Operating Results – Year ended December 31, 2010

Investment income totaled $23.6 million for the year ended December 31, 2010, with $22.0 million attributable to the Company's targeted portfolio investments and $1.6 million attributable to fee income and income from cash and cash equivalents. Operating expenses for the year ended December 31, 2010 were $12.1 million and included $5.5 million of management and incentive fees, $1.3 million of interest expense and credit facility fees and $5.3 million of general and administrative expenses. The resulting net investment income, including a $0.3 million tax provision, was $11.2 million.   The Company had a net realized capital loss before income taxes of $33.3 million from the sale of its investment in Formidable, LLC during the fourth quarter of 2010.  

The Company experienced a net decrease in unrealized depreciation before income taxes of $31.2 million, consisting of a $37.4 million decrease due to realizations, offset by a $6.2 million increase in the fair value of remaining targeted portfolio investments.

Overall, the Company had a net increase in stockholders' equity (net assets) resulting from operations of $10.5 million, or an increase of $0.49 per share. After giving effect to the $0.69 per common share dividends declared during the year, stockholders' equity (net assets) per share as of December 31, 2010 was $10.90.  Operating Results – Three months ended December 31, 2010  Investment income totaled $6.1 million for the three months ended December 31, 2010, with $5.9 million attributable to the Company's targeted portfolio investments and $0.2 million attributable to fee income and income from cash and cash equivalents. Operating expenses for the period were $3.0 million and included $1.4 million of management and incentive fees, $0.3 million of interest and credit facility fees and $1.3 million of general and administrative expenses. The resulting net investment income for the fourth quarter of 2010, including a $47,000 tax benefit was $3.2 million.   During the three months ended December 31, 2010, the Company had a net realized capital loss of $33.3 million before income taxes.   For the three months ended December 31, 2010, the Company experienced a net decrease in unrealized depreciation before income taxes of $30.5 million, consisting of a $34.0 million decrease due to realizations, offset by a $3.5 million increase in the fair value of remaining targeted portfolio investments.     Overall, the Company had a net increase in stockholders' equity (net assets) resulting from operations of $1.5 million, or an increase of $0.07 per share for the three months ended December 31, 2010 and declared dividends during the period of $0.18 per share, resulting in stockholders' equity (net assets) per share of $10.90 as of December 31, 2010.              Subsequent Events   In January 2011, we repaid the entire $50.0 million balance on our Amended and Restated Revolving Credit Agreement.  On January 7, 2011, we closed a $10 million participation in a $20 million term loan (the "Resaca Term Loan") issued by Resaca Exploitation, Inc. ("Resaca"). The Resaca Term Loan earns cash interest of 9.5% (12% for paid-in-kind interest), is unsecured, and grants us warrants entitling us to purchase up to 2.42 million additional shares of Resaca common stock. Resaca used the proceeds from the Resaca Term Loan and a new revolving credit facility to repay its existing revolving credit facility and to provide capital for additional development of its properties.

In February 2011, we increased the commitment under the Senior Secured Revolving Credit Facility (the "Revolver") with Alden Resources, LLC ("Alden") from $3.0 million to $8.0 million with initial availability of $6.9 million. The terms of the Revolver are unchanged. As consideration for increasing the Revolver commitment, we earned an incremental 1.0% royalty interest on all of Alden's revenue and a $250,000 amendment fee.

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