----

----

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

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

|                                                          |                                |
|---------------------------------------------------------------|-------------------------------------|
| Delaware                                                      | 76-0345915                          |
| (State or other jurisdiction ofincorporation or organization) | (I.R.S. EmployerIdentification No.) |
|                                                          |                                |
| Eight Greenway Plaza, Suite 930 Houston, Texas                | 77046                               |
| (Address of principal executive offices)                      | (Zip Code)                          |

|                           |                     |                    |                             |
|--------------------------------|--------------------------|-------------------------|----------------------------------|
| Large accelerated filer  ̈ | Accelerated filer  ̈ | Non-accelerated filer x | Smaller Reporting Company  ̈ |

----

Index

INDEX

|                               |         |                                                                |                                                                                        | PAGE   |
|------------------------------------|--------------|---------------------------------------------------------------------|---------------------------------------------------------------------------------------------|--------|
| PART I. FINANCIAL INFORMATION |         |                                                                |
|                               | Item 1. |                                                                | Financial Statements                                                                        |   |   |
|                               |         | Balance Sheets                                                      |                                                                                        | 3      |
|                               |         | Statements of Operations                                            |                                                                                        | 4      |
|                               |         | Statements of Changes in Net Assets                                 |                                                                                        | 6      |
|                               |         | Statements of Cash Flows                                            |                                                                                        | 7      |
|                               |         | Supplemental Information – Selected Per Share Data and Ratios |                                                                                        | 8      |
|                               |         | Schedule of Portfolio Securities                                    |                                                                                        | 9      |
|                               |         | Notes to Financial Statements                                       |                                                                                        | 15     |
|                               | Item 2.      |                                                                | Management’s Discussion and Analysis of Financial Condition and Results of Operations |   | 24 |
|                               | Item 3.      |                                                                | Quantitative and Qualitative Disclosure about Market Risk                                   |   | 32 |
|                               | Item 4.      |                                                                | Controls and Procedures                                                                     |   | 32 |
| PART II. OTHER INFORMATION         |         |                                                                |
|                               | Item 1.      |                                                                | Legal Proceedings                                                                           |   | 33 |
|                               | Item 1A.     |                                                                | Risk Factors                                                                                |   | 33 |
|                               | Item 6.      |                                                                | Exhibits                                                                                    |   | 34 |
| SIGNATURE                          |         | 35                                                                  |

----

Index

BALANCE SHEETS

Part I.

Item  1.

|                                                                                                                                                 |   | September30, 2010 |    |   | December 31, 2009 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|---------|--------|-------------------|--------|
| (in thousands, except per share amounts)                                                                                                             |   | (Unaudited)            |    |   |              |   |
| Assets                                                                                                                                               |   |                   |    |   |              |   |
| Investments in portfolio securities at fair value:                                                                                                   |   |                   |    |   |              |   |
|      Control investments (cost at $34,171 and $35,315 respectively)                                                         |   | $                      | 17,114  |   |              | $      | 28,729 |   |
|      Affiliate investments (cost at $923 and $8,973 respectively)                                                           |   |                   | 727     |   |              |   | 2,128 |   |
|      Non-affiliate investments (cost at $20,305 and $13,350 respectively)                                                   |   |                   | 3,510   |   |              |   | 11,554 |   |
|         Total investments in portfolio securities at fair value                                              |   |                   | 21,351  |   |              |   | 42,411 |   |
| Restricted cash and temporary investments                                                                                                            |   |                   | 16,160  |   |              |   | 30,299 |   |
| Cash                                                                                                                                                 |   |                   | 2,477   |   |              |   | 535 |   |
| Temporary cash investments                                                                                                                           |   |                   | 4,928   |   |              |   | 5,510 |   |
| Accounts receivable and other                                                                                                                        |   |                   | 174     |   |              |   | 47 |   |
| Accrued interest receivable due from portfolio companies                                                                                             |   |                   | 2,598   |   |              |   | 2,205 |   |
| Deferred offering costs                                                                                                                              |   |                   | 65      |   |              |   | - |   |
|           Total assets                                                                             |   |                   | 47,753  |   |              |   | 81,007 |   |
| Liabilities                                                                                                                                          |   |                   |    |   |              |   |   |   |
|      Accounts payable and accrued liabilities                                                                               |   | $                      | 178     |   |              | $      | 107 |   |
|      Accounts payable to related parties                                                                                    |   |                   | 101     |   |              |   | - |   |
|      Borrowing under margin account                                                                                         |   |                   | 16,000  |   |              |   | 29,999 |   |
|           Total liabilities                                                                        |   |                   | 16,279  |   |              |   | 30,106 |   |
| Net assets                                                                                                                                           |   | $                      | 31,474  |   |              | $      | 50,901 |   |
| Net assets consist of:                                                                                                                               |   |                   |    |   |              |   |   |   |
|      Common stock, par value                                                                                                |   |                   | 9       |   |              |   | 9 |   |
|      Capital in excess of par value                                                                                         |   |                   | 70,598  |   |              |   | 70,604 |   |
|      Undistributed net investment losses                                                                                    |   |                   | (5,085  | )      |              |   | (4,485 | ) |
|      Unrealized depreciation of portfolio securities, net                                                                   |   |                   | (34,048 | )      |              |   | (15,227 | ) |
|           Total net assets                                                                         |   | $                      | 31,474  |   |              | $      | 50,901 |   |
| Shares of common stock issued and outstanding, $.001 par value, 50,000 shares authorized           |   |                   | 8,862   |   |              |   | 8,862 |   |
| Shares of preferred stock $.001 par value, 5,000 shares authorized, no shares outstanding                                                            |   |                   | -       |   |              |   |  - |   |
| Net asset value per share                                                                                                                            |   | $                      | 3.55    |   |              | $      | 5.74 |   |

----

Index

STATEMENTS OF OPERATIONS

|                                                                                                                         |   | Three months endedSeptember 30, |    |
|------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|---------|
|  (in thousands, except per share amounts)                                                                               |   | 2010                            |    |   | 2009 |   |
| Investment income:                                                                                                           |   |                            |    |   |   |   |
|      Interest and dividend income from portfolio securities:                                        |   |                            |    |   |   |   |
|           Control investments                                              |   | $                               | 274     |   |   | $ | 809 |   |
|           Affiliate investments                                            |   |                            | 13      |   |   |   | 13 |   |
|           Non-affiliate investments                                        |   |                            | 319     |   |   |   | 501 |   |
|                Total interest and dividend income |   |                            | 606     |   |   |   | 1,323 |   |
|      Interest from temporary cash investments                                                       |   |                            | 2       |   |   |   | 6 |   |
|          Total investment income                                                |   |                            | 608     |   |   |   | 1,329 |   |
| Expenses:                                                                                                                    |   |                            |    |   |   |   |   |   |
|      Compensation expense                                                                           |   |                            | 244     |   |   |   | 259 |   |
|      Professional fees                                                                              |   |                            | 123     |   |   |   | 375 |   |
|      Director fees and expenses                                                                     |   |                            | 62      |   |   |   | 111 |   |
|      Mailing, printing and other expenses                                                           |   |                            | 37      |   |   |   | 52 |   |
|      General and administrative expense                                                             |   |                            | 42      |   |   |   | 81 |   |
|      Interest expense                                                                               |   |                            | 7       |   |   |   | 11 |   |
|      Taxes                                                                                          |   |                            | 14      |   |   |   | - |   |
|           Total expenses                                                   |   |                            | 529     |   |   |   | 889 |   |
| Net investment income                                                                                                        |   |                            | 79      |   |   |   | 440 |   |
| Net realized loss on portfolio securities:                                                                                   |   |                            |    |   |   |   |   |   |
|      Temporary cash investments                                                                     |   |                            | (1      | ) |   |   | (6 | ) |
|         Total net realized loss on portfolio securities                              |   |                            | (1      | ) |   |   | (6 | ) |
| Net unrealized depreciation of portfolio securities:                                                                         |   |                            |    |   |   |   |   |   |
|      End of period                                                                                  |   |                            | (34,048 | ) |   |   | (15,842 | ) |
|      Beginning of period                                                                            |   |                            | (27,556 | ) |   |   | (8,043 | ) |
| Net change in unrealized depreciation of portfolio securities                                                                |   |                            | (6,492  | ) |   |   | (7,799 | ) |
| Net decrease in net assets resulting from operations                                                                         |   | $                               | (6,413  | ) |   | $ | (7,365 | ) |
|                                                                                                                         |   |                            |    |   |   |   |   |   |
| Net decrease in net assets resulting from operations per share:                                                              |   |                            |    |   |   |   |   |   |
|       Basic and diluted                                                                        |   | $                               | (0.72   | ) |   | $ | (0.83 | ) |
| Weighted average shares outstanding, in thousands                                                                            |   |                            |    |   |   |   |   |   |
|       Basic and diluted                                                                        |   |                            | 8,862   |   |   |   | 8,862 |   |

