10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

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

For the quarterly period ended July 31, 2010 or

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

Commission File Number 814-00201

MVC Capital, Inc.

(Exact name of the registrant as specified in its charter)

DELAWARE (State or other jurisdiction of incorporation or organization)	94-3346760 (I.R.S. Employer Identification No.)
287 Bowman Avenue 2nd Floor Purchase, New York (Address of principal executive offices)	10577 (Zip Code)

Registrant’s telephone number, including area code: (914) 701-0310

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

There were 24,039,087 shares of the registrant’s common stock, $.01 par value, outstanding as of September 8, 2010.

MVC Capital, Inc.
(A Delaware Corporation)
Index

	Page
Part I. Consolidated Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets
— July 31, 2010 and October 31, 2009		3
Consolidated Statements of Operations
— For the Period November 1, 2009 to July 31, 2010 and
— For the Period November 1, 2008 to July 31, 2009		4
Consolidated Statements of Operations
— For the Period May 1, 2010 to July 31, 2010 and
— For the Period May 1, 2009 to July 31, 2009		5
Consolidated Statements of Cash Flows
— For the Period November 1, 2009 to July 31, 2010 and
— For the Period November 1, 2008 to July 31, 2009		6
Consolidated Statements of Changes in Net Assets
— For the Period November 1, 2009 to July 31, 2010
— For the Period November 1, 2008 to July 31, 2009 and
— For the Year ended October 31, 2009		7
Consolidated Selected Per Share Data and Ratios
— For the Period November 1, 2009 to July 31, 2010,
— For the Period November 1, 2008 to July 31, 2009 and
— For the Year ended October 31, 2009		8
Consolidated Schedule of Investments
— July 31, 2010
— October 31, 2009		9
Notes to Consolidated Financial Statements		13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		32
Item 3. Quantitative and Qualitative Disclosures about Market Risk		60
Item 4. Controls and Procedures		66
Part II. Other Information		67
Exhibits		68
SIGNATURE		69
EX-10.(A)
EX-10.(B)
EX-31
EX-32

Part I. Consolidated Financial Information

Item 1. Consolidated Financial Statements

CONSOLIDATED FINANCIAL STATEMENTS

MVC Capital, Inc.

Consolidated Balance Sheets

	July 31,			October 31,
	2010			2009
	(Unaudited)
ASSETS
Assets
Cash and cash equivalents	$	59,252,288		$	1,007,873
Investments at fair value
Non-control/Non-affiliated investments (cost $114,931,466 and $122,320,550)		67,280,518			85,451,605
Affiliate investments (cost $119,560,041 and $141,186,185)		159,637,523			210,519,609
Control investments (cost $141,826,853 and $159,287,686)		195,308,389			206,832,059
Total investments at fair value (cost $376,318,360 and $422,794,421)		422,226,430			502,803,273
Dividends, interest and fees receivable, net of reserves		6,216,168			5,385,333
Escrow receivables		2,063,420			—
Prepaid expenses		1,218,527			1,271,353
Prepaid taxes		78,463			377,883
Total assets	$	491,055,296		$	510,845,715
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Term loan	$	50,000,000		$	50,000,000
Revolving credit facility		—			12,300,000
Provision for incentive compensation (Note 9)		19,486,474			19,511,147
Management fee payable		2,175,594			2,560,120
Professional fees		668,249			650,981
Other accrued expenses and liabilities		1,472,216			1,300,490
Consulting fees		59,814			67,278
Total liabilities		73,862,347			86,390,016
Shareholders’ equity
Common stock, $0.01 par value; 150,000,000 shares authorized; 24,039,087 and 24,297,087 shares outstanding, respectively		283,044			283,044
Additional paid-in-capital		429,400,261			429,400,261
Accumulated earnings		41,507,217			34,768,686
Dividends paid to stockholders		(65,803,918	)		(57,087,927	)
Accumulated net realized gain (loss)		2,074,702			(30,113,755	)
Net unrealized appreciation on investments		45,908,070			80,008,852
Treasury stock, at cost, 4,265,361 and 4,007,361 shares held, respectively		(36,176,427	)		(32,803,462	)
Total shareholders’ equity		417,192,949			424,455,699
Total liabilities and shareholders’ equity	$	491,055,296		$	510,845,715
Net asset value per share	$	17.35		$	17.47

The accompanying notes are an integral part of these consolidated financial statements.

3

MVC Capital, Inc.

Consolidated Statements of Operations

(Unaudited)

	For the Nine Month Period			For the Nine Month Period
	November 1, 2009 to			November 1, 2008 to
	July 31, 2010			July 31, 2009
Operating Income:
Dividend income
Affiliate investments	$	2,193,340		$	1,938,611
Total dividend income		2,193,340			1,938,611
Interest income
Non-control/Non-affiliated investments		7,328,229			8,155,852
Affiliate investments		3,755,481			3,800,346
Control investments		2,530,398			2,453,306
Total interest income		13,614,108			14,409,504
Fee income
Non-control/Non-affiliated investments		275,421			509,113
Affiliate investments		1,388,569			2,080,173
Control investments		482,499			642,804
Total fee income		2,146,489			3,232,090
Other income		437,331			175,478
Total operating income		18,391,268			19,755,683
Operating Expenses:
Management fee		7,097,513			7,283,249
Interest and other borrowing costs		2,055,255			2,486,474
Other expenses		522,346			511,010
Audit fees		418,500			512,000
Legal fees		406,500			533,000
Consulting fees		325,200			175,700
Directors fees		267,800			196,600
Insurance		265,280			286,500
Administration		205,783			223,251
Printing and postage		129,396			133,824
Public relations fees		77,400			67,800
Incentive compensation (Note 9)		(24,673	)		(3,039,385	)
Total operating expenses		11,746,300			9,370,023
Less: Expense Waiver by Adviser 1		(100,000	)		—
Total net operating expenses		11,646,300			9,370,023
Net operating income before taxes		6,744,968			10,385,660
Tax Expenses:
Current tax expense		6,437			300
Total tax expenses		6,437			300
Net operating income		6,738,531			10,385,360
Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency:
Net realized gain (loss) on investments and foreign currency
Non-control/Non-affiliated investments		(205,198	)		(252	)
Affiliate investments		36,111,253			—
Controlled investments		(3,717,209	)		—
Foreign currency		(389	)		—
Total net realized gain (loss) on investments and foreign currency		32,188,457			(252	)
Net change in unrealized appreciation or depreciation on investments		(34,100,782	)		(23,636,855	)
Net realized and unrealized loss on investments and foreign currency		(1,912,325	)		(23,637,107	)
Net increase (decrease) in net assets resulting from operations	$	4,826,206		$	(13,251,747	)
Net increase (decrease) in net assets per share resulting from operations	$	0.19		$	(0.54	)
Dividends declared per share	$	0.36		$	0.36

¹ Reflects waiver by TTG Advisers, pursuant to its voluntary waiver of $150,000 of expenses (for the 2010 fiscal year) that the Company is obligated to reimburse to TTG Advisers under the Advisory Agreement (the “Voluntary Waiver”). Please see Note 8 “Management” for more information.

The accompanying notes are an integral part of these consolidated financial statements.

4

MVC Capital, Inc.

Consolidated Statements of Operations

(Unaudited)

	For the Quarter			For the Quarter
	May 1, 2010 to			May 1, 2009 to
	July 31, 2010			July 31, 2009
Operating Income:
Dividend income
Affiliate investments	$	80,580		$	514,316
Total dividend income		80,580			514,316
Interest income
Non-control/Non-affiliated investments		2,220,940			2,627,003
Affiliate investments		1,250,886			1,240,434
Control investments		799,816			1,024,140
Total interest income		4,271,642			4,891,577
Fee income
Non-control/Non-affiliated investments		99,218			117,572
Affiliate investments		472,100			1,476,745
Control investments		144,281			224,438
Total fee income		715,599			1,818,755
Other income		189,098			185,545
Total operating income		5,256,919			7,410,193
Operating Expenses:
Management fee		2,175,593			2,379,303
Interest, fees and other borrowing costs		767,092			660,967
Other expenses		190,189			225,445
Audit fees		139,500			170,000
Legal fees		138,000			186,000
Consulting fees		131,000			27,500
Insurance		87,720			90,900
Directors fees		87,000			52,500
Administration		69,163			66,385
Printing and postage		42,000			55,000
Public relations fees		25,800			19,000
Incentive compensation (Note 9)		(3,270,008	)		(2,550,199	)
Total operating expenses		583,049			1,382,801
Less: Expense Waiver by Adviser 1		(50,000	)		—
Total net operating expenses		533,049			1,382,801
Net operating income before taxes		4,723,870			6,027,392
Tax Expenses:
Current tax expense		284			—
Total tax expenses		284			—
Net operating income		4,723,586			6,027,392
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) on investments
Non-control/Non-affiliated investments		(54	)		(78	)
Affiliate investments		22,170,023			—
Control investments		(3,717,209	)		—
Total net realized gain (loss) on investments		18,452,760			(78	)
Net change in unrealized appreciation or depreciation on investments		(34,457,369	)		(12,323,885	)
Net realized and unrealized loss on investments		(16,004,609	)		(12,323,963	)
Net decrease in net assets resulting from operations	$	(11,281,023	)	$	(6,296,571	)
Net decrease in net assets per share resulting from operations	$	(0.47	)	$	(0.26	)
Dividends declared per share	$	0.12		$	0.12

¹ Reflects waiver by TTG Advisers, pursuant to its voluntary waiver of $150,000 of expenses (for the 2010 fiscal year) that the Company is obligated to reimburse to TTG Advisers under the Advisory Agreement (the “Voluntary Waiver”). Please see Note 8 “Management” for more information.

The accompanying notes are an integral part of these consolidated financial statements.

5

MVC Capital, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	For the Period			For the Period
	November 1, 2009 to			November 1, 2008 to
	July 31, 2010			July 31, 2009
Cash flows from Operating Activities:
Net increase (decrease) in net assets resulting from operations	$	4,826,206		$	(13,251,747	)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by operating activities:
Realized (gain) loss		(32,188,457	)		252
Net change in unrealized appreciation or depreciation		34,100,782			23,636,855
Amortization of discounts and fees		(11,606	)		(63,788	)
Increase in accrued payment-in-kind dividends and interest		(4,241,987	)		(4,451,055	)
Allocation of flow through income		(258,552	)		(131,318	)
Changes in assets and liabilities:
Dividends, interest and fees receivable		(830,835	)		(2,605,635	)
Escrow receivables		(2,063,420	)		—
Prepaid expenses		52,826			784,788
Prepaid taxes		299,420			448,388
Incentive compensation (Note 9)		(24,673	)		(3,039,385	)
Other liabilities		(202,996	)		671,132
Purchases of equity investments		(6,231,700	)		(1,017,554	)
Purchases of debt instruments		(2,125,051	)		(10,827,248	)
Proceeds from equity investments		71,987,007			(286,100	)
Proceeds from debt instruments		19,546,407			16,393,970
Net cash provided by operating activities		82,633,371			6,261,555
Cash flows from Financing Activities:
Repurchase of common stock		(3,372,965	)		—
Distributions to shareholders paid		(8,715,991	)		(8,746,951	)
Net repayments under revolving credit facility		(12,300,000	)		(3,900,000	)
Net cash used in financing activities		(24,388,956	)		(12,646,951	)
Net change in cash and cash equivalents for the period		58,244,415			(6,385,396	)
Cash and cash equivalents, beginning of period		1,007,873			12,764,465
Cash and cash equivalents, end of period	$	59,252,288		$	6,379,069

During the nine months ended July 31, 2010 and 2009 MVC Capital, Inc. paid $1,439,204 and $1,939,332 in interest expense, respectively.

During the nine months ended July 31, 2010 and 2009 MVC Capital, Inc. paid $2,039 and $0 in income taxes, respectively.

Non-cash activity:

During the nine months ended July 31, 2010 and 2009, MVC Capital, Inc. recorded payment-in-kind dividend and interest of $4,241,987 and $4,451,055, respectively. These amounts were added to the balance of equity and debt investments and recorded as interest/dividend income.

During the nine months ended July 31, 2010 and 2009 MVC Capital Inc. was allocated $437,331 and $175,478, respectively, in flow-through income from its equity investment in Octagon Credit Investors, LLC. Of these amounts, $178,779 and $44,160, respectively, was received in cash and the balance of $258,552 and $131,318, respectively, was undistributed and therefore increased the cost of the investment. The fair value was then increased by $258,552 and $131,318, respectively, by the Company’s Valuation Committee.

On December 29, 2009, MVC Capital, Inc. sold the common and preferred shares and the warrants of Vitality Food Service, Inc.’s (“Vitality”). As part of this transaction, there was approximately $2.9 million deposited in an escrow account subject to a reduction over a three year period in accordance with a specified schedule. This escrow is currently carried at approximately $1.9 million on the Company’s consolidated balance sheet.

Prior to the sale of Vitality on December 29, 2009, Vitality European operations (which were not purchased by the buyer) were distributed to Vitality’s shareholders on a pro-rata basis. MVC Capital, Inc. received 960 shares of Series A common stock and 334 shares of convertible Series B common stock in LHD Europe as part of this transaction.

On March 17, 2010, MVC Capital, Inc. transferred its equity interest in SGDA Sanierungsgesellschaft fur Deponien und Altlasten GmbH to their equity interest in SGDA Europe B.V. The Company owned 70% of the common stock of SGDA Sanierungsgesellschaft fur Deponien und Altlasten GmbH and a majority economic ownership in SGDA Europe B.V. SGDA Europe B.V. increased its shareholders’ equity by $4.2 million as a result of the cashless transaction.

On July 2, 2010, MVC Capital, Inc. sold its common and preferred shares of Vendio Services, Inc. As part of this transaction, there was approximately $180,020 deposited in an escrow account subject to a reduction over an 18 month period in accordance with a specified schedule. This escrow is currently carried at approximately $180,000 on the Company’s consolidated balance sheet.

The accompanying notes are an integral part of these consolidated financial statements.

6

MVC Capital, Inc.

Consolidated Statements of Changes in Net Assets

	For the Nine Month Period			For the Nine Month Period
	November 1, 2009 to			November 1, 2008 to			For the Year Ended
	July 31, 2010			July 31, 2009			October 31, 2009
	(Unaudited)			(Unaudited)
Operations:
Net operating income	$	6,738,531		$	10,385,360		$	4,524,720
Net realized gain (loss)		32,188,457			(252	)		(25,081,728	)
Net change in unrealized (depreciation) appreciation		(34,100,782	)		(23,636,855	)		34,804,497
Net increase (decrease) in net assets from operations		4,826,206			(13,251,747	)		14,247,489
Shareholder Distributions:
Distributions to shareholders		(8,715,991	)		(8,746,951	)		(11,662,602	)
Net decrease in net assets from shareholder distributions		(8,715,991	)		(8,746,951	)		(11,662,602	)
Capital Share Transactions:
Repurchase of common stock		(3,372,965	)		—			—
Net decrease in net assets from capital share transactions		(3,372,965	)		—			—
Total increase (decrease) in net assets		(7,262,750	)		(21,998,698	)		2,584,887
Net assets, beginning of period/year		424,455,699			421,870,812			421,870,812
Net assets, end of period/year	$	417,192,949		$	399,872,114		$	424,455,699
Common shares outstanding, end of period/year		24,039,087			24,297,087			24,297,087

The accompanying notes are an integral part of these consolidated financial statements.

7

MVC Capital, Inc.

Consolidated Selected Per Share Data and Ratios

	For the Nine Month Period			For the Nine Month Period			For the
	November 1, 2009 to			November 1, 2008 to			Year Ended
	July 31, 2010			July 31, 2009			October 31, 2009
	(Unaudited)			(Unaudited)
Net asset value, beginning of period/year	$	17.47		$	17.36		$	17.36
Gain (loss) from operations:
Net operating income		0.28			0.43			0.19
Net realized and unrealized gain (loss) on investments		(0.09	)		(0.97	)		0.40
Total gain (loss) from investment operations		0.19			(0.54	)		0.59
Less distributions from:
Income		(0.28	)		(0.36	)		(0.19	)
Return of capital		(0.08	)		—			(0.29	)
Total distributions		(0.36	)		(0.36	)		(0.48	)
Capital share transactions					—
Anti-dilutive effect of share repurchase program		0.05			—			—
Total capital share transactions		0.05			—			—
Net asset value, end of period/year	$	17.35		$	16.46		$	17.47
Market value, end of period/year	$	12.82		$	9.21		$	9.18
Market discount		(26.11	)%		(44.05	)%		(47.45	)%
Total Return — At NAV (a)		1.36	%		(3.15	)%		3.50	%
Total Return — At Market (a)		43.58	%		(22.24	)%		(21.48	)%
Ratios and Supplemental Data:
Net assets, end of period (in thousands)	$	417,193		$	399,872		$	424,456
Ratios to average net assets:
Expenses excluding tax expense (benefit)		3.63	%(b)		3.01	%(b)		4.88	%
Expenses including tax expense (benefit)		3.63	%(b)		3.01	%(b)		5.21	%
Expenses excluding incentive compensation		3.64	%(b)		3.99	%(b)		4.31	%
Expenses excluding incentive compensation, interest and other borrowing costs		3.00	%(b)		3.19	%(b)		3.56	%
Net operating income before tax expense (benefit)		2.10	%(b)		3.34	%(b)		1.42	%
Net operating income after tax expense (benefit)		2.10	%(b)		3.34	%(b)		1.09	%
Net operating income before incentive compensation		2.09	%(b)		2.36	%(b)		1.99	%
Net operating income before incentive compensation, interest and other borrowing costs		2.73	%(b)		3.16	%(b)		2.74	%
Ratios to average net assets excluding waivers:
Expenses excluding tax expense (benefit)		3.66	%(b)		N/A			N/A
Expenses including tax expense (benefit)		3.66	%(b)		N/A			N/A
Expenses excluding incentive compensation		3.67	%(b)		N/A			N/A
Expenses excluding incentive compensation, interest and other borrowing costs		3.03	%(b)		N/A			N/A
Net operating income before tax expense (benefit)		2.07	%(b)		N/A			N/A
Net operating income after tax expense (benefit)		2.07	%(b)		N/A			N/A
Net operating income before incentive compensation		2.06	%(b)		N/A			N/A
Net operating income before incentive compensation, interest and other borrowing costs		2.70	%(b)		N/A			N/A

(a)	Total annual return is historical and assumes changes in share price, reinvestments of all dividends and distributions, and no sales charge for the year.
(b)	Annualized.

The accompanying notes are an integral part of these consolidated financial statements.

8

MVC Capital, Inc.

Consolidated Schedule of Investments

July 31, 2010
(Unaudited)

Company	Industry	Investment	Principal		Cost		Fair Value
Non-control/ Non-affiliated investments - 16.13% (a, c, f, g)
Actelis Networks, Inc.	Technology Investments	Preferred Stock (150,602 shares) (d, j)			$	5,000,003	$	—
Amersham Corp.	Manufacturer of Precision — Machined Components	Second Lien Seller Note 10.0000%, 06/29/2010 (h, i)	$	2,473,521		2,473,521		—
		Second Lien Seller Note 17.0000%, 06/30/2013 (b, h, i)		3,996,523		3,996,523		—
						6,470,044		—
BP Clothing, LLC	Apparel	Second Lien Loan 16.5000%, 07/18/2012 (b, h)		19,355,655		19,239,123		11,289,129
		Term Loan A 6.0700%, 07/18/2011 (h)		1,987,500		1,979,773		1,725,398
		Term Loan B 9.0700%, 07/18/2011 (h)		2,000,000		1,992,804		1,747,600
						23,211,700		14,762,127
DPHI, Inc.	Technology Investments	Preferred Stock (602,131 shares) (d, j)				4,520,355		—
FOLIOfn, Inc.	Technology Investments	Preferred Stock (5,802,259 shares) (d, j)				15,000,000		10,790,000
GDC Acquisition, LLC	Electrical Distribution	Senior Subordinated Debt 17.0000%, 08/31/2011 (b, h, i)		3,201,637		3,201,637		1,600,818
		Warrants (d)				—		—
						3,201,637		1,600,818
Integrated Packaging Corporation	Manufacturer of Packaging Material	Warrants (d)				—		—
Lockorder Limited	Technology Investments	Common Stock (21,064 shares) (d, e, j)				2,007,701		—
MainStream Data, Inc.	Technology Investments	Common Stock (5,786 shares) (d, j)				3,750,000		—
SafeStone Technologies Limited	Technology Investments	Common Stock (21,064 shares) (d, e, j)				2,007,701		—
SGDA Sanierungsgesellschaft fur Deponien und Altlasten GmbH	Soil Remediation	Term Loan 7.0000%, 08/31/2012 (e, h)		6,187,350		6,187,350		6,187,350
Sonexis, Inc.	Technology Investments	Common Stock (131,615 shares) (d, j)				10,000,000		—
SP Industries, Inc.	Laboratory Research Equipment	First Lien Loan 7.5000%, 12/31/2012 (h)		750,178		596,368		750,178
		Second Lien Loan 15.0000%, 12/31/2013 (b, h)		26,026,881		25,739,100		26,026,881
						26,335,468		26,777,059
Storage Canada, LLC	Self Storage	Term Loan 8.7500%, 03/30/2013 (h)		1,029,000		1,030,901		1,029,000
Total Safety U.S., Inc.	Engineering Services	First Lien Seller Note 6.2500%, 12/08/2012 (h)		948,810		948,810		874,368
		Second Lien Seller Note 6.8156%, 12/08/2013 (h)		3,500,000		3,500,000		3,500,000
						4,448,810		4,374,368
WBS Carbons Acquistions Corp.	Specialty Chemicals	Bridge Loan 6.0000%, 12/30/2011 (h)		1,759,796		1,759,796		1,759,796
Sub Total Non-control/Non-affiliated investments						114,931,466		67,280,518
Affiliate investments - 38.27% (a, c, f, g)
Custom Alloy Corporation	Manufacturer of Pipe Fittings	Unsecured Subordinated Loan 14.0000%, 09/18/2012 (b, h)		13,331,703		13,152,623		13,331,703
		Convertible Series A Preferred Stock (9 shares) (d)				44,000		44,000
		Convertible Series B Preferred Stock (1,991 shares) (d)				9,956,000		9,956,000
						23,152,623		23,331,703
Harmony Pharmacy & Health Center, Inc.	Healthcare - Retail	Revolving Credit Facility 10.0000%, 12/31/2010 (b, h)		5,119,653		5,119,653		4,000,000
		Demand Note 10.0000% (h, i)		500,000		500,000		500,000
		Demand Note 10.0000% (h, i)		800,000		800,000		800,000
		Demand Note 10.0000% (h, i)		700,000		700,000		700,000
		Demand Note 10.0000% (h, i)		3,300,000		3,300,000		3,300,000
		Demand Note 10.0000% (h, i)		2,200,000		2,200,000		2,200,000
		Common Stock (2,000,000 shares) (d)				750,000		—
						13,369,653		11,500,000
HuaMei Capital Company, Inc.	Financial Services	Common Stock (500 shares) (d)				2,000,000		1,525,000
LHD Europe Holding, Inc.	Non-Alcoholic Beverages	Common Stock, Series A (960 shares) (d, e)				165,682		332,144
		Convertible Common Stock, Series B (344 shares) (d, e)				59,369		117,856
						225,051		450,000
Marine Exhibition Corporation	Theme Park	Senior Subordinated Debt 11.0000%, 06/30/2013 (b, h)		9,827,149		9,759,239		9,827,149
		Secured Revolving Note 1.3472%, 06/30/2013 (h)		2,000,000		2,000,000		2,000,000
		Convertible Preferred Stock (20,000 shares) (b)				2,739,720		2,739,720
						14,498,959		14,566,869
Octagon Credit Investors, LLC	Financial Services	Term Loan 4.5972%, 12/31/2011 (h)		1,000,000		996,222		1,000,000
		Limited Liability Company Interest				1,547,731		4,502,635
						2,543,953		5,502,635
PreVisor, Inc.	Human Capital Management	Common Stock (9 shares) (d)				6,000,000		10,400,000
Security Holdings B.V.	Electrical Engineering	Common Stock (900 shares) (d, e)				29,885,900		5,300,000
SGDA Europe B.V.	Soil Remediation	Common Equity Interest (d, e)				17,388,551		16,150,001
		Senior Secured Loan 10.0000%, 6/23/2012 (e, h)		1,500,000		1,500,000		1,500,000
						18,888,551		17,650,001
U.S. Gas & Electric, Inc.	Energy Services	Second Lien Loan 14.0000%, 07/26/2012 (b, h)		8,582,653		8,495,351		8,582,653
		Convertible Series B Preferred Stock (32,200 shares) (d)				500,000		58,907,092
		Convertible Series C Preferred Stock (8,216 shares) (d)				—		1,921,570
						8,995,351		69,411,315
Sub Total Affiliate investments						119,560,041		159,637,523

The accompanying notes are an integral part of these consolidated financial statements.

9

MVC Capital, Inc.
Consolidated Schedule of Investments — (Continued)
July 31, 2010
(Unaudited)

Company	Industry	Investment	Principal		Cost		Fair Value
Control Investments - 46.81% (a, c, f, g)
MVC Automotive Group B.V.	Automotive Dealerships	Common Equity Interest (d, e)			$	34,736,939	$	42,100,000
		Bridge Loan 10.0000%, 12/31/2010 (e, h)	$	3,643,557		3,643,557		3,643,557
						38,380,496		45,743,557
MVC Partners, LLC	Private Equity Firm	Limited Liability Company Interest (d)				1,350,253		1,133,729
Ohio Medical Corporation	Medical Device Manufacturer	Common Stock (5,620 shares) (d)				17,000,000		4,100,000
		Series A Convertible Preferred Stock (14,878 shares) (b, h)				30,000,000		45,006,290
						47,000,000		49,106,290
SIA Tekers Invest	Port Facilities	Common Stock (68,800 shares) (d, e)				2,300,000		3,790,000
Summit Research Labs, Inc.	Specialty Chemicals	Second Lien Loan 14.0000%, 08/31/2013 (b, h)		10,117,758		10,023,561		10,117,758
		Common Stock (1,115 shares) (d)				16,000,000		47,000,000
						26,023,561		57,117,758
Turf Products, LLC	Distributor - Landscaping and Irrigation Equipment	Senior Subordinated Debt 15.0000%, 11/30/2010 (b, h)		8,395,261		8,391,534		8,395,261
		Junior Revolving Note 6.0000%, 5/1/2011 (h)		1,000,000		1,000,000		1,000,000
		Limited Liability Company Interest (d)				3,535,694		3,221,794
		Warrants (d)				—		—
						12,927,228		12,617,055
Velocitius B.V.	Renewable Energy	Common Equity Interest (d, e)				11,395,315		23,600,000
Vestal Manufacturing Enterprises, Inc.	Iron Foundries	Senior Subordinated Debt 12.0000%, 04/29/2011 (h)		600,000		600,000		600,000
		Common Stock (81,000 shares) (d)				1,850,000		1,600,000
						2,450,000		2,200,000
Sub Total Control Investments						141,826,853		195,308,389
TOTAL INVESTMENT ASSETS - 101.21% (f)					$	376,318,360	$	422,226,430

(a)	These securities are restricted from public sale without prior registration under the Securities Act of 1933. The Fund negotiates certain aspects of the method and timing of the disposition of these investments, including registration rights and related costs.
(b)	These securities accrue a portion of their interest/dividends in “payment in kind” interest/dividends which is capitalized to the investment.
(c)	All of the Fund’s equity and debt investments are issued by eligible portfolio companies, as defined in the Investment Company Act of 1940, except LHD Europe Holding Inc., Lockorder Limited, MVC Automotive Group B.V., SafeStone Technologies Limited, Security Holdings B.V., SGDA Europe B.V., SGDA Sanierungsgesellschaft fur Deponien und Altlasten mbH, SIA Tekers Invest, and Velocitius B.V. The Fund makes available significant managerial assistance to all of the portfolio companies in which it has invested.
(d)	Non-income producing assets.
(e)	The principal operations of these portfolio companies are located outside of the United States.
(f)	Percentages are based on net assets of $417,192,949 as of July 31, 2010.
(g)	See Note 3 for further information regarding “Investment Classification.”
(h)	All or a portion of these securities have been committed as collateral for the Guggenheim Corporate Funding, LLC Credit Facility.
(i)	All or a portion of the accrued interest on these securities have been reserved against.
(j)	Legacy Investments.
	- Denotes zero cost or fair value.

The accompanying notes are an integral part of these consolidated financial statements.

10

MVC Capital, Inc.
Consolidated Schedule of Investments
October 31, 2009

Company	Industry	Investment	Principal		Cost		Fair Value
Non-control/Non-affiliated investments - 20.13% (c, f, g)
Actelis Networks, Inc.	Technology Investments	Preferred Stock (150,602 shares) (a, d, j)			$	5,000,003	$	—
Amersham Corp.	Manufacturer of Precision - Machined Components	Senior Secured Loan 6.0000%, 12/31/2009 (a, h)	$	375,000		375,000		375,000
		Second Lien Seller Note 10.0000%, 06/29/2010 (a, h, i)		2,473,521		2,473,521		775,000
		Second Lien Seller Note 17.0000%, 06/30/2013 (a, b, h, i)		3,793,841		3,793,841		1,625,000
						6,642,362		2,775,000
BP Clothing, LLC	Apparel	Second Lien Loan 16.5000%, 07/18/2012 (a, b, h)		18,778,308		18,617,403		17,503,916
		Term Loan A 6.0000%, 07/18/2011 (a, h)		1,987,500		1,973,763		1,719,388
		Term Loan B 9.0000%, 07/18/2011 (a, h)		2,000,000		1,987,208		1,742,004
						22,578,374		20,965,308
DPHI, Inc.	Technology Investments	Preferred Stock (602,131 shares) (a, d, j)				4,520,355		—
FOLIOfn,Inc.	Technology Investments	Preferred Stock (5,802,259 shares) (a, d, j)				15,000,000		10,790,000
GDC Acquisition, LLC	Electrical Distribution	Senior Subordinated Debt 17.0000%, 08/31/2011 (a, b, h)		3,096,252		3,096,252		3,096,252
		Warrants (a, d)				—		—
						3,096,252		3,096,252
Henry Company	Building Products / Specialty Chemicals	Term Loan A 3.7429%, 04/06/2011 (a, h)		1,709,921		1,709,921		1,650,642
		Term Loan B 7.9929%, 04/06/2011 (a, h)		2,000,000		2,000,000		2,000,000
						3,709,921		3,650,642
Innovative Brands, LLC	Consumer Products	Term Loan 15.5000%, 09/25/2011 (a, h)		10,414,976		10,414,976		10,414,976
Lockorder Limited	Technology Investments	Common Stock (21,064 shares) (a, d, e, j)				2,007,701		—
MainStream Data, Inc.	Technology Investments	Common Stock (5,786 shares) (a, d, j)				3,750,000		—
Phoenix Coal Corporation	Coal Processing and Production	Common Stock (666,667 shares) (d)				500,000		148,000
SafeStone Technologies Limited	Technology Investments	Common Stock (21,064 shares) (a, d, e, j)				2,007,701		—
Sonexis, Inc.	Technology Investments	Common Stock (131,615 shares) (a, d, j)				10,000,000		—
SP Industries, Inc.	Laboratory Research Equipment	First Lien Loan 7.5000%, 12/28/2012 (a, h)		901,435		656,357		901,435
		Second Lien Loan 15.0000%, 12/31/2013 (a, b, h)		25,443,638		25,092,905		25,443,638
						25,749,262		26,345,073
Storage Canada, LLC	Self Storage	Term Loan 8.7500%, 03/30/2013 (a, h)		1,108,500		1,111,347		1,108,500
Total Safety U.S., Inc.	Engineering Services	First Lien Seller Note 3.0038%, 12/08/2012 (a, h)		972,500		972,500		898,058
		Second Lien Seller Note 6.7538%, 12/08/2013 (a, h)		3,500,000		3,500,000		3,500,000
						4,472,500		4,398,058
WBS Carbons Acquisitions Corp.	Specialty Chemicals	Bridge Loan 6.0000%, 12/30/2011 (a, h)		1,759,796		1,759,796		1,759,796
Sub Total Non-control/Non-affiliated investments						122,320,550		85,451,605
Affiliate investments - 49.60% (c, f, g)
Custom Alloy Corporation	Manufacturer of Pipe Fittings	Unsecured Subordinated Loan 14.0000%, 09/18/2012 (a, b, h)		12,648,338		12,406,499		12,648,338
		Convertible Series A Preferred Stock (9 shares) (a)				44,000		44,000
		Convertible Series B Preferred Stock (1,991 shares) (a)				9,956,000		9,956,000
						22,406,499		22,648,338
Dakota Growers Pasta Company, Inc.	Manufacturer of Packaged Foods	Common Stock (1,016,195 shares)				5,521,742		15,044,698
		Convertible Preferred Stock (1,065,000 shares)				10,357,500		15,767,252
						15,879,242		30,811,950
Harmony Pharmacy & Health Center, Inc.	Healthcare - Retail	Revolving Credit Facility 10.0000%, 12/01/2009 (a, b, h)		4,755,060		4,755,060		4,000,000
		Demand Note 10.0000% (a, h, i)		500,000		500,000		500,000
		Demand Note 10.0000% (a, h, i)		700,000		700,000		700,000
		Demand Note 10.0000% (a, h, i)		3,300,000		3,300,000		3,300,000
		Demand Note 10.0000% (a, h, i)		2,200,000		2,200,000		2,200,000
		Common Stock (2,000,000 shares) (a, d)				750,000		—
						12,205,060		10,700,000
HuaMei Capital Company, Inc.	Financial Services	Common Stock (500 shares) (a, d)				2,000,000		1,525,000
Marine Exhibition Corporation	Theme Park	Senior Subordinated Debt 11.0000%, 06/30/2013 (a, b, h)		10,765,878		10,667,415		10,765,878
		Secured Revolving Note 1.2463%, 06/30/2013 (a, h)		900,000		900,000		900,000
		Convertible Preferred Stock (20,000 shares) (a, b)				2,581,699		2,581,699
						14,149,114		14,247,577
Octagon Credit Investors, LLC	Financial Services	Term Loan 4.4963%, 12/31/2011 (a, h)		5,000,000		4,971,138		5,000,000
		Limited Liability Company Interest (a)				1,289,178		2,744,083
						6,260,316		7,744,083
PreVisor, Inc.	Human Capital Management	Common Stock (9 shares) (a, d)				6,000,000		7,000,000
Security Holdings B.V.	Electrical Engineering	Common Stock (900 shares) (a, d, e)				28,154,200		10,000,000
SGDA Europe B.V.	Soil Remediation	Common Equity Interest (a, d, e)				7,450,000		7,450,000
		Senior Secured Loan 10.0000%, 6/23/2012 (a, e, h)		1,500,000		1,500,000		1,500,000
						8,950,000		8,950,000
U.S. Gas & Electric, Inc.	Energy Services	Second Lien Loan 14.0000%, 07/26/2012 (a, b, h)		8,263,979		8,143,804		8,263,979
		Convertible Series I Preferred Stock (32,200 shares) (a, d)				500,000		58,907,092
		Convertible Series J Preferred Stock (8,216 shares) (a, d)				—		1,921,570
						8,643,804		69,092,641
Vitality Foodservice, Inc.	Non-Alcoholic Beverages	Common Stock (556,472 shares) (a, d)				5,564,716		10,089,957
		Preferred Stock (1,000,000 shares) (a, b, h)				10,973,234		13,875,005
		Warrants (a, d)				—		3,835,058
						16,537,950		27,800,020
Sub Total Affiliate investments						141,186,185		210,519,609

The accompanying notes are an integral part of these consolidated financial statements.

