    
    (57,852,500
    )Common stock listing fees
    
    
    
    
    
    
    (23,585
    )Dividends paid
    
    
    (4,894,210
    )
    
    
    (13,089,236
    )Deferred offering costs
    
    
    
    
    
    
    (98,860
    )Deferred financing costs
    
    
    
    
    
    
    (1,030,972
    )Decrease in restricted cash
    
    
    14,326,289
    
    
    
    2,523,926Net cash used for financing activities
    
    
    (15,802,558
    )
    
    
    (60,518,727
    )NET INCREASE IN CASH AND CASH
EQUIVALENTS
    
    
    1,700,327
    
    
    
    313,282CASH AND CASH EQUIVALENTS AT:Beginning of Period
    
    
    6,449,454
    
    
    
    789,451End of Period
    
    $
    8,149,781
    
    
    $
    1,102,733Supplemental information:Interest paid
    
    $
    3,767,312
    
    
    $
    4,337,879Non-cash investing activities:Conversion of debt to equity
    
    $
    
    
    
    $
    5,159,567Non-cash financing activities:Dividends reinvested in common stock
    
    $
    359,500
    
    
    $
    540,064Dividends declared but not paid
    
    
    
    
    
    
    6,831,820
  4




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##### 



Patriot Capital Funding, Inc.Consolidated Schedule of Investments
June 30, 2009
(unaudited)
 Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueControl investments:Aylward Enterprises, LLC (5)(Machinery)
    
    Manufacturer of packaging equipment
    
    Revolving Line of Credit
(5.3%, Due 2/12) (3)
    
    $
    4,000,000
    
    
    $
    3,955,707
    
    
    $
    3,955,707Senior Secured Term Loan A
(6.0%, Due 2/12) (3)
    
    
    8,085,938
    
    
    
    8,019,598
    
    
    
    411,398Senior Subordinated Debt
(22.0%, Due 8/12) (2)
    
    
    7,731,663
    
    
    
    6,747,301
    
    
    
    Subordinated Member Note
(8.0%, Due 2/13) (2)
    
    
    157,683
    
    
    
    148,491
    
    
    
    Membership Interest
(1,250,000 units) (4)
    
    
    
    
    
    
    1,250,000
    
    
    
    Encore Legal Solutions, Inc.(Printing & Publishing)
    
    Legal document management services
    
    Junior Secured Term Loan A
(11.0%, Due 12/10) (2) (3)
    
    
    4,082,915
    
    
    
    4,020,456
    
    
    
    3,081,250Junior Secured Term Loan B
(14.0%, Due 12/10) (2) (3)
    
    
    7,644,318
    
    
    
    7,390,687
    
    
    
    Common Stock (20,000
shares)(4)
    
    
    
    
    
    
    5,159,567
    
    
    
    Fischbein, LLC(Machinery)
    
    Designer and manufacturer of packaging
equipment
    
    Senior Subordinated Debt
(16.5%, Due 5/13) (2) (3)
    
    
    3,572,977
    
    
    
    3,553,859
    
    
    
    3,541,760Membership Interest - Class
A (2,800,000 units) (4)
    
    
    
    
    
    
    2,800,000
    
    
    
    2,984,400L.A. Spas, Inc.(Chemicals, Plastics &
Rubber)
    
    Manufacturer of above ground spas
    
    Revolving Line of Credit
(8.8%, Due 12/09) (3)
    
    
    1,175,000
    
    
    
    1,175,000
    
    
    
    Senior Secured Term Loan
(8.8%, Due 12/09) (3)

Charge-off of cost

of impaired loan (7)
    
    
    4,165,430
    
    
    
    4,092,364
(3,693,230
    )
    
    
    
Senior Subordinated Debt
(17.5%, Due 1/10) (2) (3)

Charge-off of cost

of impaired loan (7)
    
    
    8,132,897
    
    
    
    7,907,534
(7,907,534
    )
    
    
    
Common Stock 
(1,125,000
shares) (4)
    
    
    
    
    
    
    188
    
    
    
    Common Stock Warrants
(13,828 warrants) (4)
    
    
    
    
    
    
    5,000
    
    
    
    Nupla Corporation(Home & Office Furnishings, 
Housewares & Durable 
Consumer Products)
    
    Manufacturer and marketer of professional
high-grade fiberglass-handled striking
and digging tools
    
    Revolving Line of Credit
(9.3%, Due 9/12) (3)
    
    
    1,093,276
    
    
    
    1,081,546
    
    
    
    1,081,546Senior Secured Term Loan A
(10.0%, Due 9/12) (3)
    
    
    5,139,064
    
    
    
    5,105,570
    
    
    
    5,105,570Senior Subordinated Debt
(15.0%, Due 3/13) (2) (3)
    
    
    3,162,122
    
    
    
    3,142,795
    
    
    
    1,105,556Preferred Stock Class A (475
shares) (2)
    
    
    
    
    
    
    564,638
    
    
    
    Preferred Stock Class B
(1,045 shares) (2)
    
    
    
    
    
    
    1,131,921
    
    
    
    Common Stock 
(1,140,584
shares) (4)
    
    
    
    
    
    
    80,100
    
    
    
    
 5




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##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueSidumpr Trailer Company,
Inc.
(Automobile)
    
    Manufacturer of side dump trailers
    
    Revolving Line of Credit
(7.3%, Due 1/11) (3)
    
    
    950,000
    
    
    
    934,432
    
    
    
    934,432Senior Secured Term Loan A
(7.3%, Due 1/11) (3)
    
    
    2,047,500
    
    
    
    2,036,677
    
    
    
    1,500,877Senior Secured Term Loan B
(8.8%, Due 1/11) (3)
    
    
    2,320,625
    
    
    
    2,301,926
    
    
    
    Senior Secured Term Loan C
(16.5%, Due 7/11) (2) (3)
    
    
    2,578,751
    
    
    
    2,253,829
    
    
    
    Senior Secured Term Loan D
(7.3%, Due 7/11)
    
    
    1,700,000
    
    
    
    1,700,000
    
    
    
    Preferred Stock 
(49,635.5
shares) (2)
    
    
    
    
    
    
    165,730
    
    
    
    Common Stock (64,050 shares)
(4)
    
    
    
    
    
    
    25
    
    
    
    Total Control investments (represents 8.4% of total investments at fair value)
    
    
    
    
    
    $
    65,124,177
    
    
    $
    23,702,496Affiliate investments:Boxercraft Incorporated(Textiles & Leather)
    
    Supplier of spiritwear and campus apparel
    
    Revolving Line of Credit
(9.0%, Due 9/13) (3)
    
    $
    800,000
    
    
    $
    777,090
    
    
    $
    777,090Senior Secured Term Loan A
(9.5%, Due 9/13) (3)
    
    
    4,491,748
    
    
    
    4,445,473
    
    
    
    4,445,473Senior Secured Term Loan B
(10.0%, Due 9/13) (3)
    
    
    4,937,557
    
    
    
    4,885,834
    
    
    
    4,885,834Senior Secured Term Loan C
(18.5%, Due 3/14) (2) (3)
    
    
    6,775,232
    
    
    
    6,714,635
    
    
    
    6,714,635Preferred Stock (1,000,000
shares) (4)
    
    
    
    
    
    
    1,080,000
    
    
    
    699,800Common Stock (10,000 shares)
(4)
    
    
    
    
    
    
    100
    
    
    
    KTPS Holdings, LLC(Textiles & Leather)
    
    Manufacturer and distributor of specialty
pet products
    
    Revolving Line of Credit
(11.3%, Due 1/12) (3)
    
    
    1,500,000
    
    
    
    1,488,972
    
    
    
    1,488,972Senior Secured Term Loan A
(11.3%, Due 1/12) (3)
    
    
    3,863,606
    
    
    
    3,828,779
    
    
    
    3,828,779Senior Secured Term Loan B
(12.0%, Due 1/12) (3)
    
    
    455,000
    
    
    
    450,967
    
    
    
    450,967Senior Secured Term Loan C
(18.0%, Due 3/12) (2) (3)
    
    
    4,583,209
    
    
    
    4,552,975
    
    
    
    4,320,875Membership Interest - Class
A (730.02 units) (4)
    
    
    
    
    
    
    730,020
    
    
    
    167,700Membership Interest -
Common (199,795.08 units)
(4)
    
    
    
    
    
    
    
    
    
    
    Smart, LLC (5)(Diversified/Conglomerate
Service)
    
    Provider of tuition management services
    
    Membership Interest - Class
B 
(1,218 units) (4)
    
    
    
    
    
    
    1,280,403
    
    
    
    Membership Interest - Class
D 
(1 unit) (4)
    
    
    
    
    
    
    290,333
    
    
    
    
 6




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueSport Helmets Holdings, LLC
(5)(Personal & Nondurable
Consumer Products)
    
    Manufacturer of protective headgear
    
    Senior Secured Term Loan A
(5.0%, Due 12/13) (3)
    
    
    4,087,500
    
    
    
    4,040,710
    
    
    
    3,759,310Senior Secured Term Loan B
(5.5%, Due 12/13) (3)
    
    
    7,462,500
    
    
    
    7,370,660
    
    
    
    6,856,790Senior Subordinated Debt -
Series A (15.0%, Due 6/14)
(2) (3)
    
    
    7,105,981
    
    
    
    7,012,295
    
    
    
    6,399,195Senior Subordinated Debt -
Series B 
(15.0%, Due 6/14)
(2)
    
    
    1,290,324
    
    
    
