##### 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 1934    
|           |  | For the fiscal year ended October 31, 2005                                                  
|           |  | or                                                                                          
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|           |  | For the transition period
    from           to                                             

Commission file number 814-00201


MVC Capital,
Inc.


F/ K/ A MeVC Draper
Fisher Jurvetson Fund Inc.


(Exact name of registrant as specified in its charter)


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


|                                 |  |                                          
|-------------------------------- |  | -----------------------------------------
|                                 |  | Name of Each Exchange on Which Registered
|Title of Each Class Common 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


















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##### 










MVC Capital, Inc.


(A Delaware Corporation)


Index


|                            |  |                                                                                                                         |    |      |    |  |  | 
|--------------------------- |  | ----------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- |  |  | 
|                            |  |                                                                                                                         |    | Page |   
|                            |  |                                                                                                                         |    |      |   
|Part I                     
|Item 1.                     |  | Business                                                                                                                |    |      | 2  | 
|Item 2.                     |  | Properties                                                                                                              |    |      | 20 | 
|Item 3.                     |  | Legal Proceedings                                                                                                       |    |      | 20 | 
|Item 4.                     |  | Submission of Matters to a Vote of Security
    Holders                                                                 |    |      | 21 | 
|                           
|Part II                    
|Item 5.                     |  | Market for Registrants Common Equity
    and Related Stockholder Matters and Issuer Purchases of Equity
    Securities |    |      | 21 | 
|Item 6.                     |  | Selected Consolidated Financial Data                                                                                    |    |      | 24 | 
|Item 7.                     |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                               |    |      | 25 | 
|Item 7a.                    |  | Quantitative and Qualitative Disclosure
    about Market Risk                                                           |    |      | 45 | 
|Item 8.                     |  | Financial Statements and Supplementary
    Data                                                                         |    |      | 50 | 
|Item 9A.                    |  | Controls and Procedures                                                                                                 |    |      | 76 | 
|                           
|Part III                   
|Item 10.                    |  | Directors and Executive Officers of the
    Registrant                                                                  |    |      | 78 | 
|Item 11.                    |  | Executive Compensation                                                                                                  |    |      | 78 | 
|Item 12.                    |  | Security Ownership of Certain Beneficial
    Owners and Management                                                      |    |      | 78 | 
|Item 13.                    |  | Certain Relationships and Related
    Transactions                                                                      |    |      | 78 | 
|Item 14.                    |  | Principal Accounting Fees and Services                                                                                  |    |      | 78 | 
|                           
|Part IV                    
|Item 15.                    |  | Exhibits, Financial Statements,
    Schedules                                                                           |    |      | 79 | 
|SIGNATURES                  |  |                                                                                                                         | 83 |     
|Amendment to Loan Documents
|Certification              
|Certification              





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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
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.







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

General








2



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3



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Corporate History And
Offices






i.e.


Form 10-K, Form 10-Q, Form 8-K,


Our Investment
Strategy


i.e.


i.e.




4



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short-term


|                                                 |  |                              |        |  |                  |  |        |                  |  |  |       | 
|------------------------------------------------ |  | ---------------------------- | ------ |  | ---------------- |  | ------ | ---------------- |  |  | ----- | 
|                                                 |  | Percentage of Our Net Assets |       
|                                                 |  |                              |       
|                                                 |  | As of                        |        |  | As of            |  |        | As of            | 
|Type of Investment                               |  | October 31, 2005             |        |  | October 31, 2004 |  |        | October 31, 2003 | 
|                                                 |  |                              |        |  |                  |  |        |                  | 
|Senior/ Subordinated Loans and credit facilities |  |                              | 28.81% |  |                  |  | 23.80% |                  |  |  | 9.10% | 
|Common Stock                                     |  |                              | 23.10% |  |                  |  | 26.54% |                  |  |  | 0.00% | 
|Warrants                                         |  |                              | 0.89%  |  |                  |  | 0.48%  |                  |  |  | 0.00% | 
|Preferred Stock                                  |  |                              | 7.96%  |  |                  |  | 16.64% |                  |  |  | 8.47% | 
|Other Equity Investments                         |  |                              | 0.78%  |  |                  |  | 0.48%  |                  |  |  | 0.00% | 
|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;                    
|
| |  | Favorable industry and competitive dynamics; and                        
|
| |  | Stable free cash flow of the business.                                  



5



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Investment Sourcing.




| |   |                                        
| | - | ---------------------------------------
| |  | private mezzanine and equity investors;
|
| |  | investment banks;                      
|
| |  | business brokers;                      
|
| |  | merger and acquisition advisors;       
|
| |  | financial services companies; and      
|
| |  | banks, law firms and accountants.      

Co-Investments.


Investment Structure.










6



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(payment-in


Providing Management Assistance.


Portfolio Company Monitoring.






Investment Approval Procedures.


7



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| |   |                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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




Valuation of Portfolio
Securities






8



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Valuation
Methodology






Equity Securities.






9



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Loans and Debt Securities.








payment-in payment-in payment-in payment-in


Custodian




Transfer Agent and
Distribution Agent




Risk Factors


time-to


10



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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.




| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | We depend on key personnel, especially Mr. Tokarz, in
    seeking to achieve our investment objective.





| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | 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.







11



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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.



12



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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 stock price is subject to market discount risk.





| |                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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




| |                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------
| | We may borrow money, which magnifies the potential for
    gain or loss on amounts invested and may increase the risk of
    investing in us.



13



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| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Changes in interest rates may affect our cost of capital
    and net investment income.





| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | We may be unable to meet our covenant obligations under
    our revolving 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,


14



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| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | The Funds current management team did not select a
    portion of our existing investment portfolio.

i.e.




| |                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Under our agreement with our Portfolio Manager, he 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.





| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | There are potential conflicts of interest that could
    impact our investment returns.





| |                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The war with Iraq, terrorist attacks 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.



15



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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.




| |                                                                   
| | ------------------------------------------------------------------
| | Investing in private companies involves a high degree of
    risk.





| |                                                                   
| | ------------------------------------------------------------------
| | 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.

16



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.



| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | 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.





| |                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





| |                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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




18



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Business Development Company.






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Securities purchased in transactions not involving any
    public offering from the issuer of such securities, which issuer
    (subject to certain limited exceptions) is an eligible portfolio
    company, or from any person who is, or has been during the
    preceding 13 months, an affiliated person of an eligible
    portfolio company, or from any other person, subject to such
    rules as may be prescribed by the SEC. 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 business
    development company) or a company that would be an investment
    company but for certain exclusions under the 1940 Act; and
|
| | (c) satisfies any of the following:                                                                                                                                                                                                               



| |   |                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.                                                                                                       



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) Securities of any eligible portfolio company which we
    control.                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | (3) Securities purchased in a private transaction from a
    U.S. issuer that is not an investment company or from an
    affiliated person of the issuer, or in transactions incident
    thereto, if the issuer is in bankruptcy and subject to
    reorganization or if the issuer, immediately prior to the
    purchase of its securities was unable to meet its obligations as
    they came due without material assistance other than
    conventional lending or financing arrangements.
|
| | (4) Securities of an eligible portfolio company purchased
    from any person in a private transaction if there is no ready
    market for such securities and we already own 60% of the
    outstanding equity of the eligible portfolio company.                                                                                                                                                                                                                                               
|
| | (5) Securities received in exchange for or distributed on
    or with respect to securities described in (1) through
    (4) above, or pursuant to the exercise of warrants or
    rights relating to such securities.                                                                                                                                                                                                                                                                           
|
| | (6) Cash, cash equivalents, U.S. Government securities
    or high-quality debt maturing in one year or less from the time
    of investment.                                                                                                                                                                                                                                                                                                                                                    





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








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





20



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|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders






Part II







|        |                                                                                                                        
|------- | -----------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity and Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities





|                 |  |               |          |  |      |   |       |     |  |   |       | 
|---------------- |  | ------------- | -------- |  | ---- | - | ----- | --- |  | - | ----- | 
|                 |  | Quarter Ended |          |  | High |   |       | Low | 
|                 |  |               |          |  |      |   |       |     | 
|FISCAL YEAR 2005 |  |               |          |  |      |   |       |     |  |   |       | 
|                 |  |               | 10/31/05 |  |      | $ | 12.22 |     |  | $ | 10.30 | 
|                 |  |               | 07/31/05 |  |      | $ | 11.34 |     |  | $ | 9.41  | 
|                 |  |               | 04/30/05 |  |      | $ | 9.50  |     |  | $ | 9.17  | 
|                 |  |               | 01/31/05 |  |      | $ | 9.55  |     |  | $ | 8.95  | 
|FISCAL YEAR 2004 |  |               |          |  |      |   |       |     |  |   |       | 
|                 |  |               | 10/31/04 |  |      | $ | 9.47  |     |  | $ | 8.94  | 
|                 |  |               | 07/31/04 |  |      | $ | 9.72  |     |  | $ | 8.81  | 
|                 |  |               | 04/30/04 |  |      | $ | 9.20  |     |  | $ | 8.19  | 
|                 |  |               | 01/31/04 |  |      | $ | 8.47  |     |  | $ | 7.83  | 

Dividends


12-month




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re-issued


22



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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 25 for more information.


Selected Consolidated Financial Data


|                                                                              |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |         |         |   |   |         |         |  
|----------------------------------------------------------------------------- | ---------------------------------------------------- | ------------------------------------- | ------- | ------ | ---- | - | ------- | ------- | - | - | ------- | ------- | --- | ---- | ------- | ------- | - | - | ------- | ------- | -
|                                                                              |                                                      | Year Ended October 31,                |        
|                                                                              |                                                      |                                       |        
|                                                                              |                                                      | 2005                                  |         |        | 2004 |   |         | 2003    |   |   | 2002    |         |     | 2001 |        
|                                                                              |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |        
|                                                                              |                                                      | (In thousands, except per share data) |        
|Operating Data:                                                               |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |         |         |   |   |         |        
|Interest and related portfolio income:                                        |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |         |         |   |   |         |        
|                                                                              | Interest and dividend income                         |                                       | $       | 9,457  |      |   | $       | 2,996   |   |   | $       | 2,833   |     |      | $       | 3,740   |   |   | $       | 9,046   |  
|                                                                              | Fee income                                           |                                       |         | 1,809  |      |   |         | 926     |   |   |         | 62      |     |      |         |        |   |   |         |        |  
|                                                                              | Other income                                         |                                       |         | 933    |      |   |         | 64      |   |   |         |        |     |      |         |        |   |   |         |        |  
|                                                                              |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |        
|Total operating income                                                        |                                                      |                                       | 12,199  |        |      |   | 3,986   |         |   |   | 2,895   |         |     |      | 3,740   |         |   |   | 9,046   |        
|Expenses:                                                                     |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |         |         |   |   |         |        
|                                                                              | Employee                                             |                                       |         | 2,336  |      |   |         | 1,366   |   |   |         | 2,476   |     |      |         | 696     |   |   |         |        |  
|                                                                              | Incentive compensation (Note 5)                      |                                       |         | 1,117  |      |   |         |        |   |   |         |        |     |      |         |        |   |   |         |        |  
|                                                                              | Administrative                                       |                                       |         | 3,052  |      |   |         | 2,893   |   |   |         | 8,911   | (1) |      |         | 2,573   |   |   |         |        |  
|                                                                              | Management fee                                       |                                       |         |       |      |   |         |        |   |   |         |        |     |      |         | 3,593   |   |   |         | 7,388   |  
|                                                                              |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |        
|Total operating expenses                                                      |                                                      |                                       | 6,505   |        |      |   | 4,259   |         |   |   | 11,387  |         |     |      | 6,862   |         |   |   | 7,388   |        
|                                                                              |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |        
|Litigation recovery of management fees (Note 12, 13)                          |                                                      |                                       |        |        |      |   | 370     |         |   |   |        |         |     |      |        |         |   |   |        |        
|Net operating income (loss) before taxes                                      |                                                      |                                       | 5,694   |        |      |   | 97      |         |   |   | (8,492  | )       |     |      | (3,122  | )       |   |   | 1,658   |        
|Tax expense (benefit), net                                                    |                                                      |                                       | (101    | )      |      |   | 79      |         |   |   |        |         |     |      |        |         |   |   |        |        
|                                                                              |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |        
|Net operating income (loss)                                                   |                                                      |                                       | 5,795   |        |      |   | 18      |         |   |   | (8,492  | )       |     |      | (3,122  | )       |   |   | 1,658   |        
|Net realized and unrealized gains (losses):                                   |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |         |         |   |   |         |        
|                                                                              | Net realized gains (losses)                          |                                       |         | (3,295 | )    |   |         | (37,795 | ) |   |         | (4,220  | )   |      |         | (33,469 | ) |   |         | 5       |  
|                                                                              | Net change in unrealized appreciation (depreciation) |                                       |         | 23,768 |      |   |         | 49,382  |   |   |         | (42,771 | )   |      |         | (21,765 | ) |   |         | (52,994 | )
|                                                                              |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |        
|Net realized and unrealized gains (losses) on investments                     |                                                      |                                       | 20,473  |        |      |   | 11,587  |         |   |   | (46,991 | )       |     |      | (55,234 | )       |   |   | (52,989 | )      
|                                                                              |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |        
|Net increase (decrease) in net assets resulting from operations               |                                                      | $                                     | 26,268  |        |      | $ | 11,605  |         |   | $ | (55,483 | )       |     | $    | (58,356 | )       |   | $ | (51,331 | )      
|                                                                              |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |        
|Per Share:                                                                    |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |         |         |   |   |         |        
|Net increase (decrease) in net assets per share resulting from
    operations |                                                      | $                                     | 1.45    |        |      | $ | 0.91    |         |   | $ | (3.42   | )       |     | $    | (3.54   | )       |   | $ | (3.12   | )      
|Dividends per share                                                           |                                                      | $                                     | 0.24    |        |      | $ | 0.12    |         |   | $ |        |         |     | $    | 0.04    |         |   | $ | 0.34    |        
|Balance Sheet Data:                                                           |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |         |         |   |   |         |        
|Portfolio at value                                                            |                                                      | $                                     | 122,298 |        |      | $ | 78,520  |         |   | $ | 24,071  |         |     | $    | 54,194  |         |   | $ | 90,926  |        
|Portfolio at cost                                                             |                                                      |                                       | 171,591 |        |      |   | 151,582 |         |   |   | 146,515 |         |     |      | 133,864 |         |   |   | 148,886 |        
|Total assets                                                                  |                                                      |                                       | 201,379 |        |      |   | 126,577 |         |   |   | 137,880 |         |     |      | 196,511 |         |   |   | 255,050 |        
|Shareholders equity                                                          |                                                      |                                       | 198,739 |        |      |   | 115,567 |         |   |   | 137,008 |         |     |      | 195,386 |         |   |   | 254,472 |        
|Shareholders equity per share (net asset value)                              |                                                      | $                                     | 10.41   |        |      | $ | 9.40    |         |   | $ | 8.48    |         |     | $    | 11.84   |         |   | $ | 15.42   |        
|Common shares outstanding at period end                                       |                                                      |                                       | 19,087  |        |      |   | 12,293  |         |   |   | 16,153  |         |     |      | 16,500  |         |   |   | 16,500  |        
|Other Data:                                                                   |                                                      |                                       |         |        |      |   |         |         |   |   |         |         |     |      |         |         |   |   |         |        
|Number of Investments funded in period                                        |                                                      |                                       | 9       |        |      |   | 7       |         |   |   | 5       |         |     |      | 10      |         |   |   | 11      |        
|Investments funded($) in period                                               |                                                      | $                                     | 53,836  |        |      | $ | 60,710  |         |   | $ | 21,955  |         |     | $    | 26,577  |         |   | $ | 36,332  |        