11

MVC Capital, Inc.
Consolidated Schedule of Investments — (Continued)
October 31, 2009

Company	Industry	Investment	Principal		Cost		Fair Value
Control Investments - 48.73% (a, c, f, g)
MVC Automotive Group B.V.	Automotive Dealerships	Common Equity Interest (d, e)			$	34,736,939	$	46,500,000
		Bridge Loan 10.0000%, 12/31/2009 (e, h)	$	3,643,557		3,643,557		3,643,557
						38,380,496		50,143,557
MVC Partners, LLC	Private Equity Firm	Limited Liability Company Interest (d)				1,350,253		1,133,729
Ohio Medical Corporation	Medical Device Manufacturer	Common Stock (5,620 shares) (d)				17,000,000		9,100,000
		Series A Convertible Preferred Stock (13,227 shares) (b, h)				30,000,000		40,010,429
						47,000,000		49,110,429
SGDA Sanierungsgesellschaft	Soil Remediation	Term Loan 7.0000%, 08/31/2012 (e, h)		6,187,350		6,187,350		6,187,350
fur Deponien und Altlasten GmbH		Common Equity Interest (d, e)				438,551		1
		Preferred Equity Interest (d, e)				5,000,000		6,600,000
						11,625,901		12,787,351
SIA Tekers Invest	Port Facilities	Common Stock (68,800 shares) (d, e)				2,300,000		3,790,000
Summit Research Labs, Inc.	Specialty Chemicals	Second Lien Loan 14.0000%, 08/15/2012 (b, h)		9,596,177		9,479,142		9,596,177
		Common Stock (1,115 shares) (d)				16,000,000		38,000,000
						25,479,142		47,596,177
Turf Products, LLC	Distributor - Landscaping and Irrigation Equipment	Senior Subordinated Debt 15.0000%, 11/30/2010 (b, h)		8,149,021		8,136,884		8,149,021
		Junior Revolving Note 6.0000%, 5/1/2011 (h)		1,000,000		1,000,000		1,000,000
		Limited Liability Company Interest (d)				3,535,694		3,221,794
		Warrants (d)				—		—
						12,672,578		12,370,815
Velocitius B.V.	Renewable Energy	Common Equity Interest (d, e)				11,395,315		23,200,000
Vendio Services, Inc.	Technology Investments	Common Stock (10,476 shares) (d, j)				5,500,000		9,687
		Preferred Stock (6,443,188 shares) (d, j)				1,134,001		4,490,314
						6,634,001		4,500,001
Vestal Manufacturing Enterprises, Inc.	Iron Foundries	Senior Subordinated Debt 12.0000%, 04/29/2011 (h)		600,000		600,000		600,000
		Common Stock (81,000 shares) (d)				1,850,000		1,600,000
						2,450,000		2,200,000
Sub Total Control Investments						159,287,686		206,832,059
TOTAL INVESTMENT ASSETS - 118.46% (f)					$	422,794,421	$	502,803,273

(a)	These securities are restricted from public sale without prior registration under the Securities Act of 1933. The Fund negotiates certain aspects of the method and timing of the disposition of these investments, including registration rights and related costs.
(b)	These securities accrue a portion of their interest/dividends in “payment in kind” interest/dividends which is capitalized to the investment.
(c)	All of the Fund’s equity and debt investments are issued by eligible portfolio companies, as defined in the Investment Company Act of 1940, except Lockorder Limited, MVC Automotive Group B.V., SafeStone Technologies Limited, Security Holdings B.V., SGDA Europe B.V., SGDA Sanierungsgesellschaft fur Deponien und Altlasten mbH, SIA Tekers Invest, and Velocitius B.V. The Fund makes available significant managerial assistance to all of the portfolio companies in which it has invested.
(d)	Non-income producing assets.
(e)	The principal operations of these portfolio companies are located outside of the United States.
(f)	Percentages are based on net assets of $424,455,699 as of October 31, 2009.
(g)	See Note 3 for further information regarding “Investment Classification.”
(h)	All or a portion of these securities have been committed as collateral for the Guggenheim Corporate Funding, LLC Credit Facility.
(i)	All or a portion of the accrued interest on these securities have been reserved against.
(j)	Legacy Investments.
	- Denotes zero cost or fair value.

The accompanying notes are an integral part of these consolidated financial statements.

12

MVC Capital, Inc. (the “Company”)

Notes to Consolidated Financial Statements
July 31, 2010
(Unaudited)

1. Basis of Presentation

     The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete consolidated financial statements. Certain amounts have been reclassified to adjust to current period presentations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended October 31, 2009, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 22, 2009.

2. Consolidation

     On July 16, 2004, the Company formed a wholly-owned subsidiary, MVC Financial Services, Inc. (“MVCFS”). MVCFS is incorporated in Delaware and its principal purpose is to provide advisory, administrative and other services to the Company, the Company’s portfolio companies and other entities. MVCFS had opening equity of $1 (100 shares at $0.01 per share). The Company does not hold MVCFS for investment purposes and does not intend to sell MVCFS. In the consolidation, all intercompany accounts have been eliminated.

3. Investment Classification

     As required by the Investment Company Act of 1940, as amended (the “1940 Act”), we classify our investments by level of control. As defined in the 1940 Act, “Control Investments” are investments in those companies that we are deemed to “Control.” “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of us, as defined in the 1940 Act, other than Control Investments. “Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments. Generally, under that 1940 Act, we are deemed to control a company in which we have invested if we own 25% or more of the voting securities of such company or have greater than 50% representation on its board. We are deemed to be an affiliate of a company in which we have invested if we own 5% or more and less than 25% of the voting securities of such company.

4. Investment Valuation Policy

     Our investments are carried at fair value in accordance with the 1940 Act and Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. In accordance with the 1940 Act, unrestricted minority-owned publicly traded securities for which market quotations are readily available are valued at the closing market quote on the valuation date and majority-owned publicly traded securities and other privately held securities are valued as determined in good faith by the Valuation Committee of our Board of Directors. For legally or contractually restricted securities of companies that are publicly traded, the value is based on the closing market quote on the valuation date minus a discount for the restriction. At July 31, 2010, we did not hold restricted or unrestricted securities of publicly traded companies for which we have a majority-owned interest.

     ASC 820 provides a framework for measuring the fair value of assets and liabilities. ASC 820 also provides guidance regarding a fair value hierarchy, which prioritizes information used to measure fair value and the effect of fair value measurements on earnings and provides for enhanced disclosures determined by the level

13

within the hierarchy of information used in the valuation. ASC 820 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value.

     ASC 820 defines fair value in terms of the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The price used to measure the fair value is not adjusted for transaction costs while the cost basis of our investments may include initial transaction costs. Under ASC 820, the fair value measurement also assumes that the transaction to sell an asset occurs in the principal market for the asset or, in the absence of a principal market, the most advantageous market for the asset. The principal market is the market in which the reporting entity would sell or transfer the asset with the greatest volume and level of activity for the asset. In determining the principal market for an asset or liability under ASC 820, it is assumed that the reporting entity has access to the market as of the measurement date. If no market for the asset exists or if the reporting entity does not have access to the principal market, the reporting entity should use a hypothetical market.

     In April 2009, the Financial Accounting Standards Board (“FASB”) issued Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, which is codified in ASC 820, which provided additional guidance on how to determine the fair value of assets under ASC 820 in the current economic environment and reemphasizes that the objective of a fair value measurement remains an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. ASC 820 states that a transaction price that is associated with a transaction that is not orderly is not determinative of fair value or market-participant risk premiums and companies should place little, if any, weight (compared with other indications of fair value) on transactions that are not orderly when estimating fair value or market risk premiums. This new guidance was effective for periods ending after June 15, 2009. The adoption of this new guidance has not had a material effect on the financial position or results of operations of the Company.

     In January 2010, FASB issued Accounting Standards Update (“ASU”) 2010-06, Improving Disclosure about Fair Value Measurements. ASU 2010-06 provides an amendment to ASC 820-10 which requires new disclosures on transfers in and out of Levels I and II and activity in Level III fair value measurements. ASU 2010-06 also clarifies existing disclosures such as 1.) level of disaggregation and 2.) disclosure about inputs and valuation techniques. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosure about purchases, sales, issuance, and settlements in the roll-forward of activity in Level III fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company has adopted this guidance, the application of which has not had a material effect on the financial position or results of operations of the Company but has resulted in additional disclosures.

Valuation Methodology

     Pursuant to the requirements of the 1940 Act and in accordance with ASC 820, we value our portfolio securities at their current market values or, if market quotations are not readily available, at the fair value determined by the Valuation Committee. Because our portfolio company investments generally do not have readily ascertainable market values, we record these investments at fair value in accordance with our Valuation Procedures adopted by the Board of Directors, which are consistent with ASC 820. As permitted by the SEC, the Board of Directors has delegated the responsibility of making fair value determinations to the Valuation Committee, subject to the Board of Directors’ supervision and pursuant to our Valuation Procedures. Our Board of Directors may also hire independent consultants to review our Valuation Procedures or to conduct an independent valuation of one or more of our portfolio investments.

     Pursuant to our Valuation Procedures, the Valuation Committee (which is currently comprised of three Independent Directors) determines fair valuation of portfolio company investments on a quarterly basis (or more frequently, if deemed appropriate under the circumstances). Any changes in valuation are recorded in the consolidated statements of operations as “Net change in unrealized appreciation (depreciation) on investments.”

14

Currently, our NAV per share is calculated and published on a monthly basis. The fair values determined as of the most recent quarter end are reflected in that quarter’s NAV per share and in the next two months’ NAV per share calculation. (If the Valuation Committee determines to fair value an investment more frequently than quarterly, the most recently determined fair value would be reflected in the published NAV per share.)

     The Company calculates our NAV per share by subtracting all liabilities from the total value of our portfolio securities and other assets and dividing the result by the total number of outstanding shares of our common stock on the date of valuation.

     At July 31, 2010, approximately 86.4% of our total assets were portfolio investments and escrow receivables recorded at fair value.

     Under most circumstances, at the time of acquisition, investments are carried at cost (absent the existence of conditions warranting, in management’s and the Valuation Committee’s view, a different initial value). During the period that an investment is held by the Company, its original cost may cease to approximate fair value as the result of market and investment specific factors. No pre-determined formula can be applied to determine fair value. Rather, the Valuation Committee analyzes fair value measurements based on the value at which the securities of the portfolio company could be sold in an orderly disposition over a reasonable period of time between willing parties, other than in a forced or liquidation sale. The liquidity event whereby the Company ultimately exits an investment is generally the sale, the merger, the recapitalization or, in some cases, the initial public offering of the portfolio company.

     There is no one methodology to determine fair value and, in fact, for any portfolio security, fair value may be expressed as a range of values, from which the Company derives a single fair value. To determine the fair value of a portfolio security, the Valuation Committee analyzes the portfolio company’s financial results and projections, publicly traded comparables of companies when available, comparable private transactions when available, precedent transactions in the market when available, as well as other factors. The Company generally requires, where practicable, portfolio companies to provide annual audited and more regular unaudited financial statements, and/or annual projections for the upcoming fiscal year.

     The fair value of our portfolio securities is inherently subjective. Because of the inherent uncertainty of fair valuation of portfolio securities that do not have readily ascertainable market values, our determination of fair value may significantly differ from the fair value that would have been used had a ready market existed for the securities. Such values also do not reflect brokers’ fees or other selling costs which might become payable on disposition of such investments.

     If a security is publicly traded, the fair value is generally equal to market value based on the closing price on the principal exchange on which the security is primarily traded.

     For equity securities of portfolio companies, the Valuation Committee estimates the fair value based on the market approach with value then attributed to equity or equity like securities using the enterprise value waterfall (“Enterprise Value Waterfall”) valuation methodology. Under the Enterprise Value Waterfall valuation methodology, the Valuation Committee estimates the enterprise fair value of the portfolio company and then waterfalls the enterprise value over the portfolio company’s securities in order of their preference relative to one another. To assess the enterprise value of the portfolio company, the Valuation Committee weighs some or all of the traditional market valuation methods and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise value. The methodologies for performing assets may be based on, among other things: valuations of comparable public companies, recent sales of private and public comparable companies, discounting the forecasted cash flows of the portfolio company, third party valuations of the portfolio company, consideration of any offers from third parties to buy the company, estimating the value to potential strategic buyers and considering the value of recent investments in the equity securities of the portfolio company. For non-performing assets, the Valuation Committee may estimate the liquidation or collateral value

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of the portfolio company’s assets. The Valuation Committee also takes into account historical and anticipated financial results.

     In assessing enterprise value, the Valuation Committee considers the mergers and acquisitions (“M&A”) market as the principal market in which the Company would sell its investments in portfolio companies under circumstances where the Company has the ability to control or gain control of the board of directors of the portfolio company (“Control Companies”). This approach is consistent with the principal market that the Company would use for its portfolio companies if the Company has the ability to initiate a sale of the portfolio company as of the measurement date, i.e., if it has the ability to control or gain control of the board of directors of the portfolio company as of the measurement date. In evaluating if the Company can control or gain control of a portfolio company as of the measurement date, the Company takes into account its equity securities on a fully diluted basis as well as other factors.

     For non-Control Companies, consistent with ASC 820, the Valuation Committee considers a hypothetical secondary market as the principal market in which it would sell investments in those companies.

     For loans and debt securities of non-Control Companies (for which the Valuation Committee has identified the hypothetical secondary market as the principal market), the Valuation Committee determines fair value based on the assumptions that a hypothetical market participant would use to value the security in a current hypothetical sale using a market yield (“Market Yield”) valuation methodology. In applying the Market Yield valuation methodology, the Valuation Committee determines the fair value based on such factors as third party broker quotes and market participant assumptions including synthetic credit ratings, estimated remaining life, current market yield and interest rate spreads of similar securities as of the measurement date.

     Estimates of average life are generally based on market data of the average life of similar debt securities. However, if the Valuation Committee has information available to it that the debt security is expected to be repaid in the near term, the Valuation Committee would use an estimated life based on the expected repayment date.

     The Valuation Committee determines fair value of loan and debt securities of Control Companies based on the estimate of the enterprise value of the portfolio company. To the extent the enterprise value exceeds the remaining principal amount of the loan and all other debt securities of the company, the fair value of such securities is generally estimated to be their cost. However, where the enterprise value is less than the remaining principal amount of the loan and all other debt securities, the Valuation Committee may discount the value of such securities to reflect an impairment.

     When the Company receives nominal cost warrants or free equity securities (“nominal cost equity”) with a debt security, the Company typically allocates its cost basis in the investment between debt securities and nominal cost equity at the time of origination.

     Interest income is recorded on an accrual basis to the extent that such amounts are expected to be collected. Origination and/or closing fees associated with investments in portfolio companies are accreted into income over the respective terms of the applicable loans. Upon the prepayment of a loan or debt security, any prepayment penalties and unamortized loan origination, closing and commitment fees are recorded as income. Prepayment premiums are recorded on loans when received.

     For loans, debt securities, and preferred securities with contractual payment-in-kind interest or dividends, which represent contractual interest/dividends accrued and added to the loan balance or liquidation preference that generally becomes due at maturity, the Company will not accrue payment-in-kind interest/dividends if the portfolio company valuation indicates that the payment-in-kind interest is not collectible. However, the Company may accrue payment-in-kind interest if the health of the portfolio company and the underlying securities are not in question. All payment-in-kind interest that has been added to the principal balance or capitalized is subject to ratification by the Valuation Committee.

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     Escrows from the sale of a portfolio company are generally valued at an amount which may be expected to be received from the buyer under the escrow’s various conditions discounted for both risk and time.

5. Concentration of Market Risk

     Financial instruments that subjected the Company to concentrations of market risk consisted principally of equity investments, subordinated notes, debt instruments, and escrow receivables which represented approximately 86.4% of the Company’s total assets at July 31, 2010. As discussed in Note 6, these investments consist of securities in companies with no readily determinable market values and as such are valued in accordance with the Company’s fair value policies and procedures. The Company’s investment strategy represents a high degree of business and financial risk due to the fact that the investments (other than cash equivalents) are generally illiquid, in small and middle market companies, and include entities with little operating history or entities that possess operations in new or developing industries. These investments, should they become publicly traded, would generally be (i) subject to restrictions on resale, if they were acquired from the issuer in private placement transactions; and (ii) susceptible to market risk.

6. Portfolio Investments

     Pursuant to the requirements of the 1940 Act and ASC 820, we value our portfolio securities at their current market values or, if market quotations are not readily available, at their estimates of fair values. Because our portfolio company investments generally do not have readily ascertainable market values, we record these investments at fair value in accordance with Valuation Procedures adopted by our Board of Directors. As permitted by the SEC, the Board of Directors has delegated the responsibility of making fair value determinations to the Valuation Committee, subject to the Board of Directors’ supervision and pursuant to our Valuation Procedures.

     The levels of fair value inputs used to measure our investments are characterized in accordance with the fair value hierarchy established by ASC 820. Where inputs for an asset or liability fall in more than one level in the fair value hierarchy, the investment is classified in its entirety based on the lowest level input that is significant to that investment’s fair value measurement. We use judgment and consider factors specific to the investment in determining the significance of an input to a fair value measurement. The three levels of the fair value hierarchy and investments that fall into each of the levels are described below:

• Level 1: Level 1 inputs are unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. We use Level 1 inputs for investments in publicly traded unrestricted securities for which we do not have a controlling interest. Such investments are valued at the closing price on the measurement date. We did not value any of our investments using Level 1 inputs as of July 31, 2010.

• Level 2: Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly or other inputs that are observable or can be corroborated by observable market data. We did not value any of our investments using Level 2 inputs as of July 31, 2010.

• Level 3: Level 3 inputs are unobservable and cannot be corroborated by observable market data. We use Level 3 inputs for measuring the fair value of substantially all of our investments. See Note 4 for the investment valuation policies used to determine the fair value of these investments.

     The following fair value hierarchy table sets forth our investment portfolio by level as of July 31, 2010 and October 31, 2009 (in thousands):

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	July 31, 2010
	Level 1		Level 2		Level 3		Total
Senior/Subordinated Loans and credit facilities	$	—	$	—	$	127,989	$	127,989
Common Stock		—		—		68,865		68,865
Preferred Stock		—		—		129,365		129,365
Other Equity Investments		—		—		96,008		96,008
Escrow receivables		—		—		2,063		2,063
Total Investments, net	$	—	$	—	$	424,290	$	424,290

	October 31, 2009
	Level 1		Level 2		Level 3		Total
Senior/Subordinated Loans and credit facilities	$	—	$	—	$	153,468	$	153,468
Common Stock		148		—		86,159		86,307
Preferred Stock		—		—		164,943		164,943
Warrants		—		—		3,835		3,835
Other Equity Investments		—		—		94,250		94,250
Total Investments, net	$	148	$	—	$	502,655	$	502,803

     The following tables sets forth a summary of changes in the fair value of investment assets and liabilities measured using Level 3 inputs for the nine month periods ended July 31, 2010 and July 31, 2009 (in thousands):

					Reversal of
					Prior Period
					Appreciation			Unrealized
	Balances,				(Depreciation)			Appreciation
	November 1,		Realized Gains		on Realization			(Depreciation)								Transfers In &		Balances, July
	2009		(Losses) (1)		(2)			(3)			Purchases (4)		Sales (5)			Out of Level 3		31, 2010
Senior/Subordinated Loans and credit facilities	$	153,468	$	—	$	—		$	(11,682	)	$	6,207	$	(20,004	)	$	—	$	127,989
Common Stock		86,159		12,306		(11,970	)		11,039			223		(28,892	)		—		68,865
Preferred Stock		164,943		13,703		(13,355	)		4,282			330		(40,538	)		—		129,365
Warrants		3,835		3,800		(3,835	)		—			—		(3,800	)		—		—
Other Equity Investments		94,250		—		—			(8,932	)		10,690		—			—		96,008
Escrow receivables		—		2,585		—			—			—		(522	)		—		2,063
Total	$	502,655	$	32,394	$	(29,160	)	$	(5,293	)	$	17,450	$	(93,756	)	$	—	$	424,290

					Reversal of Prior
					Period
					Appreciation		Unrealized
	Balances,				(Depreciation)		Appreciation
	November 1,		Realized Gains		on Realization		(Depreciation)								Transfers In &		Balances, July
	2008		(Losses) (1)		(2)		(3)			Purchases (4)		Sales (5)			Out of Level 3		31, 2009
Senior/Subordinated Loans and credit facilities	$	167,703	$	—	$	—	$	(12,360	)	$	2,042	$	(3,454	)	$	—	$	153,931
Common Stock		87,741		—		—		(3,504	)		—		—			—		84,237
Preferred Stock		124,874		—		—		(301	)		646		—			—		125,219
Warrants		3,735		—		—		—			—		—			—		3,735
Other Equity Investments		106,646		—		—		(7,554	)		1,149		—			—		100,241
Total	$	490,699	$	—	$	—	$	(23,719	)	$	3,837	$	(3,454	)	$	—	$	467,363

(1)	Included in net realized gain (loss) on investments in the Consolidated Statement of Operations.
(2)	Included in net unrealized appreciation (depreciation) of investments in the Consolidated Statement of Operations related to securities disposed of during the nine months ended July 31, 2010 and July 31, 2009, respectively.
(3)	Included in net unrealized appreciation (depreciation) of investments in the Consolidated Statement of Operations related to securities held at July 31, 2010 and July 31, 2009, respectively.
(4)	Includes increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the amortization of discounts, premiums and closing fees and the exchange of one or more existing securities for one or more new securities.
(5)	Includes decreases in the cost basis of investments resulting from principal repayments or sales.

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     For the Nine Month Period Ended July 31, 2010

     During the nine month period ended July 31, 2010, the Company obtained one new investment in Integrated Packaging Corporation (“IPC”) in the form of a warrant. The Company received the warrant solely for services provided to a new investor in IPC.

     During the nine month period ended July 31, 2010, the Company made three follow-on investments in existing portfolio companies committing capital totaling $7.0 million. On January 4, 2010, the Company loaned $800,000 to Harmony Pharmacy & Health Center, Inc. (“Harmony Pharmacy”) in the form of a demand note. The demand note has an annual interest rate of 10% with the accrued interest being reserved against. As of July 31, 2010, the $800,000 demand note was outstanding. On March 12, 2010, the Company invested $4.5 million and $1.7 million in SGDA Europe B.V. (“SGDA Europe”) and Security Holdings B.V. (“Security Holdings”), respectively, in the form of additional equity interests.

     At October 31, 2009, the balance of the secured revolving note provided to Marine Exhibition Corporation (“Marine”) was $900,000. Net borrowings during the nine month period ended July 31, 2010 were $1.1 million resulting in a balance of $2.0 million at such date.

     On December 29, 2009, the Company sold the common stock, preferred stock and warrants of Vitality Foodservice Holding Corp. (“Vitality”). The amount received from the sale of the 556,472 common shares was approximately $10.0 million, for the 1 million preferred shares was approximately $14.0 million, and for the 1 million warrants was approximately $3.8 million. As part of this transaction, there was approximately $2.9 million deposited in an escrow account subject to a reduction over a three year period in accordance with a specified schedule. On March 9, 2010, the Company received its first scheduled disbursement from the Vitality escrow totaling approximately $522,000. There were no claims against the escrow so 100% of the expected proceeds of the first scheduled disbursement were released. At the same time, the Company received its portion of a working capital adjustment paid to Vitality. The Company’s share of the proceeds from the working capital adjustment totaled approximately $471,000 and was recorded as additional long-term capital gain. The total proceeds received from the escrow disbursement and working capital adjustment was approximately $993,000. The value of the escrow was increased by $150,000 by the Valuation Committee during the nine month period ended July 31, 2010. This escrow is currently valued at approximately $1.9 million on the Company’s consolidated balance sheet as of July 31, 2010. Total amount received from the sale as of July 31, 2010 was approximately $30.6 million resulting in a realized gain of approximately $13.9 million, which was treated as a long-term capital gain. Prior to the sale of Vitality on December 29, 2009, Vitality’s European operations (which were not acquired by the buyer) were distributed to Vitality’s shareholders on a pro-rata basis. The Company received 960 shares of Series A common stock and 334 shares of convertible Series B common stock in LHD Europe Holding Inc. (“LHD Europe”) as part of this transaction. At July 31, 2010, the Series A common stock had a fair value of approximately $332,000 and the convertible Series B common stock had a fair value of approximately $118,000.

     On December 31, 2009 and April 7, 2010, Marine made principal payments of $625,000 on each date on its senior subordinated loan. The balance of the loan as of July 31, 2010 was $9.8 million.

     On March 10, 2010, the Company announced that its portfolio company, Dakota Growers Pasta Company, Inc. (“Dakota Growers”) had signed a definitive merger agreement with Viterra Inc. (TSX: VT) (“Viterra”), Canada’s leading agri-business that provides premium quality ingredients to leading global food manufacturers, under which Dakota Growers would be acquired by a subsidiary of Viterra for approximately $240 million in cash. Under the terms of the agreement, Viterra would commence a tender offer to acquire all of the outstanding shares of Dakota Growers’ common stock at a price of $18.28 per share resulting in anticipated proceeds of approximately $38.0 million. The acquisition closed shortly after completion of a tender of a majority (50.1%) of the outstanding shares of Dakota Growers common stock, the receipt of various regulatory approvals and the satisfaction of other customary closing conditions and contingencies. On May 3, 2010, the Company converted its 1,065,000 preferred shares of Dakota Growers to 1,065,000 common shares of Dakota

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Growers. On May 6, 2010, the Company sold its shares in Dakota Growers for approximately $37.9 million, resulting in a realized gain of approximately $22.0 million. The Company no longer has an investment in Dakota Growers.

     On March 16, 2010, the Company contributed its common and preferred equity interest in SGDA Sanierungsgesellschaft fur Deponien und Altasten GmbH (“SGDA”) to SGDA Europe to achieve operating efficiencies. The Company has 99.99% economic ownership in SGDA Europe. The fair value of SGDA Europe’s equity interest increased by approximately $4.2 million and the cost basis was increased by $5.0 million as a result of this cashless transaction. There was no gain or loss to the Company from this transaction. The fair value of SGDA Europe’s equity interest at July 31, 2010 was $16.2 million.

     On June 1, 2010, Octagon made a principal payment of $4.0 million on its term loan. The balance of the term loan as of July 31, 2010 was $1.0 million.

     On July 2, 2010, the Company sold its common and preferred shares of Vendio Services, Inc. (“Vendio”), a Legacy Investment. The amount received from the sale of the 10,476 common shares was approximately $2,900 and for the 6,443,188 preferred shares was approximately $2.9 million, which resulted in a realized loss of approximately $3.5 million, including proceeds held in escrow. As part of this transaction, there was approximately $337,000 deposited in an escrow account subject to reduction over an eighteen month period. This escrow is valued at approximately $180,000 on the Company’s consolidated balance sheet as of July 31, 2010.

     During the nine month period ended July 31, 2010, Amersham Corporation (“Amersham”) made principal payments of $375,000, repaying its senior secured loan in full, including all accrued interest.

     During the nine month period ended July 31, 2010, SP Industries, Inc. (“SP”) made principal payments of approximately $151,000, on its first lien loan. The balance of the first lien loan as of July 31, 2010, was approximately $750,000.

     During the nine month period ended July 31, 2010, Total Safety U.S., Inc. (“Total Safety”) made principal payments of approximately $24,000 on its first lien loan. The balance of the first lien loan as of July 31, 2010 was approximately $949,000.

     During the nine month period ended July 31, 2010, the Company received approximately $80,000 in principal payments on the term loan provided to Storage Canada, LLC (“Storage Canada”). The balance of the term loan at July 31, 2010 was approximately $1.0 million.

     During the nine month period ended July 31, 2010, Innovative Brands, LLC (“Innovative Brands”) made principal payments of approximately $10.4 million on its term loan, repaying the term loan in full including all accrued interest.

     During the nine month period ended July 31, 2010, the Company sold the remaining 666,667 shares of Phoenix Coal Corporation (“Phoenix Coal”) common stock. The total amount received from the sale net of commission was approximately $295,000, resulting in a realized loss of approximately $205,000.

     During the nine month period ended July 31, 2010, Henry Company made principal payments of approximately $1.7 million and $2.0 million on its term loan A and term loan B, respectively, repaying the term loans in full including all accrued interest.

     On July 31, 2009, the Company sponsored U.S. Gas & Electric, Inc. (“U.S. Gas”) in its acquisition of ESPI and provided a $10.0 million limited guarantee and cash collateral for a short-term $4.0 million letter of credit for U.S. Gas. For sponsoring and providing this credit support, the Company has earned one-time fee income of

20

approximately $1.2 million and will be recognizing an additional $1.6 million in fee income over the life of the guarantee. As of July 31, 2010, the cash collateral has been released as the letter of credit has expired.

     During the quarter ended January 31, 2010, the Valuation Committee increased the fair value of the Company’s investments in Dakota Growers common stock by approximately $2.4 million and preferred stock by approximately $2.6 million, Octagon Credit Investors, LLC (“Octagon”) equity interest by $1.0 million, Summit Research Labs, Inc. (“Summit”) common stock by $2.0 million, Velocitius B.V. (“Velocitius”) equity interest by $1.0 million, and LHD Europe series A common stock by approximately $166,000 and series B common Stock by approximately $58,000. In addition, increases in the cost basis and fair value of the loans to GDC Acquisition, LLC (“GDC”), Custom Alloy Corporation (“Custom Alloy”), SP, Marine, Turf Products, LLC (“Turf”), BP Clothing, LLC (“BP”), Summit, and U.S. Gas and the Marine and Vitality preferred stock were due to the capitalization of payment in kind (“PIK”) interest/dividends totaling $1,752,454. The Valuation Committee also increased the fair value of the Ohio Medical Corporation (“Ohio Medical”) preferred stock by approximately $1.6 million due to a PIK distribution which was treated as a return of capital. Also, during the quarter ended January 31, 2010, the undistributed allocation of flow through income from the Company’s equity investment in Octagon increased the cost basis and fair value of this investment by approximately $89,000. The Valuation Committee also decreased the fair value of the Company’s investments in Amersham Corporation (“Amersham”) second lien notes by $2.4 million, BP second lien loan by $1.6 million, Ohio Medical common stock by $1.3 million, SGDA Sanierungsgesellschaft fur Deponien und Altasten GmbH (“SGDA”) preferred equity interest by approximately $2.4 million, and Vendio Services, Inc. (“Vendio”) preferred stock by approximately $746,000 and common stock by $3,600 during the quarter ended January 31, 2010. The Valuation Committee also determined not to increase the fair values of the Harmony Pharmacy revolving credit facility and the Amersham loan for the accrued PIK interest totaling approximately $186,000.

     During the quarter ended April 30, 2010, the Valuation Committee increased the fair value of the Company’s investments in Dakota Growers common stock by approximately $1.0 million and preferred stock by approximately $1.0 million, Octagon equity interest by $500,000 and Summit common stock by $7.0 million. In addition, increases in the cost basis and fair value of the loans to GDC, Custom Alloy, SP, Marine, Turf, BP, Summit, and U.S. Gas and the Marine preferred stock were due to the capitalization of payment in kind (“PIK”) interest/dividends totaling $1,343,814. The Valuation Committee also increased the fair value of the Ohio Medical preferred stock by approximately $1.7 million due to a PIK distribution which was treated as a return of capital. Also, during the quarter ended April 30, 2010, the undistributed allocation of flow through income from the Company’s equity investment in Octagon increased the cost basis and fair value of this investment by approximately $62,000. The Valuation Committee also decreased the fair value of the Company’s investments in Velocitius equity interest by $600,000 and Vendio preferred stock by approximately $1.1 million and common stock by $1,900 during the quarter ended April 30, 2010. The Valuation Committee also determined not to increase the fair values of the Harmony Pharmacy revolving credit facility and the Amersham loan for the accrued PIK interest totaling approximately $188,000.

     During the quarter ended July 31, 2010, the Valuation Committee increased the fair value of the Company’s investments in PreVisor, Inc. common stock by $3.4 million. In addition, increases in the cost basis and fair value of the loans to GDC, Custom Alloy, SP, Marine, Turf, BP, Summit, and U.S. Gas and the Marine preferred stock were due to the capitalization of payment in kind (“PIK”) interest/dividends totaling $1,145,719. The Valuation Committee also increased the fair value of the Ohio Medical preferred stock by approximately $1.7 million due to a PIK distribution which was treated as a return of capital. Also, during the quarter ended July 31, 2010, the undistributed allocation of flow through income from the Company’s equity investment in Octagon increased the cost basis and fair value of this investment by approximately $108,000. The Valuation Committee also decreased the fair value of the Company’s investments in BP second lien loan by approximately $5.2 million, MVC Automotive Group B.V. (“MVC Automotive”) equity interest by $4.4 million, Security Holdings B.V. (“Security Holdings”) equity interest by approximately $6.4 million, Ohio Medical common stock by $3.7 million, and GDC senior subordinated loan by approximately $1.6 million during the quarter ended July 31, 2010. The Valuation Committee also determined not to increase the fair values of the Harmony

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Pharmacy revolving credit facility and the Amersham loan for the accrued PIK interest totaling approximately $193,000.

     During the nine month period ended July 31, 2010, the Valuation Committee increased the fair value of the Company’s investments in Dakota Growers common stock by approximately $3.4 million and preferred stock by approximately $3.6 million, Octagon equity interest by $1.5 million, Summit common stock by $9.0 million, Velocitius equity interest by $400,000, PreVisor common stock by $3.4 million, and LHD Europe series A common stock by approximately $166,000 and series B common Stock by approximately $58,000. In addition, increases in the cost basis and fair value of the loans to GDC, Custom Alloy, SP, Marine, Turf, BP, Summit, and U.S. Gas and the Marine and Vitality preferred stock were due to the capitalization of payment in kind (“PIK”) interest/dividends totaling $4,241,987. The Valuation Committee also increased the fair value of the Ohio Medical preferred stock by approximately $5.0 million due to PIK distributions which were treated as a return of capital. Also, during the nine month period ended July 31, 2010, the undistributed allocation of flow through income from the Company’s equity investment in Octagon increased the cost basis and fair value of this investment by approximately $259,000. The Valuation Committee also decreased the fair value of the Company’s investments in Amersham second lien notes by $2.4 million, BP second lien loan by $6.8 million, Ohio Medical common stock by $5.0 million, SGDA preferred equity interest by approximately $2.4 million, MVC Automotive equity interest by $4.4 million, Security Holdings equity interest by approximately $6.4 million, GDC senior subordinated loan by approximately $1.6 million and Vendio preferred stock by approximately $1.9 million and common stock by $5,500 during the nine month period ended July 31, 2010. The Valuation Committee also determined not to increase the fair values of the Harmony Pharmacy revolving credit facility and the Amersham loan for the accrued PIK interest totaling approximately $567,000.

     At July 31, 2010, the fair value of all portfolio investments, exclusive of short-term securities, was $422.2 million with a cost basis of $376.3 million. At July 31, 2010, the fair value and cost basis of portfolio investments of the Legacy Investments was $10.8 million and $42.3 million, respectively, and the fair value and cost basis of portfolio investments made by the Company’s current management team was $411.4 million and $334.0 million, respectively. At October 31, 2009, the fair value of all portfolio investments, exclusive of short-term securities, was $502.8 million, with a cost basis of $422.8 million. At October 31, 2009, the fair value and cost basis of the Legacy Investments was $15.3 million and $48.9 million, respectively, and the fair value and cost basis of portfolio investments made by the Company’s current management team was $487.5 million and $373.9 million, respectively.

     For the Fiscal Year Ended October 31, 2009

     During the fiscal year ended October 31, 2009, the Company made six follow-on investments in four existing portfolio companies committing capital totaling $6.3 million. The Company invested $3.4 million in Harmony Pharmacy in the form of three demand notes, a $700,000 demand note on November 4, 2008, a $2.2 million demand note on March 3, 2009 and a $500,000 demand note on September 1, 2009. The demand notes have an annual interest rate of 10% with the accrued interest being reserved against due to collectibility issues. On June 23, 2009, the Company invested $1.5 million in SGDA Europe in the form of a senior secured loan. The loan has an annual interest rate of 10% and a maturity date of June 23, 2012. On July 14, 2009 and September 1, 2009, the Company invested a combined $375,000 in Amersham in the form of a senior secured loan bearing annual interest of 6% and maturing on December 31, 2009. The Company also made an equity investment of approximately $1.0 million in MVC Partners during the fiscal year ended October 31, 2009.

     At October 31, 2008, the balance of the revolving credit facility provided to Octagon was $650,000. Net repayments during the fiscal year ended October 31, 2009 were $650,000. There was no amount outstanding as of October 31, 2009.

     At October 31, 2008, the balance of the secured revolving note provided to Marine was $700,000. Net borrowings during the fiscal year ended October 31, 2009 were $200,000 resulting in a balance of $900,000 at such date.

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     At October 31, 2007, the balance of the revolving senior credit facility provided to U.S. Gas was approximately $85,000. During the fiscal year ended October 31, 2008, U.S. Gas entered into a swap agreement which locked in a portion of the senior credit facility with an annual rate of LIBOR plus 6% for a period of two years. This portion of the senior credit facility, in connection to the swap agreement, was approximately $571,000 at October 31, 2008. Net repayments for this portion of the credit facility were approximately $571,000, resulting in no balance outstanding at October 22, 2009. The balance of the remaining portion of the senior credit facility at October 31, 2008 was approximately $4.4 million. Net repayments on this portion of the senior credit facility, which were borrowed at an annual rate of Prime plus 4.5%, were approximately $4.4 million, resulting in no balance outstanding at October 22, 2009. On October 22, 2009, the Company participated the revolving credit facility to another lender. The Company agreed to guarantee the $10 million credit facility under certain circumstances related to an event of default.

