For The Quarterly Period Ended June 30, 2005		Commission File Number: 0-22832

Maryland (State or Jurisdiction of Incorporation or Organization)		52-1081052 (IRS Employer Identification No.)

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PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		Consolidated Balance Sheet as of June 30, 2005 (unaudited) and December 31, 2004		1
		Consolidated Statement of Operations (unaudited) — For the Three and Six Months Ended June 30, 2005 and 2004		2
		Consolidated Statement of Changes in Net Assets (unaudited) — For the Six Months Ended June 30, 2005 and 2004		3
		Consolidated Statement of Cash Flows (unaudited) — For the Six Months Ended June 30, 2005 and 2004		4
		Consolidated Statement of Investments as of June 30, 2005 (unaudited)		5
		Notes to Consolidated Financial Statements		14
		Report of Independent Registered Public Accounting Firm		39
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			40
	Item 3. Quantitative and Qualitative Disclosures About Market Risk			80
	Item 4. Controls and Procedures			80
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings			81
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			81
	Item 3. Defaults Upon Senior Securities			82
	Item 4. Submission of Matters to a Vote of Security Holders			82
	Item 5. Other Information			83
	Item 6. Exhibits			83
	Signatures			86

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					June 30,				December 31,
					2005				2004
(in thousands, except share and per share amounts)					(unaudited)
ASSETS
Portfolio at value:
	Private finance
		Companies more than 25% owned (cost: 2005-$1,328,737; 2004-$1,389,342)			$	1,442,656			$	1,359,641
		Companies 5% to 25% owned (cost: 2005-$178,312; 2004-$194,750)				160,994				188,902
		Companies less than 5% owned (cost: 2005-$995,095; 2004-$800,828)				966,885				753,543
			Total private finance (cost: 2005-$2,502,144; 2004-$2,384,920)			2,570,535				2,302,086
	Commercial real estate finance (cost: 2005-$145,969; 2004-$722,612)					143,801				711,325
			Total portfolio at value (cost: 2005-$2,648,113; 2004-$3,107,532)			2,714,336				3,013,411
Deposits of proceeds from sales of borrowed Treasury securities						18,066				38,226
Accrued interest and dividends receivable						61,789				79,489
Other assets						81,333				72,712
Cash and cash equivalents						490,013				57,160
			Total assets		$	3,365,537			$	3,260,998
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
	Notes payable and debentures (maturing within one year: 2005-$150,000; 2004-$169,000)				$	986,512			$	1,064,568
	Revolving line of credit					—				112,000
	Obligations to replenish borrowed Treasury securities					18,066				38,226
	Accounts payable and other liabilities					79,672				66,426
			Total liabilities			1,084,250				1,281,220
Commitments and contingencies
Shareholders’ equity:
	Common stock, $0.0001 par value, 200,000,000 shares authorized; 134,131,115 and 133,098,807 shares issued and outstanding at June 30, 2005, and December 31, 2004, respectively					13				13
	Additional paid-in capital					2,120,529				2,094,421
	Common stock held in deferred compensation trust					(17,479	)			(13,503	)
	Notes receivable from sale of common stock					(5,270	)			(5,470	)
	Net unrealized appreciation (depreciation) on portfolio					51,939				(107,767	)
	Undistributed (distributions in excess of) earnings					131,555				12,084
			Total shareholders’ equity			2,281,287				1,979,778
			Total liabilities and shareholders’ equity		$	3,365,537			$	3,260,998
Net asset value per common share					$	17.01			$	14.87

1

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					For the Three Months								For the Six Months
					Ended June 30,								Ended June 30,
					2005				2004				2005				2004
(in thousands, except per share amounts)
					(unaudited)								(unaudited)
Interest and Related Portfolio Income:
	Interest and dividends
		Companies more than 25% owned			$	30,199			$	15,918			$	58,450			$	31,870
		Companies 5% to 25% owned				5,597				6,259				11,518				12,245
		Companies less than 5% owned				35,534				51,996				86,307				103,597
			Total interest and dividends			71,330				74,173				156,275				147,712
	Loan prepayment premiums
		Companies more than 25% owned				—				—				—				—
		Companies 5% to 25% owned				—				712				—				712
		Companies less than 5% owned				853				2,355				2,530				3,305
			Total loan prepayment premiums			853				3,067				2,530				4,017
	Fees and other income
		Companies more than 25% owned				7,877				8,306				12,758				12,795
		Companies 5% to 25% owned				55				123				125				470
		Companies less than 5% owned				6,092				1,831				9,438				4,271
			Total fees and other income			14,024				10,260				22,321				17,536
			Total interest and related portfolio income			86,207				87,500				181,126				169,265
Expenses:
	Interest					19,154				17,983				39,379				37,096
	Employee					22,877				11,920				38,333				24,275
	Administrative					23,048				9,076				43,802				14,903
			Total operating expenses			65,079				38,979				121,514				76,274
Net investment income before income taxes						21,128				48,521				59,612				92,991
Income tax expense (benefit), including excise tax						5,861				(469	)			5,593				(544	)
Net investment income						15,267				48,990				54,019				93,535
Net Realized and Unrealized Gains (Losses):
	Net realized gains (losses)
		Companies more than 25% owned				(17,884	)			4,816				(17,485	)			151,499
		Companies 5% to 25% owned				4,711				31,068				4,708				35,696
		Companies less than 5% owned				220,669				(9,281	)			230,558				(12,742	)
			Total net realized gains			207,496				26,603				217,781				174,453
	Net change in unrealized appreciation or depreciation					89,122				19,749				159,706				(152,338	)
			Total net gains			296,618				46,352				377,487				22,115
Net increase in net assets resulting from operations					$	311,885			$	95,342			$	431,506			$	115,650
Basic earnings per common share					$	2.33			$	0.74			$	3.23			$	0.90
Diluted earnings per common share					$	2.29			$	0.73			$	3.17			$	0.88
Weighted average common shares outstanding — basic						133,701				128,814				133,493				128,564
Weighted average common shares outstanding — diluted						136,381				131,208				135,982				131,620

2

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				For the Six Months
				Ended June 30,
				2005				2004
(in thousands, except per share amounts)
				(unaudited)
Operations:
	Net investment income			$	54,019			$	93,535
	Net realized gains				217,781				174,453
	Net change in unrealized appreciation or depreciation				159,706				(152,338	)
		Net increase in net assets resulting from operations			431,506				115,650
Shareholder distributions:
	Common stock dividends				(152,329	)			(146,822	)
	Preferred stock dividends				—				(52	)
		Net decrease in net assets resulting from shareholder distributions			(152,329	)			(146,874	)
Capital share transactions:
	Issuance of common stock for portfolio investments				7,200				3,227
	Issuance of common stock upon the exercise of stock options				12,689				12,033
	Issuance of common stock in lieu of cash distributions				4,163				2,964
	Net decrease in notes receivable from sale of common stock				200				10,015
	Purchase of common stock held in deferred compensation trust				(3,976	)			(6,909	)
	Other				2,056				28
		Net increase in net assets resulting from capital share transactions			22,332				21,358
		Total increase (decrease) in net assets			301,509				(9,866	)
Net assets at beginning of period					1,979,778				1,914,577
Net assets at end of period				$	2,281,287			$	1,904,711
Net asset value per common share				$	17.01			$	14.77
Common shares outstanding at end of period					134,131				128,960

3

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					For the Six Months
					Ended June 30,
					2005				2004
(in thousands)
					(unaudited)
Cash flows from operating activities:
	Net increase in net assets resulting from operations				$	431,506			$	115,650
	Adjustments
		Portfolio investments				(647,248	)			(737,227	)
		Principal collections related to investment repayments or sales				1,090,813				430,882
		Change in accrued or reinvested interest and dividends				3,567				(26,147	)
		Amortization of discounts and fees				(3,334	)			(2,490	)
		Changes in other assets and liabilities				8,136				(4,012	)
		Depreciation and amortization				963				820
		Realized gains from the receipt of notes and other securities as consideration from sale of investments, net of collections				(916	)			(49,117	)
		Realized losses				41,643				29,550
		Net change in unrealized (appreciation) or depreciation				(159,706	)			152,338
			Net cash provided by (used in) operating activities			765,424				(89,753	)
Cash flows from financing activities:
	Sale of common stock upon the exercise of stock options					12,689				12,033
	Collections of notes receivable from sale of common stock					200				10,015
	Borrowings under notes payable and debentures					—				15,212
	Repayments on notes payable and debentures					(76,700	)			(119,000	)
	Net borrowings under (repayments on) revolving line of credit					(112,000	)			208,500
	Redemption of preferred stock					—				(7,000	)
	Purchase of common stock held in deferred compensation trust					(3,976	)			(6,909	)
	Other financing activities					(1,958	)			(572	)
	Common stock dividends and distributions paid					(150,826	)			(143,859	)
	Preferred stock dividends paid					—				(52	)
			Net cash provided by (used in) financing activities			(332,571	)			(31,632	)
Net increase (decrease) in cash and cash equivalents						432,853				(121,385	)
Cash and cash equivalents at beginning of period						57,160				214,167
Cash and cash equivalents at end of period					$	490,013			$	92,782

4

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					June 30, 2005
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Companies More Than 25% Owned
Acme Paging, L.P.(4)			Loan (6.8%, Due 12/07 – 1/08)(6)		$	4,631			$	4,631			$	—
	(Telecommunications)		Equity Interests							13,274				—
			Common Stock (4,656 shares)							27				—
Advantage Sales & Marketing, Inc.			Loan (12.0%, Due 9/09)			60,000				59,758				59,758
	(Business Services)		Debt Securities (18.5%, Due 12/09)			127,716				127,716				127,716
			Common Stock (18,957,011 shares)							73,932				218,048
Alaris Consulting, LLC			Loan (16.1%, Due 12/05 – 12/07)(6)			24,850				24,877				3,209
	(Business Services)		Equity Interests							5,165				—
			Guaranty ($1,100)
American Healthcare Services, Inc.			Loan (1.1%, Due 12/04 – 12/05)(6)			5,250				4,851				4,222
	and Affiliates
	(Healthcare Services)
Avborne, Inc.(7)			Preferred Stock (12,500 shares)							7,014				892
	(Business Services)		Common Stock (27,500 shares)							—				—
Avborne Heavy Maintenance, Inc.(7)			Preferred Stock (1,568 shares)							—				—
	(Business Services)		Common Stock (2,750 shares)							—				—
Business Loan Express, LLC			Class A Equity Interests			57,175				57,175				57,175
	(Financial Services)		Class B Equity Interests							117,436				144,154
			Class C Equity Interests							109,301				138,690
			Guaranty ($107,720 — See Note 3)
			Standby Letters of Credit ($35,550 —   See Note 3)
Callidus Capital Corporation			Loan (12.0%, Due 12/06)			1,301				1,301				1,301
	(Financial Services)		Debt Securities (18.0%, Due 10/08)			4,424				4,424				4,424
			Common Stock (10 shares)							2,045				4,100
Fairchild Industrial Products			Loan (8.5%, Due 7/09)			6,297				6,297				6,297
	Company		Debt Securities (12.1%, Due 7/09)			3,624				3,624				3,624
	(Industrial Products)		Common Stock (2,000 shares)							2,841				19,576
(1) Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2) Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3) Public company.
(4) Non-U.S. company or principal place of business outside the U.S.
(5) Non-registered investment company.
(6) Loan or debt security is on non-accrual status and therefore is considered non-income producing.
(7) Avborne, Inc. and Avborne Heavy Maintenance, Inc. are affiliated companies.