----

Index

|                                                                                                                         |   | Nine months endedSeptember 30, |    |
|------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|---------|
|  (in thousands, except per share amounts)                                                                               |   | 2010                           |    |   | 2009 |   |
| Investment income:                                                                                                           |   |                           |    |   |   |   |
|      Interest and dividend income from portfolio securities:                                        |   |                           |    |   |   |   |
|           Control investments                                              |   | $                              | 851     |   |   | $ | 1,361 |   |
|           Affiliate investments                                            |   |                           | 39      |   |   |   | 37 |   |
|           Non-affiliate investments                                             |   |                           | 1,387   |   |   |   | 1,510 |   |
|                Total interest and dividend income |   |                           | 2,277   |   |   |   | 2,908 |   |
|      Interest from temporary cash investments                                                       |   |                           | 9       |   |   |   | 41 |   |
|          Total investment income                                                |   |                           | 2,286   |   |   |   | 2,949 |   |
| Expenses:                                                                                                                    |   |                           |    |   |   |   |   |   |
|      Management fee                                                                                 |   |                           | -       |   |   |   | 714 |   |
|      Administrative fees                                                                            |   |                           | -       |   |   |   | 226 |   |
|      Compensation expense                                                                           |   |                           | 793     |   |   |   | 259 |   |
|      Professional fees                                                                              |   |                           | 1,300   |   |   |   | 1,014 |   |
|      Director fees and expenses                                                                     |   |                           | 275     |   |   |   | 356 |   |
|      Mailing, printing and other expenses                                                           |   |                           | 317     |   |   |   | 212 |   |
|      General and administrative expense                                                             |   |                           | 132     |   |   |   | 81 |   |
|      Interest expense                                                                               |   |                           | 31      |   |   |   | 33 |   |
|      Taxes                                                                                          |   |                           | 38      |   |   |   | 30 |   |
|           Total expenses                                                   |   |                           | 2,886   |   |   |   | 2,925 |   |
| Net investment income loss                                                                                                   |   |                           | (600    | ) |   |   | 24 |   |
| Net realized loss on portfolio securities:                                                                                   |   |                           |    |   |   |   |   |   |
|      Temporary cash investments                                                                     |   |                           | (6      | ) |   |   | (38 | ) |
|         Total net realized loss on portfolio securities                              |   |                           | (6      | ) |   |   | (38 | ) |
| Net unrealized depreciation of portfolio securities:                                                                         |   |                           |    |   |   |   |   |   |
|      End of period                                                                                  |   |                           | (34,048 | ) |   |   | (15,842 | ) |
|      Beginning of period                                                                            |   |                           | (15,227 | ) |   |   | (3,055 | ) |
| Net change in unrealized depreciation of portfolio securities                                                                |   |                           | (18,821 | ) |   |   | (12,787 | ) |
| Net decrease in net assets resulting from operations                                                                         |   | $                              | (19,427 | ) |   | $ | (12,801 | ) |
| Net decrease in net assets resulting from operations per share:                                                              |   |                           |    |   |   |   |   |   |
|       Basic and diluted                                                                        |   | $                              | (2.19   | ) |   | $ | (1.46 | ) |
| Weighted average shares outstanding, in thousands                                                                            |   |                           |    |   |   |   |   |   |
|       Basic and diluted                                                                        |   |                           | 8,862   |   |   |   | 8,766 |   |

----

Index

STATEMENTS OF CHANGES IN NET ASSETS

|                                                                                  |   | Nine months endedSeptember 30, |    |
|---------------------------------------------------------------------------------------|--------|--------------------------------|---------|
|  (in thousands)                                                                  |   | 2010                           |    |   | 2009 |   |
|  Net decrease in net assets resulting from operations                            |   | $                              | (19,427 | ) |   | $ | (12,801 | ) |
|  Capital share transactions:                                                     |   |                           |    |   |   |   |   |   |
|       Dividend declared                                 |   |                           | -       |   |   |   | (921 | ) |
|       Shares issued in dividend                         |   |                           | -       |   |   |   | 919 |   |
|  Net increase (decrease) in net assets resulting from capital share transactions |   |                           | -       |   |   |   | (2 | ) |
|  Decrease in net assets                                                          |   |                           | (19,427 | ) |   |   | (12,803 | ) |
|  Net assets at beginning of period                                               |   |                           | 50,901  |   |   |   | 78,435 |   |
|  Net assets at end of period                                                     |   | $                              | 31,474  |   |   | $ | 65,632 |   |

----

Index

STATEMENTS OF CASH FLOWS

|                                                                                                |   | Nine months endedSeptember 30, |    |
|-----------------------------------------------------------------------------------------------------|--------|--------------------------------|---------|
| (in thousands)                                                                                      |   | 2010                           |    |   | 2009 |   |
| Reconciliation of decrease in net assets resulting from operations to net cash                      |   |                           |    |   |   |   |
|       provided by operating activities:                               |   |                           |    |   |   |   |
| Net decrease in net assets resulting from operations                                                |   | $                              | (19,427 | ) |   | $ | (12,801 | ) |
| Adjustments to reconcile net decrease in net assets resulting from operations to net cash           |   |                           |    |   |   |
|       provided by operating activities:                               |   |                           |    |   |   |   |   |   |
|      Net realized loss                                                     |   |                           | 6       |   |   |   | 38 |   |
|      Net change in unrealized depreciation of portfolio securities         |   |                           | 18,821  |   |   |   | 12,787 |   |
| Changes in operating assets and liabilities:                                                        |   |                           |    |   |   |   |   |   |
|      Purchase of portfolio securities                                      |   |                           | (775    | ) |   |   | (720 | ) |
|      Principal payments received from portfolio securities                 |   |                           | 3,501   |   |   |   | 916 |   |
|      Sales of restricted temporary cash investments                        |   |                           | 14,133  |   |   |   | 11,043 |   |
|      Decrease in accounts receivable and other                             |   |                           | (127    | ) |   |   | (46 | ) |
|      Increase in accrued interest receivable due from portfolio securities |   |                           | (880    | ) |   |   | (1,600 | ) |
|      Increase in deferred offering costs                                   |   |                           | (65     | ) |   |   | - |   |
|      Increase (decrease) in accounts payable and accrued liabilities       |   |                           | 71      |   |   |   | (103 | ) |
|      Increase in accounts payable-related parties                          |   |                           | 101     |   |   |   | - |   |
|      Decrease in due to adviser                                            |   |                           | -       |   |   |   | (455 | ) |
| Net cash provided by operating activities                                                           |   |                           | 15,359  |   |   |   | 9,059 |   |
| Cash flows from financing activities:                                                               |   |                           |    |   |   |   |   |   |
|      Borrowings under margin account                                       |   |                           | 55,999  |   |   |   | 117,038 |   |
|      Repayments under margin account                                       |   |                           | (69,998 | ) |   |   | (128,009 | ) |
|      Dividends paid                                                        |   |                           | -       |   |   |   | (2 | ) |
|         Net cash used in financing activities               |   |                           | (13,999 | ) |   |   | (10,973 | ) |
| Net decrease in cash and cash equivalents                                                           |   |                           | 1,360   |   |   |   | (1,914 | ) |
| Cash and temporary cash investments at beginning of period                                          |   |                           | 6,045   |   |   |   | 8,656 |   |
| Cash and temporary cash investments at end of period                                                |   | $                              | 7,405   |   |   | $ | 6,742 |   |
| Non-cash operating and financing activities:                                                        |   |                           |    |   |   |   |   |   |
|      Shares issued in lieu of cash dividend                                |   | $                              | -       |   |   | $ | 919 |   |
|      Accrued interest or dividends exchanged for portfolio securities      |   | $                              | 487     |   |   | $ | 875 |   |
| Supplemental disclosure of cash flow information:                                                   |   |                           |    |   |   |   |   |   |
|      Interest paid                                                         |   | $                              | 7       |   |   | $ | 42 |   |
|      Income taxes paid                                                     |   | $                              | 38      |   |   | $ | 17 |   |