24



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|                                                                              |  |                                      |       |  |       |  |        |       |  |  |       |  |  |       |       |  |          |  |       |       |  |  |       |  |  |       |       |   |       |  |       |       |  |  |        |   |  |  |         |   |  |  |        |   |  |  |         |  
|----------------------------------------------------------------------------- |  | ------------------------------------ | ----- |  | ----- |  | ------ | ----- |  |  | ----- |  |  | ----- | ----- |  | -------- |  | ----- | ----- |  |  | ----- |  |  | ----- | ----- | - | ----- |  | ----- | ----- |  |  | ------ | - |  |  | ------- | - |  |  | ------ | - |  |  | ------- | -
|                                                                              |  | 2005                                 |       |  | 2004  |  |        | 2003  | 
|                                                                              |  |                                      |       |  |       |  |        |       | 
|                                                                              |  | Qtr 4                                |       |  | Qtr 3 |  |        | Qtr 2 |  |  | Qtr 1 |  |  | Qtr 4 |       |  | Qtr 3(2) |  |       | Qtr 2 |  |  | Qtr 1 |  |  | Qtr 4 |       |   | Qtr 3 |  |       | Qtr 2 |  |  | Qtr 1  |  
|                                                                              |  |                                      |       |  |       |  |        |       |  |  |       |  |  |       |       |  |          |  |       |       |  |  |       |  |  |       |       |   |       |  |       |       |  |  |        |  
|                                                                              |  | (In thousands except per share data) |      
|Quarterly Data (Unaudited):                                                   |  |                                      |       |  |       |  |        |       |  |  |       |  |  |       |       |  |          |  |       |       |  |  |       |  |  |       |       |   |       |  |       |       |  |  |        |   |  |  |         |   |  |  |        |   |  |  |         |  
|Total operating income                                                        |  | $                                    | 3,361 |  |       |  | 4,404  |       |  |  | 2,439 |  |  |       | 1,995 |  |          |  | 1,811 |       |  |  | 951   |  |  |       | 508   |   |       |  | 716   |       |  |  | 742    |   |  |  | 776     |   |  |  | 811    |   |  |  | 566     |  
|Net operating income (loss) before net realized and unrealized
    gains      |  |                                      | 1,612 |  |       |  | 2,480  |       |  |  | 821   |  |  |       | 882   |  |          |  | 665   |       |  |  | 281   |  |  |       | (498  | ) |       |  | (430  | )     |  |  | (847   | ) |  |  | (559    | ) |  |  | (5,031 | ) |  |  | (2,055  | )
|Net increase (decrease) in net assets resulting from operations               |  |                                      | 8,933 |  |       |  | 10,310 |       |  |  | 4,360 |  |  |       | 2,665 |  |          |  | 3,274 |       |  |  | 4,922 |  |  |       | 1,104 |   |       |  | 2,305 |       |  |  | (4,660 | ) |  |  | (14,382 | ) |  |  | (6,649 | ) |  |  | (29,792 | )
|Net increase (decrease) in net assets resulting from operations
    per share |  |                                      | 0.46  |  |       |  | 0.58   |       |  |  | 0.23  |  |  |       | 0.18  |  |          |  | 0.27  |       |  |  | 0.41  |  |  |       | 0.09  |   |       |  | 0.14  |       |  |  | (0.29  | ) |  |  | (0.89   | ) |  |  | (0.41  | ) |  |  | (1.83   | )
|Net asset value per share                                                     |  |                                      | 10.41 |  |       |  | 10.06  |       |  |  | 9.64  |  |  |       | 9.41  |  |          |  | 9.40  |       |  |  | 9.25  |  |  |       | 8.85  |   |       |  | 8.76  |       |  |  | 8.48   |   |  |  | 8.77    |   |  |  | 9.66   |   |  |  | 10.06   |  






|    |                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | 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.                     
|   
|(2) | 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.






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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




i.e.




25



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i.e.






Operating
Income


For the Years Ended October 31, 2005, 2004 and 2003.




| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2005





| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2004



26



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| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2003



Operating
Expenses


For the Years Ended October 31, 2005, 2004 and 2003.




| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2005











27



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| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2004











| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2003











28



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Realized Gains and
Losses On Portfolio Securities


For the Years Ended October 31, 2005, 2004 and 2003.




| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2005









| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2004







29



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Series A-1




| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2003





Unrealized
Appreciation and Depreciation of Portfolio
Securities


For the Years Ended October 31, 2005, 2004 and 2003.




| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2005





| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2004



30



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| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2003

fn


Portfolio
Investments


For the Years Ended October 31, 2005 and 2004.




| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2005





31



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32



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##### Table of Contents





| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2004



















33



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| |                    
| | -------------------
| | Portfolio Companies





| |                       
| | ----------------------
| | Actelis Networks, Inc.

e-business






| |               
| | --------------
| | Amersham Corp.









| |                    
| | -------------------
| | Arcot Systems, Inc.

e-business










| |                          
| | -------------------------
| | Baltic Motors Corporation











34



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| |                 
| | ----------------
| | BP Clothing, LLC

®












| |           
| | ----------
| | CBCA, Inc.











| |                                   
| | ----------------------------------
| | Dakota Growers Pasta Company, Inc.











| |                         
| | ------------------------
| | Determine Software, Inc.





35



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| |                                     
| | ------------------------------------
| | DPHI, Inc. (formerly DataPlay, Inc.)







| |                       
| | ----------------------
| | Endymion Systems, Inc.

end-to






| |              
| | -------------
| | Foliofn, Inc.

fn fn


fn fn.




| |                         
| | ------------------------
| | Impact Confections, Inc.











36



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| |                                 
| | --------------------------------
| | Integral Development Corporation











| |                  
| | -----------------
| | JDC Lighting, LLC









| |                   
| | ------------------
| | Lumeta Corporation









| |                      
| | ---------------------
| | Mainstream Data, Inc.







| |                                                                  
| | -----------------------------------------------------------------
| | Mentor Graphics Corp. (formerly 0-In Design Automation,
    Inc.)





37



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##### Table of Contents













| |                              
| | -----------------------------
| | Octagon Credit Investors, LLC

















| |                         
| | ------------------------
| | Ohio Medical Corporation





38



---



##### Table of Contents



GE-SOTs








| |                             
| | ----------------------------
| | Phosistor Technologies, Inc.













| |                    
| | -------------------
| | ProcessClaims, Inc.







| |                           
| | --------------------------
| | SafeStone Technologies PLC

e-business






| |                                                              
| | -------------------------------------------------------------
| | SGDA Sanierungsgesellschaft fur Deponien und Altasten
    mbH



39



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| |                       
| | ----------------------
| | ShopEaze Systems, Inc.









| |              
| | -------------
| | Sonexis, Inc.







| |                    
| | -------------------
| | SP Industries, Inc.

configured-to








| |                          
| | -------------------------
| | Sygate Technologies, Inc.



40



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##### Table of Contents















| |                                       
| | --------------------------------------
| | Timberland Machines & Irrigation, Inc.













41



---



##### Table of Contents







| |                      
| | ---------------------
| | Vendio Services, Inc.













| |                                       
| | --------------------------------------
| | Vestal Manufacturing Enterprises, Inc.

















42



---



##### Table of Contents





| |                           
| | --------------------------
| | Vitality Foodservice, Inc.













| |           
| | ----------
| | Yaga, Inc.





Liquidity and
Capital Resources








43



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44



---



##### Table of Contents











Subsequent
Events 
(Unaudited)













|         |                                                              
|-------- | -------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosure about Market
    Risk



90-day 90-day


45



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##### Table of Contents







| |                                                                   
| | ------------------------------------------------------------------
| | Investing in private companies involves a high degree of
    risk.





| |                                                                   
| | ------------------------------------------------------------------
| | Our investments in portfolio companies are generally
    illiquid.





| |                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





46



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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.





| |                                                          
| | ---------------------------------------------------------
| | 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.               

47



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.                                                                                                                                                                                                                                                                                                                



| |                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------
| | 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.



48



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| |   |                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | price and volume fluctuations in the overall stock market from
    time to time;                                                                                                                          
|
| |  | significant volatility in the market price and trading volume of
    securities of business development companies or other financial
    services companies;                                              
|
| |  | volatility resulting from trading in derivative securities
    related to our common stock including puts, calls, long-term
    equity 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.





| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Changes in interest rates may affect our cost of capital
    and net investment income.





| |                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The war with Iraq, terrorist attacks 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.



49



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|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data




CONSOLIDATED FINANCIAL STATEMENTS


MVC Capital, Inc.