     During the fiscal year ended October 31, 2009, the Company received approximately $106,000 in principal payments on the term loan provided to Storage Canada. The balance of the term loan at October 31, 2009 was approximately $1.1 million.

     During the fiscal year ended October 31, 2009, the Company received principal payments of approximately $2.6 million on the term loan provided to Innovative Brands. The Company also received a loan amendment fee of approximately $57,000. The interest rate on the term loan was increased to 15.5% from 11.75%. The balance of the term loan as of October 31, 2009 was approximately $10.4 million.

     On December 31, 2008, the Company received a quarterly principal payment from BP on term loan A of $146,250. During the fiscal year ended October 31, 2009, the interest rates increased on term loan A to LIBOR plus 5.75% or Prime Rate plus 4.75%, on term loan B to LIBOR plus 8.75% or Prime Rate plus 7.75%, and on the second lien loan to 16.5%. The balance of term loan A as of October 31, 2009 was approximately $2.0 million.

     On December 31, 2008, March 31, 2009, June 30, 2009, and September 30, 2009, Total Safety made principal payments of $2,500 on each date on its first lien loan. The balance of the first lien loan as of October 31, 2009 was $972,500.

     During the fiscal year ended October 31, 2009, SP made principal payments totaling approximately $96,000 on its first lien loan. The balance of the first lien loan as of October 31, 2009, was approximately $901,000.

     On December 31, 2008, Henry Company made a principal payment of approximately $127,000 on its term loan A. The balance of term loan A as of October 31, 2009 was approximately $1.7 million.

     On March 11, 2009 and April 30, 2009, TerraMark L.P. (“TerraMark”) made principal payments of $300,000 and $500,000 on its senior secured loan. On July 17, 2009, TerraMark repaid its senior secured loan in full including all accrued interest. The total amount received was approximately $715,000.

     On July 31, 2009, the Company sponsored U.S. Gas in its acquisition of ESPI and provided a $10.0 million limited guarantee and cash collateral for a short-term $4.0 million letter of credit for U.S. Gas. For sponsoring and providing this credit support, the Company has earned one-time fee income of approximately $1.2 million and will be recognizing $1.0 million in fee income over the life of the guarantee. As of October 31, 2009, the cash collateral has been released as the letter of credit has expired.

     On September 30, 2009, Marine made a principal payment of $625,000 on its senior subordinated loan. The balance of the loan as of October 31, 2009 was approximately $10.8 million.

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     During the fiscal year ended October 31, 2009, Endymion Systems, Inc. (“Endymion”) was determined to no longer be an operating company. Subsequent to this determination, the Company realized a loss of $7.0 million and removed the investment from its books.

     During the fiscal year ended October 31, 2009, the Company realized a loss on Timberland Machines & Irrigation, Inc. (“Timberland”) of approximately $18.1 million. The Company received no proceeds from the company and Timberland has been removed from the Company’s portfolio.

     During the fiscal year ended October 31, 2009, the Valuation Committee increased the fair value of the Company’s investments in U.S. Gas preferred stock by $55.2 million, SGDA preferred equity interest by $500,000, SIA Tekers Invest (“Tekers”) common stock by $615,000, Velocitius equity interest by $2.2 million, Vestal Manufacturing Enterprises, Inc. (“Vestal”) common stock by $650,000, MVC Automotive equity interest by $5.0 million, Summit common stock by $5.0 million, Vitality common stock and warrants by $260,300 and $100,000, respectively, and Dakota Growers common stock by approximately $4.9 million and preferred stock by approximately $5.1 million. In addition, increases in the cost basis and fair value of the loans to GDC, Custom Alloy, SP, Marine, BP, Summit, U.S. Gas, and WBS Carbons Acquisition Corp. (“WBS”), and the Vitality and Marine preferred stock were due to the capitalization of payment in kind (“PIK”) interest/dividends totaling $6,354,807. The Valuation Committee also increased the fair value of the Ohio Medical preferred stock by approximately $5.8 million due to a PIK distribution which was treated as a return of capital. Also, during the fiscal year ended October 31, 2009, the undistributed allocation of flow through income from the Company’s equity investment in Octagon increased the cost basis and fair value of this investment by approximately $157,000. The Valuation Committee also decreased the fair value of the Company’s investments in Ohio Medical common stock by $8.1 million, Vendio preferred stock by approximately $2.1 million and common stock by $5,000, Foliofn, Inc. (“Foliofn”) preferred stock by $2.8 million, PreVisor, Inc. (“PreVisor”) common stock by $3.1 million, Custom Alloy preferred stock by $22.5 million, Amersham second lien notes by $3.1 million, Turf equity interest by $2.6 million, Harmony Pharmacy common stock by $750,000, MVC Partners LLC (“MVC Partners”) equity interest by $16,000, SGDA common stock by $560,000, Security Holdings common equity interest by $18.2 million, HuaMei Capital Company (“HuaMei”), Inc. common stock by $475,000, Timberland senior subordinated loan by approximately $7.3 million and junior revolving line of credit by $1.0 million and BP term loan B by approximately $219,000, term loan A by approximately $255,000 and second lien loan by approximately $1.3 million, during the fiscal year ended October 31, 2009. The Valuation Committee also determined not to increase the fair values of the Harmony Pharmacy revolving credit facility, Timberland senior subordinated loan and the Amersham loan for the accrued PIK interest totaling approximately $1.0 million. During the fiscal year ended October 31, 2009, the Company received a return of capital distribution from Turf of approximately $286,000.

     At October 31, 2009, the fair value of all portfolio investments, exclusive of short-term securities, was $502.8 million with a cost basis of $422.8 million. At October 31, 2009, the fair value and cost basis of portfolio investments of the Legacy Investments was $15.3 million and $48.9 million, respectively, and the fair value and cost basis of portfolio investments made by the Company’s current management team was $487.5 million and $373.9 million, respectively. At October 31, 2008, the fair value of all portfolio investments, exclusive of short-term securities, was $490.8 million, with a cost basis of $445.6 million. At October 31, 2008, the fair value and cost basis of the Legacy Investments was $20.2 million and $55.9 million, respectively, and the fair value and cost basis of portfolio investments made by the Company’s current management team was $470.6 million and $389.7 million, respectively.

7. Commitments and Contingencies

     Commitments to/for Portfolio Companies:

     At July 31, 2010, the Company’s existing commitments to portfolio companies consisted of the following:

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Commitments of MVC Capital, Inc.

Portfolio Company	Amount Committed	Amount Funded at July 31, 2010
Marine Revolving Loan Facility	$2.0 million	$2.0 million
Octagon Revolving Credit Facility	$7.0 million	—
Harmony Pharmacy Revolving Credit Facility	$4.0 million	$4.0 million
Tekers Guarantee	$1.8 million	—
MVC Automotive Guarantee	$8.5 million	—
MVC Automotive Guarantee	$5.2 million	—
Turf Junior Revolver	$1.0 million	$1.0 million
MVC Automotive Guarantee	$1.8 million	—
U.S. Gas Guarantee	$10.0 million	—
Total	$41.3 million	$7.0 million

     On June 30, 2005, the Company pledged its common stock of Ohio Medical to Guggenheim to collateralize a loan made by Guggenheim to Ohio Medical.

     On July 11, 2006, the Company provided Marine a $2.0 million secured revolving loan facility. The revolving loan facility bears annual interest at LIBOR plus 1%. The Company also receives a fee of 0.50% of the unused portion of the revolving loan facility. As of October 31, 2009, the outstanding balance of the secured revolving loan facility was $900,000. Net borrowings during the nine month period ended July 31, 2010 were $1.1 million, resulting in a balance of $2.0 million at such date.

     On October 12, 2006, the Company provided a $12.0 million revolving credit facility to Octagon in replacement of the senior secured credit facility provided on May 7, 2004. This credit facility expires on December 31, 2011. The credit facility bears annual interest at LIBOR plus 4.25%. The Company receives a 0.50% unused facility fee on an annual basis and a 0.25% servicing fee on an annual basis for maintaining the credit facility. On February 12, 2009, the commitment amount of the revolving credit facility was reduced to $7.0 million. At October 31, 2009 and July 31, 2010, there was no balance outstanding.

     On January 11, 2007, the Company provided a $4.0 million revolving credit facility to Harmony Pharmacy. The credit facility bears annual interest at 10%. The Company also receives a fee of 0.50% on the unused portion of the loan. The maturity date of the revolving credit facility was extended to December 31, 2010. At October 31, 2009 and July 31, 2010, the outstanding balance of the revolving credit facility was $4.0 million.

     On May 1, 2007, the Company provided Velocitius a $650,000 revolving line of credit. The revolving line of credit expired on April 30, 2010 and had an annual interest at 8%. At July 31, 2010, the revolving line of credit was no longer a commitment of the Company.

     On July 19, 2007, the Company agreed to guarantee a 1.4 million Euro mortgage for Tekers, equivalent to approximately $1.8 million at July 31, 2010.

     On July 26, 2007, the Company provided a $10.0 million revolving senior credit facility to U.S. Gas. The revolving senior credit facility had an annual interest at LIBOR plus 6% or Prime plus 4.5%, which is at U.S. Gas’ discretion. The balance of the senior credit facility at October 31, 2008 was approximately $12.2 million. Net repayments during fiscal year 2009 on the senior credit facility were approximately $12.2 million, resulting in a zero balance at October 22, 2009. On October 22, 2009, the Company participated the revolving credit facility to Amzak Capital Management, LLC. The Company agreed to guarantee the $10 million credit facility under certain circumstances related to an event of default. On March 31, 2010, U.S. Gas refinanced its senior credit facility with another lender. As a result of the refinancing, the $10 million guarantee to Amzak Capital Management, LLC for the senior credit facility has been released. At October 31, 2009 and July 31, 2010, the revolving senior credit facility was no longer a commitment of the Company.

     On January 15, 2008, the Company agreed to guarantee a 6.5 million Euro mortgage for MVC Automotive, equivalent to approximately $8.5 million at July 31, 2010.

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     On January 16, 2008, the Company agreed to support a 4.0 million Euro mortgage for a Ford dealership owned and operated by MVC Automotive (equivalent to approximately $5.2 million at July 31, 2010) through making financing available to the dealership and agreeing under certain circumstances not to reduce its equity stake in MVC Automotive.

     On July 31, 2008, the Company extended a $1.0 million loan to Turf in the form of a secured junior revolving note. The note bears annual interest at 6.0% and expires on May 1, 2011. On July 31, 2008, Turf borrowed $1.0 million from the secured junior revolving note. At October 31, 2009 and July 31, 2010, the outstanding balance of the secured junior revolving note was $1.0 million.

     On September 9, 2008, the Company agreed to guarantee a 35.0 million Czech Republic Koruna (“CZK”) mortgage for MVC Automotive, equivalent to approximately $1.8 million at July 31, 2010.

     On July 31, 2009, the Company sponsored U.S. Gas in its acquisition of ESPI and provided a $10.0 million limited guarantee and cash collateral for a short-term $4.0 million letter of credit for U.S. Gas. For sponsoring and providing this credit support, the Company has earned one-time fee income of approximately $1.2 million and will be recognizing an additional $1.6 million in fee income over the life of the guarantee. As of July 31, 2010, the cash collateral has been released as the letter of credit has expired.

     On March 31, 2010, the Company pledged its Series I and Series J preferred stock of U.S. Gas to Macquarie Energy, LLC (“Macquarie Energy”) as collateral for Macquarie Energy’s trade supply credit facility to U.S. Gas.

     Commitments of the Company:

     Effective November 1, 2006, under the terms of the Investment Advisory and Management Agreement with TTG Advisers, which has since been amended and restated (the “Advisory Agreement”) and described in Note 8. “Management”, TTG Advisers is responsible for providing office space to the Company and for the costs associated with providing such office space. The Company’s offices continue to be located on the second floor of 287 Bowman Avenue, Purchase, New York 10577.

     On April 27, 2006, the Company and MVCFS, as co-borrowers, entered into a four-year, $100 million credit facility (“Credit Facility I”), consisting of $50.0 million in term debt and $50.0 million in revolving credit, with Guggenheim as administrative agent for the lenders. At October 31, 2009, there was $50.0 million in term debt and $12.3 million in revolving credit on Credit Facility I outstanding. The Company made net repayments of $12.3 million on the revolving credit portion of Credit Facility I during the period November 1, 2009 to April 13, 2010. On April 13, 2010, the Company renewed Credit Facility I with Guggenheim for three years. Credit Facility I now only consists of a $50.0 million term loan, which will expire on April 27, 2013, at which time the outstanding amount under Credit Facility I will be due and payable. As of July 31, 2010, there was $50.0 million outstanding on Credit Facility I. The proceeds from borrowings made under Credit Facility I are used to fund new and existing portfolio investments and for general corporate purposes. Borrowings under Credit Facility I will bear interest, at the Company’s option, at a floating rate equal to either (i) the LIBOR rate with a 1.25% LIBOR floor (for one, two, three or six months), plus a spread of 4.5% per annum, or (ii) the Prime rate in effect from time to time, plus a spread of 3.50% per annum. The Company paid a closing fee, legal and other costs associated with obtaining and renewing Credit Facility I. These costs will be amortized evenly over the life of the facility. The prepaid expenses on the Balance Sheet include the unamortized portion of these costs. Borrowings under Credit Facility I will be secured, by among other things, cash, cash equivalents, debt investments, accounts receivable, equipment, instruments, general intangibles, the capital stock of MVCFS, and any proceeds from all the aforementioned items, as well as all other property except for equity investments made by the Company. Please see the Item 3 Risk Factor, “We may be unable to meet our covenant obligations under our credit facility, which could adversely affect our business,” for a risk factor relating to the Company’s credit facility.

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     On April 24, 2008, the Company entered into a two-year, $50 million revolving credit facility (“Credit Facility II”) with Branch Banking and Trust Company (“BB&T”). There was no amount outstanding on Credit Facility II as of October 31, 2009 and on the maturity date of April 24, 2010. Credit Facility II was not renewed. Credit Facility II provided financing to the Company in addition to the Company’s existing Credit Facility I with Guggenheim. Proceeds from borrowings made under Credit Facility II were used to provide the Company with better overall financial flexibility in managing its investment portfolio. Borrowings under Credit Facility II bore interest at LIBOR plus 50 basis points. In addition, the Company was also subject to an annual utilization fee of 25 basis points for the amount of Credit Facility II that was outstanding for more than 33% of the calendar days during each fiscal quarter, as well as an annual fee of 25 basis points of the total amount of the facility. The Company paid a closing fee, legal and other costs associated with this transaction. These costs were amortized evenly over the life of the facility. The prepaid expenses on the Balance Sheet included the unamortized portion of these costs. Borrowings under Credit Facility II were secured by cash, short-term and long-term U.S. Treasury securities and other governmental agency securities whose purchase was approved by BB&T.

     The Company enters into contracts with portfolio companies and other parties that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, the Company has not experienced claims or losses pursuant to these contracts and believes the risk of loss related to indemnifications to be remote.

8. Management

     On November 6, 2003, Michael Tokarz assumed his positions as Chairman, Portfolio Manager and Director of the Company. From November 6, 2003 to October 31, 2006, the Company was internally managed. Effective November 1, 2006, Mr. Tokarz’s employment agreement with the Company terminated and the obligations under Mr. Tokarz’s agreement were superseded by those under the Advisory Agreement entered into with TTG Advisers. Under the terms of the Advisory Agreement, the Company pays TTG Advisers a base management fee and an incentive fee for its provision of investment advisory and management services.

     Our board of directors, including all of the directors who are not “interested persons,” as defined under the 1940 Act, of the Company (the “Independent Directors”), at their in-person meeting held on October 23, 2009, approved the renewal of the Advisory Agreement for an additional year.

     Under the terms of the Advisory Agreement, TTG Advisers determines, consistent with the Company’s investment strategy, the composition of the Company’s portfolio, the nature and timing of the changes to the Company’s portfolio and the manner of implementing such changes. TTG Advisers also identifies and negotiates the structure of the Company’s investments (including performing due diligence on prospective portfolio companies), closes and monitors the Company’s investments, determines the securities and other assets purchased, retains or sells and oversees the administration, recordkeeping and compliance functions of the Company and/or third parties performing such functions for the Company. TTG Advisers’ services under the Advisory Agreement are not exclusive, and it may furnish similar services to other entities. Pursuant to the Advisory Agreement, the Company is required to pay TTG Advisers a fee for investment advisory and management services consisting of two components—a base management fee and an incentive fee. The base management fee is calculated at 2.0% per annum of the Company’s total assets excluding cash, the value of any investment in a Third-Party Vehicle covered by a Separate Agreement (as defined in the Advisory Agreement) and the value of any investment by the Company not made in portfolio companies (“Non-Eligible Assets”) but including assets purchased with borrowed funds that are not Non-Eligible Assets. The incentive fee consists of two parts: (i) one part is based on our pre-incentive fee net operating income; and (ii) the other part is based on the capital gains realized on our portfolio of securities acquired after November 1, 2003. The Advisory Agreement provides for an expense cap pursuant to which TTG Advisers will absorb or reimburse operating expenses of the Company, to the extent necessary to limit the Company’s expense ratio (the consolidated expenses of the Company, including any amounts payable to TTG Advisers under the base management fee, but excluding the amount of any interest and other direct borrowing costs, taxes, incentive compensation and

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extraordinary expenses taken as a percentage of the Company’s average net assets) to 3.5% in each of the 2009 and 2010 fiscal years. For more information, please see Note 9 of our consolidated financial statements, “Incentive Compensation.” In addition, for the 2010 fiscal year, TTG Advisers has voluntarily agreed to waive $150,000 of expenses that the Company is obligated to reimburse to TTGA Advisers under the Advisory Agreement (the “Voluntary Waiver”).

9. Incentive Compensation

     At October 31, 2009, the provision for estimated incentive compensation was $19,511,147. During the nine month period ended July 31, 2010, this provision for incentive compensation was decreased by a net amount of $24,673 to $19,486,474. The decrease in the provision for incentive compensation during the nine month period ended July 31, 2010, reflects both increases and decreases by the Valuation Committee in the fair values of certain portfolio companies and the sale of Vitality for a realized gain of $13.9 million. The difference between the amount received from the sale and Vitality’s carrying value at October 31, 2009 was an increase of $3.0 million. The amount of the provision also reflects the Valuation Committee’s determination to increase the fair values of six of the Company’s portfolio investments (Dakota Growers, Octagon, Summit, Velocitius, PreVisor and LHD Europe) by a total of $21.5 million. The Valuation Committee also increased the fair value of the Ohio Medical preferred stock by approximately $5.0 million due to PIK distributions, which were treated as a return of capital. The net decrease in the provision also reflects the Valuation Committee’s determination to decrease the fair values of seven of the Company’s portfolio investments (Amersham, BP, Ohio Medical, MVC Automotive, Security Holdings, GDC and SGDA) by a total of $29.0 million and the Valuation Committee determination not to increase the fair values of the Harmony Pharmacy revolving credit facility and the Amersham loan for the accrued PIK interest totaling $567,000. As of July 31, 2010, the Company does not anticipate an incentive compensation payment being made to TTG Advisers for fiscal year 2010 based on the terms of the Advisory Agreement. During the nine month period ended July 31, 2010, there was no provision recorded for the net operating income portion of the incentive fee as pre-incentive fee net operating income did not exceed the hurdle rate.

     At October 31, 2008, the provision for estimated incentive compensation was $15,794,295. During the fiscal year ended October 31, 2009, this provision for incentive compensation was increased by a net amount of $3,716,852 to $19,511,147. The amount of the provision reflects the Valuation Committee’s determination to increase the fair values of eight of the Company’s portfolio investments: U.S. Gas, Tekers, Vestal, Vitality, Summit, MVC Automotive, Dakota Growers and Velocitius by a total of $79.0 million. The provision also reflects the Valuation Committee’s determination to increase the fair value of the Ohio Medical preferred stock by approximately $5.8 million due to a PIK distribution which was treated as a return of capital. The Company also received a return of capital distribution from Turf of approximately $286,000. The net increase in the provision for incentive compensation during the fiscal year ended October 31, 2009 was a result of the Valuation Committee’s determination to decrease the fair values of 12 of the Company’s portfolio investments (Ohio Medical, Timberland, Custom Alloy, PreVisor, Amersham, Turf Products, LLC (“Turf”), Harmony Pharmacy, BP, MVC Partners, SGDA, Security Holdings, and HuaMei) by a total of $68.9 million. The Valuation Committee also determined not to increase the fair values of the Harmony Pharmacy revolving credit facility, Timberland senior subordinated loan and the Amersham loan for the accrued PIK interest totaling $1.0 million. During the fiscal year ended October 31, 2009, there was no provision recorded for the net operating income portion of the incentive fee as pre-incentive fee net operating income did not exceed the hurdle rate.

10. Tax Matters

     On October 31, 2009, the Company had a net capital loss carryforward of $29,988,349 of which $1,463,592 will expire in the year 2012, $3,295,550 will expire in the year 2013, and $25,229,207 will expire in the year 2017. To the extent future capital gains are offset by capital loss carryforwards, such gains need not be distributed. As of October 31, 2009, the Company had net unrealized capital gains of $76,727,734. The gross unrealized capital losses totaled $74,283,524. The total net realized capital loss carryforwards and gross unrealized capital losses at October 31, 2009 were $104,271,873.

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     ASC 740, Income Taxes, provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet a “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current period. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the consolidated statement of operations. During the nine month period ended July 31, 2010, the Company did not incur any interest or penalties. Although we file federal and state tax returns, our major tax jurisdiction is federal for the Company and MVCFS. The 2007, 2008, 2009 and 2010 federal tax years for the Company and the 2007, 2008, 2009 and 2010 federal tax years for MVCFS remain subject to examination by the IRS.

11. Dividends and Distributions to Shareholders and Share Repurchase Program

     As a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), the Company is required to distribute to its shareholders, in a timely manner, at least 90% of its investment company taxable and tax-exempt income each year. If the Company distributes, in a calendar year, at least 98% of its ordinary income for such calendar year and its capital gain net income for the 12-month period ending on October 31 of such calendar year (as well as any portion of the respective 2% balances not distributed in the previous year), it will not be subject to the 4% non-deductible federal excise tax on certain undistributed income of RICs.

     Dividends and capital gain distributions, if any, are recorded on the ex-dividend date. Dividends and capital gain distributions are generally declared and paid quarterly according to the Company’s policy established on July 11, 2005. An additional distribution may be paid by the Company to avoid imposition of federal income tax on any remaining undistributed net investment income and capital gains. Distributions can be made payable by the Company either in the form of a cash distribution or a stock dividend. The amount and character of income and capital gain distributions are determined in accordance with income tax regulations which may differ from U.S. generally accepted accounting principles. These differences are due primarily to differing treatments of income and gain on various investment securities held by the Company, differing treatments of expenses paid by the Company, timing differences and differing characterizations of distributions made by the Company. Key examples of the primary differences in expenses paid are the accounting treatment of MVCFS (which is consolidated for GAAP purposes, but not income tax purposes) and the variation in treatment of incentive compensation expense. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications and may affect the allocation between net operating income, net realized gain (loss) and paid-in capital.

     All of our shareholders who hold shares of common stock in their own name will automatically be enrolled in our dividend reinvestment plan (the “Plan”). All such shareholders will have any cash dividends and distributions automatically reinvested by the Plan Agent in additional shares of our common stock. Of course, any shareholder may elect to receive his or her dividends and distributions in cash. Currently, the Company has a policy of seeking to pay quarterly dividends to shareholders. For any of our shares that are held by banks, brokers or other entities that hold our shares as nominees for individual shareholders, the Plan Agent will administer the Plan on the basis of the number of shares certified by any nominee as being registered for shareholders that have not elected to receive dividends and distributions in cash. To receive your dividends and distributions in cash, you must notify the Plan Agent, broker or other entity that holds the shares.

     For the Quarter Ended January 31, 2010

     On December 18, 2009, the Company’s Board of Directors declared a dividend of $0.12 per share. The dividend was payable on January 8, 2010 to shareholders of record on December 31, 2009. The total distribution amounted to $2,915,650.

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     During the quarter ended January 31, 2010, as part of the Company’s dividend reinvestment plan for our common stockholders, the Company purchased 1,890 shares of our common stock at an average price of $12.27, including commission, in the open market in order to satisfy the reinvestment portion of our dividends under the Plan.

     For the Quarter Ended April 30, 2010

     On April 16, 2010, the Company’s Board of Directors declared a dividend of $0.12 per share. The dividend was payable on April 30, 2010 to shareholders of record on April 27, 2010. The total distribution amounted to $2,915,650.

     During the quarter ended April 30, 2010, as part of the Company’s dividend reinvestment plan for our common stockholders, the Company purchased 1,315 shares of our common stock at an average price of $14.75, including commission, in the open market in order to satisfy the reinvestment portion of our dividends under the Plan.

     For the Quarter Ended July 31, 2010

     On July 16, 2010, the Company’s Board of Directors declared a dividend of $0.12 per share. The dividend was payable on July 30, 2010 to shareholders of record on July 27, 2010. The total distribution amounted to $2,884,691.

     During the quarter ended July 31, 2010, as part of the Company’s dividend reinvestment plan for our common stockholders, the Company purchased 1,377 shares of our common stock at an average price of $12.93, including commission, in the open market in order to satisfy the reinvestment portion of our dividends under the Plan.

     On April 23, 2010, the Company’s Board of Directors approved a share repurchase program authorizing up to $5.0 million in share repurchases. The share repurchase program has no time limit and does not obligate the Company to acquire any specific number of shares and may be discontinued at any time. Under the share repurchase program, shares may be repurchased from time to time at prevailing market prices during the Company’s open trading periods. As of July 31, 2010, there have been 258,000 shares repurchased at an average price of $13.07, including commission, with a total cost of approximately $3.4 million. The Company’s net asset value per share was increased by approximately $0.05 as a result of the share repurchases.

12. Segment Data

     The Company’s reportable segments are its investing operations as a business development company, MVC Capital, Inc., and the financial advisory operations of its wholly-owned subsidiary, MVC Financial Services, Inc.

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     The following table presents book basis segment data for the nine month period ended July 31, 2010:

	MVC			MVCFS			Consolidated
Interest and dividend income	$	15,807,368		$	80		$	15,807,448
Fee income		30,999			2,115,490			2,146,489
Other income		437,331			—			437,331
Total operating income		16,275,698			2,115,570			18,391,268
Total operating expenses		6,975,563			4,770,737			11,746,300
Less: Expense waiver by Adviser		(100,000	)		—			(100,000	)
Total net operating expenses		6,875,563			4,770,737			11,646,300
Net operating income (loss) before taxes		9,400,135			(2,655,167	)		6,744,968
Tax expense		—			6,437			6,437
Net operating income (loss)		9,400,135			(2,661,604	)		6,738,531
Net realized gain on investments and foreign currency		32,188,457			—			32,188,457
Net change in unrealized depreciation on investments		(34,100,782	)		—			(34,100,782	)
Net increase (decrease) in net assets resulting from operations		7,487,810			(2,661,604	)		4,826,206

13. Subsequent Events

     On September 2, 2010, the limited guarantee provided by the Company to U.S. Gas as a part of the ESPI acquisition was reduced from $10.0 million to $6.5 million.

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

     This report contains certain statements of a forward-looking nature relating to future events or the future financial performance of the Company and its investment portfolio companies. Words such as may, will, expect, believe, anticipate, intend, could, estimate, might and continue, and the negative or other variations thereof or comparable terminology, are intended to identify forward-looking statements. Forward-looking statements are included in this report pursuant to the “Safe Harbor” provision of the Private Securities Litigation Reform Act of 1995. Such statements are predictions only, and the actual events or results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those relating to investment capital demand, pricing, market acceptance, the effect of economic conditions, litigation and the effect of regulatory proceedings, competitive forces, the results of financing and investing efforts, the ability to complete transactions and other risks identified below or in the Company’s filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. The following analysis of the financial condition and results of operations of the Company should be read in conjunction with the Financial Statements, the Notes thereto and the other financial information included elsewhere in this report and the Company’s annual report on Form 10-K for the year ended October 31, 2009.

SELECTED CONSOLIDATED FINANCIAL DATA:

     Financial information for the fiscal year ended October 31, 2009 is derived from the consolidated financial statements included in the Company’s annual report on Form 10-K. Quarterly financial information is derived from unaudited financial data, but in the opinion of management, reflects all adjustments (consisting only of normal recurring adjustments), which are necessary to present fairly the results for such interim periods.

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Selected Consolidated Financial Data

	Nine Month			Nine Month
	Period Ended			Period Ended			Year Ended
	July 31,			July 31,			October 31,
	2010			2009			2009
	(Unaudited)			(Unaudited)
	(In thousands, except per share data)
Operating Data:
Interest and related portfolio income:
Interest and dividend income	$	15,807		$	16,348		$	21,755
Fee income		2,147			3,232			4,099
Other income		437			175			255
Total operating income		18,391			19,755			26,109
Expenses:
Incentive compensation (Note 9)		(25	)		(3,039	)		3,717
Management fee		7,098			7,283			9,843
Interest and other borrowing costs		2,055			2,486			3,128
Administrative		2,618			2,640			3,519
Total operating expenses		11,746			9,370			20,207
Expense Waiver by Adviser		(100	)		—			—
Total net operating expenses		11,646			9,370			20,207
Net operating income before taxes		6,745			10,385			5,902
Tax expense, net		6			—			1,377
Net operating income		6,739			10,385			4,525
Net realized and unrealized gain (loss):
Net realized gain (loss) on investments and foreign currency		32,188			—			(25,082	)
Net change in unrealized appreciation (depreciation) on investments		(34,101	)		(23,637	)		34,804
Net realized and unrealized gain (loss) on investments and foreign currency		(1,913	)		(23,637	)		9,722
Net increase (decrease) in net assets resulting from operations	$	4,826		$	(13,252	)	$	14,247
Per Share:
Net increase (decrease) in net assets per share resulting from operations	$	0.19		$	(0.54	)	$	0.59
Dividends per share	$	0.36		$	0.36		$	0.48
Balance Sheet Data:
Portfolio at value	$	422,226		$	467,550		$	502,803
Portfolio at cost		376,318			445,983			422,794
Total assets		491,055			482,444			510,846
Shareholders’ equity		417,193			399,872			424,456
Shareholders’ equity per share (net asset value)	$	17.35		$	16.46		$	17.47
Common shares outstanding at period end		24,039			24,297			24,297
Other Data:
Number of Investments funded in period		4			5			6
Investments funded ($) in period	$	7,032		$	5,668		$	6,293

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	2010								2009												2008
	Qtr 3			Qtr 2			Qtr 1		Qtr 4			Qtr 3			Qtr 2			Qtr 1			Qtr 4			Qtr 3			Qtr 2			Qtr 1
	(In thousands, except per share data)
Quarterly Data (Unaudited):
Total operating income		5,257			5,336			7,798		6,354			7,410			5,757			6,588			6,246			6,804			8,081			8,896
Incentive compensation		(3,270	)		2,225			1,020		6,756			(2,550	)		(335	)		(154	)		1,496			3,929			3,740			1,657
Interest, fees and other borrowing costs		767			647			641		642			660			736			1,090			1,190			1,022			1,081			1,171
Management fee		2,176			2,467			2,455		2,560			2,379			2,421			2,483			2,510			2,276			2,185			2,018
Administrative		910			938			770		879			894			865			881			1,299			887			753			681
Expense Waiver by Adviser		(50	)		(50	)		—		—			—			—			—			—			—			—			—
Tax expense (benefit)		—			1			5		1,377			—			359			(359	)		(830	)		58			(186	)		22
Net operating income (loss) before net realized and unrealized gains		4,724			(892	)		2,907		(5,860	)		6,027			1,711			2,647			581			(1,368	)		508			3,347
Net increase (decrease) in net assets resulting from operations		(11,281	)		8,969			7,138		27,499			(6,297	)		(7,809	)		854			7,357			18,623			17,158			20,813
Net increase (decrease) in net assets resulting from operations per share		(0.47	)		0.37			0.29		1.13			(0.26	)		(0.32	)		0.04			0.30			0.77			0.70			0.86
Net asset value per share		17.35			17.89			17.64		17.47			16.46			16.84			17.28			17.36			17.18			16.53			15.95

OVERVIEW

     The Company is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company under the 1940 Act. The Company’s investment objective is to seek to maximize total return from capital appreciation and/or income.

     On November 6, 2003, Mr. Tokarz assumed his positions as Chairman and Portfolio Manager of the Company. He and the Company’s investment professionals (who, effective November 1, 2006, provide their services to the Company through the Company’s investment adviser, TTG Advisers) are seeking to implement our investment objective (i.e., to maximize total return from capital appreciation and/or income) through making a broad range of private investments in a variety of industries.

     The investments can include senior or subordinated loans, convertible debt and convertible preferred securities, common or preferred stock, equity interests, warrants or rights to acquire equity interests, and other private equity transactions. During the year ended October 31, 2009, the Company made six follow-on investments in existing portfolio            companies, committing capital totaling approximately $6.3 million. During the nine month period ended July 31, 2010, the Company made one new investment and three follow-on investments in existing portfolio companies, committing capital totaling $7.0 million.

     Prior to the adoption of our current investment objective, the Company’s investment objective had been to achieve long-term capital appreciation from venture capital investments in information technology companies. The Company’s investments had thus previously focused on investments in equity and debt securities of information technology companies. As of July 31, 2010, 2.20% of the current fair value of our assets consisted of Legacy Investments. We are, however, seeking to manage these Legacy Investments to try and realize maximum returns. We generally seek to capitalize on opportunities to realize cash returns on these investments when presented with a potential “liquidity event,” i.e., a sale, public offering, merger or other reorganization.

     Our new portfolio investments are made pursuant to our current objective and strategy. We are concentrating our investment efforts on small and middle-market companies that, in our view, provide opportunities to maximize total return from capital appreciation and/or income. Under our investment approach, we are permitted to invest, without limit, in any one portfolio company, subject to any diversification limits required in order for us to continue to qualify as a RIC under Subchapter M of the Code. Due to our asset growth and composition, compliance with the RIC requirements currently restricts our ability to make additional investments that represent more than 5% of our total assets or more than 10% of the outstanding voting securities of the issuer (“Non-Diversified Investments”).

     We participate in the private equity business generally by providing privately negotiated long-term equity and/or debt investment capital to small and middle-market companies. Our financing is generally used to fund growth, buyouts, acquisitions, recapitalizations, note purchases, and/or bridge financings. We generally invest in private companies, though, from time to time, we may invest in public companies that may lack adequate access to public capital.

     We may also seek to achieve our investment objective by establishing a subsidiary or subsidiaries that would serve as a general partner or managing member to a private equity or other investment vehicle(s). In fact,

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during fiscal year 2006, we established MVC Partners for this purpose. Furthermore, our board of directors has authorized the establishment of a private equity fund (a “PE Fund”) that would have the ability, among other things, to make Non-Diversified Investments. A subsidiary of the Company would serve as the general partner (or managing member) of the PE Fund. Our board of directors also authorized the subsidiary’s retention of TTG Advisers to serve as portfolio manager of the PE Fund. The general partner and MVC Partners are anticipated to earn (before their respective expenses) a portion (approximately 25-30%) of the revenue and carried interest generated by the PE Fund (which, if launched, may have an asset size of up to $250 million). Additionally, in pursuit of our objective, we may acquire a portfolio of existing private equity or debt investments held by financial institutions or other investment funds should such opportunities arise.

OPERATING INCOME

     For the Nine Month Periods Ended July 31, 2010 and 2009. Total operating income was $18.4 million for the nine month period ended July 31, 2010 and $19.8 million for the nine month period ended July 31, 2009, a decrease of $1.4 million.

For the Nine Month Period Ended July 31, 2010

     Total operating income was $18.4 million for the nine month period ended July 31, 2010. The decrease in operating income over the same period last year was primarily due to the repayment of investments that provide the Company with current income and a decrease in fee income because of fewer new investments closed. The main components of investment income were the interest earned on loans and dividend income from portfolio companies and the receipt of closing and monitoring fees from certain portfolio companies by the Company and MVCFS. The Company earned approximately $15.8 million in interest and dividend income from investments in portfolio companies. Of the $15.8 million recorded in interest/dividend income, approximately $4.2 million was “payment in kind” interest/dividends. The “payment in kind” interest/dividends are computed at the contractual rate specified in each investment agreement and added to the principal balance of each investment. The Company’s debt investments yielded rates from 1.3% to 17% excluding those investments in which interest is being reserved against. The Company received fee income and other income from portfolio companies and other entities totaling approximately $2.6 million.

