##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
   Form 10-K
   (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    October 31, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number
    814-00201
   MVC
    Capital, Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

94-3346760(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)287 Bowman Avenue,
    Purchase, New York(Address of principal
    executive offices)

10577(Zip Code)    Registrants telephone number, including area code
 (914) 701-0310
  Securities registered pursuant to Section 12(b) of the
    Act:
   Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock

New York Stock Exchange   Securities registered pursuant to section 12(g) of the
    Act:
 None
   (Title of class)
   (Title of class)
   o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2 þ o
  Rule 12b-2 o þ
      DOCUMENT
    INCORPORATED BY REFERENCE:




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##### 



MVC
    Capital, Inc.
  (A
    Delaware Corporation)
  Index
  PagePart IItem 1.


Business


3Item 2.


Properties


23Item 3.


Legal
    Proceedings


23Item 4.


Submission of
    Matters to a Vote of Security Holders


23Part IIItem 5.


Market for
    Registrants Common Equity and Related Stockholder Matters
    and Issuer Purchases of Equity Securities


24Item 6.


Selected
    Consolidated Financial Data


27Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


28Item 7A.


Quantitative and
    Qualitative Disclosure about Market Risk


58Item 8.


Financial
    Statements and Supplementary Data


63Item 9A.


Controls and
    Procedures


94Part IIIItem 10.


Directors and
    Executive Officers of the Registrant


96Item 11.


Executive
    Compensation


96Item 12.


Security Ownership
    of Certain Beneficial Owners and Management


96Item 13.


Certain
    Relationships and Related Transactions


96Item 14.


Principal
    Accounting Fees and Services


96Part IVItem 15.


Exhibits, Financial
    Statements, Schedules


97SIGNATURES


103Certifications of Chief Executive Officer and Chief Financial OfficerCertifications of Chief Executive Officer and Chief Financial Officer   2




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##### Table of Contents



Part I  Factors
    That May Affect Future Results
  This Annual Report on
    Form 10-K
    contains certain forward-looking statements within the meaning
    of the federal securities laws that involve substantial
    uncertainties and risks. The Funds future results may
    differ materially from its historical results and actual results
    could differ materially from those projected in the
    forward-looking statements as a result of certain risk factors.
    These factors are described in the Risk Factors
    section below. Readers should pay particular attention to the
    considerations described in the section of this report entitled
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations. Readers should also
    carefully review the risk factors described in the other
    documents the Fund files, or has filed, from time to time with
    the United States Securities and Exchange Commission (the
    SEC).
  In this Annual Report on
    Form 10-K,
    unless otherwise indicated, MVC Capital,
    we, us, our or the
    Fund refer to MVC Capital, Inc. and its wholly-owned
    subsidiary company, MVC Financial Services, Inc. and TTG
    Advisers or the Adviser refers to The Tokarz
    Group Advisers LLC. Unless the context dictates otherwise,
    we also refers to TTG Advisers acting on behalf of
    MVC Capital.
  Item 1.
    Business  General
    and/or
   3




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and/or
             4




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Corporate
    History And Offices
      i.e.
    (914) 701-0310. Form 10-K, Form 10-Q, Form 8-K,
  Our
    Investment Strategy
  i.e. and/or
   5




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##### Table of Contents



i.e.
  and/or
  and/or and/or
    Fair Value as a Percentage of Our Net AssetsAs of


As of


As ofOctober 31,


October 31,


October 31,Type of Investment

2006


2005


2004Senior/Subordinated Loans and
    credit facilities


55.98
%


28.81
%


23.80
%Common Stock


39.40
%


23.10
%


26.54
%Warrants


0.46
%


0.89
%


0.48
%Preferred Stock


13.79
%


7.96
%


16.64
%Other Equity Investments


6.77
%


0.78
%


0.48
%Other Rights


0.00
%


0.00
%


0.00
%       Market.
  Investment Criteria.
  
    Businesses with secure market niches and predictable profit
    margins;
    The presence or availability of highly qualified management
    teams;
    The line of products or services offered and their market
    potential;
    The presence of a sustainable competitive advantage; 6




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
    Favorable industry and competitive dynamics; and
    Stable free cash flow of the business.  and/or
  Investment Sourcing.
  
    private mezzanine and equity investors;
    investment banks;
    business brokers;
    merger and acquisition advisors;
    financial services companies; and
    banks, law firms and accountants.  Allocation of Investment Opportunities.
  Co-Investments.
  Investment Structure.
  and/or
   7




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(payment-in-kind
  Providing Management Assistance.
  Portfolio Company Monitoring.
   8




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Investment Approval Procedures.
    
    Initial investment screening by deal person or investment team;
    Investment professionals present an investment proposal
    containing key terms and understandings (verbal and
    written) to the entire investment team;
    Our Chief Compliance Officer reviews the proposed investment for
    compliance with the 1940 Act, the Code and all other relevant
    rules and regulations;
    Investment professionals are provided with authorization to
    commence due diligence;
    Any investment professional can call a meeting, as deemed
    necessary, to: (i) review the due diligence reports;
    (ii) review the investment structure and terms;
    (iii) or to obtain any other information deemed relevant;
    Once all due diligence is completed, the proposed investment is
    rated using a rating system which tests several factors
    including, but not limited to, cash flow, EBITDA growth,
    management and business stability. We use this rating system as
    the base line for tracking the investment in the future;
    Our Chief Compliance Officer confirms that the proposed
    investment will not cause us to violate the 1940 Act, the
    Code or any other applicable rule or regulation;
    Mr. Tokarz approves the transaction; and
    The investment is funded.  Employees
    Operating
    Expenses
   9




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provided, however e.g. provided
    that
  Valuation
    of Portfolio Securities
     10




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Valuation
    Methodology
  and/or
    Equity Securities.
      Loans and Debt Securities.
   11




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and/or
  payment-in-kind payment-in-kind payment-in-kind payment-in-kind payment-in-kind
  Custodian
    Transfer
    Agent and Distribution Agent
    Risk
    Factors
  time-to-time
   12




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BUSINESS
    RISKS
  Business risks are risks that are associated with general
    business conditions, the economy, and the operations of the
    Fund. Business risks are not risks associated with our specific
    investments or an offering of our securities.
  We
    depend on key personnel of TTG Advisers, especially
    Mr. Tokarz, in seeking to achieve our investment
    objective.
    Our
    investment adviser, TTG Advisers, is a newly-formed
    entity.
    Our
    returns may be substantially lower than the average returns
    historically realized by the private equity industry as a
    whole.
    
    the lower return we are likely to realize on short-term liquid
    investments during the period in which we are identifying
    potential investments, and
    the periodic disclosure required of business development
    companies, which could result in the Fund being less attractive
    as an investor to certain potential portfolio companies.  Substantially
    all of our portfolio investments are recorded at fair
    value and, as a result, there is a degree of uncertainty
    regarding the carrying values of our portfolio
    investments.
       13




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Economic
    recessions or downturns could impair our portfolio companies and
    harm our operating results.
      We may
    not realize gains from our equity investments.
    The
    market for private equity investments can be highly competitive.
    In some cases, our status as a regulated business development
    company may hinder our ability to participate in investment
    opportunities.
   14




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Loss
    of pass-through tax treatment would substantially reduce net
    assets and income available for dividends.
    Changes
    in the law or regulations that govern us could have a material
    impact on our business.
    Results
    may fluctuate and may not be indicative of future
    performance.
    Our
    common stock price can be volatile.
    
    price and volume fluctuations in the overall stock market from
    time to time;
    significant volatility in the market price and trading volume of
    securities of business development companies or other financial
    services companies;
    volatility resulting from trading in derivative securities
    related to our common stock including puts, calls, long-term
    equity participation securities, or LEAPs, or short trading
    positions;
    changes in regulatory policies or tax guidelines with respect to
    business development companies or RICs;
    actual or anticipated changes in our earnings or fluctuations in
    our operating results or changes in the expectations of
    securities analysts;
    general economic conditions and trends;
    loss of a major funding source; or
    departures of key personnel.  We are
    subject to market discount risk.
   15




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We
    have not established a minimum dividend payment level and we
    cannot assure you of our ability to make distributions to our
    shareholders in the future.
  year-to-year
  We
    have borrowed and may continue to borrow money, which magnifies
    the potential for gain or loss on amounts invested and may
    increase the risk of investing in us.
        Changes
    in interest rates may affect our cost of capital and net
    operating income.
   16




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We may
    be unable to meet our covenant obligations under our credit
    facility which could adversely affect our
    business.
    We
    have a limited operating history upon which you can evaluate our
    new management team.
  e-commerce, and/or
  A
    portion of our existing investment portfolio was not selected by
    the investment team of TTG Advisers.
  i.e.
  Under
    the Advisory Agreement, TTG Advisers is entitled to compensation
    based on our portfolios performance. This arrangement may
    result in riskier or more speculative investments in an effort
    to maximize incentive compensation.
   17




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There
    are potential conflicts of interest that could impact our
    investment returns.
    Allocation of Investment
    Opportunities
  The
    war with Iraq, terrorist attacks, the Middle East crisis and
    other acts of violence or war may affect any market for our
    common stock, impact the businesses in which we invest and harm
    our operations and our profitability.
    Our
    financial condition and results of operations will depend on our
    ability to effectively manage our future growth.
    INVESTMENT
    RISKS
  Investment risks are risks associated with our
    determination to execute on our business objective. These risks
    are not risks associated with general business conditions or
    those relating to an offering of our securities.
  Investing
    in private companies involves a high degree of
    risk.
   18




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Our
    investments in portfolio companies are generally
    illiquid.
    Our
    investments in small and middle-market privately-held companies
    are extremely risky and the Fund could lose its entire
    investment.
    