5

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					June 30, 2005
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Financial Pacific Company			Loan (17.4%, Due 2/12 – 8/12)		$	69,478			$	69,185			$	69,185
	(Financial Services)		Preferred Stock (10,964 shares)							10,276				11,896
			Common Stock (14,735 shares)							14,819				46,925
ForeSite Towers, LLC			Equity Interests							4,146				4,161
	(Tower Leasing)
GAC Investments, Inc.			Common Stock (107 shares)							57,356				7,661
	(Broadcasting & Cable)		Guaranty ($800)
			Standby Letter of Credit ($200)
Global Communications, LLC			Loan (14.5%, Due 12/03 – 12/06)(6)			6,393				6,393				6,393
	(Business Services)		Debt Securities (13.0%, Due 9/02 – 9/05)(6)			18,446				18,443				18,443
			Preferred Equity Interest							14,067				14,233
			Options							1,639				—
Gordian Group, Inc.			Loan (10.0%, Due 12/05 – 12/08)(6)			11,392				11,430				4,618
	(Business Services)		Common Stock (1,000 shares)							5,821				—
HealthASPex, Inc.			Preferred Stock (1,000,000 shares)							700				700
	(Business Services)		Preferred Stock (1,451,380 shares)							4,900				1,341
			Common Stock (1,451,380 shares)							4				—
HMT, Inc.			Preferred Stock (554,052 shares)							2,637				2,637
	(Energy Services)		Common Stock (300,000 shares)							3,000				3,899
			Warrants							1,155				1,501
Housecall Medical Resources, Inc.			Loan (16.8%, Due 11/07 – 11/09)			15,846				15,796				15,796
	(Healthcare Services)		Common Stock (864,000 shares)							86				53,612
Impact Innovations Group, LLC (Business Services)			Equity Interests in Affiliate							—				772
Insight Pharmaceuticals Corporation			Loan (16.0%, Due 9/12)			57,791				57,528				57,528
	(Consumer Products)		Preferred Stock (25,000 shares)							25,000				26,000
			Common Stock (6,200 shares)							6,325				442
Jakel, Inc.			Loan (15.5%, Due 3/08)(6)			5,412				5,412				—
	(Industrial Products)		Debt Securities (15.5%, Due 3/08)(6)			8,330				8,330				—
			Preferred Stock (6,460 shares)							6,460				—
			Common Stock (158,061 shares)							9,347				—
Legacy Partners Group, LLC			Loan (14.0%, Due 5/09)(6)			7,646				7,646				5,552
	(Financial Services)		Debt Securities (18.0%, Due 5/09)(6)			2,952				2,952				—
			Equity Interests							2,729				—
(1) Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.
(2) Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.
(3) Public company.
(4) Non-U.S. company or principal place of business outside the U.S.
(5) Non-registered investment company.
(6) Loan or debt security is on non-accrual status and therefore is considered non-income producing.

6

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					June 30, 2005
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Litterer Beteiligungs-GmbH(4)			Debt Securities (8.0%, Due 3/07)		$	633			$	633			$	633
	(Business Services)		Equity Interest							1,756				2,234
Maui Body Works, Inc.			Common Stock (100 shares)							2,501				—
	(Healthcare Services)
Mercury Air Centers, Inc.			Senior Loan (10.0%, Due 4/09)			23,500				23,500				23,500
	(Business Services)		Loan (16.0%, Due 4/09)			38,908				38,735				38,735
			Common Stock (57,068 shares)							33,723				29,000
			Standby Letters of Credit ($1,322)
MVL Group, Inc.			Loan (12.9%, Due 7/09)			42,440				41,948				41,948
	(Business Services)		Debt Securities (14.4%, Due 7/09)			18,266				17,793				17,793
			Common Stock (648,661 shares)							643				6,541
Pennsylvania Avenue Investors, L.P. (5)			Equity Interests							1,897				1,419
	(Private Equity Fund)
Powell Plant Farms, Inc.			Loan (15.0%, Due 12/05)			29,940				21,092				21,092
	(Consumer Products)		Debt Securities (20.0%, Due 6/03)(6)			19,291				19,224				10,392
			Preferred Stock (1,483 shares)							—				—
			Warrants							—				—
Redox Brands, Inc.			Preferred Stock (2,726,444 shares)							7,903				8,410
	(Consumer Products)		Warrants							584				300
Service Champ, Inc.			Loan (15.5%, Due 4/12)			26,739				26,593				26,593
	(Business Services)		Common Stock (63,888 Shares)							13,662				13,662
Staffing Partners Holding			Loan (13.5%, Due 10/06)(6)			940				940				940
	Company, Inc.		Debt Securities (13.5%, Due 10/06)(6)			5,672				5,672				5,672
	(Business Services)		Preferred Stock (439,600 shares)							4,968				731
			Common Stock (69,773 shares)							50				—
			Warrants							10				—
Startec Global Communications			Loan (10.0%, Due 5/07 – 5/09)			16,426				16,426				16,426
	Corporation		Common Stock (19,180,000 shares)							37,255				4,993
	(Telecommunications)
STS Operating, Inc.			Loan (15.3%, Due 3/12)			8,436				8,436				8,436
	(Industrial Products)		Common Stock (3,000,000 shares)							3,522				16,725
			Options							—				—
Total companies more than 25% owned									$	1,328,737			$	1,442,656
Companies 5% to 25% Owned
Air Evac Lifeteam			Debt Securities (13.0%, Due 7/10)		$	41,841			$	41,677			$	41,677
	(Healthcare Services)		Equity Interests							3,941				3,127
Aspen Pet Products, Inc.			Loans (19.0%, Due 6/08)			19,453				19,361				19,361
	(Consumer Products)		Preferred Stock (2,819 shares)							2,154				1,014
			Common Stock (1,400 shares)							140				—
			Warrants							—				—

(1) Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.

(2) Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.

(3) Public company.

(4) Non-U.S. company or principal place of business outside the U.S.

(5) Non-registered investment company.

(6) Loan or debt security is on non-accrual status and therefore is considered non-income producing.

7

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					June 30, 2005
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Becker Underwood, Inc.			Loan (14.5%, Due 8/12)		$	23,342			$	23,239			$	23,239
	(Industrial Products)		Common Stock (4,364 shares)							5,000				4,000
Border Foods, Inc.			Loan (13.0%, Due 12/10)			3,000				3,000				1,193
	(Consumer Products)		Debt Securities (13.0%, Due 12/10)			10,000				9,540				3,795
			Preferred Stock (50,919 shares)							2,000				—
			Common Stock (1,810 shares)							45				—
			Warrants							665				—
The Debt Exchange Inc.			Preferred Stock (921,875 shares)							1,250				2,226
	(Business Services)
MedBridge Healthcare, LLC			Loan (5.1%, Due 8/09 – 8/14)			11,447				11,447				9,829
	(Healthcare Services)		Convertible Debenture (2.0%, Due 8/14)(6)			2,985				1,000				—
Nexcel Synthetics, LLC			Loan (14.5%, Due 6/09)			10,430				10,397				10,397
	(Consumer Products)		Equity Interests							1,708				450
Pres Air Trol LLC			Debt Securities (12.0%, Due 4/10)			6,265				5,947				5,947
	(Industrial Products)		Equity Interests							1,338				319
Progressive International			Loan (16.0%, Due 12/09)			7,327				7,298				7,298
	Corporation		Preferred Stock (500 shares)							500				778
	(Consumer Products)		Common Stock (197 shares)							13				13
			Warrants							—				—
Soteria Imaging Services, LLC			Loan (12.1%, Due 11/10)			11,906				10,804				10,804
	(Healthcare Services)		Equity Interests							2,140				2,226
Universal Environmental Services,			Loan (13.5%, Due 2/09)			12,150				12,105				12,105
	LLC		Equity Interests							1,603				1,196
	(Business Services)
Total companies 5% to 25% owned									$	178,312			$	160,994
Companies Less Than 5% Owned
Anthony, Inc.			Loan (12.5%, Due 9/11 – 9/12)		$	14,596			$	14,532			$	14,532
	(Industrial Products)
Apogen Technologies, Inc.			Debt Securities (13.0%, Due 1/10)			5,000				4,984				4,984
	(Business Services)		Preferred Stock (270,008 shares)							2,700				3,354
			Common Stock (1,256,452 shares)							50				5,789
			Warrants							—				483
Autonomy Corporation PLC(3)(4)			Common Stock (302,667 shares)							1,298				1,271
	(Business Services)
Benchmark Medical, Inc.			Debt Securities (14.0%, Due 12/08)			13,788				13,734				13,734
	(Healthcare Services)		Warrants							18				18
BI Incorporated			Loan (14.0%, due 2/12)			16,040				15,964				15,964
	(Business Services)
C&K Market, Inc.			Loan (13.0%, due 12/08)			14,472				14,406				14,406
	(Retail)

(1) Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.

(2) Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.

(3) Public company.

(4) Non-U.S. company or principal place of business outside the U.S.

(5) Non-registered investment company.

(6) Loan or debt security is on non-accrual status and therefore is considered non-income producing.