Consolidated Balance Sheets


|                                                                                                                                 |                                                                                |             |             |             |             |   |             |            | 
|-------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ----------- | ----------- | ----------- | ----------- | - | ----------- | ---------- | 
|                                                                                                                                 |                                                                                | October 31, |             |             | October 31, |  
|                                                                                                                                 |                                                                                | 2005        |             |             | 2004        |  
|                                                                                                                                 |                                                                                |             |             |             |             |  
|ASSETS                                                                                                                          
|Assets                                                                                                                           |                                                                                |             |             |             |             |   |             |           
|Cash                                                                                                                             |                                                                                | $           |            |             |             | $ | 1,214,537   |           
|Cash equivalents                                                                                                                 |                                                                                |             | 26,297,190  |             |             |   | 11,932,404  |           
|Short term investments at market value (cost $51,026,902 and
    $34,114,792)                                                    |                                                                                |             | 51,026,902  |             |             |   | 34,114,792  |           
|Investments at fair value (cost $171,591,242 and $151,582,214)                                                                   |                                                                                |             |             |             |             |   |             |           
|                                                                                                                                 | Non-control/ Non-affiliated investments (cost $74,495,549 and
    $62,267,697) |             |             | 33,685,925  |             |   |             | 19,294,120 | 
|                                                                                                                                 | Affiliate investments (cost $40,370,059 and $60,287,402)                       |             |             | 32,385,810  |             |   |             | 35,600,000 | 
|                                                                                                                                 | Control investments (cost $56,725,634 and $29,027,115)                         |             |             | 56,225,944  |             |   |             | 23,626,165 | 
|                                                                                                                                 |                                                                                |             |             |             |             |  
|                                                                                                                                 | Total investments at fair value                                                |             |             | 122,297,679 |             |   |             | 78,520,285 | 
|Interest and fees receivable                                                                                                     |                                                                                |             | 902,498     |             |             |   | 428,291     |           
|Prepaid expenses                                                                                                                 |                                                                                |             | 364,780     |             |             |   | 233,803     |           
|Prepaid taxes                                                                                                                    |                                                                                |             | 98,374      |             |             |   |            |           
|Deferred tax                                                                                                                     |                                                                                |             | 303,255     |             |             |   | 87,278      |           
|Other assets                                                                                                                     |                                                                                |             | 88,600      |             |             |   | 45,445      |           
|                                                                                                                                 |                                                                                |             |             |             |             |  
|Total assets                                                                                                                     |                                                                                | $           | 201,379,278 |             |             | $ | 126,576,835 |           
|                                                                                                                                 |                                                                                |             |             |             |             |  
|                                                                                                                                
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                            
|Liabilities                                                                                                                      |                                                                                |             |             |             |             |   |             |           
|Provision for incentive compensation (Note 5)                                                                                    |                                                                                | $           | 1,117,328   |             |             | $ |            |           
|Employee compensation and benefits                                                                                               |                                                                                |             | 807,000     |             |             |   | 350,518     |           
|Other accrued expenses and liabilities                                                                                           |                                                                                |             | 353,606     |             |             |   | 155,039     |           
|Professional fees                                                                                                                |                                                                                |             | 276,621     |             |             |   | 223,069     |           
|Payable for investment purchased                                                                                                 |                                                                                |             | 79,708      |             |             |   |            |           
|Consulting fees                                                                                                                  |                                                                                |             | 3,117       |             |             |   | 71,845      |           
|Directors fees                                                                                                                  |                                                                                |             | 2,898       |             |             |   | 17,815      |           
|Revolving credit facility                                                                                                        |                                                                                |             |            |             |             |   | 10,025,000  |           
|Taxes payable                                                                                                                    |                                                                                |             |            |             |             |   | 166,205     |           
|                                                                                                                                 |                                                                                |             |             |             |             |  
|Total liabilities                                                                                                                |                                                                                |             | 2,640,278   |             |             |   | 11,009,491  |           
|                                                                                                                                 |                                                                                |             |             |             |             |  
|Shareholders equity                                                                                                             |                                                                                |             |             |             |             |   |             |           
|Common stock, $0.01 par value; 150,000,000 shares
    authorized; 19,086,566 and 12,293,042 shares outstanding,
    respectively |                                                                                |             | 231,459     |             |             |   | 165,000     |           
|Additional paid-in-capital                                                                                                       |                                                                                |             | 358,571,795 |             |             |   | 298,406,395 |           
|Accumulated earnings                                                                                                             |                                                                                |             | 13,528,526  |             |             |   | 7,856,896   |           
|Dividends paid to stockholders                                                                                                   |                                                                                |             | (12,429,181 | )           |             |   | (7,848,505  | )         
|Accumulated net realized losses                                                                                                  |                                                                                |             | (78,633,248 | )           |             |   | (75,484,412 | )         
|Net unrealized depreciation                                                                                                      |                                                                                |             | (49,293,563 | )           |             |   | (73,061,929 | )         
|Treasury stock, at cost, 4,059,382 and 4,206,958 shares
    held, respectively                                                   |                                                                                |             | (33,236,788 | )           |             |   | (34,466,101 | )         
|                                                                                                                                 |                                                                                |             |             |             |             |  
|Total shareholders equity                                                                                                       |                                                                                |             | 198,739,000 |             |             |   | 115,567,344 |           
|                                                                                                                                 |                                                                                |             |             |             |             |  
|Total liabilities and shareholders equity                                                                                       |                                                                                | $           | 201,379,278 |             |             | $ | 126,576,835 |           
|                                                                                                                                 |                                                                                |             |             |             |             |  
|Net asset value per share                                                                                                        |                                                                                | $           | 10.41       |             |             | $ | 9.40        |           
|                                                                                                                                 |                                                                                |             |             |             |             |  



50



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MVC Capital, Inc.





Consolidated Schedule of Investments


October 31, 2005


|                                                                 |  |                                               |            |                                                     |  |           |            |  |      |   |            |            |  |   |            | 
|---------------------------------------------------------------- |  | --------------------------------------------- | ---------- | --------------------------------------------------- |  | --------- | ---------- |  | ---- | - | ---------- | ---------- |  | - | ---------- | 
|Company                                                          |  | Industry                                      |            | Investment                                          |  | Principal |            |  | Cost |   |            | Fair Value | 
|                                                                 |  |                                               |            |                                                     |  |           |            |  |      |   |            |            | 
|Non-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  |            |  |   | 2,473,521  | 
|                                                                
|BP Clothing, LLC                                                 |  | Apparel                                       |            | Second Lien Loan 11.8406%, 06/02/2009               |  |           | 9,166,667  |  |      |   | 8,998,430  |            |  |   | 9,166,667  | 
|                                                                
|DPHI, 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  |            |  |   | 1,122,216  | 
|                                                                
|JDC Lighting, LLC                                                |  | Electrical Distribution                       |            | Senior Subordinated Debt 17.0000%, 01/31/2009(b)    |  |           | 3,090,384  |  |      |   | 3,025,871  |            |  |   | 3,090,384  | 
|                                                                
|Lumeta Corporation                                               |  | Technology Investments                        |            | Preferred Stock (384,615 shares)(d)                 |  |           |            |  |      |   | 250,000    |            |  |   | 43,511     | 
|                                                                 |  |                                               |            | Preferred Stock (266,846 shares)(d)                 |  |           |            |  |      |   | 156,489    |            |  |   | 156,489    | 
|                                                                 |  |                                               |            |                                                     |  |           |            |  |      |   |            |            | 
|                                                                 |  |                                               |            |                                                     |  |           |            |  |      |   | 406,489    |            |  |   | 200,000    | 
|                                                                
|MainStream 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  |            |  |   | 4,664,794  | 
|                                                                 |  |                                               |            | Limited Liability Company Interest                  |  |           |            |  |      |   | 724,857    |            |  |   | 1,228,038  | 
|                                                                 |  |                                               |            | Warrants(d)                                         |  |           |            |  |      |   | 550,000    |            |  |   | 1,069,457  | 
|                                                                 |  |                                               |            |                                                     |  |           |            |  |      |   |            |            | 
|                                                                 |  |                                               |            |                                                     |  |           |            |  |      |   | 5,835,597  |            |  |   | 6,962,289  | 
|                                                                
|SafeStone 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  |            |  |   | 4,020,488  | 
|                                                                 |  |                                               |            | Senior Subordinated Debt 17.0000%, 03/31/2012(b)    |  |           | 6,650,360  |  |      |   | 6,401,062  |            |  |   | 6,650,360  | 
|                                                                 |  |                                               |            |                                                     |  |           |            |  |      |   |            |            | 
|                                                                 |  |                                               |            |                                                     |  |           |            |  |      |   | 10,348,366 |            |  |   | 10,670,848 | 
|                                                                
|Sub Total Non-control/ Non-affiliated investments                |  |                                               | 74,495,549 |                                                     |  |           | 33,685,925 | 
|Affiliate 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  |            |  |   | 5,514,000  | 
|                                                                
|Endymion 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  |            |  |   | 5,228,826  | 
|                                                                 |  |                                               |            | Senior Subordinated Debt 7.8406%, 07/29/2008        |  |           | 325,000    |  |      |   | 318,986    |            |  |   | 325,000    | 
|                                                                 |  |                                               |            | Common Stock (252 shares)(d)                        |  |           |            |  |      |   | 2,700,000  |            |  |   | 2,700,000  | 
|                                                                 |  |                                               |            |                                                     |  |           |            |  |      |   |            |            | 
|                                                                 |  |                                               |            |                                                     |  |           |            |  |      |   | 8,152,055  |            |  |   | 8,253,826  | 

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|                                                       |  |                               |            |                                                      |  |           |            |  |      |   |            |            |  |   |            | 
|------------------------------------------------------ |  | ----------------------------- | ---------- | ---------------------------------------------------- |  | --------- | ---------- |  | ---- | - | ---------- | ---------- |  | - | ---------- | 
|Company                                                |  | Industry                      |            | Investment                                           |  | Principal |            |  | Cost |   |            | Fair Value | 
|                                                       |  |                               |            |                                                      |  |           |            |  |      |   |            |            | 
|ProcessClaims, Inc.                                    |  | Technology Investments        |            | Preferred Stock (6,250,000 shares)(d)                |  |           |            |  |      | $ | 2,000,000  |            |  | $ | 2,000,000  | 
|                                                       |  |                               |            | Preferred Stock (849,257 shares)(d)                  |  |           |            |  |      |   | 400,000    |            |  |   | 400,000    | 
|                                                       |  |                               |            | Preferred Stock Warrants(d)                          |  |           |            |  |      |   | 20         |            |  |   |           | 
|                                                       |  |                               |            |                                                      |  |           |            |  |      |   |            |            | 
|                                                       |  |                               |            |                                                      |  |           |            |  |      |   | 2,400,020  |            |  |   | 2,400,000  | 
|                                                      
|Vitality Foodservice, Inc.                             |  | Non-Alcoholic Beverages       |            | Common Stock (500,000 shares)(d)                     |  |           |            |  |      |   | 5,000,000  |            |  |   | 5,000,000  | 
|                                                       |  |                               |            | Preferred Stock (1,000,000 shares)(b)                |  |           |            |  |      |   | 10,517,984 |            |  |   | 10,517,984 | 
|                                                       |  |                               |            | Warrants(d)                                          |  |           |            |  |      |   |           |            |  |   | 700,000    | 
|                                                       |  |                               |            |                                                      |  |           |            |  |      |   |            |            | 
|                                                       |  |                               |            |                                                      |  |           |            |  |      |   | 15,517,984 |            |  |   | 16,217,984 | 
|                                                      
|Yaga, 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 | 
|                                                       |  |                               |            |                                                      |  |          
|Control 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  |            |  |   | 4,500,000  | 
|                                                       |  |                               |            | Common Stock (54,947 shares)(d, f)                   |  |           |            |  |      |   | 6,000,000  |            |  |   | 7,500,000  | 
|                                                       |  |                               |            |                                                      |  |           |            |  |      |   |            |            | 
|                                                       |  |                               |            |                                                      |  |           |            |  |      |   | 10,500,000 |            |  |   | 12,000,000 | 
|Ohio Medical Corporation                               |  | Medical Device Manufacturer   |            | Common Stock (5,620 shares)(d)                       |  |           |            |  |      |   | 17,000,000 |            |  |   | 17,000,000 | 
|SGDA Sanierungsgesellschaft fur Deponien und Altlasten |  | Soil Remediation              |            | Revolving Line of Credit 7.0000%, 08/25/2006(f)      |  |           | 1,237,700  |  |      |   | 1,237,700  |            |  |   | 1,237,700  | 
|                                                       |  |                               |            | Term Loan 7.0000%, 08/25/2009(f)                     |  |           | 4,579,050  |  |      |   | 4,304,560  |            |  |   | 4,304,560  | 
|                                                       |  |                               |            | Equity Interest(f)                                   |  |           |            |  |      |   | 315,000    |            |  |   | 315,000    | 
|                                                       |  |                               |            |                                                      |  |           |            |  |      |   |            |            | 
|                                                       |  |                               |            |                                                      |  |           |            |  |      |   | 5,857,260  |            |  |   | 5,857,260  | 
|Timberland Machines & Irrigation, Inc.                 |  | Distributor  Landscaping and |            | Senior Subordinated Debt 17.0000%, 08/04/2009(b)     |  |           | 6,318,684  |  |      |   | 6,234,373  |            |  |   | 6,318,684  | 
|                                                       |  | Irrigation Equipment          |            | Junior Revolving Line of Credit 12.5000%, 07/07/2007 |  |           | 3,250,000  |  |      |   | 3,250,000  |            |  |   | 3,250,000  | 
|                                                       |  |                               |            | Common Stock (450 shares)(d)                         |  |           |            |  |      |   | 4,500,000  |            |  |   | 4,500,000  | 
|                                                       |  |                               |            | Warrants(d)                                          |  |           |            |  |      |   |           |            |  |   |           | 
|                                                       |  |                               |            |                                                      |  |           |            |  |      |   |            |            | 
|                                                       |  |                               |            |                                                      |  |           |            |  |      |   | 13,984,373 |            |  |   | 14,068,684 | 
|Vendio Services, Inc.                                  |  | Technology Investments        |            | Common Stock (10,476 shares)(d)                      |  |           |            |  |      |   | 5,500,000  |            |  |   |           | 
|                                                       |  |                               |            | Preferred Stock (6,443,188 shares)(d)                |  |           |            |  |      |   | 1,134,001  |            |  |   | 2,700,000  | 
|                                                       |  |                               |            |                                                      |  |           |            |  |      |   |            |            | 
|                                                       |  |                               |            |                                                      |  |           |            |  |      |   | 6,634,001  |            |  |   | 2,700,000  | 

52



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|                                       |  |                                     |             |                                               |  |           |             |  |      |   |            |            |  |   |            | 
|-------------------------------------- |  | ----------------------------------- | ----------- | --------------------------------------------- |  | --------- | ----------- |  | ---- | - | ---------- | ---------- |  | - | ---------- | 
|Company                                |  | Industry                            |             | Investment                                    |  | Principal |             |  | Cost |   |            | Fair Value | 
|                                       |  |                                     |             |                                               |  |           |             |  |      |   |            |            | 
|Vestal Manufacturing Enterprises, Inc. |  | Iron Foundries                      |             | Senior Subordinated Debt 12.0000%, 04/29/2011 |  | $         | 900,000     |  |      | $ | 900,000    |            |  | $ | 900,000    | 
|                                       |  |                                     |             | Common Stock (81,000 shares)(d)               |  |           |             |  |      |   | 1,850,000  |            |  |   | 3,700,000  | 
|                                       |  |                                     |             |                                               |  |           |             |  |      |   |            |            | 
|                                       |  |                                     |             |                                               |  |           |             |  |      |   | 2,750,000  |            |  |   | 4,600,000  | 
|Sub Total Control Investments          |  |                                     | 56,725,634  |                                               |  |           | 56,225,944  | 
|Short 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 |            |  |   | 14,560,162 | 
|                                       |  |                                     |             | 3.2200%, 12/29/2005                           |  |           | 9,865,000   |  |      |   | 9,812,368  |            |  |   | 9,812,368  | 
|                                       |  |                                     |             | 3.6300%, 01/12/2006                           |  |           | 14,856,000  |  |      |   | 14,750,225 |            |  |   | 14,750,225 | 
|                                       |  |                                     |             | 3.4300%, 01/19/2006                           |  |           | 12,000,000  |  |      |   | 11,904,147 |            |  |   | 11,904,147 | 
|                                       |  |                                     |             |                                               |  |           |             |  |      |   |            |            | 
|                                       |  |                                     |             |                                               |  |           |             |  |      |   | 51,026,902 |            |  |   | 51,026,902 | 
|Sub Total Short Term Investments       |  |                                     | 51,026,902  |                                               |  |           | 51,026,902  | 
|TOTAL 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.