----

Index

SUPPLEMENTAL INFORMATION

|                                                                                                                    |   | Nine months endedSeptember 30, |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                                                                    |   | 2010                           |   |   | 2009 |   |
| Investment income                                                                                                       |   | $                              | 0.26   |   |   | $ | 0.34 |   |
| Expenses                                                                                                                |   |                           | (0.33  | ) |   |   | 0.34 |   |
| Net investment income (loss)                                                                                            |   |                           | (0.07  | ) |   |   | - |   |
| Net realized loss on portfolio securities                                                                               |   |                           | -      |   |   |   | - |   |
| Net change in unrealized depreciation of portfolio securities                                                           |   |                           | (2.12  | ) |   |   | (1.46 | ) |
| Net decrease in net assets resulting from operations                                                                    |   |                           | (2.19  | ) |   |   | (1.46 | ) |
| Capital transactions:                                                                                                   |   |                           |   |   |   |   |   |   |
|    Dividend declared                                                                                     |   |                           | -      |   |   |   | (0.11 | ) |
|    Dilutive effect of shares issued in common stock dividend                                             |   |                           | -      |   |   |   | (0.18 | ) |
| Decrease in net assets resulting from capital transactions                                                              |   |                           | -      |   |   |   | (0.29 | ) |
| Net decrease in net assets                                                                                              |   |                           | (2.19  | ) |   |   | (1.75 | ) |
| Net assets at beginning of period                                                                                       |   |                           | 5.74   |   |   |   | 9.16 |   |
| Net assets at end of period, basic and diluted                                                                          |   | $                              | 3.55   |   |   | $ | 7.41 |   |
| Weighted average number of shares outstanding during period,                                                            |   |                           |   |   |   |   |   |   |
|      in thousands                                                                              |   |                           | 8,862  |   |   |   | 8,766 |   |
| Market value per share at end of period                                                                                 |   | $                              | 2.38   |   |   | $ | 3.22 |   |
| Selected ratios:                                                                                                        |   |                           |   |   |   |   |   |   |
|      Ratio of expenses to average net assets                                                        |   |                           | 7.01   | % |   |   | 4.06 | % |
|      Ratio of net investment gain (loss) to average net assets                                      |   |                           | (1.46  | )% |   |   | 0.03 | % |
|      Ratio of net increase (decrease) in net assets resulting from operations to average net assets |   |                           | (47.17 | )% |   |   | (17.77 | )% |
|      Total return on market price*                                                                  |   |                           | (25.63 | )% |   |   | (22.62 | )% |

| * | Adjusted for dividends and can be calculated as the current market value plus year-to-date dividends declared less the beginning market value, divided by the beginning market value. There were no dividends paid in the nine months ending September 30, 2010. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

SCHEDULE OF PORTFOLIO SECURITIES

| Name and Location ofPortfolio Company                                                |   | Industry                       |   | Date of InitialInvestment                                     |   | Investment                                                                    |   | Principal                                                                      |   | Cost ofInvestment                                                                   |   | FairValue(1)                                                                                                        |
|----------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------|-------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------|
|                                                                                                     |   |                           |   |                                                                    |   |                                                                          |   | (in thousands)                                                                 |
| Control investments:  Majority-owned (5):                                                      |   |                           |   |                                                                    |   |                                                                          |   |                                                                           |   |                                                                                |
| Equus Media Development Company, LLCHouston, TX                                                          |   | Media                     |   | January 2007                                                       |   | Member interest (100%)                                                   |   |                                                                           |   | $           4,000                 |   | $          1,175                                             |
| Riptide Entertainment, LLCMiami, FL                                                                      |   | Entertainment and leisure      |   | December 2005                                                      |   | Member interest (64.67%)8% promissory notes (4)                     |   |  $        10,009                  |   | 6510,009                                                                            |   | --                                                                                                                  |
|                                                                                                     |   |                           |   |                                                                    |   |                                                                          |   |                                                                           |   | 10,074                                                                              |   | -                                                                                                                   |
| Sovereign Business Forms, Inc.Houston, TX                                                                |   | Business products and services |   | August 1996                                                             |   | 1,214,630 shares of common stock (64.66% / 55.00% Fully Diluted)              |   |                                                                           |   | 5,080                                                                               |   | 4,552                                                                                                               |
|                                                                                                     |   |                           |   |                                                                    |   | 12% subordinated promissory notes (2)                                         |   | 3,107                                                                          |   | 3,107                                                                               |   | 3,107                                                                                                               |
|                                                                                                     |   |                           |   |                                                                    |   |                                                                          |   |                                                                           |   | 8,187                                                                               |   | 7,659                                                                                                               |
| Spectrum Management, LLCCarrollton, TX                                                                   |   | Business products and services |   | December 1999                                                      |   | 285,000 units of Class A member interest (79%)                           |   |                                                                           |   | 2,850                                                                               |   | 590                                                                                                                 |
|                                                                                                     |   |                           |   |                                                                    |   | 16% subordinated promissory note(2)(3)                                        |   | 1,690                                                                          |   | 1,690                                                                               |   | 1,690                                                                                                               |
|                                                                                                     |   |                           |   |                                                                    |   |                                                                          |   |                                                                           |   | 4,540                                                                               |   | 2,280                                                                                                               |
| Total Control investments: Majority-owned (represents 52.1% of total investments at fair value)          |   |                           |   | $       26,801                                 |   | $      11,114                                   |
| Control Investments: Non-majority owned(6):                                                              |   |                           |   |                                                                    |   |                                                                          |
| ConGlobal Industries Holding, Inc.San Ramon, CA                                                          |   | Shipping products and services |   | February 1997                                                           |   | 24,397,303 shares of common stock (32.22%)7% subordinated promissory note (2) |   |   $          6,000 |   | $           1,370 6,000 |   | $                 - 6,000 |
|                                                                                                     |   |                           |   |                                                                    |   |                                                                          |   |                                                                           |   | 7,370                                                                               |   | 6,000                                                                                                               |
| Total Control Investments: Non-majority Owned (represents 28.1% of total investments at fair value) |   |                           |   | $         7,370                 |   | $        6,000                             |
| Total Control Investments: (represents 80.2% of total investments at fair value)                    |   |                           |   | $       34,171                            |   | $      17,114                                   |
| Affiliate Investments(7):                                                                                |   |                           |   |                                                                    |   |                                                                          |   |                                                                           |   |                                                                                |   |                                                                                                                |
| PalletOne, Inc.Bartow, FL                                                                                |   | Shipping products and services |   | October 2001                                                            |   | 350,000 shares of common stock (20% / 18.70% Fully Diluted)    |   |                                                                           |   | 350                                                                                 |   |                  50            |
| RP&C International Investments LLCNew York, NY                                                       |   | Healthcare                     |   | September 2006                                                     |   | Member interest (17.20%)                                                      |   |                                                                           |   | 573                                                                                 |   | 677                                                                                                                 |
| Total Affiliate Investments (represents 3.4% of total investments at fair value)                    |   |                           |   | $            923 |   | $           727        |