    1,290,324
    
    
    
    1,179,025Common Stock 
(20,000
shares)(4)
    
    
    
    
    
    
    2,000,000
    
    
    
    1,399,000Total Affiliate investments (represents 16.7% of total investments at fair value)
    
    
    
    
    
    $
    52,239,570
    
    
    $
    47,373,445Non-control/non-affiliate investments:ADAPCO, Inc.(Ecological)
    
    Distributor of specialty chemicals and

contract application services
    
    Revolving Line of Credit
(10.3%, Due 7/11) (3)
    
    $
    1,800,000
    
    
    $
    1,787,120
    
    
    $
    1,787,120Senior Secured Term Loan A
(10.3%, Due 6/11) (3)
    
    
    7,678,125
    
    
    
    7,642,739
    
    
    
    7,642,739Common Stock (5,000 shares)
(4)
    
    
    
    
    
    
    500,000
    
    
    
    158,500Aircraft Fasteners
International, LLC(Machinery)
    
    Distributor of fasteners and related
hardware 
for use in aerospace,
electronics and defense industries
    
    Senior Secured Term Loan

(4.4%, Due 11/12) (3)
    
    
    5,358,000
    
    
    
    5,287,888
    
    
    
    5,208,888Junior Secured Term Loan

(14.0%, Due 5/13) (2) (3)
    
    
    5,359,740
    
    
    
    5,303,580
    
    
    
    5,303,580Convertible Preferred Stock
(32,000 shares) (2)
    
    
    
    
    
    
    234,924
    
    
    
    435,600Allied Defense Group, Inc.(Aerospace & Defense)
    
    Diversified defense company
    
    Common Stock 
(4,000 shares)
(4)
    
    
    
    
    
    
    463,168
    
    
    
    123,200Arrowhead General Insurance
Agency, Inc. (6)(Insurance)
    
    Insurance agency and program specialist
    
    Junior Secured Term Loan

(12.8%, Due 2/13) (2) (3)
    
    
    5,012,842
    
    
    
    5,012,842
    
    
    
    4,699,639Borga, Inc.(Mining, Steel, Iron &
Nonprecious Metals)
    
    Manufacturer of pre-fabricated metal 

building systems
    
    Revolving Line of Credit

(8.0%, Due 5/10) (3)
    
    
    800,000
    
    
    
    796,199
    
    
    
    796,199Senior Secured Term Loan B

(11.5%, Due 5/10) (3)
    
    
    1,623,728
    
    
    
    1,611,597
    
    
    
    1,611,597Senior Secured Term Loan C

(19.0%, Due 5/10) (2) (3)
    
    
    8,281,883
    
    
    
    8,255,274
    
    
    
    2,141,677Common Stock Warrants
(33,750 warrants) (4)
    
    
    
    
    
    
    16,828
    
    
    
    Caleel + Hayden, LLC (5)(Personal & Nondurable
Consumer Products)
    
    Provider of proprietary branded
professional skincare and cosmetic
products to physicians and spa
communities
    
    Junior Secured Term Loan B

(9.8%, Due 11/11) (3)
    
    
    9,971,555
    
    
    
    9,884,257
    
    
    
    9,884,257Senior Subordinated Debt

(16.5%, Due 11/12) (3)
    
    
    6,250,000
    
    
    
    6,197,779
    
    
    
    6,260,279Common Stock (7,500 shares)
(4)
    
    
    
    
    
    
    750,000
    
    
    
    536,500Options in Mineral Fusion
Natural Brands, LLC 
(11,662
options) (4)
    
    
    
    
    
    
    
    
    
    
    
 7




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueCS Operating, LLC (5)(Buildings & Real Estate)
    
    Provider of maintenance, repair and
replacement of HVAC, electrical,
plumbing, and foundation repair
    
    Revolving Line of Credit
(8.0%, Due 1/13) (3)
    
    
    200,000
    
    
    
    195,448
    
    
    
    195,448Senior Secured Term Loan A
(6.8%, Due 7/12) (3)
    
    
    1,642,564
    
    
    
    1,624,813
    
    
    
    1,624,813Senior Subordinated Debt
(16.5%, Due 1/13) (2) (3)
    
    
    2,699,741
    
    
    
    2,672,682
    
    
    
    2,672,682Copernicus Group(Healthcare, Education &
Childcare)
    
    Provider of clinical trial review services
    
    Revolving Line of Credit
(8.8%, Due 10/13) (3)
    
    
    150,000
    
    
    
    132,771
    
    
    
    132,771Senior Secured Term Loan A
(8.8%, Due 10/13) (3)
    
    
    7,631,250
    
    
    
    7,523,944
    
    
    
    7,523,944Senior Subordinated Debt
(16.0%, Due 4/14) (3)
    
    
    12,356,810
    
    
    
    12,188,822
    
    
    
    11,307,622Preferred Stock - Series A
(1,000,000) (4)
    
    
    
    
    
    
    1,000,000
    
    
    
    799,900Copperhead Chemical Company,
Inc.
(Chemicals, Plastics &
Rubber)
    
    Manufacturer of bulk pharmaceuticals
    
    Senior Subordinated Debt
(21.0%, Due 1/13) (2) (3)
    
    
    3,806,647
    
    
    
    3,781,610
    
    
    
    3,781,610Custom Direct, Inc. (6)(Printing & Publishing)
    
    Direct marketer of checks and other 

financial products and services
    
    Senior Secured Term Loan
(3.3%, Due 12/13) (3)
    
    
    1,838,011
    
    
    
    1,614,297
    
    
    
    1,424,459Junior Secured Term Loan
(6.6%, Due 12/14) (3)
    
    
    2,000,000
    
    
    
    2,000,000
    
    
    
    1,150,000Dover Saddlery, Inc.(Retail Stores)
    
    Equestrian products catalog retailer
    
    Common Stock 
(30,974 shares)
(4)
    
    
    
    
    
    
    148,200
    
    
    
    52,966Employbridge Holding Company
(5) (6)(Personal, Food &
Miscellaneous Services)
    
    A provider of specialized staffing 

services
    
    Junior Secured Term Loan

(9.3%, Due 10/13) (3)
    
    
    3,000,000
    
    
    
    3,000,000
    
    
    
    EXL Acquisition Corp.(Electronics)
    
    Manufacturer of lab testing supplies
    
    Senior Secured Term Loan A

(5.0%, Due 3/11) (3)
    
    
    2,468,323
    
    
    
    2,455,202
    
    
    
    2,357,602Senior Secured Term Loan B

(5.2%, Due 3/12) (3)
    
    
    4,212,792
    
    
    
    4,172,027
    
    
    
    4,005,427Senior Secured Term Loan C

(5.7%, Due 3/12) (3)
    
    
    2,598,352
    
    
    
    2,565,670
    
    
    
    2,462,870Senior Secured Term Loan D

(15.0%, Due 3/12) (3)
    
    
    6,170,807
    
    
    
    6,122,761
    
    
    
    6,122,761Common Stock - Class A

(2,475 shares) (4)
    
    
    
    
    
    
    2,475
    
    
    
    346,739Common Stock - Class B 
(25
shares) (2)
    
    
    
    
    
    
    291,667
    
    
    
    297,022
 8




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueFairchild Industrial
Products, Co.
(Electronics)
    
    Manufacturer of industrial controls and

power transmission products
    
    Senior Secured Term Loan A

(3.6%, Due 7/10) (3)
    
    
    1,386,330
    
    
    
    1,379,347
    
    
    
    1,379,347Senior Secured Term Loan B

(5.4%, Due 1/11) (3)
    
    
    4,351,250
    
    
    
    4,329,951
    
    
    
    4,329,951Senior Subordinated Debt

(14.8%, Due 7/11) (3)
    
    
    5,460,000
    
    
    
    5,426,216
    
    
    
    5,426,216Preferred Stock - Class A

(378.4 shares) (2)
    
    
    
    
    
    
    366,297
    
    
    
    372,600Common Stock - Class B 
(27.5
shares) (4)
    
    
    
    
    
    
    121,598
    
    
    
    289,300Hudson Products Holdings,
Inc. (6)(Mining, Steel, Iron &
Nonprecious Metals)
    
    Manufactures and designs air-cooled heat

exchanger equipment
    
    Senior Secured Term Loan

(8.0%, Due 8/15) (3)
    
    
    7,443,750
    
    
    
    7,241,237
    
    
    
    6,773,813Impact Products, LLC(Machinery)
    
    Distributor of janitorial supplies
    
    Junior Secured Term Loan

(6.4%, Due 9/12) (3)
    
    
    8,856,250
    
    
    
    8,808,494
    
    
    
    8,808,494Senior Subordinated Debt

(15.0%, Due 9/12) (3)
    
    
    5,547,993
    
    
    
    5,521,880
    
    
    
    5,521,880Label Corp Holdings, Inc. (6)
(Printing & Publishing)
    
    Manufacturer of prime labels
    
    Senior Secured Term Loan

(8.0%, Due 8/14) (3)
    
    
    6,451,250
    
    
    
    6,167,519
    
    
    
    5,669,255LHC Holdings Corp.(Healthcare, Education &
Childcare)
    
    Provider of home healthcare services
    
    Senior Secured Term Loan A

(4.6%, Due 11/12) (3)
    
    
    3,710,276
    
    
    
    3,674,985
    
    
    
    3,569,585Senior Subordinated Debt

(14.5%, Due 5/13) (3)
    
    
    4,565,000
    
    
    
    4,523,264
    
    
    