For the Nine Month Period Ended July 31, 2009

     Total operating income was $19.8 million for the nine month period ended July 31, 2009. The decrease in operating income over the same period ending July 31, 2008 was primarily due to the repayment of investments that provide the Company with current income, a decrease in the LIBOR rate which impacts our variable rate loans, and reserves against non-performing loans. The main components of investment income were the interest earned on loans and dividend income from portfolio companies and the receipt of closing and monitoring fees from certain portfolio companies by the Company and MVCFS. The Company earned approximately $16.3 million in interest and dividend income from investments in portfolio companies. Of the $16.3 million recorded in interest/dividend income, approximately $4.5 million was “payment in kind” interest/dividends. The “payment in kind” interest/dividends are computed at the contractual rate specified in each investment agreement and added to the principal balance of each investment. The Company’s debt investments yielded rates from 1.3% to 17%. Also, the Company earned approximately $7,100 in interest income on its cash equivalents and short-term investments. The Company received fee income and other income from portfolio companies and other entities totaling approximately $3.4 million.

OPERATING EXPENSES

     For the Nine Month Periods Ended July 31, 2010 and 2009. Operating expenses were $11.7 million for the nine month period ended July 31, 2010 and $9.4 million for the nine month period ended July 31, 2009, an increase of approximately $2.3 million.

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For the Nine Month Period Ended July 31, 2010

     Operating expenses, net of the Voluntary Waiver, were $11.6 million or 3.63% of the Company’s average net assets, when annualized, for the nine month period ended July 31, 2010. Significant components of operating expenses for the nine month period ended July 31, 2010, included the management fee of $7.1 million and interest and other borrowing costs of approximately $2.1 million.

     The $2.3 million increase in the Company’s operating expenses for the nine month period ended July 31, 2010 compared to the nine month period ended July 31, 2009, was primarily due to the $3.0 million increase in the estimated provision for incentive compensation expense offset by the decrease of approximately $430,000 in interest and other borrowing costs. The Advisory Agreement extended the expense cap applicable to the Company for an additional two fiscal years (fiscal years 2009 and 2010) and increased the expense cap from 3.25% to 3.5%. For fiscal year 2009 and for the nine month period ended July 31, 2010 annualized, the Company’s expense ratio was 3.19% and 3.00%, respectively, (taking into account the same carve outs as those applicable to the expense cap). For the 2010 fiscal year, TTG Advisers has voluntarily agreed to waive $150,000 of expenses that the Company is obligated to reimburse to TTG Advisers under the Advisory Agreement.

     Pursuant to the terms of the Advisory Agreement, during the nine month period ended July 31, 2010, the provision for incentive compensation was decreased by a net amount of $24,673 to $19,486,474. The decrease in the provision for incentive compensation reflects both increases and decreases by the Valuation Committee in the fair values of certain portfolio companies and the sale of Vitality for a realized gain of $13.9 million. The difference between the amount received from the sale and Vitality’s carrying value at October 31, 2009 was an increase of $3.0 million. The amount of the provision also reflects the Valuation Committee’s determination to increase the fair values of six of the Company’s portfolio investments (Octagon, Summit, Velocitius, LHD Europe, PreVisor and Dakota Growers) by a total of $21.5 million. The Valuation Committee also increased the fair value of the Ohio Medical preferred stock by approximately $5.0 million due to PIK distributions, which were treated as a return of capital. The net decrease in the provision also reflects the Valuation Committee’s determination to decrease the fair values of seven of the Company’s portfolio investments (Amersham, BP, Ohio Medical, MVC Automotive, Security Holdings, GDC and SGDA) by a total of $29.0 million and the Valuation Committee determination not to increase the fair values of the Harmony Pharmacy revolving credit facility and the Amersham loan for the accrued PIK interest totaling $567,000. As of July 31, 2010, the Company does not anticipate an incentive compensation payment being made to TTG Advisers for fiscal year 2010 based on the terms of the Advisory Agreement. During the nine month period ended July 31, 2010, there was no provision recorded for the net operating income portion of the incentive fee as pre-incentive fee net operating income did not exceed the hurdle rate. Please see Note 9 “Incentive Compensation” for more information.

For the Nine Month Period Ended July 31, 2009

     Operating expenses were $9.4 million or 3.01% of the Company’s average net assets, when annualized, for the nine month period ended July 31, 2009. Significant components of operating expenses for the nine month period ended July 31, 2009, included the management fee of $7.3 million and interest expense and other borrowing costs of $2.5 million.

     The $12.0 million decrease in the Company’s operating expenses for the nine month period ended July 31, 2009 compared to the nine month period ended July 31, 2008, was primarily due to the $12.4 million decrease in the estimated provision for incentive compensation expense and the approximately $787,000 decrease in interest and other borrowing costs offset by the increase of approximately $804,000 in the management fee expense. The Amended Agreement extended the expense cap applicable to the Company for an additional two fiscal years (fiscal years 2009 and 2010) and increased the expense cap from 3.25% to 3.5%. For fiscal year 2008 and for the nine month period ended July 31, 2009 annualized, the Company’s expense ratio was 2.93% and 3.19%, respectively, (taking into account the same carve outs as those applicable to the expense cap).

     Pursuant to the terms of the Amended Agreement, during the nine month period ended July 31, 2009, the provision for incentive compensation was decreased by a net amount of $3,039,385 to $12,754,910. The amount

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of the provision reflects the Valuation Committee’s determination to increase the fair values of six of the Company’s portfolio investments (U.S. Gas, Tekers, SGDA, Velocitius, Vestal and Dakota Growers) by a total of $21.0 million. The Valuation Committee also increased the fair value of the Ohio Medical preferred stock by approximately $4.3 million due to a PIK distribution, which was treated as a return of capital. The net decrease in the provision reflects the Valuation Committee’s determination to decrease the fair values of eleven of the Company’s portfolio investments (Timberland, Amersham, Turf, PreVisor, Ohio Medical, Custom Alloy, Harmony Pharmacy, HuaMei, Security Holdings, Tekers and BP) by a total of $43.6 million and the Valuation Committee determination not to increase the fair values of the Harmony Pharmacy revolving credit facility, Timberland senior subordinated loan and the Amersham loan for the accrued PIK totaling $824,000. During the nine month period ended July 31, 2009, there was no provision recorded for the net operating income portion of the incentive fee as pre-incentive fee net operating income did not exceed the hurdle rate. Please see Note 9 “Incentive Compensation” for more information.

REALIZED GAINS AND LOSSES ON PORTFOLIO SECURITIES

     For the Nine Month Periods Ended July 31, 2010 and 2009. Net realized gains for the nine month period ended July 31, 2010 were $32.2 million. Net realized gains for the nine month period ended July 31, 2009 were immaterial.

For the Nine Month Period Ended July 31, 2010

     Net realized gains for the nine month period ended July 31, 2010 were $32.2 million. The significant components of the Company’s net realized gains for the nine month period ended July 31, 2010 was primarily due to the gains on the sale of Vitality common and preferred stock and warrants and the sale of Dakota Growers common and preferred stock offset by the losses on the sale of Vendio common and preferred stock and Phoenix Coal common stock.

     On December 29, 2009, the Company sold the common stock, preferred stock and warrants of Vitality. The amount received from the sale of the 556,472 common shares was approximately $10.0 million, for the 1 million preferred shares was approximately $14.0 million, and for the 1 million warrants was approximately $3.8 million. As part of this transaction, there was approximately $2.9 million deposited in an escrow account subject to a reduction over a three year period in accordance with a specified schedule. On March 9, 2010, the Company received its first scheduled disbursement from the Vitality escrow totaling approximately $522,000. There were no claims against the escrow, so 100% of the expected proceeds of the first scheduled disbursement were released. At the same time, the Company received its portion of a working capital adjustment paid to Vitality. The Company’s share of the proceeds from the working capital adjustment totaled approximately $471,000 and was recorded as additional long-term capital gain. The total proceeds received from the escrow disbursement and working capital adjustment was approximately $993,000. The value of the escrow was increased by $150,000 by the Valuation Committee during the nine month period ended July 31, 2010. This escrow is currently valued at approximately $1.9 million on the Company’s consolidated balance sheet as of July 31, 2010. Total amount received from the sale as of July 31, 2010 was approximately $30.6 million resulting in a realized gain of approximately $13.9 million, which was treated as a long-term capital gain.

     On March 10, 2010, the Company announced that its portfolio company, Dakota Growers had signed a definitive merger agreement with Viterra, Canada’s leading agri-business that provides premium quality ingredients to leading global food manufacturers, under which Dakota Growers would be acquired by a subsidiary of Viterra for approximately $240 million in cash. Under the terms of the agreement, Viterra would commence a tender offer to acquire all of the outstanding shares of Dakota Growers’ common stock at a price of $18.28 per share resulting in anticipated proceeds of approximately $38.0 million. The acquisition closed shortly after completion of a tender of a majority (50.1%) of the outstanding shares of Dakota Growers common stock, the receipt of various regulatory approvals and the satisfaction of other customary closing conditions and contingencies. On May 3, 2010, the Company converted its 1,065,000 preferred shares of Dakota Growers to 1,065,000 common shares of Dakota Growers. On May 6, 2010, the Company sold its shares in Dakota Growers for approximately $37.9 million, resulting in a realized gain of approximately $22.0 million.

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     On July 2, 2010, the Company sold the common stock and preferred stock of Vendio. The amount received from the sale of the 10,476 common shares was approximately $2,900 and for the 6,443,188 preferred shares was approximately $2.9 million, resulting in a realized loss of approximately $3.5 million, including the proceeds held in escrow. As part of this transaction, there was approximately $337,000 deposited in an escrow account subject to a reduction over an eighteen month period. This escrow is valued at approximately $180,000 on the Company’s consolidated balance sheet as of July 31, 2010.

     During the nine month period ended July 31, 2010, the Company sold the remaining 666,667 shares of Phoenix Coal common stock. The total amount received from the sale net of commission was approximately $295,000, resulting in a realized loss of approximately $205,000.

For the Nine Month Period Ended July 31, 2009

There were no material net realized losses or gains for the nine month period ended July 31, 2009.

UNREALIZED APPRECIATION AND DEPRECIATION OF PORTFOLIO SECURITIES

     For the Nine Month Periods Ended July 31, 2010 and 2009. The Company had a net change in unrealized depreciation on portfolio investments of approximately $34.1 million for the nine month period ended July 31, 2010 and a net change in unrealized depreciation on portfolio investments of approximately $23.6 million for the nine month period ended July 31, 2009, an increase of approximately $10.5 million.

For the Nine Month Period Ended July 31, 2010

     The Company had a net change in unrealized depreciation on portfolio investments of approximately $34.1 million for the nine month period ended July 31, 2010. The change in unrealized depreciation on investment transactions for the nine month period ended July 31, 2010 primarily resulted from the increase in unrealized depreciation reclassification from unrealized to realized, caused by the sale of Vitality, Dakota Growers, and Vendio, of approximately $29.2 million. The other components in the change in unrealized appreciation are the Valuation Committee’s decision to increase the fair value of the Company’s investments in Dakota Growers common stock by approximately $3.4 million and preferred stock by approximately $3.6 million, Octagon equity interest by $1.5 million, Summit common stock by $9.0 million, Velocitius equity interest by $400,000, PreVisor common stock by $3.4 million and LHD Europe series A common stock by approximately $166,000 and series B common Stock by approximately $58,000. The Valuation Committee also increased the fair value of the Ohio Medical preferred stock by approximately $5.0 million due to PIK distributions which were treated as a return of capital. The Valuation Committee also decreased the fair value of the Company’s investments in Amersham second lien notes by $2.4 million, BP second lien loan by $6.8 million, Ohio Medical common stock by $5.0 million, SGDA preferred equity interest by approximately $2.4 million, MVC Automotive equity interest by $4.4 million, Security Holdings equity interest by approximately $6.4 million, GDC senior subordinated loan by approximately $1.6 million and Vendio preferred stock by approximately $1.9 million and common stock by $5,500 during the nine month period ended July 31, 2010. The Valuation Committee also determined not to increase the fair values of the Harmony Pharmacy revolving credit facility and the Amersham loan for the accrued PIK interest totaling approximately $567,000.

For the Nine Month Period Ended July 31, 2009

     The Company had a net change in unrealized depreciation on portfolio investments of $23.6 million for the nine month period ended July 31, 2009. The change in unrealized depreciation on investment transactions for the nine month period ended July 31, 2009 primarily resulted from the Valuation Committee’s decision to decrease the fair value of the Company’s investments in Ohio Medical common stock by $6.5 million, Foliofn preferred stock by $2.8 million, Vendio preferred stock by $1.8 million and common stock by $4,000, PreVisor common stock by $3.1 million, Custom Alloy preferred stock by $11.5 million, Timberland senior subordinated loan by approximately $7.3 million and junior revolving line of credit by $1.0 million, Amersham second lien notes by $1.4 million, Turf equity interest by $2.6 million, Harmony Pharmacy common stock by $750,000,

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Security Holdings common equity interest by $7.2 million, HuaMei common stock by $475,000 and BP term loan B by approximately $219,000, term loan A by approximately $255,000 and second lien loan by approximately $1.3 million. The Valuation Committee also determined not to increase the fair values of the Harmony Pharmacy revolving credit facility, Timberland senior subordinated loan and the Amersham loan for the accrued PIK totaling approximately $824,000. The Valuation Committee also increased the fair value of the Company’s investments in U.S. Gas preferred stock by $6.0 million, SGDA preferred equity interest by $375,000 and common equity interest by $1.2 million, Tekers common stock by $615,000, Velocitius equity interest by $2.2 million, Vestal common stock by $650,000, Dakota Growers common stock by approximately $4.9 million and preferred stock by approximately $5.1 million, Turf membership interest by approximately $286,000 due to a return of capital and Ohio Medical preferred stock by approximately $4.3 million due to a PIK distribution which was treated as a return of capital.

PORTFOLIO INVESTMENTS

     For the Nine Month Period Ended July 31, 2010 and the Year Ended October 31, 2009. The cost of the portfolio investments held by the Company at July 31, 2010 and at October 31, 2009 was $376.3 million and $422.8 million, respectively, a decrease of $46.5 million. The aggregate fair value of portfolio investments at July 31, 2010 and at October 31, 2009 was $422.2 million and $502.8 million, respectively, a decrease of $80.6 million. The Company held cash and cash equivalents at July 31, 2010 and at October 31, 2009 of $59.3 million and $1.0 million, respectively, an increase of approximately $58.3 million.

For the Nine Month Period Ended July 31, 2010

     During the nine month period ended July 31, 2010, the Company obtained one new investment in IPC in the form of a warrant. The Company received the warrant solely for services provided to a new investor in IPC.

     During the nine month period ended July 31, 2010, the Company made three follow-on investments in existing portfolio companies committing capital totaling $7.0 million. On January 4, 2010, the Company loaned $800,000 to Harmony Pharmacy in the form of a demand note. The demand note has an annual interest rate of 10% with the accrued interest being reserved against. As of July 31, 2010, the $800,000 demand note was outstanding. On March 12, 2010, the Company invested $4.5 million and $1.7 million in SGDA Europe and Security Holdings, respectively, in the form of additional equity interests.

     At October 31, 2009, the balance of the secured revolving note provided to Marine was $900,000. Net borrowings during the nine month period ended July 31, 2010 were $1.1 million resulting in a balance of $2.0 million at such date.

     On December 29, 2009, the Company sold the common stock, preferred stock and warrants of Vitality. The amount received from the sale of the 556,472 common shares was approximately $10.0 million, for the 1 million preferred shares was approximately $14.0 million, and for the 1 million warrants was approximately $3.8 million. As part of this transaction, there was approximately $2.9 million deposited in an escrow account subject to a reduction over a three year period in accordance with a specified schedule. On March 9, 2010, the Company received its first scheduled disbursement from the Vitality escrow totaling approximately $522,000. There were no claims against the escrow so 100% of the expected proceeds of the first scheduled disbursement were released. At the same time, the Company received its portion of a working capital adjustment paid to Vitality. The Company’s share of the proceeds from the working capital adjustment totaled approximately $471,000 and was recorded as additional long-term capital gain. The total proceeds received from the escrow disbursement and working capital adjustment was approximately $993,000. The value of the escrow was increased by $150,000 by the Valuation Committee during the nine month period ended July 31, 2010. This escrow is currently valued at approximately $1.9 million on the Company’s consolidated balance sheet as of July 31, 2010. Total amount received from the sale as of July 31, 2010 was approximately $30.6 million resulting in a realized gain of approximately $13.9 million, which was treated as a long-term capital gain. Prior to the sale of Vitality on December 29, 2009, Vitality’s European operations (which were not acquired by the

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buyer) were distributed to Vitality’s shareholders on a pro-rata basis. The Company received 960 shares of Series A common stock and 334 shares of convertible Series B common stock in LHD Europe as part of this transaction. At July 31, 2010, the Series A common stock had a fair value of approximately $332,000 and the convertible Series B common stock had a fair value of approximately $118,000.

     On December 31, 2009 and April 7, 2010, Marine made principal payments of $625,000 on each date on its senior subordinated loan. The balance of the loan as of July 31, 2010 was $9.8 million.

     On March 10, 2010, the Company announced that its portfolio company, Dakota Growers had signed a definitive merger agreement with Viterra, Canada’s leading agri-business that provides premium quality ingredients to leading global food manufacturers, under which Dakota Growers would be acquired by a subsidiary of Viterra for approximately $240 million in cash. Under the terms of the agreement, Viterra would commence a tender offer to acquire all of the outstanding shares of Dakota Growers’ common stock at a price of $18.28 per share resulting in anticipated proceeds of approximately $38.0 million. The acquisition closed shortly after completion of a tender of a majority (50.1%) of the outstanding shares of Dakota Growers common stock, the receipt of various regulatory approvals and the satisfaction of other customary closing conditions and contingencies. On May 3, 2010, the Company converted its 1,065,000 preferred shares of Dakota Growers to 1,065,000 common shares of Dakota Growers. On May 6, 2010, the Company sold its shares in Dakota Growers for approximately $37.9 million, resulting in a realized gain of approximately $22.0 million. The Company no longer has an investment in Dakota Growers.

     On March 16, 2010, the Company contributed its common and preferred equity interest in SGDA to SGDA Europe to achieve operating efficiencies. The Company has 99.99% economic ownership in SGDA Europe. The fair value of SGDA Europe’s equity interest increased by approximately $4.2 million and the cost basis was increased by $5.0 million as a result of this cashless transaction. There was no gain or loss to the Company from this transaction. The fair value of SGDA Europe’s equity interest at July 31, 2010 was $16.2 million.

     On June 1, 2010, Octagon made a principal payment of $4.0 million on its term loan. The balance of the term loan as of July 31, 2010 was $1.0 million.

     On July 2, 2010, the Company sold its common and preferred shares of Vendio, a Legacy Investment. The amount received from the sale of the 10,476 common shares was approximately $2,900 and for the 6,443,188 preferred shares was approximately $2.9 million, which resulted in a realized loss of approximately $3.5 million, including proceeds held in escrow. As part of this transaction, there was approximately $337,000 deposited in an escrow, account subject to reduction over an eighteen month period. This escrow is valued at approximately $180,000 on the Company’s consolidated balance sheet as of July 31, 2010.

     During the nine month period ended July 31, 2010, Amersham made principal payments of $375,000, repaying its senior secured loan in full, including all accrued interest.

     During the nine month period ended July 31, 2010, SP made principal payments of approximately $151,000, on its first lien loan. The balance of the first lien loan as of July 31, 2010, was approximately $750,000.

     During the nine month period ended July 31, 2010, Total Safety made principal payments of approximately $24,000 on its first lien loan. The balance of the first lien loan as of July 31, 2010 was approximately $949,000.

     During the nine month period ended July 31, 2010, the Company received approximately $80,000 in principal payments on the term loan provided to Storage Canada. The balance of the term loan at July 31, 2010 was approximately $1.0 million.

     During the nine month period ended July 31, 2010, Innovative Brands made principal payments of approximately $10.4 million on its term loan, repaying the term loan in full including all accrued interest.

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     During the nine month period ended July 31, 2010, the Company sold the remaining 666,667 shares of Phoenix Coal common stock. The total amount received from the sale net of commission was approximately $295,000, resulting in a realized loss of approximately $205,000.

     During the nine month period ended July 31, 2010, Henry Company made principal payments of approximately $1.7 million and $2.0 million on its term loan A and term loan B, respectively, repaying the term loans in full including all accrued interest.

     On July 31, 2009, the Company sponsored U.S. Gas in its acquisition of ESPI and provided a $10.0 million limited guarantee and cash collateral for a short-term $4.0 million letter of credit for U.S. Gas. For sponsoring and providing this credit support, the Company has earned one-time fee income of approximately $1.2 million and will be recognizing an additional $1.6 million in fee income over the life of the guarantee. As of July 31, 2010, the cash collateral has been released as the letter of credit has expired.

     During the quarter ended January 31, 2010, the Valuation Committee increased the fair value of the Company’s investments in Dakota Growers common stock by approximately $2.4 million and preferred stock by approximately $2.6 million, Octagon equity interest by $1.0 million, Summit common stock by $2.0 million, Velocitius equity interest by $1.0 million, and LHD Europe series A common stock by approximately $166,000 and series B common Stock by approximately $58,000. In addition, increases in the cost basis and fair value of the loans to GDC, Custom Alloy, SP, Marine, Turf, BP, Summit, and U.S. Gas and the Marine and Vitality preferred stock were due to the capitalization of payment in kind (“PIK”) interest/dividends totaling $1,752,454. The Valuation Committee also increased the fair value of the Ohio Medical preferred stock by approximately $1.6 million due to a PIK distribution which was treated as a return of capital. Also, during the quarter ended January 31, 2010, the undistributed allocation of flow through income from the Company’s equity investment in Octagon increased the cost basis and fair value of this investment by approximately $89,000. The Valuation Committee also decreased the fair value of the Company’s investments in Amersham second lien notes by $2.4 million, BP second lien loan by $1.6 million, Ohio Medical common stock by $1.3 million, SGDA preferred equity interest by approximately $2.4 million, and Vendio preferred stock by approximately $746,000 and common stock by $3,600 during the quarter ended January 31, 2010. The Valuation Committee also determined not to increase the fair values of the Harmony Pharmacy revolving credit facility and the Amersham loan for the accrued PIK interest totaling approximately $186,000.

     During the quarter ended April 30, 2010, the Valuation Committee increased the fair value of the Company’s investments in Dakota Growers common stock by approximately $1.0 million and preferred stock by approximately $1.0 million, Octagon equity interest by $500,000 and Summit common stock by $7.0 million. In addition, increases in the cost basis and fair value of the loans to GDC, Custom Alloy, SP, Marine, Turf, BP, Summit, and U.S. Gas and the Marine preferred stock were due to the capitalization of payment in kind (“PIK”) interest/dividends totaling $1,343,814. The Valuation Committee also increased the fair value of the Ohio Medical preferred stock by approximately $1.7 million due to a PIK distribution which was treated as a return of capital. Also, during the quarter ended April 30, 2010, the undistributed allocation of flow through income from the Company’s equity investment in Octagon increased the cost basis and fair value of this investment by approximately $62,000. The Valuation Committee also decreased the fair value of the Company’s investments in Velocitius equity interest by $600,000 and Vendio preferred stock by approximately $1.1 million and common stock by $1,900 during the quarter ended April 30, 2010. The Valuation Committee also determined not to increase the fair values of the Harmony Pharmacy revolving credit facility and the Amersham loan for the accrued PIK interest totaling approximately $188,000.

     During the quarter ended July 31, 2010, the Valuation Committee increased the fair value of the Company’s investments in PreVisor, Inc. common stock by 3.4 million. In addition, increases in the cost basis and fair value of the loans to GDC, Custom Alloy, SP, Marine, Turf, BP, Summit, and U.S. Gas and the Marine preferred stock were due to the capitalization of payment in kind (“PIK”) interest/dividends totaling $1,145,719. The Valuation Committee also increased the fair value of the Ohio Medical preferred stock by approximately $1.7 million due to a PIK distribution which was treated as a return of capital. Also, during the quarter ended

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July 31, 2010, the undistributed allocation of flow through income from the Company’s equity investment in Octagon increased the cost basis and fair value of this investment by approximately $108,000. The Valuation Committee also decreased the fair value of the Company’s investments in BP second lien loan by approximately $5.2 million, MVC Automotive equity interest by $4.4 million, Security Holdings equity interest by approximately $6.4 million, Ohio Medical common stock by $3.7 million, and GDC senior subordinated loan by approximately $1.6 million during the quarter ended July 31, 2010. The Valuation Committee also determined not to increase the fair values of the Harmony Pharmacy revolving credit facility and the Amersham loan for the accrued PIK interest totaling approximately $193,000.

     During the nine month period ended July 31, 2010, the Valuation Committee increased the fair value of the Company’s investments in Dakota Growers common stock by approximately $3.4 million and preferred stock by approximately $3.6 million, Octagon equity interest by $1.5 million, Summit common stock by $9.0 million, Velocitius equity interest by $400,000, PreVisor common stock by $3.4 million, and LHD Europe series A common stock by approximately $166,000 and series B common Stock by approximately $58,000. In addition, increases in the cost basis and fair value of the loans to GDC, Custom Alloy, SP, Marine, Turf, BP, Summit, and U.S. Gas and the Marine and Vitality preferred stock were due to the capitalization of payment in kind (“PIK”) interest/dividends totaling $4,241,987. The Valuation Committee also increased the fair value of the Ohio Medical preferred stock by approximately $5.0 million due to PIK distributions which were treated as a return of capital. Also, during the nine month period ended July 31, 2010, the undistributed allocation of flow through income from the Company’s equity investment in Octagon increased the cost basis and fair value of this investment by approximately $259,000. The Valuation Committee also decreased the fair value of the Company’s investments in Amersham second lien notes by $2.4 million, BP second lien loan by $6.8 million, Ohio Medical common stock by $5.0 million, SGDA preferred equity interest by approximately $2.4 million, MVC Automotive equity interest by $4.4 million, Security Holdings equity interest by approximately $6.4 million, GDC senior subordinated loan by approximately $1.6 million and Vendio preferred stock by approximately $1.9 million and common stock by $5,500 during the nine month period ended July 31, 2010. The Valuation Committee also determined not to increase the fair values of the Harmony Pharmacy revolving credit facility and the Amersham loan for the accrued PIK interest totaling approximately $567,000.

     At July 31, 2010, the fair value of all portfolio investments, exclusive of short-term securities, was $422.2 million with a cost basis of $376.3 million. At July 31, 2010, the fair value and cost basis of portfolio investments of the Legacy Investments was $10.8 million and $42.3 million, respectively, and the fair value and cost basis of portfolio investments made by the Company’s current management team was $411.4 million and $334.0 million, respectively. At October 31, 2009, the fair value of all portfolio investments, exclusive of short-term securities, was $502.8 million, with a cost basis of $422.8 million. At October 31, 2009, the fair value and cost basis of the Legacy Investments was $15.3 million and $48.9 million, respectively, and the fair value and cost basis of portfolio investments made by the Company’s current management team was $487.5 million and $373.9 million, respectively.

For the Fiscal Year Ended October 31, 2009

     During the fiscal year ended October 31, 2009, the Company made six follow-on investments in four existing portfolio companies, committing capital totaling $6.3 million. The Company invested $3.4 million in Harmony Pharmacy in the form of three demand notes, a $700,000 demand note on November 4, 2008, a $2.2 million demand note on March 3, 2009 and a $500,000 demand note on September 1, 2009. The demand notes have an annual interest rate of 10% with the accrued interest being reserved against due to collectibility issues. On June 23, 2009, the Company invested $1.5 million in SGDA Europe in the form of a senior secured loan. The loan has an annual interest rate of 10% and a maturity date of June 23, 2012. On July 14, 2009 and September 1, 2009, the Company invested a combined $375,000 in Amersham in the form of a senior secured loan bearing annual interest of 6% and maturing on December 31, 2009. The Company also made an equity investment of approximately $1.0 million in MVC Partners during the fiscal year ended October 31, 2009.

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     At October 31, 2008, the balance of the revolving credit facility provided to Octagon was $650,000. Net repayments during the fiscal year ended October 31, 2009 were $650,000. There was no amount outstanding as of October 31, 2009.

     At October 31, 2008, the balance of the secured revolving note provided to Marine was $700,000. Net borrowings during the fiscal year ended October 31, 2009 were $200,000 resulting in a balance of $900,000 at such date.

     At October 31, 2007, the balance of the revolving senior credit facility provided to U.S. Gas was approximately $85,000. During the fiscal year ended October 31, 2008, U.S. Gas entered into a swap agreement which locked in a portion of the senior credit facility with an annual rate of LIBOR plus 6% for a period of two years. This portion of the senior credit facility, in connection to the swap agreement, was approximately $571,000 at October 31, 2008. Net repayments for this portion of the credit facility were approximately $571,000, resulting in no balance outstanding at October 22, 2009. The balance of the remaining portion of the senior credit facility at October 31, 2008 was approximately $4.4 million. Net repayments on this portion of the senior credit facility, which were borrowed at an annual rate of Prime plus 4.5%, were approximately $4.4 million, resulting in no balance outstanding at October 22, 2009. On October 22, 2009, the Company participated the revolving credit facility to another lender. The Company agreed to guarantee the $10 million credit facility under certain circumstances related to an event of default.

     During the fiscal year ended October 31, 2009, the Company received approximately $106,000 in principal payments on the term loan provided to Storage Canada. The balance of the term loan at October 31, 2009 was approximately $1.1 million.

     During the fiscal year ended October 31, 2009, the Company received principal payments of approximately $2.6 million on the term loan provided to Innovative Brands. The Company also received a loan amendment fee of approximately $57,000. The interest rate on the term loan was increased to 15.5% from 11.75%. The balance of the term loan as of October 31, 2009 was approximately $10.4 million.

     On December 31, 2008, the Company received a quarterly principal payment from BP on term loan A of $146,250. During the fiscal year ended October 31, 2009, the interest rates increased on term loan A to LIBOR plus 5.75% or Prime Rate plus 4.75%, on term loan B to LIBOR plus 8.75% or Prime Rate plus 7.75%, and on the second lien loan to 16.5%. The balance of term loan A as of October 31, 2009 was approximately $2.0 million.

     On December 31, 2008, March 31, 2009, June 30, 2009, and September 30, 2009, Total Safety made principal payments of $2,500 on each date on its first lien loan. The balance of the first lien loan as of October 31, 2009 was $972,500.

     During the fiscal year ended October 31, 2009, SP made principal payments totaling approximately $96,000 on its first lien loan. The balance of the first lien loan as of October 31, 2009, was approximately $901,000.

     On December 31, 2008, Henry Company made a principal payment of approximately $127,000 on its term loan A. The balance of term loan A as of October 31, 2009 was approximately $1.7 million.

     On March 11, 2009 and April 30, 2009, TerraMark made principal payments of $300,000 and $500,000 on its senior secured loan. On July 17, 2009, TerraMark repaid its senior secured loan in full including all accrued interest. The total amount received was approximately $715,000.

     On July 31, 2009, the Company sponsored U.S. Gas in its acquisition of ESPI and provided a $10.0 million limited guarantee and cash collateral for a short-term $4.0 million letter of credit for U.S. Gas. For sponsoring and providing this credit support, the Company has earned one-time fee income of approximately $1.2 million

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and will be recognizing $1.0 million in fee income over the life of the guarantee. As of October 31, 2009, the cash collateral has been released as the letter of credit has expired.

     On September 30, 2009, Marine made a principal payment of $625,000 on its senior subordinated loan. The balance of the loan as of October 31, 2009 was approximately $10.8 million.

     During the fiscal year ended October 31, 2009, Endymion was determined to no longer be an operating company. Subsequent to this determination, the Company realized a loss of $7.0 million and removed the investment from its books.

     During the fiscal year ended October 31, 2009, the Company realized a loss on Timberland of approximately $18.1 million. The Company received no proceeds from the company and Timberland has been removed from the Company’s portfolio.

     During the fiscal year ended October 31, 2009, the Valuation Committee increased the fair value of the Company’s investments in U.S. Gas preferred stock by $55.2 million, SGDA preferred equity interest by $500,000, Tekers common stock by $615,000, Velocitius equity interest by $2.2 million, Vestal common stock by $650,000, MVC Automotive equity interest by $5.0 million, Summit common stock by $5.0 million, Vitality common stock and warrants by $260,300 and $100,000, respectively, and Dakota Growers common stock by approximately $4.9 million and preferred stock by approximately $5.1 million. In addition, increases in the cost basis and fair value of the loans to GDC, Custom Alloy, SP, Marine, BP, Summit, U.S. Gas, and WBS, and the Vitality and Marine preferred stock were due to the capitalization of payment in kind (“PIK”) interest/dividends totaling $6,354,807. The Valuation Committee also increased the fair value of the Ohio Medical preferred stock by approximately $5.8 million due to a PIK distribution which was treated as a return of capital. Also, during the fiscal year ended October 31, 2009, the undistributed allocation of flow through income from the Company’s equity investment in Octagon increased the cost basis and fair value of this investment by approximately $157,000. The Valuation Committee also decreased the fair value of the Company’s investments in Ohio Medical common stock by $8.1 million, Vendio preferred stock by approximately $2.1 million and common stock by $5,000, Foliofn preferred stock by $2.8 million, PreVisor common stock by $3.1 million, Custom Alloy preferred stock by $22.5 million, Amersham second lien notes by $3.1 million, Turf equity interest by $2.6 million, Harmony Pharmacy common stock by $750,000, MVC Partners equity interest by $16,000, SGDA common stock by $560,000, Security Holdings common equity interest by $18.2 million, HuaMei common stock by $475,000, Timberland senior subordinated loan by approximately $7.3 million and junior revolving line of credit by $1.0 million and BP term loan B by approximately $219,000, term loan A by approximately $255,000 and second lien loan by approximately $1.3 million, during the fiscal year ended October 31, 2009. The Valuation Committee also determined not to increase the fair values of the Harmony Pharmacy revolving credit facility, Timberland senior subordinated loan and the Amersham loan for the accrued PIK interest totaling approximately $1.0 million. During the fiscal year ended October 31, 2009, the Company received a return of capital distribution from Turf of approximately $286,000.

     At October 31, 2009, the fair value of all portfolio investments, exclusive of short-term securities, was $502.8 million with a cost basis of $422.8 million. At October 31, 2009, the fair value and cost basis of portfolio investments of the Legacy Investments was $15.3 million and $48.9 million, respectively, and the fair value and cost basis of portfolio investments made by the Company’s current management team was $487.5 million and $373.9 million, respectively. At October 31, 2008, the fair value of all portfolio investments, exclusive of short-term securities, was $490.8 million, with a cost basis of $445.6 million. At October 31, 2008, the fair value and cost basis of Legacy Investments was $20.2 million and $55.9 million, respectively, and the fair value and cost basis of portfolio investments made by the Company’s current management team was $470.6 million and $389.7 million, respectively.

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Portfolio Companies

     During the nine month period ended July 31, 2010, the Company had investments in the following portfolio companies:

Actelis Networks, Inc.

     Actelis Networks, Inc. (“Actelis”), Fremont, California, a Legacy Investment, provides authentication and access control solutions designed to secure the integrity of e-business in Internet-scale and wireless environments.

     At October 31, 2009 and July 31, 2010, the Company’s investment in Actelis consisted of 150,602 shares of Series C preferred stock at a cost of $5.0 million. The investment has been fair valued at $0.

Amersham Corporation

     Amersham, Louisville, Colorado, is a manufacturer of precision machined components for the aviation, automotive and medical device markets.

     At October 31, 2009, the Company’s investment in Amersham consisted of a $2.5 million note, a $3.1 million note, and a $375,000 senior secured loan. The $2.5 million note is bearing annual interest at 10%. The note has a maturity date of June 29, 2010. The note had a principal face amount and cost basis of $2.5 million at October 31, 2009. The $3.1 million note bears annual interest at 17%, which includes a 3% default interest rate. The interest rate then steps down to 13% for the period July 1, 2010 to June 30, 2012 and steps down again to 12% for the period July 1, 2012 to June 30, 2013. The note has a maturity date of June 30, 2013. The note had a principal face amount and cost basis of $3.9 million at October 31, 2009. The $375,000 note bears annual interest at 9.0% and has a maturity date February 28, 2010. The note had a principal face amount and costs basis of $375,000 at October 31, 2009. At October 31, 2009, the notes had a combined outstanding balance and cost of $6.6 million and a combined fair value of $2.8 million.

     On June 29, 2010, the $2.5 million note matured. Amersham did not repay the note or the accrued interest at the time of maturity. The Company has not been accruing interest on this note since June 29, 2010.

     During the nine month period ended July 31, 2010, Amersham made principal payments of $375,000, repaying its senior secured loan in full, including all accrued interest.

     During the nine month period ended July 31, 2010, the Valuation Committee decreased the combined fair value of the $2.5 million note and the $4.0 million note by approximately $2.4 million to a combined fair value of $0.