----

Index

| Name and Location ofPortfolio Company                             |   | Industry                        |   | Date of InitialInvestment                                                          |   | Investment                                                                                                |   | Principal                                                                                                                                                                                         |   | Cost ofInvestment                                                                                                                                                               |   | FairValue(1)                                                                                                                                                              |
|---------------------------------------------------------------------------------------|--------|---------------------------------|--------|----------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                  |   |                            |   |                                                                                         |   |                                                                                                      |   | (in thousands)                                                                                                                                                                                    |
| Non-Affiliate Investments (less than 5% owned):                                       |   |                            |   |                                                                                         |   |                                                                                                      |
| 1848 Capital Partners LLCMiami, FL                                                    |   | Entertainment and leisure       |   | January 2008                                                                                 |   | 18% promissory note (2)(3)                                                                                |   | $                     3,806                                                                   |   | $                   3,806                                                             |   | $                    299                                                   |
| Big Apple Entertainment Partners LLCNew York, NY                                      |   | Entertainment and leisure  |   | October 2007                                                                            |   | 18% promissory note (2)(3)                                                                           |   | 3,274                                                                                                                                                                                        |   | 3,274                                                                                                                                                                      |   | 2,283                                                                                                                                                                |
| Infinia CorporationKennewick, WA                                                      |   | Alternative energy              |   | June 2007                                                                                    |   | 115,180 shares common stock (0.63%)                                                                       |   |                                                                                                                                                                                              |   | $                   8,000                                                             |   | $                      —                                   |
|                                                                                  |   |                            |   |                                                                                         |   | Option to purchase 16,000 shares of common stock at $6.50 per share through December 19, 2012             |   |                                                                                                                                                                                              |   |          —                                                                                                         |   |                          —   |
|                                                                                  |   |                            |   |                                                                                         |   |                                                                                                      |   |                                                                                                                                                                                              |   | 8,000                                                                                                                                                                           |   |                 —                                                                   |
| London Bridge Entertainment Partners LtdLondon, UK                                    |   | Entertainment and leisure  |   | August 2008                                                                             |   | 18% promissory notes (2)(3)                                                                          |   | 3,430                                                                                                                                                                                        |   | 3,430                                                                                                                                                                      |   | 807                                                                                                                                                                  |
| The Bradshaw GroupRichardson, TX                                                      |   | Business products and services  |   | May 2000                                                                                     |   | 576,828 Class B Shares 12.25%preferred stock                                     |   |                                                                                                                                                                                              |   | 1,795                                                                                                                                                                           |   | —                                                                                                                                                              |
|                                                                                  |   |                            |   |                                                                                         |   | 38,750 Class C shares preferred stock                                                                     |   |                                                                                                                                                                                              |   | —                                                                                                                                                               |   | —                                                                                                                                                         |
|                                                                                  |   |                            |   |                                                                                         |   | 788,649 Class D shares 15% preferred stock                                                                |   |                                                                                                                                                                                              |   | —                                                                                                                                                               |   | —                                                                                                                                                         |
|                                                                                  |   |                            |   |                                                                                         |   | 2,218,109 Class E shares 8% preferred stock                                                               |   |                                                                                                                                                                                              |   | —                                                                                                                                                               |   | —                                                                                                                                                         |
|                                                                                  |   |                            |   |                                                                                         |   | Warrant to buy 2,229,450 shares of common stock through May 2016                                          |   |                                                                                                                                                                                              |   | —                                                                                                                                                               |   | —                                                                                                                                                         |
|                                                                                  |   |                            |   |                                                                                         |   |                                                                                                      |   |                                                                                                                                                                                              |   | 1,795                                                                                                                                                                           |   |                        —                         |
| Trulite, Inc.El Dorado Hills, CA                                                      |   | Alternative energy              |   | August 2008                                                                                  |   | Warrants to buy 8,934,211 shares of common stock through at $0.01 - $0.38 per share through November 2015 |   |                               —  |   |                            —  |   |                        121                             |
| Total Non-Affiliate Investments (represents 16.4% of total investments at fair value) |   |                            |   | $               20,305 |   | $               3,510               |
| Total Investments                                                                     |   |                            |   |                                                                                         |   |                                                                                                      |   |                                                                                                                                                                                              |   | $               55,399                                                                                    |   | $             21,351                                                                                          |

| (1) | See Note 3 to the financial statements, Valuation of Investments. |
|-----|-------------------------------------------------------------------|

| (2) | Income-producing. |
|-----|-------------------|

| (3) | Income on these securities is paid-in-kind by the issuance of additional securities, accrual to maturity or through accretion of original issue discount. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Non-income producing. |
|-----|-----------------------|

| (5) | Majority owned investments are generally defined under the Investment Company Act of 1940 as companies in which the Fund owns more than 50% of the voting securities of the company. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Non-majority owned control investments are generally defined under the Investment Company Act of 1940 as companies in which the Fund owns more than 25% but not more than 50% of the voting securities of the company. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Fund owns at least 5% but not more than 25% voting securities of the company. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

| Type of Securities                    |   | Cost   |   |   | Fair Value |   |   | Fair Value as Percentage of Net Assets |
|---------------------------------------|--------|--------|--------|--------|------------|--------|--------|----------------------------------------|
| Secured and subordinated debt         |   | $      | 31,317 |   |       | $      | 14,186 |                                   |   |   | 45.1 | % |
| Limited liability company investments |   |   | 7,488  |   |       |   | 2,442  |                                   |   |   | 7.8 | % |
| Common stock                          |   |   | 6,799  |   |       |   | 4,602  |                                   |   |   | 14.6 | % |
| Preferred stock                       |   |   | 9,795  |   |       |   | -      |                                   |   |   | 0.0 | % |
| Options and warrants                  |   |   | -      |   |       |   | 121    |                                   |   |   | 0.4 | % |
|     Total         |   | $      | 55,399 |   |       | $      | 21,351 |                                   |   |   | 67.8 | % |

| Industry                       |   | Fair Value |   |   | Fair Value asPercentage ofNet Assets |
|--------------------------------|--------|------------|--------|--------|--------------------------------------|
| Entertainment and leisure      |   | $          | 3,389  |   |                                 |   | 10.9 | % |
| Business products and services |   |       | 9,939  |   |                                 |   | 31.6 | % |
| Shipping products and services |   |       | 6,050  |   |                                 |   | 19.2 | % |
| Media                          |   |       | 1,175  |   |                                 |   | 3.7 | % |
| Alternative energy             |   |       | 121    |   |                                 |   | 0.4 | % |
| Healthcare                     |   |       | 677    |   |                                 |   | 2.2 | % |
|     Total  |   | $          | 21,351 |   |                                 |   | 67.8 | % |