8

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					June 30, 2005
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Callidus Debt Partners			Class C Notes (12.9%, Due 12/13)		$	18,800			$	18,988			$	18,988
	CDO Fund I, Ltd.(4)		Class D Notes (17.0%, Due 12/13)			9,400				9,494				9,494
	(Senior Debt CDO Fund)
Callidus Debt Partners			Preferred Shares (23,600,000 shares)							24,489				24,489
	CLO Fund III, Ltd. (4)
	(Senior Debt CLO Fund)
Camden Partners Strategic Fund II, L.P.(5)			Limited Partnership Interest							2,142				2,794
	(Private Equity Fund)
Catterton Partners V, L.P.(5)			Limited Partnership Interest							2,335				2,168
	(Private Equity Fund)
CBS Personnel Holdings, Inc.			Loan (14.5%, Due 12/09)			20,357				20,272				20,272
	(Business Services)
Colibri Holding Corporation			Debt Securities (12.5%, Due 9/08)			3,750				3,516				3,516
	(Consumer Products)		Preferred Stock (459 shares)							523				875
			Common Stock (3,362 shares)							1,250				452
			Warrants							290				105
Community Education Centers, Inc.			Loan (15.0%, Due 12/10)			31,729				31,603				31,603
	(Education Services)
Component Hardware Group, Inc.			Preferred Stock (18,000 shares)							2,605				2,763
	(Industrial Products)		Common Stock (2,000 shares)							200				500
Cooper Natural Resources, Inc.			Debt Securities (0%, Due 11/07)			1,170				1,170				1,062
	(Industrial Products)		Preferred Stock (6,316 shares)							1,424				—
			Warrants							830				—
Coverall North America, Inc.			Loan (14.6%, Due 2/11)			26,958				26,906				26,906
	(Business Services)		Preferred Stock (6,500 shares)							6,500				6,659
			Warrants							2,950				3,400
DCS Business Services, Inc.			Common Stock (478,816 shares)							734				2,500
	(Business Services)
Drilltec Patents & Technologies			Loan (10.0%, Due 8/06)(6)			10,994				10,918				—
	Company, Inc.		Debt Securities (15.8%, Due 8/06)(6)			1,500				1,500				—
	(Energy Services)
eCentury Capital Partners, L.P.(5)			Limited Partnership Interest							5,024				—
	(Private Equity Fund)
EDM Consulting, LLC			Loan (6.0%, Due 12/06)(6)			100				100				85
	(Business Services)
Elexis Beta GmbH(4)			Options							426				50
	(Industrial Products)
Frozen Specialties, Inc.			Warrants							435				530
	(Consumer Products)

(1) Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.

(2) Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.

(3) Public company.

(4) Non-U.S. company or principal place of business outside the U.S.

(5) Non-registered investment company.

(6) Loan or debt security is on non-accrual status and therefore is considered non-income producing.

9

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					June 30, 2005
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Garden Ridge Corporation (Retail)			Loan (7.0%, Due 5/12)(6)		$	22,500			$	22,500			$	14,985
Geotrace Technologies, Inc.			Debt Securities (12.0%, Due 6/09)			18,400				16,468				16,468
(Energy Services)			Warrants							2,350				2,350
Ginsey Industries, Inc.			Loans (12.5%, Due 3/06)			4,105				4,105				4,105
	(Consumer Products)
Grant Broadcasting Systems II			Loan (5.0%, Due 6/09)			2,756				2,756				2,756
	(Broadcasting & Cable)
Grotech Partners, VI, L.P.(5)			Limited Partnership Interest							6,451				4,094
	(Private Equity Fund)
Haven Eldercare of New England, LLC(8)			Loans (9.3%, Due 10/05)(6)			46,671				46,670				45,022
	(Healthcare Services)
Haven Healthcare Management, LLC(8)			Loan (18.0% Due 8/06)(6)			5,817				5,817				4,721
	(Healthcare Services)
The Hillman Companies, Inc.(3)			Loan (13.5%, Due 9/11)			43,509				43,308				43,308
	(Consumer Products)
Homax Holdings, Inc.			Debt (12.0%, Due 8/11)			14,000				12,973				12,973
	(Consumer Products)		Preferred Stock (89 shares)							89				82
			Common Stock (28 shares)							6				6
			Warrants							1,106				1,333
Icon International, Inc.			Common Stock (25,707 shares)							76				—
	(Business Services)
Interline Brands, Inc.(3)			Common Stock (152,371 shares)							2,294				2,896
	(Business Services)
International Fiber Corporation			Debt Securities (14.0%, Due 6/12)			21,328				21,236				21,236
	(Industrial Products)		Preferred Stock (25,000 shares)							2,500				2,100
MedAssets, Inc.			Preferred Stock (227,865 shares)							2,049				2,807
	(Business Services)		Warrants							136				90
Meineke Car Care Centers, Inc.			Senior Loan (6.9%, Due 6/11)			28,000				27,852				27,852
	(Business Services)		Loan (11.0%, Due 6/12)			55,000				54,729				54,729
			Debt Securities (15.0%, Due 6/13)			17,000				16,916				16,916
			Common Stock (10,696,308 shares)(9)							26,985				26,985
			Warrants							—				—

(1) Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.

(2) Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.

(3) Public company.

(4) Non-U.S. company or principal place of business outside the U.S.

(5) Non-registered investment company.

(6) Loan or debt security is on non-accrual status and therefore is considered non-income producing.

(8) Haven Eldercare of New England, LLC and Haven Healthcare Management, LLC are affiliated companies.

(9) Common stock is non-voting. In addition to non-voting stock ownership, the Company has an option to acquire a majority of the voting securities of the portfolio company at fair market value.

10

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					June 30, 2005
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
MHF Logistical Solutions, Inc.			Senior Loan (10.5%, Due 5/11)		$	23,000			$	22,887			$	22,887
	(Business Services)		Preferred Stock (431 shares)							431				431
			Common Stock (1,438 shares)							144				144
Mid-Atlantic Venture Fund IV, L.P.(5)			Limited Partnership Interest							6,600				3,287
	(Private Equity Fund)
Mogas Energy, LLC (Energy Services)			Debt Securities (9.5%, Due 3/12 – 4/12)			17,227				15,773				15,773
			Warrants							1,774				2,800
MortgageRamp, Inc.			Common Stock (772,000 shares)							3,860				306
	(Business Services)
Nobel Learning Communities,			Preferred Stock (1,214,356 shares)							2,764				2,564
	Inc.(3)		Warrants							575				893
	(Education)
Norwesco, Inc.			Loan (14.0%, Due 12/11)			15,000				14,930				14,930
	(Industrial Products)
Novak Biddle Venture Partners III, L.P.(5)			Limited Partnership Interest							1,399				1,457
	(Private Equity Fund)
Oahu Waste Services, Inc.			Stock Appreciation Rights							239				580
	(Business Services)
Onyx Television GmbH(4)			Preferred Units							201				—
	(Broadcasting & Cable)
Opinion Research Corporation(3)			Warrants							996				800
	(Business Services)
Oriental Trading Company, Inc.			Common Stock (13,820 shares)							—				5,200
	(Consumer Products)
Packaging Advantage Corporation			Debt Securities (18.5%, Due 7/06)			15,439				14,731				11,134
	(Business Services)		Common Stock (232,168 shares)							2,386				—
			Warrants							963				—
Pro Mach, Inc.			Loan (13.8%, Due 6/12)			19,107				19,020				19,020
	(Industrial Products)		Equity Interests							1,500				1,200
RadioVisa Corporation			Loan (15.5%, Due 12/08)			26,484				26,378				26,378
	(Broadcasting & Cable)
Red Hawk Industries, LLC			Senior Loan (11.0%, Due 4/11)			28,000				27,866				27,866
	(Business Services)		Loan (11.0%, Due 4/11)			8,200				8,136				8,136
Resun Leasing, Inc.			Loan (15.5%, Due 11/07)			30,000				30,000				30,000
	(Business Services)
S.B. Restaurant Company			Debt Securities (15.0%, Due 11/08)			17,885				17,395				17,395
	(Retail)		Preferred Stock (54,125 shares)							135				135
			Warrants							619				619
SBBUT, LLC			Equity Interests							85				85
	(Consumer Products)

(1) Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.

(2) Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.

(3) Public company.

(4) Non-U.S. company or principal place of business outside the U.S.

(5) Non-registered investment company.

(6) Loan or debt security is on non-accrual status and therefore is considered non-income producing.

11

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					June 30, 2005
Private Finance
Portfolio Company					(unaudited)
(in thousands, except number of shares)			Investment(1)(2)		Principal				Cost				Value
Soff-Cut Holdings, Inc.			Preferred Stock (300 shares)						$	300			$	—
	(Industrial Products)		Common Stock (2,000 shares)							200				—
SPP Mezzanine Fund, L.P.(5)			Limited Partnership Interest							2,199				2,093
	(Private Equity Fund)
SunStates Refrigerated Services,			Loan (0%, Due 1/05)(6)		$	15				15				—
	Inc.
	(Warehouse Facilities)
Tradesmen International, Inc.			Debt Securities (12.0%, Due 12/09)			15,000				14,257				14,257
	(Business Services)		Warrants							710				710
United Site Services, Inc.			Loan (13.0%, Due 6/10 – 12/10)			54,107				53,851				53,851
	(Business Services)		Common Stock (160,588 shares)							1,000				1,000
Universal Tax Systems, Inc.			Loan (14.5%, Due 7/11)			18,828				18,748				18,748
	(Business Services)
Updata Venture Partners II, L.P.(5)			Limited Partnership Interest							5,075				4,876
	(Private Equity Fund)
Venturehouse-Cibernet Investors, LLC			Equity Interest							34				34
	(Business Services)
Venturehouse Group, LLC(5)			Equity Interest							598				403
	(Private Equity Fund)
VICORP Restaurants, Inc.(3)			Warrants							33				814
	(Retail)
Walker Investment Fund II, LLLP(5)			Limited Partnership Interest							1,330				709
	(Private Equity Fund)
Wear Me Apparel Corporation			Debt Securities (15.0%, Due 12/10)			45,000				43,741				43,741
	(Consumer Products)		Warrants							1,219				550
Weston Solutions, Inc.			Loan (17.3%, Due 6/10)			7,350				7,325				7,325
	(Business Services)
Wilshire Restaurant Group, Inc.			Debt Securities (20.0%, Due 6/07)(6)			19,107				18,566				18,954
	(Retail)		Warrants							735				735
Wilton Industries, Inc.			Loan (19.3%, Due 6/08)			7,200				7,200				7,200
	(Consumer Products)
Woodstream Corporation			Loan (12.8%, Due 8/12 – 2/13)			31,101				31,052				31,052
	(Consumer Products)		Common Stock (180 shares)							673				1,869
			Warrants							—				1,631
Other companies			Other investments			484				542				530
			Other investments(6)			223				223				223
			Guaranty ($153)
Total companies less than 5% owned									$	995,095			$	966,885
Total private finance (117 portfolio companies)									$	2,502,144			$	2,570,535

(1) Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.

