----

----

----

| x | ANNUAL      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|---|------------------------------------------------------------------------------------------------|

|  ̈ | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|--------|----------------------------------------------------------------------------------------------------|

|   | Commission      File No. 814-00735 |   |
|--------|-----------------------------------------|--------|

| Delaware                                                                |   | 20-5951150                                       |
|-------------------------------------------------------------------------|--------|--------------------------------------------------|
| (State      or other jurisdiction ofincorporation      or organization) |   | (I.R.S.      EmployerIdentification      Number) |

|   | (Registrant’s      telephone number, including area code) |   |
|--------|-----------------------------------------------------------------|--------|

|                                          |   |                                      |
|-----------------------------------------------|--------|-------------------------------------------|
| Title      ofeach class                       |   | Name of exchange on which      registered |
| Common      Shares, par value $0.01 per share |   | The      NASDAQ Global Select Market      |

|   | Securities      registered pursuant to Section 12(g) of the Act: None |   |
|--------|----------------------------------------------------------------------------|--------|

| Large accelerated filer  ̈ |    | Accelerated filer x |    | Non-accelerated filer  ̈                                     |    | Smaller Reporting Company  ̈ |
|-----------------------------------------------|--------------|-------------------------------|--------------|----------------------------------------------------------------------------|--------------|-------------------------------------------------|
|                                          |    |                          |    | (Do not check if asmaller reporting company) |    |                                            |

| The      number of outstanding shares of common stock of the registrant as      of March 16, 2009 was21,570,869. |
|----------------------------------------------------------------------------------------------------------------------------|

----

|   | • |   | our      future operating results; |
|--------|---------|--------|------------------------------------|

|   | • |   | our      business prospects and the prospects of our existing and prospective      portfolio companies; |
|--------|---------|--------|---------------------------------------------------------------------------------------------------------|

|   | • |   | the      impact of investments that we expect tomake; |
|--------|---------|--------|-------------------------------------------------------|

|   | • |   | our      informal relationships with thirdparties; |
|--------|---------|--------|----------------------------------------------------|

|   | • |   | the      dependence of our future success on the general economy and its impact on      the industries in which we invest; |
|--------|---------|--------|----------------------------------------------------------------------------------------------------------------------------|

|   | • |   | the      ability of our portfolio companies to achieve their      objectives; |
|--------|---------|--------|-------------------------------------------------------------------------------|

|   | • |   | our      expected financings andinvestments; |
|--------|---------|--------|----------------------------------------------|

|   | • |   | our      regulatory structure and taxtreatment; |
|--------|---------|--------|-------------------------------------------------|

|   | • |   | our      ability to operate as a BDC and aRIC; |
|--------|---------|--------|------------------------------------------------|

|   | • |   | the      adequacy of our cash resources and working capital;  and |
|--------|---------|--------|-------------------------------------------------------------------|

|   | • |   | the      timing of cash flows, if any, from the operations of our portfolio      companies, including Katonah DebtAdvisors. |
|--------|---------|--------|-----------------------------------------------------------------------------------------------------------------------------|

----

|                 |    |                                                                                                                         |    | Page |
|----------------------|--------------|------------------------------------------------------------------------------------------------------------------------------|--------------|------|
| Part      I          |    |                                                                                                                         |
| Item 1.         |    | Business                                                                                                                     |    | 1    |
| Item 1A.        |    | Risk Factors                                                                                                                 |    | 32   |
| Item 1B.        |    | Unresolved Staff Comments                                                                                                    |    | 42   |
| Item 2.         |    | Properties                                                                                                                   |    | 42   |
| Item 3.         |    | Legal Proceedings                                                                                                            |    | 43   |
| Item 4.         |    | Submission of Matters to a Vote of Security      Holders                                                                     |    | 43   |
|                 |         |
| Part II         |    |                                                                                                                         |
| Item 5.         |    | Market for Registrant’s Common Equity, Related      Stockholder Matters and Issuer Purchases of Equity      Securities |    | 44   |
| Item 6.         |    | Selected Financial Data                                                                                                      |    | 48   |
| Item 7.         |    | Management’s Discussion and Analysis of Financial      Condition and Results of Operations                             |    | 49   |
| Item 7A.        |    | Quantitative and Qualitative Disclosures About      Market Risk                                                              |    | 58   |
| Item 8.         |    | Financial Statements and Supplementary      Data                                                                             |    | 60   |
| Item 9.         |    | Changes in and Disagreements with Accountants on      Accounting and Financial Disclosure                                    |    | 60   |
| Item 9A.        |    | Controls and Procedures                                                                                                      |    | 60   |
| Item 9B.        |    | Other Information                                                                                                            |    | 61   |
|                 |         |
| Part III        |         |                                                                                                                         |
| Item 10.        |    | Directors, Executive Officers and Corporate      Governance                                                                  |    | 62   |
| Item 11.        |    | Executive Compensation                                                                                                       |    | 62   |
| Item 12.        |    | Security Ownership of Certain Beneficial Owners      and Management and Related Stockholder Matters                          |    | 62   |
| Item 13.        |    | Certain Relationships and Related Transactions,      and Director Independence                                               |    | 62   |
| Item 14.        |    | Principle Accountant Fees and      Services                                                                                  |    | 62   |
|                 |         |
| Part IV         |    |                                                                                                                         |
| Item 15.        |    | Exhibits and Financial Statement      Schedules                                                                              |    | 63   |
| Signatures           |    | 66                                                                                                                           |
| Financial Statements |    | F-1                                                                                                                          |

----

|  Item 1. | Business |
|--------------------|----------|

----

|                                                              |   | December 31, 2008 |        |   | December 31, 2007 |   |
|-------------------------------------------------------------------|--------|-----------------------------|-------------|--------|-----------------------------|--------|
|                                                         |   | Fair Value 1 |        |   | per Share 1  |   |   | Fair Value 1 |   |   | per Share 1 |   |
|  Investments      at fair value:                             |   |                        |        |   |                        |   |   |   |   |   |   |   |
|       Time      deposits            |   | $                           | 12,185,997  |   |                        | $      | 0.57 |   |   | $ | 15,674,489 |   |   | $ | 0.87 |   |
|       Money      market account     |   |                        | 10          |   |                        |   | — |   |   |   | 20,766 |   |   |   | — |   |
|       Debt      securities          |   |                        | 384,486,111 |   |                        |   | 17.94 |   |   |   | 410,954,082 |   |   |   | 22.81 |   |
|       CLO      Fund securities      |   |                        | 56,635,236  |   |                        |   | 2.64 |   |   |   | 31,020,000 |   |   |   | 1.72 |   |
|       Equity      securities        |   |                        | 4,389,831   |   |                        |   | 0.21 |   |   |   | 4,752,250 |   |   |   | 0.27 |   |
|       Asset      manager affiliates |   |                        | 56,528,088  |   |                        |   | 2.64 |   |   |   | 58,585,360 |   |   |   | 3.25 |   |
|  Cash                                                        |   |                        | 251,412     |   |                        |   | 0.01 |   |   |   | 2,088,770 |   |   |   | 0.12 |   |
|  Other      assets                                           |   |                        | 8,395,626   |   |                        |   | 0.39 |   |   |   | 10,046,242 |   |   |   | 0.56 |   |
|  Total      Assets                                           |   | $                           | 522,872,311 |   |                        | $      | 24.40 |   |   | $ | 533,141,959 |   |   | $ | 29.60 |   |
|                                                              |   |                        |        |   |                        |   |   |   |   |   |   |   |   |   |   |   |
|  Borrowings                                                  |   | $                           | 261,691,148 |   |                        | $      | 12.21 |   |   | $ | 255,000,000 |   |   | $ | 14.15 |   |
|  Other      liabilities                                      |   |                        | 10,899,063  |   |                        |   | 0.51 |   |   |   | 19,073,795 |   |   |   | 1.06 |   |
|                                                              |   |                        |        |   |                        |   |   |   |   |   |   |   |   |   |   |   |
|  Total      Liabilities                                      |   | $                           | 272,590,211 |   |                        | $      | 12.72 |   |   | $ | 274,073,795 |   |   | $ | 15.21 |   |
|                                                              |   |                        |        |   |                        |   |   |   |   |   |   |   |   |   |   |   |
|  NET      ASSET VALUE                                        |   | $                           | 250,282,100 |   |                        | $      | 11.68 |   |   | $ | 259,068,164 |   |   | $ | 14.39 |   |

----

| 1  | Our      balance sheet at fair value and resultant net asset value are calculated      on a basis consistent with accounting principles generally accepted in the      United States of America ("GAAP").  Our per share presentation      of such amounts (other than net asset value per share) is an internally      derived non-GAAP performance measure calculated by dividing the balance      sheet amount per line item by outstanding shares.  We believe      that the per share amounts for such balance sheet items are helpful in      analyzing our balance sheet both quantitatively and qualitatively in that      our shares may trade based on a percentage of net asset value and      individual investors may weight certain balance sheet items differently in      performing any analysis of theCompany. |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | represent      approximately 75% of total investmentportfolio; |
|--------|--------|----------------------------------------------------------------|

|   | · | represent      credit instruments issued by corporate  borrowers; |
|--------|--------|-------------------------------------------------------------------|

|   | · | no      asset-backed securities such as those secured by commercial mortgages or      residential mortgages and no consumer  borrowings; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | primarily      senior secured and junior secured loans (42% and 25%      respectively); |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | spread      across 26 different industries and 93 different  entities; |
|--------|--------|------------------------------------------------------------------------|

|   | · | average      balance per entity of approximately $4  million; |
|--------|--------|--------------------------------------------------------------------|

|   | · | all      but two issuers current on their debt service  obligations; |
|--------|--------|----------------------------------------------------------------------|

|   | · | weighted      average interest rate of 7.0%. |
|--------|--------|----------------------------------------------|

|   | · | represent      approximately 11% of total investment portfolio at December 31,      2008; |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | represent      investments in subordinated securities or equity securities issued by CLO      Funds; |
|--------|--------|------------------------------------------------------------------------------------------------------|

|   | · | all      CLO Funds invest primarily in credit instruments issued by corporate      borrowers; |
|--------|--------|-----------------------------------------------------------------------------------------------|

|   | · | no      asset-backed securities such as those secured by commercial mortgages or      residential mortgages and no consumer  borrowings; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | all      CLO Funds have made all required cash payments to all classes of      investors; |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | nine      different CLO Fund securities; five of such CLO Funds are managed by      Katonah Debt Advisors; |
|--------|--------|------------------------------------------------------------------------------------------------------------|

|   | · | seasoned      CLOs (for which at least four quarterly distributions have been made)      currently providing an annualized 29% cash return on investment during the      year ended December 31, 2008. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | represents      approximately 11% of total investmentportfolio; |
|--------|--------|-----------------------------------------------------------------|

|   | · | represents      our 100% ownership of the equity interest of a CLO Fund manager focused on      corporate credit investing; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|

|   | · | Katonah      Debt Advisors has approximately $2.1 billion of assets under      management; |
|--------|--------|--------------------------------------------------------------------------------------------|

|   | · | receives      contractual and recurring asset management fees based on par value of      managed investments; |
|--------|--------|---------------------------------------------------------------------------------------------------------------|

|   | · | typically      receives a one-time structuring fee upon completion of a new CLO      Fund; |
|--------|--------|--------------------------------------------------------------------------------------------|

|   | · | may      receive an incentive fee upon liquidation of a CLO Fund provided that the      CLO Fund achieves a minimum designated return on    investment; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | dividends      declared by Katonah Debt Advisors are recognized as dividend income from      affiliate asset manager on our statement of operations and are an      additional source of income to pay ourdividend; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | for      the year ended December 31, 2008, Katonah Debt Advisors had an after-tax      net loss of approximately $765,000; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------|

|   | · | for      the year ended December 31, 2008, Katonah Debt Advisors made a      distribution of over $1 million in the form of a dividend which is      recognized as current earnings to theCompany. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | time      deposits and money market accounts represent approximately 2% of our total      investment portfolio; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

|   | · | time      deposits, represented by overnight Eurodollar deposits, are partially      restricted under terms of the secured credit  facility; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      money market account contains restricted cash held for employee flexible      spending accounts. |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

----

----

|   | • |   | 98%      of our ordinary net taxable income for the calendar  year; |
|--------|---------|--------|---------------------------------------------------------------------|

|   | • |   | 98%      of our capital gains, if any, in excess of capital losses for the one-year      period ending on October 31 of the calendar year;  and |
|--------|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | any      net ordinary income and net capital gains for the preceding year that were      not distributed during such year. |
|--------|---------|--------|----------------------------------------------------------------------------------------------------------------------------|

|                                              |         | Dividend |   | DeclarationDate |       | Record      Date |       | Pay      Date |
|---------------------------------------------------|--------------|----------|--------|-----------------|------------|------------------|------------|---------------|
| 2008:                                             |    |     |   |       |       |             |       |          |   |
|      Fourth      quarter |         | $        | 0.27   |            | 12/19/2008 |             | 12/31/2008 |          | 1/29/2009 |
|      Third      quarter  |         |     | 0.35   |            | 9/19/2008  |             | 10/9/2008  |          | 10/28/2008 |
|      Second      quarter |    |     | 0.41   |            | 6/13/2008  |             | 7/9/2008   |          | 7/28/2008 |
|      First      quarter  |    |     | 0.41   |       | 3/14/2008  |             | 4/8/2008   |          | 4/28/2008 |
|                                              |         |     |   |            |       |             |       |          |   |
| Total      declared for 2008                      |         | $        | 1.44   |            |       |             |       |          |   |
|                                              |         |     |   |            |       |             |       |          |   |
| 2007:                                             |    |     |   |       |       |             |       |          |   |
|      Fourth      quarter |    | $        | 0.39   |       | 12/14/2007 |             | 12/24/2007 |          | 1/24/2008 |
|      Third      quarter  |    |     | 0.37   |       | 9/24/2007  |             | 10/10/2007 |          | 10/26/2007 |
|      Second      quarter |    |     | 0.35   |       | 6/8/2007   |             | 7/9/2007   |          | 7/23/2007 |
|      First      quarter  |    |     | 0.29   |       | 3/13/2007  |             | 4/6/2007   |          | 4/17/2007 |
|                                              |    |     |   |       |       |             |       |          |   |
| Total      declared for 2007                      |    | $        | 1.40   |       |       |             |       |          |   |

----

|                          |   | December 31, 2008 |        |   | December 31, 2007 |   |
|-------------------------------|--------|-----------------------------|-------------|--------|-----------------------------|--------|
| Security Type            |   | Cost                        |        |   | Fair Value             |   |   |   | %1 |   |   | Cost |   |   | Fair Value |   |   |   | %1 |   |
| Time      Deposits            |   | $                           | 12,185,997  |   |                        | $      | 12,185,997 |   |   |   | 2 | % |   | $ | 15,674,489 |   |   | $ | 15,674,489 |   |   |   | 3 | % |
| Money      Market Account     |   |                        | 10          |   |                        |   | 10 |   |   |   | — |   |   |   | 20,766 |   |   |   | 20,766 |   |   |   | — |   |
| Senior      Secured Loan      |   |                        | 235,123,695 |   |                        |   | 218,342,528 |   |   |   | 42 |   |   |   | 265,390,844 |   |   |   | 260,138,674 |   |   |   | 50 |   |
| Junior      Secured Loan      |   |                        | 143,370,524 |   |                        |   | 126,498,918 |   |   |   | 25 |   |   |   | 120,620,715 |   |   |   | 113,259,293 |   |   |   | 22 |   |
| Mezzanine      Investment     |   |                        | 37,097,183  |   |                        |   | 32,557,165 |   |   |   | 6 |   |   |   | 32,418,975 |   |   |   | 33,066,115 |   |   |   | 6 |   |
| Senior      Subordinated Bond |   |                        | 3,008,197   |   |                        |   | 2,287,500 |   |   |   | 1 |   |   |   | 3,009,230 |   |   |   | 2,490,000 |   |   |   | 1 |   |
| Senior      Unsecured Bond    |   |                        | 5,259,487   |   |                        |   | 4,800,000 |   |   |   | 1 |   |   |   | 2,000,000 |   |   |   | 2,000,000 |   |   |   | - |   |
| CLO      Fund Securities      |   |                        | 66,376,595  |   |                        |   | 56,635,236 |   |   |   | 11 |   |   |   | 36,061,264 |   |   |   | 31,020,000 |   |   |   | 6 |   |
| Equity      Securities        |   |                        | 5,256,660   |   |                        |   | 4,389,831 |   |   |   | 1 |   |   |   | 5,043,950 |   |   |   | 4,752,250 |   |   |   | 1 |   |
| Affiliate      Asset Managers |   |                        | 38,948,271  |   |                        |   | 56,528,088 |   |   |   | 11 |   |   |   | 33,469,995 |   |   |   | 58,585,360 |   |   |   | 11 |   |
| Total                         |   | $                           | 546,626,619 |   |                        | $      | 514,225,273 |   |   |   | 100 | % |   | $ | 513,710,228 |   |   | $ | 521,006,947 |   |   |   | 100 | % |

----

----

|                                              |   | 4Q08   |   |   | 3Q08   |   |   | 2Q08   |   |   | 1Q08  |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-------|--------|
| Security Type ($ in millions) |   | $      |   |   | %      |   |   | $      |   |   | %     |   |   | $ |   |   | % |   |   | $ |   |   | % |   |
| First      Lien                                   |   | $      | 218.3  |   |   |   | 56     | %      |   | $      | 228.8 |   |   |   | 57 | % |   | $ | 216.2 |   |   |   | 56 | % |   | $ | 216.1 |   |   |   | 59 | % |
| Second      Lien/Mezzanine/Bond                   |   |   | 166.1  |   |   |   | 43     |   |   |   | 166.9 |   |   |   | 42 |   |   |   | 164.5 |   |   |   | 43 |   |   |   | 147.1 |   |   |   | 40 |   |
| Equity                                            |   |   | 4.4    |   |   |   | 1      |   |   |   | 4.5   |   |   |   | 1 |   |   |   | 3.6 |   |   |   | 1 |   |   |   | 3.6 |   |   |   | 1 |   |
| Total                                             |   | $      | 388.9  |   |   |   | 100    | %      |   | $      | 400.2 |   |   |   | 100 | % |   | $ | 384.3 |   |   |   | 100 | % |   | $ | 366.8 |   |   |   | 100 | % |

|                                              |   | 4Q07   |   |   | 3Q07   |   |   | 2Q07   |   |   | 1Q07  |   |   | 4Q06   |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-------|--------|--------|--------|--------|
| Security Type ($ in millions) |   | $      |   |   | %      |   |   | $      |   |   | %     |   |   | $      |   |   | % |   |   | $ |   |   | % |   |   | $ |   |   | % |   |
| First      Lien                                   |   | $      | 260.1  |   |   |   | 63     | %      |   | $      | 190.2 |   |   |   | 55     | % |   | $ | 164.3 |   |   |   | 59 | % |   | $ | 150.4 |   |   |   | 69 | % |   | $ | 163.3 |   |   |   | 86 | % |
| Second      Lien/Mezzanine/Bond                   |   |   | 150.8  |   |   |   | 36     |   |   |   | 148.6 |   |   |   | 43     |   |   |   | 110.8 |   |   |   | 40 |   |   |   | 64.3 |   |   |   | 30 |   |   |   | 27.5 |   |   |   | 14 |   |
| Equity                                            |   |   | 4.8    |   |   |   | 1      |   |   |   | 5.0   |   |   |   | 2      |   |   |   | 3.0 |   |   |   | 1 |   |   |   | 3.0 |   |   |   | 1 |   |   |   | — |   |   |   |   |   |
| Total                                             |   | $      | 415.7  |   |   |   | 100    | %      |   | $      | 343.8 |   |   |   | 100    | % |   | $ | 278.1 |   |   |   | 100 | % |   | $ | 217.7 |   |   |   | 100 | % |   | $ | 190.8 |   |   |   | 100 | % |

----

|                                                                          |   | December      31, 2008 |        |   | December      31, 2007 |   |
|-------------------------------------------------------------------------------|--------|------------------------|-------------|--------|------------------------|--------|
| Industry      Classification                                                  |   | Cost                   |        |   | Fair      Value        |   |   |   | %1 |   |   | Cost |   |   | Fair      Value |   |   | %1 |   |
| Aerospace and      Defense                                                    |   | $                      | 35,545,254  |   |                   | $      | 34,846,047 |   |   |   | 7 | % |   | $ | 32,583,716 |   |   | $ | 32,481,819 |   |   |   | 6 | % |
| Asset Management      Companies2                                              |   |                   | 38,948,271  |   |                   |   | 56,528,088 |   |   |   | 11 |   |   |   | 33,469,995 |   |   |   | 58,585,360 |   |   |   | 10 |   |
| Automobile                                                                    |   |                   | 8,811,625   |   |                   |   | 7,750,003 |   |   |   | 2 |   |   |   | 5,286,731 |   |   |   | 5,147,010 |   |   |   | 1 |   |
| Broadcasting and      Entertainment                                           |   |                   | 2,982,607   |   |                   |   | 2,850,000 |   |   |   | 1 |   |   |   | 2,978,999 |   |   |   | 2,782,500 |   |   |   | 1 |   |
| Buildings and Real      Estate3                                               |   |                   | 38,404,495  |   |                   |   | 19,231,787 |   |   |   | 4 |   |   |   | 37,726,396 |   |   |   | 34,944,226 |   |   |   | 7 |   |
| Cargo      Transport                                                          |   |                   | 20,099,157  |   |                   |   | 20,071,001 |   |   |   | 4 |   |   |   | 14,967,369 |   |   |   | 14,958,789 |   |   |   | 3 |   |
| Chemicals, Plastics      and Rubber                                           |   |                   | 6,613,081   |   |                   |   | 5,840,000 |   |   |   | 1 |   |   |   | 3,956,582 |   |   |   | 3,220,000 |   |   |   | 1 |   |
| CLO Fund      Securities                                                      |   |                   | 66,376,595  |   |                   |   | 56,635,236 |   |   |   | 11 |   |   |   | 36,061,264 |   |   |   | 31,020,000 |   |   |   | 6 |   |
| Containers, Packaging      and Glass                                          |   |                   | 7,347,292   |   |                   |   | 7,316,295 |   |   |   | 1 |   |   |   | 8,895,059 |   |   |   | 8,895,059 |   |   |   | 2 |   |
| Diversified/Conglomerate      Manufacturing                                   |   |                   | 6,282,124   |   |                   |   | 6,095,170 |   |   |   | 1 |   |   |   | 8,931,343 |   |   |   | 8,718,855 |   |   |   | 2 |   |
| Diversified/Conglomerate      Service                                         |   |                   | 15,868,152  |   |                   |   | 15,139,713 |   |   |   | 3 |   |   |   | 17,962,721 |   |   |   | 17,303,969 |   |   |   | 3 |   |
| Ecological                                                                    |   |                   | 2,721,193   |   |                   |   | 2,727,813 |   |   |   | 1 |   |   |   | 3,937,850 |   |   |   | 3,937,850 |   |   |   | 1 |   |
| Electronics                                                                   |   |                   | 15,172,568  |   |                   |   | 13,686,879 |   |   |   | 3 |   |   |   | 15,830,382 |   |   |   | 15,158,502 |   |   |   | 3 |   |
| Farming and      Agriculture                                                  |   |                   | 4,298,336   |   |                   |   | 1,538,550 |   |   |   | - |   |   |   | 4,800,651 |   |   |   | 4,058,835 |   |   |   | 1 |   |
| Finance                                                                       |   |                   | 14,979,849  |   |                   |   | 13,830,557 |   |   |   | 3 |   |   |   | 11,590,697 |   |   |   | 11,209,824 |   |   |   | 2 |   |
| Healthcare, Education      and Childcare                                      |   |                   | 49,379,475  |   |                   |   | 49,581,920 |   |   |   | 10 |   |   |   | 46,715,870 |   |   |   | 46,637,705 |   |   |   | 9 |   |
| Home and Office      Furnishings, Housewares, and Durable Consumer      Goods |   |                   | 21,331,162  |   |                   |   | 20,273,496 |   |   |   | 4 |   |   |   | 24,091,185 |   |   |   | 23,265,816 |   |   |   | 3 |   |
| Hotels, Motels, Inns      and Gaming                                          |   |                   | 6,322,276   |   |                   |   | 6,073,739 |   |   |   | 1 |   |   |   | 9,364,165 |   |   |   | 9,091,041 |   |   |   | 2 |   |
| Insurance                                                                     |   |                   | 10,983,041  |   |                   |   | 10,693,769 |   |   |   | 2 |   |   |   | 24,346,884 |   |   |   | 23,941,763 |   |   |   | 5 |   |
| Leisure, Amusement,      Motion Pictures, Entertainment                       |   |                   | 16,929,910  |   |                   |   | 16,903,100 |   |   |   | 3 |   |   |   | 18,402,600 |   |   |   | 18,402,600 |   |   |   | 4 |   |
| Machinery      (Non-Agriculture, Non-Construction,      Non-Electronic)       |   |                   | 35,514,554  |   |                   |   | 36,263,857 |   |   |   | 7 |   |   |   | 39,573,338 |   |   |   | 39,483,418 |   |   |   | 8 |   |
| Mining, Steel, Iron      and Non-Precious Metals                              |   |                   | 21,751,631  |   |                   |   | 19,589,104 |   |   |   | 4 |   |   |   | 16,338,446 |   |   |   | 16,069,759 |   |   |   | 3 |   |
| Oil and      Gas                                                              |   |                   | 5,998,263   |   |                   |   | 5,940,000 |   |   |   | 1 |   |   |   | 5,997,874 |   |   |   | 5,960,000 |   |   |   | 1 |   |
| Personal and Non      Durable Consumer Products (Mfg. Only)                   |   |                   | 15,208,764  |   |                   |   | 12,264,708 |   |   |   | 2 |   |   |   | 17,315,776 |   |   |   | 14,750,095 |   |   |   | 3 |   |
| Personal, Food and      Miscellaneous Services                                |   |                   | 14,722,088  |   |                   |   | 11,445,381 |   |   |   | 2 |   |   |   | 13,918,651 |   |   |   | 13,765,201 |   |   |   | 3 |   |
| Printing and      Publishing                                                  |   |                   | 29,914,605  |   |                   |   | 28,130,061 |   |   |   | 5 |   |   |   | 21,622,999 |   |   |   | 21,236,473 |   |   |   | 4 |   |
| Retail      Stores                                                            |   |                   | 3,755,829   |   |                   |   | 3,755,829 |   |   |   | 1 |   |   |   | 4,962,500 |   |   |   | 4,813,625 |   |   |   | 1 |   |
| Time Deposits and      Money Market Account                                   |   |                   | 12,186,007  |   |                   |   | 12,186,007 |   |   |   | 2 |   |   |   | 15,695,255 |   |   |   | 15,695,255 |   |   |   | 2 |   |
| Utilities                                                                     |   |                   | 18,178,415  |   |                   |   | 17,037,163 |   |   |   | 3 |   |   |   | 16,384,930 |   |   |   | 15,471,598 |   |   |   | 3 |   |
| Total                                                                         |   | $                      | 546,626,619 |   |                   | $      | 514,225,273 |   |   |   | 100 | % |   | $ | 513,710,228 |   |   | $ | 521,006,947 |   |   |   | 100 | % |

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| 1  | Calculated      as a percentage of total portfolio at fair value.                                                                                                                                                                                                                                                                                                                                                                                        |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2  | Represents      Katonah Debt Advisors and other asset manager  affiliates.                                                                                                                                                                                                                                                                                                                                                                               |
| 3  | Buildings      and real estate relate to real estate ownership, builders, managers and      developers and excludes mortgage debt investments and mortgage lenders or      originators. As of December 31, 2008 and December 31, 2007, the Company      had no exposure to mortgage securities (residential mortgage bonds,      commercial mortgage backed securities, or related asset backed securities)      or companies providing mortgagelending. |

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----

|                                           |   |                         |   |   |   |   | December 31, 2008 |   |       | December 31, 2007 |   |
|-----------------------------------------------------|--------|------------------------------|--------|--------|--------|--------|-----------------------------|--------|------------|-----------------------------|--------|
|  CLO Fund Securities                 |   | Investment                   |   | %1     |   |   | Cost                        |   |       | Fair Value             |   |   | Cost |   |   | Fair Value |   |
|  Grant Grove CLO, Ltd.          |   | Subordinated Securities |   |   | 22.2   | %      |                        | $      | 4,620,951  |                        |   | $ | 4,665,000 |   |   | $ | 4,415,580 |   |   | $ | 4,250,000 |   |
|  Katonah      III, Ltd.                        |   | Preferred      Shares        |   |   | 23.1   |   |                        |   | 4,500,000  |                        |   |   | 1,661,000 |   |   |   | 4,500,000 |   |   |   | 2,810,000 |   |
|  Katonah      IV, Ltd.                         |   | Preferred      Shares        |   |   | 17.1   |   |                        |   | 3,150,000  |                        |   |   | 1,601,000 |   |   |   | 3,150,000 |   |   |   | 2,420,000 |   |
|  Katonah      V, Ltd.                          |   | Preferred      Shares        |   |   | 26.7   |   |                        |   | 3,320,000  |                        |   |   | 1,172,000 |   |   |   | 3,320,000 |   |   |   | 420,000 |   |
|  Katonah VII CLO Ltd.2     |   | Subordinated Securities |   |   | 16.4   |   |                        |   | 4,500,000  |                        |   |   | 2,629,000 |   |   |   | 4,500,000 |   |   |   | 3,950,000 |   |
|  Katonah VIII CLO Ltd.2    |   | Subordinated Securities |   |   | 10.3   |   |                        |   | 3,400,000  |                        |   |   | 2,252,000 |   |   |   | 3,400,000 |   |   |   | 3,290,000 |   |
|  Katonah IX CLO Ltd.2      |   | Preferred      Shares        |   |   | 6.9    |   |                        |   | 2,000,000  |                        |   |   | 1,921,000 |   |   |   | 2,000,000 |   |   |   | 2,000,000 |   |
|  Katonah X CLO Ltd.2       |   | Subordinated Securities |   |   | 33.3   |   |                        |   | 11,324,758 |                        |   |   | 11,875,000 |   |   |   | 10,775,684 |   |   |   | 11,880,000 |   |
|  Katonah 2007-1 CLO Ltd.2  |   | Preferred      Shares        |   |   | 100    |   |                        |   | 29,560,886 |                        |   |   | 28,859,236 |   |   |   | — |   |   |   | — |   |
|  Total                                         |   |                         |   |   |   |   |                        | $      | 66,376,595 |                        |   | $ | 56,635,236 |   |   | $ | 36,061,264 |   |   | $ | 31,020,000 |   |

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| CLO Fund Securities1  |   | Number ofSecurities |   |   | Number ofIssuers |   |   | Number ofIndustries |   |   | Average SecurityPosition Size |   |   | Average IssuerPosition Size |      |
|--------------------------------------|--------|--------------------------|--------|--------|-----------------------|--------|--------|--------------------------|--------|--------|-----------------------------------------|--------|--------|---------------------------------------|-----------|
| Grant      Grove CLO, Ltd.           |   |                     | 233    |   |                  |   | 172    |                     |   |   | 32                                      |   |   | $                                     | 1,227,114 |   |   | $ | 1,662,311 |   |
| Katonah      III, Ltd.               |   |                     | 288    |   |                  |   | 199    |                     |   |   | 31                                      |   |   |                                  | 1,284,316 |   |   |   | 1,858,708 |   |
| Katonah      IV, Ltd.                |   |                     | 297    |   |                  |   | 206    |                     |   |   | 28                                      |   |   |                                  | 1,064,247 |   |   |   | 1,534,375 |   |
| Katonah      V, Ltd.                 |   |                     | 337    |   |                  |   | 233    |                     |   |   | 30                                      |   |   |                                  | 697,774   |   |   |   | 1,009,227 |   |
| Katonah      VII CLO Ltd.            |   |                     | 263    |   |                  |   | 210    |                     |   |   | 33                                      |   |   |                                  | 1,350,514 |   |   |   | 1,691,358 |   |
| Katonah      VIII CLO Ltd            |   |                     | 262    |   |                  |   | 205    |                     |   |   | 33                                      |   |   |                                  | 1,508,199 |   |   |   | 1,927,551 |   |
| Katonah      IX CLO Ltd              |   |                     | 260    |   |                  |   | 204    |                     |   |   | 33                                      |   |   |                                  | 1,603,269 |   |   |   | 2,043,383 |   |
| Katonah      X CLO Ltd               |   |                     | 257    |   |                  |   | 200    |                     |   |   | 33                                      |   |   |                                  | 1,855,771 |   |   |   | 2,384,665 |   |
| Katonah      2007-1 CLO Ltd          |   |                     | 202    |   |                  |   | 164    |                     |   |   | 31                                      |   |   |                                  | 1,563,595 |   |   |   | 1,925,891 |   |