    4,523,264Membership Interest 
(125,000
units) (4)
    
    
    
    
    
    
    125,000
    
    
    
    184,800Mac & Massey Holdings, LLC(Grocery)
    
    Broker and distributor of ingredients to

manufacturers of food products
    
    Senior Subordinated Debt

(15.8%, Due 2/13) (2) (3)
    
    
    8,183,478
    
    
    
    8,158,201
    
    
    
    8,158,201Common Stock (250 shares) (4)
    
    
    
    
    
    
    235,128
    
    
    
    382,800Northwestern Management
Services, LLC(Healthcare, Education &
Childcare)
    
    Provider of dental services
    
    Revolving Line of Credit

(7.8%, Due 12/12) (3)
    
    
    125,000
    
    
    
    117,625
    
    
    
    117,625Senior Secured Term Loan A

(6.3%, Due 12/12) (3)
    
    
    5,197,531
    
    
    
    5,156,736
    
    
    
    5,156,736Senior Secured Term Loan B

(6.8%, Due 12/12) (3)
    
    
    1,231,250
    
    
    
    1,221,357
    
    
    
    1,221,357Junior Secured Term Loan

(17.0%, Due 6/13) (2) (3)
    
    
    2,882,406
    
    
    
    2,861,301
    
    
    
    2,861,301Common Stock 
(500 shares) (4)
    
    
    
    
    
    
    500,000
    
    
    
    465,500Prince Mineral Company, Inc.(Metals & Minerals)
    
    Manufacturer of pigments
    
    Junior Secured Term Loan

(6.1%, Due 12/12) (3)
    
    
    11,225,000
    
    
    
    11,095,875
    
    
    
    10,752,375Senior Subordinated Debt

(14.0%, Due 7/13) (2) (3)
    
    
    12,094,987
    
    
    
    11,993,822
    
    
    
    11,993,822
 9




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueQuartermaster, Inc.(Retail Stores)
    
    Retailer of uniforms and tactical
equipment to 
law enforcement and security
professionals
    
    Revolving Line of Credit

(6.5%, Due 12/10) (3)
    
    
    3,000,000
    
    
    
    2,985,955
    
    
    
    2,985,955Senior Secured Term Loan A

(5.7%, Due 12/10) (3)
    
    
    2,514,750
    
    
    
    2,495,985
    
    
    
    2,495,985Senior Secured Term Loan B

(7.0%, Due 12/10) (3)
    
    
    2,531,250
    
    
    
    2,518,505
    
    
    
    2,518,505Senior Secured Term Loan C

(15.0%, Due 12/11) (2) (3)
    
    
    3,451,292
    
    
    
    3,431,302
    
    
    
    3,431,302R-O-M Corporation(Automobile)
    
    Manufacturer of doors, ramps and bulk
heads for 
fire trucks and food
transportation
    
    Senior Secured Term Loan A

(3.1%, Due 2/13) (3)
    
    
    6,040,000
    
    
    
    5,993,933
    
    
    
    5,696,433Senior Secured Term Loan B

(4.6%, Due 5/13) (3)
    
    
    8,336,250
    
    
    
    8,255,898
    
    
    
    7,845,298Senior Subordinated Debt

(15.0%, Due 8/13) (3)
    
    
    7,153,842
    
    
    
    7,073,185
    
    
    
    7,073,185Total Non-control/non-affiliate investments (represents 74.9% of total investments at fair value)
    
    
    
    
    
    $
    227,017,180
    
    
    $
    212,853,296Total Investments
    
    
    
    
    
    
    
    
    
    $
    344,380,927
    
    
    $
    283,929,237
 
 (1)
    
    Affiliate investments are generally defined under the Investment Company Act of 1940, as amended (the 1940 Act), as companies in which the Company owns at least 5% but not more than 25% of the voting securities of the
company. Control investments are generally defined under the 1940 Act as companies in which the Company owns more than 25% of the voting securities of the company or has greater than 50% representation on its board.(2)
    
    Amount includes payment-in-kind (PIK) interest or dividends.(3)
    
    Pledged as collateral under the Companys Amended Securitization Facility. See Note 6 to Consolidated Financial Statements.(4)
    
    Non-income producing.(5)
    
    Some of the investments listed are issued by an affiliate of the listed portfolio company.(6)
    
    Syndicated investment which has been originated by another financial institution and broadly distributed.(7)
    
    All or a portion of the loan is considered permanently impaired and, accordingly, the charge-off of the principal balance has been recorded as a realized loss for financial reporting purposes.  10




---



##### 



PATRIOT CAPITAL FUNDING, INC.Consolidated Schedule of Investments
December 31, 2008
 Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueControl investments:Encore Legal Solutions, Inc.
(Printing & Publishing)
    
    Legal document management services
    
    Junior Secured Term Loan A
(6.2%, Due 12/10) (2) (3)
    
    $
    4,020,456
    
    
    $
    4,007,366
    
    
    $
    3,537,910Junior Secured Term Loan B
(9.2%, Due 12/10) (2) (3)
    
    
    7,390,687
    
    
    
    7,355,975
    
    
    
    6,492,888Common Stock
(30,000
shares)(4)
    
    
    
    
    
    
    5,159,567
    
    
    
    326,900Fischbein, LLC(Machinery)
    
    Designer and manufacturer of packaging 

equipment
    
    Senior Subordinated Debt
(16.5%, Due 5/13) (2) (3)
    
    
    3,492,760
    
    
    
    3,471,147
    
    
    
    3,540,987Membership Interest  Class A (2,800,000 units) (4)
    
    
    
    
    
    
    2,800,000
    
    
    
    3,876,000Nupla Corporation(Home & Office Furnishings,

Housewares & Durable Consumer

 Products)
    
    Manufacturer and marketer of professional
high-grade 
fiberglass-handled striking
and digging tools
    
    Revolving Line of Credit
(7.3%, Due 9/12) (3)
    
    
    870,000
    
    
    
    856,425
    
    
    
    856,425Senior Secured Term Loan A
(8.0%, Due 9/12) (3)
    
    
    5,354,688
    
    
    
    5,315,741
    
    
    
    5,166,852Senior Subordinated Debt
(15.0%, Due 3/13) (2) (3)
    
    
    3,123,084
    
    
    
    3,102,059
    
    
    
    2,192,375Preferred Stock Class A (475
shares) (2)
    
    
    
    
    
    
    550,584
    
    
    
    15,900Preferred Stock Class B
(1,045 shares) (2)
    
    
    
    
    
    
    1,101,001
    
    
    
    1,101,500Common Stock
(1,140,584
shares) (4)
    
    
    
    
    
    
    80,000
    
    
    
    Sidumpr Trailer Company, Inc.
(Automobile)
    
    Manufacturer of side dump trailers
    
    Revolving Line of Credit
(7.3%, Due 1/11) (3)
    
    
    950,000
    
    
    
    934,432
    
    
    
    934,432Senior Secured Term Loan A
(7.3%, Due 1/11) (3)
    
    
    2,047,500
    
    
    
    2,036,677
    
    
    
    2,036,677Senior Secured Term Loan B
(8.8%, Due 1/11) (3)
    
    
    2,320,625
    
    
    
    2,301,926
    
    
    
    Senior Secured Term Loan C
(16.5%, Due 7/11) (2) (3)
    
    
    2,406,374
    
    
    
    2,253,829
    
    
    
    Senior Secured Term Loan D
(7.3%, Due 7/11)
    
    
    1,700,000
    
    
    
    1,700,000
    
    
    
    348,200Preferred Stock
(49,635.5
shares) (2)
    
    
    
    
    
    
    165,730
    
    
    
    Common Stock
(64,050 shares)
(4)
    
    
    
    
    
    
    25
    
    
    
    Total Control investments (represents 9.4% of total investments at fair value)
    
    
    
    
    
    
    
    $
    43,192,484
    
    
    $
    30,427,046
 11




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueAffiliate investments:Boxercraft Incorporated(Textiles & Leather)
    
    Supplier of spiritwear and campus apparel
    
    Senior Secured Term Loan A
(8.0%, Due 9/13) (3)
    
    
    5,328,125
    
    
    
    5,273,766
    
    
    
    5,273,766Senior Secured Term Loan B
(8.5%, Due 9/13) (3)
    
    
    5,486,250
    
    
    
    5,429,567
    
    
    
    5,429,567Senior Subordinated Debt
(16.8%, Due 3/14) (2) (3)
    
    
    6,591,375
    
    
    
    6,524,347
    
    
    
    6,524,347Preferred Stock (1,000,000
shares) (4)
    
    
    
    
    
    
    1,029,722
    
    
    
    849,500Common Stock (10,000 shares)
(4)
    
    
    
    
    
    
    100
    
    
    
    KTPS Holdings, LLC(Textiles & Leather)
    
    Manufacturer and distributor of specialty

pet products
    
    Revolving Line of Credit
(5.0%, Due 1/12) (3)
    
    
    1,000,000
    
    
    
    986,840
    
    
    
    986,840Senior Secured Term Loan A
(5.1%, Due 1/12) (3)
    
    
    4,996,875
    
    
    
    4,950,978
    
    
    
    4,951,005Senior Secured Term Loan B
(12.0%, Due 1/12) (3)
    
    
    465,000
    
    
    
    460,265
    
    
    
    460,265Junior Secured Term Loan
(15.0%, Due 3/12) (2) (3)
    
    
    4,207,806
    
    
    
    4,172,076
    
    
    