(2) Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.

(3) Public company.

(4) Non-U.S. company or principal place of business outside the U.S.

(5) Non-registered investment company.

(6) Loan or debt security is on non-accrual status and therefore is considered non-income producing.

12

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Commercial Real Estate Finance
(in thousands, except number of loans)

												June 30, 2005
				Interest				Number of				(unaudited)
				Rate Ranges				Loans				Cost				Value
Commercial Mortgage Loans
					Up to 6.99%				7			$	43,274			$	42,954
					7.00%–8.99%				26				50,785				48,547
					9.00%–10.99%				3				10,745				10,656
					11.00%–12.99%				1				7,822				7,666
					13.00%–14.99%				1				2,297				2,297
				15.00% and above					2				3,970				3,970
		Total commercial mortgage loans(10)							40			$	118,893			$	116,090
Real Estate Owned												$	13,985			$	16,655
Equity Interests(2)
Companies more than 25% owned (Guarantees — $7,054)												$	13,091			$	9,123
	Companies less than 5% owned												—				1,933
		Total equity interests										$	13,091			$	11,056
		Total commercial real estate finance										$	145,969			$	143,801
Total portfolio												$	2,648,113			$	2,714,336

(1) Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by nature of indebtedness for a single issuer. The maturity dates represent the earliest and the latest maturity dates.

(2) Common stock, preferred stock, warrants, options, and equity interests are generally non-income producing and restricted.

(3) Public company.

(4) Non-U.S. company or principal place of business outside the U.S.

(5) Non-registered investment company.

(10) Commercial mortgage loans totaling $17.8 million were on non-accrual status and therefore were considered non-income producing.

13

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14

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	Valuation Of Portfolio Investments

	Loans and Debt Securities

15

---

 

	Equity Securities

16

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	Commercial Mortgage-Backed Securities (“CMBS”) and Collateralized Debt Obligations (“CDO”)

	Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

	Fee Income

	Guarantees

17

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	Financing Costs

	Cash and Cash Equivalents

	Dividends to Shareholders

	Stock Compensation Plans

18

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			For the Three								For the Six
			Months Ended								Months Ended
			June 30,								June 30,
			2005				2004				2005				2004
(in thousands, except per share amounts)
Net increase in net assets resulting from operations as reported			$	311,885			$	95,342			$	431,506			$	115,650
Less total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects				(4,109	)			(7,543	)			(6,964	)			(10,596	)
Pro forma net increase in net assets resulting from operations				307,776				87,799				424,542				105,054
Less preferred stock dividends				—				(7	)			—				(52	)
Pro forma net income available to common shareholders			$	307,776			$	87,792			$	424,542			$	105,002
Basic earnings per common share:
	As reported		$	2.33			$	0.74			$	3.23			$	0.90
	Pro forma		$	2.30			$	0.68			$	3.18			$	0.82
Diluted earnings per common share:
	As reported		$	2.29			$	0.73			$	3.17			$	0.88
	Pro forma		$	2.26			$	0.67			$	3.12			$	0.80

		For the Three								For the Six
		Months Ended								Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
Risk-free interest rate			4.1	%			3.8	%			4.1	%			2.9	%
Expected life in years			5.0				5.0				5.0				5.0
Expected volatility			35.5	%			37.0	%			35.5	%			37.0	%
Dividend yield			9.0	%			9.0	%			9.0	%			8.8	%
Weighted average fair value per option		$	3.87			$	3.82			$	3.87			$	4.19

	Federal and State Income Taxes and Excise Tax

19

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	Per Share Information

	Use of Estimates in the Preparation of Financial Statements

	Recent Accounting Pronouncements

20

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	Private Finance

			2005												2004
			Cost				Value				Yield(1)				Cost				Value				Yield(1)
($ in thousands)
Loans and debt securities (2)			$	1,730,570			$	1,633,016				13.7	%		$	1,679,855			$	1,602,869				13.9	%
Equity securities				771,574				937,519								705,065				699,217
	Total		$	2,502,144			$	2,570,535							$	2,384,920			$	2,302,086

(1)	The weighted average yield on loans and debt securities is computed as the (a) annual stated interest plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities less the annual amortization of loan origination costs, divided by (b) total loans and debt securities at value. At June 30, 2005, and December 31, 2004, the cost and value of loans and debt securities include the Class A equity interests in BLX and the guaranteed dividend yield on these equity interests is included in interest income. The weighted average yield is computed as of the balance sheet date.
(2)	The principal balance outstanding on loans and debt securities was $1.8 billion and $1.7 billion at June 30, 2005, and December 31, 2004, respectively. The difference between principal and cost is represented by unamortized loan origination fees and costs, original issue discounts, and market discounts totaling $26.2 million and $29.8 million at June 30, 2005, and December 31, 2004, respectively.

21

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22

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23

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	•	a partial repayment of $8.2 million of the Company’s investment in Avborne, Inc. (“Avborne”) as a result of the sale of certain of Avborne’s assets during the first quarter of 2005;
	•	fundings of $40.7 million on Callidus Capital Corporation’s (“Callidus”) revolving line of credit related to its middle market underwriting and syndication facility. Callidus repaid borrowings under this facility totaling $82.9 million during the six months ended June 30, 2005, for net repayments under the facility during the six months ended June 30, 2005, of $42.2 million. In addition, the Company paid a fee to Callidus of $0.6 million in the second quarter of 2005 for the referral of Service Champ Inc. This fee has been included in the cost basis of the Company’s equity investment in Service Champ.;
	•	a partial repayment of $14.6 million of the Company’s investment in ForeSite Towers, LLC (“ForeSite”) as a result of the sale of a portion of ForeSite’s assets during the second quarter of 2005;
	•	the contribution to capital of existing debt securities of GAC Investments, Inc. (“GAC”)with a cost basis of $11.0 million, resulting in a decrease in the Company’s debt cost basis and an increase in the Company’s common stock cost basis in GAC;
	•	an additional loan of $2.0 million to Gordian Group, Inc.;
	•	the repayment of the Company’s debt investment of $9.3 million in HMT, Inc.;
	•	the repayment of the Company’s $66.1 million senior loan investment in Insight Pharmaceuticals Corporation (“Insight”) as a result of Insight’s senior debt refinancing;
	•	an additional $9.5 million debt and equity investment in Mercury Air Centers, Inc. to finance an acquisition;
	•	an additional $27.4 million debt investment in MVL Group, Inc. to finance an acquisition;

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	•	fundings of $5.8 million on Powell Plant Farms, Inc.’s (“Powell”) revolving credit facility for working capital. Powell repaid borrowings under this facility totaling $7.9 million, for net repayments under the facility during the six months ended June 30, 2005, of $2.1 million;

	•	the sale of the assets out of bankruptcy of Norstan Apparel Shops, Inc. (“Norstan”), which resulted in a realized loss during the second quarter of 2005. During the first quarter of 2005, the Company appointed three members to Norstan’s board of directors and had control of the board. Accordingly, the realized loss was included in the portfolio companies more than 25% owned category;
	•	the repayment of the Company’s debt investment of $14.0 million in Redox Brands, Inc.;
	•	a debt and equity investment of $40.4 million in Service Champ Inc.; and
	•	an additional debt investment of $8.4 million in STS Operating, Inc. (“STS”) to support the recapitalization of STS. In connection with the recapitalization, STS redeemed the Company’s preferred stock investment.

				2005				2004
($ in thousands)
Loans and debt securities in workout status (classified as Grade 4 or 5)
	Companies more than 25% owned			$	22,441			$	34,374
	Companies less than 5% owned				15,070				16,550
Loans and debt securities not in workout status
	Companies more than 25% owned				37,000				29,368
	Companies 5% to 25% owned				—				678
	Companies less than 5% owned				68,920				15,864
		Total		$	143,431			$	96,834

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			2005				2004
Industry
Business services				43	%			32	%
Financial services				19				21
Consumer products				13				20
Healthcare services				8				8
Industrial products				6				8
Retail				3				2
Energy services				2				2
Broadcasting and cable				1				2
Other				5				5
	Total			100	%			100	%
Geographic Region(1)
Mid-Atlantic				33	%			40	%
West				29				27
Southeast				22				14
Midwest				12				15
Northeast				4				4
	Total			100	%			100	%

(1)	The geographic region for the private finance portfolio depicts the location of the headquarters for the Company’s portfolio companies. The portfolio companies may have a number of other locations.

	Commercial Real Estate Finance

			2005												2004
			Cost				Value				Yield(1)				Cost				Value				Yield(1)
($ in thousands)
CMBS bonds			$	—			$	—							$	383,310			$	373,805				14.6%
CDO bonds and preferred shares				—				—								212,590				212,573				16.8%
Commercial mortgage loans				118,893				116,090				6.7%				99,373				95,056				6.8%
Real estate owned				13,985				16,655								16,170				16,871
Equity interests				13,091				11,056								11,169				13,020
	Total		$	145,969			$	143,801							$	722,612			$	711,325

(1)

The weighted average yield on the interest-bearing investments is computed as the (a) annual stated interest plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing interest-bearing investments less the annual amortization of origination costs, divided by (b) total interest-bearing investments at value. The weighted average yield is computed as of the balance sheet date. Interest-bearing investments for the commercial real estate finance portfolio include all investments except for real estate owned and equity interests.

26

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27

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			2005				2004
Property Type
Hospitality				31	%			49	%
Housing				18				5
Office				18				17
Retail				14				21
Other(1)				19				8
	Total			100	%			100	%

	(1)	Other includes the Company’s investment in an originator of commercial mortgage loans.