     At July 31, 2010, the notes had a combined outstanding balance and cost of $6.5 million and a combined fair value of $0. The increase in the outstanding balance and cost of the loan is due to the capitalization of “payment in kind” interest. The Company’s Valuation Committee determined not to increase the fair value of the investment as a result of the capitalization of the PIK interest. The Company has reserved in full against the interest accrued on the $2.5 million and $4.0 million note.

BP Clothing, LLC

     BP, Pico Rivera, California, is a company that designs, manufactures, markets and distributes Baby Phat^®, a line of women’s clothing. BP operates within the women’s urban apparel market. The urban apparel market is highly fragmented, with a small number of prominent, nationally recognized brands and a large number of small niche players. Baby Phat is a recognized urban apparel brand in the women’s category.

     At October 31, 2009, the Company’s investment in BP consisted of an $18.8 million second lien loan, a $2.0 million term loan A, and a $2.0 million term loan B. The second lien loan bears annual interest at 16.5%. The second lien loan had a $17.5 million principal face amount and was issued at a cost basis of $17.5 million. The second lien loan’s cost basis was subsequently discounted to reflect loan origination fees received. The maturity date of the second lien loan is July 18, 2012. The principal balance is due upon maturity. The term loan A bears annual interest at LIBOR plus 5.75% or Prime Rate plus 4.75%. The term loan B bears annual interest at LIBOR plus 8.75% or Prime Rate plus 7.75%. The interest rate option on the loan assignments is at the

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borrower’s discretion. Both loans mature on July 18, 2011. The combined cost basis and fair value of the investments at October 31, 2009 was $22.6 million and $21.0 million, respectively.

     During the nine month period ended July 31, 2010, the Valuation Committee decreased the fair value of the second lien loan by approximately $6.8 million.

     At July 31, 2010, the loans had a combined outstanding balance of $23.3 million, a cost basis of $23.2 million and a fair value of $14.8 million. The increase in the outstanding balance, cost and fair value of the term loans are due to the amortization of loan origination fees and the increase in the outstanding balance and cost of the second lien loan is due to the capitalization of “payment in kind” interest. These increases were approved by the Company’s Valuation Committee.

Custom Alloy Corporation

     Custom Alloy, High Bridge, New Jersey, manufactures time sensitive and mission critical butt-weld pipe fittings for the natural gas pipeline, power generation, oil/gas refining and extraction, and nuclear generation markets.

     At October 31, 2009, the Company’s investment in Custom Alloy consisted of nine shares of convertible series A preferred stock at a cost and fair value of $44,000, 1,991 shares of convertible series B preferred stock at a cost and fair value of approximately $10.0 million. The unsecured subordinated loan, which bears annual interest at 14% and matures on September 18, 2012, had a cost of $12.4 million and a fair value of $12.6 million.

     At July 31, 2010, the Company’s investment in Custom Alloy consisted of nine shares of convertible series A preferred stock at a cost and fair value of $44,000 and the 1,991 shares of convertible series B preferred stock had a cost and fair value of approximately $10.0 million. The unsecured subordinated loan had an outstanding balance of $13.3 million, a cost of $13.2 million and a fair value of $13.3 million. The increase in the cost basis and fair value of the loan is due to the amortization of loan origination fees and the capitalization of “payment in kind” interest. These increases were approved by the Company’s Valuation Committee.

     Michael Tokarz, Chairman of the Company, and Shivani Khurana, representative of the Company, serve as directors of Custom Alloy.

Dakota Growers Pasta Company, Inc.

     Dakota Growers, Carrington, North Dakota, is the third largest manufacturer of dry pasta in North America and a market leader in private label sales. Dakota Growers and its partners in DNA Dreamfields Company, LLC introduced a new process that is designed to reduce the number of digestible carbohydrates found in traditional pasta products.

     At October 31, 2009, the Company’s investment in Dakota Growers consisted of 1,016,195 shares of common stock with a cost of $5.5 million and a fair value of $15.0 million and 1,065,000 shares of convertible preferred stock with a cost of $10.4 million and a fair value of $15.8 million.

     During the nine month period ended July 31, 2010, the Valuation Committee increased the fair value of the preferred stock by approximately $3.6 million and the common stock by approximately $3.4 million.

     On March 10, 2010, the Company announced that its portfolio company, Dakota Growers had signed a definitive merger agreement with Viterra Inc. (TSX: VT) (“Viterra”), Canada’s leading agri-business that provides premium quality ingredients to leading global food manufacturers, under which Dakota Growers would be acquired by a subsidiary of Viterra for approximately $240 million in cash. Under the terms of the agreement, Viterra would commence a tender offer to acquire all of the outstanding shares of Dakota Growers’ common stock at a price of $18.28 per share resulting in anticipated proceeds of approximately $38.0 million. The acquisition closed shortly after completion of a tender of a majority (50.1%) of the outstanding shares of Dakota Growers common stock, the receipt of various regulatory approvals and the satisfaction of other customary closing conditions and contingencies. On May 3, 2010, the Company converted its 1,065,000 preferred shares of Dakota Growers to 1,065,000 common shares of Dakota Growers. On May 6, 2010, the Company sold its shares in Dakota Growers for approximately $37.9 million, resulting in a realized gain of approximately $22.0 million.

     At July 31, 2010, the Company no longer held an investment in Dakota Growers.

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DPHI, Inc. (formerly DataPlay, Inc.)

     DPHI, Inc. (“DPHI”), Boulder, Colorado, a Legacy Investment, is trying to develop new ways of enabling consumers to record and play digital content.

     At October 31, 2009 and July 31, 2010, the Company’s investment in DPHI consisted of 602,131 shares of Series A-1 preferred stock with a cost of $4.5 million. This investment has been fair valued at $0.

Foliofn, Inc.

     Foliofn, Vienna, Virginia, a Legacy Investment, is a financial services technology company that offers investment solutions to financial services firms and investors.

     At October 31, 2009 and July 31, 2010, the Company’s investment in Foliofn consisted of 5,802,259 shares of Series C preferred stock with a cost of $15.0 million and a fair value of $10.8 million.

     Bruce Shewmaker, an officer of the Company, serves as a director of Foliofn.

GDC Acquisitions, LLC d/b/a JDC Lighting, LLC

     GDC is the holding company of JDC Lighting, LLC (“JDC”). GDC, New York, New York, is a distributor of commercial lighting and electrical products.

     At October 31, 2009, the Company’s investment in GDC consisted of a $3.1 million senior subordinated loan, bearing annual interest at 17% with a maturity date of August 31, 2011. The loan had a principal amount, an outstanding balance and a cost basis of $3.1 million and was fair valued at $3.1 million. The warrant was fair valued at $0.

     During the nine month period ended July 31, 2010, the Valuation Committee decreased the fair value of the senior subordinated loan by approximately $1.6 million.

     At July 31, 2010, the loan had an outstanding balance and cost of $3.2 million. The loan was fair valued at $1.6 million. The warrant was fair valued at $0. The increase in the outstanding balance and cost of the loan is due to the capitalization of “payment in kind” interest. These increases were approved by the Company’s Valuation Committee. The Company has reserved in full against the interest accrued on the senior subordinated note.

Harmony Pharmacy & Health Center, Inc.

     Harmony Pharmacy, Purchase, New York, operates pharmacy and healthcare centers primarily in airports in the United States. Harmony Pharmacy opened their first store in Newark International Airport in March of 2007 and has since opened stores in John F. Kennedy International Airport and San Francisco International Airport.

     At October 31, 2009, the Company’s equity investment in Harmony Pharmacy consisted of 2 million shares of common stock with a cost of $750,000 and a fair value of $0. The revolving credit facility had an outstanding balance of $4.8 million, a cost of $4.8 million, and a fair value of $4.0 million. The credit facility bears annual interest at 10%, matures on December 1, 2009 and has a 0.50% unused fee per annum. The demand notes had an outstanding balance of $6.7 million with a cost and fair value of $6.7 million.

     During the nine month period ended July 31, 2010, the Company loaned $800,000 to Harmony Pharmacy in the form of a demand note. The demand note has an annual interest rate of 10% with the accrued interest being reserved against. As of July 31, 2010, the $800,000 demand note was outstanding.

     During the nine month period ended July 31, 2010, the Company extended the maturity date of the revolving credit facility from April 30, 2010 to December 31, 2010.

     At July 31, 2010, the Company’s equity investment in Harmony Pharmacy consisted of 2 million shares of common stock with a cost of $750,000 and a fair value of $0. The revolving credit facility had an outstanding balance of $5.1 million, a cost of $5.1 million, and a fair value of $4.0 million. The demand notes had a outstanding balance, cost and fair value of $7.5 million. The increase in the outstanding balance and cost basis of the revolving credit facility is due to the capitalization of “payment in kind” interest. The Company’s Valuation Committee determined not to increase the fair value of the investment as a result of the capitalization

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of the PIK interest. The Company has reserved in full against the interest accrued on the revolving credit facility and the demand notes.

     Michael Tokarz, Chairman of the Company, serves as a director of Harmony Pharmacy.

Henry Company

     Henry Company, Huntington Park, California, is a manufacturer and distributor of building products and specialty chemicals.

     At October 31, 2009, the Company’s investment in Henry Company consisted of $3.7 million in loan assignments. The $1.7 million term loan A bears annual interest at LIBOR plus 3.5% and matures on April 6, 2011. The $2.0 million term loan B bears annual interest at LIBOR plus 7.75% and also matures on April 6, 2011.

     During the nine month period ended July 31, 2010, Henry Company made principal payments of approximately $1.7 million and $2.0 million on its term loan A and term loan B, respectively, repaying the term loans in full including all accrued interest.

     At July 31, 2010, the Company no longer held an investment in Henry.

HuaMei Capital Company, Inc.

     HuaMei, San Francisco, California, is a Chinese-American, cross border investment bank and advisory company.

     At October 31, 2009 and July 31, 2010, the Company’s investment in HuaMei consisted of 500 shares of common stock with a cost of $2.0 million and fair value of $1.5 million.

     Michael Tokarz, Chairman of the Company, serves as a director of HuaMei.

Innovative Brands, LLC

     Innovative Brands, Phoenix, Arizona, is a consumer product company that manufactures and distributes personal care products.

     At October 31, 2009, the Company’s investment in Innovative Brands consisted of a $10.4 million loan assignment. The $10.4 million term loan bears annual interest at 15.5% and matures on September 25, 2011. The loan had a cost basis and fair value of $10.4 million as of October 31, 2009.

     During the nine month period ended July 31, 2010, Innovative Brands made principal payments of approximately $10.4 million on its term loan, repaying the term loan in full including all accrued interest.

     At July 31, 2010, the Company no longer held an investment in Innovative.

Integrated Packaging Corporation

     IPC, New Brunswick, New Jersey, is a manufacturer of corrugated boxes and packaging material.

     On April 2, 2010, the Company made an investment in IPC in the form of a warrant. The Company received the warrant in exchange for services provided to a new investor in IPC.

     At July 31, 2010, the Company’s investment in IPC had no cost basis and has been fair valued at $0.

LHD Europe Holding Inc.

     LHD Europe, incorporated in Delaware, processes and markets dispensed and non-dispensed juices and frozen concentrate liquid coffee to the foodservice industry in Europe.

     On December 28, 2009, the Company sold the North American assets of Vitality. Prior to the sale of Vitality, Vitality’s European operations (which were not acquired by the buyer) were distributed to Vitality’s shareholders on a pro-rata basis. The Company received 960 shares of Series A common stock and 334 shares of convertible Series B common stock in LHD Europe as part of this transaction. These assets included the assets associated with the joint venture with Juice House.

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     On January 21, 2010, the Company sold the common stock of LHD Europe to Juice House, Inc. As of July 31, 2010, the proceeds of the sale of LHD Europe have not been distributed by Juice House, Inc. and thus LHD Europe remains an investment of the Company.

     During the nine month period ended July 31, 2010, the Valuation Committee increased the fair value of the convertible Series A common stock by approximately $166,000 and the convertible Series B common stock by approximately $58,000.

     At July 31, 2010, the convertible Series A common stock had a cost basis of approximately $166,000 and a fair value of approximately $332,000 and the convertible Series B common stock had a cost basis of approximately $59,000 and a fair value of approximately $118,000.

     Peter Seidenberg, Chief Financial Officer of the Company, serves as a director of LHD Europe.

Lockorder Limited (formerly Safestone Technologies PLC)

     Lockorder, Old Amersham, United Kingdom, a Legacy Investment, provides organizations with technology designed to secure access controls, enforcing compliance with security policies and enabling effective management of corporate IT and e-business infrastructure.

     At October 31, 2009 and July 31, 2010, the Company’s investment in Lockorder consisted of 21,064 shares of common stock with a cost of $2.0 million. The investment has been fair valued at $0 by the Company’s Valuation Committee.

Mainstream Data, Inc.

     Mainstream Data, Inc. (“Mainstream”), Salt Lake City, Utah, a Legacy Investment, builds and operates satellite, internet and wireless broadcast networks for information companies. Mainstream networks deliver text news, streaming stock quotations and digital images to subscribers around the world.

     At October 31, 2009 and July 31, 2010, the Company’s investment in Mainstream consisted of 5,786 shares of common stock with a cost of $3.75 million. The investment has been fair valued at $0.

Marine Exhibition Corporation

     Marine, Miami, Florida, owns and operates the Miami Seaquarium. The Miami Seaquarium is a family-oriented entertainment park.

     At October 31, 2009, the Company’s investment in Marine consisted of a senior secured loan, a secured revolving note, and 2,000 shares of preferred stock. The senior secured loan had an outstanding balance of $10.8 million and a cost of $10.7 million. The senior secured loan bears annual interest at 11% and matures on June 30, 2013. The senior secured loan was fair valued at $10.8 million. The secured revolving note had an outstanding balance, cost and fair value of $900,000. The secured revolving note bears interest at LIBOR plus 1%, has an unused fee of .50% per annum and matures on June 30, 2013. The preferred stock was fair valued at $2.6 million. The dividend rate on the preferred stock is 12% per annum.

     On December 31, 2009 and April 7, 2010, Marine made principal payments of $625,000 on each date on its senior subordinated loan.

     Net borrowings on the secured revolving note during the nine month period ended July 31, 2010 were $1.1 million.

     At July 31, 2010, the Company’s senior secured loan had an outstanding balance, a cost basis and a fair value of $9.8 million. The secured revolving note had an outstanding balance, cost and fair value of $2.0 million. The preferred stock had a cost and fair value of $2.7 million. The increase in the outstanding balance, cost and fair value of the loan and preferred stock is due to the amortization of loan origination fees and the capitalization of “payment in kind” interest/dividends. These increases were approved by the Company’s Valuation Committee.

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MVC Automotive Group B.V.

     MVC Automotive, an Amsterdam-based holding company, owns and operates twelve Ford, Jaguar, Land Rover, Mazda, and Volvo dealerships located in Austria, Belgium, Czech Republic, and the Netherlands.

     At October 31, 2009, the Company’s investment in MVC Automotive consisted of an equity interest with a cost of $34.7 million and a fair value of $46.5 million. The bridge loan, which bears annual interest at 10% and matures on December 31, 2009, had a cost and fair value of $3.6 million. The guarantees for MVC Automotive were equivalent to approximately $17.4 million at October 31, 2009.

     During the nine month period ended July 31, 2010, the maturity date on the bridge loan was extended to December 31, 2010.

     During the nine month period ended July 31, 2010, the Valuation Committee decreased the fair value of the equity interest by $4.4 million.

     At July 31, 2010, the Company’s investment in MVC Automotive consisted of an equity interest with a cost of $34.7 million and a fair value of $42.1 million. The bridge loan had a cost and fair value of $3.6 million. The mortgage guarantees for MVC Automotive were equivalent to approximately $15.5 million at July 31, 2010. These guarantees were taken into account in the valuation of MVC Automotive.

     Michael Tokarz, Chairman of the Company, and Christopher Sullivan, a representative of the Company, serve as directors of MVC Automotive.

MVC Partners LLC

     MVC Partners, Purchase, New York, a wholly-owned portfolio company, is a private equity firm established primarily to serve as the general partner, managing member or anchor investor of private or other investment vehicles.

     At October 31, 2009 and July 31, 2010, the Company’s equity investment in MVC Partners had a cost basis of approximately $1.4 million and fair value of approximately $1.1 million.

Octagon Credit Investors, LLC

     Octagon, is a New York-based asset management company that manages leveraged loans and high yield bonds through collateralized debt obligations (“CDO”) funds.

     At October 31, 2009, the Company’s investment in Octagon consisted of a term loan with an outstanding balance and a cost basis of $5.0 million, a revolving line of credit with no outstanding balance, and an equity investment with a cost basis of approximately $1.3 million and fair value of approximately $2.7 million. The combined fair value of the investment at October 31, 2009 was $7.7 million. The term loan bears annual interest at LIBOR plus 4.25% and matures on December 31, 2011. The revolving line of credit bears annual interest at LIBOR plus 4.25%, matures on December 31, 2011 and has an unused fee of .50% per annum.

     On June 1, 2010, Octagon made a principal payment of $4.0 million on its term loan.

     During the nine month period ended July 31, 2010, the Valuation Committee increased the fair value of the equity investment by $1.5 million.

     During the nine month period ended July 31, 2010, the cost basis of the equity investment was increased by approximately $259,000 because of an allocation in flow through income.

     At July 31, 2010, the term loan had an outstanding balance of $1.0 million with a cost of approximately $1.0 million. The loan was fair valued at $1.0 million. The increase in cost basis of the loan is due to the amortization of loan origination fees. The increase was approved by the Company’s Valuation Committee. The revolving line of credit did not have an outstanding balance as of July 31, 2010.

     At July 31, 2010, the equity investment had a cost basis of approximately $1.5 million and a fair value of $4.5 million.

Ohio Medical Corporation

     Ohio Medical, Gurnee, Illinois, is a manufacturer and supplier of suction and oxygen therapy products, medical gas equipment, and input devices.

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     At October 31, 2009, the Company’s investment in Ohio Medical consisted of 5,620 shares of common stock with a cost basis and fair value of $17.0 million and $9.1 million, respectively, and 13,227 shares of convertible preferred stock with a cost basis of $30.0 million and a fair value of $40.0 million.

     During the nine month period ended July 31, 2010, the Valuation Committee decreased the fair value of the common stock by $5.0 million.

     At July 31, 2010, the Company’s investment in Ohio Medical consisted of 5,620 shares of common stock with a cost basis and fair value of $17.0 million and $4.1 million, respectively, and 14,878 shares of convertible preferred stock with a cost basis of $30.0 million and a fair value of $45.0 million. The increase in the fair value of the convertible preferred stock of $5.0 million is due to PIK distributions which were treated as a return of capital. This increase was approved by the Company’s Valuation Committee.

     Michael Tokarz, Chairman of the Company, Peter Seidenberg, Chief Financial Officer of the Company, and Jim O’Connor, a representative of the Company, serve as directors of Ohio Medical.

Phoenix Coal Corporation

     Phoenix Coal, Madisonville, Kentucky, is engaged in the acquisition, development, production and sale of bituminous coal reserves and resources located primarily in the Illinois Basin. With offices in Madisonville, Kentucky and Champaign, Illinois, the company is focused on consolidating small and medium-sized coal mining projects and applying proprietary technology to increase efficiency and enhance profit margins.

     During the fiscal year ended October 31, 2008, Phoenix Coal began trading on the Toronto Stock Exchange (TSX: PHC). Consistent with the Company’s valuation procedures, effective June 30, 2008, the Company has been marking this investment to its market price.

     At October 31, 2009, the Company’s investment in Phoenix Coal consisted of 666,667 shares of common stock which had a cost basis of $500,000 and a market value of approximately $148,000.

     During the nine month period ended July 31, 2010, the Company sold the remaining 666,667 shares of Phoenix Coal common stock. The total amount received from the sale net of commission was approximately $295,000, resulting in a realized loss of approximately $205,000. Over the life of the investment, there was a combined realized gain on the sale of Phoenix Coal common stock of approximately $293,000.

     At July 31, 2010, the Company no longer held an investment in Phoenix Coal.

PreVisor, Inc.

     PreVisor, Roswell, Georgia, provides pre-employment testing and assessment solutions and related professional consulting services.

     On May 31, 2006, the Company invested $6.0 million in PreVisor in the form of 9 shares of common stock. Mr. Tokarz, our Chairman and Portfolio Manager, is a minority non-controlling shareholder of PreVisor. Our board of directors, including all of the Independent Directors, approved the transaction (Mr. Tokarz recused himself from making a determination or recommendation on this matter).

     At October 31, 2009, the common stock had a cost basis and fair value of $6.0 million and $7.0 million, respectively.

     During the nine month period ended July 31, 2010, the Valuation Committee increased the fair value of the common stock by $3.4 million.

     At July 31, 2010, the common stock had a cost basis and fair value of $6.0 million and $10.4 million, respectively.

SafeStone Technologies Limited (formerly Safestone Technologies PLC)

     SafeStone Limited, Old Amersham, United Kingdom, a Legacy Investment, provides organizations with technology designed to secure access controls across the extended enterprise, enforcing compliance with security policies and enabling effective management of the corporate IT and e-business infrastructure.

     At October 31, 2009 and July 31, 2010, the Company’s investment in SafeStone Limited consisted of 21,064 shares of common stock with a cost of $2.0 million. The investment has been fair valued at $0 by the Company’s Valuation Committee.

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Security Holdings, B.V.

     Security Holdings is an Amsterdam-based holding company that owns FIMA, a Lithuanian security and engineering solutions company.

     At October 31, 2009, the Company’s investment in Security Holdings had a cost of $28.2 million and a fair value of $10.0 million.

     On March 12, 2010, the Company invested $1.7 million in Security Holdings in the form of equity interest.

     During the nine month period ended July 31, 2010, the Valuation Committee decreased the fair value of the equity interest by $6.4 million.

     At July 31, 2010, the Company’s investment in Security Holdings had a cost of $29.9 million and a fair value of $5.3 million.

     Christopher Sullivan, a representative of the Company, serves as a director of Security Holdings.

SGDA Europe B.V.

     SGDA Europe is an Amsterdam-based holding company that pursues environmental and remediation opportunities in Romania.

     At October 31, 2009, the Company’s equity investment had a cost basis and a fair value of $7.5 million. The senior secured loan, with an annual interest rate of 10% and a maturity date of June 23, 2012, had an outstanding balance, cost and fair value of $1.5 million.

     On March 12, 2010, the Company invested $4.5 million in SGDA Europe in the form of equity interest.

     On March 16, 2010, the Company contributed its common and preferred equity interest in SGDA to SGDA Europe to achieve operating efficiencies. The Company owns 99.99% of the economic ownership in SGDA Europe. The fair value of SGDA Europe’s equity interest increased by approximately $4.2 million and the cost basis was increased by $5.0 million as a result of this cashless transaction. There was no gain or loss to the Company from this transaction.

     At July 31, 2010, the Company’s equity investment had a cost basis of $17.4 million and a fair value of $16.2 million. The senior secured loan had an outstanding balance, cost and fair value of $1.5 million.

     Christopher Sullivan, a representative of the Company, serves as a director of SGDA Europe.

SGDA Sanierungsgesellschaft fur Deponien und Altasten GmbH

     SGDA, Zella-Mehlis, Germany, is a company that is in the business of landfill remediation and revitalization of contaminated soil.

     At October 31, 2009, the Company’s investment in SGDA consisted of a term loan, common equity interest, and preferred equity interest. The term loan had an outstanding balance of $6.2 million with a cost of $6.2 million. The term loan bears annual interest at 7.0% and matures on August 31, 2012. The term loan was fair valued at $6.2 million. The common equity interest in SGDA had been fair valued at $1 with a cost basis of approximately $439,000. The preferred equity interest had been fair valued at $6.6 million with a cost basis of $5.0 million.

     During the nine month period ended July 31, 2010, the Valuation Committee determined to decrease the fair value of the Company’s preferred equity interest by $2.4 million.

     On March 16, 2010, the Company contributed its common and preferred equity interest in SGDA to SGDA Europe to achieve operating efficiencies. SGDA Europe is 99.99% owned by the Company. The fair value of SGDA Europe’s equity interest increased by approximately $4.2 million and the cost basis was increased by $5.0 million as a result of this cashless transaction. There was no gain or loss to the Company from this transaction.

     At July 31, 2010, the term loan had an outstanding balance of $6.2 million with a cost of $6.2 million. The term loan was fair valued at $6.2 million.

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SIA Tekers Invest

     Tekers, Riga, Latvia, is a port facility used for the storage and servicing of vehicles.

     At October 31, 2009, the Company’s investment in Tekers consisted of 68,800 shares of common stock with a cost of $2.3 million and a fair value of $3.8 million. The Company guaranteed a 1.4 million Euro mortgage for Tekers. The guarantee was equivalent to approximately $2.1 million at October 31, 2009 for Tekers.

     At July 31, 2010, the Company’s investment in Tekers consisted of 68,800 shares of common stock with a cost of $2.3 million and a fair value of $3.8 million. The guarantee for Tekers was equivalent to approximately $1.8 million at July 31, 2010. These guarantees were taken into account in the valuation of Tekers.

Sonexis, Inc.

     Sonexis, Inc. (“Sonexis”), Tewksbury, Massachusetts, a Legacy Investment, is the developer of a new kind of conferencing solution — Sonexis ConferenceManager — a modular platform that is designed to support a breadth of audio and web conferencing functionality to deliver rich media conferencing.

     At October 31, 2009 and July 31, 2010, the Company’s investment in Sonexis consisted of 131,615 shares of common stock with a cost of $10.0 million. The investment has been fair valued at $0.

SP Industries, Inc.

     SP, Warminster, Pennsylvania, is a designer, manufacturer and marketer of laboratory research and process equipment, glassware and precision glass components and configured-to-order manufacturing equipment.

     At October 31, 2009, the Company’s investment in SP consisted of a first lien loan and a second lien loan that had outstanding balances of $901,000 and $25.4 million, respectively, with a cost basis of approximately $656,000 and $25.1 million, respectively. The first lien loan bears annual interest at LIBOR, with a 2.5% floor, plus 5% and matures on December 28, 2012, and the second lien loan bears annual interest at 15% and matures on December 31, 2013. The first lien loan and second lien loan had fair values of $901,000 and $25.4 million, respectively.

     During the nine month period ended July 31, 2010, SP made principal payments of approximately $151,000, on its first lien loan.

     At July 31, 2010, the first lien loan and the second lien loan had outstanding balances of approximately $750,000 and $26.0 million, respectively, with a cost basis of approximately $596,000 and $25.7 million, respectively. The first lien loan and second loan had fair values of approximately $750,000 and $26.0 million, respectively. The increase in cost and fair value of the second lien loan is due to the amortization of loan origination fees and to the capitalization of “payment in kind” interest. These increases were approved by the Company’s Valuation Committee.

Storage Canada, LLC

     Storage Canada, Omaha, Nebraska, is a real estate company that owns and develops self-storage facilities throughout the U.S. and Canada.

     At October 31, 2009, the Company’s investment in Storage Canada consisted of a term loan with an outstanding balance, cost basis and a fair value of $1.1 million. The borrowing bears annual interest at 8.75% and matures on March 30, 2013. The loan commitment to Storage Canada was not renewed in March 2009.

     During the nine month period ended July 31, 2010, the Company received approximately $80,000 in principal payments on the term loan provided to Storage Canada.

     At July 31, 2010, the Company’s investment in Storage Canada had an outstanding balance of $1.0 million and a cost basis and fair value of $1.0 million.

Summit Research Labs, Inc.

     Summit, Huguenot, New York, is a specialty chemical company that manufactures antiperspirant actives.

     At October 31, 2009, the Company’s investment in Summit consisted of a second lien loan and 800 shares of common stock. The second lien loan bears annual interest at 14% and matures on August 31, 2013. The second lien loan had an outstanding balance of $9.6 million with a cost of $9.5 million. The second lien loan was fair

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valued at $9.6 million. The common stock had been fair valued at $38.0 million with a cost basis of $16.0 million.

     During the nine month period ended July 31, 2010, the Valuation Committee increased the fair value of the common stock by $9.0 million.

     At July 31, 2010, the Company’s second lien loan had an outstanding balance of $10.1 million with a cost of $10.0 million. The second lien loan was fair valued at $10.1 million. The 1,115 shares of common stock were fair valued at $47.0 million and had a cost basis of $16.0 million. The increase in cost and fair value of the loan is due to the amortization of loan origination fees and the capitalization of “payment in kind” interest. These increases were approved by the Company’s Valuation Committee.

     Shivani Khurana, a representative of the Company, serves as a director of Summit.

Total Safety U.S., Inc.

     Total Safety, Houston, Texas, is the leading provider of safety equipment and related services to the refining, petrochemical, and oil exploration and production industries.

     At October 31, 2009, the Company’s investment in Total Safety consisted of a $973,000 first lien loan bearing annual interest at LIBOR plus 2.75% and maturing on December 8, 2012 and a $3.5 million second lien loan bearing annual interest at LIBOR plus 6.5% and maturing on December 8, 2013. The loans had a combined outstanding balance and cost basis of $4.5 million. The loan assignments were fair valued at $4.4 million.

     During the nine month period ended July 31, 2010, Total Safety made principal payments of approximately $24,000 on its first lien loan.

     During the nine month period ended July 31, 2010, the interest rate on the first lien loan was increased to LIBOR, with a 2.0% floor, plus 4.25%.

     At July 31, 2010, the loans had a combined outstanding balance and cost basis of $4.4 million. The loan assignments were fair valued at $4.4 million.

Turf Products, LLC

     Turf, Enfield, Connecticut, is a wholesale distributor of golf course and commercial turf maintenance equipment, golf course irrigation systems and consumer outdoor power equipment.

     At October 31, 2009, the Company’s investment in Turf consisted of a senior subordinated loan, bearing interest at 15% per annum with a maturity date of November 30, 2010, LLC membership interest, and warrants. The senior subordinated loan had an outstanding balance of $8.1 million with a cost of $8.1 million. The loan was fair valued at $8.1 million. The junior revolving note had an outstanding balance, cost, and fair value of $1.0 million. The membership interest had a cost of $3.5 million and a fair value of $3.2 million. The warrants had a cost of $0 and a fair value of $0.

     At July 31, 2010, the mezzanine loan had an outstanding balance, cost basis and a fair value of $8.4 million. The increase in the outstanding balance, cost and fair value of the loan is due to the amortization of loan origination fees and to the capitalization of “payment in kind” interest. These increases were approved by the Company’s Valuation Committee. The junior revolving note had an outstanding balance and fair value of $1.0 million. The membership interest has a cost of $3.5 million and a fair value of $3.2 million. The warrant was fair valued at $0.

     Michael Tokarz, Chairman of the Company, and Puneet Sanan and Shivani Khurana, representatives of the Company, serve as directors of Turf.

U.S. Gas & Electric, Inc.

     U.S. Gas, North Miami Beach, Florida, is a licensed Energy Service Company (“ESCO”) that markets and distributes natural gas to small commercial and residential retail customers in the state of New York.

     At October 31, 2009, the second lien loan had an outstanding balance of $8.3 million with a cost of $8.1 million and a fair value of $8.3 million. The second lien loan bears annual interest at 14% and matures on July 26, 2012. The 32,200 shares of convertible Series I preferred stock had a fair value of $58.9 million and a cost

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of $500,000, and the convertible Series J preferred stock had a fair value of $1.9 million and a cost of $0. The guarantees for U.S. Gas at October 31, 2009, totaled $20.0 million. These guarantees were taken into account in the valuation of U.S. Gas.

     On July 31, 2009, the Company sponsored U.S. Gas in its acquisition of ESPI and provided a $10.0 million limited guarantee and cash collateral for a short-term $4.0 million letter of credit for U.S. Gas. The cash collateral has since been released as the letter of credit has expired.

     On March 31, 2010, U.S. Gas refinanced its senior credit facility with another lender. As a result of the refinancing, the $10 million guarantee to Amzak Capital Management, LLC for the senior credit facility has been released. At July 31, 2010, the revolving senior credit facility was no longer a commitment of the Company.

     At July 31, 2010, the second lien loan had an outstanding balance of $8.6 million with a cost of $8.5 million and a fair value of $8.6 million. The increases in the outstanding balance, cost and fair value of the loan are due to the amortization of loan origination fees and the capitalization of “payment in kind” interest. These increases were approved by the Company’s Valuation Committee. The convertible Series I preferred stock had a fair value of $58.9 million and a cost of $500,000, and the convertible Series J preferred stock had a fair value of $1.9 million and a cost of $0. The guarantee for U.S. Gas at July 31, 2010, was $10 million. This guarantee was taken into account in the valuation of U.S. Gas.

     Puneet Sanan and Shivani Khurana, representatives of the Company, serve as Chairman and director, respectively, of U.S. Gas.

Velocitius B.V.

     Velocitius, a Netherlands based holding company, manages wind farms based in Germany through operating subsidiaries.

     At October 31, 2009, the equity investment in Velocitius had a cost of $11.4 million and a fair value of $23.2 million. There was no amount outstanding on Line II, which expired on April 30, 2010 and bears annual interest at 8%.

     During the nine month period ended July 31, 2010, the Valuation Committee increased the fair value of the Company’s equity investment by $400,000.

     At July 31, 2010, the equity investment in Velocitius had a cost of $11.4 million and a fair value of $23.6 million.

     Bruce Shewmaker, an officer of the Company, serves as a director of Velocitius.

Vendio Services, Inc.

     Vendio, San Bruno, California, a Legacy Investment, offers small businesses and entrepreneurs resources to build Internet sales channels by providing software solutions designed to help these merchants efficiently market, sell and distribute their products.

     At October 31, 2009, the Company’s investments in Vendio consisted of 10,476 shares of common stock and 6,443,188 shares of Series A preferred stock at a total cost of $6.6 million. The investments were fair valued at $4.5 million, $9,687 for the common stock and approximately $4.5 million for the Series A preferred stock.

     During the nine month period ended July 31, 2010, the Valuation Committee decreased the fair value of the preferred stock by approximately $1.9 million and the common stock by $5,500.

     On July 2, 2010, the Company sold the common stock and preferred stock of Vendio. The amount received from the sale of the 10,476 common shares was approximately $2,900 and for the 6,443,188 preferred shares was approximately $2.9 million, resulting in a realized loss of approximately $3.5 million, including proceeds held in escrow. As part of this transaction, there was approximately $337,000 deposited in an escrow account subject to a reduction over an eighteen month period. This escrow is valued at approximately $180,000 on the Company’s consolidated balance sheet as of July 31, 2010.

     At July 31, 2010, the Company no longer held an investment in Vendio.

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Vestal Manufacturing Enterprises, Inc.

     Vestal, Sweetwater, Tennessee, is a market leader for steel fabricated products to brick and masonry segments of the construction industry. Vestal manufactures and sells both cast iron and fabricated steel specialty products used in the construction of single-family homes.

     At October 31, 2009 and July 31, 2010, the senior subordinated promissory note, which bears annual interest at 12% and matures on April 29, 2011, had an outstanding balance, cost, and fair value of $600,000. The 81,000 shares of common stock of Vestal that had a cost basis of $1.9 million were fair valued at $1.6 million.

     Bruce Shewmaker and Scott Schuenke, officers of the Company, serve as directors of Vestal.

Vitality Foodservice, Inc.

     Vitality, Tampa, Florida, is a market leader in the processing and marketing of dispensed and non-dispensed juices and frozen concentrate liquid coffee to the foodservice industry. With an installed base of over 42,000 dispensers worldwide, Vitality sells its frozen concentrate through a network of over 350 distributors to such market niches as institutional foodservice, including schools, hospitals, cruise ships, hotels and restaurants.

     At October 31, 2009, the investment in Vitality consisted of 556,472 shares of common stock at a cost of $5.6 million and 1,000,000 shares of Series A convertible preferred stock at a cost of $11.0 million. The convertible preferred stock has a dividend rate of 13% per annum. The common stock, Series A convertible preferred stock, and warrants were fair valued at $10.1 million, $13.9 million and $3.8 million, respectively.

     On December 29, 2009, the Company sold the common stock, preferred stock and warrants of Vitality. The amount received from the sale of the 556,472 common shares was approximately $10.0 million, for the 1 million preferred shares was approximately $14.0 million, and for the 1 million warrants were approximately $3.8 million. As part of this transaction, there was approximately $2.9 million deposited in an escrow account subject to a reduction over a three year period in accordance with a specified schedule. On March 9, 2010, the Company received its first scheduled disbursement from the Vitality escrow totaling approximately $522,000. There were no claims against the escrow so 100% of the expected proceeds of the first scheduled disbursement were released. At the same time, the Company received its portion of a working capital adjustment paid to Vitality. The Company’s share of the proceeds from the working capital adjustment totaled approximately $471,000 and was recorded as additional long-term capital gain. The total proceeds received from the escrow disbursement and working capital adjustment was approximately $993,000. The value of the escrow was increased by $150,000 by the Valuation Committee during the nine month period ended July 31, 2010. This escrow is currently valued at approximately $1.9 million on the Company’s consolidated balance sheet as of July 31, 2010. Total amount received from the sale as of July 31, 2010 was approximately $30.6 million resulting in a realized gain of approximately $13.9 million, which was treated as a long-term capital gain.