53



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MVC Capital, Inc.





Consolidated Schedule of Investments


October 31, 2004


|                                                              |  |                                            |            |                                                        |  |           |            |  |      |   |            |            |           |   |           |  |           | 
|------------------------------------------------------------- |  | ------------------------------------------ | ---------- | ------------------------------------------------------ |  | --------- | ---------- |  | ---- | - | ---------- | ---------- | --------- | - | --------- |  | --------- | 
|Company                                                       |  | Industry                                   |            | Investment                                             |  | Principal |            |  | Cost |   |            | Fair Value |          
|                                                              |  |                                            |            |                                                        |  |           |            |  |      |   |            |            |          
|Non-control/ Non-affiliated investments  16.70%(c,
    h, i) |  |                                            |            |                                                        |  |           |            | 
|                                                             
|Actelis Networks, Inc.                                        |  | Technology Investments                     |            | Preferred Stock (1,506,025 shares)(a, e)               |  |           |            |  |      | $ | 5,000,003  |            |           | $ |          | 
|                                                             
|Arcot Systems, Inc.                                           |  | Technology Investments                     |            | Convertible Credit Facility 10.0000%, 12/31/2005(a, f) |  | $         | 3,647,220  |  |      |   | 3,631,940  |            |           |   | 2,000,000 | 
|                                                             
|CBCA, Inc.                                                    |  | Technology Investments                     |            | Common Stock (753,350 shares)(a, e)                    |  |           |            |  |      |   | 11,999,995 |            |           |   |          | 
|                                                             
|Determine Software, Inc.                                      |  | Technology Investments                     |            | Credit Facility 12.0000%, 01/31/2006(a)                |  |           | 1,632,222  |  |      |   | 1,624,753  |            |           |   | 1,624,753 | 
|                                                              |  |                                            |            | Warrants(a, e)                                         |  |           |            |  |      |   |           |            |           |   |          | 
|                                                              |  |                                            |            |                                                        |  |           |            |  |      |   |            |            |           |  
|                                                              |  |                                            |            |                                                        |  |           |            |  |      |   |            |            | 1,624,753 |   |           |  | 1,624,753 | 
|                                                             
|DPHI, Inc.                                                    |  | Technology Investments                     |            | Preferred Stock (602,131 shares)(a, e)                 |  |           |            |  |      |   | 4,520,350  |            |           |   |          | 
|                                                             
|FOLIOfn,Inc.                                                  |  | Technology Investments                     |            | Preferred Stock (5,802,259 shares)(a, e)               |  |           |            |  |      |   | 15,000,000 |            |           |   |          | 
|                                                             
|Integral Development Corporation                              |  | Technology Investments                     |            | Convertible Credit Facility 10.0000%, 12/31/2005(a, f) |  |           | 2,805,552  |  |      |   | 2,793,798  |            |           |   | 2,805,552 | 
|                                                             
|Lumeta Corporation                                            |  | Technology Investments                     |            | Preferred Stock (384,615 shares)(a, e)                 |  |           |            |  |      |   | 250,000    |            |           |   | 43,511    | 
|                                                              |  |                                            |            | Preferred Stock (266,846 shares)(a, e)                 |  |           |            |  |      |   | 156,489    |            |           |   | 156,489   | 
|                                                              |  |                                            |            |                                                        |  |           |            |  |      |   |            |            |           |  
|                                                              |  |                                            |            |                                                        |  |           |            |  |      |   |            |            | 406,489   |   |           |  | 200,000   | 
|                                                             
|MainStream Data                                               |  | Technology Investments                     |            | Common Stock (5,786 shares)(a, e)                      |  |           |            |  |      |   | 3,750,000  |            |           |   |          | 
|                                                             
|Mentor Graphics Corp.                                         |  | Technology Investments                     |            | Common Stock (82,283 shares)(g)                        |  |           |            |  |      |   | 480,008    |            |           |   |          | 
|                                                              |  |                                            |            | Common Stock (603,396 shares)(b)                       |  |           |            |  |      |   | 3,519,988  |            |           |   | 7,023,529 | 
|                                                              |  |                                            |            |                                                        |  |           |            |  |      |   |            |            |           |  
|                                                              |  |                                            |            |                                                        |  |           |            |  |      |   |            |            | 3,999,996 |   |           |  | 7,023,529 | 
|                                                             
|Octagon Credit Investors, LLC                                 |  | Financial Services                         |            | Senior Subordinated Debt 15.0000%, 05/07/2011(a, j)    |  |           | 5,059,696  |  |      |   | 4,414,971  |            |           |   | 4,530,286 | 
|                                                              |  |                                            |            | Limited Liability Company Interest(a, e)               |  |           |            |  |      |   | 560,000    |            |           |   | 560,000   | 
|                                                              |  |                                            |            | Warrants(a, e)                                         |  |           |            |  |      |   | 550,000    |            |           |   | 550,000   | 
|                                                              |  |                                            |            |                                                        |  |           |            |  |      |   |            |            |           |  
|                                                              |  |                                            |            |                                                        |  |           |            |  |      |   |            |            | 5,524,971 |   |           |  | 5,640,286 | 
|                                                             
|SafeStone Technologies PLC                                    |  | Technology Investments                     |            | Preferred Stock (2,106,378 shares)(a, e)               |  |           |            |  |      |   | 4,015,402  |            |           |   |          | 
|Sub Total Non-control/ Non-affiliated investments             |  |                                            | 62,267,697 |                                                        |  |           | 19,294,120 | 
|                                                             
|Affiliate investments  30.80%(a, c, h, i)                    |  |                                            |            |                                                        |  |           |            |  |      |   |            |            |           |   |           | 
|                                                             
|Dakota Growers Pasta Company, Inc.                            |  | Manufacturer of Packaged Foods             |            | Common Stock (909,091 shares)(e)                       |  |           |            |  |      |   | 5,000,000  |            |           |   | 5,000,000 | 
|                                                             
|Endymion Systems, Inc.                                        |  | Technology Investments                     |            | Preferred Stock (7,156,760 shares)(e)                  |  |           |            |  |      |   | 7,000,000  |            |           |   |          | 
|                                                             
|Impact Confections, Inc.                                      |  | Confections Manufacturing and Distribution |            | Senior Subordinated Debt 17.0000%, 07/30/2009          |  |           | 5,000,000  |  |      |   | 4,887,382  |            |           |   | 5,000,000 | 
|                                                              |  |                                            |            | Common Stock (252 shares)(e)                           |  |           |            |  |      |   | 2,700,000  |            |           |   | 2,700,000 | 
|                                                              |  |                                            |            |                                                        |  |           |            |  |      |   |            |            |           |  
|                                                              |  |                                            |            |                                                        |  |           |            |  |      |   |            |            | 7,587,382 |   |           |  | 7,700,000 | 
|                                                             
|Phosistor Technologies, Inc.                                  |  | Technology Investments                     |            | Preferred Stock (6,666,667 shares)(d, e)               |  |           |            |  |      |   | 1,000,000  |            |           |   |          | 
|                                                             
|ProcessClaims, Inc.                                           |  | Technology Investments                     |            | Preferred Stock (6,250,000 shares)(e)                  |  |           |            |  |      |   | 2,000,000  |            |           |   | 2,000,000 | 
|                                                              |  |                                            |            | Preferred Stock (849,257 shares)(e)                    |  |           |            |  |      |   | 400,000    |            |           |   | 400,000   | 
|                                                              |  |                                            |            | Preferred Stock Warrants(e)                            |  |           |            |  |      |   | 20         |            |           |   |          | 
|                                                              |  |                                            |            |                                                        |  |           |            |  |      |   |            |            |           |  
|                                                              |  |                                            |            |                                                        |  |           |            |  |      |   |            |            | 2,400,020 |   |           |  | 2,400,000 | 

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MVC Capital, Inc.


Consolidated Schedule of Investments


October 31, 2004


|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            |            |   |             |  |            | 
|---------------------------------------- |  | ----------------------------------- | ---------- | ------------------------------------------------ |  | --------- | ---------- |  | ---- | - | ----------- | ---------- | ---------- | - | ----------- |  | ---------- | 
|Company                                  |  | Industry                            |            | Investment                                       |  | Principal |            |  | Cost |   |             | Fair Value |           
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            |           
|ShopEaze Systems, Inc.                   |  | Technology Investments              |            | Preferred Stock (2,097,902 shares)(d, e)         |  |           |            |  |      | $ | 6,000,000   |            |            | $ |            | 
|                                        
|Sonexis, Inc.                            |  | Technology Investments              |            | Common Stock (131,615 shares)(e)                 |  |           |            |  |      |   | 10,000,000  |            |            |   |            | 
|                                        
|Sygate Technologies, Inc.                |  | Technology Investments              |            | Preferred Stock (9,756,098 shares)(e)            |  |           |            |  |      |   | 4,000,000   |            |            |   | 5,500,000   | 
|                                        
|Vitality Foodservice, Inc.               |  | Non-Alcoholic Beverages             |            | Common Stock (500,000 shares)(e)                 |  |           |            |  |      |   | 5,000,000   |            |            |   | 5,000,000   | 
|                                         |  |                                     |            | Preferred Stock (1,000,000 shares)               |  |           |            |  |      |   | 10,000,000  |            |            |   | 10,000,000  | 
|                                         |  |                                     |            | Warrants(e)                                      |  |           |            |  |      |   |            |            |            |   |            | 
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            |            |  
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            | 15,000,000 |   |             |  | 15,000,000 | 
|                                        
|Yaga, Inc.                               |  | Technology Investments              |            | Preferred Stock (300,000 shares)(e)              |  |           |            |  |      |   | 300,000     |            |            |   |            | 
|                                         |  |                                     |            | Preferred Stock (1,000,000 shares)(e)            |  |           |            |  |      |   | 2,000,000   |            |            |   |            | 
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            |            |  
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            | 2,300,000  |   |             |  |           | 
|Sub Total Affiliate investments          |  |                                     | 60,287,402 |                                                  |  |           | 35,600,000 | 
|                                         |  |                                     |            |                                                  |  |          
|Control investments  20.44%(a, c, h, i) |  |                                     |            |                                                  |  |           |            | 
|                                        
|Baltic Motors Corporation                |  | Automotive Dealership               |            | Senior Subordinated Debt 10.0000%, 06/24/2007    |  | $         | 4,500,000  |  |      |   | 4,500,000   |            |            |   | 4,500,000   | 
|                                         |  |                                     |            | Common Stock (54,947 shares)(e)                  |  |           |            |  |      |   | 6,000,000   |            |            |   | 6,000,000   | 
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            |            |  
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            | 10,500,000 |   |             |  | 10,500,000 | 
|                                        
|Timberland Machines & Irrigation, Inc.   |  | Distributor  Landscaping and       |            | Senior Subordinated Debt 17.0000%, 08/04/2009(j) |  |           | 6,042,164  |  |      |   | 5,943,114   |            |            |   | 6,042,164   | 
|                                         |  | Irrigation Equipment                |            | Common Stock (450 shares)(e)                     |  |           |            |  |      |   | 4,500,000   |            |            |   | 4,500,000   | 
|                                         |  |                                     |            | Warrants(e)                                      |  |           |            |  |      |   |            |            |            |   |            | 
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            |            |  
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            | 10,443,114 |   |             |  | 10,542,164 | 
|                                        
|Vendio Services, Inc.                    |  | Technology Investments              |            | Common Stock (10,476 shares)(e)                  |  |           |            |  |      |   | 5,500,000   |            |            |   |            | 
|                                         |  |                                     |            | Preferred Stock (6,443,188 shares)(e)            |  |           |            |  |      |   | 1,134,001   |            |            |   | 1,134,001   | 
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            |            |  
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            | 6,634,001  |   |             |  | 1,134,001  | 
|                                        
|Vestal Manufacturing Enterprises, Inc.   |  | Iron Foundries                      |            | Senior Subordinated Debt 12.0000%, 04/29/2011    |  |           | 1,000,000  |  |      |   | 1,000,000   |            |            |   | 1,000,000   | 
|                                         |  |                                     |            | Common Stock (40,500 shares)(e)                  |  |           |            |  |      |   | 450,000     |            |            |   | 450,000     | 
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            |            |  
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            | 1,450,000  |   |             |  | 1,450,000  | 
|Sub Total Control Investments            |  |                                     |            |                                                  |  |           |            |  |      |   | 29,027,115  |            |            |   | 23,626,165  | 
|                                        
|Short Term Investments  29.52%(h)       |  |                                     |            |                                                  |  |           |            |  |      |   |             |            |            |   |             | 
|                                        
|U.S. Treasury Bills                      |  | U.S. Government & Agency Securities |            | 1.0000%, 11/04/2004                              |  |           | 400,000    |  |      |   | 399,956     |            |            |   | 399,956     | 
|                                         |  |                                     |            | 1.4350%, 11/18/2004                              |  |           | 1,064,000  |  |      |   | 1,063,332   |            |            |   | 1,063,332   | 
|                                         |  |                                     |            | 1.4700%, 11/26/2004                              |  |           | 700,000    |  |      |   | 699,319     |            |            |   | 699,319     | 
|                                         |  |                                     |            | 1.6200%, 01/06/2005                              |  |           | 3,490,000  |  |      |   | 3,480,147   |            |            |   | 3,480,147   | 
|                                         |  |                                     |            | 1.8000%, 01/27/2005                              |  |           | 28,600,000 |  |      |   | 28,472,038  |            |            |   | 28,472,038  | 
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            |            |  
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |            | 34,114,792 |   |             |  | 34,114,792 | 
|Sub Total Short Term Investments         |  |                                     |            |                                                  |  |           |            |  |      |   | 34,114,792  |            |            |   | 34,114,792  | 
|TOTAL INVESTMENT ASSETS  97.46%(h)      |  |                                     |            |                                                  |  |           |            |  |      | $ | 185,697,006 |            |            | $ | 112,635,077 | 
|                                         |  |                                     |            |                                                  |  |           |            |  |      |   |             |           

55



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MVC Capital, Inc.