			2005				2004
Geographic Region
Midwest				30	%			30	%
Mid-Atlantic				30				20
West				21				16
Southeast				13				26
Northeast				6				8
	Total			100	%			100	%

				2005												2004
												Annual												Annual
				Facility				Amount				Interest				Facility				Amount				Interest
				Amount				Drawn				Cost(1)				Amount				Drawn				Cost(1)
($ in thousands)
Notes payable and debentures:
	Unsecured notes payable			$	940,012			$	940,012				6.5	%		$	981,368			$	981,368				6.5	%
	SBA debentures				53,800				46,500				7.8	%			84,800				77,500				8.2	%
	OPIC loan				—				—								5,700				5,700				6.6	%
		Total notes payable and debentures			993,812				986,512				6.5	%			1,071,868				1,064,568				6.6	%
Revolving line of credit					587,500				—				—	(2)			552,500				112,000				6.3	%(2)
	Total debt			$	1,581,312			$	986,512				6.8	%(2)		$	1,624,368			$	1,176,568				6.6	%(2)

(1)	The weighted average annual interest cost is computed as the (a) annual stated interest on the debt plus the annual amortization of commitment fees and other facility fees that are recognized into interest expense over the contractual life of the respective borrowings, divided by (b) debt outstanding on the balance sheet date.
(2)	There were no amounts drawn on the revolving line of credit at June 30, 2005. The annual interest cost for total debt includes the annual cost of commitment fees and other facility fees on the revolving line of credit regardless of the amount drawn on the facility as of the balance sheet date. The annual cost of commitment fees and other facility fees was $2.8 million at June 30, 2005, and included the extension fee of $1.8 million that the Company paid on April 18, 2005, as discussed below. The stated interest rate payable on the revolving line of credit was 4.7% at December 31, 2004, which excluded the annual cost of commitment fees and other facility fees of $1.8 million.

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Year			Amount Maturing
			($ in thousands)
2005			$	125,000
2006				175,000
2007				—
2008				153,000
2009				267,512
Thereafter				266,000
	Total		$	986,512

	Revolving Line of Credit

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	Covenant Compliance

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			Total				2005				2006				2007				2008				2009				After 2009
(in millions)
Guarantees			$	116.8			$	0.1			$	0.9			$	107.8			$	—			$	2.5			$	5.5
Standby letters of credit(1)				37.1				—				37.1				—				—				—				—
	Total		$	153.9			$	0.1			$	38.0			$	107.8			$	—			$	2.5			$	5.5

(1)	Standby letters of credit are issued under the Company’s revolving line of credit that expires in April 2006. Therefore, unless a standby letter of credit is set to expire at an earlier date, it is assumed that the standby letters of credit will expire contemporaneously with the expiration of the Company’s line of credit in April 2006.

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		For the Six Months
		Ended June 30,
		2005				2004
(in thousands, except per share amounts)
Shares issued			151				110
Average price per share		$	27.58			$	26.91

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2005				2004				2005				2004
(in thousands, except per share amounts)
Net increase in net assets resulting from operations		$	311,885			$	95,342			$	431,506			$	115,650
Less preferred stock dividends			—				(7	)			—				(52	)
Income available to common shareholders		$	311,885			$	95,335			$	431,506			$	115,598
Weighted average common shares outstanding — basic			133,701				128,814				133,493				128,564
Dilutive options outstanding to officers			2,680				2,394				2,489				3,056
Weighted average common shares outstanding — diluted			136,381				131,208				135,982				131,620
Basic earnings per common share		$	2.33			$	0.74			$	3.23			$	0.90
Diluted earnings per common share		$	2.29			$	0.73			$	3.17			$	0.88

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34

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($ in thousands)
Description of Issue			2005				2004
5-year Treasury securities, due December 2009			$	—			$	533
5-year Treasury securities, due April 2010				18,066				—
10-year Treasury securities, due February 2013				—				3,908
10-year Treasury securities, due February 2014				—				4,709
10-year Treasury securities, due August 2014				—				14,743
10-year Treasury securities, due November 2014				—				14,333
	Total		$	18,066			$	38,226

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			At and for the
			Six Months Ended								At and for the
			June 30,								Year Ended
											December 31,
			2005(1)				2004				2004
Per Common Share Data(2)
Net asset value, beginning of period			$	14.87			$	14.94			$	14.94
	Net investment income			0.40				0.71				1.52
	Net realized gains(3)			1.60				1.33				0.88
	Net investment income plus net realized gains			2.00				2.04				2.40
	Net change in unrealized appreciation or depreciation (3)			1.17				(1.16	)			(0.52	)
Net increase in net assets resulting from operations				3.17				0.88				1.88
Net decrease in net assets from shareholder distributions				(1.14	)			(1.14	)			(2.30	)
Net increase in net assets from capital share transactions				0.11				0.09				0.35
Net asset value, end of period			$	17.01			$	14.77			$	14.87
Market value, end of period			$	29.11			$	24.42			$	25.84
Total return(4)				17	%			(9	)%			1	%
Ratios and Supplemental Data ($ and shares in thousands, except per share amounts)
Ending net assets			$	2,281,287			$	1,904,711			$	1,979,778
Common shares outstanding at end of period				134,131				128,960				133,099
Diluted weighted average common shares outstanding				135,982				131,620				132,458
Employee and administrative expenses/average net assets				3.91	%			2.06	%			4.65	%
Total operating expenses/average net assets				5.79	%			4.01	%			8.53	%
Net investment income/average net assets				2.57	%			4.92	%			10.45	%
Net increase in net assets resulting from operations/ average net assets				20.57	%			6.09	%			12.97	%
Portfolio turnover rate				21.76	%			16.64	%			32.97	%
Average debt outstanding			$	1,097,851			$	922,073			$	985,616
Average debt per share(2)			$	8.07			$	7.01			$	7.44

(1)	The results for the six months ended June 30, 2005, are not necessarily indicative of the operating results to be expected for the full year.
(2)	Based on diluted weighted average number of common shares outstanding for the period.
(3)	Net realized gains and net change in unrealized appreciation or depreciation can fluctuate significantly from period to period. As a result, quarterly comparisons may not be meaningful.
(4)	Total return assumes the reinvestment of all dividends paid for the periods presented.

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Item  2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

	•	changes in the economy;
	•	risks associated with possible disruption in our operations due to terrorism;
	•	future changes in laws or regulations and conditions in our operating areas; and
	•	other risks and uncertainties as may be detailed from time to time in our public announcements and SEC filings.

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		2005				2004
Private finance			95	%			76	%
Commercial real estate finance			5	%			24	%

		At and for the								At and for the
		Three Months Ended								Six Months Ended								At and for the
		June 30,								June 30,								Year Ended
																		December 31,
		2005				2004				2005				2004				2004
($ in millions)
		(unaudited)								(unaudited)
Portfolio at value		$	2,714.3			$	2,784.8			$	2,714.3			$	2,784.8			$	3,013.4
Investments funded		$	389.3			$	577.3			$	654.9			$	795.1			$	1,524.5
Change in accrued or reinvested interest and dividends		$	(14.1	)		$	13.1			$	(3.6	)		$	26.1			$	52.2
Principal collections related to investment repayments or sales		$	932.6			$	193.7			$	1,090.8			$	430.9			$	909.2
Yield on interest-bearing investments (1)			13.2	%			14.0	%			13.2	%			14.0	%			14.0	%

(1)

The weighted average yield on interest-bearing investments is computed as the (a) annual stated interest plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing interest-bearing investments less the annual amortization of loan origination costs, divided by (b) total interest-bearing investments at value. The weighted average yield is computed as of the balance sheet date.

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			At and for the								At and for the
			Three Months Ended								Six Months Ended								At and for the
			June 30,								June 30,								Year Ended
																			December 31,
			2005				2004				2005				2004				2004
($ in millions)
			(unaudited)								(unaudited)
Portfolio at value:
	Loans and debt securities		$	1,633.0			$	1,278.1			$	1,633.0			$	1,278.1			$	1,602.9
	Equity securities			937.5				634.4				937.5				634.4				699.2
Total portfolio			$	2,570.5			$	1,912.5			$	2,570.5			$	1,912.5			$	2,302.1
Investments funded(1)			$	298.0			$	404.8			$	466.3			$	562.5			$	1,140.8
Change in accrued or reinvested interest and dividends			$	6.5			$	10.4			$	14.4			$	21.4			$	45.6
Principal collections related to investment repayments or sales			$	178.8			$	189.6			$	330.0			$	394.5			$	551.9
Yield on interest-bearing investments(2)				13.7	%			14.6	%			13.7	%			14.6	%			13.9	%

(1)	Investments funded for the six months ended June 30, 2004, included a $47.5 million subordinated debt investment in The Hillman Companies, Inc. received in conjunction with the sale of Hillman as discussed below.
(2)	The weighted average yield on loans and debt securities is computed as the (a) annual stated interest plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities less the annual amortization of loan origination costs, divided by (b) total loans and debt securities at value. The weighted average yield is computed as of the balance sheet date.

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				Loans and
				Debt				Equity
				Securities				Interests				Total
($ in millions)
For the Six Months Ended June 30, 2005
	Companies more than 25% owned			$	121.5			$	20.8			$	142.3
	Companies 5% to 25% owned				2.4				1.1				3.5
	Companies less than 5% owned				283.1				37.4				320.5
		Total		$	407.0			$	59.3			$	466.3
For the Six Months Ended June 30, 2004
	Companies more than 25% owned			$	189.4			$	106.2			$	295.6
	Companies 5% to 25% owned				24.8				16.4				41.2
	Companies less than 5% owned				213.5				12.2				225.7
		Total		$	427.7			$	134.8			$	562.5
For the Year Ended December 31, 2004
	Companies more than 25% owned			$	445.4			$	171.2			$	616.6
	Companies 5% to 25% owned				112.0				14.4				126.4
	Companies less than 5% owned				351.5				46.3				397.8
		Total		$	908.9			$	231.9			$	1,140.8

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	•	We have various commitments to Callidus Capital Corporation (Callidus), an asset management company that structures and manages collateralized debt obligations (CDOs), collateralized loan obligations (CLOs), and other related investments. We own 80% of the equity of the management company. Our commitment to Callidus consists of the following:

											Amount
			Committed				Amount				Available
			Amount				Drawn				to be Drawn
($ in millions)
Subordinated debt to support warehouse facilities & warehousing activities(1)			$	85.0	(2)		$	—			$	85.0
Revolving line of credit for working capital				4.0				1.3				2.7
Revolving line of credit facility to support underwriting and syndication activities				150.0				—				150.0
	Total		$	239.0			$	1.3			$	237.7

	(1)	Callidus has two secured warehouse credit facilities with third parties for up to $300 million and $400 million, respectively. These facilities are used primarily to finance the acquisition of loans pending securitization through a CDO or CLO. In conjunction with these warehouse credit facilities, we have agreed to designate our $85 million subordinated debt commitment for Callidus to draw upon to provide first loss capital as needed to support the warehouse facilities.
	(2)	Subsequent to June 30, 2005, we increased our $85 million subordinated debt commitment to $100 million for Callidus to draw upon to provide first loss capital as needed to support its warehouse facilities.