    Small and middle-market companies may have limited financial
    resources and may not be able to repay the loans we make to
    them.  Our strategy includes providing financing
    to companies that typically do not have capital sources readily
    available to them. While we believe that this provides an
    attractive opportunity for us to generate profits, this may make
    it difficult for the borrowers to repay their loans to us upon
    maturity.
    Small and middle-market companies typically have narrower
    product lines and smaller market shares than large
    companies.  Because our target companies are
    smaller businesses, they may be more vulnerable to
    competitors actions and market conditions, as well as
    general economic downturns. In addition, smaller companies may
    face intense competition, including competition from companies
    with greater financial resources, more extensive development,
    manufacturing, marketing and other capabilities, and a larger
    number of qualified managerial and technical personnel.
    There is generally little or no publicly available
    information about these privately-held
    companies.  Because we seek to make investments in
    privately-held companies, there is generally little or no
    publicly available operating and financial information about
    them. As a result, we rely on our investment professionals to
    perform due diligence investigations of these privately-held
    companies, their operations and their prospects. We may not
    learn all of the material information we need to know regarding
    these companies through our investigations.
    Small and middle-market companies generally have less
    predictable operating results.  We expect that our
    portfolio companies may have significant variations in their
    operating results, may from time to time be parties to
    litigation, may be engaged in rapidly changing businesses with
    products subject to a substantial risk of obsolescence, may
    require substantial additional capital to support their
    operations, finance expansion or maintain their competitive
    position, may otherwise have a weak financial position or may be
    adversely affected by changes in the business cycle. Our
    portfolio companies may not meet net income, cash flow and other
    coverage tests typically imposed by their senior lenders.
    Small and middle-market businesses are more likely to be
    dependent on one or two persons.  Typically, the
    success of a small or middle-market company also depends on the
    management talents and efforts of one or two persons or a small
    group of persons. The death, disability or resignation of one or
    more of these persons could have a material adverse impact on
    our portfolio company and, in turn, on us.
    Small and middle-market companies are likely to have greater
    exposure to economic downturns than larger
    companies.  We expect that our portfolio companies
    will have fewer resources than larger businesses and an economic
    downturn may thus more likely have a material adverse effect on
    them.
    Small and middle-market companies may have limited operating
    histories.  We may make debt or equity investments
    in new companies that meet our investment criteria. Portfolio
    companies with limited operating histories are exposed to the
    operating risks that new businesses face and may be particularly
    susceptible to, among other risks, market downturns, competitive
    pressures and the departure of key executive officers. 19




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Our
    borrowers may default on their payments, which may have an
    effect on our financial performance.
    Our
    investments in mezzanine and other debt securities may involve
    significant risks.
  and/or
  When
    we are a debt or minority equity investor in a portfolio
    company, we may not be in a position to control the entity, and
    management of the company may make decisions that could decrease
    the value of our portfolio holdings.
    We may
    choose to waive or defer enforcement of covenants in the debt
    securities held in our portfolio, which may cause us to lose all
    or part of our investment in these companies.
    Our
    portfolio companies may incur obligations that rank equally
    with, or senior to, our investments in such companies. As a
    result, the holders of such obligations may be entitled to
    payments of principal or interest prior to us, preventing us
    from obtaining the full value of our investment in the event of
    an insolvency, liquidation, dissolution, reorganization,
    acquisition, merger or bankruptcy of the relevant portfolio
    company.
   20




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Our
    portfolio investments may be concentrated in a limited number of
    portfolio companies, which would magnify the effect if one of
    those companies were to suffer a significant loss. This could
    negatively impact our ability to pay you dividends and cause you
    to lose all or part of your investment.
    Investments
    in foreign debt or equity may involve significant risks in
    addition to the risks inherent in
    U.S. investments.
    Certain
    Government Regulations
    Business Development Company.
       21




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
    does not have any class of securities with respect to which a
    broker or dealer may extend margin credit;
    is controlled by a business development company or a group of
    companies including a business development company and the
    business development company has an affiliated person who is a
    director of the eligible portfolio company; or
    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.  Rules 2a-46 55a-1
                 22




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(202) 942-8090.
      Item 2.
    Properties    Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   23




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Part II  Item 5.
    Market
    for Registrants Common Equity and Related Stockholder
    Matters and Issuer Purchases of Equity Securities      Quarter Ended

High


LowFISCAL YEAR 200610/31/06

$
13.87


$
12.6107/31/06

$
13.49


$
11.9804/30/06

$
12.75


$
11.6601/31/06

$
12.22


$
10.50FISCAL YEAR 200510/31/05

$
12.22


$
10.3007/31/05

$
11.34


$
9.4104/30/05

$
9.50


$
9.1701/31/05

$
9.55


$
8.95   Dividends
  12-month
     24




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For
    the Quarter Ended July 31, 2005
    For
    the Quarter Ended October 31, 2005
    For
    the Quarter Ended January 31, 2006
    For
    the Quarter Ended April 30, 2006
   25




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For
    the Quarter Ended July 31, 2006
    For
    the Quarter Ended October 31, 2006
      form 1099-DIV,
       26




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Item 6.
    Selected
    Consolidated Financial Data  See Managements Discussion and Analysis
    of Financial Condition and Results of Operations on
    page 28 for more information.
  Selected
    Consolidated Financial Data
  Year Ended October 31,2006


2005


2004


2003


2002(In thousands, except per share data)Operating Data:Interest and related portfolio
    income:Interest and dividend income

$
13,909


$
9,457


$
2,996


$
2,833


$
3,740Fee income


3,828



1,809



926



62



Other income


771



933



64







Total operating income


18,508



12,199



3,986



2,895



3,740Expenses:Employee


3,499



2,336



1,366



2,476



696Incentive compensation
    (Note 5)


6,055



1,117











Administrative


3,420



3,021



2,891



8,911
(2)


2,573Interest and other borrowing costs


1,594



31



2







Management fee


















3,593Total operating expenses


14,568



6,505



4,259



11,387



6,862Litigation recovery of management
    fees (Note 12, 13)










370







Net operating income (loss) before
    taxes


3,940



5,694



97



(8,492
)


(3,122
)Tax expense (benefit), net


159



(101
)


79







Net operating income (loss)


3,781



5,795



18



(8,492
)


(3,122
)Net realized and unrealized gains
    (losses):Net realized gains (losses)


5,221



(3,295
)


(37,795
)


(4,220
)


(33,469
)Net change in unrealized
    appreciation (depreciation)


38,334



23,768



49,382



(42,771
)


(21,765
)Net realized and unrealized gains
    (losses) on investments


43,555



20,473



11,587



(46,991
)


(55,234
)Net increase (decrease) in net
    assets resulting from operations

$
47,336


$
26,268


$
11,605


$
(55,483
)

$
(58,356
)Per Share:Net increase (decrease) in net
    assets per share resulting from operations

$
2.48


$
1.45


$
0.91


$
(3.42
)

$
(3.54
)Dividends per share

$
0.48


$
0.24


$
0.12


$



$
0.04Balance Sheet Data:Portfolio at value

$
275,892


$
122,298


$
78,520


$
24,071


$
54,194Portfolio at cost


286,851



171,591



151,582



146,515



133,864Total assets


347,047



201,379



126,577



137,880



196,511Shareholders equity


236,993



198,707



115,567



137,008



195,386Shareholders equity per
    share (net asset value)

$
12.41


$
10.41


$
9.40


$
8.48


$
11.84Common shares outstanding at
    period end


19,094



19,087



12,293



16,153



16,500Other Data:Number of Investments funded in
    period


24



9



7



5



10Investments funded ($) in period

$
166,300


$
53,836


$
60,710


$
21,955


$
26,577   27




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2006


2005


2004Qtr 4


Qtr 3


Qtr 2


Qtr 1


Qtr 4


Qtr 3


Qtr 2


Qtr 1


Qtr 4


Qtr
    3(1)


Qtr
    2


Qtr
    1(In
    thousands except per share data)Quarterly Data
    (Unaudited):Total operating income


6,104



4,607



3,915



3,882



3,361



4,404



2,439



1,995



1,811



951



508



716Net operating income (loss) before
    net realized and unrealized gains


1,723



1,072



156



830



1,612



2,480



821



882



665



281



(498
)


(430
)Net increase (decrease) in net
    assets resulting from operations


15,866



8,046



11,117



12,307



8,933



10,310



4,360



2,665



3,274



4,922



1,104



2,305Net increase (decrease) in net
    assets resulting from operations per share


0.83



0.42



0.58



0.65



0.46



0.58



0.23



0.18



0.27



0.41



0.09



0.14Net asset value per share


12.41



11.70



11.40



10.94



10.41



10.06



9.64



9.41



9.40



9.25



8.85



8.76     (1)
    
    Data for 2004 differs from that which was filed on
    Form 10-Q
    on September 9, 2004, due to a reclassification of
    investment income and related expenses which had previously been
    accrued for.(2)
    
    The administrative expenses for the year ended October 31,
    2003 included approximately $4.0 million of
    proxy/litigation fees and expenses. These are non-recurring
    expenses.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  may, will, expect, believe, anticipate, intend,
    could, estimate, might continue
  Overview
  and/or
  i.e. and/or
   28




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i.e.
  and/or
  and/or and/or
    Operating
    Income
  For the Years Ended October 31, 2006, 2005 and
    2004.
  For
    the Year Ended October 31, 2006
   29




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For
    the Year Ended October 31, 2005
    For
    the Year Ended October 31, 2004
    Operating
    Expenses
  For the Years Ended October 31, 2006, 2005 and
    2004.
  For
    the Year Ended October 31, 2006
     30




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For
    the Year Ended October 31, 2005
         31




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For
    the Year Ended October 31, 2004
          Realized
    Gains and Losses On Portfolio Securities
  For the Years Ended October 31, 2006, 2005 and
    2004.
  For
    the Year Ended October 31, 2006
     32




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For
    the Year Ended October 31, 2005
        For
    the Year Ended October 31, 2004
     33




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##### Table of Contents



Series A-1
  Unrealized
    Appreciation and Depreciation of Portfolio Securities
  For the Years Ended October 31, 2006, 2005 and
    2004.
  For
    the Year Ended October 31, 2006
    For
    the Year Ended October 31, 2005
   34




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For
    the Year Ended October 31, 2004
      Portfolio
    Investments
  For the Years Ended October 31, 2006 and
    2005.
  For
    the Year Ended October 31, 2006
     35