----

Index

| Name and Location ofPortfolio Company                                           |   | Industry                                                                  |   | Date of InitialInvestment                                                        |   | Investment                                                                                                                      |   | Principal                                                                                                   |   | Cost ofInvestment                                                                                    |   | FairValue(1)                                                                                              |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|
|                                                                                                |   |                                                                      |   |                                                                                       |   |                                                                                                                            |   | (in thousands)                                                                                              |
| Control Investments: Majority-owned(5):                                                             |   |                                                                      |   |                                                                                       |   |                                                                                                                            |   |                                                                                                        |   |
| Equus Media Development Company, LLCHouston, TX                                                     |   | Media                                                                     |   | January 2007                                                                               |   | Member interest (100%)                                                                                                          |   |                                                                                                        |   | $              5,000                          |   | $               5,000                         |
| Riptide Entertainment, LLCMiami, FL                                                                 |   | Entertainment and leisure                                                 |   | December 2005                                                                         |   | Member interest (64.67%) 8% promissory notes(4)                                                                  |   |   $            10,010                      |   | 65 10,010                                                                                            |   | —   3,151                                                                            |
|                                                                                                |   |                                                                      |   |                                                                                       |   |                                                                                                                            |   |                                                                                                        |   | 10,075                                                                                                    |   | 3,151                                                                                                     |
| Sovereign Business Forms, Inc.Houston, TX                                                           |   | Business productsand services                                             |   | August 1996                                                                                |   | 1,214,630 shares of common stock12% promissory notes(2)                                                                         |   | 3,250                                                                                                       |   | 5,0803,250                                                                                                |   |  4,2563,250                                                                                          |
|                                                                                                |   |                                                                      |   |                                                                                       |   |                                                                                                                            |   |                                                                                                        |   | 8,330                                                                                                     |   | 7,506                                                                                                     |
| Spectrum Management, LLCCarrollton, TX                                                              |   | Business products and services                                            |   | December 1999                                                                         |   | 285,000 units of Class A member interest16% subordinated promissory note(2)(3)                                             |   | 1,690                                                                                                       |   | 2,8501,690                                                                                                |   | 3,2081,690                                                                                                |
|                                                                                                |   |                                                                      |   |                                                                                       |   |                                                                                                                            |   |                                                                                                        |   | 4,540                                                                                                     |   | 4,898                                                                                                     |
| Total Control Investments: Majority-owned (represents 48.5% of total investments at fair value)     |   | $          27,945                      |   | $            20,555                      |
| Control Investments: Non-majority owned (6)                                                         |
| ConGlobal Industries Holding, Inc.San Ramon, CA                                                     |   | Shipping products and services                                            |   | February 1997                                                                              |   | 24,397,303 shares of common stock7% promissory note(2)                                                                          |   | $              6,000                            |   | $              1,3706,000                |   | $                2,1746,000    |
|                                                                                                |   |                                                                      |   |                                                                                       |   |                                                                                                                            |   |                                                                                                        |   | 7,370                                                                                                     |   | 8,174                                                                                                     |
| Total Control Investments: Non-majority Owned (represents 19.3% of total investments at fair value) |   | $            7,370 |   | $              8,174 |
| Total Control Investments: (represents 67.8% of total investments at fair value)                    |   | $          35,315                      |   | $            28,729                                |
| Affiliate Investments(7):                                                                           |   |                                                                      |   |                                                                                       |   |                                                                                                                            |   |                                                                                                        |   |                                                                                                      |   |                                                                                                      |
| Infinia CorporationKennewick, WA                                                                    |   | Alternative energy                                                        |   | June 2007                                                                                  |   | 1,151,800 shares preferred stockOption to purchase 16,000 shares common stock at $6.50 per share through December 19, 2012 |   |                                                                                                        |   | $              8,000 —   |   | $               1 ,497 11 |
|                                                                                                |   |                                                                      |   |                                                                                       |   |                                                                                                                            |   |                                                                                                        |   | 8,000                                                                                                     |   | 1,490                                                                                                     |
| Nickent Golf, Inc.City of Industry, CA                                                              |   | Entertainment and leisure                                            |   | June 2007                                                                                  |   | 8% receivership certificate(4)                                                                                                  |   | $                   50 |   | 50                                                                                                        |   | 25                                                                                                        |
|                                                                                                |   |                                                                      |   |                                                                                       |   | 3,000,000 shares Class A convertible preferred stock                                                                            |   |                                                                                                        |   | —                                                                                              |   | —                                                                                         |
|                                                                                                |   |                                                                      |   |                                                                                       |   | Warrants to buy 15,000 shares of common stock at $0.60 per share through March 17, 2013                                    |   |                                                                                                        |   | —                                                                                              |   | —                                                                                         |
|                                                                                                |   |                                                                      |   |                                                                                       |   | Warrants to buy 1,434,149 shares of common stock at $0.60 per share through August 16, 2012, warrant terms subject to change    |   |                                                                                                        |   | —                                                                                              |   | —                                                                                         |
|                                                                                                |   |                                                                      |   |                                                                                       |   |                                                                                                                            |   |                                                                                                        |   | 50                                                                                                        |   | 25                                                                                                        |
| PalletOne, Inc.Bartow, FL                                                                           |   | Shipping products and services                                            |   | October 2001                                                                               |   | 350,000 shares of common stock                                                                                   |   |                                                                                                        |   | 350                                                                                                       |   | —                                                                                         |
| RP&C International Investments LLCNew York, NY                                                  |   | Healthcare                                                                |   | September 2006                                                                        |   | Member interest (17.2%)                                                                                                         |   |                                                                                                        |   | 573                                                                                                       |   | 613                                                                                                       |
| Total Affiliate Investments (represents 5.0% of total investments at fair value)                    |   | $       8,973                               |   | $              2,128                |

----

Index

| Name and Location ofPortfolio Company                             |   | Industry                                    |   | Date of InitialInvestment |   | Investment                                                                    |   | Principal                                  |   | Cost ofInvestment                                        |   | FairValue(1)                                |
|---------------------------------------------------------------------------------------|--------|---------------------------------------------|--------|-------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------|--------|---------------------------------------------------------------|--------|---------------------------------------------|
|                                                                                  |   |                                        |   |                                |   |                                                                          |   | (in thousands)                             |
| Non-Affiliate Investments (less than 5% owned):                                       |   |                                        |   |                                |   |                                                                          |   |                                       |   |
| 1848 Capital Partners LLCMiami, FL                                                    |   | Entertainment and leisure                   |   | January 2008                        |   | 18% promissory note(2)(3)                                                     |   | $      3,587 |   | $          3,587 |   | $       3,587 |
| Big Apple Entertainment Partners LLCNew York, NY                                      |   | Entertainment and leisure                   |   | October 2007                        |   | 18% promissory note(2)(3)                                                     |   | 3,153                                      |   | 3,153                                                         |   | 3,153                                       |
| London Bridge Entertainment Partners LtdLondon, UK                |   | Entertainment and leisure                   |   | August 2008                         |   | 18% promissory note(2)(3)                                                     |   | 2,707                                      |   | 2,707                                                         |   | 2,707                                       |
| The Bradshaw GroupRichardson, TX                                                      |   | Business products and services              |   | May 2000                            |   | 576,828 Class B Shares 12.25% preferred stock             |   |                                       |   | 1,796                                                         |   | —                           |
|                                                                                  |   |                                        |   |                                |   | 38,750 Class C shares preferred stock                                         |   |                                       |   | —                                                  |   | —                           |
|                                                                                  |   |                                        |   |                                |   | 788,649 Class D shares 15% preferred stock                                    |   |                                       |   | —                                             |   | —                           |
|                                                                                  |   |                                        |   |                                |   | 2,218,109 Class E shares 8% preferred stock                                   |   |                                       |   | —                                             |   | —                           |
|                                                                                  |   |                                        |   |                                |   | Warrant to buy 2,229,450 shares of common stock through May 2016              |   |                                       |   | —                                             |   | —                           |
|                                                                                  |   | 1,796                                       |   | —                        |
| Trulite, Inc.El Dorado Hills, CA                                                      |   | Alternative energy                          |   | August 2008                         |   | 18% promissory note(2)(3)                                                     |   | 2,107                                      |   | 2,107                                                         |   | 2,107                                       |
|                                                                                  |   |                                        |   |                                |   | Warrants to buy 6,934,211 shares of common stock ranging from at $0.01 - |   |                                       |   | —                                                  |   | —                                |
|                                                                                  |   |                                        |   |                                |   | $0.38 per share through November 2015                                    |   |                                       |   | —                                                  |   | —                                |
|                                                                                  |   |                                        |   |                                |   |                                                                          |   |                                       |   | 2,107                                                         |   | 2,107                                       |
| Total Non-Affiliate Investments (represents 27.2% of total investments at fair value) |   | $      13,350      |   | $   11,554           |
| Total Investments                                                                     |   | $      57,638 |   | $   42,411           |

| (1) | See Note 3 to the financial statements, Valuation of Investments. |
|-----|-------------------------------------------------------------------|

| (2) | Income-producing. |
|-----|-------------------|

| (3) | Income on these securities is paid-in-kind by the issuance of additional securities, accrual to maturity or through accretion of original issue discount. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Non-income producing. |
|-----|-----------------------|

| (5) | Majority owned investments are generally defined under the Investment Company Act of 1940 as companies in which the Fund owns more than 50% of the voting securities of the company. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Non-majority owned control investments are generally defined under the Investment Company Act of 1940 as companies in which the Fund owns more than 25% but not more than 50% of the voting securities of the company. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Fund owns at least 5% but not more than 25% voting securities of the company. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