	In addition, we had a commitment to Callidus to purchase preferred equity in future CDO or CLO transactions of $76.8 million at June 30, 2005.

	•	$162.3 million in the form of debt and equity to Norwesco, Inc., of which we funded $157.0 million in July 2005.
	•	$15.9 million in the form of equity to eight private venture capital funds.
	•	$15.0 million in the form of debt of financing commitments to S.B. Restaurant Company, of which $2.5 million was funded in July 2005.
	•	$8.2 million in the form of equity to Pennsylvania Avenue Investors, L.P., a limited partnership controlled by us that invests in private buyout equity funds.

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			At and for the																At and for the
			Three Months Ended June 30,																Six Months Ended June 30,																At and for
																																			the Year Ended
																																			December 31,
			2005								2004								2005								2004								2004
			(unaudited)																(unaudited)
			Value				Yield(1)				Value				Yield(1)				Value				Yield				Value				Yield				Value				Yield(1)
($ in millions)
Portfolio at value:
	CMBS bonds		$	—							$	530.8				13.0%			$	—							$	530.8				13.0%			$	373.8				14.6%
	CDO bonds and preferred shares			—								175.6				17.3%				—								175.6				17.3%				212.6				16.8%
	Commercial mortgage loans			116.1				6.7%				147.0				8.5%				116.1				6.7%				147.0				8.5%				95.0				6.8%
	Real estate owned			16.6								14.4								16.6								14.4								16.9
	Equity interests			11.1								4.5								11.1								4.5								13.0
Total portfolio			$	143.8							$	872.3							$	143.8							$	872.3							$	711.3
Investments funded			$	91.3							$	172.5							$	188.6							$	232.6							$	383.7
Change in accrued or reinvested interest			$	(20.6	)						$	2.7							$	(18.0	)						$	4.7							$	6.6
Principal collections related to investment repayments or sales			$	753.8							$	4.1							$	760.8							$	36.4							$	357.3

(1)

The weighted average yield on the interest-bearing investments is computed as the (a) annual stated interest rate plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing interest-bearing investments less the annual amortization of origination costs, divided by (b) total interest-bearing investments at value. The weighted average yield is computed as of the balance sheet date. Interest-bearing investments for the commercial real estate finance portfolio include all investments except for real estate owned and equity interests.

			Face								Amount
			Amount				Discount				Funded
($ in millions)
For the Six Months Ended June 30, 2005
CMBS bonds (4 new issuances)(2)			$	211.5			$	(90.5	)		$	121.0
Commercial mortgage loans				67.1				(0.9	)			66.2
Equity interests				1.4				—				1.4
	Total		$	280.0			$	(91.4	)		$	188.6
For the Six Months Ended June 30, 2004
CMBS bonds (8 new issuances(1))			$	262.3			$	(110.0	)		$	152.3
CDO bonds and preferred shares (1 issuance)				4.0				(0.3	)			3.7
Commercial mortgage loans				84.8				(8.3	)			76.5
Equity interests				0.1				—				0.1
	Total		$	351.2			$	(118.6	)		$	232.6
For the Year Ended December 31, 2004
CMBS bonds (13 new issuances(1))			$	419.1			$	(183.7	)		$	235.4
CDO bonds and preferred shares (3 issuances)				40.5				(0.1	)			40.4
Commercial mortgage loans				112.1				(8.2	)			103.9
Equity interests				4.0				—				4.0
	Total		$	575.7			$	(192.0	)		$	383.7

(1)	CMBS investments also include investments in issuances in which we have previously purchased CMBS bonds.
(2)	The CMBS bonds invested in during the six months ended June 30, 2005, were sold on May 3, 2005.

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				2005				2004
($ in millions)
Private finance				$	60.1			$	59.8
Commercial real estate finance
	CMBS and CDO bonds				—				18.9
	Commercial mortgage loans and other				1.7				0.8
		Total		$	61.8			$	79.5

		At June 30, 2005								At December 31, 2004
		Portfolio				Percentage of				Portfolio				Percentage of
Grade		at Value(1)				Total Portfolio				at Value				Total Portfolio
($ in millions)
1		$	1,158.1				42.7	%		$	952.5				31.6	%
2			1,321.2				48.7				1,850.5				61.4
3			143.8				5.3				121.2				4.0
4			8.9				0.3				11.7				0.4
5			82.3				3.0				77.5				2.6
		$	2,714.3				100.0	%		$	3,013.4				100.0	%

	(1)	The total portfolio at value at June 30, 2005, was $299.1 million lower than the total portfolio at value at December 31, 2004, primarily due to the completion of the sale of our portfolio of CMBS and CDO assets on May 3, 2005. See “Commercial Real Estate Finance” above. The value of the CMBS and CDO assets at December 31, 2004, was $586.4 million, and this value was included in Grade 2 assets. A portion of the principal proceeds from this sale were redeployed into the private finance portfolio during the second quarter of 2005. Cash and cash equivalents were $490.0 million and $57.2 million at June 30, 2005, and December 31, 2004, respectively.

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				2005				2004
($ in millions)
Loans and debt securities in workout status (classified as Grade 4 or 5)(1)
	Private finance
		Companies more than 25% owned		$	22.4			$	34.4
		Companies less than 5% owned			15.1				16.5
	Commercial real estate finance				15.8				5.6
Loans and debt securities not in workout status
	Private finance
		Companies more than 25% owned			37.0				29.4
		Companies 5% to 25% owned			—				0.7
		Companies less than 5% owned			68.9				15.8
	Commercial real estate finance				2.0				12.5
		Total		$	161.2			$	114.9
		Percentage of total portfolio			5.9%				3.8%

(1)	Workout loans and debt securities exclude equity securities that are included in the total Grade 4 and 5 assets above.

				2005				2004
($ in millions)
Private finance				$	77.5			$	73.5
Commercial real estate finance
	CMBS bonds				—				49.0
	Commercial mortgage loans				17.1				10.1
		Total		$	94.6			$	132.6
		Percentage of total portfolio			3.5%				4.4%

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				For the Three
				Months Ended
				June 30,
																Percentage
				2005				2004				Change				Change
($ in thousands, except per share amounts)
				(unaudited)
Interest and Related Portfolio Income
	Interest and dividends			$	71,330			$	74,173			$	(2,843	)			(4	)%
	Loan prepayment premiums				853				3,067				(2,214	)			(72	)%
	Fees and other income				14,024				10,260				3,764				37	%
		Total interest and related portfolio income			86,207				87,500				(1,293	)			(1	)%
Expenses
	Interest				19,154				17,983				1,171				7	%
	Employee				22,877				11,920				10,957				92	%
	Administrative				23,048				9,076				13,972				154	%
		Total operating expenses			65,079				38,979				26,100				67	%
Net investment income before income taxes					21,128				48,521				(27,393	)			(56	)%
Income tax expense (benefit), including excise tax					5,861				(469	)			6,330				**
Net investment income					15,267				48,990				(33,723	)			(69	)%
Net Realized and Unrealized Gains (Losses)
	Net realized gains (losses)				207,496				26,603				180,893				*
	Net change in unrealized appreciation or depreciation				89,122				19,749				69,373				*
		Total net gains			296,618				46,352				250,266				*
Net income				$	311,885			$	95,342			$	216,543				227	%
Diluted earnings per common share				$	2.29			$	0.73			$	1.56				214	%
Weighted average common shares outstanding — diluted					136,381				131,208				5,173				4	%

*	Net realized gains (losses) and net change in unrealized appreciation or depreciation can fluctuate significantly from period to period. As a result, quarterly comparisons may not be meaningful.
**	Percentage change is not meaningful.

			2005				2004
($ in millions)
Interest			$	66.0			$	70.1
Dividends				5.3				4.1
	Total		$	71.3			$	74.2

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		2005				2004
($ in millions)
Interest-bearing portfolio at value		$	1,765.8			$	2,145.9
Portfolio yield			13.2	%			14.0	%

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			2005				2004
($ in millions)
Structuring and diligence			$	7.5			$	5.3
Transaction and other services provided to portfolio companies				0.4				0.6
Management, consulting and other services provided to portfolio companies and guaranty fees				5.2				3.7
Other income				0.9				0.7
	Total fees and other income		$	14.0			$	10.3

		At and for the
		Three Months
		Ended
		June 30,
		2005				2004
($ in millions)
Total outstanding debt		$	986.5			$	1,058.8
Average outstanding debt		$	1,071.0			$	891.2
Weighted average cost(1)			6.8	%			6.8	%

(1)	The weighted average annual interest cost is computed as the (a) annual stated interest rate on the debt plus the annual amortization of commitment fees and other facility fees that are recognized into interest expense over the contractual life of the respective borrowings, divided by (b) debt outstanding on the balance sheet date.

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			For the Three
			Months Ended
			June 30,
			2005				2004
($ in millions)
Salaries and employee benefits			$	11.7			$	9.0
Transition compensation, net				5.5				—
Individual performance award (IPA)				1.9				3.5
IPA mark to market expense (benefit)				1.8				(0.6	)
Individual performance bonus (IPB)				2.0				—
	Total employee expense		$	22.9			$	11.9
Number of employees				152				153

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		For the Three
		Months Ended
		June 30,
		2005				2004
($ in millions)
Realized gains		$	244.7			$	48.0
Realized losses			(37.2	)			(21.4	)
Net realized gains		$	207.5			$	26.6

			For the Three
			Months Ended
			June 30,
($ in millions)			2005(1)				2004
Reversal of previously recorded net unrealized appreciation associated with realized gains			$	(16.6	)		$	(25.6	)
Reversal of previously recorded net unrealized depreciation associated with realized losses				37.1				21.8
	Total reversal		$	20.5			$	(3.8	)

	(1)	Includes the reversal of net unrealized appreciation of $6.5 million on the CMBS and CDO assets sold and the related hedges. The net unrealized appreciation recorded on these assets prior to their sale was determined on an individual security-by-security basis. The net gain realized upon the sale of $227.7 million reflects the total value received for the portfolio as a whole.

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		2005(1)				2004(1)
($ in millions)
Net unrealized appreciation or depreciation		$	68.6			$	23.5
Reversal of previously recorded unrealized appreciation associated with realized gains			(16.6	)			(25.6	)
Reversal of previously recorded unrealized depreciation associated with realized losses			37.1				21.8
Net change in unrealized appreciation or depreciation		$	89.1			$	19.7

(1)	The net change in unrealized appreciation or depreciation can fluctuate significantly from period to period. As a result, quarterly comparisons may not be meaningful.