Consolidated Schedule of Investments


October 31, 2004







|    |                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 shares are freely tradable with no restrictions to their
    sale.                                                                                                                                                                                                                                                                                                   
|   
|(c) |  | All of the Funds preferred and common stock and debt
    investments are issued by eligible portfolio companies, as
    defined in the Investment Company Act of 1940, except Baltic
    Motors Corporation and SafeStone Technologies PLC. The Fund
    makes available significant managerial assistance to all of the
    portfolio companies in which it has invested.
|   
|(d) |  | Company in dissolution.                                                                                                                                                                                                                                                                                                                                                    
|   
|(e) |  | Non-income producing assets.                                                                                                                                                                                                                                                                                                                                               
|   
|(f) |  | Also received warrants to purchase a number of shares of
    preferred stock to be determined upon exercise.                                                                                                                                                                                                                                                               
|   
|(g) |  | These shares are held in escrow until September 1, 2005 and
    have been valued at zero by the Funds Valuation Committee.
    The Fund has no way to determine the amount of shares, if any,
    it will receive from the escrow.                                                                                                                                        
|   
|(h) |  | Percentages are based on net assets of $115,567,344 as of
    October 31, 2004.                                                                                                                                                                                                                                                                                            
|   
|(i) |  | See Note 3 for further information regarding
    Investment Classification.                                                                                                                                                                                                                                                                                              
|   
|(j) |  | These securities accrue a portion of their interest/dividends in
    payment in kind interest/dividends which is
    capitalized to the investment.                                                                                                                                                                                                                      



| |   |                              
| | - | -----------------------------
| | - | Denotes zero cost/fair value.



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MVC Capital, Inc.





Consolidated Statements of Operations


|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |             |   |             |           |            |  
|----------------------------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------- | ---------- | --------- | ---------------- | - | ---------- | ---------------- | ----------- | - | ----------- | --------- | ---------- | -
|                                                                              |                                                     | For the Year                                  |            |           | For the Year     |   |            | For the Year     |            
|                                                                              |                                                     | Ended                                         |            |           | Ended            |   |            | Ended            |            
|                                                                              |                                                     | October 31, 2005                              |            |           | October 31, 2004 |   |            | October 31, 2003 |            
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|Operating Income:                                                             |                                                     |                                               |            |           |                  |   |            |                  |             |   |             |          
|                                                                              | Dividend income                                     |                                               |            |           |                  |   |            |                  |             |   |             |           |           
|                                                                              |                                                     | Affiliate investments                         |            | $         | 1,346,760        |   |            | $                |            |   |             | $         |           |  
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|                                                                              |                                                     | Total dividend income                         |            |           | 1,346,760        |   |            |                  |            |   |             |           |           |  
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|                                                                              | Interest income                                     |                                               |            |           |                  |   |            |                  |             |   |             |           |           
|                                                                              |                                                     | Non-control/ Non-affiliated investments       |            |           | 5,134,907        |   |            |                  | 2,308,502   |   |             |           | 2,833,564  |  
|                                                                              |                                                     | Affiliate investments                         |            |           | 874,041          |   |            |                  | 218,904     |   |             |           |           |  
|                                                                              |                                                     | Control investments                           |            |           | 2,101,808        |   |            |                  | 469,110     |   |             |           |           |  
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|                                                                              |                                                     | Total interest income                         |            |           | 8,110,756        |   |            |                  | 2,996,516   |   |             |           | 2,833,564  |  
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|                                                                              | Fee income                                          |                                               |            |           |                  |   |            |                  |             |   |             |           |           
|                                                                              |                                                     | Non-control/ Non-affiliated investments       |            |           | 398,520          |   |            |                  | 109,538     |   |             |           | 61,476     |  
|                                                                              |                                                     | Affiliate investments                         |            |           | 232,256          |   |            |                  | 727,595     |   |             |           | 274        |  
|                                                                              |                                                     | Control investments                           |            |           | 1,178,331        |   |            |                  | 88,631      |   |             |           |           |  
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|                                                                              |                                                     | Total fee income                              |            |           | 1,809,107        |   |            |                  | 925,764     |   |             |           | 61,750     |  
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|                                                                              | Other income                                        |                                               |            | 932,761   |                  |   |            | 64,104           |             |   |             |          |           
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|Total operating income                                                        |                                                     |                                               | 12,199,384 |           |                  |   | 3,986,384  |                  |             |   | 2,895,314   |          
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|Operating Expenses:                                                           |                                                     |                                               |            |           |                  |   |            |                  |             |   |             |          
|                                                                              | Employee compensation and benefits                  |                                               |            | 2,336,242 |                  |   |            | 1,365,913        |             |   |             | 2,476,068 |           
|                                                                              | Incentive compensation (Note 5)                     |                                               |            | 1,117,328 |                  |   |            |                 |             |   |             |          |           
|                                                                              | Insurance                                           |                                               |            | 590,493   |                  |   |            | 959,570          |             |   |             | 1,058,776 |           
|                                                                              | Legal fees                                          |                                               |            | 529,541   |                  |   |            | 810,848          |             |   |             | 1,514,549 |           
|                                                                              | Facilities                                          |                                               |            | 484,420   |                  |   |            | 90,828           |             |   |             | 1,281,054 |           
|                                                                              | Other expenses                                      |                                               |            | 461,769   |                  |   |            | 369,085          |             |   |             | 110,374   |           
|                                                                              | Audit fees                                          |                                               |            | 287,797   |                  |   |            | 154,938          |             |   |             | 102,102   |           
|                                                                              | Consulting fees                                     |                                               |            | 192,255   |                  |   |            |                 |             |   |             |          |           
|                                                                              | Directors fees                                      |                                               |            | 148,875   |                  |   |            | 175,956          |             |   |             | 455,292   |           
|                                                                              | Administration                                      |                                               |            | 137,191   |                  |   |            | 102,593          |             |   |             | 138,512   |           
|                                                                              | Public relations fees                               |                                               |            | 116,482   |                  |   |            | 146,509          |             |   |             | 126,490   |           
|                                                                              | Printing and postage                                |                                               |            | 71,785    |                  |   |            | 80,278           |             |   |             | 86,328    |           
|                                                                              | Interest expense                                    |                                               |            | 30,771    |                  |   |            | 2,472            |             |   |             |          |           
|                                                                              | Proxy/ Litigation related fees and expenses         |                                               |            |          |                  |   |            |                 |             |   |             | 4,037,327 |           
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|Total operating expenses                                                      |                                                     |                                               | 6,504,949  |           |                  |   | 4,258,990  |                  |             |   | 11,386,872  |          
|                                                                              | Litigation recovery of management fees (Note 12,13) |                                               |            |          |                  |   |            | 370,000          |             |   |             |          |           
|Net operating income (loss) before taxes                                      |                                                     |                                               | 5,694,435  |           |                  |   | 97,394     |                  |             |   | (8,491,558  | )        
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|Tax (Benefit) Expenses:                                                       |                                                     |                                               |            |           |                  |   |            |                  |             |   |             |          
|                                                                              | Deferred tax benefit                                |                                               |            | (215,977  | )                |   |            | (87,278          | )           |   |             |          |           
|                                                                              | Current tax expense                                 |                                               |            | 115,044   |                  |   |            | 166,205          |             |   |             |          |           
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|Total tax (benefit) expense                                                   |                                                     |                                               | (100,933   | )         |                  |   | 78,927     |                  |             |   |            |          
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|Net operating income (loss)                                                   |                                                     |                                               | 5,795,368  |           |                  |   | 18,467     |                  |             |   | (8,491,558  | )        
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|Net Realized and Unrealized Gain (Loss) on Investments:                       |                                                     |                                               |            |           |                  |   |            |                  |             |   |             |          
|Net realized gain (loss) on investments                                       |                                                     |                                               |            |           |                  |   |            |                  |             |   |             |          
|                                                                              |                                                     | Non-control/ Non-affiliated investments       |            |           | (6,684,320       | ) |            |                  | (17,465,808 | ) |             |           | (4,067,535 | )
|                                                                              |                                                     | Affiliate investments                         |            |           | 3,407,457        |   |            |                  | (20,329,102 | ) |             |           | (152,845   | )
|                                                                              |                                                     | Foreign currency                              |            |           | (18,687          | ) |            |                  |            |   |             |           |           |  
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|                                                                              |                                                     | Total net realized gain (loss) on investments |            |           | (3,295,550       | ) |            |                  | (37,794,910 | ) |             |           | (4,220,380 | )
|Net change in unrealized appreciation (depreciation) on
    investments       |                                                     |                                               | 23,768,366 |           |                  |   | 49,381,974 |                  |             |   | (42,771,460 | )        
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|Net realized and unrealized gain (loss) on investments                        |                                                     |                                               | 20,472,816 |           |                  |   | 11,587,064 |                  |             |   | (46,991,840 | )        
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|Net increase (decrease) in net assets resulting from
    operations           |                                                     | $                                             | 26,268,184 |           |                  | $ | 11,605,531 |                  |             | $ | (55,483,398 | )        
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|Net increase (decrease) in net assets per share resulting
    from operations |                                                     | $                                             | 1.45       |           |                  | $ | 0.91       |                  |             | $ | (3.42       | )        
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            
|Dividends declared per share                                                  |                                                     | $                                             | 0.24       |           |                  | $ | 0.12       |                  |             | $ |            |          
|                                                                              |                                                     |                                               |            |           |                  |   |            |                  |            



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MVC Capital, Inc.