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36




---



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37




---



##### Table of Contents



For
    the Year Ended October 31, 2005
                     38




---



##### Table of Contents



Portfolio
    Companies
    Actelis
    Networks, Inc.
  e-business
    Amersham
    Corp.
          Auto
    MOTOL BENI
         39




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Baltic
    Motors Corporation
                  BP
    Clothing, LLC
             40




---



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Dakota
    Growers Pasta Company, Inc.
                  DPHI,
    Inc. (formerly DataPlay, Inc.)
    Series A-1
  Endymion
    Systems, Inc.
  end-to-end
    Foliofn,
    Inc.
  fn fn
  fn
 41




---



##### Table of Contents



fn.
  Harmony
    Pharmacy & Health Center, Inc.
              Henry
    Company
        Impact
    Confections, Inc.
           42




---



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Innovative
    Brands, LLC
        Integral
    Development Corporation
          JDC
    Lighting, LLC
            Lumeta
    Corporation
     43




---



##### Table of Contents



Mainstream
    Data, Inc.
      Marine
    Exhibition Corporation
        Octagon
    Credit Investors, LLC
       44




---



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Ohio
    Medical Corporation
               45




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##### Table of Contents



Phoenix
    Coal Corporation
                PreVisor,
    Inc.
        ProcessClaims,
    Inc.
         46




---



##### Table of Contents



SafeStone
    Technologies PLC
  e-business
    SGDA
    Sanierungsgesellschaft fur Deponien und Altasten
    mbH
           47




---



##### Table of Contents



Sonexis,
    Inc.
      SIA BM
    Auto
        SP
    Industries, Inc.
  configured-to-order
   48




---



##### Table of Contents



Strategic
    Outsourcing, Inc.
                Storage
    Canada, LLC
         49




---



##### Table of Contents



Summit
    Research Labs, Inc.
          Timberland
    Machines & Irrigation, Inc.
                   50




---



##### Table of Contents



Total
    Safety U.S., Inc.
            Turf
    Products, LLC
           51




---



##### Table of Contents



Velocitius
    B.V.
              Vendio
    Services, Inc.
            Vestal
    Manufacturing Enterprises, Inc.
             52




---



##### Table of Contents



Vitality
    Foodservice, Inc.
                Yaga,
    Inc.
          Liquidity
    and Capital Resources
   53




---



##### Table of Contents



Commitments
    to/for Portfolio Companies:
    Open
    Commitments of MVC Capital, Inc.
  Portfolio Company

Amount Committed

Amount Funded at October 31, 2006Marine

$2.0 million

Octagon

$12.0 million

$3.25 millionStorage Canada

$6.0 million

$1.95 millionTimberland

$3.25 million

$2.83 millionVelocitius

$260,000

$143,614      54




---



##### Table of Contents



55




---



##### Table of Contents



Commitments
    of the Fund:
          Subsequent
    Events
   56




---



##### Table of Contents



and/or
                  Form N-2
         57




---



##### Table of Contents



*
     Item 7A.
    Quantitative
    and Qualitative Disclosure about Market Risk    90-day 90-day
    Investing
    in private companies involves a high degree of
    risk.
    Our
    investments in portfolio companies are generally
    illiquid.
      *
 58




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##### Table of Contents



Substantially
    all of our portfolio investments are recorded at fair
    value and, as a result, there is a degree of uncertainty
    regarding the carrying values of our portfolio
    investments.
        Economic
    recessions or downturns could impair our portfolio companies and
    harm our operating results.
      Our
    borrowers may default on their payments, which may have an
    effect on our financial performance.
   59




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##### Table of Contents



Our
    investments in mezzanine and other debt securities may involve
    significant risks.
  and/or
  We may
    not realize gains from our equity investments.
    Our
    investments in small and middle-market privately-held companies
    are extremely risky and you could lose your entire
    investment.
    
    Small and middle-market companies may have limited financial
    resources and may not be able to repay the loans we make to
    them.  Our strategy includes providing financing
    to companies that typically do not have capital sources readily
    available to them. While we believe that this provides an
    attractive opportunity for us to generate profits, this may make
    it difficult for the borrowers to repay their loans to us upon
    maturity.
    Small and middle-market companies typically have narrower
    product lines and smaller market shares than large
    companies.  Because our target companies are
    smaller businesses, they may be more vulnerable to
    competitors actions and market conditions, as well as
    general economic downturns. In addition, smaller companies may
    face intense competition, including competition from companies
    with greater financial resources, more extensive development,
    manufacturing, marketing and other capabilities, and a larger
    number of qualified managerial and technical personnel.
    There is generally little or no publicly available
    information about these privately-held
    companies.  Because we seek to make investments in
    privately-held companies, there is generally little or no
    publicly available operating and financial information about
    them. As a result, we rely on our investment professionals to
    perform due diligence investigations of these privately-held
    companies, their operations and their prospects. We may not
    learn all of the material information we need to know regarding
    these companies through our investigations.
    Small and middle-market companies generally have less
    predictable operating results.  We expect that our
    portfolio companies may have significant variations in their
    operating results, may from time to time be parties to
    litigation, may be engaged in rapidly changing businesses with
    products subject to a substantial risk of obsolescence, may
    require substantial additional capital to support their
    operations, finance expansion or maintain their competitive
    position, may otherwise have a weak financial position or may be
    adversely affected by changes in the business cycle. Our
    portfolio companies may not meet net income, cash flow and other
    coverage tests typically imposed by their senior lenders.
    Small and middle-market businesses are more likely to be
    dependent on one or two persons.  Typically, the
    success of a small or middle-market company also depends on the
    management talents and efforts of one or 60




---



##### Table of Contents



two persons or a small group of persons. The death, disability
    or resignation of one or more of these persons could have a
    material adverse impact on our portfolio company and, in turn,
    on us.  
    Small and middle-market companies are likely to have greater
    exposure to economic downturns than larger
    companies.  We expect that our portfolio companies
    will have fewer resources than larger businesses and an economic
    downturn may thus more likely have a material adverse effect on
    them.
    Small and middle-market companies may have limited operating
    histories.  We may make debt or equity investments
    in new companies that meet our investment criteria. Portfolio
    companies with limited operating histories are exposed to the
    operating risks that new businesses face and may be particularly
    susceptible to, among other risks, market downturns, competitive
    pressures and the departure of key executive officers.  Investments
    in foreign debt or equity may involve significant risks in
    addition to the risks inherent in
    U.S. investments.
    The
    market for private equity investments can be highly competitive.
    In some cases, our status as a regulated business development
    company may hinder our ability to participate in investment
    opportunities.
    Our
    common stock price can be volatile.
    
    price and volume fluctuations in the overall stock market from
    time to time;
    significant volatility in the market price and trading volume of
    securities of business development companies or other financial
    services companies;
    volatility resulting from trading in derivative securities
    related to our common stock including puts, calls, long-term
    equity participation securities, or LEAPs, or short trading
    positions;
    changes in regulatory policies or tax guidelines with respect to
    business development companies or RICs;
    actual or anticipated changes in our earnings or fluctuations in
    our operating results or changes in the expectations of
    securities analysts;
    general economic conditions and trends; 61




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##### Table of Contents




    loss of a major funding source; or
    departures of key personnel.  We are
    subject to market discount risk.
    Changes
    in interest rates may affect our cost of capital and net
    operating income.
    The
    war with Iraq, terrorist attacks, the Middle East crisis and
    other acts of violence or war may affect any market for our
    common stock, impact the businesses in which we invest and harm
    our operations and our profitability.
   62




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##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  CONSOLIDATED
    FINANCIAL STATEMENTS
  MVC
    Capital, Inc.
  Consolidated
    Balance Sheets
  October 31,


October 31,2006


2005ASSETSAssetsCash and cash equivalents

$
66,217,123


$
26,297,190Short term investments at market
    value (cost $- and $51,026,902)






51,026,902Investments at fair value (cost
    $286,850,759 and $171,591,242)Non-control/Non-affiliated
    investments (cost $108,557,066 and $74,495,549)


71,848,976



33,685,925Affiliate investments (cost
    $71,672,386 and $40,370,059)


75,248,140



32,385,810Control investments (cost
    $106,621,307 and $56,725,634)


128,794,436



56,225,944Total investments at fair value


275,891,552



122,297,679Dividends, interest and fees
    receivable


1,617,511



902,498Prepaid expenses


2,597,547



364,780Prepaid taxes






98,374Deferred tax


548,120



303,255Deposits


120,000



Other assets


54,796



88,600Total assets

$
347,046,649


$
201,379,278LIABILITIES AND
    SHAREHOLDERS EQUITYLiabilitiesRevolving credit facility

$
50,000,000


$
Term loan


50,000,000



Provision for incentive
    compensation (Note 5)


7,172,352



1,117,328Employee compensation and benefits


1,635,600



807,000Other accrued expenses and
    liabilities


774,048



353,606Professional fees


402,133



276,621Consulting fees


70,999



3,117Payable for investment purchased






79,708Taxes payable


33,455



Directors fees


(35,312
)


2,898Total liabilities


110,053,275



2,640,278Shareholders
    equityCommon stock, $0.01 par
    value; 150,000,000 shares authorized; 19,093,929 and
    19,086,566 shares outstanding, respectively


231,459



231,459Additional
    paid-in-capital


353,479,871



358,571,795Accumulated earnings


22,026,261



13,528,526Dividends paid to stockholders


(21,592,946
)


(12,429,181
)Accumulated net realized loss


(73,016,601
)


(78,633,248
)Net unrealized depreciation


(10,959,207
)


(49,293,563
)Treasury stock, at cost, 4,052,019
    and 4,059,382 shares held, respectively


(33,175,463
)


(33,236,788
)Total shareholders
    equity


236,993,374



198,739,000Total liabilities and
    shareholders equity

$
347,046,649


$
201,379,278Net asset value per
    share

$
12.41


$
10.41    63




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##### Table of Contents



MVC
    Capital, Inc.
  Consolidated
    Schedule of Investments
    October 31, 2006
  Company

Industry

Investment

Principal


Cost


Fair ValueNon-control/Non-affiliated
    investments  30.32%(a, c, g, f)Actelis Networks, Inc.