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				For the Six
				Months Ended
				June 30,
																Percentage
				2005				2004				Change				Change
($ in thousands, except per share amounts)
				(unaudited)
Interest and Related Portfolio Income
	Interest and dividends			$	156,275			$	147,712			$	8,563				6	%
	Loan prepayment premiums				2,530				4,017				(1,487	)			(37	)%
	Fees and other income				22,321				17,536				4,785				27	%
		Total interest and related portfolio income			181,126				169,265				11,861				7	%
Expenses
	Interest				39,379				37,096				2,283				6	%
	Employee				38,333				24,275				14,058				58	%
	Administrative				43,802				14,903				28,899				194	%
		Total operating expenses			121,514				76,274				45,240				59	%
Net investment income before income taxes					59,612				92,991				(33,379	)			(36	)%
Income tax expense (benefit), including excise tax					5,593				(544	)			6,137				**
Net investment income					54,019				93,535				(39,516	)			(42	)%
Net Realized and Unrealized Gains (Losses)
	Net realized gains (losses)				217,781				174,453				43,328				*
	Net change in unrealized appreciation or depreciation				159,706				(152,338	)			312,044				*
		Total net gains			377,487				22,115				355,372				*
Net income				$	431,506			$	115,650			$	315,856				273	%
Diluted earnings per common share				$	3.17			$	0.88			$	2.29				260	%
Weighted average common shares outstanding — diluted					135,982				131,620				4,362				3	%

*	Net realized gains (losses) and net change in unrealized appreciation or depreciation can fluctuate significantly from period to period. As a result, year-to-date comparisons may not be meaningful.

**	Percentage change is not meaningful.

			2005				2004
($ in millions)
Interest			$	146.9			$	139.9
Dividends				9.4				7.8
	Total interest and dividends		$	156.3			$	147.7

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		2005				2004
($ in millions)
Interest-bearing portfolio at value		$	1,765.8			$	2,145.9
Portfolio yield			13.2	%			14.0	%

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			2005				2004
($ in millions)
Structuring and diligence			$	8.9			$	7.2
Transaction and other services provided to portfolio companies				1.6				1.3
Management, consulting and other services provided to portfolio companies and guaranty fees				10.0				8.0
Other income				1.8				1.0
	Total fees and other income		$	22.3			$	17.5

		At and for the
		Six Months Ended
		June 30,
		2005				2004
($ in millions)
Total Outstanding Debt		$	986.5			$	1,058.8
Average Outstanding Debt		$	1,097.9			$	922.1
Weighted Average Cost(1)			6.8%				6.8%

(1)	The weighted average annual interest cost is computed as the (a) annual stated interest rate on the debt plus the annual amortization of commitment fees and other facility fees that are recognized into interest expense over the contractual life of the respective borrowings, divided by (b) debt outstanding on the balance sheet date.

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			For the Six
			Months Ended
			June 30,
			2005				2004
($ in millions)
Salaries and employee benefits			$	23.5			$	17.9
Transition compensation, net				5.5				—
Individual performance award (IPA)				3.8				7.0
IPA mark to market expense (benefit)				1.9				(0.6	)
Individual performance bonus (IPB)				3.6				—
	Total employee expense		$	38.3			$	24.3
Number of employees				152				153

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		For the Six
		Months Ended
		June 30,
		2005				2004
($ in millions)
Realized gains		$	259.4			$	204.0
Realized losses			(41.6	)			(29.5	)
Net realized gains		$	217.8			$	174.5

			For the Six
			Months Ended
			June 30,
			2005(1)				2004
($ in millions)
Reversal of previously recorded net unrealized appreciation associated with realized gains			$	(26.5	)		$	(168.4	)
Reversal of previously recorded net unrealized depreciation associated with realized losses				41.9				29.6
	Total reversal		$	15.4			$	(138.8	)

	(1)	Includes the reversal of net unrealized appreciation of $6.5 million on the CMBS and CDO assets sold and the related hedges. The net unrealized appreciation recorded on these assets prior to their sale was determined on an individual security-by-security basis. The net gain realized upon the sale of $227.7 million reflects the total value received for the portfolio as a whole.

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		2005(1)				2004(1)
($ in millions)
Net unrealized appreciation or depreciation		$	144.3			$	(13.5	)
Reversal of previously recorded unrealized appreciation associated with realized gains			(26.5	)			(168.4	)
Reversal of previously recorded unrealized depreciation associated with realized losses			41.9				29.6
Net change in unrealized appreciation or depreciation		$	159.7			$	(152.3	)

(1)	The net change in unrealized appreciation or depreciation can fluctuate significantly from period to period. As a result year-to-date comparisons may not be meaningful.

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($ in millions)			2005				2004
Net cash provided by (used in) operating activities			$	765.4			$	(89.8	)
Add: portfolio investments funded				647.2				737.2
	Total cash provided by operating activities before new investments		$	1,412.6			$	647.4

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($ in millions)		2005				2004
Total cash and cash equivalents		$	490.0			$	57.2
Total assets		$	3,365.5			$	3,261.0
Total debt outstanding		$	986.5			$	1,176.6
Total shareholders’ equity		$	2,281.3			$	1,979.8
Debt to equity ratio			0.43				0.59
Asset coverage ratio(1)			343	%			280	%

(1)	As a business development company, we are generally required to maintain a minimum ratio of 200% of total assets to total borrowings.

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												Annual
				Facility				Amount				Interest
				Amount				Outstanding				Cost(1)
($ in millions)
Notes payable and debentures:
	Unsecured notes payable			$	940,012			$	940,012				6.5	%
	SBA debentures				53,800				46,500				7.8	%
		Total notes payable and debentures			993,812				986,512				6.5	%
Revolving line of credit					587,500				—				—	(2)
		Total debt		$	1,581,312			$	986,512				6.8	%(2)

(1)	The weighted average annual interest cost is computed as the (a) annual stated interest on the debt plus the annual amortization of commitment fees and other facility fees that are recognized into interest expense over the contractual life of the respective borrowings, divided by (b) debt outstanding on the balance sheet date.
(2)	There were no amounts drawn on the revolving line of credit at June 30, 2005. The annual interest cost for total debt includes the annual cost of commitment fees and other facility fees on the revolving line of credit regardless of the amount outstanding on the facility as of the balance sheet date. The annual cost of commitment fees and other facility fees was $2.8 million at June 30, 2005, which included the extension fee of $1.8 million that we paid on April 18, 2005, as discussed below.

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								Payments Due By Year
																												After
				Total				2005				2006				2007				2008				2009				2009
($ in millions)
Notes payable and debentures:
	Unsecured long-term notes payable			$	940.0			$	125.0			$	175.0			$	—			$	153.0			$	267.5			$	219.5
	SBA debentures				46.5				—				—				—				—				—				46.5
Revolving line of credit(1)					—				—				—				—				—				—				—
Operating leases					31.3				2.3				4.5				4.4				4.5				4.6				11.0
		Total contractual obligations		$	1,017.8			$	127.3			$	179.5			$	4.4			$	157.5			$	272.1			$	277.0

(1)	As discussed above, we exercised our option to extend the maturity of the revolving line of credit to April 2006. At June 30, 2005, $550.4 million remained unused and available, net of amounts committed for standby letters of credit of $37.1 million issued under the credit facility.

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							Amount of Commitment Expiration Per Year
																											After
			Total				2005				2006				2007				2008				2009				2009
($ in millions)
Guarantees			$	116.8			$	0.1			$	0.9			$	107.8			$	—			$	2.5			$	5.5
Standby letters of credit(1)				37.1				—				37.1				—				—				—				—
	Total commitments		$	153.9			$	0.1			$	38.0			$	107.8			$	—			$	2.5			$	5.5

(1)

Standby letters of credit are issued under our revolving line of credit. As discussed above, we exercised our option to extend the maturity of the revolving line of credit to April 2006. Therefore, unless a standby letter of credit is set to expire at an earlier date, we have assumed that the standby letters of credit will expire contemporaneously with the expiration of our line of credit in April 2006.

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	•	price and volume fluctuations in the overall stock market from time to time;
	•	significant volatility in the market price and trading volume of securities of business development companies or other financial services companies;
	•	volatility resulting from trading in derivative securities related to our common stock including puts, calls, long-term equity anticipation securities, or LEAPs, or short trading positions;
	•	changes in regulatory policies or tax guidelines with respect to business development companies or regulated investment companies;
	•	actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the expectations of securities analysts;
	•	general economic conditions and trends;
	•	loss of a major funding source; or
	•	departures of key personnel.

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			Total Number
			of Shares				Average Price
			Purchased				Paid Per Share
DCP I(1)
	4/1/2005 to 4/30/2005			28			$	27.17
	5/1/2005 to 5/31/2005			—				—
	6/1/2005 to 6/30/2005			—				—
DCP II(2)
	4/1/2005 to 4/30/2005			10,617			$	27.16
	5/1/2005 to 5/30/2005			—				—
	6/1/2005 to 6/30/2005			67,740			$	27.68
Total				78,385			$	27.61

(1)	The DCP I is an unfunded plan, as defined by the Internal Revenue Code of 1986, that provides for the deferral of compensation by our directors, employees, and consultants. Our directors, employees, or consultants are eligible to participate in the plan at such time and for such period as designated by the Board of Directors. The DCP I is administered through a trust by an independent third-party trustee, and we fund this plan through cash contributions. Directors may choose to defer director’s fees through the DCP I, and may choose to invest such deferred income in shares of our common stock. To the extent a director elects to invest in our common stock, the trustee of the DCP I will be required to use such deferred director’s fees to purchase shares of our common stock in the market.
(2)	We have established a long-term incentive compensation program whereby we will generally determine an individual performance award for certain officers annually at the beginning of each year. In conjunction with the program, we instituted the DCP II, which is an unfunded plan (as defined by the Internal Revenue Code of 1986) that is administered through a trust by an independent third-party trustee. The individual performance awards will be deposited in the trust in four equal installments, generally on a quarterly basis in the form of cash and the DCP II requires the trustee to use the cash exclusively to purchase shares of our common stock in the market.

	1.	Election of Directors: Shareholders elected five directors of the Company, who will serve for three years, or until their successors are elected and qualified. Votes were cast as follows:

		For				Withheld
John D. Firestone			124,256,301				935,225
Anthony T. Garcia			124,219,315				972,212
Lawrence I. Hebert			124,173,894				1,017,632
Marc F. Racicot			122,873,030				2,318,496
Laura W. van Roijen			124,202,012				989,514

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	The following directors are continuing as directors of the Company for their respective terms — Brooks H. Browne, Ann Torre Bates, John I. Leahy, Robert E. Long, Alex J. Pollock, Guy T. Steuart II, Joan M. Sweeney, and William L. Walton.