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|   | • |   | senior      secured term loans from $10 to $20 million maturing in five to seven      years; |
|--------|---------|--------|---------------------------------------------------------------------------------------------------|

|   | • |   | second      lien term loans from $5 to $20 million maturing in six to eight      years; |
|--------|---------|--------|----------------------------------------------------------------------------------------------|

|   | • |   | senior      unsecured loans $5 to $10 million maturing in six to eight      years; |
|--------|---------|--------|-----------------------------------------------------------------------------------------|

|   | • |   | mezzanine      loans from $5 to $10 million maturing in seven to ten years;      and |
|--------|---------|--------|-------------------------------------------------------------------------------------------|

|   | • |   | equity      investments from $1 to $5 million. |
|--------|---------|--------|------------------------------------------------|

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|   | • |   | companies      with EBITDA of $10 to $50 million; |
|--------|---------|--------|---------------------------------------------------|

|   | • |   | companies      with financing needs of $25 to $150million; |
|--------|---------|--------|------------------------------------------------------------|

|   | • |   | companies      purchased by top tier equitysponsors; |
|--------|---------|--------|------------------------------------------------------|

|   | • |   | non-sponsored      companies with successful management and  systems; |
|--------|---------|--------|-----------------------------------------------------------------------|

|   | • |   | high-yield      bonds and broadly syndicated loans to larger companies on a selective      basis; and |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------|

|   | • |   | equity      co-investment in companies where we see substantial opportunity for      capital appreciation. |
|--------|---------|--------|------------------------------------------------------------------------------------------------------------|

|   | • |   | private      equity sponsors; |
|--------|---------|--------|-------------------------------|

|   | • |   | regional      investment banks for non-sponsoredcompanies; |
|--------|---------|--------|------------------------------------------------------------|

|   | • |   | other      middle market lenders with whom we can “club”  loans; |
|--------|---------|--------|------------------------------------------------------------------------------|

|   | • |   | Katonah      Debt Advisors with regard to high-yield bonds and syndicated loans;      and |
|--------|---------|--------|-------------------------------------------------------------------------------------------|

|   | • |   | Kohlberg &      Co. with regard to selected private equity investment      opportunities. |
|--------|---------|--------|----------------------------------------------------------------------------------------------------|

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|   | • |   | Industry      fundamentals; |
|--------|---------|--------|-----------------------------|

|   | • |   | Competitive      position and market share; |
|--------|---------|--------|---------------------------------------------|

|   | • |   | Past      ability to work through historicaldown-cycles; |
|--------|---------|--------|----------------------------------------------------------|

|   | • |   | Quality      of financial and technologyinfrastructure; |
|--------|---------|--------|---------------------------------------------------------|

|   | • |   | Sourcing      risks and opportunities; |
|--------|---------|--------|----------------------------------------|

|   | • |   | Labor      and union strategy; |
|--------|---------|--------|--------------------------------|

|   | • |   | Technology      risk; |
|--------|---------|--------|-----------------------|

|   | • |   | Diversity      of customer base and product lines; |
|--------|---------|--------|----------------------------------------------------|

|   | • |   | Quality      and experience of management; |
|--------|---------|--------|--------------------------------------------|

|   | • |   | Quality      of financial sponsor (if applicable);and |
|--------|---------|--------|-------------------------------------------------------|

|   | • |   | Acquisition      and integration history. |
|--------|---------|--------|-------------------------------------------|

|   | • |   | Income      statement analysis of growth and margintrends; |
|--------|---------|--------|------------------------------------------------------------|

|   | • |   | Balance      sheet analysis of working capitalefficiency; |
|--------|---------|--------|-----------------------------------------------------------|

|   | • |   | Cash      flow analysis of capital expenditures and free cash  flow; |
|--------|---------|--------|----------------------------------------------------------------------|

|   | • |   | Financial      ratio and market share standing among comparable  companies; |
|--------|---------|--------|-----------------------------------------------------------------------------|

|   | • |   | Financial      projections: underwriting versus stresscase; |
|--------|---------|--------|-------------------------------------------------------------|

|   | • |   | Event      specific Maximum Reasonable Adversity credit  modeling; |
|--------|---------|--------|--------------------------------------------------------------------|

|   | • |   | Future      capital expenditure needs and asset saleplans; |
|--------|---------|--------|------------------------------------------------------------|

|   | • |   | Downside      protection to limit losses in an event of  default; |
|--------|---------|--------|-------------------------------------------------------------------|

|   | • |   | Risk      adjusted returns and relative value analysis;  and |
|--------|---------|--------|--------------------------------------------------------------|

|   | • |   | Enterprise      and asset valuations. |
|--------|---------|--------|---------------------------------------|

----

|   | • |   | reviewing      financial statements with comparisons to prior year financial statements,      as well as the current budget including key financial ratios such as      debt/EBITDA, margins and fixed chargecoverage; |
|--------|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | independently      computing and verifying compliance with financial    covenants; |
|--------|---------|--------|------------------------------------------------------------------------------------|

|   | • |   | reviewing      and analyzing monthly borrowing base, ifany; |
|--------|---------|--------|-------------------------------------------------------------|

|   | • |   | a      monthly discussion of MD&A with company management and the private      equity sponsor, if applicable; |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | • |   | determining      if current performance could cause future financial covenant      default; |
|--------|---------|--------|---------------------------------------------------------------------------------------------|

|   | • |   | discussing      prospects with the private equity sponsor, if  applicable; |
|--------|---------|--------|----------------------------------------------------------------------------|

|   | • |   | determining      if a portfolio company should be added to our “watch list” (companies to      be reviewed in more depth); |
|--------|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | if      a company is not meeting expectations, reviewing original underwriting      assumptions and determining if either enterprise value or asset value has      deteriorated enough to warrant further action;  and |
|--------|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | a      monthly update to be reviewed by both the Chief Executive Officer (“CEO”)      and Chief Investment Officer(“CIO”). |
|--------|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | • |   | Internally managed structure      and significant management resources.    We are      internally managed by our executive officers under the supervision of our      Board of Directors and do not depend on a third party investment advisor.      As a result, we do not pay investment advisory fees and all of our income      is available to pay our operating costs and to make distributions to our      stockholders. |
|--------|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Multiple sourcing capabilities      for assets.    We have multiple sources of      loans, mezzanine investments and equity investments through our industry      relationships, Katonah Debt Advisors and our strategic relationship with      Kohlberg & Co. |
|--------|---------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Disciplined investment      process.    We employ a rigorous credit review      process and due diligence intensive investment strategy which our senior      management has developed over more than 20 years of lending. For each      analyzed company, we develop our own underwriting case and multiple stress      case scenarios and an event-specific financial model reflecting company,      industry and market variables. Generally, both we and the CLO Funds      managed by Katonah Debt Advisors have decided not to invest in highly      leveraged or “covenant light” creditfacilities. |
|--------|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Katonah Debt Advisors’ credit      platform.    Katonah Debt Advisors serves as a      source of our direct investment opportunities and cash flow, and certain      credit analysts employed by Katonah Debt Advisors who also serve as      officers of the Company serve as a resource for credit      analysis. |
|--------|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Investments in a wide variety      of portfolio companies in a number of different industries with no direct      exposure to mortgage-backed securities.    Our      investment portfolio (excluding our investments in Katonah Debt Advisors      and CLO Fund securities) is spread across 26 different industries and 93      different entities with an average balance per entity of      approximately $4 million. Our investment portfolio as well as the      investment portfolios of the CLO Funds in which we have invested and the      investment portfolios of the CLO Funds managed by Katonah Debt Advisors      consist exclusively of credit instruments and other securities issued by      companies and do not include any asset-backed securities secured by      commercial mortgages, residential mortgages or other consumer      borrowings. |
|--------|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Strategic relationship with      Kohlberg & Co.    We believe that      Kohlberg & Co. is one of the oldest and most well-known private      equity firms focused on the middle market, and we expect to continue to      derive substantial benefits from our strategic relationship with      Kohlberg & Co. |
|--------|---------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Significant equity ownership      and alignment of incentives.    Our senior      management team, the senior management team of Katonah Debt Advisors and      affiliates of Kohlberg & Co. together have a significant equity      interest in the Company, ensuring that their incentives are strongly      aligned with those of ourstockholders. |
|--------|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · |   | Securities      of an “eligible portfolio company” purchased in transactions not involving      any public offering. An “eligible portfolio company” is defined in the      1940 Act as any issuer which: |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (a) | is      organized under the laws of, and has its principal place of business in,      the United States; |
|--------|-----|----------------------------------------------------------------------------------------------------------|

|   | (b) | is      not an investment company (other than a small business investment company      wholly-owned by the BDC) or a company that would be an investment company      but for certain exclusions under the 1940 Act;  and |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | satisfies      any of the following: |
|--------|-----|--------------------------------------|

|   | (i) | does      not have outstanding any class of securities with respect to which a      broker or dealer may extend margincredit; |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | is      controlled by a BDC or a group of companies including a BDC and the BDC      has an affiliated person who is a director of the eligible portfolio      company; |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | is      a small and solvent company having total assets of not more than $4      million and capital and surplus of not less than $2 million;      or |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | does      not have any class of securities listed on a national securities      exchange. |
|--------|------|-------------------------------------------------------------------------------------------|

|   | · |   | Securities      of any eligible portfolio company that we  control; |
|--------|--------|--------|---------------------------------------------------------------------|

|   | · |   | Securities      purchased in a private transaction from a U.S. issuer that is not an      investment company and is in bankruptcy and subject to      reorganization; |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · |   | Securities      received in exchange for or distributed on or with respect to securities      described above, or pursuant to the conversion of warrants or rights      relating to such securities; |
|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · |   | Cash,      cash equivalents, U.S. government securities or high-quality debt      securities maturing in one year or less from the time of investment;      and |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · |   | Under      certain circumstances, securities of companies that were eligible      portfolio companies at the time of the initial investment but that are not      eligible portfolio companies at the time of the follow-on      investment. |
|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · |   | a      citizen or individual resident of the United States including an alien      individual who is a lawful permanent resident of the United States or      meets the “substantial presence” test in Section 7701(b) of the      Code; |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · |   | a      corporation or other entity taxable as a corporation, for U.S. federal      income tax purposes, created or organized in or under the laws of the      United States or any political subdivision  thereof; |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · |   | a      trust over the administration of which a court in the U.S. has primary      supervision or over which U.S. persons have control;  or |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · |   | an      estate, the income of which is subject to U.S. federal income taxation      regardless of its source. |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------------|

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|   | · |   | have      in effect at all times during each taxable year an election to be      regulated as a BDC under the 1940Act; |
|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------|

|   | · |   | in      each taxable year, derive at least 90% of our gross income from      (a) dividends, interest, payments with respect to certain securities      loans, gains from the sale of stock or other securities, or other income      derived with respect to our business of investing in such stock or      securities and (b) net income derived from an interest in a      “qualified publicly traded partnership” (as defined by the Code) (all such      income “Qualifying Income”); and |
|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · |   | diversify      our holdings so that at the end of each quarter of the taxable year:      (i) at least 50% of the value of our assets consists of cash, cash      equivalents, U.S. government securities, securities of other RICs, and      other securities if such other securities of any one issuer do not      represent more than 5% of the value of our assets or more than 10% of the      outstanding voting securities of such issuer; and (ii) no more than      25% of the value of our assets is invested in the securities, other than      U.S. government securities or securities of other RICs, of (a) one      issuer, (b) two or more issuers that are controlled, as determined      under applicable tax rules, by us and that are engaged in the same or      similar or related trades or businesses or (c) one or more “qualified      publicly traded partnerships” (the “Diversification    Tests”). |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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----

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|   | · |   |  that      has not provided a satisfactory statement that the beneficial owner is not      a U.S. person; |
|--------|--------|--------|----------------------------------------------------------------------------------------------------------------|

|   | · |   |  to      the extent that the dividend is attributable to certain interest on an      obligation if the non-U.S. stockholder is the issuer or is a 10%      stockholder of the issuer; |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · |   |  that      is within certain foreign countries that have inadequate information      exchange with the United States; or |
|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|

|   | · |   |  to      the extent the dividend is attributable to interest paid by a person that      is a related person of the non-U.S. stockholder and the non-U.S.      stockholder is a “controlled foreign corporation” for U.S. federal income      tax purposes. |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Item 1A. | Risk      Factors |
|---------------|-------------------|

----

----

----

|   | • |   | a      likelihood of greater volatility of net asset value and market price of      our common stock than a comparable portfolio without    leverage; |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | exposure      to increased risk of loss if we incur debt or issue senior securities to      finance investments because a decrease in the value of our investments      would have a greater negative impact on our returns and therefore the      value of our common stock than if we did not use  leverage; |
|--------|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | that      the covenants contained in the documents governing the Facility or other      debt instruments could restrict our operating flexibility. Such covenants      may impose asset coverage or investment portfolio composition requirements      that are more stringent than those imposed by the 1940 Act and could      require us to liquidate investments at an inopportune time;      and |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | that      we, and indirectly our stockholders, will bear the cost of leverage,      including issuance and servicing costs ( i.e. ,      interest). |
|--------|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | • |   | limited      financial resources and inability to meet their obligations, which may be      accompanied by a deterioration in the value of any collateral and a      reduction in the likelihood of our realizing the value of any guarantees      we may have obtained in connection with our  investment; |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | shorter      operating histories, narrower product lines and smaller market shares than      larger businesses, which tend to render them more vulnerable to      competitors’ actions and market conditions, as well as general economic      downturns; |
|--------|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | dependence      on management talents and efforts of a small group of persons; therefore,      the death, disability, resignation or termination of one or more of these      persons could have a material adverse impact on our portfolio company and,      in turn, on us; |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | less      predictable operating results, being parties to litigation from time to      time, engaging in rapidly changing businesses with products subject to a      substantial risk of obsolescence, and requiring substantial additional      capital to support their operations, finance expansion or maintain their      competitive position; |
|--------|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | difficulty      accessing the capital markets to meet future capital needs;      and |
|--------|---------|--------|--------------------------------------------------------------------------------------|

|   | • |   | generally      less publicly available information about their businesses, operations and      financial condition. |
|--------|---------|--------|---------------------------------------------------------------------------------------------------------------------|

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----

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----

|   | • |   | Senior Securities.          As a result of issuing senior securities, we would      also be exposed to typical risks associated with leverage, including an      increased risk of loss. If we issue preferred securities they would rank      “senior” to common stock in our capital structure. Preferred stockholders      would have separate voting rights and may have rights, preferences or      privileges more favorable than those of our common stock. Furthermore, the      issuance of preferred securities could have the effect of delaying,      deferring or preventing a transaction or a change of control that might      involve a premium price for our common stockholders or otherwise be in      your best interest. |
|--------|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Additional Common      Stock.     Our Board of Directors may decide to      issue common stock to finance our operations rather than issuing debt or      other senior securities. As a BDC, we are generally not able to issue our      common stock at a price below net asset value without first obtaining      required approvals from our stockholders and our independent directors; we      received the required stockholder approval at a special meeting on July      21, 2008 (this approval is valid for one year from the date of such      approval). In any such case, the price at which our securities are to be      issued and sold may not be less than a price, that in the determination of      our Board of Directors, closely approximates the market value of such      securities (less any commission or discount). We may also make rights      offerings to our stockholders at prices per share less than the net asset      value per share, subject to the 1940 Act. If we raise additional funds by      issuing more common stock or senior securities convertible into, or      exchangeable for, our common stock, the percentage ownership of our      stockholders at that time would decrease, and you may experience      dilution. |
|--------|---------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Securitization.          In addition to issuing securities to raise capital      as described above, we securitize a portion of our loans to generate cash      for funding new investments through our Facility. To securitize loans, we      have created a wholly-owned subsidiary and contributed a pool of loans to      the subsidiary. An inability to successfully securitize our loan portfolio      could limit our ability to grow our business and fully execute our      business strategy and adversely affect our earnings, if any. Moreover, the      successful securitization of our loan portfolio might expose us to losses,      as the residual loans in which we do not sell interests tend to be those      that are riskier and more apt to generate  losses. |
|--------|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Item 1B. | Unresolved      Staff Comments |
|---------------|--------------------------------|

| Item 2. | Properties |
|--------------|------------|

----

| Item 3. | Legal      Proceedings |
|--------------|------------------------|

| Item 4. | Submission      of Matters to a Vote of SecurityHolders |
|--------------|---------------------------------------------------------|

----

|  Item 5. | Market for      Registrant’s Common Equity, Related Stockholder Matters and Issuer      Purchases of EquitySecurities |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------|

|                                                          |   | High   |   |   | Low    |   |   | Close  |   |   | NAV1   |   |
|---------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| 2008:                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Fourth      quarter                                           |   | $      | 8.41   |   |   | $      | 3.14   |   |   | $      | 3.64   |   |   | $ | 11.68 |   |
| Third      quarter                                            |   | $      | 11.01  |   |   | $      | 8.07   |   |   | $      | 8.59   |   |   | $ | 12.97 |   |
| Second      quarter                                           |   | $      | 13.35  |   |   | $      | 9.41   |   |   | $      | 10.00  |   |   | $ | 13.14 |   |
| First      quarter                                            |   | $      | 12.99  |   |   | $      | 9.56   |   |   | $      | 10.38  |   |   | $ | 13.98 |   |
| 2007:                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fourth      quarter                                           |   | $      | 15.49  |   |   | $      | 10.00  |   |   | $      | 12.00  |   |   | $ | 14.38 |   |
| Third      quarter                                            |   | $      | 19.10  |   |   | $      | 13.65  |   |   | $      | 15.06  |   |   | $ | 14.77 |   |
| Second      quarter                                           |   | $      | 19.68  |   |   | $      | 15.75  |   |   | $      | 18.55  |   |   | $ | 15.39 |   |
| First      quarter                                            |   | $      | 18.00  |   |   | $      | 15.05  |   |   | $      | 16.00  |   |   | $ | 14.78 |   |
| 2006:                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fourth      quarter December 11, 2006—December 31, 2006 |   | $      | 17.45  |   |   | $      | 15.79  |   |   | $      | 17.30  |   |   | $ | 14.29 |   |

----

| 1 | Net      asset value per share is determined as of the last day in the relevant      quarter and therefore may not reflect the net asset value per share on the      date of the high and low closing sales prices. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |

----

|                                 |   | Dividend |   | Declaration      Date |       | Record Date |       | Pay      Date |
|------------------------------------------------|--------|----------|--------|-----------------------|------------|------------------|------------|---------------|
| 2008:                           |   |     |   |                  |       |             |       |          |
| Fourth      quarter                            |   | $        | 0.27   |                  | 12/19/2008 |             | 12/31/2008 |          | 1/29/2009 |
| Third      quarter                             |   |     | 0.35   |                  | 9/19/2008  |             | 10/9/2008  |          | 10/28/2008 |
| Second      quarter                  |   |     | 0.41   |                  | 6/13/2008  |             | 7/9/2008   |          | 7/28/2008 |
| First      quarter                   |   |     | 0.41   |                  | 3/14/2008  |             | 4/8/2007   |          | 4/28/2008 |
|                                           |   |     |   |                  |       |             |       |          |   |
| Total      declared for 2008              |   | $        | 1.44   |                  |       |             |       |          |   |
|                            |   |     |   |                  |       |             |       |          |   |
| 2007:                                |   |     |   |                  |       |             |       |          |   |
| Fourth      quarter                  |   | $        | 0.39   |                  | 12/14/2007 |             | 12/24/2007 |          | 1/24/2008 |
| Third      quarter                   |   |     | 0.37   |                  | 9/24/2007  |             | 10/10/2007 |          | 10/26/2007 |
| Second      quarter                  |   |     | 0.35   |                  | 6/8/2007   |             | 7/9/2007   |          | 7/23/2007 |
| First      quarter                   |   |     | 0.29   |                  | 3/13/2007  |             | 4/6/2007   |          | 4/17/2007 |
|                  |   |     |   |                  |       |             |       |          |   |
| Total      declared for 2007    |   | $        | 1.40   |                  |       |             |       |          |   |

----

| Note: | No      dividend was declared for the period from December 11, 2006 (inception) to      December 31, 2006.  The distributable income earned during this      period was paid during 2007. |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 1 | Total      return includes reinvestment of dividends through December 31, 2008. The      IXF is an index of diversified financial sector stocks and, as such, the      Company believes that it is representative of our industry. The Russell      2000 is a broad based equity market index that tracks companies with a      market capitalization that the Company believes are closer to Kohlberg      Capital Corporation’s than the companies represented by the S&P 500,      which the Company used in previousdisclosures. |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Item 6. | Selected      Financial Data |
|--------------|------------------------------|

| KOHLBERG      CAPITAL CORPORATION |
|-----------------------------------|
| SELECTED      FINANCIAL DATA      |

|                                                                      |   | Year EndedDecember 31, 2008 |        |   | Year EndedDecember 31, 20071 |   |        | For the PeriodDecember 11, 2006(inception) throughDecember 31, 20061 |   |
|---------------------------------------------------------------------------|--------|-----------------------------|-------------|--------|-----------------------------------|--------|-------------|---------------------------------------------------------------------------|--------|
| Income      Statement Data:                                               |   |                        |        |   |                              |   |        |                                                                      |   |
| Interest      and related portfolio income:                               |   |                        |        |   |                              |   |        |                                                                      |   |
| Interest      and Dividends                                               |   | $                           | 46,208,978  |   |                              | $      | 37,219,713  |                                                                      |   | $ | 1,110,109 |   |
| Fees      and other income                                                |   |                        | 1,653,232   |   |                              |   | 759,301     |                                                                      |   |   | 41,794 |   |
| Dividends      from affiliate asset manager                               |   |                        | 1,350,000   |   |                              |   | 500,000     |                                                                      |   |   | — |   |
|                                                                      |   |                        |        |   |                              |   |        |                                                                      |   |   |   |   |
| Total      interest and related portfolio income                          |   |                        | 49,212,210  |   |                              |   | 38,479,014  |                                                                      |   |   | 1,151,903 |   |
|                                                                      |   |                        |        |   |                              |   |        |                                                                      |   |   |   |   |
| Expenses:                                                                 |   |                        |        |   |                              |   |        |                                                                      |   |   |   |   |
| Interest      and amortization of debt issuance costs                     |   |                        | 10,925,624  |   |                              |   | 7,229,597   |                                                                      |   |   | — |   |
| Compensation                                                              |   |                        | 3,940,638   |   |                              |   | 4,104,761   |                                                                      |   |   | 175,186 |   |
| Other                                                                     |   |                        | 3,640,031   |   |                              |   | 4,385,707   |                                                                      |   |   | 487,254 |   |
|                                                                      |   |                        |        |   |                              |   |        |                                                                      |   |   |   |   |
| Total      operating expenses                                             |   |                        | 18,506,293  |   |                              |   | 15,720,065  |                                                                      |   |   | 662,440 |   |
|                                                                      |   |                        |        |   |                              |   |        |                                                                      |   |   |   |   |
| Net      Investment Income                                                |   |                        | 30,705,917  |   |                              |   | 22,758,949  |                                                                      |   |   | 489,463 |   |
| Realized      and unrealized gains (losses) on investments:               |   |                        |        |   |                              |   |        |                                                                      |   |   |   |   |
| Net      realized gains (losses)                                          |   |                        | (575,179    | )      |                              |   | 266,317     |                                                                      |   |   | 1,077 |   |
| Net      change in unrealized gains (losses)                              |   |                        | (39,698,065 | )      |                              |   | 3,116,719   |                                                                      |   |   | 4,180,000 |   |
|                                                                      |   |                        |        |   |                              |   |        |                                                                      |   |   |   |   |
| Total      net gains (losses)                                             |   |                        | (40,273,244 | )      |                              |   | 3,383,036   |                                                                      |   |   | 4,181,077 |   |
|                                                                      |   |                        |        |   |                              |   |        |                                                                      |   |   |   |   |
| Net      increase in net assets resulting from operations                 |   | $                           | (9,567,327  | )      |                              | $      | 26,141,985  |                                                                      |   | $ | 4,670,540 |   |
|                                                                      |   |                        |        |   |                              |   |        |                                                                      |   |   |   |   |
| Per      Share:                                                           |   |                        |        |   |                              |   |        |                                                                      |   |   |   |   |
| Earnings      per common share—basic                                |   | $                           | (0.47       | )      |                              | $      | 1.45        |                                                                      |   | $ | 0.26 |   |
| Net      investment income plus net realized gains per share—basic  |   | $                           | 1.49        |   |                              | $      | 1.28        |                                                                      |   | $ | 0.03 |   |
| Net      investment income plus net realized gains pershare—diluted |   | $                           | 1.47        |   |                              | $      | 1.28        |                                                                      |   | $ | 0.03 |   |
| Dividends      declared per common share                                  |   | $                           | 1.44        |   |                              | $      | 1.40        |                                                                      |   | $ | — |   |
|                                                                      |   |                        |        |   |                              |   |        |                                                                      |   |   |   |   |
| Balance      Sheet Data:                                                  |   |                        |        |   |                              |   |        |                                                                      |   |   |   |   |
| Investment      assets at fair value                                      |   | $                           | 514,225,273 |   |                              | $      | 521,006,947 |                                                                      |   | $ | 281,087,215 |   |
| Total      assets                                                         |   | $                           | 522,872,311 |   |                              | $      | 533,141,959 |                                                                      |   | $ | 282,375,847 |   |
| Total      debt outstanding                                               |   | $                           | 261,691,148 |   |                              | $      | 255,000,000 |                                                                      |   | $ | — |   |
| Stockholders'      equity                                                 |   | $                           | 250,282,100 |   |                              | $      | 259,068,164 |                                                                      |   | $ | 256,400,423 |   |
| Net      asset value per common share                                     |   | $                           | 11.68       |   |                              | $      | 14.38       |                                                                      |   | $ | 14.29 |   |
| Common      shares outstanding at end of year                             |   |                        | 21,436,936  |   |                              |   | 18,017,699  |                                                                      |   |   | 17,946,333 |   |
|                                                                      |   |                        |        |   |                              |   |        |                                                                      |   |   |   |   |
| Other      Data:                                                          |   |                        |        |   |                              |   |        |                                                                      |   |   |   |   |
| Investments      funded 2                                                 |   |                        | 109,442,643 |   |                              |   | 373,852,286 |                                                                      |   |   | 191,706,724 |   |
| Principal      collections related to investment repayments or sales2     |   |                        | 72,345,600  |   |                              |   | 104,037,559 |                                                                      |   |   | 533,315 |   |
| Number      of portfolio investments at year end2                         |   |                        | 149         |   |                              |   | 145         |                                                                      |   |   | 86 |   |
| Weighted      average yield of income producing debt investments3         |   |                        | 7.0         | %      |                              |   | 9.5         | %                                                                         |   |   | 9.0 | % |

----

| 1 | Certain      prior year amounts have been reclassified to conform to current year      presentation.                                                                                                                                                                                                                              |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Does      not include investments in time deposits or money  markets                                                                                                                                                                                                                                                              |
| 3 | Weighted      average yield of income producing debt investments is calculated as the      average yield to par outstanding balances for investments in loans and      mezzanine debt.  The yields on CLO equities and investment in      our wholly-owned portfolio manager, Katonah Debt Advisors, are      excluded. |
|   |

----

| Item 7. | Management’s      Discussion and Analysis of Financial Condition and Results of      Operations |
|--------------|-------------------------------------------------------------------------------------------------------|

----

----

|   | • |   | Level      I – Quoted prices are available in active markets for identical      investments as of the reporting date. The type of investments included in      Level I include listed securities. As required by SFAS 157, the Company      does not adjust the quoted price for these investments, even in situations      where we hold a large position and a sale could reasonably affect the      quoted price. |
|--------|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Level      II – Pricing inputs are other than quoted prices in active markets, which      are either directly or indirectly observable as of the reporting date, and      fair value is determined through the use of models or other valuation      methodologies. Investments which are generally included in this category      include illiquid corporate loans and bonds and less liquid, privately held      or restricted equity securities for which some level of recent trading      activity has been observed. |
|--------|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Level      III – Pricing inputs are unobservable for the investment and includes      situations where there is little, if any, market activity for the      investment. The inputs into the determination of fair value may require      significant management judgment or estimation. Even if observable-market      data for comparable performance or valuation measures (earnings multiples,      discount rates, other financial/valuation ratios, etc.) are available,      such investments are grouped as Level III if any significant data point      that is not also market observable (private company earnings, cash flows,      etc.) is used in the valuationprocess. |
|--------|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                      |   | Debt Securities |              |   | CLO FundSecurities |   |             | Equity Securities |   |   | Affiliate AssetManagers |   |   | Total Portfolio |             |
|-------------------------------------------|--------|----------------------|-------------------|--------|-------------------------|--------|------------------|------------------------|--------|--------|------------------------------|--------|--------|----------------------|------------------|
| 2007      Activity:                       |   |                 |              |   |                    |   |             |                   |   |   |                         |   |   |                 |             |   |   |   |   |   |
| Purchases      / originations /draws      |   | $                    | 336,182,774  |   |                    | $      | 14,775,000  |                   |   | $      | 5,043,950               |   |   | $                    | 75,000      |   |   | $ | 356,076,724  |   |
| Pay-downs      / pay-offs / sales         |   |                 | (104,037,559)     |   |                    |   | —          |                   |   |   | —                      |   |   |                 | —          |   |   |   | (104,037,559) |   |
| Net      accretion of discount            |   |                 | 260,848      |   |                    |   | 416,264     |                   |   |   | —                      |   |   |                 | —          |   |   |   | 677,112  |   |
| Net      realized gains                   |   |                 | 266,317      |   |                    |   | —          |                   |   |   | —                      |   |   |                 | —          |   |   |   | 266,317  |   |
| Increase      (decrease) in fair value    |   |                 | (12,485,682)      |   |                    |   | (5,041,264)      |                   |   |   | (291,700)                    |   |   |                 | 20,935,365  |   |   |   | 3,116,719  |   |
|                                      |   |                 |              |   |                    |   |             |                   |   |   |                         |   |   |                 |             |   |   |   |   |   |
| Fair      Value at December 31, 2007 |   | $                    | 410,954,082  |   |                    | $      | 31,020,000  |                   |   | $      | 4,752,250               |   |   | $                    | 58,585,360  |   |   | $ | 505,311,692  |   |
| 2008      Activity:                       |   |                 |              |   |                    |   |             |                   |   |   |                         |   |   |                 |             |   |   |   |   |   |
| Purchases      / originations /draws      |   | $                    | 71,949,153   |   |                    | $      | 28,859,236  |                   |   | $      | 212,710                 |   |   | $                    | 5,478,276   |   |   | $ | 106,499,376  |   |
| Pay-downs      / pay-offs / sales         |   |                 | (71,671,847)      |   |                    |   | —          |                   |   |   | —                      |   |   |                 | —          |   |   |   | (71,671,847) |   |
| Net      accretion of discount            |   |                 | 717,195      |   |                    |   | 1,456,095   |                   |   |   | —                      |   |   |                 | —          |   |   |   | 2,173,290  |   |
| Net      realized losses                  |   |                 | (575,179)         |   |                    |   | —          |                   |   |   | —                      |   |   |                 | —          |   |   |   | (575,179) |   |
| Increase      (decrease) in fair value    |   |                 | (26,887,293)      |   |                    |   | (4,700,095)      |                   |   |   | (575,129)                    |   |   |                 | (7,535,548)      |   |   |   | (39,698,065) |   |
|                                      |   |                 |              |   |                    |   |             |                   |   |   |                         |   |   |                 |             |   |   |   |   |   |
| Fair      Value at December 31, 2008      |   | $                    | 384,486,111  |   |                    | $      | 56,635,236  |                   |   | $      | 4,389,831               |   |   | $                    | 56,528,088  |   |   | $ | 502,039,266  |   |