    4,172,076Membership Interest  Class
A(730.02 units) (4)
    
    
    
    
    
    
    730,020
    
    
    
    721,200Membership Interest 
Common (199,795.08 units)
(4)
    
    
    
    
    
    
    
    
    
    
    Smart, LLC (5)(Diversified/Conglomerate Service)
    
    Provider of tuition management services
    
    Membership Interest  Class
B (1,218 units) (4)
    
    
    
    
    
    
    1,280,403
    
    
    
    311,500Membership Interest  Class
D (1 unit) (4)
    
    
    
    
    
    
    290,333
    
    
    
    312,000Sport Helmets Holdings, LLC (5)(Personal & Nondurable Consumer Products)
    
    Manufacturer of protective headgear
    
    Senior Secured Term Loan A
(5.9%, Due 12/13) (3)
    
    
    4,500,000
    
    
    
    4,445,614
    
    
    
    4,282,314Senior Secured Term Loan B
(6.4%, Due 12/13) (3)
    
    
    7,500,000
    
    
    
    7,400,148
    
    
    
    7,128,048Senior Subordinated Debt -

Series A (15.0%, Due 6/14)
(2) (3)
    
    
    7,000,000
    
    
    
    6,896,866
    
    
    
    6,896,866Senior Subordinated Debt -
Series B (15.0%, Due 6/14)
(2)
    
    
    1,258,488
    
    
    
    1,258,488
    
    
    
    1,258,488Common Stock (20,000
shares)(4)
    
    
    
    
    
    
    2,000,000
    
    
    
    1,899,300Total Affiliate investments (represents 16.0% of total investments at fair value)
    
    
    
    
    
    
    
    $
    53,129,533
    
    
    $
    51,457,082
 12




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueNon-control/non-affiliate investments:ADAPCO, Inc.
(Ecological)
    
    Distributor of specialty chemicals and

contract application services
    
    Senior Secured Term Loan A
(11.5%, Due 6/11) (3)
    
    $
    8,103,125
    
    
    $
    8,056,102
    
    
    $
    8,056,102Common Stock (5,000 shares)
(4)
    
    
    
    
    
    
    500,000
    
    
    
    108,800Aircraft Fasteners International, LLC(Machinery)
    
    Distributor of fasteners and related
hardware for use in 
aerospace,
electronics and defense industries
    
    Senior Secured Term Loan
(4.1%, Due 11/12) (3)
    
    
    5,528,000
    
    
    
    5,446,932
    
    
    
    5,208,632Junior Secured Term Loan
(14.0%, Due 5/13) (2) (3)
    
    
    5,306,249
    
    
    
    5,242,761
    
    
    
    5,242,761Convertible Preferred Stock
(32,500 shares) (2)
    
    
    
    
    
    
    273,397
    
    
    
    503,600Allied Defense Group, Inc.(Aerospace & Defense)
    
    Diversified defense company
    
    Common Stock (4,000 shares)
(4)
    
    
    
    
    
    
    463,168
    
    
    
    173,600Arrowhead General Insurance Agency, Inc. (6)(Insurance)
    
    Insurance agency and program specialist
    
    Junior Secured Term Loan
(7.7%, Due 2/13) (3)
    
    
    5,000,000
    
    
    
    5,000,000
    
    
    
    4,048,200Aylward Enterprises, LLC (5)(Machinery)
    
    Manufacturer of packaging equipment
    
    Revolving Line of Credit
(10.0%, Due 2/12) (3)
    
    $
    3,700,000
    
    
    $
    3,647,158
    
    
    $
    3,647,158Senior Secured Term Loan A
(11.6%, Due 2/12) (3)
    
    
    8,085,938
    
    
    
    7,999,958
    
    
    
    3,572,320Senior Subordinated Debt
(22.0%, Due 8/12) (2)
    
    
    7,328,591
    
    
    
    6,747,301
    
    
    
    Subordinated Member Note
(8.0%, Due 2/13) (2)
    
    
    151,527
    
    
    
    148,491
    
    
    
    Membership Interest
(1,250,000 units) (4)
    
    
    
    
    
    
    1,250,000
    
    
    
    Borga, Inc.(Mining, Steel, Iron & Nonprecious Metals)
    
    Manufacturer of pre-fabricated metal

building systems
    
    Revolving Line of Credit
(4.9%, Due 5/10) (3)
    
    
    800,000
    
    
    
    793,950
    
    
    
    793,950Senior Secured Term Loan A
(5.4%, Due 5/09) (3)
    
    
    328,116
    
    
    
    325,903
    
    
    
    325,903Senior Secured Term Loan B
(8.4%, Due 5/10) (3)
    
    
    1,635,341
    
    
    
    1,617,095
    
    
    
    1,617,095Senior Secured Term Loan C
(16.0%, Due 5/10) (2) (3)
    
    
    8,117,266
    
    
    
    8,074,916
    
    
    
    8,074,916Common Stock Warrants
(33,750 warrants) (4)
    
    
    
    
    
    
    14,805
    
    
    
    Caleel + Hayden, LLC (5)(Personal & Nondurable Consumer Products)
    
    Provider of proprietary branded
professional skincare and 
cosmetic
products to physicians and spa
communities
    
    Junior Secured Term Loan B
(4.7%, Due 11/11) (3)
    
    
    10,771,562
    
    
    
    10,668,072
    
    
    
    10,668,072Senior Subordinated Debt(14.5%, Due 11/12) (3)
    
    
    6,250,000
    
    
    
    6,190,008
    
    
    
    6,252,608Common Stock (7,500 shares)
(4)
    
    
    
    
    
    
    750,000
    
    
    
    862,100
 13




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueCDW Corporation (6)(Electronics)
    
    Direct marketer of computer and
peripheral equipment
    
    Senior Secured Term Loan
(6.7%, Due 10/14)
    
    
    2,000,000
    
    
    
    1,780,924
    
    
    
    920,000CS Operating, LLC (5)(Buildings & Real Estate)
    
    Provider of maintenance, repair and
replacement of 
HVAC, electrical,
plumbing, and foundation repair
    
    Revolving Line of Credit
(6.8%, Due 1/13) (3)
    
    
    200,000
    
    
    
    194,564
    
    
    
    194,564Senior Secured Term Loan A

(6.6%, Due 7/12) (3)
    
    
    1,855,064
    
    
    
    1,832,122
    
    
    
    1,832,122Senior Subordinated Debt
(16.5%, Due 1/13) (2) (3)
    
    
    2,616,863
    
    
    
    2,586,496
    
    
    
    2,586,496Copernicus Group(Healthcare, Education & Childcare)
    
    Provider of clinical trial review services
    
    Revolving Line of Credit
(8.8%, Due 10/13) (3)
    
    
    150,000
    
    
    
    130,753
    
    
    
    130,753Senior Secured Term Loan A
(9.0%, Due 10/13) (3)
    
    
    8,043,750
    
    
    
    7,917,470
    
    
    
    7,917,470Senior Subordinated Debt
(16.0%, Due 4/14) (3)
    
    
    12,112,000
    
    
    
    11,926,408
    
    
    
    11,926,408Preferred Stock  Series A

(1,000,000 shares) (4)
    
    
    
    
    
    
    1,000,000
    
    
    
    1,033,000Copperhead Chemical Company, Inc.
(Chemicals, Plastics & Rubber)
    
    Manufacturer of bulk pharmaceuticals
    
    Senior Subordinated Debt
(21.0%, Due 1/13) (2) (3)
    
    
    3,693,195
    
    
    
    3,664,655
    
    
    
    3,664,655Custom Direct, Inc. (6)(Printing & Publishing)
    
    Direct marketer of checks and other
financial products and services
    
    Senior Secured Term Loan
(4.2%, Due 12/13) (3)
    
    
    1,847,386
    
    
    
    1,603,118
    
    
    
    1,330,100Junior Secured Term Loan
(7.5%, Due 12/14) (3)
    
    
    2,000,000
    
    
    
    2,000,000
    
    
    
    880,000Dover Saddlery, Inc.
(Retail Stores)
    
    Equestrian products catalog retailer
    
    Common Stock (30,974
shares) (4)
    
    
    
    
    
    
    148,200
    
    
    
    41,500Employbridge Holding Company (5) (6)(Personal, Food & Miscellaneous Services)
    
    A provider of specialized staffing

services
    
    Junior Secured Term Loan
(10.4%, Due 10/13) (3)
    
    
    3,000,000
    
    
    
    3,000,000
    
    
    
    1,050,000EXL Acquisition Corp.(Electronics)
    
    Manufacturer of lab testing supplies
    
    Senior Secured Term Loan A
(6.6%, Due 3/11) (3)
    
    
    3,278,998
    
    
    
    3,258,757
    
    
    
    3,072,159Senior Secured Term Loan B
(6.9%, Due 3/12) (3)
    
    
    4,499,911
    
    
    
    4,452,650
    
    
    
    4,196,539Senior Secured Term Loan C
(7.4%, Due 3/12) (3)
    
    
    2,775,439
    
    
    
    2,737,602
    
    
    
    2,579,563Senior Secured Term Loan D
(15.0%, Due 3/12) (3)
    
    
    6,557,997
    
    
    
    6,501,063
    
    
    
    6,501,063Common Stock  Class A
(2,475 shares) (4)
    
    
    
    
    
    
    2,475
    
    
    
    269,000Common Stock  Class B (25
shares) (2)
    
    
    
    
    
    
    279,222
    
    
    
    281,900
 14




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueFairchild Industrial Products, Co.
(Electronics)
    