Technology Investments

Preferred Stock
    (150,602 shares)(d)





$
5,000,003


$
Amersham Corp.

Manufacturer of
    Precision  Machined Components

Second Lien Seller
    Note 10.0000%, 06/29/2010(h)

$
2,473,521



2,473,521



2,473,521Second Lien Seller
    Note 16.0000%, 06/30/2013(b, h)


2,627,538



2,627,538



2,627,5385,101,059



5,101,059BP Clothing, LLC

Apparel

Second Lien Loan 14.0000%,
    07/18/2012(b, h)


10,041,165



9,862,650



10,041,165Term Loan A 9.6500%,
    07/18/2011(h)


2,910,000



2,858,549



2,858,549Term Loan B 11.8000%,
    07/18/2011(h)


2,000,000



1,964,638



1,964,63814,685,837



14,864,352DPHI, Inc.

Technology Investments

Preferred Stock
    (602,131 shares)(d)






4,520,350



FOLIOfn, Inc.

Technology Investments

Preferred Stock
    (5,802,259 shares)(d)






15,000,000



5,000,000Henry Company

Building Products/Specialty
    Chemicals

Term Loan A 8.8244%,
    04/06/2011(h)


3,000,000



3,000,000



3,000,000Term Loan B 13.0744%,
    04/06/2011(h)


2,000,000



2,000,000



2,000,0005,000,000



5,000,000Innovative Brands, LLC

Consumer Products

Term Loan 11.1250%, 09/22/2011(h)


15,000,000



15,000,000



15,000,000JDC Lighting, LLC

Electrical Distribution

Senior Subordinated Debt 17.0000%,
    01/31/2009(b, h)


3,035,844



2,988,002



3,035,844MainStream Data

Technology Investments

Common Stock (5,786 shares)(d)






3,750,000



SafeStone Technologies PLC

Technology Investments

Preferred Stock
    (2,106,378 shares)(d, e)






4,015,402



Sonexis, Inc.

Technology Investments

Common Stock
    (131,615 shares)(d)






10,000,000



SP Industries, Inc.

Laboratory Research Equipment

Term Loan B 13.3244%,
    03/31/2011(h)


3,059,300



3,007,411



3,059,300Senior Subordinated Debt 16.0000%,
    03/31/2012(b, h)


12,959,013



12,653,021



12,959,01315,660,432



16,018,313Storage Canada, LLC

Self Storage

Term Loan 8.7500%, 03/30/2013(h)


1,320,500



1,327,073



1,320,500Term Loan 8.7500%, 10/06/2013(h)


619,000



619,000



619,0001,946,073



1,939,500Total Safety U.S., Inc.

Engineering Services

Term Loan A 9.8300%,
    12/31/2010(h)


4,908,257



4,908,257



4,908,257Term Loan B 13.8300%,
    12/31/2010(h)


981,651



981,651



981,6515,889,908



5,889,908Sub Total
    Non-control/Non-affiliated investments








108,557,066



71,848,976Affiliate
    investments  31.75%(a, c, g, f)Dakota Growers Pasta Company, Inc.

Manufacturer of Packaged Foods

Common Stock (1,081,195 shares)






5,879,242



8,957,880Endymion Systems, Inc.

Technology Investments

Preferred Stock
    (7,156,760 shares)(d)






7,000,000



Harmony Pharmacy & Health
    Center, Inc.

Healthcare  Retail

Common Stock
    (2,000,000 shares)(d)






750,000



750,000Impact Confections, Inc.

Confections Manufacturing
    and Distribution

Senior Subordinated Debt 17.0000%,
    07/30/2009(b, h)


5,468,123



5,390,649



5,468,123Senior Subordinated Debt 9.3244%,
    07/29/2008(h)


325,000



321,218



325,000Common Stock (252 shares)(d)






2,700,000



2,700,0008,411,867



8,493,123Marine Exhibition Corporation

Theme Park

Senior Subordinated Debt 11.0000%,
    06/30/2013(b, h)


10,091,111



9,899,988



10,091,111Convertible Preferred Stock
    (20,000 shares)(b)






2,035,652



2,035,65211,935,640



12,126,763Octagon Credit Investors, LLC

Financial Services

Term Loan 9.5744%, 12/31/2011(h)


5,000,000



4,931,096



5,000,000Revolving Line of Credit 9.5744%,
    12/31/2011(h)


3,250,000



3,250,000



3,250,000Limited Liability Company Interest






894,095



1,927,9329,075,191



10,177,932Phoenix Coal Corporation

Coal Processing and Production

Common Stock (1,666,667)(d)






1,000,000



1,000,000Second Lien Note 15.0000%,
    06/08/2011(b, h)


7,088,615



6,959,809



7,088,6157,959,809



8,088,615PreVisor, Inc.

Human Capital Management

Common Stock (9 shares)(d)






6,000,000



6,000,000Vitality Foodservice, Inc.

Non-Alcoholic Beverages

Common Stock
    (500,000 shares)(d)






5,000,000



8,500,000Preferred Stock
    (1,000,000 shares)(b, h)






9,660,637



11,053,827Warrants(d)










1,100,00014,660,637



20,653,827Sub Total Affiliate
    investments










71,672,386



75,248,140   64




---



##### Table of Contents



MVC
    Capital, Inc.
  Consolidated
    Schedule of Investments  (Continued)
    October 31, 2006
  Company

Industry

Investment

Principal


Cost


Fair ValueControl investments 
    54.34%(a, c,g, f)auto MOTOL BENI

Automotive Dealership

Common Stock (200 shares)(d, e)





$
2,000,000


$
2,000,000Baltic Motors Corporation

Automotive Dealership

Senior Subordinated Debt 10.0000%,
    06/24/2007(e, h)

$
4,500,000



4,500,000



4,500,000Bridge Loan 12.0000%,
    12/22/2006(e, h)


1,000,000



1,000,000



1,000,000Common Stock
    (60,684 shares)(d, e)






8,000,000



21,155,00013,500,000



26,655,000Ohio Medical Corporation

Medical Device Manufacturer

Common Stock (5,620 shares)(d)






17,000,000



26,200,000SGDA Sanierungsgesellschaft fur
    Deponien
    und Altlasten

Soil Remediation

Term Loan 7.0000%, 08/25/2009(e, h)


6,187,350



5,989,710



5,989,710Common Equity Interest(d, e)






338,551



338,551Preferred Equity Interest(d, e)






5,000,000



5,000,00011,328,261



11,328,261SIA BM Auto

Automotive Dealership

Common Stock
    (47,300 shares)(d, e)






8,000,000



8,000,000Summit Research Labs, Inc.

Specialty Chemicals

Second Lien Loan 14.0000%,
    08/15/2012(b, h)


5,044,813



4,948,327



5,044,813Preferred Stock (800 shares)(d)






11,200,000



11,200,00016,148,327



16,244,813Timberland Machines &
    Irrigation, Inc.

Distributor 
    Landscaping
    and Irrigation Equipment

Senior Subordinated Debt 14.4260%,
    08/04/2009(b, h)


6,607,859



6,551,408



6,607,859Junior Revolving Line of Credit
    12.5000%, 07/07/2007(h)


2,829,709



2,829,709



2,829,709Common Stock (542 shares)(d)






5,420,291



4,420,291Warrants(d)










14,801,408



13,857,859Turf Products, LLC

Distributor 
    Landscaping
    and Irrigation Equipment

Senior Subordinated Debt 15.0000%,
    11/30/2010(b, h)


7,676,330



7,627,137



7,676,330Limited Liability Company
    Interest(d)






3,821,794



5,821,794Warrants(d)










11,448,931



13,498,124Velocitius B.V.

Renewable Energy

Common Equity Interest(d, e)






2,966,765



2,966,765Revolving Line of Credit 8.0000%,
    10/31/2009(e, h)


143,614



143,614



143,6143,110,379



3,110,379Vendio Services, Inc.

Technology Investments

Common Stock (10,476 shares)(d)






5,500,000



Preferred Stock
    (6,443,188 shares)(d)






1,134,001



3,400,0006,634,001



3,400,000Vestal Manufacturing Enterprises,
    Inc.

Iron Foundries

Senior Subordinated Debt 12.0000%,
    04/29/2011(h)


800,000



800,000



800,000Common Stock (81,000 shares)






1,850,000



3,700,0002,650,000



4,500,000Sub Total Control
    Investments








106,621,307



128,794,436TOTAL INVESTMENT ASSETS
    116.41%(f)







$
286,850,759


$
275,891,552     (a)
    
    These securities are restricted
    from public sale without prior registration under the Securities
    Act of 1933. The Fund negotiates certain aspects of the method
    and timing of the disposition of these investments, including
    registration rights and related costs.(b)
    
    These securities accrue a portion
    of their interest/dividends in payment in kind
    interest/dividends which is capitalized to the investment.(c)
    
    All of the Funds equity and
    debt investments are issued by eligible portfolio companies, as
    defined in the Investment Company Act of 1940, except auto MOTOL
    BENI, Baltic Motors Corporation, Safestone Technologies PLC,
    SGDA Sanierungsgesellschaft fur Deponien und Altlasten,SIA BM
    Auto and Velocitius B.V. The Fund makes available significant
    managerial assistance to all of the portfolio companies in which
    it has invested.(d)
    
    Non-income producing assets.(e)
    
    The principal operations of these
    portfolio companies are located outside of the United States.(f)
    
    Percentages are based on net assets
    of $236,993,374 as of October 31, 2006.(g)
    
    See Note 3 for further
    information regarding Investment Classification.(h)
    
    All or a portion of these
    securities have been committed as collateral for the Guggenheim
    Corporate Funding, LLC Credit Facility.
    
    Denotes zero cost/fair value.   65




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##### Table of Contents



MVC
    Capital, Inc.
  Consolidated
    Schedule of Investments
    October 31, 2005
  Company

Industry

Investment

Principal


Cost


Fair ValueNon-control/Non-affiliated
    investments  16.95%(a, c, g, h)Actelis Networks, Inc.