----

----

----

|                          |   | Investments at Fair Value |        |
|-------------------------------|--------|------------------------------------------|-------------|
| Security      Type            |   | December      31, 2008                   |        |   | December      31, 2007 |   |
| Cash                          |   | $                                        | 251,412     |   |   | $ | 2,088,770 |   |
| Time      Deposits            |   |                                     | 12,185,997  |   |   |   | 15,674,489 |   |
| Money      Market Account     |   |                                     | 10          |   |   |   | 20,766 |   |
| Senior      Secured Loan      |   |                                     | 218,342,528 |   |   |   | 260,138,674 |   |
| Junior      Secured Loan      |   |                                     | 126,498,918 |   |   |   | 113,259,293 |   |
| Mezzanine      Investment     |   |                                     | 32,557,165  |   |   |   | 33,066,115 |   |
| Senior      Subordinated Bond |   |                                     | 2,287,500   |   |   |   | 2,490,000 |   |
| Senior      Unsecured Bond    |   |                                     | 4,800,000   |   |   |   | 2,000,000 |   |
| CLO      Fund Securities      |   |                                     | 56,635,236  |   |   |   | 31,020,000 |   |
| Equity      Securities        |   |                                     | 4,389,831   |   |   |   | 4,752,250 |   |
| Affiliate      Asset Managers |   |                                     | 56,528,088  |   |   |   | 58,585,360 |   |
|                          |   |                                     |        |   |   |   |   |   |
| Total                         |   | $                                        | 514,476,685 |   |   | $ | 523,095,717 |   |

----

----

|                                  |   | Payments      Due by Period |        |
|---------------------------------------|--------|-----------------------------|-------------|
| ContractualObligations                |   | Total                       |        |   | 2009 |   |   | 2010 |   |   | 2011 |   |   | 2012 |   |   | 2013 |   |   | More      than5      years |   |
| Operating      lease obligations      |   | $                           | 1,244,357   |   |   | $ | 309,691 |   |   | $ | 304,649 |   |   | $ | 311,504 |   |   | $ | 318,513 |   |   | $ | — |   |   | $ | — |   |
| Long-term      debt obligations       |   |                        | 261,691,148 |   |   |   | — |   |   |   | 261,691,148 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Unused      lending commitments1 |   |                        | 1,640,000   |   |   |   | 1,640,000 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
|                                  |   |                        |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                 |   | $                           | 264,575,505 |   |   | $ | 1,949,691 |   |   | $ | 261,995,797 |   |   | $ | 311,504 |   |   | $ | 318,513 |   |   | $ | — |   |   | $ | — |   |

----

|  Item 7A. | Quantitative      and Qualitative Disclosures about MarketRisk |
|---------------------|----------------------------------------------------------------|

----

----

| Item 8. | Financial      Statements and SupplementaryData |
|--------------|-------------------------------------------------|

| Item 9. | Changes      in and Disagreements with Accountants on Accounting and Financial      Disclosure |
|--------------|------------------------------------------------------------------------------------------------|

| Item 9A. | Controls      and Procedures |
|---------------|------------------------------|

|   | • |   | Pertain      to the maintenance of records that, in reasonable detail, accurately and      fairly reflect the transactions and dispositions of the assets of Kohlberg      Capital Corporation; |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Provide      reasonable assurance that transactions are recorded as necessary to permit      preparation of financial statements in accordance with generally accepted      accounting principles, and that our receipts and expenditures are being      made only in accordance with authorizations of Kohlberg Capital      Corporation’s management and directors;and |
|--------|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Provide      reasonable assurance regarding prevention or timely detection of      unauthorized acquisition, use or disposition of our assets that could have      a material effect on our financialstatements. |
|--------|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Item 9B. | Other      Information |
|---------------|------------------------|

----

| Item 10. | Directors,      Executive Officers and Corporate  Governance |
|---------------|--------------------------------------------------------------|

| Item 11. | Executive      Compensation |
|---------------|-----------------------------|

| Item 12. | Security      Ownership of Certain Beneficial Owners and Management and Related      Stockholder Matters |
|---------------|----------------------------------------------------------------------------------------------------------|

| Item 13. | Certain      Relationships and Related Transactions, and Director      Independence |
|---------------|-------------------------------------------------------------------------------------|

| Item 14. | Principal      Accountant Fees and Services |
|---------------|---------------------------------------------|

----

| Item 15. | Exhibits      and Financial StatementSchedules |
|---------------|------------------------------------------------|

| Balance      Sheets as of December 31, 2008 and December 31, 2007                                                                                                                           | F-4    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                        |   |
| Statements      of Operations for the years ended December 31, 2008,  December      31, 2007 and for the period from December 11, 2006 (inception) through      December 31, 2006 | F-5    |
|                                                                                                                                                                                        |   |
| Statements      of Changes in Net Assets for the years ended December 31, 2008, December      31, 2007 and for the period from December 11, 2006 (inception) through      December 31, 2006 | F-6    |
|                                                                                                                                                                                        |   |
| Statements      of Cash Flows for the years ended December 31, 2008, December 31, 2007 and      for the period from December 11, 2006 (inception) through December 31,      2006            | F-7    |
|                                                                                                                                                                                        |   |
| Schedules      of Investments as of December 31, 2008 and December 31,    2007                                                                                                              | F-8    |
|                                                                                                                                                                                        |   |
| Financial      Highlights for the years ended December 31, 2008, December 31, 2007 and      for the period from December 11, 2006 (inception) through December 31,      2006                | F-32   |
|                                                                                                                                                                                        |   |
| Notes      to Financial Statements                                                                                                                                                          | F-33   |

| ExhibitNumber   |    | Description                                                                                                             |
|-----------------|--------------|-------------------------------------------------------------------------------------------------------------------------|
|   3.1 |    | Form      of Certificate of Incorporation of Kohlberg Capital Corporation (the      “Company”). (1)         |
|            |         |
|   3.2 |    | Form      of Bylaws of the Company. (2)                                                                                 |
|            |         |
|   4.1 |    | Specimen      Certificate of the Company’s common stock, par value $0.01 per share.      (1)                      |
|            |         |
|   4.2 |    | Form      of Registration Rights Agreement. (3)                                                                         |
|            |         |
|   4.3 |    | Form      of Dividend Reinvestment Plan. (3)                                                                            |
|            |         |
| 10.1            |    | Form      of the Amended and Restated 2006 Equity Incentive Plan. (9)                                                   |
|            |         |
| 10.2            |    | Form      of Company Non-Qualified Stock Option Certificate. (3)                                                        |
|            |         |
| 10.3            |    | Form      of Custodian Agreement by and among Kohlberg Capital Corporation and U.S.      Bank National Association. (3) |
|            |         |
| 10.4            |    | Form      of License and Referral Agreement between the Company and Kohlberg &      Company, LLC. (1)               |
|            |         |
| 10.5            |    | Form      of Overhead Allocation Agreement between the Company and Katonah Debt      Advisors, LLC. (3)                 |
|            |         |
| 10.6            |    | Form      of Employment Agreement between the Company and Dayl W. Pearson. (3)                                          |
|            |         |
| 10.7            |    | Form      of Employment Agreement between the Company and Michael I. Wirth. (3)                                         |
|            |         |
| 10.8            |    | Form      of Employment Agreement between the Company and R. Jon Corless. (3)                                           |
|            |         |
| 10.9            |    | Form      of Employment Agreement between the Company and E.A. Kratzman.      (3)                                       |
|            |         |
| 10.10           |    | Form      of Employment Agreement between Katonah Debt Advisors and E.A.      Kratzman.      (3)                        |
|            |         |
| 10.11           |    | Form      of Indemnification Agreement for Officers and Directors of the Company.      (4)                              |

----

| ExhibitNumber |    | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|---------------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.12         |    | Execution      Copy of Loan Funding and Servicing Agreement dated as of February 14,      2007, by and among Kohlberg Capital Funding LLC I, Kohlberg Capital      Corporation, each of the conduit lenders and institutional lenders from      time to time party thereto, each of the lender agents from time to time      party thereto, BMO Capital Markets Corp., as the Agent, Lyon Financial      Services, Inc. (d/b/a U.S. Bank Portfolio Services), as the Backup      Services, and U.S. Bank National Association, as Trustee. (5)         |
|          |         |
| 10.13         |    | Execution      Copy of First Amendment to Loan Funding and Servicing Agreement, dated as      of May 30, 2007, by and among Kohlberg Capital Funding LLC I, the Company,      each of the conduit lenders and institutional lenders from time to time      party thereto, each of the lender agents from time to time party thereto,      BMO Capital Markets Corp., as the Agent, Lyon Financial Services, Inc.      (d/b/a U.S. Bank Portfolio Services), as the Backup Servicer, and U.S.      Bank National Association, as Trustee. (6)           |
|          |         |
| 10.14         |    | Execution      Copy of Second Amendment to Loan Funding and Servicing Agreement, dated as      of October 1, 2007, by and among Kohlberg Capital Funding LLC I, the      Company, each of the conduit lenders and institutional lenders from time      to time party thereto, each of the lender agents from time to time party      thereto, BMO Capital Markets Corp., as the Agent, Lyon Financial Services,      Inc. (d/b/a U.S. Bank Portfolio Services), as the Backup Servicer, and      U.S. Bank National Association, as Trustee. (6)  |
|          |         |
| 10.15         |    | Execution      Copy of Third Amendment to Loan Funding and Servicing Agreement, dated as      of November 21, 2007, by and among Kohlberg Capital Funding LLC I, the      Company, each of the conduit lenders and institutional lenders from time      to time party thereto, each of the lender agents from time to time party      thereto, BMO Capital Markets Corp., as the Agent, Lyon Financial Services,      Inc. (d/b/a U.S. Bank Portfolio Services), as the Backup Servicer, and      U.S. Bank National Association, as Trustee.      (8) |
|          |         |
| 10.16         |    | Execution      Copy of Purchase and Sale Agreement dated as of February 14, 2007, by and      among Kohlberg Capital Funding LLC I and the Company. (7)                                                                                                                                                                                                                                                                                                                                                                                                |
|          |         |
| 10.17         |    | Form      of 2008 Non-Employee Director Plan. (10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|          |         |
| 21.1          |    | List      of Subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|          |         |
| 23.1          |    | Consent      of Deloitte & Touche LLP, Independent Registered Public Accounting      Firm.                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|          |         |
| 31.1          |    | Chief      Executive Officer Certification Pursuant to Rule 13a-14 of the Securities      Exchange Act of 1934, as adopted pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                             |
|          |         |
| 31.2          |    | Chief      Financial Officer Certification Pursuant to Rule 13a-14 of the Securities      Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act      of 2002.                                                                                                                                                                                                                                                                                                                                                                      |
|          |         |
| 32.1          |    | Chief      Executive Officer Certification pursuant to Section 1350, Chapter 63 of      Title 18, United States Code, as adopted pursuant to Section 906 of the      Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                       |
|          |         |
| 32.2          |    | Chief      Financial Officer Certification pursuant to Section 1350, Chapter 63 of      Title 18, United States Code, as adopted pursuant to Section 906 of the      Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                       |

----

| (1) | Incorporated      by reference to the exhibit included in Pre-Effective Amendment No. 1      on Form N-2, as filed on October 6, 2006 (File      No. 333-136714). |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Incorporated      by reference to the exhibit included on Form N-2, as filed on      March 16, 2007 (FileNo. 333-141382). |
|-----|-------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Incorporated      by reference to the exhibit included in Pre-Effective Amendment No. 2      on Form N-2, as filed on November 20, 2006 (File      No. 333-136714). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Incorporated      by reference to the exhibit included in Pre-Effective Amendment No. 3      on Form N-2, as filed on November 24, 2006 (File      No. 333-136714). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Incorporated      by reference to Exhibit 10.15 of the Annual Report on Form 10-K, as filed      on March 29, 2007 (File  No. 814-00735). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Incorporated      by reference to the exhibit included in Pre-Effective Amendment No. 1      on Form N-2, as filed on October 18, 2007 (File      No. 333-146190). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Incorporated      by reference to Exhibit 10.2 of the Current Report on Form 8-K, as filed      on February 16, 2007 (File  No. 814-00735). |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (8) | Incorporated      by reference to Exhibit 10.15 of the Annual Report on Form 10-K, as filed      on March 14, 2008 (File  No. 814-00735). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Incorporated      by reference to Exhibit 10.1 of the Current Report on Form 8-K, as filed      on June 19, 2008 (File No.814-00735). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Incorporated      by reference to the exhibit included in Pre-Effective Amendment No. 1      on Form N-2, as filed on June 30, 2008 (File      No. 333-151268). |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                      |   | K      OHLBERG C APITAL C ORPORATION |
|---------------------------|--------|--------------------------------------|
|                      |   |                                 |
| Date:      March 16, 2009 |   | By                                   | /s/    Dayl      W. Pearson |
|                      |   |                                 | Dayl W.      PearsonPresident      and Chief ExecutiveOfficer |

| Signature                                                     |   | Title                                                                                                                                          |   | Date              |
|---------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|
|                                                          |   |                                                                                                                                           |   |              |
| / S      /    Dayl W.      Pearson        |   | President and Chief Executive Officer                                                                                      |   | March 16,    2009 |
| Dayl      W. Pearson                                          |   | (principal      executive officer) and Memberof      the Board of Directors                                                                    |   |              |
|                                                          |   |                                                                                                                                           |   |              |
| / S      /    Michael      I. Wirth       |   | Chief Financial Officer,                                                                                                             |   | March 16,    2009 |
| Michael      I. Wirth                                         |   | Chief Compliance      Officer,  Secretaryand      Treasurer     (principal financial andaccounting      officer) |   |              |
|                                                          |   |                                                                                                                                           |   |              |
| / S      /    Christopher      Lacovara   |   |   Member of the Board of      Directors                                                                                              |   | March 16,    2009 |
| Christopher      Lacovara                                     |   |                                                                                                                                           |   |              |
|                                                          |   |                                                                                                                                           |   |              |
| / S      /    Samuel      P. Frieder      |   |   Member of the Board of      Directors                                                                                              |   | March 16,    2009 |
| Samuel      P. Frieder                                        |   |                                                                                                                                           |   |              |
|                                                          |   |                                                                                                                                           |   |              |
| / S      /    Gary      Cademartori       |   |   Member of the Board of      Directors                                                                                              |   | March 16,    2009 |
| Gary      Cademartori                                         |   |                                                                                                                                           |   |              |
|                                                          |   |                                                                                                                                           |   |              |
| / S      /    C.      Michael Jacobi      |   |   Member of the Board of      Directors                                                                                              |   | March 16,    2009 |
| C.      Michael Jacobi                                        |   |                                                                                                                                           |   |              |
|                                                          |   |                                                                                                                                           |   |              |
| / S      /    Albert      G. Pastino      |   |   Member of the Board of      Directors                                                                                              |   | March 16,    2009 |
| Albert      G. Pastino                                        |   |                                                                                                                                           |   |              |
|                                                          |   |                                                                                                                                           |   |              |
| / S      /    C.      Turney Stevens, Jr. |   |   Member of the Board of      Directors                                                                                              |   | March 16,    2009 |
| C.      Turney Stevens, Jr.                                   |   |                                                                                                                                           |   |              |

----

| Reports      of Independent Registered Public Accounting Firm                                                                                                                               |   | F-2    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                                                                                        |   |   |
| Balance      Sheets as of December 31, 2008 and December 31, 2007                                                                                                                           |   | F-4    |
|                                                                                                                                                                                        |   |   |
| Statements      of Operations for the years ended December 31, 2008,  December      31, 2007 and for the period from December 11, 2006 (inception) through      December 31, 2006 |   | F-5    |
|                                                                                                                                                                                        |   |   |
| Statements      of Changes in Net Assets for the years ended December 31, 2008, December      31, 2007 and for the period from December 11, 2006 (inception) through      December 31, 2006 |   | F-6    |
|                                                                                                                                                                                        |   |   |
| Statements      of Cash Flows for the years ended December 31, 2008, December 31, 2007 and      for the period from December 11, 2006 (inception) through December 31,      2006            |   | F-7    |
|                                                                                                                                                                                        |   |   |
| Schedules      of Investments as of December 31, 2008 and December 31,    2007                                                                                                              |   | F-8    |
|                                                                                                                                                                                        |   |   |
| Financial      Highlights for the years ended December 31, 2008, December 31, 2007 and      for the period from December 11, 2006 (inception) through December 31,      2006                |   | F-32   |
|                                                                                                                                                                                        |   |   |
| Notes      to Financial Statements                                                                                                                                                          |   | F-33   |

----

----

----

| KOHLBERG      CAPITAL CORPORATION |
|-----------------------------------|
| BALANCE      SHEETS               |

|                                                                                                                                                                                                                                             |   | As      ofDecember      31, 2008 |        |   | As      ofDecember      31, 2007 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|-------------|--------|----------------------------------|--------|
|                                                                                                                                                                                                                                             |   |                             |        |   |                             |   |
| ASSETS                                                                                                                                                                                                                                           |   |                             |        |   |                             |   |
| Investments      at fair value:                                                                                                                                                                                                                  |   |                             |        |   |                             |   |
| Time      deposits (cost: 2008 - $12,185,997; 2007 - $15,674,489)                                                                                                                                                                                |   | $                                | 12,185,997  |   |                             | $      | 15,674,489 |   |
| Money      market account (cost: 2008 - $10; 2007 - $20,766)                                                                                                                                                                                     |   |                             | 10          |   |                             |   | 20,766 |   |
| Debt      securities (cost: 2008 - $423,859,086; 2007 -$423,439,764)                                                                                                                                                                             |   |                             | 384,486,111 |   |                             |   | 410,954,082 |   |
| CLO      fund securities managed by non-affiliates (cost: 2008 - $15,590,951; 2007      - $15,385,580)                                                                                                                                           |   |                             | 9,099,000   |   |                             |   | 9,900,000 |   |
| CLO      fund securities managed by affiliate (cost: 2008 - $50,785,644; 2007 -      $20,675,684)                                                                                                                                                |   |                             | 47,536,236  |   |                             |   | 21,120,000 |   |
| Equity      securities (cost: 2008 - $5,256,660; 2007 - $5,043,950)                                                                                                                                                                              |   |                             | 4,389,831   |   |                             |   | 4,752,250 |   |
| Asset      manager affiliates (cost: 2008 - $38,948,271; 2007 -      $33,469,995)                                                                                                                                                                |   |                             | 56,528,088  |   |                             |   | 58,585,360 |   |
| Total      Investments at fair value                                                                                                                                                                                                             |   |                             | 514,225,273 |   |                             |   | 521,006,947 |   |
| Cash                                                                                                                                                                                                                                             |   |                             | 251,412     |   |                             |   | 2,088,770 |   |
| Restricted      cash                                                                                                                                                                                                                             |   |                             | 2,119,991   |   |                             |   | 1,418,868 |   |
| Interest      and dividends receivable                                                                                                                                                                                                           |   |                             | 4,168,599   |   |                             |   | 5,592,637 |   |
| Due      from affiliates                                                                                                                                                                                                                         |   |                             | 390,590     |   |                             |   | 540,773 |   |
| Other      assets                                                                                                                                                                                                                                |   |                             | 1,716,446   |   |                             |   | 2,493,964 |   |
|                                                                                                                                                                                                                                             |   |                             |        |   |                             |   |   |   |
| Total      assets                                                                                                                                                                                                                                |   | $                                | 522,872,311 |   |                             | $      | 533,141,959 |   |
|                                                                                                                                                                                                                                             |   |                             |        |   |                             |   |   |   |
| LIABILITIES                                                                                                                                                                                                                                      |   |                             |        |   |                             |   |   |   |
| Borrowings                                                                                                                                                                                                                                       |   | $                                | 261,691,148 |   |                             | $      | 255,000,000 |   |
| Payable      for open trades                                                                                                                                                                                                                     |   |                             | 1,955,000   |   |                             |   | 5,905,000 |   |
| Accounts      payable and accrued expenses                                                                                                                                                                                                       |   |                             | 3,064,403   |   |                             |   | 6,141,892 |   |
| Dividend      payable                                                                                                                                                                                                                            |   |                             | 5,879,660   |   |                             |   | 7,026,903 |   |
|                                                                                                                                                                                                                                             |   |                             |        |   |                             |   |   |   |
| Total      liabilities                                                                                                                                                                                                                           |   | $                                | 272,590,211 |   |                             | $      | 274,073,795 |   |
| Commitments      and contingencies  (note 8)                                                                                                                                                                                           |   |                             |        |   |                             |   |   |   |
|                                                                                                                                                                                                                                             |   |                             |        |   |                             |   |   |   |
| STOCKHOLDERS'      EQUITY                                                                                                                                                                                                                        |   |                             |        |   |                             |   |   |   |
| Common      stock, par value $.01 per share, 100,000,000 common shares authorized;      21,776,519 and 21,436,936 common shares issued and outstanding at December      31, 2008 and 18,017,699 issued and outstanding at December 31,      2007 |   | $                                | 214,369     |   |                             | $      | 180,177 |   |
| Capital      in excess of par value                                                                                                                                                                                                              |   |                             | 282,171,860 |   |                             |   | 252,771,715 |   |
| Accumulated      undistributed (distribution in excess of) net investment      income                                                                                                                                                            |   |                             | 977,904     |   |                             |   | (1,180,447 | ) |
| Accumulated      net realized losses                                                                                                                                                                                                             |   |                             | (680,687    | )      |                             |   | - |   |
| Net      unrealized appreciation (depreciation) on investments                                                                                                                                                                                   |   |                             | (32,401,346 | )      |                             |   | 7,296,719 |   |
|                                                                                                                                                                                                                                             |   |                             |        |   |                             |   |   |   |
| Total      stockholders' equity                                                                                                                                                                                                                  |   | $                                | 250,282,100 |   |                             | $      | 259,068,164 |   |
|                                                                                                                                                                                                                                             |   |                             |        |   |                             |   |   |   |
| Total      liabilities and stockholders' equity                                                                                                                                                                                                  |   | $                                | 522,872,311 |   |                             | $      | 533,141,959 |   |
|                                                                                                                                                                                                                                             |   |                             |        |   |                             |   |   |   |
| NET      ASSET VALUE PER SHARE                                                                                                                                                                                                                   |   | $                                | 11.68       |   |                             | $      | 14.38 |   |

----

| KOHLBERG      CAPITAL CORPORATION |
|-----------------------------------|
| STATEMENTS      OF OPERATIONS     |

|                                                                                                                         |   |                    |             |   |                    |   |             | For      the Period December      11, 2006 |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|------------------|--------|-------------------------|--------|------------------|--------------------------------------------|--------|
|                                                                                                                         |   | For      the Year Ended |             |   | For      the Year Ended |   |             | (inception)      through                   |   |
|                                                                                                                         |   | December      31, 2008  |             |   | December      31, 2007  |   |             | December      31, 2006                |   |
| Investment      Income:                                                                                                      |   |                         |             |   |                    |   |             |                                       |   |
| Interest      from investments in debt securities                                                                            |   | $                       | 33,386,213       |   |                    | $      | 29,606,231       |                                       |   | $ | 572,065 |   |
| Interest      from cash and time deposits                                                                               |   |                    | 251,287          |   |                    |   | 552,509          |                                       |   |   | 132,841 |   |
| Dividends      from investments in CLO fund securities managed by      non-affiliates                                        |   |                    | 5,946,736        |   |                    |   | 4,528,021        |                                       |   |   | 377,503 |   |
| Dividends      from investments in CLO fund securities managed by    affiliate                                               |   |                    | 6,624,742        |   |                    |   | 2,532,952        |                                       |   |   | 27,700 |   |
| Dividends      from affiliate asset manager                                                                                  |   |                    | 1,350,000        |   |                    |   | 500,000          |                                       |   |   | — |   |
| Capital      structuring service fees                                                                                        |   |                    | 1,653,232        |   |                    |   | 759,301          |                                       |   |   | 41,794 |   |
|                                                                                                                         |   |                    |             |   |                    |   |             |                                       |   |   |   |   |
| Total      investment income                                                                                                 |   |                    | 49,212,210       |   |                    |   | 38,479,014       |                                       |   |   | 1,151,903 |   |
|                                                                                                                         |   |                    |             |   |                    |   |             |                                       |   |   |   |   |
| Expenses:                                                                                                                    |   |                    |             |   |                    |   |             |                                       |   |   |   |   |
| Interest      and amortization of debt issuance costs                                                                        |   |                    | 10,925,624       |   |                    |   | 7,229,597        |                                       |   |   | — |   |
| Compensation                                                                                                                 |   |                    | 3,940,638        |   |                    |   | 4,104,761        |                                       |   |   | 175,186 |   |
| Professional      fees                                                                                                       |   |                    | 1,992,142        |   |                    |   | 2,887,515        |                                       |   |   | 371,624 |   |
| Insurance                                                                                                                    |   |                    | 286,456          |   |                    |   | 174,647          |                                       |   |   | 12,821 |   |
| Organizational      Expenses                                                                                                 |   |                    | —          |   |                    |   | —          |                                       |   |   | 40,000 |   |
| Administrative      and other                                                                                                |   |                    | 1,361,433        |   |                    |   | 1,323,545        |                                       |   |   | 41,647 |   |
|                                                                                                                         |   |                    |             |   |                    |   |             |                                       |   |   |   |   |
| Total      expenses                                                                                                          |   |                    | 18,506,293       |   |                    |   | 15,720,065       |                                       |   |   | 641,278 |   |
|                                                                                                                         |   |                    |             |   |                    |   |             |                                       |   |   |   |   |
| Net      Investment Income before Income Tax Expense                                                                         |   |                    |  30,705,917 |   |                    |   |  22,758,949 |                                       |   |   |  510,625  |   |
| Excise      taxes                                                                                                            |   |                    | —          |   |                    |   |  —    |                                       |   |   |  (21,162 | )  |
| Net      Investment Income                                                                                                   |   |                    |  30,705,917 |   |                    |   | 22,758,949       |                                       |   |   | 489,463 |   |
| Realized      And Unrealized Gains (Losses) On Investments:                                                                  |   |                    |             |   |                    |   |             |                                       |   |   |   |   |
| Net      realized gain (loss) from investment transactions                                                                   |   |                    | (575,179         | )      |                    |   | 266,317          |                                       |   |   | 1,077  |   |
| Net      change in unrealized appreciation (depreciation) on:                                                                |   |                    |             |   |                    |   |             |                                       |   |   |   |   |
| Debt      securities                                                                                                         |   |                    | (26,887,293      | )      |                    |   | (12,485,682      | )                                          |   |   | — |   |
| Equity      securities                                                                                                       |   |                    | (575,129         | )      |                    |   | (291,700         | )                                          |   |   | — |   |
| CLO      fund securities managed by affiliate                                                                                |   |                    | (3,693,724       | )      |                    |   | 444,316          |                                       |   |   | — |   |
| CLO      fund securities managed by non-affiliates                                                                           |   |                    | (1,006,371       | )      |                    |   | (5,485,580       | )                                          |   |   | — |   |
| Affiliate      asset manager investments                                                                                     |   |                    | (7,535,548       | )      |                    |   | 20,935,365       |                                       |   |   | 4,180,000  |   |
|                                                                                                                         |   |                    |             |   |                    |   |             |                                       |   |   |   |   |
| Net      realized and unrealized appreciation (depreciation) on      investments                                             |   |                    | (40,273,244      | )      |                    |   | 3,383,036        |                                       |   |   | 4,181,077  |   |
|                                                                                                                         |   |                    |             |   |                    |   |             |                                       |   |   |   |   |
| Net      Increase (Decrease) In Stockholders’ Equity Resulting From      Operations                                    |   | $                       | (9,567,327       | )      |                    | $      | 26,141,985       |                                       |   | $ | 4,670,540 |   |
|                                                                                                                         |   |                    |             |   |                    |   |             |                                       |   |   |   |   |
| Net      Increase (Decrease) in Stockholders' Equity Resulting from Operations per      Common Share—Basic and Diluted |   | $                       | (0.47            | )      |                    | $      | 1.45             |                                       |   | $ | 0.26 |   |
| Net      Investment Income Per Common Share—Basic                                                                      |   | $                       | 1.51             |   |                    | $      | 1.27             |                                       |   | $ | 0.03 |   |
| Net      Investment Income Per Common Share—Diluted                                                                    |   | $                       | 1.50             |   |                    | $      | 1.27             |                                       |   | $ | 0.03 |   |
| Net      Investment Income and Net Realized Gains (Losses) Per Common      Share—Basic                                 |   | $                       | 1.49             |   |                    | $      | 1.28             |                                       |   | $ | 0.03 |   |
| Net      Investment Income and Net Realized Gains (Losses) Per Common      Share—Diluted                               |   | $                       | 1.47             |   |                    | $      | 1.28             |                                       |   | $ | 0.03 |   |
|                                                                                                                         |   |                    |             |   |                    |   |             |                                       |   |   |   |   |
| Weighted      Average Shares of Common Stock Outstanding—Basic                                                         |   |                    | 20,276,430       |   |                    |   | 17,977,348       |                                       |   |   | 17,946,333 |   |
| Weighted      Average Shares of Common Stock Outstanding—Diluted                                                       |   |                    | 20,455,322       |   |                    |   | 17,977,348       |                                       |   |   | 17,946,333 |   |

| See      accompanying notes to financial statements. |   |
|------------------------------------------------------|--------|

----

| KOHLBERG      CAPITAL CORPORATION        |
|------------------------------------------|
| STATEMENTS      OF CHANGES IN NET ASSETS |

|                                                                                                                                                                                                                                                                                   |   | Year      EndedDecember      31, 2008 |        |   | Year      EndedDecember      31, 2007 |   |        | For      the Period December      11, 2006 (inception)      through December      31, 2006 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|-------------|--------|---------------------------------------|--------|-------------|--------------------------------------------------------------------------------------------|--------|
| Operations:                                                                                                                                                                                                                                                                                 |   |                                  |        |   |                                  |   |        |                                                                                       |   |
| Net      investment income                                                                                                                                                                                                                                                                  |   | $                                     | 30,705,917  |   |                                  | $      | 22,758,949  |                                                                                       |   | $ | 489,463 |   |
| Net      realized gain (loss) from investment transactions                                                                                                                                                                                                                                  |   |                                  | (575,179    | )      |                                  |   | 266,317     |                                                                                       |   |   | 1,077 |   |
| Net      change in unrealized gain (loss) on investments                                                                                                                                                                                                                                    |   |                                  | (39,698,065 | )      |                                  |   | 3,116,719   |                                                                                       |   |   | 4,180,000 |   |
|                                                                                                                                                                                                                                                                                        |   |                                  |        |   |                                  |   |        |                                                                                       |   |   |   |   |
| Net      increase (decrease) in net assets resulting fromoperations                                                                                                                                                                                                                         |   |                                  | (9,567,327  | )      |                                  |   | 26,141,985  |                                                                                       |   |   | 4,670,540 |   |
|                                                                                                                                                                                                                                                                                        |   |                                  |        |   |                                  |   |        |                                                                                       |   |   |   |   |
| Shareholder      distributions:                                                                                                                                                                                                                                                             |   |                                  |        |   |                                  |   |        |                                                                                       |   |   |   |   |
| Dividends      from net investment income to common stockholders                                                                                                                                                                                                                            |   |                                  | (29,377,019 | )      |                                  |   | (22,758,949 | )                                                                                          |   |   | — |   |
| Dividends      from net investment income to restricted stockholders                                                                                                                                                                                                                        |   |                                  | (246,626    | )      |                                  |   | —     |                                                                                       |   |   | — |   |
| Dividends      in excess of net investment income to common stockholders                                                                                                                                                                                                                    |   |                                  | —     |   |                                  |   | (1,669,909  | )                                                                                          |   |   | — |   |
| Distributions      from paid-in capital to common stockholders                                                                                                                                                                                                                              |   |                                  | —     |   |                                  |   | (481,437    | )                                                                                          |   |   | — |   |
| Distributions      from realized gains to common stockholders                                                                                                                                                                                                                               |   |                                  | —     |   |                                  |   | (267,394    | )                                                                                          |   |   | — |   |
|                                                                                                                                                                                                                                                                                        |   |                                  |        |   |                                  |   |        |                                                                                       |   |   |   |   |
| Net      decrease in net assets resulting from stockholder      distributions                                                                                                                                                                                                               |   |                                  | (29,623,645 | )      |                                  |   | (25,177,689 | )                                                                                          |   |   | — |   |
|                                                                                                                                                                                                                                                                                        |   |                                  |        |   |                                  |   |        |                                                                                       |   |   |   |   |
| Capital      share transactions:                                                                                                                                                                                                                                                            |   |                                  |        |   |                                  |   |        |                                                                                       |   |   |   |   |
| Issuance      of common stock for:                                                                                                                                                                                                                                                          |   |                                  |        |   |                                  |   |        |                                                                                       |   |   |   |   |
| Initial      public offering                                                                                                                                                                                                                                                                |   |                                  | —     |   |                                  |   | —     |                                                                                       |   |   | 199,451,388 |   |
| Interest      in affiliate company                                                                                                                                                                                                                                                          |   |                                  | —     |   |                                  |   | —     |                                                                                       |   |   | 33,394,995 |   |
| Interest      in CLO securities managed by affiliate                                                                                                                                                                                                                                        |   |                                  | —     |   |                                  |   | —     |                                                                                       |   |   | 18,870,000 |   |
| Dividend      reinvestment plan                                                                                                                                                                                                                                                             |   |                                  | 2,591,296   |   |                                  |   | 1,103,245   |                                                                                       |   |   | — |   |
| Rights      offering                                                                                                                                                                                                                                                                        |   |                                  | 26,925,214  |   |                                  |   | —     |                                                                                       |   |   | — |   |
| Vesting      of restricted stock                                                                                                                                                                                                                                                            |   |                                  | 30          |   |                                  |   | —     |                                                                                       |   |   | — |   |
| Stock      based compensation                                                                                                                                                                                                                                                               |   |                                  | 888,368     |   |                                  |   | 600,200     |                                                                                       |   |   | 13,500 |   |
|                                                                                                                                                                                                                                                                                        |   |                                  |        |   |                                  |   |        |                                                                                       |   |   |   |   |
| Net      increase in net assets resulting from capital share      transactions                                                                                                                                                                                                              |   |                                  | 30,404,908  |   |                                  |   | 1,703,445   |                                                                                       |   |   | 251,729,883 |   |
|                                                                                                                                                                                                                                                                                        |   |                                  |        |   |                                  |   |        |                                                                                       |   |   |   |   |
| Net      assets at beginning of period                                                                                                                                                                                                                                                      |   |                                  | 259,068,164 |   |                                  |   | 256,400,423 |                                                                                       |   |   | — |   |
|                                                                                                                                                                                                                                                                                        |   |                                  |        |   |                                  |   |        |                                                                                       |   |   |   |   |
| Net      assets at end of period (including accumulated undistributed net      investment income of $977,904 in 2008, accumulated distribution in excess      of net investment income of $1,180,447 in 2007, and accumulated      undistributed net investment income of $489,463 in 2006) |   | $                                     | 250,282,100 |   |                                  | $      | 259,068,164 |                                                                                       |   | $ | 256,400,423 |   |
|                                                                                                                                                                                                                                                                                        |   |                                  |        |   |                                  |   |        |                                                                                       |   |   |   |   |
| Net      asset value per common share                                                                                                                                                                                                                                                       |   | $                                     | 11.68       |   |                                  | $      | 14.38       |                                                                                       |   | $ | 14.29 |   |
| Common      shares outstanding at end of period                                                                                                                                                                                                                                             |   |                                  | 21,436,936  |   |                                  |   | 18,017,699  |                                                                                       |   |   | 17,946,333 |   |

| See      accompanying notes to financialstatements. |
|-----------------------------------------------------|