    Manufacturer of industrial controls and 
power transmission products
    
    Senior Secured Term Loan A
(5.8%, Due 7/10) (3)
    
    
    1,690,402
    
    
    
    1,678,459
    
    
    
    1,652,157Senior Secured Term Loan B(7.7%, Due 1/11) (3)
    
    
    4,477,500
    
    
    
    4,448,975
    
    
    
    4,379,475Senior Subordinated Debt
(14.8%, Due 7/11) (3)
    
    
    5,460,000
    
    
    
    5,418,066
    
    
    
    5,418,066Preferred Stock  Class A
(378.4 shares) (2)
    
    
    
    
    
    
    353,573
    
    
    
    353,573Common Stock  Class B (27.5
shares) (4)
    
    
    
    
    
    
    121,598
    
    
    
    410,000Hudson Products Holdings, Inc. (6)(Mining, Steel, Iron & Nonprecious Metals)
    
    Manufactures and designs air-cooled heat
exchanger 
equipment
    
    Senior Secured Term Loan
(8.0%, Due 8/15) (3)
    
    
    7,481,250
    
    
    
    7,265,876
    
    
    
    6,433,900Impact Products, LLC(Machinery)
    
    Distributor of janitorial supplies
    
    Junior Secured Term Loan
(7.0%, Due 9/12) (3)
    
    
    8,893,750
    
    
    
    8,839,775
    
    
    
    8,418,625Senior Subordinated Debt
(15.0%, Due 9/12) (3)
    
    
    5,547,993
    
    
    
    5,517,791
    
    
    
    5,517,791Keltner Enterprises, LLC (5)(Oil & Gas)
    
    Distributor of automotive oils, chemicals 
and parts
    
    Senior Subordinated Debt
(14.0%, Due 12/11) (3)
    
    
    3,850,000
    
    
    
    3,840,677
    
    
    
    3,840,677Label Corp Holdings, Inc. (6)(Printing & Publishing)
    
    Manufacturer of prime labels
    
    Senior Secured Term Loan
(8.0%, Due 8/14) (3)
    
    
    6,483,750
    
    
    
    6,176,385
    
    
    
    5,592,200L.A. Spas, Inc.
(Chemicals, Plastics & Rubber)
    
    Manufacturer of above ground spas
    
    Revolving Line of Credit
(8.8%, Due 12/09) (3)
    
    
    1,000,000
    
    
    
    990,794
    
    
    
    990,794Senior Secured Term Loan
(8.8%, Due 12/09) (3)
    
    
    4,165,430
    
    
    
    4,092,364
    
    
    
    4,092,364Senior Subordinated Debt
(17.5%, Due 1/10) (2) (3)
    
    
    8,011,600
    
    
    
    7,907,534
    
    
    
    599,193Common Stock (250,000
shares) (4)
    
    
    
    
    
    
    100
    
    
    
    Common Stock Warrants
(13,828 warrants) (4)
    
    
    
    
    
    
    3,963
    
    
    
    LHC Holdings Corp.(Healthcare, Education & Childcare)
    
    Provider of home healthcare services
    
    Senior Secured Term Loan A
(4.5%, Due 11/12) (3)
    
    
    4,100,403
    
    
    
    4,057,774
    
    
    
    3,927,171Senior Subordinated Debt
(14.5%, Due 5/13) (3)
    
    
    4,565,000
    
    
    
    4,517,936
    
    
    
    4,517,936Membership Interest
(1,25,000 units) (4)
    
    
    
    
    
    
    125,000
    
    
    
    159,500Mac & Massey Holdings, LLC(Grocery)
    
    Broker and distributor of ingredients to
manufacturers of 
food products
    
    Senior Subordinated Debt
(16.5%, Due 2/13) (2) (3)
    
    
    7,942,142
    
    
    
    7,913,369
    
    
    
    7,913,369Common Stock (250 shares) (4)
    
    
    
    
    
    
    242,820
    
    
    
    365,200
 15




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueNorthwestern Management Services, LLC(Healthcare, Education & Childcare)
    
    Provider of dental services
    
    Senior Secured Term Loan A
(4.5%, Due 12/12) (3)
    
    
    5,580,000
    
    
    
    5,531,693
    
    
    
    5,531,693Senior Secured Term Loan B
(5.0%, Due 12/12) (3)
    
    
    1,237,500
    
    
    
    1,226,436
    
    
    
    1,226,436Junior Secured Term Loan
(15.0%, Due 6/13) (2) (3)
    
    
    2,839,310
    
    
    
    2,815,535
    
    
    
    2,815,535Common Stock (500 shares) (4)
    
    
    
    
    
    
    500,000
    
    
    
    315,200Prince Mineral Company, Inc.(Metals & Minerals)
    
    Manufacturer of pigments
    
    Junior Secured Term Loan
(5.5%, Due 12/12) (3)
    
    
    11,275,000
    
    
    
    11,131,129
    
    
    
    10,750,129Senior Subordinated Debt
(14.0%, Due 7/13) (2) (3)
    
    
    12,034,071
    
    
    
    11,918,351
    
    
    
    11,703,780Quartermaster, Inc.(Retail Stores)
    
    Retailer of uniforms and tactical
equipment to 
law enforcement and security
professionals
    
    Revolving Line of Credit
(6.7%, Due 12/10) (3)
    
    
    1,750,000
    
    
    
    1,731,275
    
    
    
    1,731,275Senior Secured Term Loan A
(6.8%, Due 12/10) (3)
    
    
    3,225,250
    
    
    
    3,197,369
    
    
    
    3,197,369Senior Secured Term Loan B
(8.1%, Due 12/10) (3)
    
    
    2,543,750
    
    
    
    2,526,377
    
    
    
    2,526,377Senior Secured Term Loan C
(15.0%, Due 12/11) (2) (3)
    
    
    3,399,818
    
    
    
    3,375,763
    
    
    
    3,375,763R-O-M Corporation(Automobile)
    
    Manufacturer of doors, ramps and bulk
heads for
 fire trucks and food
transportation
    
    Senior Secured Term Loan A
(3.4%, Due 2/13) (3)
    
    
    6,640,000
    
    
    
    6,582,627
    
    
    
    6,266,127Senior Secured Term Loan B
(4.9%, Due 5/13) (3)
    
    
    8,379,000
    
    
    
    8,290,058
    
    
    
    7,890,766Senior Subordinated Debt
(15.0%, Due 8/13) (3)
    
    
    9,100,000
    
    
    
    9,011,070
    
    
    
    9,011,070Total Non-control/non-affiliate investments (represents 74.6% of total investments at fair value)
    
    $
    269,577,008
    
    
    $
    240,486,620Total Investments
    
    
    
    
    
    
    
    
    
    $
    365,899,025
    
    
    $
    322,370,748
 
 (1)
    
    Affiliate investments are generally defined under the Investment Company Act of 1940, as amended (the 1940 Act), as companies in which the Company owns at least 5% but not more than 25% of the voting securities of the
company. Control investments are generally defined under the 1940 Act as companies in which the Company owns more than 25% of the voting securities of the company or has greater than 50% representation on its board.(2)
    
    Amount includes payment-in-kind (PIK) interest or dividends.(3)
    
    Pledged as collateral under the Companys Amended Securitization Facility. See Note 6 to Consolidated Financial Statements.(4)
    
    Non-income producing.(5)
    
    Some of the investments listed are issued by an affiliate of the listed portfolio company.(6)
    
    Syndicated investment which has been originated by another financial institution and broadly distributed.  16




---



##### 



Patriot Capital Funding, Inc.
 
 Notes to Consolidated Financial Statements
(unaudited)
 Note 1. Description of Business
 Description
of Business
   Note 2. Going Concern
    17




---



##### 



Note 3. Summary of Significant Accounting Policies
 Basis of Presentation
   Recent
Accounting Pronouncements
     18




---



##### 



Interest,
Dividends, Fees, and Other Investment Income
  Federal
Income Taxes
   Dividends
Paid
   19




---



##### 



Consideration of Subsequent Events.
  Note 4. Investments
 Statement of Financial Standards No. 157Fair Value Measurement
 June 30, 2009
    
    
    December 31, 2008Cost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair ValueInvestments in debt securities
    
    $
    323,087,617
    
    
    $
    274,232,910
    
    
    $
    344,683,219
    
    
    $
    308,079,975Investments in equity securities
    
    
    21,293,310
    
    
    
    9,696,327
    
    
    
    21,215,806
    
    
    
    14,290,773Total
    
    $
    344,380,927
    
    
    $
    283,929,237
    
    
    $
    365,899,025
    
    
    $
    322,370,748
     June 30, 2009
    
    
    December 31, 2008Cost
    
    
    % (1)
    
    
    Fair Value
    
    
    % (1)
    
    
    Cost
    
    
    % (1)
    
    
    Fair Value
    
    
    % (1)Senior Secured Debt
    
    $
    163,009,989
    
    
    
    47.3
    %
    
    $
    137,712,207
    
    
    
    48.5
    %
    
    $
    171,889,470
    
    
    
    47.0
    %
    
    $
    156,638,667
    
    
    
    48.6
    %Junior Secured Debt
    
    
    63,930,467
    
    
    
    18.6
    
    
    
    50,861,771
    
    
    
    17.9
    
    
    
    64,232,689
    
    
    
    17.5
    
    
    
    58,076,196
    
    
    
    18.0Subordinated Debt
    
    
    96,147,161
    
    
    