Technology Investments

Preferred Stock
    (150,602 shares)(d)





$
5,000,003


$
Amersham Corp.

Manufacturer of Precision-Machined
    Components

Second Lien Seller
    Note 10.0000%, 06/29/2010

$
2,473,521



2,473,521



2,473,521BP Clothing, LLC

Apparel

Second Lien Loan 11.8406%,
    06/02/2009


9,166,667



8,998,430



9,166,667DPHI, Inc.

Technology Investments

Preferred Stock
    (602,131 shares)(d)






4,520,350



FOLIOfn, Inc.

Technology Investments

Preferred Stock
    (5,802,259 shares)(d)






15,000,000



Integral Development Corporation

Technology Investments

Convertible Credit Facility
    11.7500%,
    12/31/2005(e)


1,122,216



1,121,520



1,122,216JDC Lighting, LLC

Electrical Distribution

Senior Subordinated Debt 17.0000%,
    01/31/2009(b)


3,090,384



3,025,871



3,090,384Lumeta Corporation

Technology Investments

Preferred Stock
    (384,615 shares)(d)






250,000



43,511Preferred Stock
    (266,846 shares)(d)






156,489



156,489406,489



200,000MainStream Data

Technology Investments

Common Stock (5,786 shares)(d)






3,750,000



Octagon Credit Investors, LLC

Financial Services

Senior Subordinated Debt 15.0000%,
    05/07/2011(b)


5,145,912



4,560,740



4,664,794Limited Liability Company Interest






724,857



1,228,038Warrants(d)






550,000



1,069,4575,835,597



6,962,289SafeStone Technologies PLC

Technology Investments

Preferred Stock
    (2,106,378 shares)(d, f)






4,015,402



Sonexis, Inc.

Technology Investments

Common Stock
    (131,615 shares)(d)






10,000,000



SP Industries, Inc.

Laboratory Research Equipment

Term Loan B 13.8406%,
    03/31/2010(b)


4,020,488



3,947,304



4,020,488Senior Subordinated Debt 17.0000%,
    03/31/2012(b)


6,650,360



6,401,062



6,650,36010,348,366



10,670,848Sub Total
    Non-control/Non-affiliated investments








74,495,549



33,685,925Affiliate
    investments  16.29%(a, c, g, h)Dakota Growers Pasta Company, Inc.

Manufacturer of Packaged Foods

Common Stock
    (909,091 shares)(d)






5,000,000



5,514,000Endymion Systems, Inc.

Technology Investments

Preferred Stock
    (7,156,760 shares)(d)






7,000,000



Impact Confections, Inc.

Confections Manufacturing and
    Distribution

Senior Subordinated Debt 17.0000%,
    07/30/2009(b)


5,228,826



5,133,069



5,228,826Senior Subordinated Debt 7.8406%,
    07/29/2008


325,000



318,986



325,000Common Stock (252 shares)(d)






2,700,000



2,700,0008,152,055



8,253,826ProcessClaims, Inc.

Technology Investments

Preferred Stock
    (6,250,000 shares)(d)






2,000,000



2,000,000Preferred Stock
    (849,257 shares)(d)






400,000



400,000Preferred Stock Warrants(d)






20



2,400,020



2,400,000Vitality Foodservice, Inc.

Non-Alcoholic Beverages

Common Stock
    (500,000 shares)(d)






5,000,000



5,000,000Preferred Stock
    (1,000,000 shares)(b)






10,517,984



10,517,984Warrants(d)










700,00015,517,984



16,217,984Yaga, Inc.

Technology Investments

Preferred Stock
    (300,000 shares)(d)






300,000



Preferred Stock
    (1,000,000 shares)(d)






2,000,000



2,300,000



Sub Total Affiliate
    investments










40,370,059



32,385,810    66




---



##### Table of Contents



MVC
    Capital, Inc.
  Consolidated
    Schedule of Investments  (Continued)
    October 31, 2005
  Company

Industry

Investment

Principal


Cost


Fair ValueControl investments 
    28.30%(a, c, g, h)Baltic Motors Corporation

Automotive Dealership

Senior Subordinated Debt 10.0000%,
    06/24/2007(f)

$
4,500,000


$
4,500,000


$
4,500,000Common Stock
    (54,947 shares)(d, f)






6,000,000



7,500,00010,500,000



12,000,000Ohio Medical Corporation

Medical Device Manufacturer

Common Stock (5,620 shares)(d)






17,000,000



17,000,000SGDA Sanierungsgesellschaft fur
    Deponien und Altlasten

Soil Remediation

Revolving Line of Credit 7.0000%,
    08/25/2006(f)


1,237,700



1,237,700



1,237,700Term Loan 7.0000%, 08/25/2009(f)


4,579,050



4,304,560



4,304,560Equity Interest(f)






315,000



315,0005,857,260



5,857,260Timberland Machines &
    Irrigation, Inc.

Distributor - Landscaping and
    Irrigation Equipment

Senior Subordinated Debt 17.0000%,
    08/04/2009(b)


6,318,684



6,234,373



6,318,684Junior Revolving Line of Credit
    12.5000%, 07/07/2007


3,250,000



3,250,000



3,250,000Common Stock (450 shares)(d)






4,500,000



4,500,000Warrants(d)










13,984,373



14,068,684Vendio Services, Inc.

Technology Investments

Common Stock (10,476 shares)(d)






5,500,000



Preferred Stock
    (6,443,188 shares)(d)






1,134,001



2,700,0006,634,001



2,700,000Vestal Manufacturing Enterprises,
    Inc.

Iron Foundries

Senior Subordinated Debt 12.0000%,
    04/29/2011


900,000



900,000



900,000Common Stock (81,000 shares)(d)






1,850,000



3,700,0002,750,000



4,600,000Sub Total Control
    Investments










56,725,634



56,225,944Short Term Investments
    25.67%(g)U.S. Treasury Bills

U.S. Government & Agency
    Securities

3.4400%, 12/01/2005


14,600,000



14,560,162



14,560,1623.2200%, 12/29/2005


9,865,000



9,812,368



9,812,3683.6300%, 01/12/2006


14,856,000



14,750,225



14,750,2253.4300%, 01/19/2006


12,000,000



11,904,147



11,904,14751,026,902



51,026,902Sub Total Short Term
    Investments










51,026,902



51,026,902TOTAL INVESTMENT ASSETS 
    87.21%(g)









$
222,618,144


$
173,324,581    (a)
    
    These securities are restricted from public sale without prior
    registration under the Securities Act of 1933. The Fund
    negotiates certain aspects of the method and timing of the
    disposition of these investments, including registration rights
    and related costs.(b)
    
    These securities accrue a portion of their interest/dividends in
    payment in kind interest/dividends which is
    capitalized to the investment.(c)
    
    All of the Funds equity and debt investments are issued by
    eligible portfolio companies, as defined in the Investment
    Company Act of 1940, except Baltic Motors Corporation, Safestone
    Technologies PLC and SGDA Sanierungsgesellschaft fur Deponien
    und Altlasten. The Fund makes available significant managerial
    assistance to all of the portfolio companies in which it has
    invested.(d)
    
    Non-income producing assets.(e)
    
    Also received warrants to purchase a number of shares of
    preferred stock to be determined upon exercise.(f)
    
    The principal operations of these portfolio companies are
    located outside of the United States.(g)
    
    Percentages are based on net assets of $198,739,000 as of
    October 31, 2005.(h)
    
    See Note 3 for further information regarding
    Investment Classification.
    
    Denotes zero cost/fair value.   67




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##### Table of Contents



MVC
    Capital, Inc.
  Consolidated
    Statements of Operations
  For the Year Ended


For the Year Ended


For the Year EndedOctober 31, 2006


October 31, 2005


October 31, 2004Operating Income:Dividend incomeAffiliate investments

$
89,842


$
1,346,760


$
Control investments


132,545







Total dividend income


222,387



1,346,760



Interest income (net of foreign
    taxes withheld of $18,433, $0, and $0, respectively)Non-control/Non-affiliated
    investments


6,930,733



5,134,907



2,308,502Affiliate investments


2,922,372



874,041



218,904Control investments


3,833,499



2,101,808



469,110Total interest income


13,686,604



8,110,756



2,996,516Fee incomeNon-control/Non-affiliated
    investments


1,187,954



398,520



109,538Affiliate investments


470,530



232,256



727,595Control investments


2,169,236



1,178,331



88,631Total fee income


3,827,720



1,809,107



925,764Other income


771,405



932,761



64,104Total operating income


18,508,116



12,199,384



3,986,384Operating Expenses:Employee compensation and benefits


3,498,571



2,336,242



1,365,913Incentive compensation (Note 5)


6,055,024



1,117,328



Insurance


471,711



590,493



959,570Legal fees


685,396



529,541



810,848Facilities


603,328



484,420



90,828Other expenses


334,212



461,769



369,085Audit fees


381,944



287,797



154,938Consulting fees


344,576



192,255



Directors fees


205,071



148,875



175,956Administration


194,826



137,191



102,593Public relations fees


70,316



116,482



146,509Printing and postage


129,438



71,785



80,278Interest and other borrowing costs


1,594,009



30,771



2,472Total operating
    expenses


14,568,422



6,504,949



4,258,990Litigation recovery of management
    fees (Note 12, 13)










370,000Net operating income before
    taxes


3,939,694



5,694,435



97,394Tax (Benefit)
    Expenses:Deferred tax benefit


(244,865
)


(215,977
)


(87,278
)Current tax expense


403,937



115,044



166,205Total tax (benefit)
    expense


159,072



(100,933
)


78,927Net operating income


3,780,622



5,795,368



18,467Net Realized and Unrealized Gain
    (Loss) on Investments:Net realized gain (loss) on
    investmentsNon-control/Non-affiliated
    investments


(151,877
)


(6,684,320
)


(17,465,808
)Affiliate investments


5,373,267



3,407,457



(20,329,102
)Foreign currency






(18,687
)