     At July 31, 2010, the Company no longer held an investment in Vitality.

WBS Carbons Acquisitions Corp.

     WBS, Middletown, New York, is a manufacturer of antiperspirant actives and water treatment chemicals.

     At October 31, 2009 and July 31, 2010, the bridge loan had an outstanding balance, cost and fair value of $1.8 million. The bridge loan bears annual interest at 6% and matures on December 30, 2011.

Liquidity and Capital Resources

     At July 31, 2010, the Company had investments in portfolio companies totaling $422.2 million. Also, at July 31, 2010, the Company had cash equivalents totaling approximately $59.3 million. The Company considers all money market and other cash investments purchased with an original maturity of less than three months to be cash equivalents. U.S. government securities and cash equivalents are highly liquid.

     During the nine month period ended July 31, 2010, the Company obtained one new investment in IPC in the form of a warrant. The Company received the warrant solely for services provided to a new investor in IPC.

     During the nine month period ended July 31, 2010, the Company made three follow-on investments in existing portfolio companies committing capital totaling $7.0 million. On January 4, 2010, the Company loaned

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$800,000 to Harmony Pharmacy in the form of a demand note. The demand note has an annual interest rate of 10% with the accrued interest being reserved against. As of July 31, 2010, the $800,000 demand note was outstanding. On March 12, 2010, the Company invested $4.5 million and $1.7 million in SGDA Europe and Security Holdings, respectively, in the form of additional equity interests.

     Current balance sheet resources, which include the additional cash resources from Credit Facility I, are believed to be sufficient to finance current commitments. Current commitments include:

     Commitments to/for Portfolio Companies:

     At July 31, 2010, the Company’s existing commitments to portfolio companies consisted of the following:

Commitments of MVC Capital, Inc.

Portfolio Company	Amount Committed	Amount Funded at July 31, 2010
Marine Revolving Loan Facility	$2.0 million	$2.0 million
Octagon Revolving Credit Facility	$7.0 million	—
Harmony Pharmacy Revolving Credit Facility	$4.0 million	$4.0 million
Tekers Guarantee	$1.8 million	—
MVC Automotive Guarantee	$8.5 million	—
MVC Automotive Guarantee	$5.2 million	—
Turf Junior Revolver	$1.0 million	$1.0 million
MVC Automotive Guarantee	$1.8 million	—
U.S. Gas Guarantee	$10.0 million	—
Total	$41.3 million	$7.0 million

     On June 30, 2005, the Company pledged its common stock of Ohio Medical to Guggenheim to collateralize a loan made by Guggenheim to Ohio Medical.

     On July 11, 2006, the Company provided Marine a $2.0 million secured revolving loan facility. The revolving loan facility bears annual interest at LIBOR plus 1%. The Company also receives a fee of 0.50% of the unused portion of the revolving loan facility. As of October 31, 2009, the outstanding balance of the secured revolving loan facility was $900,000. Net borrowings during the nine month period ended July 31, 2010 were $1.1 million, resulting in a balance of $2.0 million at such date.

     On October 12, 2006, the Company provided a $12.0 million revolving credit facility to Octagon in replacement of the senior secured credit facility provided on May 7, 2004. This credit facility expires on December 31, 2011. The credit facility bears annual interest at LIBOR plus 4.25%. The Company receives a 0.50% unused facility fee on an annual basis and a 0.25% servicing fee on an annual basis for maintaining the credit facility. On February 12, 2009, the commitment amount of the revolving credit facility was reduced to $7.0 million. At October 31, 2009 and July 31, 2010, there was no balance outstanding.

     On January 11, 2007, the Company provided a $4.0 million revolving credit facility to Harmony Pharmacy. The credit facility bears annual interest at 10%. The Company also receives a fee of 0.50% on the unused portion of the loan. The maturity date of the revolving credit facility was extended to December 31, 2010. At October 31, 2009 and July 31, 2010, the outstanding balance of the revolving credit facility was $4.0 million.

     On May 1, 2007, the Company provided Velocitius a $650,000 revolving line of credit. The revolving line of credit expired on April 30, 2010 and had an annual interest at 8%. At July 31, 2010, the revolving line of credit was no longer a commitment of the Company.

     On July 19, 2007, the Company agreed to guarantee a 1.4 million Euro mortgage for Tekers, equivalent to approximately $1.8 million at July 31, 2010.

     On July 26, 2007, the Company provided a $10.0 million revolving senior credit facility to U.S. Gas. The revolving senior credit facility had an annual interest at LIBOR plus 6% or Prime plus 4.5%, which is at U.S.

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Gas’ discretion. The balance of the senior credit facility at October 31, 2008 was approximately $12.2 million. Net repayments during fiscal year 2009 on the senior credit facility were approximately $12.2 million, resulting in a zero balance at October 22, 2009. On October 22, 2009, the Company participated the revolving credit facility to Amzak Capital Management, LLC. The Company agreed to guarantee the $10 million credit facility under certain circumstances related to an event of default. On March 31, 2010, U.S. Gas refinanced its senior credit facility with another lender. As a result of the refinancing, the $10 million guarantee to Amzak Capital Management, LLC for the senior credit facility has been released. At October 31, 2009 and July 31, 2010, the revolving senior credit facility was no longer a commitment of the Company.

     On January 15, 2008, the Company agreed to guarantee a 6.5 million Euro mortgage for MVC Automotive, equivalent to approximately $8.5 million at July 31, 2010.

     On January 16, 2008, the Company agreed to support a 4.0 million Euro mortgage for a Ford dealership owned and operated by MVC Automotive (equivalent to approximately $5.2 million at July 31, 2010) through making financing available to the dealership and agreeing under certain circumstances not to reduce its equity stake in MVC Automotive.

     On July 31, 2008, the Company extended a $1.0 million loan to Turf in the form of a secured junior revolving note. The note bears annual interest at 6.0% and expires on May 1, 2011. On July 31, 2008, Turf borrowed $1.0 million from the secured junior revolving note. At October 31, 2009 and July 31, 2010, the outstanding balance of the secured junior revolving note was $1.0 million.

     On September 9, 2008, the Company agreed to guarantee a 35.0 million Czech Republic Koruna (“CZK”) mortgage for MVC Automotive, equivalent to approximately $1.8 million at July 31, 2010.

     On July 31, 2009, the Company sponsored U.S. Gas in its acquisition of ESPI and provided a $10.0 million limited guarantee and cash collateral for a short-term $4.0 million letter of credit for U.S. Gas. For sponsoring and providing this credit support, the Company has earned one-time fee income of approximately $1.2 million and will be recognizing an additional $1.6 million in fee income over the life of the guarantee. As of July 31, 2010, the cash collateral has been released as the letter of credit has expired.

     On March 31, 2010, the Company pledged its Series I and Series J preferred stock of U.S. Gas to Macquarie Energy as collateral for Macquarie Energy’s trade supply credit facility to U.S. Gas.

     Commitments of the Company:

     Effective November 1, 2006, under the terms of the Investment Advisory and Management Agreement with TTG Advisers, which has since been amended and restated (the “Advisory Agreement”) and described in Note 8. “Management”, TTG Advisers is responsible for providing office space to the Company and for the costs associated with providing such office space. The Company’s offices continue to be located on the second floor of 287 Bowman Avenue.

     On April 27, 2006, the Company and MVCFS, as co-borrowers, entered into a four-year, $100 million Credit Facility I, consisting of $50.0 million in term debt and $50.0 million in revolving credit, with Guggenheim as administrative agent for the lenders. At October 31, 2009, there was $50.0 million in term debt and $12.3 million in revolving credit on Credit Facility I outstanding. The Company made net repayments of $12.3 million on the revolving credit portion of Credit Facility I during the period November 1, 2009 to April 13, 2010. On April 13, 2010, the Company renewed Credit Facility I with Guggenheim for three years. Credit Facility I now only consists of a $50.0 million term loan, which will expire on April 27, 2013, at which time the outstanding amount under Credit Facility I will be due and payable. As of July 31, 2010, there was $50.0 million outstanding on Credit Facility I. The proceeds from borrowings made under Credit Facility I are used to fund new and existing portfolio investments and for general corporate purposes. Borrowings under Credit Facility I will bear interest, at the Company’s option, at a floating rate equal to either (i) the LIBOR rate with a

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1.25% LIBOR floor (for one, two, three or six months), plus a spread of 4.5% per annum, or (ii) the Prime rate in effect from time to time, plus a spread of 3.50% per annum. The Company paid a closing fee, legal and other costs associated with obtaining and renewing Credit Facility I. These costs will be amortized evenly over the life of the facility. The prepaid expenses on the Balance Sheet include the unamortized portion of these costs. Borrowings under Credit Facility I will be secured, by among other things, cash, cash equivalents, debt investments, accounts receivable, equipment, instruments, general intangibles, the capital stock of MVCFS, and any proceeds from all the aforementioned items, as well as all other property except for equity investments made by the Company. Please see the Item 3 Risk Factor, “We may be unable to meet our covenant obligations under our credit facility, which could adversely affect our business,” for a risk factor relating to the Company’s credit facility.

     On April 24, 2008, the Company entered into a two-year, $50 million revolving Credit Facility II with Branch Banking and Trust Company (“BB&T”). There was no amount outstanding on Credit Facility II as of October 31, 2009 and on the maturity date of April 24, 2010. Credit Facility II was not renewed. Credit Facility II provided financing to the Company in addition to the Company’s existing Credit Facility I with Guggenheim. Proceeds from borrowings made under Credit Facility II were used to provide the Company with better overall financial flexibility in managing its investment portfolio. Borrowings under Credit Facility II bore interest at LIBOR plus 50 basis points. In addition, the Company was also subject to an annual utilization fee of 25 basis points for the amount of Credit Facility II that was outstanding for more than 33% of the calendar days during each fiscal quarter, as well as an annual fee of 25 basis points of the total amount of the facility. The Company paid a closing fee, legal and other costs associated with this transaction. These costs were amortized evenly over the life of the facility. The prepaid expenses on the Balance Sheet included the unamortized portion of these costs. Borrowings under Credit Facility II were secured by cash, short-term and long-term U.S. Treasury securities and other governmental agency securities whose purchase was approved by BB&T.

     The Company enters into contracts with portfolio companies and other parties that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, the Company has not experienced claims or losses pursuant to these contracts and believes the risk of loss related to indemnifications to be remote.

Subsequent Events

     On September 2, 2010, the limited guarantee provided by the Company to U.S. Gas as a part of the ESPI acquisition was reduced from $10.0 million to $6.5 million.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Historically the Company has invested in small companies, and its investments in these companies are considered speculative in nature. The Company’s investments often include securities that are subject to legal or contractual restrictions on resale that adversely affect the liquidity and marketability of such securities. As a result, the Company is subject to risk of loss which may prevent our shareholders from achieving price appreciation, dividend distributions and return of capital.

     Financial instruments that subjected the Company to concentrations of market risk consisted principally of equity investments, subordinated notes, debt instruments, and escrow receivables which represent approximately 86.4% of the Company’s total assets at July 31, 2010. As discussed in Note 6 “Portfolio Investments,” these investments consist of securities in companies with no readily determinable market values and as such are valued in accordance with the Company’s fair value policies and procedures. The Company’s investment strategy represents a high degree of business and financial risk due to the fact that the investments (other than cash equivalents) are generally illiquid, in small and middle market companies, and include entities with little operating history or entities that possess operations in new or developing industries. These investments, should they become publicly traded, would generally be: (i) subject to restrictions on resale, if they were acquired from the issuer in private placement transactions; and (ii) susceptible to market risk. At this time, the Company’s investments in short-term securities are in 90-day Treasury Bills, which are federally guaranteed securities, or other high quality, highly liquid investments. The Company’s cash balances, if not large enough to be invested in 90-day Treasury Bills or other high quality, highly liquid investments, are swept into designated money market accounts.

     In addition, the following risk factors relate to market risks impacting the Company.

Investing in private companies involves a high degree of risk.

     Our investment portfolio generally consists of loans to, and investments in, private companies. Investments in private businesses involve a high degree of business and financial risk, which can result in substantial losses and accordingly should be considered speculative. There is generally very little publicly available information about the companies in which we invest, and we rely significantly on the due diligence of the members of the investment team to obtain information in connection with our investment decisions.

Our investments in portfolio companies are generally illiquid.

     We generally acquire our investments directly from the issuer in privately negotiated transactions. Most of the investments in our portfolio (other than cash or cash equivalents) are typically subject to restrictions on resale or otherwise have no established trading market. We may exit our investments when the portfolio company has a liquidity event, such as a sale, recapitalization or initial public offering. The illiquidity of our investments may adversely affect our ability to dispose of equity and debt securities at times when it may be otherwise advantageous for us to liquidate such investments. In addition, if we were forced to immediately liquidate some or all of the investments in the portfolio, the proceeds of such liquidation could be significantly less than the current fair value of such investments.

Substantially all of our portfolio investments are recorded at “fair value” and, as a result, there is a degree of uncertainty regarding the carrying values of our portfolio investments.

     Pursuant to the requirements of the 1940 Act, because our portfolio company investments do not have readily ascertainable market values, we record these investments at fair value in accordance with our Valuation Procedures adopted by our board of directors. As permitted by the SEC, the board of directors has delegated the responsibility of making fair value determinations to the Valuation Committee, subject to the board of directors’ supervision and pursuant to the Valuation Procedures.

     At July 31, 2010, approximately 86.4% of our total assets represented portfolio investments recorded at fair value.

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     There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. In determining the fair value of a portfolio investment, the Valuation Committee analyzes, among other factors, the portfolio company’s financial results and projections and publicly traded comparables when available, which may be dependent on general economic conditions. We specifically value each individual investment and record unrealized depreciation for an investment that we believe has become impaired, including where collection of a loan or realization of an equity security is doubtful. Conversely, we will record unrealized appreciation if we have an indication (based on a significant development) that the underlying portfolio company has appreciated in value and, therefore, our equity security has also appreciated in value, where appropriate. Without a readily ascertainable market value and because of the inherent uncertainty of fair valuation, fair value of our investments may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material.

     Pursuant to our Valuation Procedures, our Valuation Committee (which is currently comprised of three Independent Directors) reviews, considers and determines fair valuations on a quarterly basis (or more frequently, if deemed appropriate under the circumstances). Any changes in valuation are recorded in the consolidated statements of operations as “Net change in unrealized appreciation (depreciation) on investments.”

Economic recessions or downturns could impair our portfolio companies and have a material adverse impact on our business, financial condition and results of operations.

     Many of the companies in which we have made or will make investments may be susceptible to economic slowdowns or recessions. An economic slowdown may affect the ability of a company to engage in a liquidity event. These conditions could lead to financial losses in our portfolio and a decrease in our revenues, net income and assets. Through the date of this report, conditions in the public debt and equity markets have been volatile and pricing levels have performed similarly. As a result, depending on market conditions, we could incur substantial realized losses and suffer unrealized losses in future periods, which could have a material adverse impact on our business, financial condition and results of operations. If current market conditions continue, or worsen, it may adversely impact our ability to deploy our investment strategy and achieve our investment objective.

     Our overall business of making private equity investments may be affected by current and future market conditions. The absence of an active mezzanine lending or private equity environment may slow the amount of private equity investment activity generally. As a result, the pace of our investment activity may slow, which could impact our ability to achieve our investment objective. In addition, significant changes in the capital markets could have an effect on the valuations of private companies and on the potential for liquidity events involving such companies. This could affect the amount and timing of any gains realized on our investments and thus have a material adverse impact on our financial condition.

     During the fiscal year ended October 31, 2009, conditions in the public debt and equity markets deteriorated and pricing levels continued to decline. As a result, depending on market conditions, we could incur substantial realized losses and suffer unrealized losses in future periods, which could have a material adverse impact on our business, financial condition and results of operations. In addition, the global financial markets have not fully recovered from the global financial crisis and the economic factors which gave rise to the crisis. The continuation of current global market conditions, uncertainty or further deterioration could result in further declines in the market values of the Company investments. Such declines could also lead to diminished investment opportunities for the Company, prevent the Company from successfully executing its investment strategies or require the Company to dispose of investments at a loss while such adverse market conditions prevail.

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Our borrowers may default on their payments, which may have an effect on our financial performance.

     We may make long-term unsecured, subordinated loans, which may involve a higher degree of repayment risk than conventional secured loans. We primarily invest in companies that may have limited financial resources and that may be unable to obtain financing from traditional sources. In addition, numerous factors may adversely affect a portfolio company’s ability to repay a loan we make to it, including the failure to meet a business plan, a downturn in its industry or operating results, or negative economic conditions. Deterioration in a borrower’s financial condition and prospects may be accompanied by deterioration in any related collateral.

Our investments in mezzanine and other debt securities may involve significant risks.

     Our investment strategy contemplates investments in mezzanine and other debt securities of privately held companies. “Mezzanine” investments typically are structured as subordinated loans (with or without warrants) that carry a fixed rate of interest. We may also make senior secured and other types of loans or debt investments. Our debt investments are typically not rated by any rating agency, but we believe that if such investments were rated, they would be below investment grade quality (rated lower than “Baa3” by Moody’s or lower than “BBB-” by Standard & Poor’s, commonly referred to as “junk bonds”). Loans of below investment grade quality have predominantly speculative characteristics with respect to the borrower’s capacity to pay interest and repay principal. Our debt investments in portfolio companies may thus result in a high level of risk and volatility and/or loss of principal.

We may not realize gains from our equity investments.

     When we invest in mezzanine and senior debt securities, we may acquire warrants or other equity securities as well. We may also invest directly in various equity securities. Our goal is ultimately to dispose of such equity interests and realize gains upon our disposition of such interests. However, the equity interests we receive or invest in may not appreciate in value and, in fact, may decline in value. In addition, the equity securities we receive or invest in may be subject to restrictions on resale during periods in which it would be advantageous to resell. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.

Our investments in small and middle-market privately-held companies are extremely risky and you could lose your entire investment.

     Investments in small and middle-market privately-held companies are subject to a number of significant risks including the following:

• Small and middle-market companies may have limited financial resources and may not be able to repay the loans we make to them. Our strategy includes providing financing to companies that typically do not have capital sources readily available to them. While we believe that this provides an attractive opportunity for us to generate profits, this may make it difficult for the borrowers to repay their loans to us upon maturity.

• Small and middle-market companies typically have narrower product lines and smaller market shares than large companies. Because our target companies are smaller businesses, they may be more vulnerable to competitors’ actions and market conditions, as well as general economic downturns. In addition, smaller companies may face intense competition, including competition from companies with greater financial resources, more extensive development, manufacturing, marketing and other capabilities, and a larger number of qualified managerial and technical personnel.

• There is generally little or no publicly available information about these privately-held companies. There is generally little or no publicly available operating and financial information about privately-held companies. As a result, we rely on our investment professionals to perform due diligence investigations of these privately-held companies, their operations and their prospects. We may not learn all of the material information we need to know regarding these companies through our investigations. It is difficult, if not

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impossible, to protect the Company from the risk of fraud, misrepresentation or poor judgement by our portfolio companies.

• Small and middle-market companies generally have less predictable operating results. We expect that our portfolio companies may have significant variations in their operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, may require substantial additional capital to support their operations, finance expansion or maintain their competitive position, may otherwise have a weak financial position or may be adversely affected by changes in the business cycle. Our portfolio companies may not meet net income, cash flow and other coverage tests typically imposed by their senior lenders.

• Small and middle-market businesses are more likely to be dependent on one or two persons. Typically, the success of a small or middle-market company also depends on the management talents and efforts of one or two persons or a small group of persons. The death, disability or resignation of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us.

• Small and middle-market companies are likely to have greater exposure to economic downturns than larger companies. We expect that our portfolio companies will have fewer resources than larger businesses and an economic downturn may thus more likely have a material adverse effect on them.

• Small and middle-market companies may have limited operating histories. We may make debt or equity investments in new companies that meet our investment criteria. Portfolio companies with limited operating histories are exposed to the operating risks that new businesses face and may be particularly susceptible to, among other risks, market downturns, competitive pressures and the departure of key executive officers.

Investments in foreign debt or equity may involve significant risks in addition to the risks inherent in U.S. investments.

     Our investment strategy has resulted in some investments in debt or equity of foreign companies (subject to applicable limits prescribed by the 1940 Act). Investing in foreign companies can expose us to additional risks not typically associated with investing in U.S. companies. These risks include exchange rates, changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility. A portion of our investments are located in countries that use the euro as their official currency. The USD/euro exchange rate, like foreign exchange rates in general, can be volatile and difficult to predict. This volatility could materially and adversely affect the value of the Company’s shares.

The market for private equity investments can be highly competitive. In some cases, our status as a regulated business development company may hinder our ability to participate in investment opportunities.

     We face competition in our investing activities from private equity funds, other business development companies, investment banks, investment affiliates of large industrial, technology, service and financial companies, small business investment companies, wealthy individuals and foreign investors. As a regulated business development company, we are required to disclose quarterly the name and business description of portfolio companies and the value of any portfolio securities. Many of our competitors are not subject to this disclosure requirement. Our obligation to disclose this information could hinder our ability to invest in certain portfolio companies. Additionally, other regulations, current and future, may make us less attractive as a potential investor to a given portfolio company than a private equity fund not subject to the same regulations. Furthermore, some of our competitors have greater resources than we do. Increased competition would make it

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more difficult for us to purchase or originate investments at attractive prices. As a result of this competition, sometimes we may be precluded from making certain investments.

Complying with the RIC requirements causes us to forego otherwise attractive opportunities.

     In order to qualify as a RIC for U.S. federal income tax purposes, we must satisfy tests concerning the sources of our income, the nature and diversification of our assets and the amounts we distribute to our shareholders. We may be unable to pursue investments that would otherwise be advantageous to us in order to satisfy the source of income or asset diversification requirements for qualification as a RIC. In particular, to qualify as a RIC, at least 50% of our assets must be in the form of cash and cash items, Government securities, securities of other RICs, and other securities that represent not more than 5% of our total assets and not more than 10% of the outstanding voting securities of the issuer. We have from time to time held a significant portion of our assets in the form of securities that exceed 5% of our total assets or more than 10% of the outstanding voting security of an issuer, and compliance with the RIC requirements currently restricts us from making additional investments that represent more than 5% of our total assets or more than 10% of the outstanding voting securities of the issuer. Thus, compliance with the RIC requirements restricts our ability to take advantage of certain investment opportunities believed to be attractive, including potential follow-on investments in certain portfolio companies.

Regulations governing our operation as a business development company affect our ability to, and the way in which we, raise additional capital.

     We are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock or warrants at a price below the then-current net asset value per share of our common stock if our board of directors determines that such sale is in the best interests of the Company and its stockholders, and our stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our board of directors, closely approximates the market value of such securities (less any distributing commission or discount). If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage ownership of our stockholders at that time will decrease, and you might experience dilution.

Our common stock price can be volatile.

     The trading price of our common stock may fluctuate substantially. The price of the common stock may be higher or lower than the price you pay for your shares, depending on many factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include the following:

• Price and volume fluctuations in the overall stock market from time to time;

• Significant volatility in the market price and trading volume of securities of business development companies or other financial services companies;

• Volatility resulting from trading in derivative securities related to our common stock including puts, calls, long-term equity participation securities, or LEAPs, or short trading positions;

• Changes in regulatory policies or tax guidelines with respect to business development companies or RICs;

• Our adherence to applicable regulatory and tax requirements, including the current restriction on our ability to make Non-Diversified Investments;

• Actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the expectations of securities analysts;

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• General economic conditions and trends;

• Loss of a major funding source, which would limit our liquidity and our ability to finance transactions; or

• Departures of key personnel of TTG Advisers.

We are subject to market discount risk.

     As with any stock, the price of our shares will fluctuate with market conditions and other factors. If shares are sold, the price received may be more or less than the original investment. Whether investors will realize gains or losses upon the sale of our shares will not depend directly upon our NAV, but will depend upon the market price of the shares at the time of sale. Since the market price of our shares will be affected by such factors as the relative demand for and supply of the shares in the market, general market and economic conditions and other factors beyond our control, we cannot predict whether the shares will trade at, below or above our NAV. Although our shares, from time to time, have traded at a premium to our NAV, currently, our shares are trading at a discount to NAV, which discount may fluctuate over time.

Our ability to grow depends on our ability to raise capital.

     To fund new investments, we may need to issue periodically equity securities or borrow from financial institutions. Unfavorable economic conditions could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. If we fail to obtain capital to fund our investments, it could limit both our ability to grow our business and our profitability. With certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowing. The amount of leverage that we employ depends on TTG Advisers’ and our board of directors’ assessment of market and other factors at the time of any proposed borrowing. We cannot assure you that we will be able to maintain our current facilities or obtain other lines of credit at all or on terms acceptable to us.

Changes in interest rates may affect our cost of capital and net operating income and our ability to obtain additional financing.

     Because we have borrowed and may continue to borrow money to make investments, our net investment income before net realized and unrealized gains or losses, or net investment income, may be dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds. As a result, there can be no assurance that a significant change in market interest rates would not have a material adverse effect on our net investment income. In periods of declining interest rates, we may have difficulty investing our borrowed capital into investments that offer an appropriate return. In periods of sharply rising interest rates, our cost of funds would increase, which could reduce our net investment income. We may use a combination of long-term and short-term borrowings and equity capital to finance our investing activities. We may utilize our short-term credit facilities as a means to bridge to long-term financing. Our long-term fixed-rate investments are financed primarily with equity and long-term fixed-rate debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Additionally, we cannot assure you that financing will be available on acceptable terms, if at all. Recent turmoil in the credit markets has greatly reduced the availability of debt financing. Deterioration in the credit markets, which could delay our ability to sell certain of our loan investments in a timely manner, could also negatively impact our cash flows.

Our ability to use our capital loss carryforwards may be subject to limitations.

     If we experience a shift in the ownership of our common stock (e.g., if a shareholder acquires 5% or more of our outstanding shares of common stock, or if a shareholder who owns 5% or more of our outstanding shares of

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common stock significantly increases or decreases its investment in the Company), our ability to utilize our capital loss carryforwards to offset future capital gains may be severely limited. Further, in the event that we are deemed to have failed to meet the requirements to qualify as a RIC, our ability to use our capital loss carryforwards could be adversely affected.

We may be unable to meet our covenant obligations under our credit facility, which could adversely affect our business.

     On April 27, 2006, the Company and MVCFS, as co-borrowers, entered into a four-year, $100 million revolving credit facility (“Credit Facility I”) with Guggenheim Corporate Funding, LLC (“Guggenheim”) as administrative agent to the lenders. On April 13, 2010, the Company renewed Credit Facility I with Guggenheim for three years. Credit Facility I now only consists of a $50.0 million term loan with an interest rate of LIBOR plus 450 basis points with a 1.25% LIBOR floor. Credit Facility I contains covenants that we may not be able to meet. If we cannot meet these covenants, events of default would arise, which could result in payment of the applicable indebtedness being accelerated and may limit our ability to execute on our investment strategy. As of July 31, 2010, there was $50.0 million in term debt outstanding under Credit Facility I. Credit Facility I will expire on April 27, 2013, at which time the outstanding amount under Credit Facility I will be due and payable.

     In addition, if we require working capital greater than that provided by Credit Facility I, we may be required to obtain other sources of financing, which may result in increased borrowing costs for the Company and/or additional covenant obligations.

The wars in Iraq and Afghanistan, terrorist attacks, and other acts of violence or war may affect any market for our common stock, impact the businesses in which we invest and harm our operations and our profitability.

     The wars in Iraq and Afghanistan, their aftermath and the continuing occupation of Iraq are likely to have a substantial impact on the U.S. and world economies and securities markets. The nature, scope and duration of the wars and occupation cannot be predicted with any certainty. Furthermore, terrorist attacks may harm our results of operations and your investment. We cannot assure you that there will not be further terrorist attacks against the United States or U.S. businesses. Such attacks and armed conflicts in the United States or elsewhere may impact the businesses in which we invest directly or indirectly, by undermining economic conditions in the United States. Losses resulting from terrorist events are generally uninsurable.

Item 4. Controls and Procedures

(a) As of the end of the period covered by this quarterly report on Form 10-Q, the individual who performs the functions of a Principal Executive Officer (the “CEO”) and the individual who performs the functions of a Principal Financial Officer (the “CFO”) conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended). Based upon this evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective and provide reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

(b) There have been no changes in our internal controls over financial reporting that occurred during the fiscal quarter ended July 31, 2010, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

     We are not subject to any pending legal proceeding, and no such proceedings are known to be contemplated.

Item 1A. Risk Factors

     A description of the risk factors associated with our business is set forth in the “Quantitative and Qualitative Disclosures about Market Risk” section, above.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We had no unregistered sales of equity securities for the nine month period ended July 31, 2010. The following table represents our stock repurchase program for the nine month period ended July 31, 2010.

					Total Number of Shares		Approximate Dollar Value of
	Total Number of Shares		Average Price Paid per		Purchased as Part of Publicly		Shares that May Yet Be
Period	Purchased		Share including commission		Announced Program		Purchased Under the Program
May 1, 2010 - May 31, 2010		—		—		—	$	5,000,000
June 1, 2010 - June 30, 2010		175,000	$	13.09		175,000	$	2,708,461
July 1, 2010 - July 31, 2010		83,000	$	13.03		83,000	$	1,627,035
Total		258,000	$	13.07		258,000	$	1,627,035

     On April 23, 2010, the Company’s Board of Directors approved a share repurchase program authorizing up to $5.0 million in share repurchases. The share repurchase program has no time limit and does not obligate the Company to acquire any specific number of shares and may be discontinued at any time. Under the share repurchase program, shares may be repurchased from time to time at prevailing market prices during the Company’s open trading periods. As of July 31, 2010, there have been 258,000 shares repurchased at an average price of $13.07, including commission, with a total cost of approximately $3.4 million.

Item 3. Defaults Upon Senior Securities

     None.

Item 4. (Removed and Reserved)

Item 5. Other Information

     None.

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Item 6. Exhibits

(a) Exhibits

Exhibit No.	Exhibit
10(a)	JPMorgan Chase Bank, N.A. Account Agreement.
10(b)	Amendment to Asset Account Agreement and General Terms for Accounts and Services by and between JPMorgan Chase Bank, N.A. and MVC Capital, Inc.
31	Rule 13a-14(a) Certifications.
32	Section 1350 Certifications.

Other required Exhibits are included in this Form 10-Q or have been previously filed with the Securities and Exchange Commission (the “SEC”) in the Company’s Registration Statements on Form N-2 (Reg. Nos. 333-147039, 333-119625, 333-125953) or the Company’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as filed with the SEC (File No. 814-00201).

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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed by the undersigned, thereunto duly authorized.

	MVC Capital, Inc.
Date: September 8, 2010	/s/ Michael Tokarz
	Michael Tokarz
	In the capacity of the officer who performs the functions of Principal Executive Officer.
	MVC Capital, Inc.
Date: September 8, 2010	/s/ Peter Seidenberg
	Peter Seidenberg
	In the capacity of the officer who performs the functions of Principal Financial Officer.

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EX-10.(A)

Exhibit 10(a)

COMBINED TERMS AND CONDITIONS

CONTENTS

NOTE — This document contains various account agreements related to deposit, custody, and brokerage services offered at J.P. Morgan. Only those agreements specific to the service requested shall apply.

General Terms for Accounts and Services	1
Deposit Accounts and Services Offered By JPMorgan Chase Bank, N.A.	5
Money Market Deposit Account (“MMDA”) Agreement	5
Checking Account Agreement	6
Certificate of Deposit Agreement	6
Accounts and Services Relating to Assets Held by JPMorgan Chase Bank, N.A. and Affiliated Banks	7
Asset Allocation Advisory Services	7
Asset Account Agreement	7
Agreements for Accounts and Services Offered Through J.P. Morgan Securities Inc.
and J.P. Morgan Entities	12
Brokerage Account Agreement	12
Margin Disclosure Statement	15
Margin Account Agreement	15
Disclosure to Clients in Compliance With FINRA Rule 4370 Regarding Continuity
and Contingency Plans and Emergency Contact Information for J.P. Morgan	17
Risks Of Certain Investments	17
Appendix: Asset Account and Deposit Account — Funds Availability Policy Statement	22
Appendix: Other Banking Services Relating to Accounts	23
Appendix: General Rules and Regulations for Deposit Accounts	24
Appendix: Electronic Fund Transfers	28

GENERAL TERMS FOR ACCOUNTS AND SERVICES

“Account” refers to the account or accounts subject to these General Terms and an additional account agreement. “Accountholder” means the person or entity (also called “I” or “me”) who owns the Account. “You” means JPMCB or, in the case of a product or service furnished by, or Account with, or Obligations owed to another Morgan Affiliate, that Morgan Affiliate. Other definitions of capitalized terms used in these General Terms are found in the Definitions Section.

1. Types of Accounts

The titles under which accounts are opened, the selection of the type of account or opening an account for a minor under various states’ Uniform Transfers or Gifts to Minors Acts (UTMA/UGMA) have important consequences for taxes, control of assets, and wealth and estate planning. Clients should discuss how to structure financial accounts with their own legal or tax adviser. Material provided by J.P. Morgan is not intended to provide, and should not be relied on for, accounting, legal, estate planning or tax advice nor does it provide investment advice unless specifically contracted for.

Individual Accounts

Where only one individual appears on the Application or a signature card as the owner of such account, the Account will be treated as a solely owned account. In the event of the Accountholder’s death or adjudication of incompetence, you have the right to honor checks or other items drawn against the Account until ten days after you receive actual written notice of death or incompetence, and upon such notice, you may restrict access to the Account until my executor, administrator or other representative of my estate provides the appropriate documentation to you, including a death certificate. To the extent and under the circumstances permitted by the laws of the state governing my Account, upon receipt of actual written notice and proof of my death, the balance in my Account will be paid to the person or entity I designate to “pay on death” (“POD”) or whom I designate as a POD payee or beneficiary on my Account’s signature card, Application, or other form provided by you.

Joint Accounts

Unless the signature card or Application provides otherwise, where two or more individuals are designated or appear on a signature card or Application as owners of such Account, then as between them, they will be treated as joint tenants with rights of survivorship. For any joint account where a joint owner has died, you need not release funds in the Account until all legal documents are delivered to you. I will notify you of the death of any joint owner and reimburse you for any tax you may be required to pay by reason of your payment or release of funds in the Account. Certain states also permit married residents to own property as community property or as tenants by the entirety. These forms of ownership have different attributes than ownership as joint tenants with right of survivorship. I must consult my own legal advisor about which type of account is best for me.

Any joint owner may close the Account. You may, at your sole discretion, act upon the instructions of any joint owner, including an instruction to withdraw funds or add a signatory to the Account, without the consent of the other joint owner. However, you are under no obligation to follow such instruction, and may refuse to do so without liability. You also may pay all or any part of the funds in the Account to any of the joint owners upon request of that joint owner or to a court or governmental agency upon receipt of a garnishment order, tax levy or similar legal process identifying any one of the joint owners.

Any Accountholder may grant a security interest in a joint account without the consent of the other owners. All joint owners will be jointly and severally liable for all Obligations, whether or not that particular owner incurred the Obligation or received benefit from a transaction which resulted, directly or indirectly, in such Obligation.

Each joint owner appoints each of the others as such joint owner’s agent and attorney in fact with power to endorse and deposit Items payable to such joint owner in the joint account. If a joint account is established without the signature of the other joint owner, we will hold you harmless for your reliance upon the designation of the other as a joint owner.

If I hold an investment through my Account which is entered into under a separate agreement, for example, an investment in a hedge fund, the agreements governing such investment may impose terms and conditions on investors that are at variance with the characteristics of the type of joint account I have selected. I agree that the terms and conditions in such investment’s governing documents supersede and prevail over this Agreement. However, this Agreement governs any proceeds distributed to the Account as a result of such investment, including, without limitation, liquidation proceeds.

Accounts for Minors

The custodian of an Account opened for a minor under the Uniform Transfers or Gifts to Minors Act controls the Account, but the designated minor is the owner of the funds in the Account. When the minor reaches the age mandated by law, full control of the Account must be turned over to the minor by the custodian. The Social Security number of the minor is to be used for income tax reporting. The gift to the minor is irrevocable.