    27.9
    
    
    
    85,658,932
    
    
    
    30.2
    
    
    
    108,561,060
    
    
    
    29.7
    
    
    
    93,365,112
    
    
    
    29.0Warrants / Equity
    
    
    21,293,310
    
    
    
    6.2
    
    
    
    9,696,327
    
    
    
    3.4
    
    
    
    21,215,806
    
    
    
    5.8
    
    
    
    14,290,773
    
    
    
    4.4Total
    
    $
    344,380,927
    
    
    
    100.0
    %
    
    $
    283,929,237
    
    
    
    100.0
    %
    
    $
    365,899,025
    
    
    
    100.0
    %
    
    $
    322,370,748
    
    
    
    100.0
    %
 
 (1)
    
    Represents percentage of total portfolio. 20




---



##### 



June 30, 2009
    
    
    December 31, 2008Cost
    
    
    % (1)
    
    
    Fair Value
    
    
    % (1)
    
    
    Cost
    
    
    % (1)
    
    
    Fair Value
    
    
    % (1)Machinery
    
    $
    51,631,722
    
    
    
    15.0
    %
    
    $
    36,171,707
    
    
    
    12.7
    %
    
    $
    51,384,711
    
    
    
    14.0
    %
    
    $
    39,527,874
    
    
    
    12.3
    %Health Care, Education & Childcare
    
    
    39,025,805
    
    
    
    11.3
    
    
    
    37,864,405
    
    
    
    13.3
    
    
    
    39,749,005
    
    
    
    10.9
    
    
    
    39,501,102
    
    
    
    12.2Personal & Nondurable Consumer Products
    
    
    38,546,025
    
    
    
    11.2
    
    
    
    36,274,356
    
    
    
    12.8
    
    
    
    39,609,196
    
    
    
    10.8
    
    
    
    39,247,796
    
    
    
    12.2Automobile
    
    
    30,715,635
    
    
    
    8.9
    
    
    
    23,050,225
    
    
    
    8.1
    
    
    
    33,276,374
    
    
    
    9.1
    
    
    
    26,487,272
    
    
    
    8.2Textiles & Leather
    
    
    28,954,845
    
    
    
    8.4
    
    
    
    27,780,125
    
    
    
    9.8
    
    
    
    29,557,681
    
    
    
    8.1
    
    
    
    29,368,566
    
    
    
    9.1Electronics
    
    
    27,233,211
    
    
    
    7.9
    
    
    
    27,389,835
    
    
    
    9.6
    
    
    
    31,033,364
    
    
    
    8.5
    
    
    
    30,033,495
    
    
    
    9.3Printing & Publishing
    
    
    26,352,526
    
    
    
    7.6
    
    
    
    11,324,964
    
    
    
    4.0
    
    
    
    26,302,411
    
    
    
    7.2
    
    
    
    18,159,998
    
    
    
    5.6Metals & Minerals
    
    
    23,089,697
    
    
    
    6.7
    
    
    
    22,746,197
    
    
    
    8.0
    
    
    
    23,049,480
    
    
    
    6.3
    
    
    
    22,453,909
    
    
    
    7.0Mining, Steel, Iron & Nonprecious Metals
    
    
    17,921,135
    
    
    
    5.2
    
    
    
    11,323,286
    
    
    
    4.0
    
    
    
    18,092,545
    
    
    
    4.9
    
    
    
    17,245,764
    
    
    
    5.3Retail Stores
    
    
    11,579,947
    
    
    
    3.4
    
    
    
    11,484,713
    
    
    
    4.1
    
    
    
    10,978,984
    
    
    
    3.0
    
    
    
    10,872,284
    
    
    
    3.4Housewares & Durable Consumer Products
    
    
    11,106,570
    
    
    
    3.2
    
    
    
    7,292,672
    
    
    
    2.6
    
    
    
    11,005,810
    
    
    
    3.0
    
    
    
    9,333,052
    
    
    
    2.9Ecological
    
    
    9,929,859
    
    
    
    2.9
    
    
    
    9,588,359
    
    
    
    3.4
    
    
    
    8,556,102
    
    
    
    2.3
    
    
    
    8,164,902
    
    
    
    2.5Grocery
    
    
    8,393,329
    
    
    
    2.4
    
    
    
    8,541,001
    
    
    
    3.0
    
    
    
    8,156,189
    
    
    
    2.2
    
    
    
    8,278,569
    
    
    
    2.6Chemicals, Plastic & Rubber
    
    
    5,360,932
    
    
    
    1.6
    
    
    
    3,781,610
    
    
    
    1.3
    
    
    
    16,659,410
    
    
    
    4.6
    
    
    
    9,347,006
    
    
    
    2.9Insurance
    
    
    5,012,842
    
    
    
    1.5
    
    
    
    4,699,639
    
    
    
    1.6
    
    
    
    5,000,000
    
    
    
    1.4
    
    
    
    4,048,200
    
    
    
    1.3Buildings & Real Estate
    
    
    4,492,943
    
    
    
    1.3
    
    
    
    4,492,943
    
    
    
    1.6
    
    
    
    4,613,182
    
    
    
    1.3
    
    
    
    4,613,182
    
    
    
    1.4Personal, Food & Miscellaneous Services
    
    
    3,000,000
    
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    3,000,000
    
    
    
    0.8
    
    
    
    1,050,000
    
    
    
    0.3Diversified/Conglomerate Service
    
    
    1,570,736
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    1,570,736
    
    
    
    0.4
    
    
    
    623,500
    
    
    
    0.2Aerospace & Defense
    
    
    463,168
    
    
    
    0.1
    
    
    
    123,200
    
    
    
    0.1
    
    
    
    463,168
    
    
    
    0.1
    
    
    
    173,600
    
    
    
    0.1Oil & Gas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,840,677
    
    
    
    1.1
    
    
    
    3,840,677
    
    
    
    1.2Total
    
    $
    344,380,927
    
    
    
    100.0
    %
    
    $
    283,929,237
    
    
    
    100.0
    %
    
    $
    365,899,025
    
    
    
    100.0
    %
    
    $
    322,370,748
    
    
    
    100.0
    %
 
 (1)
    
    Represents percentage of total portfolio.  Note 5. Fair Value Measurements
      21




---



##### 



As of June 30, 2009Internal Models with
    
    Internal Models with
    
    Total Fair ValueQuoted Market Prices
    
    Significant Observable
    
    Significant Unobservable
    
    Reported inin Active Markets
    
    Market Parameters
    
    Market Parameters
    
    Consolidated(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    Balance SheetInvestments:Non-affiliate investments
    
    $
    176,166
    
    
    $
    19,717,166
    
    
    $
    192,959,964
    
    
    $
    212,853,296Affiliate investments
    
    
    
    
    
    
    
    
    
    
    47,373,445
    
    
    
    47,373,445Control investments
    
    
    
    
    
    
    
    
    
    
    23,702,496
    
    
    
    23,702,496Total investments at fair value
    
    $
    176,166
    
    
    $
    19,717,166
    
    
    $
    264,035,905
    
    
    $
    283,929,237Liabilities:Interest rate swaps (1)
    
    $
    
    
    
    $
    (2,235,647
    )
    
    $
    
    
    
    $
    (2,235,647
    )Total liabilities at fair value
    
    $
    
    
    
    $
    (2,235,647
    )
    
    $
    
    
    
    $
    (2,235,647
    )
 
 (1)
    
    Represents interest rate swaps in connection with the Companys Amended Securitization
Facility. The fair value of the interest rate swaps are included in the accounts payable, accrued
expenses and other line of the liabilities section of the Consolidated Balance Sheets. On July 9,
2009, the Company terminated all of its interest rate swap agreements and realized a loss of $3.3
million in connection with entering into an agreement, limited consent and amendment to the
Companys Amended Securitization Facility with the Lenders (see Note 14. Subsequent Events).  Fair value measurements using unobservable inputs (Level 3)Non-affiliate
    
    Affiliate
    
    ControlInvestments
    
    Investments
    
    Investments
    
    TotalFair Value December 31, 2008
    
    $
    220,017,120
    
    
    $
    51,457,082
    
    
    $
    30,427,046
    
    
    $
    301,901,248Total realized losses
    
    
    
    
    
    
    
    
    
    
    (11,600,764
    )
    
    
    (11,600,764
    )Change in unrealized depreciation
    
    
    (6,171,546
    )
    
    
    (3,193,648
    )
    
    
    (8,719,219
    )
    
    
    (18,084,413)
    (1)Purchases, issuances, settlements and other, net
    
    
    (7,983,780
    )
    
    
    (889,989
    )
    
    
    693,603
    
    
    
    (8,180,166
    )Transfers within Level 3
    
    
    (12,901,830
    )
    
    
    
    
    
    
    12,901,830
    
    
    
    Transfers in (out) of Level 3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair value as of June 30, 2009
    
    $
    192,959,964
    
    
    $
    47,373,445
    
    
    $
    23,702,496
    
    
    $
    264,035,905
 
 (1)
    
    Relates to assets held at June 30, 2009    22




---



##### 



Note 6. Borrowings
      23




---



##### 



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Interest charges
    
    $
    2,644,393
    
    
    $
    1,733,144
    
    
    $
    4,043,615
    
    
    $
    3,719,520Amortization of debt issuance costs
    
    
    131,729
    
    
    
    131,728
    
    
    
    263,456
    
    
    
    190,632Unused facility fees
    
    
    1,248
    
    
    
    60,358
    
    
    
    56,736
    
    
    