| Type of Securities                    |   | Cost   |    |   | FairValue |   |   | Fair Value asPercentage ofNet Assets |
|---------------------------------------|--------|--------|---------|--------|-----------|--------|--------|-----------------------------------------------------|
| Secured and subordinated debt         |   | $      | 32,555  |   |      | $      | 25,671 |                                                |   |   | 50.5 | % |
| Limited liability company investments |   |   | 8,488   |   |      |   | 8,820  |                                                |   |   | 17.3 | % |
| Common stock                          |   |   | 6,800   |   |      |   | 6,430  |                                                |   |   | 12.6 | % |
| Preferred stock                       |   |   | 9,795   |   |      |   | 1,479  |                                                |   |   | 2.9 | % |
| Options and warrants                  |   |   | — |   |      |   | 11     |                                                |   |   | 0.0 | % |
| Total                                 |   | $      | 57,638  |   |      | $      | 42,411 |                                                |   |   | 83.3 | % |

| Industry                       |   | FairValue |   |   | Fair Value asPercentage ofNet Assets |
|--------------------------------|--------|-----------|--------|--------|-----------------------------------------------------|
| Entertainment and leisure      |   | $         | 12,624 |   |                                                |   | 24.8 | % |
| Business products and services |   |      | 12,403 |   |                                                |   | 24.4 | % |
| Shipping products and services |   |      | 8,174  |   |                                                |   | 16.1 | % |
| Alternative energy             |   |      | 3,597  |   |                                                |   | 7.1 | % |
| Media                          |   |      | 5,000  |   |                                                |   | 9.8 | % |
| Healthcare                     |   |      | 613    |   |                                                |   | 1.1 | % |
| Total                          |   | $         | 42,411 |   |                                                |   | 83.3 | % |

----

Index

NOTES TO FINANCIAL STATEMENTS

----

Index

----

Index

----

Index

----

Index

|                                                                                                                    |   |   |   |   | Fair Value Measurements As of September 30, 2010               |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|----------------------------------------------------------------|--------|
| (in thousands)                                                                                                          |   | Total  |   |   | Quoted Prices in Active Markets for Identical Assets (Level 1) |   |   | Significant Other Observable Inputs (Level 2) |   |   | Significant Unobservable Inputs (Level 3) |   |
| Assets                                                                                                                  |   |   |   |   |                                                           |   |   |   |   |   |   |   |
|   Investments:                                                                                                |   |   |   |   |                                                           |   |   |   |   |   |   |   |
|         Control investments                                                     |   | $      | 17,114 |   |                                                           | $      | - |   |   | $ | - |   |   | $ | 17,114 |   |
|         Affiliate investments                                                        |   |   | 727    |   |                                                           |   | - |   |   |   | - |   |   |   | 727 |   |
|         Non-Affiliate investments                                               |   |   | 3,510  |   |                                                           |   | - |   |   |   | - |   |   |   | 3,510 |   |
|               Total assets reported at fair value |   | $      | 21,351 |   |                                                           | $      | - |   |   | $ | - |   |   | $ | 21,351 |   |

----

Index

|                                |   | Fair Value Measurements As of December 31, 2009 |   |
|-------------------------------------|--------|------------------------------------------------------------------------------------|--------|
| (in thousands)                      |   | Total                                                                              |   |   | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   |   | Significant OtherObservable Inputs(Level 2) |   |   | SignificantUnobservableInputs(Level 3) |   |
| Assets                              |   |                                                                               |   |   |   |   |   |   |   |   |   |   |
| Investments:                        |   |                                                                               |   |   |   |   |   |   |   |   |   |   |
| Affiliate investments               |   | $                                                                                  | 28,729 |   |   | $ | — |   |   | $ | — |   |   | $ | 28,729 |   |
| Non-Affiliate investments           |   |                                                                               | 2,128  |   |   |   | — |   |   |   | — |   |   |   | 2,128 |   |
| Affiliate investments               |   |                                                                               | 11,554 |   |   |   | — |   |   |   | — |   |   |   | 11,554 |   |
| Total assets reported at fair value |   | $                                                                                  | 42,411 |   |   | $ | — |   |   | $ | — |   |   | $ | 42,411 |   |

|                                                                                                                                                                                                                  |   |   |   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
|                                                                                                                                                                                                                  |
| The following table provides a reconciliation of fair value changes during the nine months ending September 30, 2010 for all investments for which we determine fair value using unobservable (Level 3) factors: |

|                                             |   | Fair value measurements using significant unobservable inputs (Level 3) |    |
|--------------------------------------------------|--------|-------------------------------------------------------------------------|---------|
| (in thousands)                                   |   | Control Investments                                                     |    |   | Affiliate Investments |   |   | Non-affiliate Investments |   |   | Total |   |
| Fair value as of December 31, 2009          |   | $                                                                       | 28,729  |   |   | $ | 2,128 |   |   | $ | 11,554 |   |   | $ | 42,411 |   |
| Total realized gains (losses)                    |   |                                                                    | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Change in unrealized appreciation (depreciation) |   |                                                                    | (10,471 | ) |   |   | (686 | ) |   |   | (7,664 | ) |   |   | (18,821 | ) |
| Purchases, issuances and settlements, net        |   |                                                                    | (1,144  | ) |   |   | (50 | ) |   |   | (1,045 | ) |   |   | (2,239 | ) |
| Change in control                                |   |                                                                    | — |   |   |   | (665 | ) |   |   | 665 |   |   |   | — |   |
| Transfers in (out) of Level 3               |   |                                                                    | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Fair value as of September 30, 2010              |   | $                                                                       | 17,114  |   |   | $ | 727 |   |   | $ | 3,510 |   |   | $ | 21,351 |   |

| The following table provides a reconciliation of fair value changes during the nine months ending September 30, 2009 for all investments for which we determine fair value using unobservable (Level 3) factors: |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                  |   |
|                                                                                                                                                                                                                  |   |   |   |   |

|                                             |   | Fair value measurements using unobservable inputs (Level 3) |    |
|--------------------------------------------------|--------|------------------------------------------------------------------------------------------------|---------|
| (in thousands)                                   |   | ControlInvestments                                                                             |    |   | AffiliateInvestments |   |   | Non-affiliateInvestments |   |   | Total |   |
| Fair value as of December 31, 2008          |   | $                                                                                              | 37,190  |   |   | $ | 20,974 |   |   | $ | 10,135 |   |   | $ | 68,299 |   |
| Total realized gains                             |   |                                                                                           | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Change in unrealized appreciation (depreciation) |   |                                                                                           | (2,079  | ) |   |   | (9,970 | ) |   |   | (738 | ) |   |   | (12,787 | ) |
| Purchases, issuances and settlements, net        |   |                                                                                           | (514    | ) |   |   | 318 |   |   |   | 874 |   |   |   | 678 |   |
| Transfers in (out) of Level 3                    |   |                                                                                           | — |   |   |   | — |   |   |   | 738 |   |   |   | 738 |   |
| Fair value as of September 30, 2009         |   | $                                                                                              | 34,597  |   |   | $ | 11,322 |   |   | $ | 11,009 |   |   | $ | 56,928 |   |

----

Index

|                                     |   | Investment Activity |   |   |                 |   |
|------------------------------------------|--------|---------------------|--------|--------|----------------------|--------|
|                                     |   | New Investments     |   |   | Existing Investments |   |   |   |   |
| Portfolio Company                        |   | Cash                |   |   | PIK                  |   |   | Follow-On |   |   | PIK |   |   | Total |   |
| London Bridge Entertainment Partners Ltd |   | $                   | -      |   |                 | $      | - |   |   | $ | 575 |   |   | $ | 148 |   |   | $ | 723 |   |
| 1848 Capital Partners LLC                |   |                | -      |   |                 |   | - |   |   |   | - |   |   |   | 219 |   |   |   | 219 |   |
| Trulite, Inc.                            |   |                | -      |   |                 |   |   |   |   |   | 200 |   |   |   | - |   |   |   | 200 |   |
| Big Apple Entertainment Partners LLC     |   |                | -      |   |                 |   | - |   |   |   | - |   |   |   | 120 |   |   |   | 120 |   |
|                                     |   | $                   | -      |   |                 | $      | - |   |   | $ | 775 |   |   | $ | 487 |   |   | $ | 1,262 |   |