Deposit Account (“Totten”) Trusts

If a deposit account is established as “in trust for” (“ITF”) or as trustee for a third person without formal trust documents, the Account will be treated as a Totten Trust account or as otherwise required by the laws of the state where the deposit is located.

Transfer on Death Accounts

Securities in an Account designated as “Transfer on Death” (“TOD”) will be held for the benefit of the beneficiaries I designate on the Application. Upon the death of the last surviving Accountholder, ownership of the Securities passes to those beneficiaries, not the deceased Accountholder’s estate. If there are two or more beneficiaries, they will hold as tenants in common. If no beneficiary survives the death of all Account owners, the Securities will be part of the last surviving owner’s estate. TOD Accounts may not be available in all States and are available only for Accounts eligible to hold Securities.

2. My Representations and Warranties

All information provided in the Application or otherwise given to you from time to time is accurate, true and complete.

For individual and joint accounts, the identified Accountholders are the beneficial owners. For entity accounts, beneficial ownership is as I have told you. I will notify you immediately if the beneficial ownership of any Account changes.

If I am a natural person, I represent and warrant that I am of the age of majority according to the law of my place of residence and of the place of my Accounts.

If I establish the Account when acting in a fiduciary capacity, (i) all beneficial interests in the estate, trust or Account for which I am a fiduciary are owned by individuals or by non-profit organizations; and (ii) I am legally empowered to enter into and perform this Agreement in such capacity.

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If the Account is to be maintained in the name of a sole proprietorship, (i) I am the sole owner of the sole proprietorship; (ii) the sole proprietorship is doing business under the name and style of, and at the location, given in the Application; (iii) I will be personally responsible for any debts, deficiencies or overdrafts in the sole proprietorship Account; and (iv) checks drawn on the sole proprietorship’s Account may be debited against any Account I hold, in my individual name or jointly, with you.

For Accounts opened other than by a natural person, the Accountholder (i) has the power to enter into and perform under the Agreement, all necessary actions have been taken and approvals received in accordance with its organizational documents and applicable law and regulation, and it is duly organized and in good standing in the jurisdiction in which it is organized. The persons signing the Application have the authority to bind the Accountholder to the Agreement.

You may rely on these representations and warranties, which are made as of the date of the Agreement and which will continue until the Agreement is terminated.

3. Authorized Instructions

Authorized Persons on my Account are those indicated on my Application, any resolution, or other separate written authorization related to the Account that I deliver to you. I agree to be bound by all instructions that you believe are authorized and to have been given by an Authorized Person, regardless of how those instructions have been transmitted, and no Morgan Affiliate will be liable for any loss, cost, or expense for acting on such instructions. Until I or another Authorized Person has revoked the authority of an Authorized Person in writing, Authorized Persons shall continue to be Authorized Persons. I authorize you to accept instructions by telephone, facsimile transmission, in writing or any other method that we may agree to use but understand that you are not required to accept instructions by any such media.

I agree to be bound by any facsimile or other electronically transmitted signature that you in good faith believe to have been transmitted by me and that such signature will evidence my agreement or consent and will be legally binding, enforceable and the legal equivalent of my handwritten signature.

4. Monitoring Conversations; Electronic Communications

I agree that so long as my Account is open, you may monitor or record conversations and telephone calls (should you elect, in your discretion, to do so) that I have with your employees or agents for the purpose of verifying transactions, quality control, or for other business reasons. I waive any notice other than this provision that our communications shall or may be recorded at any time.

Confidentiality and integrity of messages via email, facsimile, or other electronic media cannot be assured, and electronic media may not always transmit correctly, so I will not assume you have received a message via such media if you do not respond within a reasonable time. I understand that messages left on a voice-mail system may not be collected immediately for various reasons and, again, I will not assume you have received a message if you do not respond within a reasonable time. I understand that you do not accept securities, money transfer, or other instructions sent by electronic media, and will not be responsible for them. If you agree to accept instructions I send by such media, I accept that I do so at my risk, in accordance with this paragraph and Section 3 above. You may record and monitor communications via electronic media similarly to telephone conversations, as explained above.

5. Statements and Confirmations; Balancing and Holding Information

You will provide me with periodic statements detailing the activity that occurs in my Accounts. JPMSI will confirm Brokerage Account transactions when required by applicable law and regulation. I will not receive confirmations relating to my Investment Management Account activity or accounts opened for me with Third Party Managers. All statements and advices will be sent to me by mail at the address last recorded by you unless we make other arrangements. This address must be one where I or someone I have authorized to receive communications on my behalf actually receives communications. I will notify you in writing of any address change. For deposit accounts, if there have been no deposits or withdrawals made to my account within a 30-month period (12 months in Texas), annual statements will be sent unless specifically indicated in the personal or business account disclosures. I may be unable to access my Account other than by an in-person withdrawal if my account has no deposits or withdrawals within a 24-month period (10 months in Texas).

I agree that I must review statements and confirmations promptly and notify you immediately of any errors, omissions, improper payments, or transfers. Unless otherwise provided by applicable law or regulation or specifically provided elsewhere in the General Terms or any Account Agreement, I agree that I cannot make a claim against you based on any error, omission, improper payment or transfer disclosed by a confirmation or statement if I fail to notify you of it within three (3) Business Days after its delivery in the case of a confirmation, and within thirty (30) Business Days after its delivery in the case of a statement. My responsibilities with respect to periodic statements covering Deposit Accounts are identified in “Appendix: General Rules and Regulations for Deposit Accounts,” Section A.14.

Asset values on periodic statements come from your proprietary pricing models or external pricing services that you select and may rest on estimates and assumptions you make about relevant future market conditions and other matters, all of which are subject to change without notice. Such changes may have a material impact on valuations, and valuations based on other models or different assumptions may yield materially different results. Statement valuations may not represent the actual or indicative terms for new transactions or for liquidation of existing transactions, and may vary from valuations used by you for other purposes. Accordingly, I will not use my statements as the sole basis for valuing my assets, and I will seek advice from my accountant or attorney about using statements to prepare tax returns, financial statements, regulatory reports, or for other purposes. I agree that you and Morgan Affiliates shall not be liable for losses, costs, expenses or damages (incidental, special, consequential, compensatory, punitive, or otherwise) arising out of any use or reliance on any valuation of any asset set forth in a periodic statement or other document.

Balances and Account holdings change on a frequent basis. Information about the amount of my balance or holdings will be as of a given time, and there is no assurance that the same balance or holdings will be in my Account at the time the checks that I write are presented for payment. I hereby waive any claims against you based on balance and holdings information provided to me orally, electronically or in writing or to a third party on my behalf.

6. Security Interest; Right to Debit and Setoff

In order to secure payment when due of any and all Obligations under this Agreement to you or any Morgan Affiliate I pledge and grant to you and each of them a continuing security interest in the Collateral. This security interest shall apply to any Collateral (and proceeds thereof) now or at any time in the future held in or credited to any Account or other accounts maintained for me. I acknowledge and agree that where you or any other Morgan Affiliate holds Collateral or is a securities intermediary in respect of any

2

Collateral, you each hold the Collateral for yourself and also as agent for all other Morgan Affiliates who are secured parties hereunder pursuant to the Intercompany J.P. Morgan Securities Account Control Agreement among various Morgan Affiliates as amended or restated from time to time. At any time that I have not met any Obligation under this Agreement you may liquidate, sell or transfer all or any portion of the Collateral to satisfy that Obligation in whatever priority you choose in your sole discretion; exercise all rights and remedies you have under applicable law with respect to the Collateral; or, exercise any other rights or remedies you have under other agreements or applicable law.

If I have a line of credit connected to an Asset Account, this security interest is in addition to any security interest that I have granted in connection with that line of credit.

In addition, you may, without prior notice or demand, apply or setoff the funds in my Account at any time to pay off any Obligation, whether direct or indirect, I have to a Morgan Affiliate that provides products or services under this Agreement. If the Account is a joint account, the funds in the joint account may be used to pay the Obligations of a single Accountholder. A hold against the Account (to the extent of your right of offset) may be imposed rather than an immediate debit of the funds. Any of my assets or my Obligations may be transferred within and among Morgan Affiliates in order to effect the rights in this Section 6. I acknowledge that my Account is a general account and not a special purpose account.

7. Fees

I agree to pay all fees, charges and commissions associated with this Agreement and the Accounts and services you provide to me. You are authorized to charge my Accounts directly for payment for all applicable fees contained in the fee schedules in effect from time to time, which are available upon request.

8. Error Corrections

You have the right to correct all errors that arise in my Accounts without prior notice to me, including debiting my Accounts for any sums or positions incorrectly existing therein and correcting errors with respect to Account holdings or balances. You may also reverse any provisional credits or recredits. You may take these actions even if they result in a debit balance or overdraft.

9. Credit Reports

You may request credit reports on me in connection with my Application for an Account or in the future in connection with an update, renewal or extension of an Account. Upon my request, you will inform me whether you have obtained any such reports and, if you have, you will inform me of the name and address of the reporting agency that furnished the reports to you. Any credit reports that you receive will be deemed to have been obtained by each Morgan Affiliate for its own benefit.

10. Limitations on Responsibilities and Liabilities; Indemnification

You shall be responsible for the performance of only those duties that are set forth in this Agreement.

Except as otherwise provided by law, your sole liability and that of Morgan Affiliates to me, my heirs, legal representatives, assigns or any other party for any wrongful act or failure to act in connection with any of the products or services provided to me shall be any direct damages I incur because of your gross negligence or willful misconduct. Direct damages will be limited to the amount of any funds or the fair market value of any property lost because of such gross negligence or willful misconduct, together with compensatory interest and a credit for your fees with respect to any relevant transaction. Under no circumstance shall you be liable to me or any other person for any services provided by third parties (e.g., clearing agencies, central depositories, communications carriers) or for any indirect, incidental, special, or consequential damages, regardless of the form of action and even if you have been advised of the possibility of such damages. You disclaim any and all warranties, whether express or implied, including but not limited to all warranties of merchantability or fitness for a particular purpose.

You will not be responsible for losses caused directly or indirectly by events or conditions beyond your control, such as war, acts of terrorism, natural disasters, government restrictions, strikes, a failure of public utility, communication, computer, equipment or other systems, a failure or delay in receiving electronic data or any law, legal or regulatory requirements, exchange or market rulings, or suspension of trading.

I will indemnify and hold all Morgan Affiliates providing products or services under the Agreement harmless from any claim, loss, liability, or expense, including, without limitation, collection costs, reproduction and search costs and the reasonable fees and disbursements of counsel and other advisers incurred by them (i) in rendering services hereunder; (ii) if I breach the Agreement; (iii) if a third party brings a claim, suit or proceeding against a Morgan Affiliate because it provided products and services to me, or (iv) resulting from a subpoena, administrative order, court order, levy, garnishment, attachment or other legal process affecting the Account. I will not be required to indemnify any Morgan Affiliate if the claim, loss, or liability results from its gross negligence or willful misconduct.

11. Taxes

I will be responsible for the payment of all taxes relating to my Accounts. I will reimburse you and all Morgan Affiliates on demand for any transfer taxes, documentary taxes, assessments or charges that are imposed at any time on or in connection with this Agreement and shall indemnify you and them against liability for any such tax (including any interest and penalties). You are authorized to deduct from any cash receivable credited to my Accounts any taxes or levies required to be deducted by any revenue or governmental authority for whatever reason with respect to my Accounts.

12. Abandoned or Inactive Accounts

Unless I make a transaction in my Account from time to time or notify you in writing that I know my Account still exists, state law may require you to send the Property in the Account to the applicable state as abandoned property. The applicable state is generally the state of my last known address as shown on your books and records, or the state of the JPMCB address where my Account is maintained if my address is outside the United States. After the turnover, the funds must be reclaimed from the applicable state. My Account may be charged for certain expenses incurred in remitting funds to any state. These charges are not refundable.

13. Retention of Assets; Disputes over Account Assets

You may refuse to pay out any money or transfer or distribute Securities or other Property from my Accounts (i) in the event of my death or the death of any co-Accountholder, until you are fully satisfied, in your sole judgment, that you will have no resulting liability or potential liability for any estate tax, gift tax or other tax, or (ii) upon receipt of oral or written notice of a claim regarding the Account, until you have a court order or the written consent of all required parties. You also may place a hold on the Account or you may file an action in interpleader. I agree to reimburse you for any expenses, including reasonable attorneys’ fees that you incur because of any dispute, including any incurred without litigation. You are not required to determine whether a dispute has merit in order to take one of the actions permitted by this section.

14. Termination

Either of us may terminate this Agreement or some or all of the products, features and services provided at any time upon notice to the other. However, any security interest in

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Collateral, or any other setoff rights against my Accounts or Property will not terminate until I have satisfied indefeasibly and in full all my Obligations, whether arising before or after termination. Termination of one or more of the services and features of an Account may result in the cancellation of some or all of the features or privileges described in this Agreement. I understand that I remain responsible for all charges, debit Items, or other transactions initiated or authorized by me or Authorized Persons, whether arising before or after termination.

15. Compliance with Laws

I certify that I have observed and will continue to observe all laws and regulations that apply to my activities and relationship with you or any Morgan Affiliate.

16. Rules and Regulations

My transactions will be effected in accordance with your internal rules and policies, the applicable rules, regulations, customs, and usages of any exchange, market, clearinghouse, or self-regulatory organization, and all applicable federal and state laws, rules, regulations, and treaties.

17. Governing Law; Jurisdiction

Except as otherwise provided, or insofar as preempted by federal law, this Agreement shall be governed by the law of the State of New York without giving effect to its choice of law or conflict of laws provisions (other than section 5- 1401 of the New York General Obligations Law).

Deposit accounts shall be governed by the law of the place where each deposit account is located.

Under federal law, deposits that I maintain in any JPMCB branch located outside of the U.S. are not insured by the Federal Deposit Insurance Corporation (“FDIC”); are subject to cross-border risks; and enjoy a lesser preference, as compared to deposits held in the U.S., in the event JPMCB should be liquidated, become insolvent or be placed into receivership or be subject to other proceedings for the benefit of creditors.

This Agreement varies applicable law or regulation to the maximum extent permitted under any such law or regulation. Any provision of applicable law or regulation that cannot be varied by agreement or notice shall supersede any conflicting term of this Agreement. If any provision of this Agreement is held to be illegal or unenforceable, the validity of the remaining portions of this Agreement shall not be affected.

I submit to the exclusive jurisdiction of any federal or state court located in the county where the office holding my Account is situated for all legal proceedings arising out of this Agreement. I irrevocably waive any objection of inconvenient forum that I may now or later have.

18. Waiver of Jury Trial

To the extent permitted by law, you and I knowingly, voluntarily and irrevocably waive all right to trial by jury in any action, proceeding or counterclaim, of whatever type or nature, including but not limited to actions in contract or tort, arising out of this Agreement or the relationship established by this Agreement.

I acknowledge that this jury waiver is a material inducement to you to enter into this agreement and acknowledge that no representative of yours has represented (expressly or otherwise) that you might not enforce this jury waiver in the event of litigation.

19. Use and Exchange of Nonpublic Personal Information

The J.P. Morgan Privacy Policy governs the use and exchange of nonpublic personal information about me, including by Morgan Affiliates.

20. Successors and Assigns; Subcontracting

This Agreement shall be binding upon and inure to the benefit of each of us and our successors, assigns, heirs, and representatives. I will not assign any of my rights or obligations under this Agreement without your prior written consent. Except where prohibited by applicable law or regulation, each Morgan Affiliate providing accounts and services under this Agreement may assign its rights and obligations under this Agreement, or grant participations in its rights, such as its rights as a creditor, to any other party without notice to me or my consent. I agree that each Morgan Affiliate may arrange for another Morgan Affiliate or other entity to perform on its behalf any act required to be performed by such Morgan Affiliate under this Agreement.

21. Entire Agreement, Amendment, Waiver, and Construction

This Agreement contains the entire agreement between me, you and all Morgan Affiliates for the Accounts and services described and supersedes any prior oral or written agreements relating to the Accounts opened and services contracted for. No prior conduct, past practice, or oral statement by your officers or employees will modify my or your obligations under the Agreement. If there are any conflicts between the General Terms and any product Agreement contained in this document, the product Agreement shall prevail. This Agreement and your fees and charges may be amended, and you may modify any aspect of an Account, at any time following notice sent to me by ordinary mail. You do not waive any right under this Agreement or under applicable law because you delay in exercising that right. If you exercise any single or partial right, you may exercise or further exercise that right or any other right or remedy at a later time. Your rights are cumulative under this Agreement and do not exclude any rights or remedies provided by law. No ambiguity in any provision of this Agreement shall be construed against you by reason of the fact that you or your legal counsel drafted such provision.

22. Definitions

“AC Fund” means a mutual fund which American Century Investment Management Inc. (“ACI”) advises or to which it provides other services for which it is separately compensated. JPMorgan Chase & Co. has an equity interest in ACI.

“Agreement” means these General Terms, the applicable Agreements for Accounts and Services for the products and services I select, all relevant appendices, the Application, any supplemental forms I am asked to complete, and rate and fee schedules, all as the same may be amended or supplemented from time to time.

“Application” means the application I have signed with respect to the Accounts and this Agreement, any supplemental or additional applications (including those amending or replacing a prior application) for products and services offered by J.P. Morgan. My Application includes any agreements or applications I signed or submitted to a predecessor of a Morgan Affiliate, and further means any information I have given in writing to you or a predecessor of a Morgan Affiliate related to these products and services.

“Authorized Persons” means me and those persons who have been authorized by me to act on my behalf in connection with an Account.

“Business Day” unless otherwise specified in the Agreement means a day on which a relevant Morgan Affiliate is generally open for the conduct of substantially all of its business functions. For any Morgan Affiliate that is an insured depository institution, a Business Day is any day other than Saturday, Sunday, or a legal holiday where the Morgan Affiliate is located.

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“Collateral” means all of my rights, title, and interest in and to any Deposit Accounts, or in and to any Property maintained in any other Account identified as Collateral on any Application or otherwise, and any proceeds thereof and substitutions and additions thereto.

“Item” means any check, substitute check, draft, note or other instrument for the payment of money.

“JPMCB” means JPMorgan Chase Bank, N.A.

“J.P. Morgan” means the marketing name used for the private banking business conducted by JPMorgan Chase & Co. and its subsidiaries worldwide.

“JPMSI” means J.P. Morgan Securities Inc.

“JPM Fund” means a mutual fund or other collective investment fund which a Morgan Affiliate advises or to which it provides other services for which it is separately compensated.

“Line of Credit” means the line of credit you may provide to me as part of the Asset Account.

“Morgan” or “Morgan Affiliate” means JPMorgan Chase & Co. or any entity controlled by, controlling, or under common control with JPMorgan Chase & Co. For the purpose of this definition, “control” means ownership of more than 50% of the voting securities of an entity or the ability to elect a majority of the board of directors or other governing body of such entity.

“Obligations” means all obligations of payment or performance, whether joint or several, contingent or otherwise, that I have to a Morgan Affiliate arising under the Agreement or any other agreement relating to products or services offered by or through J.P. Morgan, including but not limited to agreements for borrowed money, guarantees, letters of credit, floors, collars, swaps, options, foreign exchange transactions (or any similar transaction or combination of these types of transactions), overdrafts and shortfalls of any kind, no matter how arising, as well as obligations to pay fees, to provide information, to make accurate representations and to provide security.

“Property” means, but is not limited to, Securities and securities entitlements of all kinds, money, deposits, bankers’ acceptances, commercial paper, contract rights of all kinds, accounts, goods, documents, general intangibles, chattel paper, commodities and commodity interests and the distributions, proceeds, products and accessions of and to the above.

“Security” or “Securities” means any share (including a mutual fund share or unit of a unit investment trust), stock, bond, debenture, note, certificate of indebtedness, warrant, option, interest, or other security (whether represented by a certificate or by a book entry on the records of the issuer or other entity responsible for recording such book entries), and any security entitlement in respect of any of the foregoing.

DEPOSIT ACCOUNTS AND SERVICES OFFERED BY JPMORGAN CHASE BANK, N.A.¹

The Money Market Deposit Account Agreement, the Checking Account Agreement, and the Certificate of Deposit Agreement, with amendments from time to time, will apply to any such future account opened or product or service obtained from J.P. Morgan if you and I have agreed, orally, electronically or otherwise, upon such account, product or service. Each Agreement is subject to the General Terms for Accounts and Services, Appendix: Other Banking Services Relating to the Accounts, Appendix: General Rules and Regulations for Deposit Accounts, and Appendix: Electronic Fund Transfers contained herein (collectively, the “General Terms”). Capitalized terms not defined in each Agreement have the meanings given to them in the General Terms.

MONEY MARKET DEPOSIT ACCOUNT (“MMDA”) AGREEMENT

A Money Market Deposit Account is a deposit account at JPMorgan Chase Bank, N.A., which is an insured depository institution. I understand and agree that upon notice to me, you may transfer my MMDA to another branch office without my consent. The MMDA holds only U.S. dollar deposits.

1. Interest Rate and Annual Percentage Yield

My interest rate is the rate of interest paid without regard to compounding, shown as an annual figure. If you have not disclosed an interest rate, but instead have disclosed an annual percentage yield, the interest rate is the rate that will produce the disclosed annual percentage yield. The annual percentage yield means a percentage rate my money will earn if it remains on deposit for a full year with compounding and no change in the interest rate and all interest is left in the account. Interest rates are determined at your discretion and you may change them at any time without notifying me. The annual percentage yield in effect when I open my Account is effective only until the next interest rate change.

Depending on the type of account, interest may be compounded daily or monthly, computed on a 360- or 365- day basis according to the daily balance method. This method applies a daily periodic rate to the principal and accrued (but not yet credited) interest in the Account each day.

The interest rate and annual percentage yield applicable to my Account on the date my Account is opened will be set forth on a separate “rate sheet” or other interest rate disclosure provided to me when my Account is opened. That interest rate disclosure is considered part of this Agreement.

Deposits begin to earn interest when you receive credit for the deposit, which depends on where the Item originated and/or how the deposit was made. Cash, wire and electronic transfer deposits and Items drawn on you will earn interest as of the day of deposit. Other Items generally will begin to earn interest one to two days from the day of deposit. Interest will be paid by crediting my Account at the end of each monthly statement cycle. If I close my account before interest is credited, I will receive the accrued interest.

Generally, deposits made on a Business Day before 2:00 p.m. at a branch or before 12 noon at an ATM will have that day as the day of deposit. Local ATMs will provide the exact cut-off time. For deposits made after that time or on a day that is not a Business Day, the day of deposit will be the next Business Day.

From time to time, you may establish, change or eliminate different balance levels and apply different rates of interest to different balance levels or establish a balance above or below which interest shall not be paid. If a claim is made against my Account restricting or prohibiting the withdrawal of funds, you may convert the Account to a non-interest bearing account.

2. Limitations on Withdrawls and Transfers

Certain types of transfers from MMDA accounts are limited by federal regulation to no more than six (6) per statement period (approximately one month). Examples of restricted transfers or withdrawals include checks, telephone or online withdrawals or transfers, pre-authorized third party payments, pre-authorized transfers to another account, and Purchase Transactions, as defined in Section A.3 of the Appendix:

¹ Deposit products and services offered by JPMorgan Chase Bank, N.A. Member FDIC.

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Electronic Fund Transfers. Once I reach my limit, you may refuse to process any additional restricted transfer or withdrawal. You also may treat as restricted transactions debits for the purchase of your official checks. If these limits are exceeded three times in a six month period, you will be obliged to restrict or close my MMDA or convert it to a checking account that offers unlimited check writing and transfers, and I may pay a fee for each transfer you process in excess of either of the limits described above in accordance with the current fee schedule. There is no limit on the number of withdrawals or transfers I may make in person, by mail, at an ATM, or by messenger.

Federal regulations require you to reserve the right to require seven days’ advance written notice before permitting a withdrawal from my MMDA, although you do not presently exercise this right.

CHECKING ACCOUNT AGREEMENT

I understand and agree that upon notice to me, you may transfer my Checking Account to another branch office without my consent.

1. Minimum Balance Required to Avoid Additional Fees; Earnings Credit on Business Accounts

The Checking Account holds only U.S. dollar deposits. If my account is a personal account, you can impose a minimum average daily balance that I must maintain during each month to avoid the imposition of a monthly account maintenance fee.

Business accounts are accounts held by or on behalf of an entity (a person other than a natural person) or held by an individual in a professional or business capacity. Each month the non-interest bearing funds in a business Account will earn a credit that is based on the rate paid on three-month U.S. Treasury bills from time to time. Each month’s credit is calculated by taking the average daily non-interest bearing balance of my Account during the month and multiplying the result by 90% of the applicable Treasury bill rate and by the number of days in the current month divided by 365. The average daily non-interest bearing balance is the sum of each day’s ending balance from the last day of the prior month through the second-to-last day of the current month divided by the number of days in the month. The average daily balance is calculated the same way but using only balances in the Account that are above zero and available for withdrawal.

Each month’s credit will be used to offset maintenance and certain transaction fees incurred in that month for account maintenance and services. The credit may be applied only against current fees and will never be credited to my Account. Fees in excess of a credit will be charged to my Account, or to the Account designated as my primary business checking account if I have more than one. No credit is earned on funds in personal non-interest bearing accounts unless they are linked to a business relationship.

2. Interest on My Account

If my Account pays interest, the interest rate is the rate of interest paid without regard to compounding, shown as an annual figure. If you have not disclosed an interest rate, but instead have disclosed an annual percentage yield, the interest rate is the rate that will produce the disclosed annual percentage yield. The annual percentage yield means a percentage rate my money will earn if it remains on deposit for a full year with compounding and no change in the interest rate and all interest is left in the account. Interest rates are determined at your discretion and you may change them at any time without notifying me. The annual percentage yield in effect when I open my Account is effective only until the next interest rate change.

Interest is compounded daily and computed on a 365-day basis according to the daily balance method. This method applies a daily periodic rate to the principal and accrued (but not yet credited) interest in the Account each day.

Deposits begin to earn interest when you receive credit for the deposit, which depends on where the Item originated and/or how the deposit is made. Cash, wire and electronic transfer deposits and Items drawn on you will earn interest as of the day of deposit. Other Items generally will begin to earn interest one to two days from the day of deposit. Interest will be paid by crediting my Account at the end of each monthly statement cycle. If I close my Account before interest is credited, I will receive the accrued interest.

Generally, deposits made on a Business Day before 2:00 p.m. at a branch or before 12 noon at an ATM will have that day as the day of deposit. Local ATMs will provide the exact cut-off time. For deposits made after that time, or on a day that is not a Business Day, the day of deposit will be the next Business Day.

From time to time, you may establish, change or eliminate different balance levels and apply different rates of interest to different balance levels or establish a balance above or below which interest shall not be paid. In the event that a claim restricting or prohibiting withdrawals from my Account is asserted against the funds on deposit, you may, in your discretion, place such funds in a non-interest bearing account.

3. Limitations on Withdrawls and Transfers

If my Checking Account is interest bearing, federal regulations require you to reserve the right to require seven days’ advance written notice before permitting a withdrawal from my Account, although you do not presently exercise this right.

4. Checking Account Sub-Accounts

In order to accommodate your internal accounting and regulatory reporting, a money market sub-account is established and is a part of my Checking Account. This does not affect my account number, balance requirements, monthly statement or my use of the Account. The sub-account does not affect the way I earn interest or my transactional (check writing or otherwise) capabilities.

There will be two portions or “sub-accounts” within my Checking Account. One is a checking sub-account to match my primary account with no transaction limitations, and the other is a money market sub-account. (The sub-account for a non-interest bearing Checking Account is a non-interest bearing money market account.) At the beginning of each statement period, you will automatically allocate a portion of my Checking Account to each sub-account. All checks, withdrawals and other charges will be made against the checking or checking with interest sub-account. As funds are needed, you will, without charge, automatically transfer funds from the money market sub-account to the checking or checking with interest sub-account. This can occur up to six times per statement period. Upon the sixth transfer, the entire balance in the money market sub-account will be transferred to the checking or checking with interest subaccount. This process will repeat at the beginning of each statement period. You will be responsible for monitoring these transactions. My monthly statement will reflect one combined balance and, for an interest bearing Checking Account, one annual percentage yield earned and one amount of interest paid for the entire Checking Account. The statement will not reflect the previously described internal transfers between the two sub-accounts.

CERTIFICATE OF DEPOSIT AGREEMENT

I understand and agree that upon notice to me, you may transfer my Certificate of Deposit to another branch office without my consent. To the extent there are any conflicts between the General Terms and this Agreement, this Agreement shall prevail.

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CD Features

The duration, rate of interest, annual percentage yield, and time and method for payment of interest on a Certificate of Deposit (“CD”) will be established when the Account is opened.

Renewal

CDs will be renewed automatically for the same (or similar) term at the interest rate in effect on the maturity date. You have the right not to renew any CD or to renew it on different terms.

Grace Period

During the CD grace period, I can elect not to renew the CD and withdraw funds from the CD without penalty. I can also make one additional deposit to the CD during the grace period. A grace period of ten (10) calendar days applies to a CD with a term of 14 days or greater. A grace period of five (5) calendar days applies to a CD with a term of 7 through 13 days.

Interest After Maturity

If I do not renew a CD, no interest will be earned on or after the maturity date.

Early Withdrawal Penalty

I have contracted to keep the deposit amount on deposit for the entire term. You are not required to permit me to withdraw any part of my deposit early, but you may do so. If you do permit me to withdraw my deposit early, you will assess an early withdrawal penalty in the following amounts, regardless of the length of time the funds withdrawn have remained on deposit. For CDs with a term of less than 12 months, the penalty is one percent (1%) of the amount withdrawn plus $25. For CDs with a term of 12 months or longer, the penalty is three percent (3%) of the amount withdrawn plus $25.

If there is insufficient accrued interest to pay a required penalty, forfeiture of some principal will be necessary. There will be no penalty for early withdrawal if I die or am determined to be legally incapacitated by a court of competent jurisdiction.

ACCOUNTS AND SERVICES RELATING TO ASSETS HELD BY JPMORGAN CHASE BANK, N.A. AND AFFILIATED BANKS

ASSET ALLOCATION ADVISORY SERVICES

Upon my request, JPMCB or an affiliated bank (a “Bank”) will advise me about the allocation and management of my investments and cash under management or held by JPMCB or Morgan Affiliates. The Bank also may, in consultation with me, present to me investment ideas and strategies for assets held or managed by other financial institutions to the extent I disclose such assets in writing to the Bank.

The Bank may advise and assist me in the preparation of an investment plan based upon information provided by me. Such investment plan documents the Bank’s understanding of, among other things, my current wealth picture, investment goals, risk profile and strategic asset allocation with J.P. Morgan, including discretionary assets managed or held by the Bank in an Investment Management Account and self-directed assets traded through JPMSI in a Brokerage Account. The Bank will exercise discretion and execute investment ideas in my Investment Management Account based upon written guidelines the Bank and I agree to if consistent with applicable fiduciary standards. JPMSI will execute trades in Brokerage Accounts and will sell me alternative investments (hedge funds, private equity funds, funds of such funds, structured products, and the like) based upon my prior express direction and if applicable suitability standards, documentation requirements, and other relevant considerations have been fully satisfied.

I will review my investment plan from time to time and notify the Bank if I believe any information contained therein is incorrect or does not reflect my investment goals, risk profile, desired asset allocation and/or other considerations addressed therein. Rebalancing decisions and directing the movement of assets between my Accounts are my sole responsibility and neither the Bank nor JPMSI will do so except pursuant to my express direction.

From time to time the Bank may recommend changes in my investment plan. No changes in such plan shall be effective unless agreed to in writing by me. Until notified in writing by me, the Bank is entitled to rely upon the most recent investment plan that I have adopted.

Asset allocation services are subject to the General Terms for Accounts and Services and Appendices contained herein (the “General Terms”). Capitalized terms not otherwise defined in this Agreement have the meanings given to them in the General Terms. To the extent there are any conflicts between the General Terms and this Agreement, this Agreement shall prevail.

ASSET ACCOUNT AGREEMENT

The Asset Account is a group of accounts and financial services that can be linked together. Account activity and holdings will be reported on an integrated and comprehensive statement.

The following accounts and services may be linked:

• An automatic sweep of deposits and uninvested cash balances into a deposit account at a Morgan Affiliate that is an insured depositary institution or a JPM Fund that is a money market mutual fund;

• A Custody Account which will hold my Securities and other Property;

• Direct purchase of JPM Funds and AC Funds;

• Banking services:

1.	check writing capability
2.	an ATM or debit card (“Banking Card”) issued by a Morgan Affiliate which I may use to withdraw funds from my Account or to make purchases at participating merchants
3.	electronic banking and funds transfers services, including information about the Asset Account

• A discretionary line of credit; and

• An optional brokerage account with JPMSI

Each of these is described in more detail below.

1. Automatic Sweep of Deposits and Uninvested Cash Deposit Sweep

Uninvested cash balances and new cash deposits will be transferred automatically to a deposit sweep (a “Deposit Sweep”) on a daily basis. Deposits will be held on my behalf by my custodian with Chase Bank USA, N.A. or JPMorgan Chase Bank, N.A., wholly owned subsidiaries of JPMorgan Chase & Co. The Deposit Sweep rate is established on the basis of various market factors including short term rates, federal funds rates, LIBOR and competitors’ rates. At any time and at your discretion, how the rate is determined on the Deposit Sweep may change. This rate may be tiered based on the balances in my Accounts.

Interest will be compounded, calculated monthly using the average daily balance method, and credited to my Account on the first day of the month. The average-daily-balance method applies the average daily periodic rate to the average daily balance in the account for the period. The average daily balance is calculated by adding the principal in the account for each day of the period and dividing that figure by the number of days in the period. Interest will begin to accrue on the first business day that funds are swept into the Account.

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The interest rate and annual percentage yield (APY) applicable to my Deposit Sweep on the date my Asset Account is opened will be set forth on a “rate sheet” or other interest rate disclosure provided to me when my Asset Account is opened. The interest rate disclosure is considered part of this agreement.

The Deposit Sweep is insured by the Federal Deposit Insurance Corporation (“FDIC”). From October 3, 2008 through December 31, 2013, the $250,000 limit on FDIC insurance generally represents the aggregate coverage available to an individual for all deposit accounts held in a custodial capacity on the individual’s behalf at any particular insured financial institution. If the combined balances of my Deposit Sweep and any other single ownership categories that I have with the same bank exceeds $250,000, my total FDIC coverage for all single ownership categories with the same bank will be limited to $250,000, but if I have funds in a different insured depository Morgan Affiliate, those funds will be covered separately. Funds in a Deposit Sweep in excess of $250,000 will be uninsured. After December 31, 2013, the deposit insurance coverage limit will revert back to the $100,000 per depositor, per insured financial institution.

I understand that you may receive certain benefits from having client cash balances sweep into deposit accounts. For example, Chase Bank USA, N.A. and JPMorgan Chase Bank, N.A. will obtain additional liquidity from clients’ deposits.

Money Market Sweep Fund

Instead of the Deposit Sweep, uninvested cash balances and new cash deposits can be swept to a dividend-paying money market mutual fund (the “Money Market Sweep Fund”) offered by a Morgan Affiliate so long as the selected Money Market Sweep Fund is available to accept funds for investment. Funds will be swept in accordance with the investment deadlines set by the selected Money Market Sweep Fund and will be insured by the FDIC, subject to the limitations on FDIC insurance described above, until swept.

You have no duty to supervise any Money Market Sweep Fund and have not provided me with any investment advice or recommendation nor are you responsible for any act or omission, or the solvency of, any Money Market Sweep Fund. The transfer agent or distributor of the Money Market Sweep Fund has the sole responsibility to provide information to me about it. In certain states, money market mutual funds are marketed through J.P. Morgan Securities Inc.

Money Market Sweep Funds are mutual funds. Mutual funds are securities. Securities are not bank deposits and are not FDIC insured nor are they obligations of or guaranteed by JPMorgan Chase Bank, N.A. or its affiliates or any federal or state government or government agency or government sponsored agency. Securities involve investment risks, including the possible loss of the principal amount invested.

Although the Money Market Sweep Fund seeks to maintain a stable net asset value of $1.00 per share, there can be no assurance that it will continue to do so. The prospectus for a Money Market Sweep Fund should be reviewed before a decision is made to invest.

I appoint you, or your designated Morgan Affiliate, as my attorney-in-fact with full power and authority to purchase or redeem shares of the Money Market Sweep Fund or otherwise to effect transactions with my Money Market Sweep Fund as instructed by me, or to discharge any Obligation I owe to you or a Morgan Affiliate, or as required by the prospectus of the applicable Money Market Sweep Fund, or otherwise in accordance with this Agreement.

You are not obligated to continue to provide money market sweep services during any time that the Sweep Fund I select is not available to accept collected balances for investment.