Total net realized gain (loss) on
    investments


5,221,390



(3,295,550
)


(37,794,910
)Net change in unrealized
    appreciation on investments


38,334,356



23,768,366



49,381,974Net realized and unrealized gain on
    investments


43,555,746



20,472,816



11,587,064Net increase in net assets
    resulting from operations

$
47,336,368


$
26,268,184


$
11,605,531Net increase in net assets per
    share resulting from operations

$
2.48


$
1.45


$
0.91Dividends declared per
    share

$
0.48


$
0.24


$
0.12    68




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##### Table of Contents



MVC
    Capital, Inc.
  Consolidated
    Statements of Cash Flows
  For the Year Ended


For the Year Ended


For the Year EndedOctober 31, 2006


October 31, 2005


October 31, 2004Cash flows from Operating
    Activities:Net increase in net assets
    resulting from operations

$
47,336,368


$
26,268,184


$
11,605,531Adjustments to reconcile net
    increase in net assets resulting from operations to net cash
    provided (used) by operating activities:Realized (gain) loss


(5,221,390
)


3,295,550



37,794,910Net change in unrealized
    (appreciation) depreciation


(38,334,356
)


(23,768,366
)


(49,381,974
)Amortization of discounts and fees


(505,428
)


(235,428
)


Increase in accrued
    payment-in-kind
    dividends and interest


(2,183,786
)


(1,370,777
)


(101,861
)Increase in allocation of flow
    through income


(279,422
)


(114,845
)


Changes in assets and liabilities:Interest and fees receivable


(715,013
)


(474,207
)


(275,661
)Prepaid expenses


(2,232,767
)


(130,977
)


178,200Prepaid taxes


98,374



(98,374
)


Deferred tax


(244,865
)


(215,977
)


(87,278
)Deposits


(120,000
)






Other assets


33,804



(43,155
)


(45,445
)Payable for investment purchased


(79,708
)


79,708



Liabilities


7,492,705



1,576,079



112,361Purchases of equity investments


(45,913,914
)


(17,315,000
)


(34,210,000
)Purchases of debt instruments


(111,105,943
)


(37,950,271
)


(20,848,139
)Purchases of short term investments


(406,066,963
)


(313,505,406
)


(398,988,675
)Purchases of warrants










(550,000
)Proceeds from equity investments


10,593,459



23,396,719



4,309,991Proceeds from debt instruments


37,895,884



10,796,111



8,478,894Sales/maturities of short term
    investments


458,554,888



297,482,209



478,170,586Net cash provided (used) by
    operating activities


(50,998,073
)


(32,328,223
)


36,161,440Cash flows from Financing
    Activities:Issuance of common stock






60,478,127



Repurchase of common stock










(31,571,184
)Distributions to shareholders paid


(9,081,994
)


(4,572,359
)


(1,475,165
)Net borrowings under (repayments
    on) revolving credit facility


100,000,000



(10,427,296
)


10,025,000Net cash provided (used) for
    financing activities


90,918,006



45,478,472



(23,021,349
)Net change in cash and cash
    equivalents for the year


39,919,933



13,150,249



13,140,091Cash and cash equivalents,
    beginning of year


26,297,190



13,146,941



6,850Cash and cash equivalents, end
    of year

$
66,217,123


$
26,297,190


$
13,146,941    69




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##### Table of Contents



$- in
  $- in
  Non-cash activity:
                               70




---



##### Table of Contents



MVC
    Capital, Inc.
  Consolidated
    Statements of Changes in Net Assets
  For the Year Ended


For the Year Ended


For the Year EndedOctober 31, 2006


October 31, 2005


October 31, 2004Operations:Net operating income

$
3,780,622


$
5,795,368


$
18,467Net realized gain (loss)


5,221,390



(3,295,550
)


(37,794,910
)Net change in unrealized
    appreciation


38,334,356



23,768,366



49,381,974Net increase in net assets from
    operations


47,336,368



26,268,184



11,605,531Shareholder
    Distributions:Distributions to shareholders


(9,163,765
)


(4,580,676
)


(10,072
)Return of capital distributions to
    shareholders










(1,465,093
)Net decrease in net assets from
    shareholder distributions


(9,163,765
)


(4,580,676
)


(1,475,165
)Capital Share
    Transactions:Issuance of common stock






60,478,127



Reissuance of treasury stock to
    purchase investment






1,400,000



Offering expenses






(402,296
)


Reissuance of treasury stock in
    lieu of cash dividend


81,771



8,317



Repurchase of common stock










(31,571,184
)Net increase (decrease) in net
    assets from capital share transactions


81,771



61,484,148



(31,571,184
)Total increase (decrease) in
    net assets


38,254,374



83,171,656



(21,440,818
)Net assets, beginning of
    year


198,739,000



115,567,344



137,008,162Net assets, end of
    year

$
236,993,374


$
198,739,000


$
115,567,344Common shares outstanding, end
    of year


19,093,929



19,086,566



12,293,042    71




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##### Table of Contents



MVC
    Capital, Inc.
  Consolidated
    Selected Per Share Data and Ratios
  For the


For the


For the


For the


For theYear Ended


Year Ended


Year Ended


Year Ended


Year EndedOctober 31, 2006


October 31, 2005


October 31, 2004


October 31, 2003


October 31, 2002Net asset value, beginning of year

$
10.41


$
9.40


$
8.48


$
11.84


$
15.42Gain (loss) from operations:Net operating income (loss)


0.20



0.32







(0.53
)


(0.19
)Net realized and unrealized gain
    (loss) on investments


2.28



1.13



0.91



(2.89
)


(3.35
)Total gain (loss) from investment
    operations


2.48



1.45



0.91



(3.42
)


(3.54
)Less distributions from:Income


(0.48
)


(0.24
)










(0.04
)Return of capital










(0.12
)






Total distributions


(0.48
)


(0.24
)


(0.12
)






(0.04
)Capital share transactionsDilutive effect of share issuance






(0.20
)










Anti-dilutive effect of share
    repurchase program










0.13



0.06



Total capital share transactions






(0.20
)


0.13



0.06



Net asset value, end of year

$
12.41


$
10.41


$
9.40


$
8.48


$
11.84Market value, end of year

$
13.08


$
11.25


$
9.24


$
8.10


$
7.90Market premium (discount)


5.40
%


8.07
%


(1.70
)%


(4.48
)%


(33.28
)%Total Return  At
    NAV(a)


24.23
%


13.36
%


12.26
%


(28.38
)%


(22.88
)%Total Return  At
    Market(a)


20.75
%


24.38
%


15.56
%


2.53
%


(14.22
)%Ratios and Supplemental
    Data:Net assets, end of year (in
    thousands)

$
236,993


$
198,739


$
115,567


$
137,008


$
195,386Ratios to average net assets:Expenses excluding incentive
    compensation, interest and other borrowing costs


3.29
%


3.03
%


3.74
%(c)


7.01
%(b)


3.02
%Expenses excluding incentive
    compensation


4.03
%


3.05
%


3.74
%(c)


7.01
%(b)


3.02
%Expenses excluding tax expense
    (benefit)


6.78
%


3.75
%


3.68
%(c)


7.01
%(b)


3.02
%Expenses including tax expense
    (benefit), incentive compensation, interest and other borrowing
    costs


6.85
%


3.69
%


3.74
%(c)


7.01
%(b)


3.02
%Net operating income (loss) before
    incentive compensation, interest and other borrowing costs


5.32
%


4.00
%


0.02
%


(5.22
)%(b)


(1.37
)%Net operating income (loss) before
    incentive compensation


4.58
%


3.98
%


0.02
%


(5.22
)%(b)


(1.37
)%Net operating income (loss) before
    tax expense (benefit)


1.83
%


3.28
%


0.08
%


(5.22
)%(b)


(1.37
)%Net operating income (loss) after
    tax expense (benefit), incentive compensation, interest and
    other borrowing costs


1.76
%


3.34
%


0.02
%


(5.22
)%(b)


(1.37
)%     (a)
    
    Total annual return is historical and assumes changes in share
    price, reinvestments of all dividends and distributions, and no
    sales charge for the year.(b)
    
    The expense ratio for the year ended October 31, 2003
    included approximately $4.0 million of proxy/litigation
    fees and expenses. When these fees and expenses are excluded,
    the Funds expense ratio was 4.52% and the net operating
    loss was -2.74%.(c)
    
    The expense ratio for the year ended October 31, 2004,
    included a one-time expense recovery of approximately $250,000
    (See Note 13). For the year ended October 31, 2004,
    without this one-time recovery, the expense ratio, excluding and
    including tax expense would have been 3.89% and 3.95%,
    respectively.   72




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##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements
 October 31,
    2006
  1.
    Organization
    and Business Purpose  and/or
    sub-advisory Sub-Advisor). Sub-Advisor
             73




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##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
  2.
    Consolidation    3.
    Significant
    Accounting Policies      Valuation of Portfolio Securities 
         74




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##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
  and/or
                and/or
  payment-in-kind
 75




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
  payment-in-kind payment-in-kind payment-in-kind payment-in-kind
    Investment Classification 
  Investment Transactions and Related Operating
    Income  first-in, payment-in-kind
  Cash Equivalents 
  Restricted Securities 
  Distributions to Shareholders 
  Income Taxes 
 76




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
  and/or
    Reclassifications 
  4.
    Management            5.
    Incentive
    Compensation   77




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
    6.
    Dividends
    and Distributions to Shareholders  12-month
    For
    the Year Ended October 31, 2006
       78




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
      For
    the Year Ended October 31, 2005
      For
    the Year Ended October 31, 2004
    7.
    Transactions
    with Other Parties    sub-leased
    8.
    Concentration
    of Market and Credit Risk   79




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
  90-day 90-day
  9.
    Portfolio
    Investments  For
    the Year Ended October 31, 2006
       80




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
                     81




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
                     82




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
  For
    the Year Ended October 31, 2005
                   83




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
        10.
    Commitments
    and Contingencies  Commitments
    to/for Portfolio Companies:
    Open
    Commitments of MVC Capital, Inc.
  Portfolio Company