----

Index

|   | (i) | Decline in estimated fair market value of 1848 Capital Partners LLC (“1848”) of $3.5 million. The management of 1848 has indicated that the company will have to raise outside capital to repay the promissory note due to the Fund upon maturity in January 2011. Due to the uncertainty of the recoverability of the promissory note, the Fund determined that the fair value of the promissory note was impaired. The promissory note is personally guaranteed jointly and severally by the principals of 1848, who also guarantee the Big Apple Entertainment Partners LLC and London Bridge Entertainment Partners Ltd promissory notes. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Decline in fair market value of Big Apple Entertainment Partners LLC (“Big Apple”) of $1.0 million.  Subsequent to September 30, 2010, the loan due from Big Apple matured and Big Apple failed to repay the note.  Big Apple has been in payment default of the loan and on October 5, 2010, the Fund demanded that the guarantors pay and perform all obligations of Big Apple under the loan. The Fund is continuing discussions with the guarantors of this note and is contemplating the next prudent course of action. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Decline in fair market value of Equus Media Development Company, LLC (“EMDC”) of $2.8 million. In June 2010, the Fund received a distribution of $1.0 million from EMDC. Currently, EMDC holds $1.6 million in cash and has a remaining funding commitment of $0.5 under its agreement with Kopleson Entertainment. In addition, if Kopleson Entertainment generates $0.2 million of income for EMDC, that event will trigger an additional $1.0 million funding obligation of EMDC. EMDC has written down the fair value of its assets. |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Decline in fair market value of Infinia Corporation of $1.5 million. Infinia has informed the Fund of its significant capital and liquidity needs. Based on these factors, the nominal equity holdings of the Fund and the future potential dilution, the Fund has written down the investment to $0. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (v) | Decline in fair market value of London Bridge Entertainment Partners Ltd (“London Bridge”) of $2.6 million. London Bridge has experienced a working capital shortfall and required an additional $0.6 million investment from the Fund in July 2010 in the form of a 60-day promissory note. In September 2010, the Fund accelerated payment of its notes to London Bridge as the company was in payment default of both notes.  Subsequent to quarter end, London Bridge paid the Fund $0.7 million which paid in full principal and interest of the 60-day note and partially paid previously unpaid and accrued interest of the $2.6 million note but did not cure the default related to this loan.  Based on the current condition of London Bridge, the Fund determined the fair value of the $2.6 million loan was impaired. The loan is senior in liquidation preference and is guaranteed by the management principals, many of which guarantee the 1848 Capital Partners LLC and Big Apple Entertainment Partners LLC promissory notes.  On August 31, 2010, Equus accelerated the maturity and demanded that the guarantors pay and perform all obligations of London Bridge under the April 2009 and July 2010 promissory notes.  Subsequent to quarter end, the July 2010 note was repaid in full.  As of the date of this filing, London Bridge remains in default of the April 2009 promissory note.  The Fund is continuing discussions with the guarantors of this note and is contemplating the next prudent course of action. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vi) | Decline in fair market value of Riptide Entertainment, LLC (“Riptide”) of $3.1 million. Riptide owns subordinated debt interest in both Big Apple Entertainment Partners LLC and London Bridge directly and through derivative entities and equity directly in London Bridge. The Fund has determined the value of these investments to be impaired based on the operating results and liquidity concerns of both companies. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vii) | Decline in fair market value of ConGlobal Industries Holding, Inc. (“ConGlobal”) of $2.2 million. ConGlobal has experienced a decline in its storage business due to the increasing activity of shipping containers. While the activity has contributed to revenue through other services of the company, the contribution margin of these services is less than the storage revenue and has had a negative impact on its operating cash flow. |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Index

|   | (viii) | Increase in fair market value of PalletOne, Inc. of $0.1 million. PalletOne, Inc. has continued to generate cash flows which have reduced debt levels. The Fund believes the performance of the company in recent years and its continued debt reduction initiatives has created value for its equity holdings. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ix) | Increase in fair market value of Sovereign Business Forms, Inc. (“Sovereign”) of $0.3 million. Sovereign has continued to reduce its debt which has caused a corresponding increase to the value of the equity held by the Fund in Sovereign. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  (x) | Decline in fair market value of Spectrum Management, LLC (“Spectrum”) of $2.6 million.   Subsequent to the quarter-end, the Fund loaned Spectrum $0.4 million to meet its immediate working capital needs.  The valuation reflects Spectrum’s consistent business results coupled with the working capital shortfall the company recently experienced. |
|--------|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (xi) | Increase in fair market value of Trulite, Inc. (“Trulite”) of $0.1 million. The Fund holds approximately nine million warrants in Trulite, many with a nominal exercise price. Based on Trulite’s recent equity raise and repayment of the Fund’s debt, the Fund determined the warrants have increased in value. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |   | New    |    |   | Follow-On |   |    |   |   |
|------------------------------------------|--------|--------|---------|--------|-----------|--------|---------|--------|--------|
| Portfolio Company                        |   | Cash   |    |   | Noncash   |   |    | Cash   |   |   | Noncash |   |   | Total |   |
| Nickent Golf, Inc.                       |   | $      | — |   |      | $      | — |   |   | $ | 370 |   |   | $ | — |   |   | $ | 370 |   |
| Riptide Entertainment, LLC               |   |   | — |   |      |   | — |   |   |   | 350 |   |   |   | — |   |   |   | 350 |   |
| 1848 Capital Partners LLC                |   |   | — |   |      |   | — |   |   |   | — |   |   |   | 382 |   |   |   | 382 |   |
| Trulite, Inc.                            |   |   | — |   |      |   | — |   |   |   | — |   |   |   | 225 |   |   |   | 225 |   |
| London Bridge Entertainment Partners Ltd |   |   | — |   |      |   | — |   |   |   | — |   |   |   | 154 |   |   |   | 154 |   |
| Big Apple Entertainment Partners LLC     |   |   | — |   |      |   | — |   |   |   | — |   |   |   | 114 |   |   |   | 114 |   |
|                                     |   | $      | — |   |      | $      | — |   |   | $ | 720 |   |   | $ | 875 |   |   | $ | 1,595 |   |

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Index

Item  2.