----

| KOHLBERG      CAPITAL CORPORATION |
|-----------------------------------|
| STATEMENTS      OF CASH FLOWS     |

|                                                                                                                |   | Year      Ended        |                   |    | Year      Ended        |   |         | For      the Period December      11, 2006 (inception)      through |   |
|---------------------------------------------------------------------------------------------------------------------|--------|------------------------|------------------------|---------|------------------------|--------|--------------|---------------------------------------------------------------------|--------|
|                                                                                                                |   | December      31, 2008 |                   |    | December      31, 2007 |   |         | December      31, 2006                                              |   |
| OPERATING      ACTIVITIES:                                                                                          |   |                        |                   |    |                   |   |         |                                                                |   |
| Net      increase (decrease) in stockholders’ equity resulting from      operations                           |   | $                      | (9,567,327             | )  |                   | $      | 26,141,985   |                                                                |   | $ | 4,670,540 |   |
| Adjustments      to reconcile net increase (decrease) in stockholders’ equity resulting      from operations: |   |                   |                   |    |                   |   |         |                                                                |   |   |   |   |
| Net      realized loss (gain) on investment transactions                                                            |   |                   |  575,179     |    |                   |   | (266,317     | )                                                                   |   |   | (1,077 | ) |
| Net      unrealized loss (gain) on investments                                                                      |   |                   |  39,698,065  |    |                   |   | (3,116,719   | )                                                                   |   |   | (4,180,000 | ) |
| Net      accretion of discount on securities                                                                        |   |                   |  (2,173,289       | )  |                   |   | (677,112     | )                                                                   |   |   | (3,819 | ) |
| Amortization      of debt issuance cost                                                                             |   |                   |  522,015     |    |                   |   | 319,093      |                                                                |   |   | — |   |
| Purchases      of investments                                                                                       |   |                   |  (108,769,127     | )  |                   |   | (360,579,378 | )                                                                   |   |   | (200,987,595 | ) |
| Payment-in-kind      interest                                                                                       |   |                   |  (1,680,247       | )  |                   |   | (502,482     | )                                                                   |   |   | — |   |
| Proceeds      from sale and redemption of investments                                                               |   |                   |  75,181,094  |    |                   |   | 106,944,232  |                                                                |   |   | 533,315 |   |
| Stock      based compensation expense                                                                               |   |                   |  888,368     |    |                   |   | 600,200      |                                                                |   |   | 13,500 |   |
| Changes      in operating assets and liabilities:                                                                   |   |                   |                   |    |                   |   |         |                                                                |   |   |   |   |
| Decrease      (increase) in interest and dividends receivable                                                       |   |                   |  1,424,038   |    |                   |   | (4,990,552   | )                                                                   |   |   | (602,085 | ) |
| Decrease      (increase) in other assets                                                                            |   |                   |  255,502     |    |                   |   | (371,842     | )                                                                   |   |   | (156,890 | ) |
| Decrease      (increase) in due from affiliates                                                                     |   |                   |  150,183     |    |                   |   | (540,773     | )                                                                   |   |   | — |   |
| Increase      (decrease) in due to affiliates                                                                       |   |                   |  —          |    |                   |   | (87,832      | )                                                                   |   |   | 87,832 |   |
| Increase      (decrease) in accounts payable and accrued expenses                                                   |   |                   |  (3,077,489       | )  |                   |   | 4,437,344    |                                                                |   |   | 1,704,548 |   |
|                                                                                                                |   |                   |                   |    |                   |   |         |                                                                |   |   |   |   |
| Net      cash used in operating activities                                                                          |   |                   |  (6,573,035       | )  |                   |   | (232,690,153 | )                                                                   |   |   | (198,921,731 | ) |
|                                                                                                                |   |                   |                   |    |                   |   |         |                                                                |   |   |   |   |
| FINANCING      ACTIVITIES:                                                                                          |   |                   |                   |    |                   |   |         |                                                                |   |   |   |   |
| Issuance      of stock (net of offering costs)                                                                      |   |                   |  26,925,244  |    |                   |   | —      |                                                                |   |   | 199,451,388 |   |
| Dividends      paid in cash                                                                                         |   |                   |  (28,179,592      | )  |                   |   | (17,047,541  | )                                                                   |   |   | — |   |
| Proceeds      from issuance of debt (net of offering costs)                                                         |   |                   |  50,000,000  |    |                   |   | 255,000,000  |                                                                |   |   | — |   |
| Cash      paid on repayment of debt                                                                                 |   |                   |  (43,308,852      | )  |                   |   | —      |                                                                |   |   | — |   |
| Debt      issuance costs                                                                                            |   |                   |  —          |    |                   |   | (2,284,325   | )                                                                   |   |   | — |   |
| Increase      in restricted cash                                                                                    |   |                   |  (701,123         | )  |                   |   | (1,418,868   | )                                                                   |   |   | — |   |
|                                                                                                                |   |                   |                   |    |                   |   |         |                                                                |   |   |   |   |
| Net      cash provided by financing activities                                                                      |   |                   |  4,735,677   |    |                   |   | 234,249,266  |                                                                |   |   | 199,451,388 |   |
|                                                                                                                |   |                   |                   |    |                   |   |         |                                                                |   |   |   |   |
| CHANGE      IN CASH                                                                                                 |   |                   |  (1,837,358       | )  |                   |   | 1,559,113    |                                                                |   |   | 529,657 |   |
| CASH,      BEGINNING OF PERIOD                                                                                      |   |                   |  2,088,770   |    |                   |   | 529,657      |                                                                |   |   | — |   |
|                                                                                                                |   |                   |                   |    |                   |   |         |                                                                |   |   |   |   |
| CASH,      END OF PERIOD                                                                                            |   | $                      | 251,412                |    |                   | $      | 2,088,770    |                                                                |   | $ | 529,657 |   |
|                                                                                                                |   |                   |                   |    |                   |   |         |                                                                |   |   |   |   |
| Supplemental      Information:                                                                                      |   |                   |                   |    |                   |   |         |                                                                |   |   |   |   |
| Interest      paid during the period                                                                                |   | $                      | 10,984,993             |    |                   | $      | 5,474,198    |                                                                |   | $ | — |   |
| Non-cash      dividends paid during the period under dividend reinvestment      plan                                |   | $                      | 2,591,296              |    |                   | $      | 1,103,245    |                                                                |   | $ | — |   |
| Issuance      of common stock for affiliate investment                                                              |   | $                      | —                |    |                   | $      | —      |                                                                |   | $ | 33,394,995 |   |
| Issuance      of common stock for CLO equity investments managed by      affiliate                                  |   | $                      | —                |    |                   | $      | —      |                                                                |   | $ | 18,870,000 |   |
| Non-cash      settlement of warehoused loans                                                                        |   | $                      | —                |    |                   | $      | 13,293,674   |                                                                |   | $ | — |   |
|                                                                                                                |   |                   |                   |    |                   |   |         |                                                                |   |   |   |   |

| See      accompanying notes to financialstatements. |
|-----------------------------------------------------|

----

| Portfolio Company / Principal      Business                                                                                                              |   | InvestmentInterest      Rate1 / Maturity                                            |   | Principal |      |   | Cost   |   |      | Value2 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|-----------|-----------|--------|--------|--------|-----------|--------|--------|
| Advanced      Lighting Technologies, Inc.6     Home      and Office Furnishings, Housewares, and Durable Consumer      Products |   | Senior      Secured Loan — Deferred Draw Term Loan (First Lien)6.6%,      Due 6/13 |   | $         | 356,819   |   |   | $      | 356,819   |   |   | $ | 356,819 |   |
|                                                                                                                                                     |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| Advanced      Lighting Technologies, Inc.     Home      and Office Furnishings, Housewares, and Durable Consumer      Products  |   | Senior      Secured Loan — Revolving Loan3.9%,      Due 6/13                       |   |      | 960,000   |   |   |   | 952,585   |   |   |   | 960,000 |   |
|                                                                                                                                                     |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| Advanced      Lighting Technologies, Inc.6     Home      and Office Furnishings, Housewares, and Durable Consumer      Products |   | Junior      Secured Loan — Second Lien Term Loan Note8.5%,      Due 6/14           |   |      | 5,000,000 |   |   |   | 5,000,000 |   |   |   | 5,000,000 |   |
|                                                                                                                                                     |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| Advanced      Lighting Technologies, Inc.6     Home      and Office Furnishings, Housewares, and Durable Consumer      Products |   | Senior      Secured Loan — Term Loan (First Lien)4.6%,      Due 6/13               |   |      | 1,834,277 |   |   |   | 1,834,277 |   |   |   | 1,834,277 |   |
|                                                                                                                                                     |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| Aero      Products International, Inc.6     Personal      and Non Durable Consumer Products (Mfg. Only)                         |   | Senior      Secured Loan — Term Loan7.0%,      Due 4/12                            |   |      | 3,118,560 |   |   |   | 3,118,560 |   |   |   | 3,118,560 |   |
|                                                                                                                                                     |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| Aerostructures      Acquisition LLC6     Aerospace      and Defense                                                             |   | Senior      Secured Loan — Delayed Draw Term Loan7.5%,      Due 3/13               |   |      | 429,397   |   |   |   | 429,397   |   |   |   | 429,397 |   |
|                                                                                                                                                     |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| Aerostructures      Acquisition LLC6     Aerospace      and Defense                                                             |   | Senior      Secured Loan — Term Loan7.5%,      Due 3/13                            |   |      | 5,436,949 |   |   |   | 5,436,949 |   |   |   | 5,436,949 |   |
|                                                                                                                                                     |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| AGA      Medical Corporation6     Healthcare,      Education and Childcare                                                      |   | Senior      Secured Loan — Tranche B Term Loan4.2%,      Due 4/13                  |   |      | 3,832,209 |   |   |   | 3,829,883 |   |   |   | 3,458,569 |   |
|                                                                                                                                                     |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| AGS      LLC6     Hotels,      Motels, Inns, and Gaming                                                                         |   | Senior      Secured Loan — Delayed Draw Term Loan3.5%,      Due 5/13               |   |      | 442,044   |   |   |   | 436,817   |   |   |   | 419,942 |   |
|                                                                                                                                                     |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| AGS      LLC6     Hotels,      Motels, Inns, and Gaming                                                                         |   | Senior      Secured Loan — Initial Term Loan3.5%,      Due 5/13                    |   |      | 3,159,324 |   |   |   | 3,121,965 |   |   |   | 3,001,357 |   |
|                                                                                                                                                     |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| AmerCable      Incorporated6     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic)                             |   | Senior      Secured Loan — Initial Term Loan5.0%,      Due 6/14                    |   |      | 5,900,113 |   |   |   | 5,900,113 |   |   |   | 5,900,113 |   |
|                                                                                                                                                     |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| Astoria      Generating Company Acquisitions, L.L.C.6     Utilities                                                             |   | Junior      Secured Loan — Term C4.2%,      Due 8/13                               |   |      | 4,000,000 |   |   |   | 4,040,652 |   |   |   | 3,613,340 |   |

----

| Portfolio Company / Principal      Business                                                                                                   |   | InvestmentInterest      Rate1 / Maturity                                         |   | Principal |      |   | Cost   |   |      | Value2 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------|--------|-----------|-----------|--------|--------|--------|-----------|--------|--------|
| Atlantic      Marine Holding Company6     Cargo      Transport                                                       |   | Senior      Secured Loan — Term Loan6.5%,      Due 3/14                         |   | $         | 1,721,939 |   |   | $      | 1,731,184 |   |   | $ | 1,721,939 |   |
|                                                                                                                                          |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Aurora      Diagnostics, LLC6     Healthcare,      Education and Childcare                                           |   | Senior      Secured Loan — Tranche A Term Loan (First Lien)6.7%,      Due 12/12 |   |      | 4,265,636 |   |   |   | 4,231,984 |   |   |   | 4,265,636 |   |
|                                                                                                                                          |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Awesome      Acquisition Company (CiCi's Pizza)6     Personal,      Food and Miscellaneous Services                  |   | Junior      Secured Loan — Term Loan (Second Lien)6.5%,      Due 6/14           |   |      | 4,000,000 |   |   |   | 3,977,593 |   |   |   | 3,820,000 |   |
|                                                                                                                                          |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| AZ      Chem US Inc.     Chemicals,      Plastics and Rubber                                                         |   | Junior      Secured Loan — Second Lien Term Loan6.0%,      Due 2/14             |   |      | 3,300,000 |   |   |   | 2,649,436 |   |   |   | 2,640,000 |   |
|                                                                                                                                          |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| AZ      Chem US Inc.6     Chemicals,      Plastics and Rubber                                                        |   | Junior      Secured Loan — Second Lien Term Loan6.0%,      Due 2/14             |   |      | 4,000,000 |   |   |   | 3,963,645 |   |   |   | 3,200,000 |   |
|                                                                                                                                          |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Bankruptcy      Management Solutions, Inc.6     Diversified/Conglomerate      Service                                |   | Junior      Secured Loan — Loan (Second Lien)8.1%,      Due 7/13                |   |      | 2,443,750 |   |   |   | 2,473,717 |   |   |   | 1,906,125 |   |
|                                                                                                                                          |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Bankruptcy      Management Solutions, Inc.6     Diversified/Conglomerate      Service                                |   | Senior      Secured Loan — Term Loan (First Lien)4.5%,      Due 7/12            |   |      | 1,955,000 |   |   |   | 1,964,334 |   |   |   | 1,803,488 |   |
|                                                                                                                                          |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Bicent      Power LLC6     Utilities                                                                                 |   | Junior      Secured Loan — Advance (Second Lien)5.5%,      Due 12/14            |   |      | 4,000,000 |   |   |   | 4,000,000 |   |   |   | 3,730,000 |   |
|                                                                                                                                          |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| BP      Metals, LLC6     Mining,      Steel, Iron and Non-Precious Metals                                            |   | Senior      Secured Loan — Term Loan10.1%,      Due 6/13                        |   |      | 4,937,500 |   |   |   | 4,937,500 |   |   |   | 4,937,500 |   |
|                                                                                                                                          |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Broadlane,      Inc.6     Healthcare,      Education and Childcare                                                   |   | Senior      Secured Loan — Term Loan8.5%,      Due 8/13                         |   |      | 4,987,500 |   |   |   | 4,918,231 |   |   |   | 4,987,500 |   |
|                                                                                                                                          |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Caribe      Information Investments Incorporated6     Printing      and Publishing                                   |   | Senior      Secured Loan — Term Loan3.4%,      Due 3/13                         |   |      | 1,694,554 |   |   |   | 1,688,542 |   |   |   | 1,364,116 |   |
|                                                                                                                                          |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Cast      & Crew Payroll, LLC (Payroll Acquisition)6     Leisure,      Amusement, Motion Pictures, Entertainment |   | Senior      Secured Loan — Initial Term Loan4.4%,      Due 9/12                 |   |      | 9,208,100 |   |   |   | 9,234,910 |   |   |   | 9,208,100 |   |
|                                                                                                                                          |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| CEI      Holdings, Inc. (Cosmetic Essence)6     Personal      and Non Durable Consumer Products (Mfg. Only)          |   | Senior      Secured Loan — Term Loan6.3%,      Due 3/14                         |   |      | 1,469,323 |   |   |   | 1,403,698 |   |   |   | 1,322,391 |   |
|                                                                                                                                          |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Centaur,      LLC6     Hotels,      Motels, Inns, and Gaming                                                         |   | Senior      Secured Loan — Term Loan (First Lien)9.3%,      Due 10/12           |   |      | 2,792,043 |   |   |   | 2,763,495 |   |   |   | 2,652,440 |   |

----

| Portfolio Company / Principal      Business                                                                                       |   | InvestmentInterest      Rate1 / Maturity                                   |   | Principal |       |   | Cost   |   |       | Value2 |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|--------|-----------|------------|--------|--------|--------|------------|--------|--------|
| Charlie      Acquisition Corp.     Personal,      Food and Miscellaneous Services                        |   | Mezzanine      Investment — Senior Subordinated Notes15.5%,      Due 6/13 |   | $         | 10,893,401 |   |   | $      | 10,744,496 |   |   | $ | 7,625,381 |   |
|                                                                                                                              |   |                                                                            |   |      |       |   |   |   |       |   |   |   |   |   |
| Clarke      American Corp.6     Printing      and Publishing                                             |   | Senior      Secured Loan — Tranche B Term Loan4.2%,      Due 6/14         |   |      | 2,955,000  |   |   |   | 2,955,000  |   |   |   | 2,296,035 |   |
|                                                                                                                              |   |                                                                            |   |      |       |   |   |   |       |   |   |   |   |   |
| CoActive      Technologies, Inc.6     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic) |   | Senior      Secured Loan — Term Loan (First Lien)4.5%,      Due 7/14      |   |      | 3,960,000  |   |   |   | 3,944,053  |   |   |   | 3,960,000 |   |
|                                                                                                                              |   |                                                                            |   |      |       |   |   |   |       |   |   |   |   |   |
| CoActive      Technologies, Inc.6     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic) |   | Junior      Secured Loan — Term Loan (Second Lien)8.2%,      Due 1/15     |   |      | 2,000,000  |   |   |   | 1,966,739  |   |   |   | 2,000,000 |   |
|                                                                                                                              |   |                                                                            |   |      |       |   |   |   |       |   |   |   |   |   |
| Coastal      Concrete Southeast, LLC     Buildings      and Real Estate4                            |   | Mezzanine      Investment — Mezzanine Term Loan10.0%,      Due 3/13       |   |      | 8,886,903  |   |   |   | 8,557,108  |   |   |   | 6,931,785 |   |
|                                                                                                                              |   |                                                                            |   |      |       |   |   |   |       |   |   |   |   |   |
| Cooper-Standard      Automotive Inc6     Automobile                                                      |   | Senior      Unsecured Bond —8.4%,      Due 12/14                          |   |      | 4,000,000  |   |   |   | 3,259,487  |   |   |   | 2,800,000 |   |
|                                                                                                                              |   |                                                                            |   |      |       |   |   |   |       |   |   |   |   |   |
| DaimlerChrysler      Financial Services Americas LLC6     Finance                                        |   | Senior      Secured Loan — Term Loan (First Lien)6.0%,      Due 8/12      |   |      | 3,959,925  |   |   |   | 3,723,431  |   |   |   | 2,771,947 |   |
|                                                                                                                              |   |                                                                            |   |      |       |   |   |   |       |   |   |   |   |   |
| Dealer      Computer Services, Inc. (Reynolds & Reynolds)6     Electronics                           |   | Junior      Secured Loan — Term Loan (Second Lien)6.0%,      Due 10/13    |   |      | 1,000,000  |   |   |   | 1,007,900  |   |   |   | 990,000 |   |
|                                                                                                                              |   |                                                                            |   |      |       |   |   |   |       |   |   |   |   |   |
| Dealer      Computer Services, Inc. (Reynolds & Reynolds)6     Electronics                           |   | Junior      Secured Loan — Term Loan (Third Lien)8.0%,      Due 4/14      |   |      | 7,700,000  |   |   |   | 7,501,237  |   |   |   | 6,747,125 |   |
|                                                                                                                              |   |                                                                            |   |      |       |   |   |   |       |   |   |   |   |   |
| Delta      Educational Systems, Inc.6     Healthcare,      Education and Childcare                       |   | Senior      Secured Loan — Term Loan7.5%,      Due 6/12                   |   |      | 2,748,162  |   |   |   | 2,748,162  |   |   |   | 2,748,162 |   |
|                                                                                                                              |   |                                                                            |   |      |       |   |   |   |       |   |   |   |   |   |
| Dex      Media West LLC     Printing      and Publishing                                                 |   | Senior      Secured Loan — Tranche B Term Loan7.1%,      Due 10/14        |   |      | 7,000,000  |   |   |   | 6,309,065  |   |   |   | 6,289,990 |   |
|                                                                                                                              |   |                                                                            |   |      |       |   |   |   |       |   |   |   |   |   |
| Dresser,      Inc.6     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic)               |   | Junior      Secured Loan — Term Loan (Second Lien)8.0%,      Due 5/15     |   |      | 3,000,000  |   |   |   | 2,964,626  |   |   |   | 2,830,005 |   |
|                                                                                                                              |   |                                                                            |   |      |       |   |   |   |       |   |   |   |   |   |
| DRI      Holdings, Inc.6     Healthcare,      Education and Childcare                                    |   | Junior      Secured Loan — US Term Loan (Second Lien)10.1%,      Due 7/15 |   |      | 6,000,000  |   |   |   | 5,411,785  |   |   |   | 6,000,000 |   |
|                                                                                                                              |   |                                                                            |   |      |       |   |   |   |       |   |   |   |   |   |
| Edgestone      CD Acquisition Corp. (Custom Direct)6     Printing      and Publishing                    |   | Junior      Secured Loan — Loan (Second Lien)7.5%,      Due 12/14         |   |      | 5,000,000  |   |   |   | 5,000,000  |   |   |   | 4,850,000 |   |

----

| Portfolio Company / Principal      Business                                                                         |   | InvestmentInterest      Rate1 / Maturity                                     |   | Principal |       |   | Cost   |   |       | Value2 |   |
|---------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|-----------|------------|--------|--------|--------|------------|--------|--------|
| Edgestone      CD Acquisition Corp. (Custom Direct)6     Printing      and Publishing      |   | Senior      Secured Loan — Term Loan (First Lien)4.2%,      Due 12/13       |   | $         | 4,455,857  |   |   | $      | 4,460,205  |   |   | $ | 3,965,713 |   |
|                                                                                                                |   |                                                                              |   |      |       |   |   |   |       |   |   |   |   |   |
| eInstruction      Corporation6     Healthcare,      Education and Childcare                |   | Senior      Secured Loan — Initial Term Loan5.8%,      Due 7/13             |   |      | 4,781,365  |   |   |   | 4,781,365  |   |   |   | 4,781,365 |   |
|                                                                                                                |   |                                                                              |   |      |       |   |   |   |       |   |   |   |   |   |
| eInstruction      Corporation6     Healthcare,      Education and Childcare                |   | Junior      Secured Loan — Term Loan (Second Lien)9.3%,      Due 7/14       |   |      | 10,000,000 |   |   |   | 10,000,000 |   |   |   | 10,000,000 |   |
|                                                                                                                |   |                                                                              |   |      |       |   |   |   |       |   |   |   |   |   |
| Emerson      Reinsurance Ltd.3     Insurance                                               |   | Senior      Secured Loan — Series C Loan7.3%,      Due 12/11                |   |      | 1,000,000  |   |   |   | 1,000,000  |   |   |   | 1,000,000 |   |
|                                                                                                                |   |                                                                              |   |      |       |   |   |   |       |   |   |   |   |   |
| Endeavor      Energy Resources, L.P.6     Oil      and Gas                                 |   | Junior      Secured Loan — Initial Loan (Second Lien)6.3%,      Due 4/12    |   |      | 4,000,000  |   |   |   | 4,000,000  |   |   |   | 4,000,000 |   |
|                                                                                                                |   |                                                                              |   |      |       |   |   |   |       |   |   |   |   |   |
| Fasteners      For Retail, Inc.6     Diversified/Conglomerate      Manufacturing           |   | Senior      Secured Loan — Term Loan6.6%,      Due 12/12                    |   |      | 4,320,878  |   |   |   | 4,327,124  |   |   |   | 4,277,670 |   |
|                                                                                                                |   |                                                                              |   |      |       |   |   |   |       |   |   |   |   |   |
| FD      Alpha Acquisition LLC  (Fort Dearborn)6     Printing      and Publishing |   | Senior      Secured Loan — US Term Loan6.3%,      Due 11/12                 |   |      | 1,740,026  |   |   |   | 1,624,251  |   |   |   | 1,713,926 |   |
|                                                                                                                |   |                                                                              |   |      |       |   |   |   |       |   |   |   |   |   |
| First      American Payment Systems, L.P.6     Finance                                     |   | Senior      Secured Loan — Term Loan4.3%,      Due 10/13                    |   |      | 3,398,000  |   |   |   | 3,398,000  |   |   |   | 3,398,000 |   |
|                                                                                                                |   |                                                                              |   |      |       |   |   |   |       |   |   |   |   |   |
| First      Data Corporation     Finance                                                    |   | Senior      Secured Loan — Initial Tranche B-2 Term Loan3.2%,      Due 9/14 |   |      | 4,974,811  |   |   |   | 4,534,131  |   |   |   | 4,520,860 |   |
|                                                                                                                |   |                                                                              |   |      |       |   |   |   |       |   |   |   |   |   |
| Flatiron      Re Ltd.3,      6     Insurance                                               |   | Senior      Secured Loan — Closing Date Term Loan5.7%,      Due 12/10       |   |      | 96,855     |   |   |   | 97,333     |   |   |   | 96,855 |   |
|                                                                                                                |   |                                                                              |   |      |       |   |   |   |       |   |   |   |   |   |
| Flatiron      Re Ltd.3,      6     Insurance                                               |   | Senior      Secured Loan — Delayed Draw Term Loan5.7%,      Due 12/10       |   |      | 46,914     |   |   |   | 47,146     |   |   |   | 46,914 |   |
|                                                                                                                |   |                                                                              |   |      |       |   |   |   |       |   |   |   |   |   |
| Ford      Motor Company6     Automobile                                                    |   | Senior      Secured Loan — Term Loan5.0%,      Due 12/13                    |   |      | 1,969,849  |   |   |   | 1,967,877  |   |   |   | 1,378,894 |   |
|                                                                                                                |   |                                                                              |   |      |       |   |   |   |       |   |   |   |   |   |
| Freescale      Semiconductor, Inc.     Electronics                                         |   | Senior      Subordinated Bond —10.3%,      Due 12/16                        |   |      | 3,000,000  |   |   |   | 3,008,197  |   |   |   | 2,287,500 |   |
|                                                                                                                |   |                                                                              |   |      |       |   |   |   |       |   |   |   |   |   |
| Frontier      Drilling USA, Inc.6     Oil      and Gas                                     |   | Senior      Secured Loan — Term B Advance9.3%,      Due 6/13                |   |      | 2,000,000  |   |   |   | 1,998,263  |   |   |   | 1,940,000 |   |

----

| Portfolio Company / Principal      Business                                                                                                  |   | InvestmentInterest      Rate1 / Maturity                                                  |   | Principal |      |   | Cost   |   |      | Value2 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|--------|-----------|-----------|--------|--------|--------|-----------|--------|--------|
| Getty      Images, Inc.     Printing      and Publishing                                                            |   | Senior      Secured Loan — Initial Term Loan8.1%,      Due 7/15                          |   | $         | 2,981,250 |   |   | $      | 2,981,250 |   |   | $ | 2,712,938 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Ginn      LA Conduit Lender, Inc.10     Buildings      and Real Estate4                                        |   | Senior      Secured Loan — First Lien Tranche A Credit-Linked Deposit7.8%,      Due 6/11 |   |      | 1,257,143 |   |   |   | 1,224,101 |   |   |   | 150,857 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Ginn      LA Conduit Lender, Inc.10     Buildings      and Real Estate4                                        |   | Senior      Secured Loan — First Lien Tranche B Term Loan7.8%,      Due 6/11             |   |      | 2,694,857 |   |   |   | 2,624,028 |   |   |   | 323,383 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Ginn      LA Conduit Lender, Inc.10     Buildings      and Real Estate4                                        |   | Junior      Secured Loan — Loan (Second Lien)11.8%,      Due 6/12                        |   |      | 3,000,000 |   |   |   | 2,715,997 |   |   |   | 90,000 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Gleason      Works, The6     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic)                     |   | Senior      Secured Loan — New US Term Loan4.9%,      Due 6/13                           |   |      | 2,437,280 |   |   |   | 2,443,443 |   |   |   | 2,205,739 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Hawkeye      Renewables, LLC6     Farming      and Agriculture                                                      |   | Senior      Secured Loan — Term Loan (First Lien)7.3%,      Due 6/12                     |   |      | 2,908,544 |   |   |   | 2,856,515 |   |   |   | 1,250,674 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| HMSC      Corporation (aka Swett and Crawford)6     Insurance                                                       |   | Junior      Secured Loan — Loan (Second Lien)6.0%,      Due 10/14                        |   |      | 5,000,000 |   |   |   | 4,831,923 |   |   |   | 4,550,000 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Huish      Detergents Inc.6     Personal      and Non Durable Consumer Products (Mfg. Only)                         |   | Junior      Secured Loan — Loan (Second Lien)4.7%,      Due 10/14                        |   |      | 1,000,000 |   |   |   | 1,000,000 |   |   |   | 765,000 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Hunter      Fan Company6     Home      and Office Furnishings, Housewares, and Durable Consumer      Products       |   | Senior      Secured Loan — Initial Term Loan (First Lien)4.7%,      Due 4/14             |   |      | 3,723,929 |   |   |   | 3,577,920 |   |   |   | 3,165,339 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Hunter      Fan Company6     Home      and Office Furnishings, Housewares, and Durable Consumer      Products       |   | Junior      Secured Loan — Loan (Second Lien)7.6%,      Due 10/14                        |   |      | 3,000,000 |   |   |   | 3,000,000 |   |   |   | 2,347,500 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Infiltrator      Systems, Inc.6     Ecological                                                                      |   | Senior      Secured Loan — Term Loan7.3%,      Due 9/12                                  |   |      | 2,727,813 |   |   |   | 2,721,193 |   |   |   | 2,727,813 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Inmar,      Inc.6     Retail      Stores                                                                            |   | Senior      Secured Loan — Term Loan2.7%,      Due 4/13                                  |   |      | 3,755,829 |   |   |   | 3,755,829 |   |   |   | 3,755,829 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| International      Aluminum Corporation (IAL Acquisition Co.)6     Mining,      Steel, Iron and Non-Precious Metals |   | Senior      Secured Loan — Term Loan4.8%,      Due 3/13                                  |   |      | 3,001,367 |   |   |   | 3,001,367 |   |   |   | 3,001,367 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Intrapac      Corporation/Corona Holdco6     Containers,      Packaging and Glass                                   |   | Senior      Secured Loan — First Lien Term Loan6.9%,      Due 5/12                       |   |      | 4,316,295 |   |   |   | 4,329,467 |   |   |   | 4,316,295 |   |