Amount Committed

Amount Funded at October 31, 2006Marine

$2.0 million

Octagon

$12.0 million

$3.25 millionStorage Canada

$6.0 million

$1.95 millionTimberland

$3.25 million

$2.83 millionVelocitius

$260,000

$143,614          84




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
                   85




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
  Commitments
    of the Fund:
          11.
    Certain
    Issuances of Equity Securities by the Issuer   86




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
      12.
    Legal
    Proceedings      13.
    Recovery
    of Expenses and Unusual Income Items       87




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
    14.
    Tax
    Matters  Return of Capital Statement of Position (ROCSOP)
    Adjustment:
  Distributions to Shareholders:
  Tax Basis Accumulated Earnings
    (Deficit)Accumulated capital and other
    losses

$
(73,524,707
)Undistributed net operating income


2,164,435Gross unrealized appreciation


40,341,227Gross unrealized depreciation


(51,934,799
)Net unrealized depreciation

$
(11,593,572
)Total tax basis accumulated deficit


(82,953,844
)Tax cost of investments


287,485,124Current year distributions to
    shareholders on a tax basisOrdinary income


9,163,765Prior year distributions to
    shareholders on a tax basisOrdinary income


4,580,676     Qualified
    Dividend Income Percentage
  form 1099-DIV,
  Corporate
    Dividends Received Deduction Percentage
       88




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##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
  15.
    Income
    Taxes    Year EndedOctober 31,


October 31,


October 31,2006


2005


2004Current tax expense:Federal

$
314,859


$
92,892


$
134,201State


89,078



22,152



32,004Total current tax expense


403,937



115,044



166,205Deferred tax benefit:Federal


(203,645
)


(174,390
)


(70,472
)State


(41,220
)


(41,587
)


(16,806
)Total deferred tax benefit


(244,865
)


(215,977
)


(87,278
)Total tax (benefit) provision

$
159,072


$
(100,933
)

$
78,927     Year EndedOctober 31,2006Federal statutory tax rate


34.00
%Permanent difference


(0.39
)%State taxes, net of federal tax
    benefit


4.27
%Valuation allowance for deferred
    tax assets


Other, net


Effective income tax rate


38.66
%  89




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
    October 31,


October 31,


October 31,2006


2005


2004Deferred tax assets:Deferred revenues

$
548,120


$
295,307


$
82,445Others


2,822



7,948



4,833Total deferred tax assets

$
548,120


$
303,255


$
87,278Valuation allowance










Net deferred tax assets

$
548,120


$
303,255


$
87,278Deferred tax liabilities:Deferred tax liabilities










Total deferred tax liabilities










Net deferred taxes

$
548,120


$
303,255


$
87,278   Valuation
    Allowance
    16.
    Segment
    Data      MVC


MVCFS


ConsolidatedInterest and dividend income

$
13,756,679


$
152,312


$
13,908,991Fee income


291,764



3,535,956



3,827,720Other income


770,501



904



771,405Total operating income


14,818,944



3,689,172



18,508,116Total operating expenses


14,152,170



416,252



14,568,422Net operating income before taxes


666,774



3,272,920



3,939,694Tax expense (benefit)






159,072



159,072Net operating income


666,774



3,113,848



3,780,622Net realized gain (loss) on
    investments and foreign currency


5,221,390







5,221,390Net change in unrealized
    appreciation on investments


38,334,356







38,334,356Net increase in net assets
    resulting from operations

$
44,222,520


$
3,113,848


$
47,336,368    90




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
  17.
    Subsequent
    Events  and/or
                  Form N-2
     91




---



##### Table of Contents



MVC
    Capital, Inc.
  Notes to
    Consolidated Financial Statements 
    (Continued)
              *
      *
 92




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##### Table of Contents



Report of
    Independent Registered Accounting Firm
             
    93




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##### Table of Contents



Item 9A.
    Controls
    and Procedures  Form 10-K,
      Managements
    Report on Internal Control over Financial
    Reporting
  Rule 13a-15(f) Internal Control  Integrated
    Framework Internal
    Control  Integrated Framework
 94




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
                
   95




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##### Table of Contents



Changes
    in Internal Controls
  Rule 13a-15(f)
 Part III  Item 10.
    Directors
    and Executive Officers of the Registrant      Form 10-K Form 10-K.
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and
    Management    Item 13.
    Certain
    Relationships and Related Transactions  sub-leased
    Item 14.
    Principal
    Accounting Fees and Services   96




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##### Table of Contents



Part IV  Item 15.
    Exhibits,
    Financial Statements, Schedules  Page(s)(a)(1)  Financial
    StatementsConsolidated Balance SheetsOctober 31, 2006 and
    October 31, 2005


63Consolidated Schedule of
    InvestmentsOctober 31, 2006


64-65October 31, 2005


66-67Consolidated Statement of
    Operations
    For the Year Ended October 31, 2006, 
    the Year Ended October 31, 2005, and 
    the Year Ended October 31, 2004


68Consolidated Statement of Cash
    Flows
    For the Year Ended October 31, 2006,
    the Year Ended October 31, 2005, and
    the Year Ended October 31, 2004


69Consolidated Statement of Changes
    in Net Assets
    For the Year Ended October 31, 2006,
    the Year Ended October 31, 2005, and
    the Year Ended October 31, 2004


71Consolidated Selected Per Share
    Data and Ratios
    For the Year Ended October 31, 2006,
    the Year Ended October 31, 2005,
    the Year Ended October 31, 2004,
    the Year Ended October 31, 2003, and
    the Year Ended October 31, 2002


72Notes to Consolidated Financial
    Statements


73-92Report of Independent Registered
    Public Accounting Firm


93(a)(2)  The following
    financial statement schedules are filed here with:Schedule 12-14
    of Investments in and Advances to Affiliates


100       ExhibitNumber

Description3
.1

Certificate of Incorporation.
    (Incorporated by reference to Exhibit 99.a filed with
    the Registrants initial Registration Statement on
    Form N-2
    (File
    No. 333-92287)
    filed on December 8, 1999)3
.2

Certificate of Amendment of
    Certificate of Incorporation. (Incorporated by reference to
    Exhibit 99.a.2 filed with the Registrants
    Pre-Effective Amendment No. 1 to the Registration Statement
    on
    Form N-2
    (File
    No. 333-119625)
    filed on November 23, 2004)3
.3

Fifth Amended and Restated Bylaws.
    (Incorporated by reference to Exhibit 99.b. filed with
    Registrants Pre-Effective Amendment No. 1 to the
    Registration Statement on
    Form N-2
    (File
    No. 333-125953)
    filed on August 29, 2005)4
.1

Form of Share Certificate.
    (Incorporated by reference to Exhibit 99.d.1 filed with the
    Registrants
    Pre-Effective
    Amendment No. 1 to the Registration Statement on
    Form N-2
    (File
    No. 333-119625)
    filed on November 23, 2004) 97




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##### Table of Contents



ExhibitNumber

Description10
.1

Dividend Reinvestment Plan, as
    amended. (Incorporated by reference to Exhibit 99.e
    filed with the Registrants Pre-Effective Amendment
    No. 1 to the Registration Statement on
    Form N-2
    (File
    No. 333-119625)
    filed on November 23, 2004)10
.2

Sub-lease
    for 287 Bowman Avenue, Purchase, NY 10577. (Incorporated by
    reference to Exhibit 10 filed with Registrants
    Quarterly Report on
    Form 10-Q
    (File No. 814-00201) filed on June 8, 2005)10
.3

Agreement between the Registrant
    and Michael Tokarz. (Incorporated by reference to
    Exhibit 10.2 filed with Annual Report on
    Form 10-K
    (File No. 814-00201) filed on January 29, 2004)10
.4

Investment Advisory and Management
    Agreement between the Registrant and The Tokarz Group Advisers
    LLC. Incorporated by reference to Exhibit 99.g filed
    with the Registrants Post-Effective Amendment No. 2
    to the Registration Statement on
    Form N-2
    (File
    No. 333-119625)
    filed on November 29, 2006)10
.5

Form of Custody Agreement between
    Registrant and U.S. Bank National Association.
    (Incorporated by reference to Exhibit 99.j.1 filed with
    the Registrants Pre-Effective Amendment No. 1 to the
    Registration Statement on
    Form N-2
    (File
    No. 333-119625)
    filed on November 23, 2004)10
.6

Form of Amendment to Custody
    Agreement between Registrant and U.S. Bank National
    Association. (Incorporated by reference to Exhibit 99.j.2
    filed with the Registrants Pre-Effective Amendment
    No. 1 to the Registration Statement on
    Form N-2
    (File
    No. 333-119625)
    filed on February 21, 2006)10
.7

Form of Custodian Agreement
    between Registrant and LaSalle Bank National Association.
    (Incorporated by reference to Exhibit 99.j.3 filed with
    the Registrants Pre-Effective Amendment No. 1 to the
    Registration Statement on
    Form N-2
    (File
    No. 333-119625)
    filed on November 23, 2004)10
.8

Form of Registrar, Transfer Agency
    and Service Agreement with Registrant and State Street Bank and
    Trust Company. (Incorporated by reference to
    Exhibit 99.k(1) filed with the Registrants
    Pre-Effective Amendment No. 2 to the Registration Statement
    on
    Form N-2
    (File
    No. 333-92287)
    filed on February 11, 2000)10
.9

Form of Transfer Agency Letter
    Agreement with Registrant and EquiServe Trust Company, N.A.
    (Incorporated by reference to Exhibit 99.k.2 filed with
    the Registrants Pre-Effective Amendment No. 1 to the
    Registration Statement on
    Form N-2
    (File No.
    333-119625)
    filed on November 23, 2004)10
.10

Form of Loan Agreement with
    Registrant and LaSalle Bank National Association.
    (Incorporated by reference to Exhibit 99.k.3 filed with
    the Registrants Pre-Effective Amendment No. 1 to the
    Registration Statement on
    Form N-2
    (File
    No. 333-119625)
    filed on November 23, 2004)10
.11