    74,601Total
    
    $
    2,777,370
    
    
    $
    1,925,230
    
    
    $
    4,363,807
    
    
    $
    3,984,753
 Note 7. Stock Option Plan and Restricted Stock Plan
    Note 8. Share Data and Common Stock
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Weighted average common shares outstanding, basic
    
    
    20,950,501
    
    
    
    20,693,337
    
    
    
    20,940,294
    
    
    
    20,671,896Effect of dilutive stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares outstanding, diluted
    
    
    20,950,501
    
    
    
    20,693,337
    
    
    
    20,940,294
    
    
    
    20,671,896
 24




---



##### 



Date Declared
    
    Record Date
    
    Payment Date
    
    AmountOctober 30, 2008
    
    December 22, 2008
    
    January 15, 2009
    
    $0.25July 30, 2008
    
    September 12, 2008
    
    October 15, 2008
    
    $0.33May 2, 2008
    
    June 5, 2008
    
    July 16, 2008
    
    $0.33February 27, 2008
    
    March 14, 2008
    
    April 16, 2008
    
    $0.33
 Note 9. Commitments and Contingencies
    Note 10. Concentrations of Credit Risk
   25




---



##### 



Note 11. Income Taxes
   January 1, 2009toJune 30, 2009GAAP net investment income
    
    $
    7,620,000Tax timing differences of:Origination fees, net
    
    
    (794,000
    )Permanent impairment on loans
    
    
    (11,826,000
    )Stock compensation expense, original issue discount
and depreciation and amortization
    
    
    1,464,000Tax loss
    
    $
    (3,536,000
    )
     Note 12. Hedging Activities
   26




---



##### 



Three months endedJune 30, 2009As of June 30, 2009
    
    
    UnrealizedDate
    
    
    Date
    
    
    Interest
    
    
    
    
    
    
    
    
    
    
    Fair
    
    
    AppreciationEntered
    
    
    Expiring
    
    
    Rate
    
    
    Notional
    
    
    Cost
    
    
    Value
    
    
    (Depreciation)03/06
    
    
    
    01/11
    

    
    5.04
    %
    
    $
    9,937,058
    
    
    $
    
    
    
    $
    (366,499
    )
    
    $
    100,12312/06
    
    
    
    02/12
    

    
    4.84
    %
    
    
    3,192,219
    
    
    
    
    
    
    
    (283,220
    )
    
    
    54,95708/07
    
    
    
    04/12
    

    
    5.17
    %
    
    
    3,938,246
    
    
    
    
    
    
    
    (381,891
    )
    
    
    86,29409/07
    
    
    
    04/12
    

    
    4.98
    %
    
    
    3,784,074
    
    
    
    
    
    
    
    (339,268
    )
    
    
    79,83412/07
    
    
    
    01/11
    

    
    4.28
    %
    
    
    485,449
    
    
    
    
    
    
    
    (47,511
    )
    
    
    4,58104/08
    
    
    
    12/12
    

    
    3.51
    %
    
    
    9,385,926
    
    

    
    
    
    
    (387,814
    )
    
    
    218,43405/08
    
    
    
    09/10

    
    
    3.32
    %
    
    
    664,775
    
    
    
    
    
    
    
    (12,718
    )
    
    
    6,34910/08
    
    
    
    10/12

    
    
    3.54
    %
    
    
    12,458,127
    
    
    
    
    
    
    
    (416,726
    )
    
    
    128,316Total


    
    
    
    
    
    
    
    
    
    $
    43,845,874
    
    
    $
    
    
    
    $
    (2,235,647
    )
    
    $
    678,888
 Note 13. Financial Highlights
 For the Six Months EndedJune 30,2009
    
    
    2008Per Share Data:Net asset value at beginning of period
    
    $
    8.65
    
    
    $
    10.73Net investment income
    
    
    .37
    
    
    
    .64Net realized loss on investments
    
    
    (.57
    )
    
    
    (.02
    )Net change in unrealized depreciation
on investments
    
    
    (.81
    )
    
    
    (.64
    )Effect of issuance of common stock
    
    
    (.04
    )
    
    
    Distributions from net investment income
    
    
    
    
    
    
    (.64
    )Distributions in excess of net investment income
    
    
    
    
    
    
    (.02
    )Net change in unrealized swap appreciation
    
    
    .04
    
    
    
    .01Stock based compensation expense
    
    
    .02
    
    
    
    .02Net asset value at end of period
    
    $
    7.66
    
    
    $
    10.08Total net asset value return (1)
    
    
    (11.5
    )%
    
    
    0.1
    %Per share market value, beginning of period
    
    $
    3.64
    
    
    $
    10.09Per share market value, end of period
    
    $
    1.71
    
    
    $
    6.25Total market value return (2)
    
    
    (53.0
    )%
    
    
    (31.9
    )%Shares outstanding at end of period
    
    
    20,950,501
    
    
    
    20,702,485Ratios and Supplemental Data:Net assets at end of period
    
    $
    160,496,000
    
    
    $
    208,622,000Average net assets
    
    
    173,572,000
    
    
    
    214,404,000Ratio of operating expenses to average
net assets (annualized)
    
    
    10.3
    %
    
    
    8.1
    %Ratio of net investment income to average
net assets (annualized)
    
    
    8.8
    %
    
    
    12.3
    %Average borrowings outstanding
    
    $
    146,350,000
    
    
    $
    146,170,000Average amount of borrowings per
share
    
    $
    6.99
    
    
    $
    7.06
 
 (1)
    
    The total net asset value return (not annualized) reflects the change in net asset
value of a share of stock, plus dividends.(2)
    
    The total market value return (not annualized) reflects the change in the ending market
value per share plus dividends, divided by the beginning market value per share. Note 14. Subsequent Events
   27




---



##### 



28




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   
    
    Our ability to negotiate an arrangement with the lenders of our Amended
Securitization Facility for repayment terms that do not require us to use all
principal and interest collected from the debt investments secured by the
facility to pay down amounts outstanding thereunder;
    
    Our ability to negotiate other financing and/or strategic alternatives,
including possible debt or equity financing, acquisition or disposition of
assets, and other strategic transactions;
    
    Our ability to maintain our status as a RIC under the Code;
    
    Our ability to continue as a going concern;
    
    Our future operating results;
    
    Our business prospects and the prospects of our portfolio companies;
    
    The ability of our portfolio companies to achieve their objectives;
    
    Our expected financings and investments;
    
    Future changes in laws or regulations (including the interpretation of these
laws and regulations by regulatory authorities) and conditions in our operating
areas, particularly with respect to business development companies and RICs;
    
    The adequacy of our cash resources and working capital; and
    
    The timing of cash flows, if any, from the operations of our portfolio companies.
   Overview
   29




---



##### 



Portfolio Composition
   June 30, 2009
    
    
    December 31, 2008Beginning portfolio at fair value
    
    $
    322,370,748
    
    
    $
    384,725,753Investments in debt securities
    
    
    10,273,276
    
    
    
    79,096,786Investments in equity securities
    
    
    188
    
    
    
    3,245,937Investment repayments
    
    
    (21,116,671
    )
    
    
    (95,018,988
    )Increase in payment-in-kind interest/dividends
    
    
    2,218,782
    
    
    
    5,452,124Sale of investments
    
    
    (1,377,011
    )
    
    
    (15,267,401
    )Change in unearned revenue
    
    
    443,572
    
    
    
    (129,458
    )Realized loss on investments
    
    
    (12,013,473
    )
    
    
    Change in fair value of investments
    
    
    (16,870,174
    )
    
    
    (39,992,921
    )Ending portfolio at fair value
    
    $
    283,929,237
    
    
    $
    322,370,748
 30




---



##### 



June 30, 2009
    
    
    December 31, 2008Investments at
    
    
    Percentage of
    
    
    Investments at
    
    
    Percentage ofFair Value
    
    
    Total Portfolio
    
    
    Fair Value
    
    
    Total PortfolioSenior secured revolving lines of credit
    
    $
    14,252,865
    
    
    
    5.0
    %
    
    $
    10,266,191
    
    
    
    3.2
    %Senior secured term loans
    
    
    123,459,342
    
    
    
    43.5
    
    
    
    146,372,476
    
    
    
    45.4Junior secured term loans
    
    
    50,861,771
    
    
    
    17.9
    
    
    
    58,076,196
    
    
    
    18.0Senior subordinated debt
    
    
    85,658,932
    
    
    
    30.2
    
    
    
    93,365,112
    
    
    
    29.0Investments in equity securities
    
    
    9,696,327
    
    
    
    3.4
    
    
    
    14,290,773
    
    
    
    4.4Totals
    
    $
    283,929,237
    
    
    
    100.0
    %
    
    $
    322,370,748
    
    
    
    100.0
    %
    June 30, 2009
    
    
    December 31, 2008Cost
    
    
    % (1)
    
    
    Fair Value
    
    
    % (1)
    
    
    Cost
    
    
    % (1)
    
    
    Fair Value
    
    
    % (1)Machinery
    
    $
    51,631,722
    
    
    
    15.0
    %
    
    $
    36,171,707
    
    
    
    12.7
    %
    
    $
    51,384,711
    
    
    
    14.0
    %
    
    $
    39,527,874
    
    
    
    12.3
    %Health Care, Education & Childcare
    
    
    39,025,805
    
    
    
    11.3
    
    
    
    37,864,405
    
    
    
    13.3
    
    
    
    39,749,005
    
    
    
    10.9
    
    
    