Consolidated Statements of Cash Flows


|                                                     |                                                                                                                                                       |                                                               |                                  |            |                  |           |            |                  |              |          |             |             |              |          |  
|---------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------- | -------------------------------- | ---------- | ---------------- | --------- | ---------- | ---------------- | ------------ | -------- | ----------- | ----------- | ------------ | -------- | -
|                                                     |                                                                                                                                                       | For the Year                                                  |                                  |            | For the Year     |           |            | For the Year     |             
|                                                     |                                                                                                                                                       | Ended                                                         |                                  |            | Ended            |           |            | Ended            |             
|                                                     |                                                                                                                                                       | October 31, 2005                                              |                                  |            | October 31, 2004 |           |            | October 31, 2003 |             
|                                                     |                                                                                                                                                       |                                                               |                                  |            |                  |           |            |                  |             
|Cash Flows from Operating Activities:                |                                                                                                                                                       |                                                               |                                  |            |                  |           |            |                  |              |          |             |            
|                                                     | Net increase (decrease) in net assets resulting from operations                                                                                       |                                                               | $                                | 26,268,184 |                  |           | $          | 11,605,531       |              |          | $           | (55,483,398 | )           
|                                                     | Adjustments to reconcile net increase (decrease) in net assets
    resulting from operations to net cash provided (used) by
    operating activities: |                                                               |                                  |            |                  |           |            |                  |              |          |             |             |             
|                                                     |                                                                                                                                                       | Realized loss                                                 |                                  |            | 3,295,550        |           |            |                  | 37,794,910   |          |             |             | 4,220,380    |         
|                                                     |                                                                                                                                                       | Net change in unrealized (appreciation) depreciation          |                                  |            | (23,768,366      | )         |            |                  | (49,381,974  | )        |             |             | 42,771,460   |         
|                                                     |                                                                                                                                                       | Amortization of discounts and fees                            |                                  |            | (235,428         | )         |            |                  |             |          |             |             |             |         
|                                                     |                                                                                                                                                       | Increase in accrued payment-in-kind dividends and interest    |                                  |            | (1,370,777       | )         |            |                  | (101,861     | )        |             |             |             |         
|                                                     |                                                                                                                                                       | Increase in allocation of flow through income                 |                                  |            | (114,845         | )         |            |                  |             |          |             |             |             |         
|                                                     |                                                                                                                                                       | Changes in assets and liabilities:                            |                                  |            |                  |           |            |                  |              |          |             |             |              |         
|                                                     |                                                                                                                                                       |                                                               | Interest and fees receivable     |            |                  | (474,207  | )          |                  |              | (275,661 | )           |             |              | 63,394   |  
|                                                     |                                                                                                                                                       |                                                               | Prepaid expenses                 |            |                  | (130,977  | )          |                  |              | 178,200  |             |             |              | (361,331 | )
|                                                     |                                                                                                                                                       |                                                               | Prepaid taxes                    |            |                  | (98,374   | )          |                  |              |         |             |             |              |         |  
|                                                     |                                                                                                                                                       |                                                               | Deferred tax                     |            |                  | (215,977  | )          |                  |              | (87,278  | )           |             |              |         |  
|                                                     |                                                                                                                                                       |                                                               | Other assets                     |            |                  | (43,155   | )          |                  |              | (45,445  | )           |             |              |         |  
|                                                     |                                                                                                                                                       |                                                               | Receivable for investments sold  |            |                  |          |            |                  |              |         |             |             |              | 379,632  |  
|                                                     |                                                                                                                                                       |                                                               | Payable for investment purchased |            |                  | 79,708    |            |                  |              |         |             |             |              |         |  
|                                                     |                                                                                                                                                       |                                                               | Liabilities                      |            |                  | 1,576,079 |            |                  |              | 112,361  |             |             |              | (252,393 | )
|                                                     |                                                                                                                                                       | Purchases of equity investments                               |                                  |            | (17,315,000      | )         |            |                  | (34,210,000  | )        |             |             | (1,999,997   | )       
|                                                     |                                                                                                                                                       | Purchases of debt instruments                                 |                                  |            | (37,950,271      | )         |            |                  | (20,848,139  | )        |             |             | (19,955,000  | )       
|                                                     |                                                                                                                                                       | Purchases of short term investments                           |                                  |            | (313,505,406     | )         |            |                  | (398,988,675 | )        |             |             | (952,013,288 | )       
|                                                     |                                                                                                                                                       | Purchases of warrants                                         |                                  |            |                 |           |            |                  | (550,000     | )        |             |             |             |         
|                                                     |                                                                                                                                                       | Proceeds from equity investments                              |                                  |            | 23,396,719       |           |            |                  | 4,309,991    |          |             |             | 1,884,848    |         
|                                                     |                                                                                                                                                       | Proceeds from debt instruments                                |                                  |            | 10,796,111       |           |            |                  | 8,478,894    |          |             |             | 3,239,364    |         
|                                                     |                                                                                                                                                       | Sales/maturities of short term investments                    |                                  |            | 297,482,209      |           |            |                  | 478,170,586  |          |             |             | 901,534,611  |         
|                                                     |                                                                                                                                                       |                                                               |                                  |            |                  |           |            |                  |             
|                                                     |                                                                                                                                                       | Net cash provided (used) by operating activities              |                                  |            | (32,328,223      | )         |            |                  | 36,161,440   |          |             |             | (75,971,718  | )       
|                                                     |                                                                                                                                                       |                                                               |                                  |            |                  |           |            |                  |             
|Cash flows from Financing Activities:                |                                                                                                                                                       |                                                               |                                  |            |                  |           |            |                  |              |          |             |            
|                                                     |                                                                                                                                                       | Issuance of common stock                                      |                                  |            | 60,478,127       |           |            |                  |             |          |             |             |             |         
|                                                     |                                                                                                                                                       | Repurchase of common stock                                    |                                  |            |                 |           |            |                  | (31,571,184  | )        |             |             | (2,894,917   | )       
|                                                     |                                                                                                                                                       | Distributions to shareholders paid                            |                                  |            | (4,572,359       | )         |            |                  | (1,475,165   | )        |             |             |             |         
|                                                     |                                                                                                                                                       | Offering expenses                                             |                                  |            | (402,296         | )         |            |                  |             |          |             |             |             |         
|                                                     |                                                                                                                                                       | Net borrowings under (repayments on) revolving line of credit |                                  |            | (10,025,000      | )         |            |                  | 10,025,000   |          |             |             |             |         
|                                                     |                                                                                                                                                       |                                                               |                                  |            |                  |           |            |                  |             
|                                                     |                                                                                                                                                       | Net cash provided (used) for financing activities             |                                  |            | 45,478,472       |           |            |                  | (23,021,349  | )        |             |             | (2,894,917   | )       
|                                                     |                                                                                                                                                       |                                                               |                                  |            |                  |           |            |                  |             
|Net change in cash and cash equivalents for the year |                                                                                                                                                       |                                                               | 13,150,249                       |            |                  |           | 13,140,091 |                  |              |          | (78,866,635 | )          
|                                                     |                                                                                                                                                       |                                                               |                                  |            |                  |           |            |                  |             
|Cash and cash equivalents, beginning of year         |                                                                                                                                                       |                                                               | 13,146,941                       |            |                  |           | 6,850      |                  |              |          | 78,873,485  |            
|                                                     |                                                                                                                                                       |                                                               |                                  |            |                  |           |            |                  |             
|Cash and cash equivalents, end of year               |                                                                                                                                                       | $                                                             | 26,297,190                       |            |                  | $         | 13,146,941 |                  |              | $        | 6,850       |            
|                                                     |                                                                                                                                                       |                                                               |                                  |            |                  |           |            |                  |             

Non-Cash Activity:














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MVC Capital, Inc.





Consolidated Statements of Changes in Net Assets


|                            |                                                                           |                  |   |             |                  |  |   |                  |   |  |   |             |  
|--------------------------- | ------------------------------------------------------------------------- | ---------------- | - | ----------- | ---------------- |  | - | ---------------- | - |  | - | ----------- | -
|                            |                                                                           | For the Year     |   |             | For the Year     |  |   | For the Year     |  
|                            |                                                                           | Ended            |   |             | Ended            |  |   | Ended            |  
|                            |                                                                           | October 31, 2005 |   |             | October 31, 2004 |  |   | October 31, 2003 |  
|                            |                                                                           |                  |   |             |                  |  |   |                  |  
|Operations:                 |                                                                           |                  |   |             |                  |  |   |                  |   |  |   |            
|                            | Net operating income (loss)                                               |                  | $ | 5,795,368   |                  |  | $ | 18,467           |   |  | $ | (8,491,558  | )
|                            | Net realized loss                                                         |                  |   | (3,295,550  | )                |  |   | (37,794,910      | ) |  |   | (4,220,380  | )
|                            | Net change in unrealized (appreciation) depreciation                      |                  |   | 23,768,366  |                  |  |   | 49,381,974       |   |  |   | (42,771,460 | )
|                            |                                                                           |                  |   |             |                  |  |   |                  |  
|                            | Net increase (decrease) in net assets from operations                     |                  |   | 26,268,184  |                  |  |   | 11,605,531       |   |  |   | (55,483,398 | )
|                            |                                                                           |                  |   |             |                  |  |   |                  |  
|Shareholder Distributions:  |                                                                           |                  |   |             |                  |  |   |                  |   |  |   |            
|                            | Distributions to shareholders                                             |                  |   | (4,580,676  | )                |  |   | (10,072          | ) |  |   |            |  
|                            | Return of capital distributions to shareholders                           |                  |   |            |                  |  |   | (1,465,093       | ) |  |   |            |  
|                            |                                                                           |                  |   |             |                  |  |   |                  |  
|                            | Net decrease in net assets from shareholder distributions                 |                  |   | (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                     |                  |   | 8,317       |                  |  |   |                 |   |  |   |            |  
|                            | Repurchase of common stock                                                |                  |   |            |                  |  |   | (31,571,184      | ) |  |   | (2,894,917  | )
|                            |                                                                           |                  |   |             |                  |  |   |                  |  
|                            | Net increase (decrease) in net assets from capital share
    transactions |                  |   | 61,484,148  |                  |  |   | (31,571,184      | ) |  |   | (2,894,917  | )
|                            |                                                                           |                  |   |             |                  |  |   |                  |  
|                            | Total increase (decrease) in net assets                                   |                  |   | 83,171,656  |                  |  |   | (21,440,818      | ) |  |   | (58,378,315 | )
|                            |                                                                           |                  |   |             |                  |  |   |                  |  
|                            | Net assets, beginning of year                                             |                  |   | 115,567,344 |                  |  |   | 137,008,162      |   |  |   | 195,386,477 |  
|                            |                                                                           |                  |   |             |                  |  |   |                  |  
|                            | Net assets, end of year                                                   |                  | $ | 198,739,000 |                  |  | $ | 115,567,344      |   |  | $ | 137,008,162 |  
|                            |                                                                           |                  |   |             |                  |  |   |                  |  
|                            | Common shares outstanding, end of year                                    |                  |   | 19,086,566  |                  |  |   | 12,293,042       |   |  |   | 16,152,600  |  
|                            |                                                                           |                  |   |             |                  |  |   |                  |  



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MVC Capital, Inc.





Consolidated Selected Per Share Data and Ratios


|                                       |                                                          |                  |         |       |                  |   |         |                  |      |   |                  |       |       |                  |         |       |    |   |         |       |  
|-------------------------------------- | -------------------------------------------------------- | ---------------- | ------- | ----- | ---------------- | - | ------- | ---------------- | ---- | - | ---------------- | ----- | ----- | ---------------- | ------- | ----- | -- | - | ------- | ----- | -
|                                       |                                                          | For the Year     |         |       | For the Year     |   |         | For the Year     |      |   | For the Year     |       |       | For the Year     |        
|                                       |                                                          | Ended            |         |       | Ended            |   |         | Ended            |      |   | Ended            |       |       | Ended            |        
|                                       |                                                          | October 31, 2005 |         |       | October 31, 2004 |   |         | October 31, 2003 |      |   | October 31, 2002 |       |       | October 31, 2001 |        
|                                       |                                                          |                  |         |       |                  |   |         |                  |      |   |                  |       |       |                  |        
|Net asset value, beginning of year     |                                                          | $                | 9.40    |       |                  | $ | 8.48    |                  |      | $ | 11.84            |       |       | $                | 15.42   |       |    | $ | 18.88   |      
|Gain (loss) from operations:           |                                                          |                  |         |       |                  |   |         |                  |      |   |                  |       |       |                  |         |       |    |   |         |      
|                                       | Net operating income (loss)                              |                  |         | 0.32  |                  |   |         |                 |      |   |                  | (0.53 | )     |                  |         | (0.19 | )  |   |         | 0.10  |  
|                                       | Net realized and unrealized gain (loss) on investments   |                  |         | 1.13  |                  |   |         | 0.91             |      |   |                  | (2.89 | )     |                  |         | (3.35 | )  |   |         | (3.22 | )
|                                       |                                                          |                  |         |       |                  |   |         |                  |      |   |                  |       |       |                  |        
|                                       | Total gain (loss) from investment operations             |                  |         | 1.45  |                  |   |         | 0.91             |      |   |                  | (3.42 | )     |                  |         | (3.54 | )  |   |         | (3.12 | )
|                                       |                                                          |                  |         |       |                  |   |         |                  |      |   |                  |       |       |                  |        
|Less distributions from:               |                                                          |                  |         |       |                  |   |         |                  |      |   |                  |       |       |                  |         |       |    |   |         |      
|                                       | Income                                                   |                  |         | (0.24 | )                |   |         |                 |      |   |                  |      |       |                  |         | (0.04 | )  |   |         | (0.34 | )
|                                       | Return of capital                                        |                  |         |      |                  |   |         | (0.12            | )    |   |                  |      |       |                  |         |      |    |   |         |      |  
|                                       |                                                          |                  |         |       |                  |   |         |                  |      |   |                  |       |       |                  |        
|                                       | Total distributions                                      |                  |         | (0.24 | )                |   |         | (0.12            | )    |   |                  |      |       |                  |         | (0.04 | )  |   |         | (0.34 | )
|                                       |                                                          |                  |         |       |                  |   |         |                  |      |   |                  |       |       |                  |        
|Capital share transactions             |                                                          |                  |         |       |                  |   |         |                  |      |   |                  |       |       |                  |         |       |    |   |         |      
|                                       | Dilutive 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           |                                                          | $                | 10.41   |       |                  | $ | 9.40    |                  |      | $ | 8.48             |       |       | $                | 11.84   |       |    | $ | 15.42   |      
|                                       |                                                          |                  |         |       |                  |   |         |                  |      |   |                  |       |       |                  |        
|Market value, end of year              |                                                          | $                | 11.25   |       |                  | $ | 9.24    |                  |      | $ | 8.10             |       |       | $                | 7.90    |       |    | $ | 9.25    |      
|                                       |                                                          |                  |         |       |                  |   |         |                  |      |   |                  |       |       |                  |        
|Market premium (discount)              |                                                          |                  | 8.07    | %     |                  |   | (1.70   | )%               |      |   | (4.48            | )%    |       |                  | (33.28  | )%    |    |   | (40.01  | )%   
|Total Return  At NAV(a)               |                                                          |                  | 13.36   | %     |                  |   | 12.26   | %                |      |   | (28.38           | )%    |       |                  | (22.88  | )%    |    |   | (15.99  | )%   
|Total Return  At Market(a)            |                                                          |                  | 24.38   | %     |                  |   | 15.56   | %                |      |   | 2.53             | %     |       |                  | (14.22  | )%    |    |   | (17.26  | )%   
|Ratios and Supplemental Data:          |                                                          |                  |         |       |                  |   |         |                  |      |   |                  |       |       |                  |         |       |    |   |         |      
|Net assets, end of year (in thousands) |                                                          | $                | 198,739 |       |                  | $ | 115,567 |                  |      | $ | 137,008          |       |       | $                | 195,386 |       |    | $ | 254,472 |      
|Ratios to average net assets:          |                                                          |                  |         |       |                  |   |         |                  |      |   |                  |       |       |                  |         |       |    |   |         |      
|                                       | Expenses excluding tax expense (benefit)                 |                  |         | 3.75  | %                |   |         | 3.68             | %(c) |   |                  | 7.01  | %(b)  |                  |         | 3.02  | %  |   |         | 2.50  | %
|                                       | Net operating income (loss) before tax expense (benefit) |                  |         | 3.28  | %                |   |         | 0.08             | %    |   |                  | (5.22 | )%(b) |                  |         | (1.37 | )% |   |         | 0.56  | %
|                                       | Expenses including tax expense (benefit)                 |                  |         | 3.69  | %                |   |         | 3.74             | %(c) |   |                  | 7.01  | %(b)  |                  |         | 3.02  | %  |   |         | 2.50  | %
|                                       | Net operating income (loss) after tax expense (benefit)  |                  |         | 3.34  | %                |   |         | 0.02             | %    |   |                  | (5.22 | )%(b) |                  |         | (1.37 | )% |   |         | 0.56  | %






|    |                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.