Form of Amendment to Loan
    Agreement with Registrant and LaSalle Bank National Association.
    (Incorporated by reference to Exhibit 10.10  filed with
    Annual Report on
    Form 10-K
    (File No. 814-00201) filed on December 22, 2005)10
.12

Form of Custody Account Pledge
    Agreement with Registrant and LaSalle Bank National Association.
    (Incorporated by reference to Exhibit 99.k.4 filed with
    the Registrants Pre-Effective Amendment No. 1 to the
    Registration Statement on
    Form N-2
    (File No.
    333-119625)
    filed on November 23, 2004)10
.13

Form of Fund Administration
    Servicing Agreement with Registrant and U.S. Bancorp Fund
    Services, LLC. (Incorporated by reference to
    Exhibit 99.k.6 filed with the Registrants
    Pre-Effective Amendment No. 1 to the Registration Statement
    on
    Form N-2
    (File No.
    333-119625)
    filed on February 21, 2006)10
.14

Form of Fund Accounting Servicing
    Agreement with Registrant and U.S. Bancorp Fund Services,
    LLC. (Incorporated by reference to Exhibit 99.k.7 filed
    with Registrants Pre-Effective Amendment No. 1 to the
    Registration Statement on
    Form N-2
    (File
    No. 333-119625)
    filed on February 21, 2006)10
.15

Form of Credit Agreement with
    Registrant and Guggenheim Corporate Funding, LLC et al.
    (Incorporated by reference to Exhibit10 filed with
    Registrants Quarterly Report on Form 10Q (File No.
    814-00201) filed on June 9, 2006)14


Joint Code of Ethics of the
    Registrant and The Tokarz Group LLC. (Incorporated by
    reference to Exhibit 99r filed with the Registrants
    Post-Effective Amendment No. 2 to the Registration
    Statement on
    Form N-2
    (File
    No. 333-119625)
    filed on November 29, 2006) 98




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##### Table of Contents



ExhibitNumber

Description31*


Certifications of the Chief
    Executive Officer and the Chief Financial Officer pursuant to
    Rule 13a-14(a)
    of the Securities Exchange Act of 193432*


Certifications of the Chief
    Executive Officer and the Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002,
    18 U.S.C. Section 1350     *
    
    Filed herewith    Exhibit No.

Exhibit31


Certifications of the Chief
    Executive Officer and the Chief Financial Officer pursuant to
    Rule 13a-14(a)
    of the Securities Exchange Act of 193432


Certifications of the Chief
    Executive Officer and the Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002,
    18 U.S.C. Section 1350    99




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##### Table of Contents



Schedule 12-14
  MVC Capital, Inc. and Subsidiaries
  Schedule of Investments in and Advances to Affiliaties
  Amount of Interestor Dividends Credited


October 31,


Gross


Gross


October 31,Portfolio Company

Investment(1)

to Income(5)


Other(2)


2005 Value


Additions(3)


Reductions(4)


2006 ValueCompanies More than 25%
    ownedauto MOTOL BENI

Common Stock














2,000,000







2,000,000(Automotive Dealership)Baltic Motors Corporation

Loan


456,250







4,500,000











4,500,000(Automotive Dealership)

Loan


11,333











1,000,000







1,000,000Bridge Loan


15,833











3,500,000



(3,500,000
)


Common Stock










7,500,000



13,655,000







21,155,000Ohio Medical Corporation

Common Stock










17,000,000



9,200,000







26,200,000(Medical Device Manufacturer)SGDA Sanierungsgesellschaft fur
    Deponien und Altlasten

Loan


408,895







4,304,560



1,685,150







5,989,710(Soil Remediation)

Revolver


74,023







1,237,700



370,600



(1,608,300
)


Bridge Loan


6,300











300,000



(300,000
)


Common Equity Interest










315,000



23,551







338,551Preferred Equity Interest














5,000,000







5,000,000SIA BM Auto

Common Stock














8,000,000







8,000,000(Automotive Dealership)

Loan


165,900











7,000,000



(7,000,000
)


Summit Research Labs, Inc.

Loan


150,444











5,044,813







5,044,813(Specialty Chemical)

Preferred Stock














11,200,000







11,200,000Timberland Machines &
    Irrigation, Inc.

Loan


1,039,760







6,318,684



289,175







6,607,859(Distributer 
    Landscaping & Irrigation Equipment)

Revolver


347,554







3,250,000



500,000



(920,291
)


2,829,709Common Stock










4,500,000



920,291



(1,000,000
)


4,420,291Warrants






















Turf Products, LLC

Loan


1,049,262











7,676,331







7,676,331(Distributer 
    Landscaping & Irrigation Equipment)

LLC Interest














6,074,750



(252,957
)


5,821,793Warrant






















Vendio Services, Inc.

Common Stock






















(Technology)

Preferred Stock










2,700,000



700,000







3,400,000Vestal Manufacturing Enterprises,
    Inc.

Loan


107,467







900,000







(100,000
)


800,000(Iron Foundries)

Common Stock


132,545







3,700,000











3,700,000Velocitius B.V

Revolver


478











143,614







143,614(Renewable Energy)

Common Equity Interest














2,966,765







2,966,765Total companies more than 25%
    owned



$
3,966,044


















$
128,794,436 100




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##### Table of Contents



MVC
    Capital, Inc. and Subsidiaries
  Schedule
    of Investments in and Advances to
    Affiliaties  (Continued)
  Amount of Interestor Dividends Credited


October 31,


Gross


Gross


October 31,Portfolio Company

Investment(1)

to Income(5)


Other(2)


2005 Value


Additions(3)


Reductions(4)


2006 ValueCompanies More than 5% owned,
    but less than 25%Dakota Growers Pasta Company,
    Inc.

Common Stock


36,364







5,514,000



3,443,880







8,957,880(Manufacturer of Packged Food)Endymion Systems, Inc.

Preferred Stock






















(Technology Investments)Harmony Pharmacy & Health
    Center, Inc.

Loan


7,444











200,000



(200,000
)


(Healthcase  Retail)

Common Stock














750,000







750,000Impact Confections, Inc.

Loan


907,468







5,228,826



239,297







5,468,123(Confections
    Manufacturing & Distribution)

Loan


28,768







325,000











325,000Common Stock










2,700,000











2,700,000Marine Exhibition Corporation

Loan


346,141











10,091,111







10,091,111(Theme Park)

Preferred Stock*


53,478











2,035,652







2,035,652ProcessClaims, Inc.

Preferred Stock










2,000,000







(2,000,000
)


(Technology)

Preferred Stock










400,000







(400,000
)


Warrants






















Octagon Credit Investors, LLC

Loan


1,244,315







4,664,794



5,568,803



(5,233,597
)


5,000,000(Financial Services)

Revolver


30,830











3,750,000



(500,000
)


3,250,000LLC Interest










1,228,038



1,911,171



(1,211,277
)


1,927,932Warrants










1,069,457







(1,069,457
)


Phoenix Coal Corporation

Loan


357,407











7,088,615







7,088,615(Coal Processing and Production)

Common Stock














1,000,000







1,000,000Previsor

Common Stock














6,000,000







6,000,000(Human Capital Management)Vitality Foodservice, Inc.

Common Stock










5,000,000



3,500,000







8,500,000(Non-Alcoholic Beverages)

Preferred Stock










10,517,984



535,843







11,053,827Warrants










700,000



400,000







1,100,000Yaga, Inc.

Preferred Stock






















(Technology)

Preferred Stock






















Total companies more than 5%
    owned, but less than 25%



$
3,012,214


















$
75,248,140       (1)
    
    Common stock, preferred stock, warrants, options and equity
    interests are generally non-income producing and restricted. The
    principal amount for loans and debt securities and the number of
    shares of common and preferred stock is shown in the
    consolidated schedule of investments as of October 31, 2006. 101




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##### Table of Contents



MVC
    Capital, Inc. and Subsidiaries
  Schedule
    of Investments in and Advances to
    Affiliaties  (Continued)
  (2)
    
    Other includes interest, dividend, or other income which was
    applied to the principal of the investment and therefore reduced
    the total investment. These reductions are also included in the
    Gross Reductions for the investment, as applicable.(3)
    
    Gross additions includes increases in the cost basis of
    investments resulting from new portfolio investments,
    paid-kind-interest or dividends, the amortization of discounts
    and closing fees, and the exchange of one or more existing
    securities for one or more new securities. Gross additions also
    includes net increases in unrealized appreciation or net
    decreases in unrealized depreciation.(4)
    
    Gross reductions included decreases in the cost basis of
    investments resulting from principal collections related to
    investment repayments or sales and the exchange of one or more
    existing securities for one or more new securities. Gross
    reductions also include net increases in unrealized depreciation
    or net decreases in unrealized appreciation.(5)
    
    Represents the total amount of interest or dividends credited to
    income for portion of the year an investment was included in the
    companies more than 25% owned or companies 5% to 25% owned
    categories, respectively.*
    
    All or a portion of the dividend income on this investment was
    or will be paid in the form of additional securities or by
    increasing the liquidation preference. Dividends
    paid-in-kind
    are also included in the Gross Additions for the investment, as
    applicable.   102




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##### Table of Contents



Signature

Title

Date/s/  Michael
    Tokarz(Michael
    Tokarz)

Chairman
    (Principal Executive Officer)
    and Director

Date: January 3, 2007  103




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##### Table of Contents



Signature

Title

Date/s/  Michael
    Tokarz(Michael
    Tokarz)

Chairman
    (Principal Executive Officer)
    and Director

Date: January 3, 2007/s/  Peter
    Seidenberg(Peter
    Seidenberg)

Chief Financial Officer

Date: January 3, 2007/s/  Gerald
    Hellerman(Gerald
    Hellerman)

Director

Date: January 3, 2007/s/  Robert
    C. Knapp(Robert
    C. Knapp)

Director

Date: January 3, 2007/s/  William
    E. Taylor(William
    E. Taylor)

Director

Date: January 3, 2007/s/  Emilio
    Dominianni(Emilio
    Dominianni)

Director

Date: January 3, 2007  104