----

| Portfolio Company / Principal      Business                                                                                                     |   | InvestmentInterest      Rate1 / Maturity                                       |   | Principal |       |   | Cost   |   |       | Value2 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------|--------|-----------|------------|--------|--------|--------|------------|--------|--------|
| Intrapac      Corporation/Corona Holdco6     Containers,      Packaging and Glass                                      |   | Junior      Secured Loan — Term Loans (Second Lien)10.9%,      Due 5/13       |   | $         | 3,000,000  |   |   | $      | 3,017,825  |   |   | $ | 3,000,000 |   |
|                                                                                                                                            |   |                                                                                |   |      |       |   |   |   |       |   |   |   |   |   |
| Jones      Stephens Corp.6     Buildings      and Real Estate4                                                    |   | Senior      Secured Loan — Term Loan5.2%,      Due 9/12                       |   |      | 10,090,295 |   |   |   | 10,068,492 |   |   |   | 10,090,295 |   |
|                                                                                                                                            |   |                                                                                |   |      |       |   |   |   |       |   |   |   |   |   |
| JW      Aluminum Company6     Mining,      Steel, Iron and Non-Precious Metals                                         |   | Junior      Secured Loan — Term Loan (Second Lien)7.2%,      Due 12/13        |   |      | 5,371,429  |   |   |   | 5,387,168  |   |   |   | 3,222,857 |   |
|                                                                                                                                            |   |                                                                                |   |      |       |   |   |   |       |   |   |   |   |   |
| Kepler      Holdings Limited3,      6     Insurance                                                                    |   | Senior      Secured Loan — Loan7.0%,      Due 6/09                            |   |      | 5,000,000  |   |   |   | 5,006,639  |   |   |   | 5,000,000 |   |
|                                                                                                                                            |   |                                                                                |   |      |       |   |   |   |       |   |   |   |   |   |
| KIK      Custom Products Inc.6     Personal      and Non Durable Consumer Products (Mfg. Only)                         |   | Junior      Secured Loan — Loan (Second Lien)8.5%,      Due 12/14             |   |      | 5,000,000  |   |   |   | 5,000,000  |   |   |   | 3,400,000 |   |
|                                                                                                                                            |   |                                                                                |   |      |       |   |   |   |       |   |   |   |   |   |
| La      Paloma Generating Company, LLC6     Utilities                                                                  |   | Junior      Secured Loan — Loan (Second Lien)5.0%,      Due 8/13              |   |      | 2,000,000  |   |   |   | 2,014,136  |   |   |   | 2,000,000 |   |
|                                                                                                                                            |   |                                                                                |   |      |       |   |   |   |       |   |   |   |   |   |
| LBREP/L-Suncal      Master I LLC6,      10     Buildings      and Real Estate4                                    |   | Senior      Secured Loan — Term Loan (First Lien)5.5%,      Due 1/10          |   |      | 3,875,156  |   |   |   | 3,835,789  |   |   |   | 290,637 |   |
|                                                                                                                                            |   |                                                                                |   |      |       |   |   |   |       |   |   |   |   |   |
| LBREP/L-Suncal      Master I LLC6,      10     Buildings      and Real Estate4                                    |   | Junior      Secured Loan — Term Loan (Second Lien)9.5%,      Due 1/11         |   |      | 2,000,000  |   |   |   | 1,920,211  |   |   |   | 7,500 |   |
|                                                                                                                                            |   |                                                                                |   |      |       |   |   |   |       |   |   |   |   |   |
| LBREP/L-Suncal      Master I LLC10     Buildings      and Real Estate4                                            |   | Junior      Secured Loan — Term Loan (Third Lien)11.3%,      Due 2/12         |   |      | 2,332,868  |   |   |   | 2,332,868  |   |   |   | 1,000 |   |
|                                                                                                                                            |   |                                                                                |   |      |       |   |   |   |       |   |   |   |   |   |
| Lear      Corporation     Automobile                                                                                   |   | Senior      Secured Loan — Term Loan3.7%,      Due 4/12                       |   |      | 1,993,927  |   |   |   | 1,709,640  |   |   |   | 1,694,838 |   |
|                                                                                                                                            |   |                                                                                |   |      |       |   |   |   |       |   |   |   |   |   |
| Legacy      Cabinets, Inc.6     Home      and Office Furnishings, Housewares, and Durable Consumer      Products       |   | Senior      Secured Loan — Term Loan5.8%,      Due 8/12                       |   |      | 2,269,824  |   |   |   | 2,269,824  |   |   |   | 2,269,824 |   |
|                                                                                                                                            |   |                                                                                |   |      |       |   |   |   |       |   |   |   |   |   |
| Levlad,      LLC & Arbonne International, LLC6     Personal      and Non Durable Consumer Products (Mfg. Only)     |   | Senior      Secured Loan — Term Loan4.5%,      Due 3/14                       |   |      | 2,731,786  |   |   |   | 2,731,786  |   |   |   | 1,693,708 |   |
|                                                                                                                                            |   |                                                                                |   |      |       |   |   |   |       |   |   |   |   |   |
| LN      Acquisition Corp. (Lincoln Industrial)6     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic) |   | Junior      Secured Loan — Initial Term Loan (Second Lien)6.8%,      Due 1/15 |   |      | 2,000,000  |   |   |   | 2,000,000  |   |   |   | 1,970,000 |   |
|                                                                                                                                            |   |                                                                                |   |      |       |   |   |   |       |   |   |   |   |   |
| LPL      Holdings, Inc.6     Finance                                                                                   |   | Senior      Secured Loan — Tranche D Term Loan2.8%,      Due 6/13             |   |      | 3,305,000  |   |   |   | 3,324,288  |   |   |   | 3,139,750 |   |

----

| Portfolio Company / Principal Business                                                          |   | InvestmentInterest Rate1 / Maturity                              |   | Principal |   | Cost      |   | Value2 |   |
|---------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|-----------|--------|-----------|--------|--------|--------|
| Manitowoc      Company Inc., The     Diversified/Conglomerate      Manufacturing           |   | Senior      Secured Loan — Term B Loan6.5%,      Due 8/14                      |   |      | $      | 2,000,000 |   |   | $      | 1,955,000 |   |   | $ | 1,817,500 |   |
|                                                                                                                |   |                                                                                 |   |      |   |      |   |   |   |
| MCCI      Group Holdings, LLC6     Healthcare,      Education and Childcare                |   | Senior      Secured Loan — Term Loan (First Lien)6.6%,      Due 12/12          |   |      |   | 5,899,925 |   |   |   | 5,884,108 |   |   |   | 5,899,925 |   |
|                                                                                                                |   |                                                                                 |   |      |   |      |   |   |   |   |   |   |   |
| MCCI      Group Holdings, LLC6     Healthcare,      Education and Childcare                |   | Junior      Secured Loan — Term Loan (Second Lien)9.4%,      Due 6/13          |   |      |   | 1,000,000 |   |   |   | 1,000,000 |   |   |   | 1,000,000 |   |
|                                                                                                                |   |                                                                                 |   |      |   |      |   |   |   |
| Murray      Energy Corporation6     Mining,      Steel, Iron and Non-Precious Metals       |   | Senior      Secured Loan — Tranche B Term Loan (First Lien)6.9%,      Due 1/10 |   |      |   | 1,949,367 |   |   |   | 1,954,403 |   |   |   | 1,910,380 |   |
|                                                                                                                |   |                                                                                 |   |      |   |      |   |   |   |   |   |   |   |
| Mylan      Inc.     Healthcare,      Education and Childcare                               |   | Senior      Secured Loan — U.S. Tranche B Term Loan5.0%,      Due 10/14        |   |      |   | 1,969,849 |   |   |   | 1,912,634 |   |   |   | 1,792,563 |   |
|                                                                                                                |   |                                                                                 |   |      |   |      |   |   |   |
| National      Interest Security Company, L.L.C.     Aerospace      and Defense             |   | Mezzanine      Investment — Mezzanine Facility15.0%,      Due 6/13             |   |      |   | 3,000,000 |   |   |   | 3,000,000 |   |   |   | 3,000,000 |   |
|                                                                                                                |   |                                                                                 |   |      |   |      |   |   |   |   |   |   |   |
| National      Interest Security Company, L.L.C.     Aerospace      and Defense             |   | Junior      Secured Loan — Second Lien Term Loan15.0%,      Due 6/13           |   |      |   | 1,000,000 |   |   |   | 1,000,000 |   |   |   | 1,000,000 |   |
|                                                                                                                |   |                                                                                 |   |      |   |      |   |   |   |   |   |   |   |   |   |
| National      Interest Security Company, L.L.C.6     Aerospace      and Defense            |   | Senior      Secured Loan — Term Loan - First Lien7.8%,      Due 12/12          |   |      |   | 8,075,000 |   |   |   | 8,075,000 |   |   |   | 8,075,000 |   |
|                                                                                                                |   |                                                                                 |   |      |   |      |   |
| Northeast      Biofuels, LP6     Farming      and Agriculture                              |   | Senior      Secured Loan — Construction Term Loan8.3%,      Due 6/13           |   |      |   | 1,382,120 |   |   |   | 1,384,467 |   |   |   | 276,424 |   |
|                                                                                                                |   |                                                                                 |   |      |   |      |   |   |   |   |   |   |   |   |   |
| Northeast      Biofuels, LP6     Farming      and Agriculture                              |   | Senior      Secured Loan — Synthetic LC Term Loan8.3%,      Due 6/13           |   |      |   | 57,257    |   |   |   | 57,354 |   |   |   | 11,451 |   |
|                                                                                                                |   |                                                                                 |   |      |   |      |   |
| PAS      Technologies Inc.     Aerospace      and Defense                                  |   | Senior      Secured Loan — Incremental Term Loan Add On6.8%,      Due 6/11     |   |      |   | 744,382   |   |   |   | 744,382 |   |   |   | 744,382 |   |
|                                                                                                                |   |                                                                                 |   |      |   |      |   |   |   |   |   |   |   |   |   |
| PAS      Technologies Inc.6     Aerospace      and Defense                                 |   | Senior      Secured Loan — Term Loan6.8%,      Due 6/11                        |   |      |   | 3,680,556 |   |   |   | 3,665,393 |   |   |   | 3,680,556 |   |
|                                                                                                                |   |                                                                                 |   |      |   |      |   |
| Pegasus      Solutions, Inc.6     Leisure,      Amusement, Motion Pictures, Entertainment  |   | Senior      Secured Loan — Term Loan7.8%,      Due 4/13                        |   |      |   | 5,695,000 |   |   |   | 5,695,000 |   |   |   | 5,695,000 |   |
|                                                                                                                |   |                                                                                 |   |      |   |      |   |   |   |   |   |   |   |   |   |
| Pegasus      Solutions, Inc.13     Leisure,      Amusement, Motion Pictures, Entertainment |   | Senior      Unsecured Bond —10.5%,      Due 4/15                               |   |      |   | 2,000,000 |   |   |   | 2,000,000 |   |   |   | 2,000,000 |   |

----

| Portfolio Company / Principal Business                                                      |   | InvestmentInterest Rate1 / Maturity                      |   | Principal |   | Cost      |   | Value2 |   |
|-----------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|-----------|--------|-----------|--------|--------|--------|
| Primus International Inc.6     Aerospace      and Defense                    |   | Senior      Secured Loan — Term Loan4.3%,      Due 6/12                |   |      | $      | 1,246,565 |   |   | $      | 1,248,519 |   |   | $ | 1,215,401 |   |
|                                                                                                            |   |                                                                         |   |      |   |      |   |   |   |
| QA      Direct Holdings, LLC6     Printing      and Publishing                         |   | Senior      Secured Loan — Term Loan6.8%,      Due 8/14                |   |      |   | 4,937,343 |   |   |   | 4,896,292 |   |   |   | 4,937,343 |   |
|                                                                                                            |   |                                                                         |   |      |   |      |   |   |   |   |   |   |   |
| Resco      Products, Inc.6     Mining,      Steel, Iron and Non-Precious Metals        |   | Junior      Secured Loan — Term Loan (Second Lien)10.2%,      Due 6/14 |   |      |   | 6,650,000 |   |   |   | 6,471,193 |   |   |   | 6,517,000 |   |
|                                                                                                            |   |                                                                         |   |      |   |      |   |   |   |
| Rhodes      Companies, LLC, The6     Buildings      and Real Estate4              |   | Senior      Secured Loan — First Lien Term Loan5.0%,      Due 11/10    |   |      |   | 1,685,674 |   |   |   | 1,629,483 |   |   |   | 842,837 |   |
|                                                                                                            |   |                                                                         |   |      |   |      |   |   |   |   |   |   |   |   |   |
| Rhodes      Companies, LLC, The6     Buildings      and Real Estate4              |   | Junior      Secured Loan — Second Lien Term Loan9.2%,      Due 11/11   |   |      |   | 2,013,977 |   |   |   | 2,022,278 |   |   |   | 503,494 |   |
|                                                                                                            |   |                                                                         |   |      |   |      |   |
| San      Juan Cable, LLC6     Broadcasting      and Entertainment                      |   | Junior      Secured Loan — Loan (Second Lien)7.7%,      Due 10/13      |   |      |   | 3,000,000 |   |   |   | 2,982,607 |   |   |   | 2,850,000 |   |
|                                                                                                            |   |                                                                         |   |      |   |      |   |   |   |   |   |   |   |   |   |
| Schneller      LLC6     Aerospace      and Defense                                     |   | Senior      Secured Loan — Term Loan5.1%,      Due 6/13                |   |      |   | 4,694,560 |   |   |   | 4,658,215 |   |   |   | 4,694,560 |   |
|                                                                                                            |   |                                                                         |   |      |   |      |   |   |   |   |   |   |   |
| Seismic      Micro-Technology, Inc. (SMT)6     Electronics                             |   | Senior      Secured Loan — Term Loan5.8%,      Due 6/12                |   |      |   | 1,430,000 |   |   |   | 1,427,248 |   |   |   | 1,430,000 |   |
|                                                                                                            |   |                                                                         |   |      |   |      |   |   |   |
| Seismic      Micro-Technology, Inc. (SMT)6     Electronics                             |   | Senior      Secured Loan — Term Loan5.8%,      Due 6/12                |   |      |   | 953,333   |   |   |   | 951,498 |   |   |   | 953,333 |   |
|                                                                                                            |   |                                                                         |   |      |   |      |   |   |   |   |   |   |   |
| Specialized      Technology Resources, Inc.6     Diversified/Conglomerate      Service |   | Junior      Secured Loan — Loan (Second Lien)7.5%,      Due 12/14      |   |      |   | 7,500,000 |   |   |   | 7,500,000 |   |   |   | 7,500,000 |   |
|                                                                                                            |   |                                                                         |   |      |   |      |   |   |   |
| Specialized      Technology Resources, Inc.6     Diversified/Conglomerate      Service |   | Senior      Secured Loan — Term Loan (First Lien)3.0%,      Due 6/14   |   |      |   | 3,930,101 |   |   |   | 3,930,101 |   |   |   | 3,930,101 |   |
|                                                                                                            |   |                                                                         |   |      |   |      |   |   |   |   |   |   |   |
| Standard      Steel, LLC6     Cargo      Transport                                     |   | Senior      Secured Loan — Delayed Draw Term Loan3.0%,      Due 7/12   |   |      |   | 766,973   |   |   |   | 771,034 |   |   |   | 766,973 |   |
|                                                                                                            |   |                                                                         |   |      |   |      |   |   |   |
| Standard      Steel, LLC6     Cargo      Transport                                     |   | Senior      Secured Loan — Initial Term Loan4.0%,      Due 7/12        |   |      |   | 3,805,590 |   |   |   | 3,825,741 |   |   |   | 3,805,590 |   |
|                                                                                                            |   |                                                                         |   |      |   |      |   |   |   |   |   |   |   |
| Standard      Steel, LLC6     Cargo      Transport                                     |   | Junior      Secured Loan — Loan (Second Lien)7.5%,      Due 7/13       |   |      |   | 1,750,000 |   |   |   | 1,758,373 |   |   |   | 1,750,000 |   |

----

| Portfolio Company / Principal Business                                                                                        |   | InvestmentInterest Rate1 / Maturity                            |   | Principal |   | Cost       |   | Value2 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------|--------|-----------|--------|------------|--------|--------|--------|
| Texas Competitive      Electric Holdings Company, LLC (TXU)     Utilities                                           |   | Senior      Secured Loan — Initial Tranche B-2 Term Loan5.6%,      Due 10/14 |   |      | $      | 1,989,924  |   |   | $      | 1,814,330 |   |   | $ | 1,810,831 |   |
|                                                                                                                                              |   |                                                                               |   |      |   |       |   |
| TPF      Generation Holdings, LLC6     Utilities                                                                         |   | Junior      Secured Loan — Loan (Second Lien)5.7%,      Due 12/14            |   |      |   | 2,000,000  |   |   |   | 2,028,327 |   |   |   | 1,900,000 |   |
|                                                                                                                                              |   |                                                                               |   |      |   |       |   |   |   |   |   |   |   |   |   |
| TransAxle      LLC     Automobile                                                                                        |   | Senior      Secured Loan — Revolving Loan6.0%,      Due 8/11                 |   |      |   | 400,000    |   |   |   | 397,067 |   |   |   | 398,716 |   |
|                                                                                                                                              |   |                                                                               |   |      |   |       |   |
| TransAxle      LLC     Automobile                                                                                        |   | Senior      Secured Loan — Term Loan5.8%,      Due 9/12                      |   |      |   | 1,477,554  |   |   |   | 1,477,554 |   |   |   | 1,477,554 |   |
|                                                                                                                                              |   |                                                                               |   |      |   |       |   |   |   |   |   |   |   |   |   |
| TUI      University, LLC6     Healthcare,      Education and Childcare                                                   |   | Senior      Secured Loan — Term Loan (First Lien)6.1%,      Due 10/14        |   |      |   | 3,736,736  |   |   |   | 3,581,708 |   |   |   | 3,568,583 |   |
|                                                                                                                                              |   |                                                                               |   |      |   |       |   |
| Twin-Star      International, Inc.6     Home      and Office Furnishings, Housewares, and Durable Consumer      Products |   | Senior      Secured Loan — Term Loan7.9%,      Due 4/13                      |   |      |   | 4,339,736  |   |   |   | 4,339,736 |   |   |   | 4,339,736 |   |
|                                                                                                                                              |   |                                                                               |   |      |   |       |   |   |   |   |   |   |   |   |   |
| United      Maritime Group, LLC (fka Teco Transport Corporation)6     Cargo      Transport                               |   | Junior      Secured Loan — Term Loan (Second Lien)9.0%,      Due 12/13       |   |      |   | 6,500,000  |   |   |   | 6,486,324 |   |   |   | 6,500,000 |   |
|                                                                                                                                              |   |                                                                               |   |      |   |       |   |   |   |   |   |   |   |   |   |
| Walker      Group Holdings LLC     Cargo      Transport                                                                  |   | Junior      Secured Loan — Term Loan B12.6%,      Due 12/12                  |   |      |   | 526,500    |   |   |   | 526,500 |   |   |   | 526,500 |   |
|                                                                                                                                              |   |                                                                               |   |      |   |       |   |
| Walker      Group Holdings LLC6     Cargo      Transport                                                                 |   | Junior      Secured Loan — Term Loan B12.5%,      Due 12/12                  |   |      |   | 5,000,000  |   |   |   | 5,000,000 |   |   |   | 5,000,000 |   |
|                                                                                                                                              |   |                                                                               |   |      |   |       |   |   |   |   |   |   |   |   |   |
| Water      PIK, Inc.6     Personal      and Non Durable Consumer Products (Mfg. Only)                                    |   | Senior      Secured Loan — Loan (First Lien)4.2%,      Due 6/13              |   |      |   | 1,965,050  |   |   |   | 1,954,720 |   |   |   | 1,965,050 |   |
|                                                                                                                                              |   |                                                                               |   |      |   |       |   |
| Wesco      Aircraft Hardware Corp.     Aerospace      and Defense                                                        |   | Junior      Secured Loan — Loan (Second Lien)6.2%,      Due 3/14             |   |      |   | 2,000,000  |   |   |   | 1,923,443 |   |   |   | 1,845,000 |   |
|                                                                                                                                              |   |                                                                               |   |      |   |       |   |   |   |   |   |   |   |   |   |
| Wesco      Aircraft Hardware Corp.6     Aerospace      and Defense                                                       |   | Junior      Secured Loan — Loan (Second Lien)6.2%,      Due 3/14             |   |      |   | 4,132,887  |   |   |   | 4,161,055 |   |   |   | 3,812,589 |   |
|                                                                                                                                              |   |                                                                               |   |      |   |       |   |
| WireCo      WorldGroup Inc. 6,      13     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic)            |   | Mezzanine      Investment —11.0%,      Due 2/15                              |   |      |   | 10,000,000 |   |   |   | 10,000,000 |   |   |   | 10,000,000 |   |
|                                                                                                                                              |   |                                                                               |   |      |   |       |   |   |   |   |   |   |   |   |   |
| WireCo      WorldGroup Inc. 13     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic)                    |   | Mezzanine      Investment —11.0%,      Due 2/15                              |   |      |   | 5,000,000  |   |   |   | 4,795,580 |   |   |   | 5,000,000 |   |

----

| Portfolio Company / Principal Business               |   | InvestmentInterest Rate1 / Maturity                        |   |        | Principal |      |   | Cost        |   |      | Value2 |        |
|--------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------|--------|-------------|-----------|-----------|--------|-------------|--------|-----------|--------|-------------|
| Wolf Hollow I,      LP6     Utilities |   | Senior      Secured Loan — Acquisition Term Loan3.7%,      Due 6/12      |   |        | $         | 775,624   |   |        | $      | 767,066   |   |        | $ | 729,087 |   |
|                                                                     |   |                                                                           |   |        |      |      |   |        |   |      |   |        |   |   |   |
| Wolf      Hollow I, LP6     Utilities           |   | Senior      Secured Loan — Synthetic Letter of Credit.4%,      Due 6/12  |   |        |      | 668,413   |   |        |   | 661,032   |   |        |   | 628,304 |   |
|                                                                     |   |                                                                           |   |        |      |      |   |        |   |      |   |        |   |
| Wolf      Hollow I, LP6     Utilities           |   | Senior      Secured Loan — Synthetic Revolver Deposit1.1%,      Due 6/12 |   |        |      | 167,103   |   |        |   | 165,259   |   |        |   | 157,077 |   |
|                                                                     |   |                                                                           |   |        |      |      |   |        |   |      |   |        |   |   |   |
| Wolf      Hollow I, LP6     Utilities           |   | Junior      Secured Loan — Term Loan (Second Lien)6.0%,      Due 12/12   |   |        |      | 2,683,177 |   |        |   | 2,687,607 |   |        |   | 2,468,522 |   |
|                                                                     |   |                                                                           |   |        |      |      |   |        |   |      |   |        |   |   |   |
| X-Rite,      Incorporated6     Electronics      |   | Junior      Secured Loan — Loan (Second Lien)14.4%,      Due 10/13       |   |        |      | 645,361   |   |        |   | 645,361   |   |        |   | 645,361 |   |
|                                                                     |   |                                                                           |   |        |      |      |   |        |   |      |   |        |   |   |   |
| X-Rite,      Incorporated6     Electronics      |   | Senior      Secured Loan — Term Loan (First Lien)7.3%,      Due 10/12    |   |        |      | 633,560   |   |        |   | 631,128   |   |        |   | 633,560 |   |
|                                                                     |   |                                                                           |   |        |      |      |   |        |   |      |   |        |   |   |   |
| Total      Investment in Debt Securities                                 |   |                                                                           |   |        |      |      |   |        |   |      |   |        |   |
|     (154%      of net asset value at fair value)     |   |                                                                           | $      | 430,366,772 |      |      | $      | 423,859,086 |   |      | $      | 384,486,111 |   |
|                                                                     |   |                                                                           |   |        |      |      |   |        |   |      |   |        |   |   |   |
| Equity      Portfolio                                                    |   |                                                                           |   |        |      |      |   |        |   |      |   |        |   |   |   |

| Portfolio Company / Principal Business                                                       |   | Investment                        |   | PercentageInterest/Shares |   | Cost   |   | Value2 |   |
|------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|---------------------------|--------|--------|--------|--------|--------|
| Aerostructures Holdings L.P.7     Aerospace      and Defense                  |   | Partnership      Interests        |   |                      |   | 1.2    | %      |   | $      | 1,000,000 |   |   | $ | 750,000 |   |
|                                                                                                             |   |                              |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Aerostructures      Holdings L.P.7     Aerospace      and Defense                       |   | Series      A Preferred Interests |   |                      |   | 0.0    | %      |   |   | 160,361 |   |   |   | 160,361 |   |
|                                                                                                             |   |                              |   |                      |   |   |   |   |   |
| Allen-Vanguard      Corporation3,      7     Aerospace      and Defense                 |   | Common      Shares                |   |                      |   | 10,253 |   |   |   | 42,542 |   |   |   | 1,853 |   |
|                                                                                                             |   |                              |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Coastal      Concrete Southeast, LLC7,      8     Buildings      and Real Estate4  |   | Warrants                          |   |                      |   | 580    |   |   |   | 474,140 |   |   |   | — |   |
|                                                                                                             |   |                              |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| eInstruction      Acquisition, LLC7     Healthcare,      Education and Childcare        |   | Membership      Units             |   |                      |   | 1.1    | %      |   |   | 1,079,617 |   |   |   | 1,079,617 |   |

----

| Portfolio Company / Principal Business                                                                                             |   | Investment            |   | PercentageInterest/Shares |   |   | Cost      |   |      | Value2 |      |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|--------|---------------------------|--------|--------|-----------|--------|-----------|--------|-----------|
| FP      WRCA Coinvestment Fund      VII, Ltd.3,      7     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic) |   | Class      A Shares   |   |                      | 15,000 |   |      | $      | 1,500,000 |   |      | $ | 2,398,000 |   |
|                                                                                                                                                   |   |                  |   |                      |   |   |      |   |      |   |      |   |   |   |
| Park      Avenue Coastal Holding, LLC     Buildings      and Real Estate4                                                |   | Common      Interests |   |                      | 2.0    | %      |      |   | 1,000,000 |   |      |   | — |   |
|                                                                                                                                                   |   |                  |   |                      |   |   |      |   |      |   |      |   |   |   |
| Total      Investment in Equity Securities                                                                                                             |   |                  |   |                      |   |   |      |   |      |   |      |   |
|     (2%      of net asset value at fair value)                                                                                     |   |                  |   |                      |   | $      | 5,256,660 |   |      | $      | 4,389,831 |   |
|                                                                                                                                                   |   |                  |   |                      |   |   |      |   |      |   |      |   |   |   |
| CLO      Fund Securities                                                                                                                               |   |                  |   |                      |   |   |      |   |      |   |      |   |   |   |

| Portfolio Company / Principal Business                                                            |   | Investment                   |   | PercentageInterest |   |   | Cost       |   |       | Value2 |       |
|-----------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|--------------------|--------|--------|------------|--------|------------|--------|------------|
| Grant      Grove CLO, Ltd.3,      13                                                                                  |   | Subordinated      Securities |   |               | 22.2   | %      |       | $      | 4,620,951  |   |       | $ | 4,665,000 |   |
| Katonah      III, Ltd.3,      13                                                                                      |   | Preferred      Shares        |   |               | 23.1   | %      |       |   | 4,500,000  |   |       |   | 1,661,000 |   |
| Katonah      IV, Ltd.3,      13                                                                                       |   | Preferred      Shares        |   |               | 17.1   | %      |       |   | 3,150,000  |   |       |   | 1,601,000 |   |
| Katonah      V, Ltd.3,      13                                                                                        |   | Preferred      Shares        |   |               | 26.7   | %      |       |   | 3,320,000  |   |       |   | 1,172,000 |   |
| Katonah      VII CLO Ltd.3, 9,      13                                                                                |   | Subordinated      Securities |   |               | 16.4   | %      |       |   | 4,500,000  |   |       |   | 2,629,000 |   |
| Katonah      VIII CLO Ltd3, 9,      13                                                                                |   | Subordinated      Securities |   |               | 10.3   | %      |       |   | 3,400,000  |   |       |   | 2,252,000 |   |
| Katonah      IX CLO Ltd3, 9,      13                                                                                  |   | Preferred      Shares        |   |               | 6.9    | %      |       |   | 2,000,000  |   |       |   | 1,921,000 |   |
| Katonah      X CLO Ltd 3, 9,      13                                                                                  |   | Subordinated      Securities |   |               | 33.3   | %      |       |   | 11,324,758 |   |       |   | 11,875,000 |   |
| Katonah      2007-I CLO Ltd.3, 9,      13                                                                             |   | Preferred      Shares        |   |               | 100.0  | %      |       |   | 29,560,886 |   |       |   | 28,859,236 |   |
|                                                                                                                  |   |                         |   |               |   |   |       |   |       |   |       |   |   |   |
| Total      Investment in CLO Fund Securities     (23%      of net asset value at fair value) |   |                         |   |               |   | $      | 66,376,595 |   |       | $      | 56,635,236 |   |
|                                                                                                                  |   |                         |   |               |   |   |       |   |       |   |       |   |   |   |
| Asset      Manager Affiliates                                                                                         |   |                         |   |               |   |   |       |   |       |   |       |   |   |   |

| Portfolio Company / Principal Business                                                                 |   | Investment                |   | PercentageInterest |   | Cost   |   | Value2     |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|--------|--------------------|--------|--------|--------|------------|--------|
| Katonah      Debt Advisors, LLC                                                                                            |   | Membership      Interests |   |               |   | 100    | %      |       | $      | 37,151,495 |   |   | $ | 54,731,312 |   |
| PKSIL                                                                                                                      |   | Class      A Shares       |   |               |   | 100    | %      |       |   | 1,793,276 |   |   |   | 1,793,276 |   |
| PKSIL                                                                                                                      |   | Class      B Shares       |   |               |   | 35     | %      |       |   | 3,500 |   |   |   | 3,500 |   |
|                                                                                                                       |   |                      |   |               |   |   |   |       |   |   |   |   |   |   |   |
| Total      Investment in Asset Manager Affiliates     (22%      of net asset value at fair value) |   |                      |   |               |   |   | $      | 38,948,271 |   |   | $ | 56,528,088 |   |