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MVC Capital, Inc.





Notes to Consolidated Financial Statements


October 31, 2005




|   |                                  
|-- | ---------------------------------
|1. | Organization and Business Purpose





Sub-Advisor). Sub-Advisor














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MVC Capital, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|   |              
|-- | -------------
|2. | Consolidation





|   |                                
|-- | -------------------------------
|3. | Significant Accounting Policies





Investment Classification


Valuation of Portfolio Securities








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MVC Capital, Inc.


Notes to Consolidated Financial
Statements  (Continued)


















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##### Table of Contents



MVC Capital, Inc.


Notes to Consolidated Financial
Statements  (Continued)






payment-in payment-in payment-in payment-in




Investment Transactions and Related Investment
Income first-in, payment-in


Cash Equivalents


Restricted Securities


Distributions to Shareholders


Income Taxes


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MVC Capital, Inc.


Notes to Consolidated Financial
Statements  (Continued)






Reclassifications




|   |           
|-- | ----------
|4. | Management









|   |                       
|-- | ----------------------
|5. | Incentive Compensation



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MVC Capital, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|   |                                            
|-- | -------------------------------------------
|6. | Dividends and Distributions to Shareholders

12-month






| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2005







| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2004





|   |                                
|-- | -------------------------------
|7. | Transactions with Other Parties



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MVC Capital, Inc.


Notes to Consolidated Financial
Statements  (Continued)






|   |                                        
|-- | ---------------------------------------
|8. | Concentration of Market and Credit Risk

90-day 90-day




|   |                      
|-- | ---------------------
|9. | Portfolio Investments



| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2005













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MVC Capital, Inc.


Notes to Consolidated Financial
Statements  (Continued)


















| |                                    
| | -----------------------------------
| | For the Year Ended October 31, 2004





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MVC Capital, Inc.


Notes to Consolidated Financial
Statements  (Continued)


















|    |                              
|--- | -----------------------------
|10. | Commitments and Contingencies





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MVC Capital, Inc.


Notes to Consolidated Financial
Statements  (Continued)


















|    |                                                     
|--- | ----------------------------------------------------
|11. | Certain Issuances of Equity Securities by the Issuer



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MVC Capital, Inc.


Notes to Consolidated Financial
Statements  (Continued)








|    |                  
|--- | -----------------
|12. | Legal Proceedings







|    |                                              
|--- | ---------------------------------------------
|13. | Recovery of Expenses and Unusual Income Items







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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                      |  | $ | (78,779,962  | )
|Undistributed net operating income                        |  |   | 2,325,641    |  
|Unrealized appreciation/depreciation                      |  |   | (49,992,918  | )
|Total tax basis accumulated deficit                       |  |   | (126,447,239 | )
|Tax cost of investments                                   |  |   | 247,035,955  |  
|Current year distributions to shareholders on a tax basis |  |   |              |  
|Ordinary income                                           |  |   | 4,580,676    |  
|Prior year distributions to shareholders on a tax basis   |  |   |              |  
|Ordinary income                                           |  |   | 10,072       |  
|Return of capital                                         |  |   | 1,465,093    |  



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MVC Capital, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|    |             
|--- | ------------
|15. | Income Taxes



|                              |  |             |          |   |             |   |         |  
|----------------------------- |  | ----------- | -------- | - | ----------- | - | ------- | -
|                              |  | Year Ended  |         
|                              |  |             |         
|                              |  | October 31, |          |   | October 31, |  
|                              |  | 2005        |          |   | 2004        |  
|                              |  |             |          |   |             |  
|Current tax expense:          |  |             |          |   |             |   |         |  
|Federal                       |  | $           | 92,892   |   |             | $ | 134,201 |  
|State                         |  |             | 22,152   |   |             |   | 32,004  |  
|                              |  |             |          |   |             |  
|Total current tax expense     |  |             | 115,044  |   |             |   | 166,205 |  
|Deferred tax benefit:         |  |             |          |   |             |   |         |  
|Federal                       |  |             | (174,390 | ) |             |   | (70,472 | )
|State                         |  |             | (41,587  | ) |             |   | (16,806 | )
|                              |  |             |          |   |             |  
|Total deferred tax benefit    |  |             | (215,977 | ) |             |   | (87,278 | )
|                              |  |             |          |   |             |  
|Total tax (benefit) provision |  | $           | (100,933 | ) |             | $ | 78,927  |  
|                              |  |             |          |   |             |  



|                                            |  |             |       |   
|------------------------------------------- |  | ----------- | ----- | --
|                                            |  | Year Ended  |      
|                                            |  | October 31, |      
|                                            |  | 2005        |      
|                                            |  |             |      
|Federal statutory tax rate                  |  |             | 34.00 | % 
|Permanent difference                        |  |             | (0.54 | )%
|State taxes, net of federal tax benefit     |  |             | 4.87  | % 
|Valuation allowance for deferred tax assets |  |             |      |   
|Other, net                                  |  |             |      |   
|                                            |  |             |      
|Effective income tax rate                   |  |             | 38.33 | % 
|                                            |  |             |      



|                               |  |             |         |  |             |   |        | 
|------------------------------ |  | ----------- | ------- |  | ----------- | - | ------ | 
|                               |  | October 31, |         |  | October 31, |  
|                               |  | 2005        |         |  | 2004        |  
|                               |  |             |         |  |             |  
|Deferred tax assets:           |  |             |         |  |             |   |        | 
|Deferred tax assets            |  | $           | 303,255 |  |             | $ | 87,278 | 
|                               |  |             |         |  |             |  
|Total deferred tax assets      |  | $           | 303,255 |  |             | $ | 87,278 | 
|Valuation allowance            |  |             |        |  |             |   |       | 
|                               |  |             |         |  |             |  
|Net deferred tax assets        |  | $           | 303,255 |  |             | $ | 87,278 | 
|Deferred tax liabilities:      |  |             |         |  |             |   |        | 
|Deferred tax liabilities       |  |             |        |  |             |   |       | 
|                               |  |             |         |  |             |  
|Total deferred tax liabilities |  |             |        |  |             |   |       | 
|Net deferred tax assets        |  | $           | 303,255 |  |             | $ | 87,278 | 
|                               |  |             |         |  |             |  

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MVC Capital, Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |                    
| | -------------------
| | Valuation Allowance





|    |               
|--- | --------------
|16. | Segment Data 





|                                                             |  |     |            |   |       |   |           |              |  |   |            |  
|------------------------------------------------------------ |  | --- | ---------- | - | ----- | - | --------- | ------------ |  | - | ---------- | -
|                                                             |  | MVC |            |   | MVCFS |   |           | Consolidated | 
|                                                             |  |     |            |   |       |   |           |              | 
|Interest and dividend income                                 |  | $   | 9,434,247  |   |       | $ | 23,269    |              |  | $ | 9,457,516  |  
|Fee income                                                   |  |     | 160,599    |   |       |   | 1,648,508 |              |  |   | 1,809,107  |  
|Other income                                                 |  |     | 932,761    |   |       |   |          |              |  |   | 932,761    |  
|Total operating income                                       |  |     | 10,527,607 |   |       |   | 1,671,777 |              |  |   | 12,199,384 |  
|Total operating expenses                                     |  |     | 6,238,086  |   |       |   | 266,863   |              |  |   | 6,504,949  |  
|Net operating income before taxes                            |  |     | 4,289,521  |   |       |   | 1,404,914 |              |  |   | 5,694,435  |  
|Tax expense (benefit)                                        |  |     |           |   |       |   | (100,933  | )            |  |   | (100,933   | )
|Net investment income                                        |  |     | 4,289,521  |   |       |   | 1,505,847 |              |  |   | 5,795,368  |  
|Net realized gain (loss) on investments and foreign currency |  |     | (3,295,550 | ) |       |   |          |              |  |   | (3,295,550 | )
|Net change in unrealized appreciation on investments         |  |     | 23,768,366 |   |       |   |          |              |  |   | 23,768,366 |  
|Net increase in net assets resulting from operations         |  | $   | 24,762,337 |   |       | $ | 1,505,847 |              |  | $ | 26,268,184 |  





|    |                                                    
|--- | ---------------------------------------------------
|17. | Submission of Matters to a Vote of Security Holders





|    |                                
|--- | -------------------------------
|18. | Subsequent Events  (Unaudited)







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Report of Independent Registered Accounting Firm














| |                  
| | -----------------
| | Ernst & Young LLP





75



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|         |                        
|-------- | -----------------------
|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


76



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Report of Independent Registered Public Accounting Firm


















| |                  
| | -----------------
| | Ernst & Young LLP





77



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| |                             
| | ----------------------------
| | 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








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



78



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Part IV







|         |                                          
|-------- | -----------------------------------------
|Item 15. | Exhibits, Financial Statements, Schedules

|       |  |                                                                                                                                                                                                                                                 |  |         |       | 
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- | ----- | 
|(a)(1) |  | Financial Statements                                                                                                                                                                                                                            |  | Page(s) |      
|       |  |                                                                                                                                                                                                                                                 |  |         |      
|       |  | Consolidated Balance Sheets
    October 31, 2005 and October 31, 2004                                                                                                                                                                           |  |         | 50    | 
|       |  | Consolidated Schedule of Investments
    October 31, 2005                                                                                                                                                                                       |  |         | 51-53 | 
|       |  | October 31, 2004                                                                                                                                                                                                                                |  |         | 54-56 | 
|       |  | Consolidated Statement of Operations
    For the Year Ended October 31, 2005, the Year Ended
    October 31, 2004, and the Year Ended October 31,
    2003                                                                                      |  |         | 57    | 
|       |  | Consolidated Statement of Cash Flows
    For the Year Ended October 31, 2005, the Year Ended
    October 31, 2004, and the Year Ended October 31,
    2003                                                                                      |  |         | 58    | 
|       |  | Consolidated Statement of Changes in Net
    Assets
    For the Year Ended October 31, 2005, the Year Ended
    October 31, 2004, and the Year Ended October 31,
    2003                                                                       |  |         | 59    | 
|       |  | Consolidated Selected Per Share Data and
    Ratios
    For the Year Ended October 31, 2005, the Year Ended
    October 31, 2004, the Year Ended October 31, 2003, the
    Year Ended October 31, 2002, and the Year Ended
    October 31, 2001 |  |         | 60    | 
|       |  | Notes to Consolidated Financial
    Statements                                                                                                                                                                                                  |  |         | 61-74 | 
|       |  | Report of Independent Registered Public
    Accounting Firm                                                                                                                                                                                     |  |         | 75    | 
|(a)(2) |  | The following financial statement schedules are filed herewith:                                                                                                                                                                                 |  |         |       | 
|       |  | Schedule 12-14 of Investments in and
    Advances to Affiliates                                                                                                                                                                                 |  |         | 79-80 | 