	2.	Ratification of the selection of KPMG LLP to serve as independent public accounts for the year ending December 31, 2005. Votes were cast as follows:

For				Against				Abstain
	124,029,873				650,029				511,623

Exhibit
Number				Description
	3	.1		Restated Articles of Incorporation. (Incorporated by reference to Exhibit a.1 filed with Allied Capital’s Post-Effective Amendment No. 2 to registration statement on Form N-2 (File No. 333-67336) filed on March 22, 2002).
	3	.2		Amended and Restated Bylaws. (Incorporated by reference to Exhibit 3.1. filed with Allied Capital’s Form 8-K on December 15, 2004).
	4	.1		Specimen Certificate of Allied Capital’s Common Stock, par value $0.0001 per share. (Incorporated by reference to Exhibit d. filed with Allied Capital’s registration statement on Form N-2 (File No. 333-51899) filed on May 6, 1998).
	4	.2		Form of debenture between certain subsidiaries of Allied Capital and the U.S. Small Business Administration. (Incorporated by reference to Exhibit 4.2 filed by a predecessor entity to Allied Capital on Form 10-K for the year ended December 31, 1996).
	10	.1		Dividend Reinvestment Plan, as amended. (Incorporated by reference to Exhibit e. filed with Allied Capital’s registration statement on Form N-2 (File No. 333-87862) filed on May 8, 2002).
	10	.2		Third Amended and Restated Credit Agreement, dated April 18, 2003. (Incorporated by reference to Exhibit 10.2 filed with Allied Capital’s Form 10-Q for the period ended March 31, 2003).
	10	.2(a)		First Amendment to Credit Agreement, dated as of October 6, 2003.(Incorporated by reference to Exhibit 10.2(a) filed with Allied Capital’s Form 10-Q for the period ended September 30, 2003).
	10	.2(b)		Second Amendment to Credit Agreement, dated as of December 17, 2003. (Incorporated by reference to Exhibit 10.2(b) filed with Allied Capital’s Form 10-K for the year ended December 31, 2003).
	10	.2(c)		Third Amendment to Credit Agreement, dated May 28, 2004. (Incorporated by reference to Exhibit 10.2(c) filed with Allied Capital’s Form 10-Q for the period ended June 30, 2004).
	10	.2(d)		Fourth Amendment to Credit Agreement, dated March 29, 2005. (Incorporated by reference to Exhibit f.2(d) filed with Allied Capital’s registration statement on Form N-2 filed on April 7, 2005).
	10	.2(e)		Fifth Amendment to Credit Agreement, dated April 15, 2005. (Incorporated by reference to Exhibit 10.2(e) filed with Allied Capital’s Form 10-Q for the period ended March 31, 2005).

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Exhibit
Number				Description
	10	.4		Loan Agreement between a predecessor entity to Allied Capital and Overseas Private Investment Corporation, dated April 10, 1995. (Incorporated by reference to Exhibit f.7 filed by a predecessor entity to Allied Capital to Pre-Effective Amendment No. 2 to registration statement on Form N-2 (File No. 333-64629) filed on January 24, 1996). Letter, dated December 11, 1997, evidencing assignment of Loan Agreement from the predecessor entity of Allied Capital to Allied Capital. (Incorporated by reference to Exhibit 10.3 to Allied Capital’s Form 10-K for the year ended December 31, 1997).
	10	.5		Note Agreement, dated as of May 1, 1999. (Incorporated by reference to Exhibit 10.5 filed with Allied Capital Form 10-Q for the period ended June 30, 1999).
	10	.12		Note Agreement, dated as of October 15, 2000. (Incorporated by reference to Exhibit 10.4b filed with Allied Capital’s Form 10-Q for the period ended September 30, 2000).
	10	.13		Note Agreement, dated as of October 15, 2001. (Incorporated by reference to Exhibit f.10 filed with Allied Capital’s Post-Effective Amendment No. 1 to registration statement on Form N-2 (File No. 333-67336) filed on November 14, 2001).
	10	.15		Control Investor Guaranty Agreement, dated as of March 28, 2001, between Allied Capital and Fleet National Bank and Business Loan Express, Inc. (Incorporated by reference to Exhibit f.14 filed with Allied Capital’s Post-Effective Amendment No. 3 to registration statement on Form N-2 (File No. 333-43534) filed on May 15, 2001).
	10	.17		Non-Qualified Deferred Compensation Plan II. (Incorporated by reference to Exhibit A filed with Allied Capital’s Proxy Statement filed on March 30, 2004).
	10	.18		Amended and Restated Deferred Compensation Plan, dated January 30, 2004. (Incorporated by reference to Exhibit 10.16 filed with Allied Capital’s Form 10-K for the year ended December 31, 2003).
	10	.19		Amended Stock Option Plan. (Incorporated by reference to Exhibit B of Allied Capital’s definitive proxy statement for Allied Capital’s 2004 Annual Meeting of Stockholders filed on March 30, 2004).
	10	.20(a)		Allied Capital Corporation 401(k) Plan, dated September 1, 1999. (Incorporated by reference to Exhibit 4.4 filed with Allied Capital’s registration statement on Form S-8 (File No. 333-88681) filed on October 8, 1999).
	10	.20(b)		Amendment to Allied Capital Corporation 401(k) Plan, dated April 15, 2004. (Incorporated by reference to Exhibit 10.20(b) filed with Allied Capital’s Form 10-Q for the period ended June 30, 2004).
	10	.21		Employment Agreement, dated January 1, 2004, between Allied Capital and William L. Walton. (Incorporated by reference to Exhibit 10.21 filed with Allied Capital’s Form 10-K for the year ended December 31, 2003).
	10	.22		Employment Agreement, dated January 1, 2004, between Allied Capital and Joan M. Sweeney. (Incorporated by reference to Exhibit 10.22 filed with Allied Capital’s Form 10-K for the year ended December 31, 2003).
	10	.23		Retention Agreement, dated March 21, 2005, between Allied Capital and John M. Scheurer. (Incorporated by reference to Exhibit 99.1 filed with Allied Capital’s current report on Form 8-K filed on March 24, 2005).
	10	.25		Form of Custody Agreement with Riggs Bank N.A. (Incorporated by reference to Exhibit j.1 filed with Allied Capital’s registration statement on Form N-2 (File No. 333-51899) filed on May 6, 1998).
	10	.26		Form of Custody Agreement with LaSalle National Bank. (Incorporated by reference to Exhibit j.2 filed with Allied Capital’s registration statement on Form N-2 (File No. 333- 51899) filed on May 6, 1998).

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Exhibit
Number				Description
	10	.27		Custodian Agreement with LaSalle National Bank Association dated July 9, 2001. (Incorporated by reference to Exhibit j.3 filed with Allied Capital’s registration statement on Form N-2 (File No. 333-67336) filed on August 10, 2001).
	10	.28		Code of Ethics. (Incorporated by reference to Exhibit 10.28 filed with Allied Capital’s Form 10-K for the year ended December 31, 2003.)
	10	.30		Agreement and Plan of Merger by and among Allied Capital, Allied Capital Lock Acquisition Corporation, and Sunsource, Inc dated June 18, 2001. (Incorporated by reference to Exhibit k.1 filed with Allied Capital’s registration statement on Form N-2 (File No. 333-67336) filed on August 10, 2001).
	10	.31		Note Agreement, dated as of May 14, 2003. (Incorporated by reference to Exhibit 10.31 filed with Allied Capital’s Form 10-Q for the period ended March 31, 2003).
	10	.32		Amendment, dated as of April 30, 2003, to Note Agreement, dated as of April 30, 1998. (Incorporated by reference to Exhibit 10.32 filed with Allied Capital’s Form 10-Q for the period ended March 31, 2003).
	10	.33		Amendment, dated as of April 30, 2003, to Note Agreement, dated as of May 1, 1999. (Incorporated by reference to Exhibit 10.33 filed with Allied Capital’s Form 10-Q for the period ended March 31, 2003).
	10	.35		Amendment, dated as of April 30, 2003, to Note Agreement, dated as of October 15, 2000. (Incorporated by reference to Exhibit 10.35 filed with Allied Capital’s Form 10-Q for the period ended March 31, 2003).
	10	.36		Amendment, dated as of April 30, 2003, to Note Agreement, dated as of October 15, 2001. (Incorporated by reference to Exhibit 10.36 filed with Allied Capital’s Form 10-Q for the period ended March 31, 2003).
	10	.37		Form of Indemnification Agreement between Allied Capital and its directors and certain officers. (Incorporated by reference to Exhibit 10.37 filed with Allied Capital’s Form 10-K for the year ended December 31, 2003).
	10	.38		Note Agreement, dated as of March 25, 2004. (Incorporated by reference to Exhibit 10.38 filed with Allied Capital’s Form 10-Q for the period ended March 31, 2004).
	10	.39		Note Agreement, dated as of November 15, 2004. (Incorporated by reference to Exhibit 99.1 filed with Allied Capital’s current report on Form 8-K filed on November 18, 2004).
	10	.40		Real Estate Securities Purchase Agreement. (Incorporated by reference to Exhibit 2.1 filed with Allied Capital’s Form 8-K filed on May 4, 2005.)
	10	.41		Platform Assets Purchase Agreement. (Incorporated by reference to Exhibit 2.2 filed with Allied Capital’s Form 8-K filed on May 4, 2005.)
	10	.42		Transition Services Agreement. (Incorporated by reference to Exhibit 10.1 filed with Allied Capital’s Form 8-K filed on May 4, 2005.)
	15	.*		Letter regarding Unaudited Interim Financial Information
	31	.1*		Certification of Chief Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.
	31	.2*		Certification of Chief Financial Officer Pursuant Rule 13a-14 of the Securities Exchange Act of 1934.
	32	.1*		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
	32	.2*		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

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	ALLIED CAPITAL CORPORATION
	(Registrant)

Dated: August 5, 2005		/s/ William L. Walton --------------------------------------------------- William L. Walton Chairman and Chief Executive Officer
		/s/ Penni F. Roll --------------------------------------------------- Penni F. Roll Chief Financial Officer

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Exhibit
Number				Description
	15	.*		Letter regarding Unaudited Interim Financial Information
	31	.1*		Certification of Chief Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.
	31	.2*		Certification of Chief Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.
	32	.1*		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
	32	.2*		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.