----

| Time      Deposits and Money Market Account                                                                                             |   |                      |   |   |   |   |       |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|--------|--------|--------|--------|------------|
|                                                                                                                                    |   |                      |   |   |   |   |       |   |   |   |   |
| Time Deposits and Money Market Account                                                                         |   | Investment                | Yield  |   | Cost   |   | Value2     |   |
| US Bank Eurodollar Sweep      CL2                                                                                        |   | Time      Deposit         |   |   | 0.10   | %      |       | $ | 10,462,702 |   |   | $ | 10,462,702 |   |
|                                                                                                                                    |   |                      |   |   |   |   |       |   |   |   |   |   |   |   |
| JP      Morgan Asset Account                                                                                                            |   | Time      Deposit         |   |   | 0.20   | %      |       |   | 1,723,295 |   |   |   | 1,723,295 |   |
|                                                                                                                                    |   |                      |   |   |   |   |
| JP      Morgan Business Money Market Account                                                                                            |   | Money      Market Account |   |   | 0.19   | %      |       |   | 10 |   |   |   | 10 |   |
|                                                                                                                                    |   |                      |   |   |   |   |       |   |   |   |   |   |   |   |
| Total      Investment in Time Deposit and Money Market Accounts     (5%      of net asset value at fair value) |   |                      |   |   |   | $      | 12,186,007 |   |   | $ | 12,186,007 |   |
|                                                                                                                                    |   |                      |   |   |   |   |       |   |   |   |   |   |   |   |
| Total      Investments5      (205%      of net asset value at fair value)                                 |   |                      |   |   |   |   |       | $ | 546,626,619 |   |   | $ | 514,225,273 |   |

| 1 | A      majority of the variable rate loans to our portfolio companies bear      interest at a rate that may be determined by reference to either LIBOR or      an alternate Base Rate (commonly based on the Federal Funds Rate or the      Prime Rate), which typically resets semi-annually, quarterly, or monthly.      For each such loan, we have provided the weighted average annual stated      interest rate in effect at December 31,2008. |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2 | Reflects      the fair market value of all existing investments as of December 31, 2008,      as determined by our Board ofDirectors. |
|---|---------------------------------------------------------------------------------------------------------------------------------------|

| 3 | Non-U.S.      company or principal place of business outside the  U.S. |
|---|------------------------------------------------------------------------|

| 4 | Buildings      and real estate relate to real estate ownership, builders, managers and      developers and excludes mortgage debt investments and mortgage lenders or      originators. As of December 31, 2008, we had no exposure to mortgage      securities (residential mortgage bonds, commercial mortgage backed      securities, or related asset backed securities), companies providing      mortgage lending or emerging markets investments either directly or      through our investments in CLOfunds. |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5 | The      aggregate cost of investments for federal income tax purposes is      approximately $547 million. The aggregate gross unrealized appreciation is      approximately $20 million and the aggregate gross unrealized depreciation      is approximately $53 million. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6 | Pledged      as collateral for the secured revolving credit facility (see Note 6 to the      financial statements). |
|---|---------------------------------------------------------------------------------------------------------------------|

| 7 | Non-income      producing. |
|---|----------------------------|

| 8 | Warrants      having a strike price of $0.01 and expiration date of March      2017. |
|---|--------------------------------------------------------------------------------------|

| 9 | An      affiliate CLO Fund managed by Katonah Debt Advisors or its      affiliate. |
|---|------------------------------------------------------------------------------------|

| 10 | Loan      or debt security is on non-accrual status and therefore is considered      non-income producing. |
|----|------------------------------------------------------------------------------------------------------------|

| 11     | Time      deposit investment partially restricted under terms of the secured credit      facility (see Note 6 to financial statements). |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                    |

| 12 | Money      market account holding restricted cash for employee flexible spending      accounts. |
|----|-------------------------------------------------------------------------------------------------|

| 13 | These      securities are exempt from registration under Rule 144A of the Securities      Act of 1933.  These securities may be resold in transactions      that are exempt from registration, normally to qualified institutional      buyers. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Portfolio Company / Principal Business                                                            |   | InvestmentInterest Rate1 / Maturity                                  |   | Principal |      |   | Cost   |   |      | Value2 |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|-----------|-----------|--------|--------|--------|-----------|--------|--------|
| Advanced      Lighting Technologies, Inc.Home and Office Furnishings,      Housewares, and Durable Consumer Products  |   | Senior      Secured Loan — Revolving Loan7.5%,      Due 6/13                       |   | $         | —   |   |   | $      | —   |   |   | $ | — |   |
|                                                                                                                  |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| Advanced      Lighting Technologies, Inc.6Home and Office Furnishings,      Housewares, and Durable Consumer Products |   | Junior      Secured Loan — Second Lien Term Loan Note11.1%,      Due 6/14          |   |      | 5,000,000 |   |   |   | 4,990,905 |   |   |   | 5,000,000 |   |
|                                                                                                                  |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| Advanced      Lighting Technologies, Inc.6Home and Office Furnishings,      Housewares, and Durable Consumer Products |   | Senior      Secured Loan — Term Loan (First Lien)7.9%,      Due 6/13               |   |      | 3,573,000 |   |   |   | 3,573,000 |   |   |   | 3,573,000 |   |
|                                                                                                                  |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| Advanced      Lighting Technologies, Inc.6Home and Office Furnishings,      Housewares, and Durable Consumer Products |   | Senior      Secured Loan — Deferred Draw Term Loan (First Lien)7.5%,      Due 6/13 |   |      | 650,268   |   |   |   | 650,268   |   |   |   | 650,268 |   |
|                                                                                                                  |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| Aero      Products International, Inc.6Personal and Non Durable      Consumer Products (Mfg. Only)                    |   | Senior      Secured Loan — Term Loan8.8%,      Due 4/12                            |   |      | 3,700,000 |   |   |   | 3,700,000 |   |   |   | 3,681,500 |   |
|                                                                                                                  |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| Aerostructures      Acquisition LLC6Aerospace and      Defense                                                        |   | Senior      Secured Loan — Delayed Draw Term Loan7.9%,      Due 3/13               |   |      | 500,000   |   |   |   | 500,000   |   |   |   | 497,500 |   |
|                                                                                                                  |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| Aerostructures      Acquisition LLC6Aerospace and      Defense                                                        |   | Senior      Secured Loan — Term Loan7.8%,      Due 3/13                            |   |      | 6,378,125 |   |   |   | 6,378,125 |   |   |   | 6,378,125 |   |
|                                                                                                                  |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| AGA      Medical Corporation6Healthcare, Education and      Childcare                                                 |   | Senior      Secured Loan — Tranche B Term Loan7.2%,      Due 4/13                  |   |      | 3,832,209 |   |   |   | 3,829,343 |   |   |   | 3,654,970 |   |
|                                                                                                                  |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| AGS      LLC6Hotels, Motels, Inns, and      Gaming                                                                    |   | Senior      Secured Loan — Delayed Draw Term Loan7.7%,      Due 5/13               |   |      | 579,194   |   |   |   | 562,331   |   |   |   | 550,234 |   |
|                                                                                                                  |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| AGS      LLC6Hotels, Motels, Inns, and      Gaming                                                                    |   | Senior      Secured Loan — Initial Term Loan7.9%,      Due 5/13                    |   |      | 4,802,419 |   |   |   | 4,732,592 |   |   |   | 4,562,298 |   |
|                                                                                                                  |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| Allen-Vanguard      Corporation3Aerospace and      Defense                                                            |   | Senior      Secured Loan — US Term Loan12.0%,      Due 9/12                        |   |      | 2,309,736 |   |   |   | 2,277,028 |   |   |   | 2,277,028 |   |
|                                                                                                                  |   |                                                                                     |   |      |      |   |   |   |      |   |   |   |   |   |
| AmerCable      Incorporated6Machinery (Non-Agriculture,      Non-Construction, Non-Electronic)                        |   | Senior      Secured Loan — Initial Term Loan8.4%,      Due 6/14                    |   |      | 6,965,000 |   |   |   | 6,965,000 |   |   |   | 6,965,000 |   |

----

| Portfolio Company / Principal Business                                                                                    |   | InvestmentInterest Rate1 / Maturity                               |   | Principal |       |   | Cost   |   |       | Value2 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------|--------|-----------|------------|--------|--------|--------|------------|--------|--------|
| Astoria      Generating Company Acquisitions, LLC6Utilities                                                                                   |   | Junior      Secured Loan — Second Lien Term Loan C8.7%,      Due 8/13           |   | $         | 4,000,000  |   |   | $      | 4,049,430  |   |   | $ | 3,900,000 |   |
|                                                                                                                                          |   |                                                                                  |   |      |       |   |   |   |       |   |   |   |   |   |
| Atlantic      Marine Holding Company6Cargo      Transport                                                                                     |   | Senior      Secured Loan — Term Loan7.1%,      Due 3/14                         |   |      | 1,739,465  |   |   |   | 1,750,599  |   |   |   | 1,730,768 |   |
|                                                                                                                                          |   |                                                                                  |   |      |       |   |   |   |       |   |   |   |   |   |
| Aurora      Diagnostics, LLC6Healthcare, Education and      Childcare                                                                         |   | Senior      Secured Loan — Tranche A Term Loan (First Lien)9.0%,      Due 12/12 |   |      | 4,060,000  |   |   |   | 4,010,521  |   |   |   | 4,019,823 |   |
|                                                                                                                                          |   |                                                                                  |   |      |       |   |   |   |       |   |   |   |   |   |
| Awesome      Acquisition Company (CiCi's Pizza)6     Personal,      Food and Miscellaneous Services                  |   | Junior      Secured Loan — Term Loan (Second Lien)9.8%,      Due 6/14           |   |      | 4,000,000  |   |   |   | 3,973,451  |   |   |   | 3,820,000 |   |
|                                                                                                                                          |   |                                                                                  |   |      |       |   |   |   |       |   |   |   |   |   |
| AZ      Chem US Inc.6     Chemicals,      Plastics and Rubber                                                        |   | Junior      Secured Loan — Second Lien Term Loan10.6%,      Due 2/14            |   |      | 4,000,000  |   |   |   | 3,956,582  |   |   |   | 3,220,000 |   |
|                                                                                                                                          |   |                                                                                  |   |      |       |   |   |   |       |   |   |   |   |   |
| Bankruptcy      Management Solutions, Inc.6     Diversified/Conglomerate      Service                                |   | Senior      Secured Loan — First Lien Term Loan7.6%,      Due 7/12              |   |      | 1,975,000  |   |   |   | 1,987,070  |   |   |   | 1,846,625 |   |
|                                                                                                                                          |   |                                                                                  |   |      |       |   |   |   |       |   |   |   |   |   |
| Bankruptcy      Management Solutions, Inc.6     Diversified/Conglomerate      Service                                |   | Junior      Secured Loan — Loan (Second Lien)11.1%,      Due 7/13               |   |      | 2,468,750  |   |   |   | 2,505,651  |   |   |   | 1,987,344 |   |
|                                                                                                                                          |   |                                                                                  |   |      |       |   |   |   |       |   |   |   |   |   |
| Bay      Point Re Limited3,      6     Insurance                                                                     |   | Senior      Secured Loan — Loan9.6%,      Due 12/10                             |   |      | 3,000,000  |   |   |   | 3,019,487  |   |   |   | 3,019,487 |   |
|                                                                                                                                          |   |                                                                                  |   |      |       |   |   |   |       |   |   |   |   |   |
| Bicent      Power LLC6     Utilities                                                                                 |   | Junior      Secured Loan — Advance (Second Lien)8.8%,      Due 12/14            |   |      | 4,000,000  |   |   |   | 4,000,000  |   |   |   | 3,730,000 |   |
|                                                                                                                                          |   |                                                                                  |   |      |       |   |   |   |       |   |   |   |   |   |
| Byram      Healthcare Centers, Inc.     Healthcare,      Education and Childcare                                     |   | Senior      Secured Loan — Term Loan A10.1%,      Due 11/11                     |   |      | 3,733,691  |   |   |   | 3,733,691  |   |   |   | 3,733,691 |   |
|                                                                                                                                          |   |                                                                                  |   |      |       |   |   |   |       |   |   |   |   |   |
| Byram      Healthcare Centers, Inc.     Healthcare,      Education and Childcare                                     |   | Senior      Secured Loan — Revolving Loan9.7%,      Due 11/10                   |   |      | 375,000    |   |   |   | 375,000    |   |   |   | 375,000 |   |
|                                                                                                                                          |   |                                                                                  |   |      |       |   |   |   |       |   |   |   |   |   |
| Caribe      Information Investments Incorporated6     Printing      and Publishing                                   |   | Senior      Secured Loan — Term Loan7.3%,      Due 3/13                         |   |      | 2,815,534  |   |   |   | 2,803,185  |   |   |   | 2,709,951 |   |
|                                                                                                                                          |   |                                                                                  |   |      |       |   |   |   |       |   |   |   |   |   |
| Cast      & Crew Payroll, LLC (Payroll Acquisition)6     Leisure,      Amusement, Motion Pictures, Entertainment |   | Senior      Secured Loan — Initial Term Loan7.8%,      Due 9/12                 |   |      | 10,608,400 |   |   |   | 10,647,600 |   |   |   | 10,647,600 |   |
|                                                                                                                                          |   |                                                                                  |   |      |       |   |   |   |       |   |   |   |   |   |
| CEI      Holdings, Inc. (Cosmetic Essence)6     Personal      and Non Durable Consumer Products (Mfg. Only)          |   | Senior      Secured Loan — Term Loan7.5%,      Due 3/14                         |   |      | 1,850,051  |   |   |   | 1,751,546  |   |   |   | 1,665,046 |   |

----

| Portfolio Company / Principal Business                                                                     |   | InvestmentInterest Rate1 / Maturity                          |   | Principal |       |   | Cost   |   |      | Value2 |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|--------|-----------|------------|--------|--------|--------|-----------|--------|--------|
| Centaur,      LLC6     Hotels,      Motels, Inns, and Gaming                                          |   | Senior      Secured Loan — Term Loan      (First Lien)8.8%,      Due 10/12 |   | $         | 4,122,807  |   |   | $      | 4,069,243 |   |   | $ | 3,978,509 |   |
|                                                                                                                           |   |                                                                             |   |      |       |   |   |   |      |   |   |   |   |   |
| Centaur,      LLC6     Hotels,      Motels, Inns, and Gaming                                          |   | Senior      Secured Loan — Delayed Draw Term Loan8.7%,      Due 10/12      |   |      | —    |   |   |   | —   |   |   |   | — |   |
|                                                                                                                           |   |                                                                             |   |      |       |   |   |   |      |   |   |   |   |   |
| Charlie      Acquisition Corp.     Personal,      Food and Miscellaneous Services                     |   | Mezzanine      Investment — Senior Subordinated Notes15.5%,      Due 6/13  |   |      | 10,127,500 |   |   |   | 9,945,201 |   |   |   | 9,945,201 |   |
|                                                                                                                           |   |                                                                             |   |      |       |   |   |   |      |   |   |   |   |   |
| Clarke      American Corp.6     Printing      and Publishing                                          |   | Senior      Secured Loan — Tranche B Term Loan7.3%,      Due 6/14          |   |      | 2,985,000  |   |   |   | 2,985,000 |   |   |   | 2,693,963 |   |
|                                                                                                                           |   |                                                                             |   |      |       |   |   |   |      |   |   |   |   |   |
| Clayton      Holdings, Inc6     Finance                                                               |   | Senior      Secured Loan — Term Loan7.0%,      Due 12/11                   |   |      | 614,320    |   |   |   | 616,752   |   |   |   | 552,888 |   |
|                                                                                                                           |   |                                                                             |   |      |       |   |   |   |      |   |   |   |   |   |
| Coastal      Concrete Southeast, LLC     Buildings      and Real Estate4                         |   | Mezzanine      Investment — Mezzanine Term Loan15.0%,      Due 3/13        |   |      | 8,120,914  |   |   |   | 7,711,760 |   |   |   | 8,120,914 |   |
|                                                                                                                           |   |                                                                             |   |      |       |   |   |   |      |   |   |   |   |   |
| Concord      Re Limited3     Insurance                                                                |   | Senior      Secured Loan — Term Loan9.2%,      Due 2/12                    |   |      | 3,000,000  |   |   |   | 3,024,013 |   |   |   | 3,000,000 |   |
|                                                                                                                           |   |                                                                             |   |      |       |   |   |   |      |   |   |   |   |   |
| CST      Industries, Inc.6     Diversified/Conglomerate      Manufacturing                            |   | Senior      Secured Loan — Term Loan7.9%,      Due 8/13                    |   |      | 987,500    |   |   |   | 990,623   |   |   |   | 990,623 |   |
|                                                                                                                           |   |                                                                             |   |      |       |   |   |   |      |   |   |   |   |   |
| DaimlerChrysler      Financial Services Americas LLC6     Finance                                     |   | Senior      Secured Loan — Term Loan (First Lien)9.0%,      Due 8/12       |   |      | 1,995,000  |   |   |   | 1,903,193 |   |   |   | 1,923,519 |   |
|                                                                                                                           |   |                                                                             |   |      |       |   |   |   |      |   |   |   |   |   |
| Dealer      Computer Services, Inc. (Reynolds & Reynolds)6     Electronics                        |   | Junior      Secured Loan — Term Loan (Third Lien)12.3%,      Due 4/14      |   |      | 3,500,000  |   |   |   | 3,537,846 |   |   |   | 3,491,250 |   |
|                                                                                                                           |   |                                                                             |   |      |       |   |   |   |      |   |   |   |   |   |
| Dealer      Computer Services, Inc. (Reynolds & Reynolds)6     Electronics                        |   | Junior      Secured Loan — Term Loan (Second Lien)10.3%,      Due 10/13    |   |      | 1,000,000  |   |   |   | 1,009,544 |   |   |   | 990,000 |   |
|                                                                                                                           |   |                                                                             |   |      |       |   |   |   |      |   |   |   |   |   |
| Delta      Educational Systems, Inc.6     Healthcare,      Education and Childcare                    |   | Senior      Secured Loan — Term Loan8.3%,      Due 6/12                    |   |      | 2,876,053  |   |   |   | 2,876,053 |   |   |   | 2,876,053 |   |
|                                                                                                                           |   |                                                                             |   |      |       |   |   |   |      |   |   |   |   |   |
| DeltaTech      Controls, Inc.6     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic) |   | Senior      Secured Loan — Term Loan (First Lien)8.0%,      Due 7/14       |   |      | 4,000,000  |   |   |   | 3,980,991 |   |   |   | 3,980,991 |   |
|                                                                                                                           |   |                                                                             |   |      |       |   |   |   |      |   |   |   |   |   |
| DeltaTech      Controls, Inc.6     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic) |   | Junior      Secured Loan — Term Loan (Second Lien)11.7%,      Due 1/15     |   |      | 2,000,000  |   |   |   | 1,961,246 |   |   |   | 1,961,246 |   |

----

| Portfolio Company / Principal Business                                                          |   | InvestmentInterest Rate1 / Maturity                                |   | Principal |       |   | Cost   |   |       | Value2 |   |
|---------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|--------|-----------|------------|--------|--------|--------|------------|--------|--------|
| Dresser,      Inc.6     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic) |   | Junior      Secured Loan — Term Loan (Second Lien)11.1%,      Due 5/15           |   | $         | 3,000,000  |   |   | $      | 2,959,031  |   |   | $ | 2,861,250 |   |
|                                                                                                                |   |                                                                                   |   |      |       |   |   |   |       |   |   |   |   |   |
| Edgestone      CD Acquisition Corp. (Custom Direct)6     Printing      and Publishing      |   | Junior      Secured Loan — Loan (Second Lien)10.8%,      Due 12/14               |   |      | 5,000,000  |   |   |   | 5,000,000  |   |   |   | 5,000,000 |   |
|                                                                                                                |   |                                                                                   |   |      |       |   |   |   |       |   |   |   |   |   |
| Edgestone      CD Acquisition Corp. (Custom Direct)6     Printing      and Publishing      |   | Senior      Secured Loan — Term Loan (First Lien)7.6%,      Due 12/13            |   |      | 4,975,000  |   |   |   | 4,980,828  |   |   |   | 4,980,828 |   |
|                                                                                                                |   |                                                                                   |   |      |       |   |   |   |       |   |   |   |   |   |
| eInstruction      Corporation6     Healthcare,      Education and Childcare                |   | Junior      Secured Loan — Second Lien Term Loan (Dec. 2007)12.5%,      Due 7/14 |   |      | 10,000,000 |   |   |   | 10,000,000 |   |   |   | 10,000,000 |   |
|                                                                                                                |   |                                                                                   |   |      |       |   |   |   |       |   |   |   |   |   |
| eInstruction      Corporation6     Healthcare,      Education and Childcare                |   | Senior      Secured Loan — Initial Term Loan (Dec. 2007)9.0%,      Due 7/13      |   |      | 4,970,013  |   |   |   | 4,970,013  |   |   |   | 4,970,013 |   |
|                                                                                                                |   |                                                                                   |   |      |       |   |   |   |       |   |   |   |   |   |
| Emerson      Reinsurance Ltd.3     Insurance                                               |   | Senior      Secured Loan — Series C Loan10.2%,      Due 12/11                    |   |      | 3,000,000  |   |   |   | 3,000,000  |   |   |   | 2,985,000 |   |
|                                                                                                                |   |                                                                                   |   |      |       |   |   |   |       |   |   |   |   |   |
| Endeavor      Energy Resources, L.P.     Oil      and Gas                                  |   | Junior      Secured Loan — Second Lien Term Loan9.6%,      Due 3/12              |   |      | 4,000,000  |   |   |   | 4,000,000  |   |   |   | 4,000,000 |   |
|                                                                                                                |   |                                                                                   |   |      |       |   |   |   |       |   |   |   |   |   |
| Fasteners      For Retail, Inc.6     Diversified/Conglomerate      Manufacturing           |   | Senior      Secured Loan — Term Loan7.9%,      Due 12/12                         |   |      | 7,926,391  |   |   |   | 7,940,720  |   |   |   | 7,728,231 |   |
|                                                                                                                |   |                                                                                   |   |      |       |   |   |   |       |   |   |   |   |   |
| FD      Alpha Acquisition LLC  (Fort Dearborn)6     Printing      and Publishing |   | Senior      Secured Loan — US Term Loan8.3%,      Due 11/12                      |   |      | 915,400    |   |   |   | 915,400    |   |   |   | 901,669 |   |
|                                                                                                                |   |                                                                                   |   |      |       |   |   |   |       |   |   |   |   |   |
| First      American Payment Systems, L.P.6     Finance                                     |   | Senior      Secured Loan — Term Loan8.2%,      Due 10/13                         |   |      | 3,694,000  |   |   |   | 3,694,000  |   |   |   | 3,601,650 |   |
|                                                                                                                |   |                                                                                   |   |      |       |   |   |   |       |   |   |   |   |   |
| Flatiron      Re Ltd.3     Insurance                                                       |   | Senior      Secured Loan — Closing Date Term Loan9.1%,      Due 12/10            |   |      | 3,664,488  |   |   |   | 3,691,697  |   |   |   | 3,646,165 |   |
|                                                                                                                |   |                                                                                   |   |      |       |   |   |   |       |   |   |   |   |   |
| Flatiron      Re Ltd.3     Insurance                                                       |   | Senior      Secured Loan — Delayed Draw Term Loan9.1%,      Due 12/10            |   |      | 1,774,986  |   |   |   | 1,788,166  |   |   |   | 1,766,111 |   |
|                                                                                                                |   |                                                                                   |   |      |       |   |   |   |       |   |   |   |   |   |
| Ford      Motor Company6     Automobile                                                    |   | Senior      Secured Loan — Term Loan8.0%,      Due 12/13                         |   |      | 1,989,950  |   |   |   | 1,987,554  |   |   |   | 1,845,678 |   |
|                                                                                                                |   |                                                                                   |   |      |       |   |   |   |       |   |   |   |   |   |
| Freescale      Semiconductor, Inc.     Electronics                                         |   | Senior      Subordinated Bond —10.1%,      Due 12/16                             |   |      | 3,000,000  |   |   |   | 3,009,230  |   |   |   | 2,490,000 |   |

----

| Portfolio Company / Principal Business                                                                                   |   | InvestmentInterest Rate1 / Maturity                                        |   | Principal |      |   | Cost   |   |      | Value2 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|--------|-----------|-----------|--------|--------|--------|-----------|--------|--------|
| Frontier      Drilling USA, Inc.6     Oil      and Gas                                                              |   | Senior      Secured Loan — Term B Advance8.7%,      Due 6/13                             |   | $         | 2,000,000 |   |   | $      | 1,997,874 |   |   | $ | 1,960,000 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Ginn      LA Conduit Lender, Inc.     Buildings      and Real Estate4                                          |   | Senior      Secured Loan — First Lien Tranche A Credit-Linked Deposit8.2%,      Due 6/11 |   |      | 1,257,143 |   |   |   | 1,218,578 |   |   |   | 1,026,143 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Ginn      LA Conduit Lender, Inc.     Buildings      and Real Estate4                                          |   | Senior      Secured Loan — First Lien Tranche B Term Loan8.3%,      Due 6/11             |   |      | 2,701,714 |   |   |   | 2,618,835 |   |   |   | 2,205,274 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Ginn      LA Conduit Lender, Inc.     Buildings      and Real Estate4                                          |   | Junior      Secured Loan — Second Lien Term Loan12.3%,      Due 6/12                     |   |      | 3,000,000 |   |   |   | 2,680,274 |   |   |   | 1,925,010 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Gleason      Works, The6     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic)                     |   | Senior      Secured Loan — New US Term Loan6.8%,      Due 6/13                           |   |      | 2,437,280 |   |   |   | 2,444,818 |   |   |   | 2,324,556 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Hawkeye      Renewables, LLC6     Farming      and Agriculture                                                      |   | Senior      Secured Loan — Term Loan (First Lien)9.0%,      Due 6/12                     |   |      | 2,962,406 |   |   |   | 2,894,213 |   |   |   | 2,346,640 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| HealthSouth      Corporation     Healthcare,      Education and Childcare                                           |   | Senior      Secured Loan — Term Loan7.7%,      Due 3/13                                  |   |      | 1,262,594 |   |   |   | 1,266,540 |   |   |   | 1,208,403 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| HMSC      Corporation (aka Swett and Crawford)6     Insurance                                                       |   | Junior      Secured Loan — Loan (Second Lien)10.7%,      Due 10/14                       |   |      | 5,000,000 |   |   |   | 4,803,383 |   |   |   | 4,550,000 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Huish      Detergents Inc.6     Personal      and Non Durable Consumer Products (Mfg. Only)                         |   | Junior      Secured Loan — Loan (Second Lien)9.1%,      Due 10/14                        |   |      | 1,000,000 |   |   |   | 1,000,000 |   |   |   | 811,660 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Hunter      Fan Company6     Home      and Office Furnishings, Housewares, and Durable Consumer      Products       |   | Senior      Secured Loan — Initial Term Loan (First Lien)7.4%,      Due 4/14             |   |      | 4,161,071 |   |   |   | 3,947,013 |   |   |   | 3,682,548 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Hunter      Fan Company6     Home      and Office Furnishings, Housewares, and Durable Consumer      Products       |   | Junior      Secured Loan — Loan (Second Lien)11.6%,      Due 10/14                       |   |      | 3,000,000 |   |   |   | 3,000,000 |   |   |   | 2,430,000 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Hunter      Fan Company6     Home      and Office Furnishings, Housewares, and Durable Consumer      Products       |   | Senior      Secured Loan — Delayed Draw Term Loan7.2%,      Due 4/14                     |   |      | —   |   |   |   | —   |   |   |   | — |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| IAL      Acquisition Co. (International Aluminum Corporation)6     Mining,      Steel, Iron and Non-Precious Metals |   | Senior      Secured Loan — Term Loan7.6%,      Due 3/13                                  |   |      | 4,039,700 |   |   |   | 4,039,700 |   |   |   | 4,039,700 |   |
|                                                                                                                                         |   |                                                                                           |   |      |      |   |   |   |      |   |   |   |   |   |
| Infiltrator      Systems, Inc.6     Ecological                                                                      |   | Senior      Secured Loan — Term Loan8.4%,      Due 9/12                                  |   |      | 3,950,000 |   |   |   | 3,937,850 |   |   |   | 3,937,850 |   |

----

| Portfolio Company / Principal Business                                                                                  |   | InvestmentInterest Rate1 / Maturity                       |   | Principal |       |   | Cost   |   |       | Value2 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|-----------|------------|--------|--------|--------|------------|--------|--------|
| Inmar,      Inc.6     Retail      Stores                                                                           |   | Senior      Secured Loan — Term Loan7.3%,      Due 4/13                 |   | $         | 4,962,500  |   |   | $      | 4,962,500  |   |   | $ | 4,813,625 |   |
|                                                                                                                                        |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| Intrapac      Corporation/Corona Holdco6     Containers,      Packaging and Glass                                  |   | Senior      Secured Loan — First Lien Term Loan8.5%,      Due 5/12      |   |      | 5,850,000  |   |   |   | 5,873,152  |   |   |   | 5,873,152 |   |
|                                                                                                                                        |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| Intrapac      Corporation/Corona Holdco6     Containers,      Packaging and Glass                                  |   | Junior      Secured Loan — Term Loans (Second Lien)12.5%,      Due 5/13 |   |      | 3,000,000  |   |   |   | 3,021,907  |   |   |   | 3,021,907 |   |
|                                                                                                                                        |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| Jones      Stephens Corp.6     Buildings      and Real Estate4                                                |   | Senior      Secured Loan — Term Loan8.8%,      Due 9/12                 |   |      | 10,245,530 |   |   |   | 10,217,367 |   |   |   | 10,217,367 |   |
|                                                                                                                                        |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| JW      Aluminum Company6     Mining,      Steel, Iron and Non-Precious Metals                                     |   | Junior      Secured Loan — Term Loan (Second Lien)11.1%,      Due 12/13 |   |      | 5,371,429  |   |   |   | 5,390,350  |   |   |   | 5,210,286 |   |
|                                                                                                                                        |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| Kepler      Holdings Limited3     Insurance                                                                        |   | Senior      Secured Loan — Loan10.3%,      Due 6/09                     |   |      | 3,000,000  |   |   |   | 3,000,000  |   |   |   | 2,985,000 |   |
|                                                                                                                                        |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| Kepler      Holdings Limited3,      6     Insurance                                                                |   | Senior      Secured Loan — Loan10.3%,      Due 6/09                     |   |      | 2,000,000  |   |   |   | 2,020,139  |   |   |   | 1,990,000 |   |
|                                                                                                                                        |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| KIK      Custom Products Inc.6     Personal      and Non Durable Consumer Products (Mfg. Only)                     |   | Junior      Secured Loan — Loan (Second Lien)9.8%,      Due 12/14       |   |      | 5,000,000  |   |   |   | 5,000,000  |   |   |   | 3,400,000 |   |
|                                                                                                                                        |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| La      Paloma Generating Company, LLC     Utilities                                                               |   | Junior      Secured Loan — Loan (Second Lien)8.3%,      Due 8/13        |   |      | 2,000,000  |   |   |   | 2,017,210  |   |   |   | 1,890,000 |   |
|                                                                                                                                        |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| LBREP/L-Suncal      Master I LLC     Buildings      and Real Estate4                                          |   | Junior      Secured Loan — Term Loan (Third Lien)13.8%,      Due 2/12   |   |      | 2,254,068  |   |   |   | 2,254,068  |   |   |   | 2,006,120 |   |
|                                                                                                                                        |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| LBREP/L-Suncal      Master I LLC6     Buildings      and Real Estate4                                         |   | Senior      Secured Loan — Term Loan (First Lien)8.2%,      Due 1/10    |   |      | 3,920,000  |   |   |   | 3,842,022  |   |   |   | 3,567,200 |   |
|                                                                                                                                        |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| LBREP/L-Suncal      Master I LLC6     Buildings      and Real Estate4                                         |   | Junior      Secured Loan — Term Loan (Second Lien)12.2%,      Due 1/11  |   |      | 2,000,000  |   |   |   | 1,918,000  |   |   |   | 1,780,000 |   |
|                                                                                                                                        |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| Legacy      Cabinets, Inc.     Home      and Office Furnishings, Housewares, and Durable Consumer      Products    |   | Senior      Secured Loan — First Lien Term Loan8.6%,      Due 8/12      |   |      | 2,955,000  |   |   |   | 2,955,000  |   |   |   | 2,955,000 |   |
|                                                                                                                                        |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| Levlad,      LLC & Arbonne International, LLC6     Personal      and Non Durable Consumer Products (Mfg. Only) |   | Senior      Secured Loan — Term Loan7.2%,      Due 3/14                 |   |      | 2,898,451  |   |   |   | 2,898,451  |   |   |   | 2,266,589 |   |