Schedule 12-14


MVC Capital, Inc. and Subsidiary


Schedule of Invesments in and Advances to Affiliaties


|                                                       |  |                 |  |                       |           |  |             |  |   |       |  |  |              |             |  |               |            |  |       |  |            |   |  |  |            | 
|------------------------------------------------------ |  | --------------- |  | --------------------- | --------- |  | ----------- |  | - | ----- |  |  | ------------ | ----------- |  | ------------- | ---------- |  | ----- |  | ---------- | - |  |  | ---------- | 
|                                                       |  |                 |  | Amount of Interest or |           |  |             |  |   |       |  |  |             
|                                                       |  |                 |  | Dividends Credited    |           |  | October 31, |  |   |       |  |  |              | October 31, | 
|                                                       |  |                 |  |                       |           |  | 2004        |  |   | Gross |  |  | Gross        |             |  | 2005          |           
|Portfolio Company                                      |  | Investment(1)   |  | To Income(5)          |           |  | Other(2)    |  |   | Value |  |  | Additions(3) |             |  | Reductions(4) |            |  | Value | 
|                                                       |  |                 |  |                       |           |  |             |  |   |       |  |  |              |             |  |               |            |  |       | 
|Companies More than 25% owned                          |  |                 |  |                       |           |  |             |  |   |       |  |  |              |             |  |               |            |  |       |  |            |   |  |  |            | 
|Baltic Motors Corporation                              |  | Loan            |  |                       | 456,250   |  |             |  |  |       |  |  | 4,500,000    |             |  |               |           |  |       |  |           |   |  |  | 4,500,000  | 
|(Automotive Dealership)                                |  | Common Stock    |  |                       |          |  |             |  |  |       |  |  | 6,000,000    |             |  |               | 1,500,000  |  |       |  |           |   |  |  | 7,500,000  | 
|Ohio Medical Corporation                               |  | Common Stock    |  |                       |          |  |             |  |  |       |  |  |             |             |  |               | 17,000,000 |  |       |  |           |   |  |  | 17,000,000 | 
|(Medical Device Manufacturer)                          |  |                 |  |                       |           |  |             |  |   |       |  |  |              |             |  |               |            |  |       |  |            |   |  |  |            | 
|SGDA Sanierungsgesellschaft fur Deponien und Altlasten |  | Loan            |  |                       | 263,103   |  |             |  |  |       |  |  |             |             |  |               | 4,304,560  |  |       |  |           |   |  |  | 4,304,560  | 
|(Soil Remediation)                                     |  | Revolver        |  |                       | 23,624    |  |             |  |  |       |  |  |             |             |  |               | 1,237,700  |  |       |  |           |   |  |  | 1,237,700  | 
|                                                       |  | Equity Interest |  |                       |          |  |             |  |  |       |  |  |             |             |  |               | 315,000    |  |       |  |           |   |  |  | 315,000    | 
|Timberland Machines & Irrigation, Inc.                 |  | Loan            |  |                       | 1,048,624 |  |             |  |  |       |  |  | 6,042,164    |             |  |               | 276,520    |  |       |  |           |   |  |  | 6,318,684  | 
|(Distributer  Landscaping & Irrigation
    Equipment) |  | Revolver        |  |                       | 194,374   |  |             |  |  |       |  |  |             |             |  |               | 4,500,000  |  |       |  | (1,250,000 | ) |  |  | 3,250,000  | 
|                                                       |  | Common Stock    |  |                       |          |  |             |  |  |       |  |  | 4,500,000    |             |  |               |           |  |       |  |           |   |  |  | 4,500,000  | 
|                                                       |  | Warrants        |  |                       |          |  |             |  |  |       |  |  |             |             |  |               |           |  |       |  |           |   |  |  |           | 
|Vendio Services, Inc.                                  |  | Common Stock    |  |                       |          |  |             |  |  |       |  |  |             |             |  |               |           |  |       |  |           |   |  |  |           | 
|(Technology)                                           |  | Preferred Stock |  |                       |          |  |             |  |  |       |  |  | 1,134,001    |             |  |               | 1,565,999  |  |       |  |           |   |  |  | 2,700,000  | 

79



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|                                                      |  |                  |  |                       |           |  |             |  |   |       |  |  |              |             |  |               |           |  |       |  |             |   |  |   |            | 
|----------------------------------------------------- |  | ---------------- |  | --------------------- | --------- |  | ----------- |  | - | ----- |  |  | ------------ | ----------- |  | ------------- | --------- |  | ----- |  | ----------- | - |  | - | ---------- | 
|                                                      |  |                  |  | Amount of Interest or |           |  |             |  |   |       |  |  |             
|                                                      |  |                  |  | Dividends Credited    |           |  | October 31, |  |   |       |  |  |              | October 31, | 
|                                                      |  |                  |  |                       |           |  | 2004        |  |   | Gross |  |  | Gross        |             |  | 2005          |          
|Portfolio Company                                     |  | Investment(1)    |  | To Income(5)          |           |  | Other(2)    |  |   | Value |  |  | Additions(3) |             |  | Reductions(4) |           |  | Value | 
|                                                      |  |                  |  |                       |           |  |             |  |   |       |  |  |              |             |  |               |           |  |       | 
|Vestal Manufacturing Enterprises, Inc.                |  | Loan             |  |                       | 115,833   |  |             |  |  |       |  |  | 1,000,000    |             |  |               |          |  |       |  | (100,000    | ) |  |   | 900,000    | 
|(Iron Foundries)                                      |  | Common Stock     |  |                       |          |  |             |  |  |       |  |  | 450,000      |             |  |               | 3,250,000 |  |       |  |            |   |  |   | 3,700,000  | 
|Total companies more than 25% owned                   |  |                  |  | $                     | 2,101,808 |  |             |  |   |       |  |  |              |             |  |               |           |  |       |  |             |   |  | $ | 56,225,944 | 
|Companies More than 5% owned, but less than 25%       |  |                  |  |                       |           |  |             |  |   |       |  |  |              |             |  |               |           |  |       |  |             |   |  |   |            | 
|Dakota Growers Pasta Company, Inc.                    |  | Common Stock     |  |                       |          |  |             |  |  |       |  |  | 5,000,000    |             |  |               | 514,000   |  |       |  |            |   |  |   | 5,514,000  | 
|(Manufacturer of Packged Food)                        |  |                  |  |                       |           |  |             |  |   |       |  |  |              |             |  |               |           |  |       |  |             |   |  |   |            | 
|Endymion Systems, Inc.                                |  | Preferred Stock  |  |                       |          |  |             |  |  |       |  |  |             |             |  |               |          |  |       |  |            |   |  |   |           | 
|(Technology Investments)                              |  |                  |  |                       |           |  |             |  |   |       |  |  |              |             |  |               |           |  |       |  |             |   |  |   |            | 
|Impact Confections, Inc.                              |  | Loan             |  |                       | 867,755   |  |             |  |  |       |  |  | 5,000,000    |             |  |               | 228,826   |  |       |  |            |   |  |   | 5,228,826  | 
|(Confections Manufacturing & Distribution)            |  | Loan             |  |                       | 6,286     |  |             |  |  |       |  |  |             |             |  |               | 325,000   |  |       |  |            |   |  |   | 325,000    | 
|                                                      |  | Common Stock     |  |                       |          |  |             |  |  |       |  |  | 2,700,000    |             |  |               |          |  |       |  |            |   |  |   | 2,700,000  | 
|Phosister Technologies, Inc.                          |  | Preferred Stock  |  |                       |          |  |             |  |  |       |  |  |             |             |  |               |          |  |       |  |            |   |  |   |           | 
|(Technology)                                          |  |                  |  |                       |           |  |             |  |   |       |  |  |              |             |  |               |           |  |       |  |             |   |  |   |            | 
|ProcessClaims, Inc.                                   |  | Preferred Stock  |  |                       |          |  |             |  |  |       |  |  | 2,000,000    |             |  |               |          |  |       |  |            |   |  |   | 2,000,000  | 
|(Technology)                                          |  | Preferred Stock  |  |                       |          |  |             |  |  |       |  |  | 400,000      |             |  |               |          |  |       |  |            |   |  |   | 400,000    | 
|                                                      |  | Warrants         |  |                       |          |  |             |  |  |       |  |  |             |             |  |               |          |  |       |  |            |   |  |   |           | 
|ShopEaze Systems, Inc.                                |  | Preferred Stock  |  |                       |          |  |             |  |  |       |  |  |             |             |  |               |          |  |       |  |            |   |  |   |           | 
|(Technology)                                          |  |                  |  |                       |           |  |             |  |   |       |  |  |              |             |  |               |           |  |       |  |             |   |  |   |            | 
|Sonexis, Inc.                                         |  | Common Stock     |  |                       |          |  |             |  |  |       |  |  |             |             |  |               |          |  |       |  |            |   |  |   |           | 
|(Technology)                                          |  |                  |  |                       |           |  |             |  |   |       |  |  |              |             |  |               |           |  |       |  |             |   |  |   |            | 
|Sygate Technologies, Inc.                             |  | Preferred Stock  |  |                       |          |  |             |  |  |       |  |  | 5,500,000    |             |  |               | 8,900,000 |  |       |  | (14,400,000 | ) |  |   |           | 
|(Technology)                                          |  |                  |  |                       |           |  |             |  |   |       |  |  |              |             |  |               |           |  |       |  |             |   |  |   |            | 
|Vitality Foodservice, Inc.                            |  | Common Stock     |  |                       |          |  |             |  |  |       |  |  | 5,000,000    |             |  |               |          |  |       |  |            |   |  |   | 5,000,000  | 
|(Non-Alcoholic Beverages)                             |  | Preferred Stock* |  |                       | 1,346,760 |  |             |  |  |       |  |  | 10,000,000   |             |  |               | 517,984   |  |       |  |            |   |  |   | 10,517,984 | 
|                                                      |  | Warrants         |  |                       |          |  |             |  |  |       |  |  |             |             |  |               | 700,000   |  |       |  |            |   |  |   | 700,000    | 
|Yaga, Inc.                                            |  | Preferred Stock  |  |                       |          |  |             |  |  |       |  |  |             |             |  |               |          |  |       |  |            |   |  |   |           | 
|(Technology)                                          |  | Preferred Stock  |  |                       |          |  |             |  |  |       |  |  |             |             |  |               |          |  |       |  |            |   |  |   |           | 
|Total companies more than 5% owned, but less than 25% |  |                  |  | $                     | 2,220,801 |  |             |  |   |       |  |  |              |             |  |               |           |  |       |  |             |   |  | $ | 32,385,810 | 








|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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, 2005.                                                                                                 
|   
|(2) | Other includes interest, dividend, or other income which was
    applied to the principal of the investment and therefore reduced
    the total investment. These reductions are also included in the
    Gross Reductions for the investment, as applicable.                                                                                                                                                                   
|   
|(3) | Gross additions include increases in the cost basis of
    investments resulting from new portfolio investments,
    paid-in-kind-interest or dividends, the amortization of
    discounts and closing fees, 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 include 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 the portion of the year an investment was included in
    the companies more than 25% owned or companies 5% to 25% owned
    categories, respectively.                                                                                                                                                                                          

80



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| |   |                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | 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.





|        |    |             |  |                                                                                                                                                                                                                                                                                                                                         
|------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 3  | .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)                                                                                           
|       
|        | 10 | .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          |  | 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 | .5          |  | 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 November 23, 2004)                    
|       
|        | 10 | .6          |  | 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 | .7          |  | 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 | .8          |  | 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 | .9          |  | 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 | .10*        |  | Form of Amendment to Loan Agreement with Registrant and LaSalle
    Bank National Association                                                                                                                                                                                                                                           
|       
|        | 10 | .11         |  | 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 | .12         |  | Form of Fund Administration Servicing Agreement with
    Registrant and U.S. Bancorp Fund Services, LLC.
    (Incorporated by reference to Exhibit 99.k.5 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)             

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##### Table of Contents



|        |     |             |  |                                                                                                                                                                                                                                                                                                                        
|------- | --- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |            
|Number  |     | Description
|        |     |            
|       
|        | 10  | .13         |  | Form of Amendment to the Fund Administration Servicing
    Agreement. (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 November 23, 2004)                                   
|       
|        | 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 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  | .15         |  | Form of Amendment to the Fund Accounting Servicing
    Agreement. (Incorporated by reference to Exhibit 99.k.8
    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)                                       
|       
|        | 14  |             |  | Code of Ethics. (Incorporated by reference to
    Exhibit 99.r 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)                                                                                           
|       
|        | 31* |             |  | Certifications of the Chief Executive Officer and the Chief
    Financial Officer pursuant to Rule 13a-14(a) of the
    Securities Exchange Act of 1934                                                                                                                                                                
|       
|        | 32* |             |  | 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.     |    | Exhibit
|        |    |        
|        | 10 | .10     |  | Form of Amendment to Loan Agreement with Registrant and LaSalle
    Bank National Association                                                                          
|       
|        | 31 |         |  | Certifications of the Chief Executive Officer and the Chief
    Financial Officer pursuant to Rule 13a-14(a) of the
    Securities Exchange Act of 1934                
|       
|        | 32 |         |  | 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



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##### Table of Contents





|                                     |  |                                                     |  |                   |  | 
|------------------------------------ |  | --------------------------------------------------- |  | ----------------- |  | 
|Signature                            |  | Title                                               |  | Date             
|                                     |  |                                                     |  |                  
|                                    
|/s/ Michael TokarzMichael
    Tokarz |  | Chairman (Principal Executive Officer) and Director |  | December 21, 2005



|                                           |  |                                                     |  |                   |  | 
|------------------------------------------ |  | --------------------------------------------------- |  | ----------------- |  | 
|Signature                                  |  | Title                                               |  | Date             
|                                           |  |                                                     |  |                  
|                                          
|/s/ Michael TokarzMichael
    Tokarz       |  | Chairman (Principal Executive Officer) and Director |  | December 21, 2005
|                                          
|/s/ Peter SeidenbergPeter
    Seidenberg   |  | Chief Financial Officer                             |  | December 21, 2005
|                                          
|/s/ Gerald HellermanGerald
    Hellerman   |  | Director                                            |  | December 21, 2005
|                                          
|/s/ Robert C. KnappRobert
    C. Knapp     |  | Director                                            |  | December 21, 2005
|                                          
|/s/ Robert S. EverettRobert
    S. Everett |  | Director                                            |  | December 21, 2005
|                                          
|/s/ Emilio DominianniEmilio
    Dominianni |  | Director                                            |  | December 21, 2005

83