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Index

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Index

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Index

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Index

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Index

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Index

|   | i) | Decline in estimated fair market value of 1848 Capital Partners LLC (“1848”) of $3.5 million. The management of 1848 has indicated that the company will have to raise outside capital to repay the promissory note due to the Fund upon maturity in January 2011. Due to the uncertainty of the recoverability of the promissory note, the Fund determined that the fair value of the promissory note was impaired. The promissory note is personally guaranteed jointly and severally by the principals of 1848,  who also guarantee the Big Apple Entertainment Partners LLC and London Bridge Entertainment Partners Ltd promissory notes. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Decline in fair market value of Big Apple Entertainment Partners LLC (“Big Apple”) of $1.0 million.  Subsequent to September 30, 2010, the loan due from Big Apple matured and Big Apple failed to repay the note.  Big Apple has been in payment default of the loan and on October 5, 2010, the Fund demanded that the guarantors pay and perform all obligations of Big Apple under the loan. The Fund is continuing discussions with the guarantors of this note and is contemplating the next prudent course of action. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Decline in fair market value of Equus Media Development Company, LLC (“EMDC”) of $2.8 million. In June 2010, the Fund received a distribution of $1.0 million from EMDC. Currently, EMDC holds $1.6 million in cash and has a remaining funding commitment of $0.5 under its agreement with Kopleson Entertainment. In addition, if Kopleson Entertainment generates $0.2 million of income for EMDC, that event will trigger an additional $1.0 million funding obligation of EMDC. EMDC has written down the fair value of its assets. |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Decline in fair market value of Infinia Corporation of $1.5 million. Infinia has informed the Fund of its significant capital and liquidity needs. Based on these factors, the nominal equity holdings of the Fund and the future potential dilution, the Fund has written down the investment to $0. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (v) | Decline in fair market value of London Bridge Entertainment Partners Ltd (“London Bridge”) of $2.6 million. London Bridge has experienced a working capital shortfall and required an additional $0.6 million investment from the Fund in July 2010 in the form of a 60-day promissory note. In September 2010, the Fund accelerated payment of its notes to London Bridge as the company was in payment default of both notes.  Subsequent to quarter end, London Bridge paid the Fund $0.7 million which paid in full principal and interest of the 60-day note and partially paid previously unpaid and accrued interest of the $2.6 million note but did not cure the default related to this loan.  Based on the current condition of London Bridge, the Fund determined the fair value of the $2.6 million loan was impaired. The loan is senior in liquidation preference and is guaranteed by the management principals, many of which guarantee the 1848 Capital Partners LLC and Big Apple Entertainment Partners LLC promissory notes.  On August 31, 2010, Equus accelerated the maturity and demanded that the guarantors pay and perform all obligations of London Bridge under the April 2009 and July 2010 promissory notes.  Subsequent to quarter end, the July 2010 note was repaid in full.  As of the date of this filing, London Bridge remains in default of the April 2009 promissory note.  The Fund is continuing discussions with the guarantors of this note and is contemplating the next prudent course of action. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  (vi) | Decline in fair market value of Riptide Entertainment, LLC (“Riptide”) of $3.1 million. Riptide owns subordinated debt interest in both Big Apple Entertainment Partners LLC and London Bridge directly and through derivative entities and equity directly in London Bridge. The Fund has determined the value of these investments to be impaired based on the operating results and liquidity concerns of both companies. |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vii) | Decline in fair market value of ConGlobal Industries Holding, Inc. (“ConGlobal”) of $2.2 million. ConGlobal has experienced a decline in its storage business due to the increasing activity of shipping containers. While the activity has contributed to revenue through other services of the company, the contribution margin of these services is less than the storage revenue and has had a negative impact on its operating cash flow. |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Index

|   | (viii) | Increase in fair market value of PalletOne, Inc. of $0.1 million. PalletOne, Inc. has continued to generate cash flows which have reduced debt levels. The Fund believes the performance of the company in recent years and its continued debt reduction initiatives has created value for its equity holdings. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ix) | Increase in fair market value of Sovereign Business Forms, Inc. (“Sovereign”) of $0.3 million. Sovereign has continued to reduce its debt which has caused a corresponding increase to the value of the equity held by the Fund in Sovereign. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  (x) | Decline in fair market value of Spectrum Management, LLC (“Spectrum”) of $2.6 million.   Subsequent to the quarter-end, the Fund loaned Spectrum $0.4 million to meet its immediate working capital needs.  The valuation reflects Spectrum’s consistent business results coupled with the working capital shortfall the company recently experienced. |
|--------|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (xi) | Increase in fair market value of Trulite, Inc. (“Trulite”) of $0.1 million. The Fund holds approximately nine million warrants in Trulite, many with a nominal exercise price. Based on Trulite’s recent equity raise and repayment of the Fund’s debt, the Fund determined the warrants have increased in value. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |   | Investment Activity |   |   |                 |   |
|------------------------------------------|--------|---------------------|--------|--------|----------------------|--------|
|                                     |   | New Investments     |   |   | Existing Investments |   |   |   |   |
| Portfolio Company                        |   | Cash                |   |   | PIK                  |   |   | Follow-On |   |   | PIK |   |   | Total |   |
| London Bridge Entertainment Partners Ltd |   | $                   | -      |   |                 | $      | - |   |   | $ | 575 |   |   | $ | 148 |   |   | $ | 723 |   |
| 1848 Capital Partners LLC                |   |                | -      |   |                 |   | - |   |   |   | - |   |   |   | 219 |   |   |   | 219 |   |
| Trulite, Inc.                            |   |                | -      |   |                 |   | - |   |   |   | 200 |   |   |   | - |   |   |   | 200 |   |
| Big Apple Entertainment Partners LLC     |   |                | -      |   |                 |   | - |   |   |   | - |   |   |   | 120 |   |   |   | 120 |   |
|                                     |   | $                   | -      |   |                 | $      | - |   |   | $ | 775 |   |   | $ | 487 |   |   | $ | 1,262 |   |

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Index

|                                     |   | New    |    |   | Follow-On |   |    |   |   |
|------------------------------------------|--------|--------|---------|--------|-----------|--------|---------|--------|--------|
| Portfolio Company                        |   | Cash   |    |   | Noncash   |   |    | Cash   |   |   | Noncash |   |   | Total |   |
| Nickent Golf, Inc.                       |   | $      | — |   |      | $      | — |   |   | $ | 370 |   |   | $ | — |   |   | $ | 370 |   |
| Riptide Entertainment, LLC               |   |   | — |   |      |   | — |   |   |   | 350 |   |   |   | — |   |   |   | 350 |   |
| 1848 Capital Partners LLC                |   |   | — |   |      |   | — |   |   |   | — |   |   |   | 382 |   |   |   | 382 |   |
| Trulite, Inc.                            |   |   | — |   |      |   | — |   |   |   | — |   |   |   | 225 |   |   |   | 225 |   |
| London Bridge Entertainment Partners Ltd |   |   | — |   |      |   | — |   |   |   | — |   |   |   | 154 |   |   |   | 154 |   |
| Big Apple Entertainment Partners LLC     |   |   | — |   |      |   | — |   |   |   | — |   |   |   | 114 |   |   |   | 114 |   |
|                                     |   | $      | — |   |      | $      | — |   |   | $ | 720 |   |   | $ | 875 |   |   | $ | 1,595 |   |

Item  3.

Item  4.

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Index

Part II. 

Item  1.  

Item  1A.

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Index

Item  6.

| 3. | Articles of Incorporation and by-laws |
|----|---------------------------------------|

|   | (a) | Restated Certificate of Incorporation of the Fund, as amended. [Incorporated by reference to Exhibit 3(a) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007.] |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Certificate of Merger dated June 30, 1993, between the Fund and Equus Investments Incorporated [Incorporated by reference to Exhibit 3(c) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007.] |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Amended and Restated Bylaws of the Fund. [Incorporated by reference to Exhibit 3(b) to Registrant’s Current Report on Form 8-K filed on June 9, 2010] |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10. | Material Contracts. |
|-----|---------------------|

|   | (c) | Safekeeping Agreement between the Fund and Amegy Bank dated August 16, 2008. [Incorporated by reference to Exhibit 10(c) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008.] |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | Form of Indemnification Agreement between the Fund and certain of its directors and officers. [Incorporated by reference to Exhibit 10(g) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004.] |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | Form of Release Agreement between the Fund and certain of its officers and former officers. [Incorporated by reference to Exhibit 10(h) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004.] |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | Code of Ethics of the Fund (Rule 17j-1) [Incorporated by reference to Exhibit 10(f) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009.] |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31. | Rule 13a-14(a)/15d-14(a) Certifications |
|-----|-----------------------------------------|

|   | 1. | Certification by Principal Executive Officer |
|--------|----|----------------------------------------------|

|   | 2. | Certification by Chief Financial Officer |
|--------|----|------------------------------------------|

| 32. | Section 1350 Certifications |
|-----|----------------------------------|

|   | 1. | Certification by Principal Executive Officer |
|--------|----|----------------------------------------------|

|   | 2. | Certification by Chief Financial Officer |
|--------|----|------------------------------------------|

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Index

SIGNATURE

|                    | EQUUS TOTAL RETURN, INC. |                   |
|-------------------------|--------------------------|------------------------|
|                    |                     |                   |   |
| Date: November 10, 2010 | By:                      | /s/ John A. Hardy |   |
|                    |                     | John A. Hardy          |   |
|                    |                     | Executive Chairman     |   |
|                    |                     |                   |   |

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Index