----

| Portfolio Company / Principal Business                                                                                      |   | InvestmentInterest Rate1 / Maturity                              |   | Principal |      |   | Cost   |   |      | Value2 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|-----------|-----------|--------|--------|--------|-----------|--------|--------|
| LN      Acquisition Corp. (Lincoln Industrial)6     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic) |   | Junior      Secured Loan — Initial Term Loan (Second Lien)10.9%,      Due 1/15 |   | $         | 2,000,000 |   |   | $      | 2,000,000 |   |   | $ | 1,970,000 |   |
|                                                                                                                                            |   |                                                                                 |   |      |      |   |   |   |      |   |   |   |   |   |
| LPL      Holdings, Inc.6     Finance                                                                                   |   | Senior      Secured Loan — Tranche D Term Loan6.8%,      Due 6/13              |   |      | 5,338,639 |   |   |   | 5,376,752 |   |   |   | 5,131,767 |   |
|                                                                                                                                            |   |                                                                                 |   |      |      |   |   |   |      |   |   |   |   |   |
| MCCI      Group Holdings, LLC6     Healthcare,      Education and Childcare                                            |   | Junior      Secured Loan — Term Loan (Second Lien)12.7%,      Due 6/13         |   |      | 1,000,000 |   |   |   | 1,000,000 |   |   |   | 1,000,000 |   |
|                                                                                                                                            |   |                                                                                 |   |      |      |   |   |   |      |   |   |   |   |   |
| MCCI      Group Holdings, LLC6     Healthcare,      Education and Childcare                                            |   | Senior      Secured Loan — Term Loan (First Lien)9.4%,      Due 12/12          |   |      | 5,960,018 |   |   |   | 5,940,018 |   |   |   | 5,960,018 |   |
|                                                                                                                                            |   |                                                                                 |   |      |      |   |   |   |      |   |   |   |   |   |
| Murray      Energy Corporation6     Mining,      Steel, Iron and Non-Precious Metals                                   |   | Senior      Secured Loan — Tranche B Term Loan (First Lien)7.9%,      Due 1/10 |   |      | 1,969,620 |   |   |   | 1,979,459 |   |   |   | 1,890,835 |   |
|                                                                                                                                            |   |                                                                                 |   |      |      |   |   |   |      |   |   |   |   |   |
| National      Interest Security Company, L.L.C.6     Aerospace      and Defense                                        |   | Senior      Secured Loan — Term Loan9.7%,      Due 12/12                       |   |      | 5,000,000 |   |   |   | 5,000,000 |   |   |   | 5,000,000 |   |
|                                                                                                                                            |   |                                                                                 |   |      |      |   |   |   |      |   |   |   |   |   |
| Northeast      Biofuels, LP6     Farming      and Agriculture                                                          |   | Senior      Secured Loan — Construction Term Loan8.5%,      Due 6/13           |   |      | 1,365,854 |   |   |   | 1,368,725 |   |   |   | 1,229,268 |   |
|                                                                                                                                            |   |                                                                                 |   |      |      |   |   |   |      |   |   |   |   |   |
| Northeast      Biofuels, LP6     Farming      and Agriculture                                                          |   | Senior      Secured Loan — Synthetic LC Term Loan8.1%,      Due 6/13           |   |      | 536,585   |   |   |   | 537,713   |   |   |   | 482,927 |   |
|                                                                                                                                            |   |                                                                                 |   |      |      |   |   |   |      |   |   |   |   |   |
| PAS      Technologies Inc.     Aerospace      and Defense                                                              |   | Senior      Secured Loan — Incremental Term Loan Add On8.5%,      Due 6/11     |   |      | 856,741   |   |   |   | 856,741   |   |   |   | 856,741 |   |
|                                                                                                                                            |   |                                                                                 |   |      |      |   |   |   |      |   |   |   |   |   |
| PAS      Technologies Inc.     Aerospace      and Defense                                                              |   | Senior      Secured Loan — Term Loan8.4%,      Due 6/11                        |   |      | 4,236,111 |   |   |   | 4,211,616 |   |   |   | 4,211,616 |   |
|                                                                                                                                            |   |                                                                                 |   |      |      |   |   |   |      |   |   |   |   |   |
| Pegasus      Solutions, Inc.12      Leisure,      Amusement, Motion Pictures, Entertainment                       |   | Senior      Unsecured Bond —10.5%,      Due 4/15                               |   |      | 2,000,000 |   |   |   | 2,000,000 |   |   |   | 2,000,000 |   |
|                                                                                                                                            |   |                                                                                 |   |      |      |   |   |   |      |   |   |   |   |   |
| Pegasus      Solutions, Inc.6     Leisure,      Amusement, Motion Pictures, Entertainment                              |   | Senior      Secured Loan — Term Loan8.1%,      Due 4/13                        |   |      | 5,755,000 |   |   |   | 5,755,000 |   |   |   | 5,755,000 |   |
|                                                                                                                                            |   |                                                                                 |   |      |      |   |   |   |      |   |   |   |   |   |
| Primus      International Inc.6     Aerospace      and Defense                                                         |   | Senior      Secured Loan — Term Loan7.7%,      Due 6/12                        |   |      | 3,259,279 |   |   |   | 3,265,878 |   |   |   | 3,177,797 |   |
|                                                                                                                                            |   |                                                                                 |   |      |      |   |   |   |      |   |   |   |   |   |
| QA      Direct Holdings, LLC6     Printing      and Publishing                                                         |   | Senior      Secured Loan — Term Loan9.6%,      Due 8/14                        |   |      | 4,987,469 |   |   |   | 4,938,587 |   |   |   | 4,950,063 |   |

----

| Portfolio Company / Principal Business                                                                     |   | InvestmentInterest Rate1 / Maturity                               |   | Principal |      |   | Cost   |   |      | Value2 |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------|--------|-----------|-----------|--------|--------|--------|-----------|--------|--------|
| Resco      Products, Inc.6     Mining,      Steel, Iron and Non-Precious Metals                       |   | Junior      Secured Loan — Second Lien Term Loan13.1%,      Due 6/14            |   | $         | 5,000,000 |   |   | $      | 4,928,938 |   |   | $ | 4,928,938 |   |
|                                                                                                                           |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Rhodes      Companies, LLC, The6     Buildings      and Real Estate                                   |   | Senior      Secured Loan — First Lien Term Loan8.3%,      Due 11/10             |   |      | 1,878,788 |   |   |   | 1,780,166 |   |   |   | 1,647,077 |   |
|                                                                                                                           |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Rhodes      Companies, LLC, The6     Buildings      and Real Estate                                   |   | Junior      Secured Loan — Second Lien Term Loan12.6%,      Due 11/11           |   |      | 2,000,000 |   |   |   | 2,011,185 |   |   |   | 1,266,680 |   |
|                                                                                                                           |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| San      Juan Cable, LLC6     Broadcasting      and Entertainment                                     |   | Junior      Secured Loan — Second Lien Term Loan10.7%,      Due 10/13           |   |      | 3,000,000 |   |   |   | 2,978,999 |   |   |   | 2,782,500 |   |
|                                                                                                                           |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Schneller      LLC6     Aerospace      and Defense                                                    |   | Senior      Secured Loan — First Lien Term Loan8.7%,      Due 6/13              |   |      | 4,975,000 |   |   |   | 4,927,882 |   |   |   | 4,950,125 |   |
|                                                                                                                           |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Seismic      Micro-Technology, Inc. (SMT)6     Electronics                                            |   | Senior      Secured Loan — Term Loan7.6%,      Due 6/12                         |   |      | 995,000   |   |   |   | 992,532   |   |   |   | 992,532 |   |
|                                                                                                                           |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Seismic      Micro-Technology, Inc. (SMT)6     Electronics                                            |   | Senior      Secured Loan — Term Loan7.6%,      Due 6/12                         |   |      | 1,492,500 |   |   |   | 1,488,798 |   |   |   | 1,488,798 |   |
|                                                                                                                           |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Sorenson      Communications, Inc.6     Electronics                                                   |   | Senior      Secured Loan — Tranche C Term Loan7.4%,      Due 8/13               |   |      | 2,791,551 |   |   |   | 2,807,105 |   |   |   | 2,720,897 |   |
|                                                                                                                           |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Specialized      Technology Resources, Inc.6     Diversified/Conglomerate      Service                |   | Senior      Secured Loan — Term  Loan (First Lien)7.3%,      Due 6/14 |   |      | 5,970,000 |   |   |   | 5,970,000 |   |   |   | 5,970,000 |   |
|                                                                                                                           |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Specialized      Technology Resources, Inc.6     Diversified/Conglomerate      Service                |   | Junior      Secured Loan — Loan (Second Lien)11.8%,      Due 12/14              |   |      | 7,500,000 |   |   |   | 7,500,000 |   |   |   | 7,500,000 |   |
|                                                                                                                           |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Standard      Steel, LLC6     Cargo      Transport                                                    |   | Senior      Secured Loan — Delayed Draw Term Loan7.4%,      Due 7/12            |   |      | 825,699   |   |   |   | 831,324   |   |   |   | 831,324 |   |
|                                                                                                                           |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Standard      Steel, LLC6     Cargo      Transport                                                    |   | Senior      Secured Loan — Initial Term Loan7.3%,      Due 7/12                 |   |      | 4,097,298 |   |   |   | 4,125,208 |   |   |   | 4,125,208 |   |
|                                                                                                                           |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Standard      Steel, LLC6     Cargo      Transport                                                    |   | Junior      Secured Loan — Loan (Second Lien)10.8%,      Due 7/13               |   |      | 1,750,000 |   |   |   | 1,760,240 |   |   |   | 1,760,240 |   |
|                                                                                                                           |   |                                                                                  |   |      |      |   |   |   |      |   |   |   |   |   |
| Stolle      Machinery Company6     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic) |   | Junior      Secured Loan — Loan (Second Lien)11.4%,      Due 9/13               |   |      | 1,000,000 |   |   |   | 1,015,115 |   |   |   | 975,000 |   |

----

| Portfolio Company / Principal Business                                                                                        |   | InvestmentInterest Rate1 / Maturity                                      |   | Principal |       |   | Cost   |   |       | Value2 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|-----------|------------|--------|--------|--------|------------|--------|--------|
| Stolle      Machinery Company6     Machinery      (Non-Agriculture, Non-Construction, Non-Electronic)                    |   | Senior      Secured Loan — First Lien Term Loan7.9%,      Due 9/12      |   | $         | 1,975,000  |   |   | $      | 1,985,124  |   |   | $ | 1,945,375 |   |
|                                                                                                                                              |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| TLC      Funding Corp.6     Healthcare,      Education and Childcare                                                     |   | Senior      Secured Loan — Term Loan (First Lien)9.9%,      Due 5/12    |   |      | 3,930,000  |   |   |   | 3,850,590  |   |   |   | 3,959,475 |   |
|                                                                                                                                              |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| TPF      Generation Holdings, LLC6     Utilities                                                                         |   | Junior      Secured Loan — Second Lien Term Loan9.1%,      Due 12/14    |   |      | 2,000,000  |   |   |   | 2,033,096  |   |   |   | 1,890,000 |   |
|                                                                                                                                              |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| TransAxle      LLC     Automobile                                                                                        |   | Senior      Secured Loan — Revolver8.2%,      Due 8/11                  |   |      | 490,909    |   |   |   | 486,678    |   |   |   | 488,832 |   |
|                                                                                                                                              |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| TransAxle      LLC6     Automobile                                                                                       |   | Senior      Secured Loan — Term Loan9.2%,      Due 9/12                 |   |      | 2,812,500  |   |   |   | 2,812,500  |   |   |   | 2,812,500 |   |
|                                                                                                                                              |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| TUI      University, LLC6     Healthcare,      Education and Childcare                                                   |   | Senior      Secured Loan — Term Loan (First Lien)8.1%,      Due 10/14   |   |      | 3,990,000  |   |   |   | 3,794,292  |   |   |   | 3,810,450 |   |
|                                                                                                                                              |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| Twin-Star      International, Inc.6     Home      and Office Furnishings, Housewares, and Durable Consumer      Products |   | Senior      Secured Loan — Term Loan7.8%,      Due 4/13                 |   |      | 4,975,000  |   |   |   | 4,975,000  |   |   |   | 4,975,000 |   |
|                                                                                                                                              |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| United      Maritime Group, LLC (fka Teco Transport Corporation)6     Cargo      Transport                               |   | Junior      Secured Loan — Term Loan (Second Lien)12.8%,      Due 12/13 |   |      | 4,500,000  |   |   |   | 4,500,000  |   |   |   | 4,511,250 |   |
|                                                                                                                                              |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| United      Maritime Group, LLC (fka Teco Transport Corporation)6     Cargo      Transport                               |   | Senior      Secured Loan — 1st Lien Term Loan9.0%,      Due 12/12       |   |      | 2,000,000  |   |   |   | 2,000,000  |   |   |   | 2,000,000 |   |
|                                                                                                                                              |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| Water      PIK, Inc.6     Personal      and Non Durable Consumer Products (Mfg. Only)                                    |   | Senior      Secured Loan — Loan (First Lien)8.2%,      Due 6/13         |   |      | 2,985,000  |   |   |   | 2,965,778  |   |   |   | 2,925,300 |   |
|                                                                                                                                              |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| Wesco      Aircraft Hardware Corp.6     Aerospace      and Defense                                                       |   | Junior      Secured Loan — Second Lien Term Loan10.6%,      Due 3/14    |   |      | 4,132,887  |   |   |   | 4,166,447  |   |   |   | 4,132,887 |   |
|                                                                                                                                              |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| WireCo      WorldGroup Inc. 12      Machinery      (Non-Agriculture, Non-Construction, Non-Electronic)              |   | Mezzanine      Investment —11.0%,      Due 2/15                         |   |      | 5,000,000  |   |   |   | 4,762,014  |   |   |   | 5,000,000 |   |
|                                                                                                                                              |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| WireCo      WorldGroup Inc. 12      Machinery      (Non-Agriculture, Non-Construction, Non-Electronic)              |   | Mezzanine      Investment —11.0%,      Due 2/15                         |   |      | 10,000,000 |   |   |   | 10,000,000 |   |   |   | 10,000,000 |   |
|                                                                                                                                              |   |                                                                          |   |      |       |   |   |   |       |   |   |   |   |   |
| Wolf      Hollow I, LP6     Utilities                                                                                    |   | Junior      Secured Loan — Term Loan (Second Lien)9.3%,      Due 12/12  |   |      | 2,683,177  |   |   |   | 2,688,724  |   |   |   | 2,555,726 |   |

----

| Portfolio Company / Principal Business                           |   | InvestmentInterest Rate1 / Maturity                                        |   | Principal |            |   | Cost   |   |            | Value2 |   |
|--------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|--------|-----------|-----------------|--------|--------|--------|-----------------|--------|--------|
| Wolf      Hollow I, LP6     Utilities                       |   | Senior      Secured Loan — Acquisition Term Loan7.1%,      Due 6/12       |   | $         | 783,980         |   |   | $      | 772,832         |   |   | $ | 733,021 |   |
|                                                                                 |   |                                                                            |   |      |            |   |   |   |            |   |   |   |   |   |
| Wolf      Hollow I, LP6     Utilities                       |   | Senior      Secured Loan — Synthetic Letter of Credit7.1%,      Due 6/12  |   |      | 668,412    |   |   |   | 658,900    |   |   |   | 618,280 |   |
|                                                                                 |   |                                                                            |   |      |            |   |   |   |            |   |   |   |   |   |
| Wolf      Hollow I, LP6     Utilities                       |   | Senior      Secured Loan — Synthetic Revolver Deposits7.1%,      Due 6/12 |   |      | 167,103    |   |   |   | 164,727    |   |   |   | 154,570 |   |
|                                                                                 |   |                                                                            |   |      |            |   |   |   |            |   |   |   |   |   |
| X-Rite,      Incorporated6     Electronics                  |   | Senior      Secured Loan — Term Loan (First Lien)8.5%,      Due 10/12     |   |      | 1,995,000  |   |   |   | 1,985,328  |   |   |   | 1,985,025 |   |
|                                                                                 |   |                                                                            |   |      |            |   |   |   |            |   |   |   |   |   |
| X-Rite,      Incorporated6     Electronics                  |   | Junior      Secured Loan — Loan (Second Lien)12.4%,      Due 10/13        |   |      | 1,000,000  |   |   |   | 1,000,000  |   |   |   | 1,000,000 |   |
|                                                                                 |   |                                                                            |   |      |            |   |   |   |            |   |   |   |   |   |
| Total      Investment in Debt Securities(159% of net      asset value at fair value) |   |                                                                            |   | $         | 426,014,170     |   |   | $      | 423,439,764     |   |   | $ | 410,954,082 |   |

| Portfolio Company / Principal      Business                                                                              |   | Investment                |   | PercentageInterest/Shares |   |   | Cost   |   |      | Value2 |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|--------|---------------------------|--------|--------|--------|--------|-----------|--------|--------|
| Aerostructures      Holdings L.P.7Aerospace      and Defense                                                             |   | Partnership      Interest |   |                      | 1.2    | %      |   | $      | 1,000,000 |   |   | $ | 1,000,000 |   |
|                                                                                                                     |   |                      |   |                      |   |   |   |   |      |   |   |   |   |   |
| eInstruction      Acquisition, LLC7Healthcare,      Education and Childcare                                              |   | Membership      Units     |   |                      | 1.1    | %      |   |   | 1,069,810 |   |   |   | 1,069,810 |   |
|                                                                                                                     |   |                      |   |                      |   |   |   |   |      |   |   |   |   |   |
| FP      WRCA Coinvestment Fund VII, Ltd.3,      7Machinery      (Non-Agriculture, Non-Construction,      Non-Electronic) |   | Class      A Shares       |   |                      | 15,000 |   |   |   | 1,500,000 |   |   |   | 1,500,000 |   |
|                                                                                                                     |   |                      |   |                      |   |   |   |   |      |   |   |   |   |   |
| Park      Avenue Coastal Holding, LLC7Buildings and Real      Estate4                                                    |   | Common      Interests     |   |                      | 2.0    | %      |   |   | 1,000,000 |   |   |   | 803,000 |   |
|                                                                                                                     |   |                      |   |                      |   |   |   |   |      |   |   |   |   |   |
| Coastal      Concrete Southeast, LLC7,      8Buildings and Real      Estate4                                             |   | Warrants                  |   |                      | 580    |   |   |   | 474,140   |   |   |   | 379,440 |   |
|                                                                                                                     |   |                      |   |                      |   |   |   |   |      |   |   |   |   |   |
| Total      Investment in Equity Securities(2%      of net asset value at fair value)                                     |   |                      |   |                      |   |   |   | $      | 5,043,950 |   |   | $ |    4,752,250 |   |

----

| Portfolio Company / Principal Business |   | Investment                         |   | PercentageInterest |   |           | Cost   |   |       | Value2 |   |
|------------------------------------------------------------|--------|------------------------------------|--------|--------------------|--------|----------------|--------|--------|------------|--------|--------|
| Grant Grove CLO,      Ltd.3,      12                       |   | Subordinated      Securities       |   |               | 22.2   | %    |   | $      | 4,415,580  |   |   | $ | 4,250,000 |   |
| Katonah III,      Ltd.3,      12                           |   | Preferred      Shares              |   |               | 23.1   | %    |   |   | 4,500,000  |   |   |   |        2,810,000 |   |
| Katonah IV,      Ltd.3,      12                            |   | Preferred      Shares              |   |               | 17.1   | %    |   |   | 3,150,000  |   |   |   |        2,420,000 |   |
| Katonah V, Ltd.3,      12                                  |   | Preferred      Shares              |   |               | 26.7   | %    |   |   | 3,320,000  |   |   |   |        420,000 |   |
| Katonah VII CLO      Ltd.3, 9,      12                     |   | Subordinated      Securities       |   |               | 16.4   | %    |   |   | 4,500,000  |   |   |   |        3,950,000 |   |
| Katonah VIII CLO      Ltd3,      9, 12                     |   | Subordinated      Securities       |   |               | 10.3   | %    |   |   | 3,400,000  |   |   |   |        3,290,000 |   |
| Katonah IX CLO      Ltd3,      9, 12                       |   | Preferred      Shares              |   |               | 6.9    | %    |   |   | 2,000,000  |   |   |   |        2,000,000 |   |
| Katonah X CLO Ltd      3, 9,      12                       |   | Subordinated      Securities  |   |               | 33.3   | %              |   |   | 10,775,684 |   |   |   | 11,880,000 |   |
|                                                       |   |                               |   |               |   |           |   |   |       |   |   |   |   |   |
|                                                       |   |                               |   |               |   |           |   |   |       |   |   |   |   |   |
| Total      Investment in CLO Fund    Securities            |   |                               |   |               |   |           |   | $      | 36,061,264 |   |   | $ | 31,020,000 |   |
| (12%      of net asset value at fair      value)           |   |                               |   |               |   |           |   |   |       |   |   |   |   |   |

| Portfolio Company / Principal      Business       |   | Investment                |   | PercentageInterest |   |   | Cost   |   |       | Value2 |   |
|---------------------------------------------------|--------|---------------------------|--------|--------------------|--------|--------|--------|--------|------------|--------|--------|
| Katonah      Debt Advisors, LLC                   |   | Membership      Interests |   |               | 100    | %      |   | $      | 33,394,995 |   |   | $ | 58,510,360 |   |
|                                              |   |                      |   |               |   |   |   |   |       |   |   |   |   |   |
| PKSIL                                             |   | Class      A Shares       |   |               | 100    | %      |   |   | 71,500     |   |   |   | 71,500 |   |
|                                              |   |                      |   |               |   |   |   |   |       |   |   |   |   |   |
| PKSIL                                             |   | Class      B Shares       |   |               | 35     | %      |   |   | 3,500      |   |   |   | 3,500 |   |
|                                              |   |                      |   |               |   |   |   |   |       |   |   |   |   |   |
|                                              |   |                      |   |               |   |   |   |   |       |   |   |   |   |   |
| Total      Investment in Asset Manager Affiliates |   |                      |   |               |   |   |   | $      | 33,469,995 |   |   | $ | 58,585,360 |   |
|  (23% of net      asset value at fair value) |   |                      |   |               |   |   |   |   |       |   |   |   |   |   |

| Portfolio Company / Principal      Business                                                               |   | Investment                |   | Yield  |   |   | Cost   |   |        | Value2 |   |
|-----------------------------------------------------------------------------------------------------------|--------|---------------------------|--------|--------|--------|--------|--------|--------|-------------|--------|--------|
| US      Bank Eurodollar Sweep CL23,      10                                                               |   | Time      Deposit         |   |   | 3.50   | %      |   | $      | 12,809,784  |   |   | $ | 12,809,784 |   |
|                                                                                                      |   |                      |   |   |   |   |   |   |        |   |   |   |   |   |
| JP      Morgan Asset Account                                                                              |   | Time      Deposit         |   |   | 3.49   | %      |   |   | 2,864,705   |   |   |   | 2,864,705 |   |
|                                                                                                      |   |                      |   |   |   |   |   |   |        |   |   |   |   |   |
| JP      Morgan Business Money Market Account11                                                            |   | Money      Market Account |   |   | 0.43   | %      |   |   | 20,766      |   |   |   | 20,766 |   |
|                                                                                                      |   |                      |   |   |   |   |   |   |        |   |   |   |   |   |
|                                                                                                      |   |                      |   |   |   |   |   |   |        |   |   |   |   |   |
| Total      Investment in Time Deposits and Money Market Account(6% of net      asset value at fair value) |   |                      |   |   |   |   |   | $      | 15,695,255  |   |   | $ | 15,695,255 |   |
|                                                                                                      |   |                      |   |   |   |   |   |   |        |   |   |   |   |   |
| Total      Investments5                                                                                   |   |                      |   |   |   |   |   | $      | 513,710,228 |   |   | $ | 521,006,947 |   |
| (201% of net      asset value at fair value)                                                              |   |                      |   |   |   |   |   |   |        |   |   |   |   |   |

----

| 1  | A      majority of the variable rate loans to our portfolio companies bear      interest at a rate that may be determined by reference to either LIBOR or      an alternate Base Rate (commonly based on the Federal Funds Rate or the      Prime Rate), which typically resets semi-annually, quarterly, or monthly.      For each such loan, we have provided the weighted average annual stated      interest rate in effect at December 31, 2007.                                                                 |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2       | Reflects      the fair market value of all existing investments as of December 31, 2007,      as determined by our Board of Directors.                                                                                                                                                                                                                                                                                                                                                                                |
| 3       | Non-U.S.      company or principal place of business outside the U.S.                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4       | Buildings      and real estate relate to real estate ownership, builders, managers and      developers and excludes mortgage debt investments and mortgage lenders or      originators. As of December 31, 2007, we had no exposure to mortgage      securities (residential mortgage bonds, commercial mortgage backed      securities, or related asset backed securities), companies providing      mortgage lending or emerging markets investments either directly or      through our investments in CLO funds. |
| 5       | The      aggregate cost of investments for federal income tax purposes is      approximately $500 million. The aggregate gross unrealized appreciation is      approximately $27 million and the aggregate gross unrealized depreciation      is approximately $20 million.                                                                                                                                                                                                                                      |
| 6       | Pledged      as collateral for the secured revolving credit facility (see Note 6 to the      financial statements).                                                                                                                                                                                                                                                                                                                                                                                                   |
| 7       | Non-income      producing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 8       | Warrants      having a strike price of $0.01 and expiration date of March      2017.                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 9       | An      affiliate CLO Fund managed by Katonah Debt Advisors or its      affiliate.                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10      | Time      deposit investment partially restricted under terms of the secured credit      facility (see Note 6 to financial statements).                                                                                                                                                                                                                                                                                                                                                                               |
| 11      | Money      market account holding restricted cash for employee flexible spending      accounts.                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 12      | These      securities are exempt from registration under Rule 144A of the Securities      Act of 1933.  These securities may be resold in transactions      that are exempt from registration, normally to qualified institutional      buyers.                                                                                                                                                                                                                                                             |

----

|                                                           |   | For the Year EndedDecember 31, 2008 |        |     | For the Year EndedDecember 31, 2007 |   |             | For the Period December11, 2006 (inception)through December 31,2006 |   |
|---------------------------------------------------------------------|--------|--------------------------------------------------------------|-------------|----------|--------------------------------------------------------------|--------|------------------|--------------------------------------------------------------------------------------------------------|--------|
| Per      Share Data:                                                |   |                                                              |        |     |                                                         |   |             |                                                                                                   |   |
| Net      asset value, at beginning of period                        |   | $                                                            | 14.38       |     |                                                         | $      | 14.29            |                                                                                                   |   | $ | 15.00 |   |
| Underwriting      Costs                                             |   |                                                         | —     |     |                                                         |   | —          |                                                                                                   |   |   | (0.97 | ) |
| Post-IPO      net asset value                                       |   |                                                         | 14.38       |     |                                                         |   | 14.29            |                                                                                                   |   |   | 14.03  |   |
| Net      income (loss)                                              |   |                                                         |        |     |                                                         |   |             |                                                                                                   |   |   |   |   |
| Net investment      income1                                         |   |                                                         | 1.51        |     |                                                         |   | 1.27             |                                                                                                   |   |   | 0.02  |   |
| Net realized      gains1                                            |   |                                                         | (0.03       | )        |                                                         |   | 0.01             |                                                                                                   |   |   | — |   |
| Net change in      unrealized appreciation on investments1          |   |                                                         | (4.16       | )   |                                                         |   |  0.12  |                                                                                                   |   |   | 0.24  |   |
| Net      income (loss)                                              |   |                                                         | (2.68       | )        |                                                         |   | 1.40             |                                                                                                   |   |   | 0.26  |   |
| Net      decrease in net assets resulting from distributions        |   |                                                         |        |     |                                                         |   |             |                                                                                                   |   |   |   |   |
| From      net investment income                                     |   |                                                         | (1.44       | )        |                                                         |   | (1.36            | )                                                                                                      |   |   | — |   |
| From      capital gains                                             |   |                                                         | —     |     |                                                         |   | (0.01            | )                                                                                                      |   |   | — |   |
| From      return of capital                                         |   |                                                         | —     |     |                                                         |   |  (0.03      | )                                                                                                 |   |   | — |   |
| Total      distributions to shareholders                            |   |                                                         | (1.44       | )        |                                                         |   | (1.40            | )                                                                                                      |   |   | — |   |
| Effect      of distributions on restricted stock 1                  |   |                                                         | (0.01       | )   |                                                         |   |  —    |                                                                                                   |   |   | — |   |
| Net      decrease in net assets resulting from distributions        |   |                                                         | (1.45       | )        |                                                         |   | (1.40            | )                                                                                                      |   |   | — |   |
| Net      increase in net assets relating to stock-basedtransactions |   |                                                         |        |     |                                                         |   |             |                                                                                                   |   |   |   |   |
| Issuance      of common stock (not including DRIP)                  |   |                                                         | 1.27        |     |                                                         |   | —          |                                                                                                   |   |   | — |   |
| Issuance      of common stock under dividend reinvestment plan      |   |                                                         | 0.12        |     |                                                         |   | 0.06             |                                                                                                   |   |   | — |   |
| Stock      based compensation expense                               |   |                                                         | 0.04        |     |                                                         |   | 0.03             |                                                                                                   |   |   | — |   |
| Net      increase in net assets relating to stock-basedtransactions |   |                                                         |  1.43  |     |                                                         |   | 0.09             |                                                                                                   |   |   | — |   |
| Net      asset value, end of period                                 |   | $                                                            | 11.68       |     |                                                         | $      | 14.38            |                                                                                                   |   | $ | 14.29  |   |
| Total net asset      value return2                                  |   |                                                         |  (8.7  | )      % |                                                         |   | 10.4             | %                                                                                                      |   |   | 1.9 | % |
|                                                                |   |                                                         |        |     |                                                         |   |             |                                                                                                   |   |   |   |   |
| Ratio/Supplemental      Data:                                       |   |                                                         |        |     |                                                         |   |             |                                                                                                   |   |   |   |   |
| Per      share market value at beginning of period                  |   | $                                                            | 12.00       |     |                                                         | $      | 17.30            |                                                                                                   |   | $ | 15.00 |   |
| Per      share market value at end of period                        |   | $                                                            | 3.64        |     |                                                         | $      | 12.00            |                                                                                                   |   | $ | 17.30 |   |
| Total market      return3                                           |   |                                                         | (57.6       | )      % |                                                         |   | (22.5            | )      %                                                                                               |   |   | 15.3 | % |
| Shares      outstanding at end of period                            |   |                                                         | 21,436,936  |     |                                                         |   | 18,017,699       |                                                                                                   |   |   | 17,946,333  |   |
| Net      assets at end of period                                    |   | $                                                            | 250,282,100 |     |                                                         | $      | 259,068,164      |                                                                                                   |   | $ | 256,000,423 |   |
| Portfolio      turnover rate                                        |   |                                                         | 14.0        | %        |                                                         |   | 24.5             | %                                                                                                      |   |   | 0.3 | %4  |
| Asset      coverage ratio                                           |   |                                                         | 196         | %   |                                                         |   | 202              | %                                                                                                      |   |   | N/A |   |
| Ratio      of net investment income to average net assets           |   |                                                         | 11.6        | %        |                                                         |   | 8.5              | %                                                                                                      |   |   | 4.4 | %5  |
| Ratio      of total expenses to average net assets                  |   |                                                         | 7.0         | %        |                                                         |   | 5.9              | %                                                                                                      |   |   | 6.3 | %5  |
| Ratio      of interest expense to average net assets                |   |                                                         | 4.1         | %        |                                                         |   | 2.7              | %                                                                                                      |   |   | — | %5  |
| Ratio      of non-interest expenses to average net assets           |   |                                                         | 2.9         | %        |                                                         |   | 3.2              | %                                                                                                      |   |   | 6.3 | %5  |

----

----

----

|   | 1) | Each      portfolio company or investment is cross-referenced to an independent      pricing service to determine if a current market quote is      available; |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | a) | The      nature and quality of such quote is reviewed to determine reliability and      relevance of the quote – factors considered include if the quote is from a      transaction, a broker quote, the date and aging of such quote, if the      transaction is arms-length, a liquidation or distressed sale and other      factors. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2) | If      an investment does not have a market quotation on either a broad market      exchange or from an independent pricing service, the investment is      initially valued by the Company’s investment professionals responsible for      the portfolio investment in conjunction with the portfolio management      team. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3) | Preliminary      valuation conclusions are discussed and documented by      management. |
|--------|----|-----------------------------------------------------------------------------------------|

|   | 4) | With      respect to the valuations of Katonah Debt Advisors, the CLO Fund      securities and other illiquid junior and mezzanine securities selected on      a rotating quarterly basis such that they are reviewed at least once      during a trailing 12 month period, an independent valuation firm, engaged      by our Board of Directors, conducts independent valuations and reviews      management’s preliminary valuations and makes their own independent      valuation assessment. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 5) | The      Valuation Committee of the Board of Directors reviews the portfolio      valuations, as well as the input and report of the independent valuation      firm. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 6) | Upon      approval of the investment valuations by the Valuation Committee of the      Board of Directors, the Audit Committee of the Board of Directors reviews      the results for inclusion in the Company’s quarterly and annual financial      statements. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 7) | The      Board of Directors discusses the valuations and determines in good faith      that the fair values of each investment in the portfolio is reasonable      based upon the independent pricing service, input of management,      independent valuation firms and the recommendations of the Valuation      Committee of the Board ofDirectors. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                                                                                                       |   | For the Year EndedDecember 31, 2008 |             |   | For the Year EndedDecember 31, 2007 |   |       | For the Period December11, 2006 (inception) throughDecember 31, 2006 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|------------------|--------|--------------------------------------------------------------|--------|------------|--------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                            |   |                                                         |             |   |                                                         |   |       |                                                                                                         |   |
|  Numerator      for basic and diluted net increase (decrease) in stockholders’ equity      resulting from operations per      share: |   | $                                                            | (9,567,327       | )      |                                                         | $      | 26,141,985 |                                                                                                         |   | $ | 4,670,540 |   |
|  Denominator      for basic weighted average      shares:                                                                                  |   |                                                         |  20,276,430 |   |                                                         |   | 17,977,348 |                                                                                                         |   |   | 17,946,333 |   |
|  Dilutive      effect of restricted      stock:                                                                                            |   |                                                         |  178,892    |   |                                                         |   | —    |                                                                                                         |   |   | — |   |
|  Dilutive      effect of stock      options:                                                                                               |   |                                                         |  —    |   |                                                         |   | —    |                                                                                                         |   |   |  — |   |
|  Denominator      for diluted weighted average shares:1                                                                               |   |                                                         |  20,455,322 |   |                                                         |   | 17,977,348 |                                                                                                         |   |   |  17,946,333 |   |
|  Basic      net increase (decrease) in stockholders’ equity resulting from operations      per share:                                |   | $                                                            | (0.47            | )      |                                                         | $      | 1.45       |                                                                                                         |   | $ | 0.26 |   |
|  Diluted      net increase (decrease) in stockholders’ equity resulting from operations      per share:                              |   | $                                                            | (0.47            | )      |                                                         | $      | 1.45       |                                                                                                         |   | $ | 0.26 |   |