    39,501,102
    
    
    
    12.2Personal & Nondurable Consumer Products
    
    
    38,546,025
    
    
    
    11.2
    
    
    
    36,274,356
    
    
    
    12.8
    
    
    
    39,609,196
    
    
    
    10.8
    
    
    
    39,247,796
    
    
    
    12.2Automobile
    
    
    30,715,635
    
    
    
    8.9
    
    
    
    23,050,225
    
    
    
    8.1
    
    
    
    33,276,374
    
    
    
    9.1
    
    
    
    26,487,272
    
    
    
    8.2Textiles & Leather
    
    
    28,954,845
    
    
    
    8.4
    
    
    
    27,780,125
    
    
    
    9.8
    
    
    
    29,557,681
    
    
    
    8.1
    
    
    
    29,368,566
    
    
    
    9.1Electronics
    
    
    27,233,211
    
    
    
    7.9
    
    
    
    27,389,835
    
    
    
    9.6
    
    
    
    31,033,364
    
    
    
    8.5
    
    
    
    30,033,495
    
    
    
    9.3Printing & Publishing
    
    
    26,352,526
    
    
    
    7.6
    
    
    
    11,324,964
    
    
    
    4.0
    
    
    
    26,302,411
    
    
    
    7.2
    
    
    
    18,159,998
    
    
    
    5.6Metals & Minerals
    
    
    23,089,697
    
    
    
    6.7
    
    
    
    22,746,197
    
    
    
    8.0
    
    
    
    23,049,480
    
    
    
    6.3
    
    
    
    22,453,909
    
    
    
    7.0Mining, Steel, Iron & Nonprecious Metals
    
    
    17,921,135
    
    
    
    5.2
    
    
    
    11,323,286
    
    
    
    4.0
    
    
    
    18,092,545
    
    
    
    4.9
    
    
    
    17,245,764
    
    
    
    5.3Retail Stores
    
    
    11,579,947
    
    
    
    3.4
    
    
    
    11,484,713
    
    
    
    4.1
    
    
    
    10,978,984
    
    
    
    3.0
    
    
    
    10,872,284
    
    
    
    3.4Housewares & Durable Consumer Products
    
    
    11,106,570
    
    
    
    3.2
    
    
    
    7,292,672
    
    
    
    2.6
    
    
    
    11,005,810
    
    
    
    3.0
    
    
    
    9,333,052
    
    
    
    2.9Ecological
    
    
    9,929,859
    
    
    
    2.9
    
    
    
    9,588,359
    
    
    
    3.4
    
    
    
    8,556,102
    
    
    
    2.3
    
    
    
    8,164,902
    
    
    
    2.5Grocery
    
    
    8,393,329
    
    
    
    2.4
    
    
    
    8,541,001
    
    
    
    3.0
    
    
    
    8,156,189
    
    
    
    2.2
    
    
    
    8,278,569
    
    
    
    2.6Chemicals, Plastic & Rubber
    
    
    5,360,932
    
    
    
    1.6
    
    
    
    3,781,610
    
    
    
    1.3
    
    
    
    16,659,410
    
    
    
    4.6
    
    
    
    9,347,006
    
    
    
    2.9Insurance
    
    
    5,012,842
    
    
    
    1.5
    
    
    
    4,699,639
    
    
    
    1.6
    
    
    
    5,000,000
    
    
    
    1.4
    
    
    
    4,048,200
    
    
    
    1.3Buildings & Real Estate
    
    
    4,492,943
    
    
    
    1.3
    
    
    
    4,492,943
    
    
    
    1.6
    
    
    
    4,613,182
    
    
    
    1.3
    
    
    
    4,613,182
    
    
    
    1.4Personal, Food & Miscellaneous Services
    
    
    3,000,000
    
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    3,000,000
    
    
    
    0.8
    
    
    
    1,050,000
    
    
    
    0.3Diversified/Conglomerate Service
    
    
    1,570,736
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    1,570,736
    
    
    
    0.4
    
    
    
    623,500
    
    
    
    0.2Aerospace & Defense
    
    
    463,168
    
    
    
    0.1
    
    
    
    123,200
    
    
    
    0.1
    
    
    
    463,168
    
    
    
    0.1
    
    
    
    173,600
    
    
    
    0.1Oil & Gas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,840,677
    
    
    
    1.1
    
    
    
    3,840,677
    
    
    
    1.2Total
    
    $
    344,380,927
    
    
    
    100.0
    %
    
    $
    283,929,237
    
    
    
    100.0
    %
    
    $
    365,899,025
    
    
    
    100.0
    %
    
    $
    322,370,748
    
    
    
    100.0
    %
 
 (1)
    
    Represents percentage of total portfolio. 31




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##### 



Portfolio Asset Quality
   June 30, 2009
    
    
    December 31, 2008Investments at
    
    
    Percentage of
    
    
    Investments at
    
    
    Percentage ofInvestment Rating
    
    Fair Value
    
    
    Total Portfolio
    
    
    Fair Value
    
    
    Total Portfolio1
    
    $
    95,779,317
    
    
    
    34.9
    %
    
    $
    82,179,735
    
    
    
    26.7
    %2
    
    
    134,852,717
    
    
    
    49.2
    
    
    
    184,507,897
    
    
    
    59.93
    
    
    30,469,979
    
    
    
    11.1
    
    
    
    21,275,475
    
    
    
    6.94
    
    
    4,890,139
    
    
    
    1.8
    
    
    
    8,477,320
    
    
    
    2.75
    
    
    8,240,758
    
    
    
    3.0
    
    
    
    11,639,548
    
    
    
    3.8Totals
    
    $
    274,232,910
    
    
    
    100.0
    %
    
    $
    308,079,975
    
    
    
    100.0
    %
   Results of Operations
  Comparison for the three months ended June 30, 2009 and 2008
 Total Investment Income
  32




---



##### 



Expenses
   Realized Gain (Loss) on Disposition of Investments
  Net Change in Unrealized Appreciation or Depreciation on Investments
  33




---



##### 



Net Unrealized Appreciation or Depreciation on Interest Rate Swaps
  Net Income (Loss)
  Comparison for the six months ended June 30, 2009 and 2008
 Total Investment Income
    Expenses
   34




---



##### 



Realized Gain (Loss) on the Disposition of Investments
  Net Change in Unrealized Appreciation or Depreciation on Investments
  Unrealized Appreciation or Depreciation on Interest Rate Swaps
  Net Income (Loss)
  Financial Condition, Liquidity and Capital Resources
 Cash, Cash Equivalents and Restricted Cash
  35




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##### 



Liquidity and Capital Resources
   
    
    curtailing our investment originations;
    
    reducing our operating expenses;
    
    obtaining stockholder approval at our 2008 annual meeting of stockholders to sell shares
of our common stock below the then current net asset value per share in one or more
offerings for a period of one year which ended on June 17, 2009; and
    
    postponing any decisions relating to 2009 dividend requirements, if any, until we have a
better insight on our requirement and our ability to pay.
  36




---



##### 



Borrowings
 Securitization Revolving Credit Facility.
      37




---



##### 



Regulated Investment Company Status and Dividends
     Critical Accounting Policies
  Going Concern
  38




---



##### 



Valuation of Portfolio Investments
     Fee Income Recognition
  Payment-in-Kind or PIK Interest and Dividends
  39




---



##### 



Six Months EndedJune 30, 2009Beginning PIK balance
    
    $
    6,605,194PIK interest and dividends earned during the period
    
    
    2,218,782PIK write-off (1)
    
    
    (1,110,041
    )PIK receipts during the period
    
    
    (447,982
    )Ending PIK balance
    
    $
    7,265,953
 
 (1)
    
    Write-off is the result of the permanent impairment of loans to one of our portfolio
companies. Interest and Dividend Income Recognition
   Off-Balance Sheet Arrangements
   Contractual Obligations
  40




---



##### 



Recent Developments
        
   41




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##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
 (a)
    
    As of the end of the period covered by this report, we carried out an evaluation,
under the supervision and with the participation of our management, including our Chief
Executive Officer and our Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934). Based on that evaluation, our Chief
Executive Officer and our Chief Financial Officer have concluded that our current disclosure
controls and procedures are effective in facilitating timely decisions regarding required
disclosure of any material information relating to us that is required to be disclosed by us
in the reports we file or submit under the Securities Exchange Act of 1934.(b)
    
    There have been no changes in our internal control over financial reporting that occurred
during the quarter ended June 30, 2009 that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
 42




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##### 



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
   For
    
    WithheldSteven Drogin
    
    
    17,718,141
    
    
    
    1,311,480Mel P. Melsheimer
    
    
    18,138,313
    
    
    
    891,308Richard A. Sebastiao
    
    
    17,729,785
    
    
    
    1,299,836
  
  For
    
    Against
    
    AbstainTotals
    
    18,482,056
    
    411,990
    
    136,134
 
 Item 5. Other Information
  43




---



##### 



Item 6. Exhibits
 
 ExhibitNumber
    
    Description of Document31.1*
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.31.2*
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.32.1*
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U. S.
C. 1350).32.2*
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U. S.
C. 1350).
 
 *
    
    Submitted herewith. 44




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##### 



SIGNATURES
  PATRIOT CAPITAL FUNDING, INC.By:
    /s/    Richard P. BuckanavageRichard P. BuckanavageChief Executive Officer and PresidentBy:
    /s/     William E. Alvarez, Jr.William E. Alvarez, Jr.Executive Vice President, Chief
 Financial
Officer and Secretary 45