----

|                          |   | December      31, 2008 |        |   | December      31, 2007 |   |
|-------------------------------|--------|------------------------|-------------|--------|------------------------|--------|
| Security      Type            |   | Cost                   |        |   | Fair      Value        |   |   |   | %1 |   |   | Cost |   |   | Fair      Value |   |   |   | %1 |   |
| Time      Deposits            |   | $                      | 12,185,997  |   |                   | $      | 12,185,997 |   |   |   | 5 | % |   | $ | 15,674,489 |   |   | $ | 15,674,489 |   |   |   | 6 | % |
| Money      Market Account     |   |                   | 10          |   |                   |   | 10 |   |   |   | — |   |   |   | 20,766 |   |   |   | 20,766 |   |   |   | — |   |
| Senior      Secured Loan      |   |                   | 235,123,695 |   |                   |   | 218,342,528 |   |   |   | 87 |   |   |   | 265,390,844 |   |   |   | 260,138,674 |   |   |   | 100 |   |
| Junior      Secured Loan      |   |                   | 143,370,524 |   |                   |   | 126,498,918 |   |   |   | 51 |   |   |   | 120,620,715 |   |   |   | 113,259,293 |   |   |   | 44 |   |
| Mezzanine      Investment     |   |                   | 37,097,183  |   |                   |   | 32,557,165 |   |   |   | 12 |   |   |   | 32,418,975 |   |   |   | 33,066,115 |   |   |   | 12 |   |
| Senior      Subordinated Bond |   |                   | 3,008,197   |   |                   |   | 2,287,500 |   |   |   | 1 |   |   |   | 3,009,230 |   |   |   | 2,490,000 |   |   |   | 1 |   |
| Senior      Unsecured Bond    |   |                   | 5,259,487   |   |                   |   | 4,800,000 |   |   |   | 2 |   |   |   | 2,000,000 |   |   |   | 2,000,000 |   |   |   | 1 |   |
| CLO      Fund Securities      |   |                   | 66,376,595  |   |                   |   | 56,635,236 |   |   |   | 23 |   |   |   | 36,061,264 |   |   |   | 31,020,000 |   |   |   | 12 |   |
| Equity      Securities        |   |                   | 5,256,660   |   |                   |   | 4,389,831 |   |   |   | 2 |   |   |   | 5,043,950 |   |   |   | 4,752,250 |   |   |   | 2 |   |
| Affiliate      Asset Managers |   |                   | 38,948,271  |   |                   |   | 56,528,088 |   |   |   | 22 |   |   |   | 33,469,995 |   |   |   | 58,585,360 |   |   |   | 23 |   |
|                          |   |                   |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                         |   | $                      | 546,626,619 |   |                   | $      | 514,225,273 |   |   |   | 205 | % |   | $ | 513,710,228 |   |   | $ | 521,006,947 |   |   |   | 201 | % |

----

----

|                                                                                |   | December      31, 2008 |        |   | December      31, 2007 |   |
|-------------------------------------------------------------------------------------|--------|------------------------|-------------|--------|------------------------|--------|
|  Industry      Classification                                                  |   | Cost                   |        |   | Fair      Value        |   |   |   | %1 |   |   | Cost |   |   | Fair      Value |   |   |   | %1 |   |
|  Aerospace      and Defense                                                    |   | $                      | 35,545,254  |   |                   | $      | 34,846,047 |   |   |   | 14 | % |   | $ | 32,583,716 |   |   | $ | 32,481,819 |   |   |   | 13 | % |
|  Asset      Management Companies2                                         |   |                   | 38,948,271  |   |                   |   | 56,528,088 |   |   |   | 23 |   |   |   | 33,469,995 |   |   |   | 58,585,360 |   |   |   | 23 |   |
|  Automobile                                                                    |   |                   | 8,811,625   |   |                   |   | 7,750,003 |   |   |   | 3 |   |   |   | 5,286,731 |   |   |   | 5,147,010 |   |   |   | 2 |   |
|  Broadcasting      and Entertainment                                           |   |                   | 2,982,607   |   |                   |   | 2,850,000 |   |   |   | 1 |   |   |   | 2,978,999 |   |   |   | 2,782,500 |   |   |   | 1 |   |
|  Buildings      and Real Estate3                                          |   |                   | 38,404,495  |   |                   |   | 19,231,787 |   |   |   | 8 |   |   |   | 37,726,396 |   |   |   | 34,944,226 |   |   |   | 13 |   |
|  Cargo      Transport                                                          |   |                   | 20,099,157  |   |                   |   | 20,071,001 |   |   |   | 8 |   |   |   | 14,967,369 |   |   |   | 14,958,789 |   |   |   | 6 |   |
|  Chemicals,      Plastics and Rubber                                           |   |                   | 6,613,081   |   |                   |   | 5,840,000 |   |   |   | 2 |   |   |   | 3,956,582 |   |   |   | 3,220,000 |   |   |   | 1 |   |
|  CLO      Fund Securities                                                      |   |                   | 66,376,595  |   |                   |   | 56,635,236 |   |   |   | 23 |   |   |   | 36,061,264 |   |   |   | 31,020,000 |   |   |   | 12 |   |
|  Containers,      Packaging and Glass                                          |   |                   | 7,347,292   |   |                   |   | 7,316,295 |   |   |   | 3 |   |   |   | 8,895,059 |   |   |   | 8,895,059 |   |   |   | 3 |   |
|  Diversified/Conglomerate      Manufacturing                                   |   |                   | 6,282,124   |   |                   |   | 6,095,170 |   |   |   | 2 |   |   |   | 8,931,343 |   |   |   | 8,718,855 |   |   |   | 3 |   |
|  Diversified/Conglomerate      Service                                         |   |                   | 15,868,152  |   |                   |   | 15,139,713 |   |   |   | 6 |   |   |   | 17,962,721 |   |   |   | 17,303,969 |   |   |   | 7 |   |
|  Ecological                                                                    |   |                   | 2,721,193   |   |                   |   | 2,727,813 |   |   |   | 1 |   |   |   | 3,937,850 |   |   |   | 3,937,850 |   |   |   | 2 |   |
|  Electronics                                                                   |   |                   | 15,172,568  |   |                   |   | 13,686,879 |   |   |   | 5 |   |   |   | 15,830,382 |   |   |   | 15,158,502 |   |   |   | 6 |   |
|  Farming      and Agriculture                                                  |   |                   | 4,298,336   |   |                   |   | 1,538,550 |   |   |   | 1 |   |   |   | 4,800,651 |   |   |   | 4,058,835 |   |   |   | 2 |   |
|  Finance                                                                       |   |                   | 14,979,849  |   |                   |   | 13,830,557 |   |   |   | 6 |   |   |   | 11,590,697 |   |   |   | 11,209,824 |   |   |   | 4 |   |
|  Healthcare,      Education and Childcare                                      |   |                   | 49,379,475  |   |                   |   | 49,581,920 |   |   |   | 20 |   |   |   | 46,715,870 |   |   |   | 46,637,705 |   |   |   | 18 |   |
|  Home      and Office Furnishings, Housewares, and Durable Consumer      Goods |   |                   | 21,331,162  |   |                   |   | 20,273,496 |   |   |   | 8 |   |   |   | 24,091,185 |   |   |   | 23,265,816 |   |   |   | 9 |   |
|  Hotels,      Motels, Inns and Gaming                                          |   |                   | 6,322,276   |   |                   |   | 6,073,739 |   |   |   | 2 |   |   |   | 9,364,165 |   |   |   | 9,091,041 |   |   |   | 4 |   |
|  Insurance                                                                     |   |                   | 10,983,041  |   |                   |   | 10,693,769 |   |   |   | 4 |   |   |   | 24,346,884 |   |   |   | 23,941,763 |   |   |   | 9 |   |
|  Leisure,      Amusement, Motion Pictures, Entertainment                       |   |                   | 16,929,910  |   |                   |   | 16,903,100 |   |   |   | 6 |   |   |   | 18,402,600 |   |   |   | 18,402,600 |   |   |   | 7 |   |
|  Machinery      (Non-Agriculture, Non-Construction,      Non-Electronic)       |   |                   | 35,514,554  |   |                   |   | 36,263,857 |   |   |   | 14 |   |   |   | 39,573,338 |   |   |   | 39,483,418 |   |   |   | 15 |   |
|  Mining,      Steel, Iron and Non-Precious Metals                              |   |                   | 21,751,631  |   |                   |   | 19,589,104 |   |   |   | 8 |   |   |   | 16,338,446 |   |   |   | 16,069,759 |   |   |   | 6 |   |
|  Oil      and Gas                                                              |   |                   | 5,998,263   |   |                   |   | 5,940,000 |   |   |   | 2 |   |   |   | 5,997,874 |   |   |   | 5,960,000 |   |   |   | 2 |   |
|  Personal      and Non Durable Consumer Products (Mfg.Only)                    |   |                   | 15,208,764  |   |                   |   | 12,264,708 |   |   |   | 5 |   |   |   | 17,315,776 |   |   |   | 14,750,095 |   |   |   | 6 |   |
|  Personal,      Food and Miscellaneous Services                                |   |                   | 14,722,088  |   |                   |   | 11,445,381 |   |   |   | 5 |   |   |   | 13,918,651 |   |   |   | 13,765,201 |   |   |   | 5 |   |
|  Printing      and Publishing                                                  |   |                   | 29,914,605  |   |                   |   | 28,130,061 |   |   |   | 11 |   |   |   | 21,622,999 |   |   |   | 21,236,473 |   |   |   | 8 |   |
|  Retail      Stores                                                            |   |                   | 3,755,829   |   |                   |   | 3,755,829 |   |   |   | 2 |   |   |   | 4,962,500 |   |   |   | 4,813,625 |   |   |   | 2 |   |
|  Time      Deposits and Money Market Account                                   |   |                   | 12,186,007  |   |                   |   | 12,186,007 |   |   |   | 5 |   |   |   | 15,695,255 |   |   |   | 15,695,255 |   |   |   | 6 |   |
|  Utilities                                                                     |   |                   | 18,178,415  |   |                   |   | 17,037,163 |   |   |   | 7 |   |   |   | 16,384,930 |   |   |   | 15,471,598 |   |   |   | 6 |   |
|                                                                                |   |                   |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Total                                                                         |   | $                      | 546,626,619 |   |                   | $      | 514,225,273 |   |   |   | 205 | % |   | $ | 513,710,228 |   |   | $ | 521,006,947 |   |   |   | 201 | %  |

----

| 1 | Calculated as a percentage of net      asset value. |
|---|-----------------------------------------------------|

| 2  | Represents Katonah Debt Advisors      and related asset manageraffiliates. |
|---------|----------------------------------------------------------------------------|

| 3  |  Buildings and real estate relate      to real estate ownership, builders, managers and developers and excludes      mortgage debt investments and mortgage lenders or originators. As of      December 31, 2008 and December 31, 2007, the Company had no exposure to      mortgage securities (residential mortgage bonds, commercial mortgage      backed securities, or related asset backed securities) or companies      providing mortgagelending. |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                        |   | Level I |        |   | Level II |   |       | Level III |   |   | Total             |   |
|---------------------------------------------|--------|--------------|-------------|--------|---------------|--------|------------|----------------|--------|--------|-------------------|--------|
| Time      deposits and money market account |   | $            | -           |   |          | $      | 12,186,007 |           |   | $      | -                 |   |   | $ | 12,186,007 |   |
| Debt      securities                        |   |         |  -     |   |          |   |  -    |           |   |   |  384,486,111 |   |   |   |  384,486,111 |   |
| CLO      fund securities                    |   |         |  -     |   |          |   |  -    |           |   |   |  56,635,236  |   |   |   |  56,635,236 |   |
| Equity      securities                      |   |         |  1,853 |   |          |   |  -    |           |   |   |  4,387,978   |   |   |   |  4,389,831 |   |
| Asset      manager affiliates               |   |         |  -     |   |          |   |  -    |           |   |   |  56,528,088  |   |   |   |  56,528,088 |   |

| Fair Value Based on        |   | Debt Securities |     |   | CLO FundSecurities |   |    | Equity Securities |   |   | Asset ManagerAffiliates |   |   | Total  |    |
|-------------------------------------------|--------|----------------------|----------|--------|-------------------------|--------|---------|------------------------|--------|--------|------------------------------|--------|--------|--------|---------|
| Third party pricing      service          |   |                 | —  | %      |                    |   | — | %                      |   |   | —                      | %      |   |   | — | % |   |   | — | % |
| Public      / private company comparables |   |                 | 77       |   |                    |   | — |                   |   |   | —                      |   |   |   | 11      |   |   |   | 88 |   |
| Discounted      cash flow                 |   |                 | —  |   |                    |   | 11      |                   |   |   | —                      |   |   |   | — |   |   |   | 11 |   |
| Residual      enterprise value            |   |                 | —  |   |                    |   | — |                   |   |   | 1                            |   |   |   | — |   |   |   | 1 |   |
| Total                                     |   |                 | 77  | %      |                    |   | 11      | %                      |   |   | 1                            | %      |   |   | 11      | % |   |   | 100 | % |

----

|                                                                                                                    |   | Years Ended December 31, 2008 |        |
|-------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|-------------|
|                                                                                                                    |   | Debt Securities                              |        |   | CLO FundSecurities |   |   | Equity Securities |   |   | Asset ManagerAffiliates |   |   | Total |   |
| Balance,      December 31, 2007                                                                                         |   | $                                                 | 410,954,082 |   |   | $ | 31,020,000 |   |   | $ | 4,752,250 |   |   | $ | 58,585,360 |   |   | $ | 505,311,692 |   |
| Transfers      in/out of Level 3                                                                                        |   |                                              | —     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Net      amortization/(accretion) of premium/(discount)                                                                 |   |                                              | 717,194     |   |   |   | 1,456,095 |   |   |   | — |   |   |   | — |   |   |   | 2,173,289 |   |
| Purchases      (sales), net                                                                                             |   |                                              | 277,308     |   |   |   | 28,859,236 |   |   |   | 170,168 |   |   |   | 5,478,276 |   |   |   | 34,784,988 |   |
| Total      gain (loss) realized and unrealized included in earnings                                                     |   |                                              | (27,462,473 | ) |   |   | (4,700,095 | ) |   |   | (534,440 | ) |   |   | (7,535,548 | ) |   |   | (40,232,556 | ) |
| Balance,      December 31, 2008                                                                                         |   | $                                                 | 384,486,111 |   |   | $ | 56,635,236 |   |   | $ | 4,387,978 |   |   | $ | 56,528,088 |   |   | $ | 502,037,413 |   |
| Changes      in unrealized gains (losses) included in earnings related to investments      still held at reporting date |   | $                                                 | (26,887,293 | ) |   | $ | (4,700,095 | ) |   | $ | (534,440 | ) |   | $ | (7,535,548 | ) |   | $ | (39,657,376 | ) |

----

----

|                                     |                   | As of       |        |    | As of       |    |
|------------------------------------------|-----------------------------|------------------|------------------|--------------|------------------|--------------|
| December 31, 2008              | December 31, 2007 |
|                                |                        | (Unaudited)      |             |         | (Unaudited)      |         |
| Assets:                                  |                   |             |             |         |             |         |   |   |
| Current      assets                      |                   | $                | 8,153,011   |         |             | $            | 7,035,155  |   |
| Noncurrent      assets                   |                   |             | 318,106     |         |             |         | 396,111  |   |
|                                     |                   |             |             |         |             |         |   |   |
| Total      assets                        |                   | $                | 8,471,117   |         |             | $            | 7,431,266  |   |
|                                     |                   |             |             |         |             |         |   |   |
| Liabilities:                             |                   |             |             |         |             |         |   |   |
| Current      liabilities                 |                   |             | 3,652,380   |         |             |         | 4,254,202  |   |
|                                     |                   |             |             |         |             |         |   |   |
| Total      liabilities                   |                   |  $          | 3,652,380   |         |             |  $      | 4,254,202  |   |
|                                     |                        |             |             |         |             |         |
|                                     |                   | Years Ended |        |    | Years Ended |    |
| December 31, 2008              | December 31, 2007 |
|                                     |                        | (Unaudited)      |             |         | (Unaudited)      |         |
| Gross      revenue                       |                   | $                | 11,206,771  |         |             | $            | 11,262,969  |   |
| Total      expenses                      |                   |             | 11,971,596  |         |             |         | 8,505,115  |   |
|                                     |                   |             |             |         |             |         |   |   |
| Net      income (loss)                   |                   | $                | (764,825)        |         |             | $            | 2,757,854  |   |
|                                     |                   |             |             |         |             |         |   |   |
| Dividends      declared                  |                   | $                | 1,350,000   |         |             | $            | 500,000  |   |
|                                     |                        |             |             |         |             |         |   |   |
| Cumulative      undistributed net income |                        | $                | 70,319      |         |             | $            | 2,185,144  |   |

|                                                                              |   | As      of             |        |   | As      of             |   |
|-----------------------------------------------------------------------------------|--------|------------------------|-------------|--------|------------------------|--------|
|                                                                              |   | December      31, 2008 |        |   | December      31, 2007 |   |
|                                                                              |   |                   |        |   |                   |   |
| Secured      credit facility, $275 million commitment due September 29,      2010 |   | $                      | 261,691,148 |   |                   | $      | 255,000,000 |   |

----

|                                                                                                    |    | Year      Ended |                |
|---------------------------------------------------------------------------------------------------------|--------------|-----------------|---------------------|
| December      31, 2008                                                                                  |
|                                                                                                    |    |            |                |
| Pre-tax      net decrease in stockholders’ equity resulting from    operations                    |    | $               |  (9,567,327)   |   |
| Net      unrealized losses on investments transactions not taxable                                      |    |            | 39,698,065     |   |
| Income      not currently taxable                                                                       |         |            |  (1,390,939)   |   |
| Expenses      not currently deductible                                                                  |    |            |  940,864  |   |
|                                                                                                    |    |            |                |   |
| Taxable      income before deductions for distributions                                                 |    | $               | 29,680,663     |   |
|                                                                                                    |    |            |                |   |
| Taxable      income before deductions for distributions per weighted average shares for      the period |    | $               | 1.46           |   |

----

|                                    |    | Year      Ended |               |
|-----------------------------------------|--------------|-----------------|--------------------|
| December      31, 2008                  |
|                                    |    |            |               |
| Undistributed      ordinary income      |    | $               | 977,904       |   |
| Capital      loss carryforward          |    |            |  (680,687)    |   |
| Net      unrealized depreciation        |         |            |  (32,401,346) |   |
|                                    |    |            |               |   |
| Total      tax-basis accumulated losses |    | $               | (32,104,129)  |   |

|                                                 |    | Year      Ended |            |
|------------------------------------------------------|--------------|-----------------|-----------------|
| December      31, 2008                               |
|                                                 |    |            |            |
| Accumulated      undistributed net investment income |    | $               | 1,076,078  |   |
| Accumulated      net realized loss                   |    | $               |  (105,508) |   |
| Paid-in-capital                                      |         | $               |  (970,570) |   |

----

----

|                                              |   | Shares |       |   | Weighted AverageExercise Price perShare |   |   | Weighted AverageContractualRemaining Term(years) |   |   | AggregateIntrinsic Value1 |   |
|---------------------------------------------------|--------|--------|------------|--------|--------------------------------------------------------|--------|--------|------------------------------------------------------------|--------|--------|--------------------------------|--------|
|  Options      outstanding at January 1, 2008 |   |   | 1,315,000  |   |                                                   | $      | 15.52  |                                                       |   |   |                           |   |   |   |
|  Granted                                     |   |   | 20,000     |   |                                                   | $      | 11.97  |                                                       |   |   |                           |   |   |   |
|  Exercised                                   |   |   | —    |   |                                                   |   |   |                                                       |   |   |                           |   |   |   |
|  Forfeited                                   |   |   | (1,315,000 | )      |                                                   | $      | 15.52  |                                                       |   |   |                           |   |   |   |
|                                              |   |   |       |   |                                                   |   |   |                                                       |   |   |                           |   |   |   |
|  Outstanding      at December 31, 2008       |   |   | 20,000     |   |                                                   | $      | 11.97  |                                                       |   |   | 9.5                            |   |   | $ | — |   |
|                                              |   |   |       |   |                                                   |   |   |                                                       |   |   |                           |   |   |   |   |   |
|  Total      vested at December 31, 2008      |   |   | 10,000     |   |                                                   | $      | 11.97  |                                                       |   |   | 8.8                            |   |   |   |   |   |

| 1  | Represents      the difference between the market value of the options at December 31,      2008 and the cost for the option holders to exercise the      options. |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                        |   | Non-VestedRestrictedShares |    |   |   | Weighted AverageExercise Price perShare |   |   | Weighted AverageContractualRemaining Term(years) |   |
|-------------------------------------------------------------|--------|----------------------------|---------|--------|--------|--------------------------------------------------------|--------|--------|------------------------------------------------------------|--------|
|  Non-vested      shares outstanding at January 1, 2008 |   |                       | — |   |   |                                                   |   | $      | —                                                    |   |   |   |   |
|  Granted                                               |   |                       | 359,250 |   |   |                                                   |   | $      | 10.73                                                      |   |   |   | 2.4 |   |
|  Exercised                                             |   |                       | (3,000  | )      |   |                                                   |   | $      | 9.21                                                       |   |   |   |   |   |
|  Forfeited                                             |   |                       | (16,667 | )      |   |                                                   |   | $      | 9.21                                                       |   |   |   |   |   |
|  Outstanding      at December 31, 2008                 |   |                       | 339,583 |   |   |                                                   |   | $      | 10.83                                                      |   |   |   | 2.4 |   |
|                                                        |   |                       |    |   |   |                                                   |   |   |                                                       |   |   |   |   |   |
|  Total      non-vested shares at December 31, 2008     |   |                       | 334,250 |   |   |                                                   |   | $      | 10.84                                                      |   |   |   | 2.4 |   |
|  Total      vested shares at December 31, 2008         |   |                       | 5,333   |   |   |                                                   |   | $      | 10.39                                                      |   |   |   |   |   |

----

|                                                                                                        |   |   | Q1 2008 |   |   |   | Q2 2008 |   |   |   | Q3 2008 |   |   |   | Q4 2008 |   |
|-------------------------------------------------------------------------------------------------------------|--------|--------|--------------|--------|--------|--------|--------------|--------|--------|--------|--------------|--------|--------|--------|--------------|--------|
| Total      interest and related portfolio income                                                            |   | $      | 14,332,842   |   |   | $      | 12,265,524   |   |   | $      | 11,328,553   |   |   | $      | 11,285,291   |   |
| Net      investment income and realized gains                                                               |   | $      | 8,049,958    |   |   | $      | 7,762,979    |   |   | $      | 7,467,710    |   |   | $      | 6,850,091    |   |
| Net      increase (decrease) in net assets resulting fromoperations                                         |   | $      | 195,252      |   |   | $      | 7,297,285    |   |   | $      | 3,988,536    |   |   | $      | (21,048,400  | )      |
| Net      increase (decrease) in net assets resulting from operations per      share—basic             |   | $      | 0.01         |   |   | $      | 0.36         |   |   | $      | 0.19         |   |   | $      | (0.98        | )      |
| Net      increase (decrease) in net assets resulting from operations per      share—diluted           |   | $      | 0.01         |   |   | $      | 0.36         |   |   | $      | 0.18         |   |   | $      | (0.97        | )      |
| Net      investment income and realized gains per share—basic                                         |   | $      | 0.45         |   |   | $      | 0.38         |   |   | $      | 0.35         |   |   | $      | 0.32         |   |
| Net      investment income and realized gains per share—diluted                                       |   | $      | 0.45         |   |   | $      | 0.38         |   |   | $      | 0.34         |   |   | $      | 0.31         |   |
|                                                                                                        |   |   |         |   |   |   |         |   |   |   |         |   |   |   |         |   |
|                                       |   |   | Q1 20071     |   |   |   | Q2 20071     |   |   |   | Q3 20071     |   |   |   | Q4      2007 |   |
| Total      interest and related portfolio income                                                            |   | $      | 6,534,567    |   |   | $      | 8,578,364    |   |   | $      | 10,483,244   |   |   | $      | 12,882,839   |   |
| Net      investment income and realized gains                                                               |   | $      | 4,892,907    |   |   | $      | 5,425,858    |   |   | $      | 6,018,176    |   |   | $      | 6,688,325    |   |
| Net      increase (decrease) in net assets resulting fromoperations                                         |   | $      | 13,949,008   |   |   | $      | 16,940,501   |   |   | $      | (4,683,689   | )      |   | $      | (63,835      | )      |
| Net      increase (decrease) in net assets resulting from operations per      share—basic and diluted |   | $      | 0.78         |   |   | $      | 0.94         |   |   | $      | (0.26        | )      |   | $      | —      |   |
| Net      investment income and realized gains per share—basic and      diluted                        |   | $      | 0.27         |   |   | $      | 0.30         |   |   | $      | 0.33         |   |   | $      | 0.37         |   |

----

| ExhibitNumber   |    | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   3.1 |    | Form      of Certificate of Incorporation of Kohlberg Capital Corporation (the      “Company”). (1)                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|            |         |
|   3.2 |    | Form      of Bylaws of the Company. (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|            |         |
|   4.1 |    | Specimen      certificate of the Company’s common stock, par value $0.01 per share.      (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|            |         |
|   4.2 |    | Form      of Registration Rights Agreement. (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|            |         |
|   4.3 |    | Form      of Dividend Reinvestment Plan. (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|            |         |
| 10.1            |    | Form      of the Amended and Restated 2006 Equity Incentive Plan. (9)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|            |         |
| 10.2            |    | Form      of Company Non-Qualified Stock Option Certificate. (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|            |         |
| 10.3            |    | Form      of Custodian Agreement by and among Kohlberg Capital Corporation and U.S.      Bank National Association. (3)                                                                                                                                                                                                                                                                                                                                                                                                                               |
|            |         |
| 10.4            |    | Form      of License and Referral Agreement between the Company and Kohlberg &      Company, LLC. (1)                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|            |         |
| 10.5            |    | Form      of Overhead Allocation Agreement between the Company and Katonah Debt      Advisors, LLC. (3)                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|            |         |
| 10.6            |    | Form      of Employment Agreement between the Company and Dayl W. Pearson. (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|            |         |
| 10.7            |    | Form      of Employment Agreement between the Company and Michael I. Wirth. (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|            |         |
| 10.8            |    | Form      of Employment Agreement between the Company and R. Jon Corless. (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|            |         |
| 10.9            |    | Form      of Employment Agreement between the Company and E.A. Kratzman. (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|            |         |
| 10.10           |    | Form      of Employment Agreement between Katonah Debt Advisors and E.A. Kratzman.      (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|            |         |
| 10.11           |    | Form      of Indemnification Agreement for Officers and Directors of the Company.      (4)                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.12           |    | Execution      Copy of Loan Funding and Servicing Agreement dated as of February 14,      2007, by and among Kohlberg Capital Funding LLC I, Kohlberg Capital      Corporation, each of the conduit lenders and institutional lenders from      time to time party thereto, each of the lender agents from time to time      party thereto, BMO Capital Markets Corp., as the Agent, Lyon Financial      Services, Inc. (d/b/a U.S. Bank Portfolio Services), as the Backup      Services, and U.S. Bank National Association, as Trustee. (5)        |
|            |         |
| 10.13           |    | Execution      Copy of First Amendment to Loan Funding and Servicing Agreement, dated as      of May 30, 2007, by and among Kohlberg Capital Funding LLC I, the Company,      each of the conduit lenders and institutional lenders from time to time      party thereto, each of the lender agents from time to time party thereto,      BMO Capital Markets Corp., as the Agent, Lyon Financial Services, Inc.      (d/b/a U.S. Bank Portfolio Services), as the Backup Servicer, and U.S.      Bank National Association, as Trustee. (6)          |
|            |         |
| 10.14           |    | Execution      Copy of Second Amendment to Loan Funding and Servicing Agreement, dated as      of October 1, 2007, by and among Kohlberg Capital Funding LLC I, the      Company, each of the conduit lenders and institutional lenders from time      to time party thereto, each of the lender agents from time to time party      thereto, BMO Capital Markets Corp., as the Agent, Lyon Financial Services,      Inc. (d/b/a U.S. Bank Portfolio Services), as the Backup Servicer, and      U.S. Bank National Association, as Trustee. (6) |

----

| ExhibitNumber |    | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|---------------|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.15         |    | Execution      Copy of Third Amendment to Loan Funding and Servicing Agreement, dated as      of November 21, 2007, by and among Kohlberg Capital Funding LLC I, the      Company, each of the conduit lenders and institutional lenders from time      to time party thereto, each of the lender agents from time to time party      thereto, BMO Capital Markets Corp., as the Agent, Lyon Financial Services,      Inc. (d/b/a U.S. Bank Portfolio Services), as the Backup Servicer, and      U.S. Bank National Association, as Trustee. (8) |
|          |         |
| 10.16         |    | Execution      Copy of Purchase and Sale Agreement dated as of February 14, 2007, by and      among Kohlberg Capital Funding LLC I and the Company. (7)                                                                                                                                                                                                                                                                                                                                                                                           |
|          |         |
| 10.17         |    | Form      of 2008 Non-Employee Director Plan. (10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|          |         |
| 21.1          |    | List      of Subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|          |         |
| 23.1          |    | Consent      of Deloitte & Touche LLP, Independent Registered Public Accounting      Firm.                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|          |         |
| 31.1          |    | Chief      Executive Officer Certification Pursuant to Rule 13a-14 of the Securities      Exchange Act of 1934, as adopted pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                        |
|          |         |
| 31.2          |    | Chief      Financial Officer Certification Pursuant to Rule 13a-14 of the Securities      Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act      of 2002.                                                                                                                                                                                                                                                                                                                                                                 |
|          |         |
| 32.1          |    | Chief      Executive Officer Certification pursuant to Section 1350, Chapter 63 of      Title 18, United States Code, as adopted pursuant to Section 906 of the      Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                  |
|          |         |
| 32.2          |    | Chief      Financial Officer Certification pursuant to Section 1350, Chapter 63 of      Title 18, United States Code, as adopted pursuant to Section 906 of the      Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                  |

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| (1) | Incorporated      by reference to the exhibit included in Pre-Effective Amendment No. 1      on Form N-2, as filed on October 6, 2006 (File      No. 333-136714). |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Incorporated      by reference to the exhibit included on Form N-2, as filed on      March 16, 2007 (FileNo. 333-141382). |
|-----|-------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Incorporated      by reference to the exhibit included in Pre-Effective Amendment No. 2      on Form N-2, as filed on November 20, 2006 (File      No. 333-136714). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Incorporated      by reference to the exhibit included in Pre-Effective Amendment No. 3      on Form N-2, as filed on November 24, 2006 (File      No. 333-136714). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Incorporated      by reference to Exhibit 10.15 of the Annual Report on Form 10-K, as filed      on March 29, 2007 (File  No. 814-00735). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Incorporated      by reference to the exhibit included in Pre-Effective Amendment No. 1      on Form N-2, as filed on October 18, 2007 (File      No. 333-146190). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Incorporated      by reference to Exhibit 10.2 of the Current Report on Form 8-K, as filed      on February 16, 2007 (File  No. 814-00735). |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|  (8) | Incorporated      by reference to Exhibit 10.15 of the Annual Report on Form 10-K, as filed      on March 14, 2008 (File  No. 814-00735). |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Incorporated      by reference to Exhibit 10.1 of the Current Report on Form 8-K, as filed      on June 19, 2008 (File No.814-00735). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|

|  (10) | Incorporated      by reference to the exhibit included in Pre-Effective Amendment No. 1      on Form N-2, as filed on June 30, 2008 (File      No. 333-151268). |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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