Withdrawals from My Sweep Account

You may refuse withdrawals from my Deposit Sweep or my Money Market Sweep Fund if funds are not available, or if the Account is pledged as collateral in respect of an outstanding Obligation or otherwise, or if you suspect legal violations, fraud, impropriety, or other irregularity, or if you are served with legal process affecting my Account.

If there are insufficient funds in my Deposit Sweep or my Money Market Sweep Fund you may, at your discretion, transfer funds to cover any debit from proceeds of a loan drawn on my Line of Credit, if I have a Line of Credit.

On any day, and subject to the limitations described in this Agreement, I can withdraw the total balance of (i) the available balance in my Deposit Sweep or Money Market Sweep Fund, and (ii) if there is no available balance, at your discretion, the unused portion of my Line of Credit. In the event that the total balance is zero or less or in any other circumstance when funds cannot be transferred to cover debits or withdrawals that would result in an overdraft, you will have no obligation to honor any withdrawal, debit, or instruction to transfer funds, including payments for purchases of Securities or other Property. In the event that my action creates an overdraft and you agree to pay it, I will pay the entire amount of such overdraft balance immediately. Interest will be charged on such overdraft at a rate computed in accordance with your current rates schedule.

2. The Custody Account

Custody Accounts are maintained at the Morgan Affiliate determined to be most convenient when an Account is opened. The Morgan Affiliate with which my Custody Account is held is identified on my monthly statement.

Terms of Custody

You will record, on your books, my interest in Property that you hold directly or indirectly for my account as my custodial agent. Property may be held through one or more sub-custodians or securities depositories you select and may be registered in the name of your nominee, or in the name of the nominee of any depository or sub-custodian that you use. My Securities may be treated as fungible with all other securities of the same issue pursuant to the provisions of applicable law.

You will make purchases, sales, and deliveries only in accordance with instructions given by me or an Authorized Person, but you are not obligated to make payments for purchases unless the total balance of my Deposit Sweep or Money Market Sweep Fund (collectively, a “Sweep”) and/or Line of Credit (if you permit me to use my Line of Credit to purchase Securities) can cover the payment. If, however, you do make a payment on my instruction which exceeds the total balance, I will reimburse you immediately for the amount of the excess. You are not obligated to exchange or transfer Securities unless sufficient Securities actually are in the Custody Account and available for delivery.

You may, in your discretion, hold non-US dollar currencies in my Account to effect transactions denominated in non-U.S. dollar currencies. You may convert one currency into another at any time and without prior notice at the current market rate for spot foreign exchange transactions or for forward foreign exchange transactions as reasonably determined by you or any Morgan Affiliate in your or its sole discretion. Deposits may be held, and transactions effected through, an account with an affiliate or another bank in the country where such currency is the lawful currency or in other countries where such currency may be lawfully held on deposit.

You will receive distributions of dividends, interest, stock, rights, and other similar payments and distributions with respect to Securities, present for payment maturing Securities and those called for redemption, sell any fractional interests in

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Securities resulting from a dividend of Securities, in all cases net of any applicable taxes or other charges withheld by the maker of such payment or distribution, and deposit funds received in my Asset Account.

You will exchange temporary certificates for definitive ones, or obtain new certificates if the par value of any shares is changed.

You will notify me of the following: (i) any rights offering by an issuer of Securities, and if you are not instructed how to exercise rights under an offering by the applicable deadline, then consistent with local market practice and applicable law, the rights will be sold in the principal market and the proceeds of sale deposited in my Asset Account; and (ii) the partial redemption of any Securities, and if my Securities are part of a fungible mass, you or the sub-custodian or securities depository may select the securities to participate in partial redemptions, partial payments, or other actions affecting less than all securities of the relevant class in any nondiscriminatory manner that you or it customarily uses to make such selection.

Promptly after receipt you will forward to me communications relating to any Securities held in my Custody Account that call for voting or other specific action (including materials relating to legal proceedings intended to be transmitted to holders of the Securities). With respect to any corporate events not listed above, you may (in the absence of an instruction from an Authorized Person within any prescribed deadline) take any action that you consider appropriate under the circumstances, provided that you will not be obligated to take any action with respect to any corporate event or any legal proceedings involving holders of Securities.

Unless I have instructed you otherwise in writing, or such release is mandatory, you are authorized to release to issuing companies my name, address, and share positions, in compliance with applicable laws.

I will be solely responsible for compliance with any notification or other requirement of any jurisdiction affecting my beneficial ownership of Property, and you will not be liable for my noncompliance with those requirements.

In some securities markets and cash clearing systems, deliveries of Securities and cash may be reversed under certain circumstances. Accordingly, credits of Securities and/or cash to the Custody Account are provisional and subject to reversal if, in accordance with relevant local law and practice, the delivery of the Securities or cash is reversed.

Appointment as Agent: Authorization

I appoint you, or your designated Morgan Affiliate, as my agent and authorize you to represent me in every respect, in my name and place, with regard to your acting as my agent pursuant to this Agreement. By way of example, but not by way of limitation, you or the appropriate sub-custodian are authorized to execute endorsements, assignments, or other instruments of conveyance or transfers of Securities or other Property in the Account and to execute any other documents deemed necessary or desirable and proper in connection with your provision of services under this Agreement. Your signature or that of the appropriate sub-custodian, as well as any and all declarations or other documents, will be fully binding on me, and I will be fully liable for any and all dispositions made by you. This power is coupled with an interest and will survive my disability or incompetence. Your appointment as agent pursuant to this paragraph will not be understood to impose upon you any additional duties not expressly undertaken in this Agreement.

You, in your sole discretion, are also expressly authorized to employ agents and sub-agents in connection with your provision of services under this Agreement and pay reasonable compensation to such agents and sub-agents directly from the Account.

Standing Broker Transactions

You are authorized to accept and act on all instructions received from JPMSI to either receive or deliver Property against payment into or from my Custody Account and to take funds from my Deposit Sweep or Money Market Sweep Account to pay for any transaction, service, or other fee on behalf of JPMSI. I agree to assume all risks that may result from any action you take in reliance in good faith on instructions from JPMSI. I will not send you separate settlement instructions for my Securities transactions.

You are authorized to receive from or deliver to any broker Securities as specified by the broker through the Depository Trust Company (“DTC”) Interactive Institutional Delivery System. You will accept instructions through DTC from any broker and will automatically affirm and settle for my Custody Account each Securities transaction when my broker provides information to you through DTC’s Interactive Institutional Delivery System or any other electronic execution, affirmation, confirmation, or delivery system for Securities in common use in the relevant market or markets for any particular instrument that you determine to be appropriate under the circumstances in your sole discretion. In carrying out these transactions, my broker will furnish me with confirmations directly and my broker will be responsible for the accuracy of the trade and any other transaction details.

3. Direct Purchase of JPM Funds or AC Funds

Subject to applicable law, I may purchase shares directly in one or more JPM Funds or AC Funds. In certain states, however, JPM Funds and AC Funds are available only through JPMSI.

My positions in JPM Funds and AC Funds will appear on my Asset Account statement, and I will not receive a separate statement from any Fund. All cash proceeds of redemptions of JPM Funds or AC Funds will be credited to my Asset Account and transferred to my Sweep. Dividends and capital gains distributions from JPM Funds or AC Funds will be reinvested unless I otherwise notify you at the time of purchase.

4. Banking Services

If you have selected banking services for your Account, uninvested cash held in the Account can be accessed through use of banking services, including checks, a banking card, electronic banking and funds transfer services. The use of banking services is governed by the Appendix: Other Banking Services Relating to Accounts; Appendix: General Rules and Regulations for Deposit Accounts; and Appendix: Electronic Fund Transfers. I understand that I must also refer to the Banking Card Agreement I will receive when the Card is delivered to me.

Use of the Banking Card by an Authorized Person, presentment of a check signed by an Authorized Person, and requests for funds transfers will be an instruction to you to redeem shares of my Sweep Fund. You are also authorized to redeem the shares in my Sweep Fund to discharge any Obligation I owe to you or any Morgan Affiliate, or as required by the prospectus of the applicable Sweep Fund. This authorization extends to my Sweep Fund only, not to other assets held in the Account.

I may elect to transfer funds into or out of my Sweep Fund or cash on deposit by funds transfers, “Payment Orders” (fund transfers NOT governed by the Electronic Fund Transfer Act) or automated clearing house (“ACH”) transactions. If I request you to arrange for domestic and/or international fund transfers and related services, I authorize you to accept such funds transfer instructions from me by telephone, tested telex, facsimile transmission, or in writing or other methods upon which we agree, and to receive funds sent to my Account.

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5. Line of Credit

By checking the applicable box for banking services or for a line of credit in the Application, I am requesting you to extend credit to me from time to time as provided for in this Agreement (the “Line of Credit”). I understand that I will have only one Line of Credit, even if I have more than one Custody Account or Brokerage Account. In your sole discretion you will determine my credit limit under my Line of Credit from time to time, which in no event will be greater than the lending value of the Accounts held by you and Morgan Affiliates (“Collateral”). You have the right to modify the eligibility and lending value of any Collateral in your sole discretion.

JPMCB or another Morgan Affiliate will provide the Line of Credit. The Line of Credit will be extended to, and be an Obligation of, each of the Accountholders (if more than one), and each Accountholder will be jointly and severally liable for the Obligations under this Line of Credit.

The Asset Account statement will show the amounts drawn under my Line of Credit (each, a “Loan”). Subject to the terms of this Agreement, a Loan may be made whenever the cash on deposit and/or Sweep total balance is insufficient to pay an Item, Banking Card transaction (as described under the Banking Card Services Available in the Electronic Fund Transfers Appendix [to the General Terms] or any other debit. I hereby irrevovably authorize you, or your designated Morgan Affiliate, as my attorney-in-fact with full power and authority to effect such borrowing. You may at any time withdraw or modify the Line of Credit and demand repayment of any Loans, without prior notice, even though this may cause Items to be returned unpaid, authorizations for Banking Card transactions to be denied, or other debits to be rejected. Each Loan is secured by the Collateral in which I have granted you a security interest as described below.

I agree to repay you ON DEMAND the principal amount of any Loan under my Line of Credit and any related finance charges and other fees and charges in U.S. Dollars in same-day funds.

I represent and warrant that I have not requested a Morgan Affiliate to arrange for you to finance my purchase of any Security underwritten or placed by a Morgan Affiliate during the period of underwriting or placement, or for 30 days thereafter, or to provide financing against such a Security as Collateral. I will not use any Loan to purchase shares of a JPM Fund or AC Fund or to purchase or fund capital calls owed in connection with investments in private equity, hedge, or similar funds established, sponsored, advised, managed by, or sold through, a Morgan Affiliate.

Security Interest; Events of Default

In order to secure the payment when due of any and all Obligations under my Line of Credit, I pledge and grant to you a continuing security interest in the Collateral. This security interest will apply to any Collateral (and proceeds thereof) now or at any time in the future held in or credited to any Account or other accounts maintained for me.

I acknowledge and agree that where you or any other Morgan Affiliate holds Collateral or are a securities intermediary in respect of any Collateral, you each hold the Collateral for yourself and also as agent for all other Morgan Affiliates who are secured parties hereunder pursuant to the Intercompany J.P. Morgan Securities Account Control Agreement among various Morgan Affiliates as amended or restated from time to time. You and other Morgan Affiliates have the right to take any further action necessary to perfect your respective security interests in the Collateral. I agree to execute any documents and take other action as you or any other Morgan Affiliate may reasonably request in order to allow you or any other Morgan Affiliate to perfect rights with respect to the Collateral. I appoint you and any other Morgan Affiliate as my attorney-in-fact to act on my behalf to sign and deliver all documents, and to do all acts as may be required to realize upon all rights in the Collateral. Such power is coupled with an interest and will survive my death or disability.

I agree that you will have full control of the Collateral and that any transfer affecting the Collateral is subject to your approval. Any contrary instruction I give will be of no effect regardless of any action you take. I may substitute collateral as long as it is substantially similar to the Collateral originally held by you, provided, however, you may elect not to accept such substitution. If you do not enforce your rights, you will not be deemed to have waived your rights in the Collateral.

“Event of Default” means my failure to pay (whether on demand or otherwise) or meet any Obligation under the Line of Credit; my failure to observe or perform any provision of this Agreement relating to the Line of Credit; my making any materially incorrect representation, warranty, certification or statement to you or a Morgan Affiliate in connection with the Line of Credit; my failure to provide financial information to you if you request it; my death, incapacity or incompetency; any entity that has Obligations under the Line of Credit is dissolved or ceases activity; a material judgment is entered against me; a bankruptcy, foreclosure or insolvency action or proceeding is brought by or against me; a writ or order of attachment or garnishment is made or issued against any of my Property; or a receiver is appointed for a portion of my Property.

At any time that an Event of Default has occurred you may: liquidate, sell or transfer all or any portion of the Collateral to satisfy my Obligations under the Line of Credit in whatever priority you, in your sole discretion, may lawfully choose; exercise all rights and remedies available to you under applicable law with respect to the Collateral you or any other Morgan Affiliate hold; or, exercise any other rights or remedies available to you pursuant to other agreements or applicable law.

Except for such notice as may be required under applicable law, you may make such sale or transfer without notice to me and sell any Collateral in any public, private, or restricted sale. You or any other Morgan Affiliate may be a purchaser at any sale of Collateral under this section. Each purchaser of any Collateral will receive the Collateral free of any right and claim I may have of whatsoever kind, including any equity of redemption, without your prior written consent which I waive.

In the event that you determine that additional Collateral is required to meet any margin maintenance, collateral or similar requirement with respect to any Obligations secured under this Agreement, you are authorized (but are not obliged) on my behalf to instruct any Morgan Affiliate holding Collateral to transfer Collateral, selected by you in your sole discretion, to my Account, in sufficient amount to meet any such requirements. Similarly, if any Morgan Affiliate instructs you to transfer Collateral from my Account to an Account held with it, you are authorized to do so.

In the event that my Loan Balance on any day exceeds my Line of Credit for any reason, I authorize you to (i) liquidate sufficient Collateral and/or (ii) debit my Deposit Sweep, redeem the necessary number of shares of my Money Market Sweep Account, or redeem the necessary number of shares in other JPM Funds or AC Funds, as you choose in your sole discretion, and to apply the proceeds to bring my Loan Balance within my Line of Credit.

No provision of this Agreement concerning liens or security interests will apply to my Account or the cash, Securities, or Property therein, to the extent that such application would result in an adverse tax consequence to my Account under any provision of the Internal Revenue Code relating to early

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distribution or withdrawal of assets held in qualified retirement accounts.

I have the power to grant a security interest in the Collateral and I am the sole owner of or have the right to transfer the Collateral to you, free and clear of all other liens or other restrictions. Upon the transfer of Collateral to you, you will have a valid and perfected first priority security interest in the Collateral and the Collateral will be fully marketable by you without any restriction on transferability, voting or dividends or limitations or restrictions relating to holding period, volume, filing or manner of sale, unless you have previously consented in writing to any restriction.

Interest Charges

I agree to pay interest charges determined as described below, on all Loans or related fees or other charges (collectively, the “Loan Balance”) outstanding under my Line of Credit. Interest charges begin to accrue on the day a Loan is made, or a fee or other charge is due, and continue to accrue until the Loan Balance is paid in full.

You will determine the applicable interest charge by applying the Daily Periodic Rate to the Daily Balance of my Line of Credit.

The “Daily Balance” is the beginning balance of my Line of Credit each day plus the amount of any Loans or other debits made during the day minus the amount of any payments or other credits made during the day.

The Daily Periodic Rate and corresponding Annual Percentage Rate are variable rates and therefore may increase or decrease during the billing cycle. The “Daily Periodic Rate” will be equal to the applicable interest rate divided by 360. The applicable interest rate is the rate of interest announced by you from time to time as your Line of Credit Borrowing Rate (the “Borrowing Rate”) in the list of current rates that you have separately provided to me. The corresponding “Annual Percentage Rate” is the Daily Periodic Rate multiplied by 365.

The Daily Periodic Rate and corresponding Annual Percentage Rate increase when the Borrowing Rate increases and decrease when the Borrowing Rate decreases. An increase in the Daily Periodic Rate and corresponding Annual Percentage Rate means I pay a larger interest charge. A decrease in the Daily Periodic Rate and corresponding Annual Percentage Rate means I pay a smaller interest charge. There is no limit on the amount by which the Daily Periodic Rate and corresponding Annual Percentage Rate may change at any one time or over the life of my Line of Credit. If the Borrowing Rate changes, the Daily Periodic Rate and corresponding Annual Percentage Rate will be increased or decreased on the effective date of such change in the Borrowing Rate. The new Daily Periodic Rate will be applied to the Daily Balance beginning on that day. The current Borrowing Rate schedule will be provided to me upon request.

If I fail to pay any Obligation when demanded or due or there is an Event of Default under the Line of Credit, I agree to pay an interest charge at two percentage points (2%) above the applicable rate that would otherwise be in effect.

Without prejudice to my obligation to make payment on demand, I agree to pay all of my interest charges on the first Business Day of each month. Such amount will automatically be paid from my Deposit Sweep or Money Market Sweep Account to the extent there are sufficient available funds. In the event the total balance is insufficient, I agree to pay such interest charges from other sources upon your demand.

My Billing Rights: Keep This Document For Future Use The following sections tell me about my rights and your responsibilities under the Fair Credit Billing Act.

What To Do If I Find A Mistake On My Statement

If I think there is an error on my Asset Account statement relating to my Line of Credit, I will send you a letter to:

JPMorgan Chase Bank, N.A.
500 Stanton Christiana Road, 1/OPS
Newark, DE 19713-2107

In my letter, I will give you the following information:

• Account information: My name and Asset Account number.

• Dollar amount: The dollar amount of the suspected error.

• Description of problem: If I think there is an error on my bill, describe what I believe is wrong and why I believe it is a mistake.

I must contact you:

• Within 60 days after the error appeared on my statement.

• At least 3 business days before an automated payment is scheduled, if I want to stop payment on the amount I think is wrong.

I must notify you of any potential errors in writing (or electronically). I may telephone you, but if I do you are not required to investigate any potential errors and I may have to pay the amount in question.

What Will Happen After You Receive My Letter

When you receive my letter, you must do two things:

• Within 30 days of receiving my letter, you must tell me that you received my letter. You must also tell me if you have already corrected the error.

• Within 90 days of receiving my letter, you must either correct the error or explain to me why you believe the statement was correct.

While you investigate whether or not there has been an error:

• You cannot try to collect the amount in question, or report me as delinquent on that amount.

• The charge in question may remain on my statement, and you may continue to charge me interest on that amount.

• While I do not have to pay the amount in question, I am responsible for the remainder of my balance.

• You can apply any unpaid amount against my credit limit.

After you finish your investigation, one of two things will happen:

• If you made a mistake: I will not have to pay the amount in question or any interest or other fees related to that amount.

• If you do not believe there was a mistake: I will have to pay the amount in question, along with applicable interest and fees. You will send me a statement of the amount I owe and the date payment is due. You may then report me as delinquent if I do not pay the amount you think I owe.

If I receive your explanation but still believe my Asset Account statement is wrong, I must write to you within 10 days telling you that I still refuse to pay. If I do so, you cannot report me as delinquent without also reporting that I am questioning my statement. You must tell me the name of anyone to whom you reported me as delinquent, and you must let those organizations know when the matter has been settled between us.

If you do not follow all of the rules above, I do not have to pay the first $50 of the amount I question even if my Asset Account statement is correct.

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AGREEMENTS FOR ACCOUNTS AND SERVICES OFFERED THROUGH J.P. MORGAN SECURITIES INC. AND J.P. MORGAN ENTITIES

The parties to the agreements set forth below shall consist of the client and J.P. Morgan Securities Inc., its successor firms, present and future direct or indirect subsidiaries, affiliates and assigns with which the client transacts securities brokerage business. (Each affiliate is referred to as a “J.P. Morgan entity” and all J.P. Morgan entities together with J.P. Morgan Securities Inc. are referred to collectively as “J.P.Morgan”.)

JPMSI obligations and the Securities sold, offered, or recommended by JPMSI are not deposits and are not insured by the Federal Deposit Insurance Corporation (“FDIC”). JPMSI is not a bank and is a separate legal entity from JPMorgan Chase Bank, N.A. (“JPMCB”) and all other Morgan Affiliates. The obligations of JPMSI are not obligations of JPMCB or any other Morgan Affiliate (unless explicitly stated otherwise), and neither JPMCB nor any other Morgan Affiliate is responsible for Securities sold, offered, or recommended by JPMSI. JPMCB and other Morgan Affiliates may be lenders to issuers of Securities that JPMSI underwrites, in which case proceeds of offerings underwritten by JPMSI may be used for the repayment of such loans. The disclosure documents relating to particular Securities will discuss any such lending relationships.

Brokerage Accounts will be subject to the Brokerage Account Agreement below. Margin Accounts will be subject to the Margin Account Agreement (which incorporates the terms of the Brokerage Account Agreement).

BROKERAGE ACCOUNT AGREEMENT

1. Nature of Services

(a) A J.P. Morgan entity will execute transactions accepted by it and/or will provide such other clearance, settlement and custody services in connection with the maintenance of the client’s Account(s) at J.P. Morgan.

(b) All investments executed through a J.P. Morgan Brokerage Account are made upon the client’s sole discretion, risk and responsibility. J.P. Morgan may choose to contact clients about investment opportunities J.P. Morgan believes may be of interest to a client, but J.P. Morgan is not obliged to provide the client with any financial, market or investment information, nor advice or oversight with respect to asset allocation. J.P. Morgan personnel do not take discretion over any client Accounts, although the client may obtain such advice and services from JPMCB under separate agreements.

(c) Any J.P. Morgan entity that is a party to this Agreement is acting as a broker-dealer and/or custodian, and not as (1) an investment adviser under the Investment Advisers Act of 1940, or (2) a “fiduciary” as defined in Section 3(21) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or Section 4975 of the Internal Revenue Code of 1986, as amended (“Code”), with respect to the client’s Account(s) under this Agreement. Brokerage activities are regulated under different laws and rules than advisory activities and generally do not give rise to the fiduciary duties that an investment adviser has to its clients. When acting in a brokerage capacity, J.P. Morgan has a duty to deal fairly with brokerage clients but may face certain conflicts of interest and as such, J.P. Morgan’s interests may differ from those of its clients. Neither J.P. Morgan nor its employees are authorized to provide, and shall not provide, legal, estate planning, tax or accounting advice or services and the client will not solicit or rely upon any such advice from them whether in connection with transactions in any of the client’s Accounts or otherwise. The client has consulted or will consult with the client’s own technical, legal, regulatory, tax, business, investment, financial and accounting advisors to the extent the client deems necessary in determining the investment and trading strategy appropriate for the client and the appropriateness of each transaction. J.P. Morgan assumes no responsibility for the accuracy and completeness of or the performance or outcome or tax consequences of any investment made by the client as a result of receiving information from J.P. Morgan, and J.P. Morgan has no obligation to update the information or recommendation provided. J.P. Morgan’s recommendation does not imply any endorsement or guarantee.

(d) J.P. Morgan shall not be obligated to take any action or render any advice with respect to the voting of proxies related to issues of securities held in a client’s Account(s). Further, there may be instances when the client may not be able to exercise voting or other rights of ownership. The J.P. Morgan entity that acts as custodian for the Account will forward all proxies received by it, including proxy solicitation material and other related material, including interim reports, annual reports and other issuer mailings to the client and the client is responsible for providing such J.P. Morgan entity with any applicable instructions or directions contemplated by such communications.

(e) In addition to retaining the sole responsibility for investment decisions and shareholder actions, the client is responsible for knowing the rights and terms of all securities in the client’s Brokerage Account, specifically including valuable rights that may expire unless the client take action. This includes, but is not limited to, warrants, stock rights, convertible securities, bonds, and securities subject to a tender or exchange offer. J.P. Morgan has no obligation to notify the client of any upcoming expiration or redemption dates, or, except as required by applicable law or regulation, to take any action on the client’s behalf without specific instructions from the client.

(f) Unless I have instructed you otherwise in writing, or such release is mandatory, you are authorized to release to issuing companies my name, address, and share positions, in compliance with applicable laws.

2. Satisfaction of Liabilities; Security Interest and Lien

(a) The client agrees to satisfy each and every obligation or liability owed to J.P. Morgan (such obligations or liabilities, whether fixed, matured, unmatured, liquidated, unliquidated or contingent, “Obligations”) when due, including without limitation, to pay any debit balance in any Account and any costs described in this Agreement and in the event of a sell or redemption order by the client, to deliver the applicable security in good deliverable form no later than the deadline set by J.P. Morgan if the applicable security is not credited to an Account at the time such order is placed or settled.

(b) To secure the payment and performance of Obligations to each J.P. Morgan entity providing products or services to the client pursuant to this Agreement, the client hereby grants each such J.P. Morgan entity a lien on and a valid and first priority, perfected, continuing security interest in the following: (i) all property, including all investment property, held, carried or controlled by or through any J.P. Morgan entity in which J.P. Morgan presently has or in which the client acquires an interest in the future, including all property in each Account in the client’s name, (ii) any and all rights, claims or causes of action the client may now or hereafter have against any J.P. Morgan entity and (iii) all proceeds of or distributions on the foregoing (collectively (i) through (iii) are referred to in this Agreement as “Collateral”). Each item of property, including Investment Property, a Security, a general intangible, contract rights, an Instrument and cash, held in or credited to any Securities Account at a Securities Intermediary shall be treated as a Financial Asset. All undefined terms in the preceding sentence shall have the meanings ascribed to them in the New York Uniform Commercial Code (“NYUCC”), as in effect from time to time.

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(c) Any Collateral held by a J.P. Morgan entity is held by such J.P. Morgan entity as agent and bailee for itself and all other J.P. Morgan entities. Each J.P. Morgan entity holding Collateral shall, without the client’s further consent, comply with (i) entitlement orders or instructions from a J.P. Morgan entity with respect to the Collateral and (ii) if such J.P. Morgan entity holding Collateral is a commodity intermediary, any instructions to such J.P. Morgan entity from another J.P. Morgan entity to apply any value distributed on account of a commodity contract. Additionally, each J.P. Morgan entity holding Collateral has the right, in its sole discretion, (i) to decline to enter into control agreements with third parties and (ii) to decline to comply with (a) any entitlement order or instruction from the client or a third party with respect to the Collateral and (b) any instruction from the client to apply any value on account of any commodity contract, if a J.P. Morgan entity requests that such order or instruction not be complied with in order to maintain security for the payment and performance of the client’s Obligations to it. Further, each J.P. Morgan entity is authorized, at any time and without notice to the client, to transfer Collateral from any Account to any account of an obligor for which J.P. Morgan has provided a guarantee within such J.P. Morgan entity and/or at any other J.P. Morgan entity to collateralize or satisfy any Obligations of such obligor. The client agrees that the actions of a J.P. Morgan entity in declining to comply with orders or instructions as allowed in this Section 2(c) satisfies any duties J.P. Morgan may have under the NYUCC.

(d) The client agrees that the client’s execution of this Agreement shall constitute notice to each J.P. Morgan entity of the security interest the client has granted to each other J.P. Morgan entity herein, and each J.P. Morgan entity holding Collateral is on notice of the security interest granted to each other J.P. Morgan entity.

(e) The reasonable costs and expenses of collection of any such indebtedness or debit balance, including but not limited to attorneys’ fees and expenses, shall be payable by the client to J.P. Morgan.

(f) In order to secure the payment and performance of any of the client’s outstanding Obligations to any J.P. Morgan entity, J.P. Morgan may, to the fullest extent permitted by law, without prior notice to the client use, apply or transfer Collateral as it determines. Unless otherwise agreed in writing, J.P. Morgan may register and hold Collateral in its name or the name of its designee.

(g) The client appoints J.P. Morgan with full power as the client’s true and lawful attorney-in-fact, to the fullest extent permitted by law, for the purpose of perfecting the security interest granted in this Agreement and taking any action and executing any instrument that J.P. Morgan deems necessary or advisable to accomplish the purposes of this Agreement.

3. Restrictions on Trading

In its sole discretion, J.P. Morgan may prohibit or restrict trading in a Brokerage Account. The client shall nevertheless remain liable for all of the client’s Obligations to J.P. Morgan under this Agreement or otherwise.

4. Representations and Warranties

The client hereby represents and warrants to J.P. Morgan that: (i) no other party has an interest or shall have an interest in the Property or Collateral unless J.P. Morgan has consented in writing to the other party’s interest; (ii) the client has the right to pledge and assign Collateral to J.P. Morgan; (iii) except as the client may have informed or may from time to time inform J.P. Morgan in writing, the client is not an affiliate (as defined in Rule 144(a)(1) under the Securities Act of 1933) of the issuer of any Security held in a Margin Account; (iv) since the date of the client’s most recent audited or unaudited financial statements (if any) there has been no material adverse change in the client’s business, financial condition, results of operations or prospects; (v) the client has not taken or failed to take, and shall not take any action or fail to take, any action with respect to an Account(s) that would result in a non-exempt prohibited transaction under ERISA, the Code or any applicable state, local or non-US law that is similar to the provisions of Section 406 of ERISA or Section 4975 of the Code; and (vi) all of the client’s other representations made in the Account application and under the General Terms and Brokerage Account Agreement continue to be true.

5. Confirmation Reports and Account Statements

Confirmation reports of transactions shall be conclusive if not objected to in writing by the client within the shorter of (i) the applicable settlement cycle of the subject transactions or (ii) three (3) business days after such documents have been transmitted to the client by mail or otherwise. Statements of Account(s) shall be conclusive if not objected to in writing by the client within thirty (30) Business Days after transmission. In all cases, J.P. Morgan reserves the right to challenge a client’s objections.

6. Service Fees; Taxes

(a) J.P. Morgan may charge Brokerage Accounts for brokerage commissions, mark-ups, inactivity fees (if applicable) and other fees for the maintenance of Account(s), the execution of transactions, fails, buy-ins, and currency conversions, and for furnishing other services to the client (collectively, “Service Fees”). Service Fees may be implemented or increased from time to time.

(b) The client will be responsible for and pay any applicable value added tax and such other taxes, duties and fees applicable to activities in the client’s Account(s). Amounts owed to J.P. Morgan shall not be affected by any taxes, duties or other amounts J.P. Morgan may owe to any third party. If the client is required by law to make any deduction or withholding from any payment due to J.P. Morgan, the client shall pay to J.P. Morgan simultaneously with making such payment an additional amount as may be necessary in order for the total amount received by J.P. Morgan after all deductions and withholdings to be equal to the amount which J.P. Morgan would have received had no deduction or withholding been made. Any and all taxes, including any interest and penalties with respect thereto, which may be levied or assessed under present or future laws upon or in respect to the client’s Account(s), activities or upon or in respect of income thereof shall be paid by the client. All Service Fees, charges, expenses, disbursements and taxes as described above may be deducted by J.P. Morgan from the client’s Account(s).

7. Payments to J.P. Morgan

J.P. Morgan may receive payments or other remuneration from the advisers, distributors or other affiliates of certain of the mutual funds available through J.P. Morgan. Such payments or remuneration are for administrative, technological or other services provided in connection with fund Accounts and generally are calculated based on the amount of assets held in the Accounts. Such payments or other remuneration are in addition to shareholder servicing and distribution fees that J.P. Morgan may receive. Funds whose affiliates do not make payments to J.P. Morgan, including funds that may provide a higher or lower return, may be available to clients. Further, in certain instances, J.P. Morgan may be paid both by clients and certain other third parties who compensate J.P. Morgan based upon what clients purchase and J.P. Morgan’s profits and compensation may vary by product and over time.

8. Control or Restricted Securities

The client hereby agrees, prior to placing an order with J.P. Morgan, to inform J.P. Morgan if the securities are restricted or control securities and subject to: Rule 144, 144A, 145 or 701 of the Securities Act of 1933 (“Securities Act”); an effective registration statement; and/or any contractual limitation. The client understands and agrees that J.P. Morgan may not execute any orders regarding restricted or control securities

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until J.P. Morgan has conducted its due diligence surrounding the transaction and may in its sole discretion decline to execute the order until the securities have cleared legal transfer. The client further agrees to provide, without cost to J.P. Morgan, all documentation required by J.P, Morgan to complete the order, including, but not limited to, any required forms, representation letters, opinions of seller’s counsel and transfer documentation and authorizes J.P. Morgan to communicate with the issuer of the restricted or control securities, its attorneys and its transfer agent in connection with the client’s transaction. Furthermore, the client acknowledges and agrees that there may be time delays in connection with the due diligence process, the execution of the order and the processing of the transaction and further acknowledges and agrees that the proceeds of the transactions may not be paid until the securities have been transferred into street name and delivered, free of restrictive legend and stop transfer instruction. J.P. Morgan shall not be liable for any losses, direct or indirect, that may have been caused by such delays.

9. Short and Long Sales

Short sales must be executed in a Margin Account. In placing any sell order for a long Account, the client will designate the order as such and hereby authorizes J.P. Morgan to mark the order as being “long.” The designation by the client of a sell order as being for a long Account shall constitute a representation by the client that the client owns the security with respect to which the sell order has been placed, that such security may be sold without restriction in the open market and that, if J.P. Morgan does not have the security in its possession at the time the client places the sell order, the client shall deliver the security by settlement date in good deliverable form and if the client fails to deliver as such, J.P. Morgan is authorized (but is not required to) to borrow, purchase, or otherwise acquire the security in order to make delivery. The client shall be liable to J.P. Morgan for any losses and expenses it may incur or sustain as a result of the client’s failure to make delivery on a timely basis and for any loss, expense, premium and other costs incurred in connection with borrowing, purchase or acquisition of the required securities.

10. Obligations Upon Termination

Upon termination of this Agreement or the closing of the client’s Account(s), the client will be responsible for issuing instructions in writing with regard to the assets held in the Account(s). Unless and until J.P. Morgan receives such instructions, it will be under no obligation to take any action with regard to the Securities and Property in the Accounts. The client agrees to be responsible for any transaction costs associated with the client’s instructions, including commissions and related costs.

THE FOLLOWING SECTION REGARDING ARBITRATION APPLIES ONLY TO BROKERAGE AND MARGIN ACCOUNTS WITH A J.P. MORGAN ENTITY

11. Arbitration; Consent to Jurisdiction; Service of Process

(a) THIS AGREEMENT CONTAINS A PREDISPUTE ARBITRATION CLAUSE. BY SIGNING AN ARBITRATION AGREEMENT THE PARTIES AGREE AS FOLLOWS:

• ALL PARTIES TO THIS AGREEMENT ARE GIVING UP THE RIGHT TO SUE EACH OTHER IN COURT, INCLUDING THE RIGHT TO A TRIAL BY JURY, EXCEPT AS PROVIDED BY THE RULES OF THE ARBITRATION FORUM IN WHICH A CLAIM IS FILED.

• ARBITRATION AWARDS ARE GENERALLY FINAL AND BINDING; A PARTY’S ABILITY TO HAVE A COURT REVERSE OR MODIFY AN ARBITRATION AWARD IS VERY LIMITED.

• THE ABILITY OF THE PARTIES TO OBTAIN DOCUMENTS, WITNESS STATEMENTS AND OTHER DISCOVERY IS GENERALLY MORE LIMITED IN ARBITRATION THAN IN COURT PROCEEDINGS.

• THE ARBITRATORS DO NOT HAVE TO EXPLAIN THE REASON(S) FOR THEIR AWARD.

• THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.

• THE RULES OF SOME ARBITRATION FORUMS MAY IMPOSE TIME LIMITS FOR BRINGING A CLAIM IN ARBITRATION. IN SOME CASES, A CLAIM THAT IS INELIGIBLE FOR ARBITRATION MAY BE BROUGHT IN COURT.

• THE RULES OF THE ARBITRATION FORUM IN WHICH THE CLAIM IS FILED, AND ANY AMENDMENTS THERETO, SHALL BE INCORPORATED INTO THIS AGREEMENT.

• NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE CLASS ACTION OR WHO IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL:

i)	THE CLASS CERTIFICATION IS DENIED;
ii)	THE CLASS IS DECERTIFIED; OR
iii)	THE CLIENT IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN.

• BY ENTERING INTO THIS AGREEMENT THE CLIENT AND J.P. MORGAN AGREE THAT CONTROVERSIES ARISING UNDER OR RELATING TO THIS AGREEMENT OR ANY ACTIVITY BETWEEN THE CLIENT AND J.P. MORGAN, ITS PREDECESSORS, AND ANY OF THEIR RESPECTIVE SUCCESSORS, ASSIGNS, AND ANY OF THEIR, DIRECTORS, EMPLOYEES, AND ANY OTHER CONTROL PERSONS AND ANY OF THEIR AGENTS, WHETHER ARISING PRIOR TO, ON OR SUBSEQUENT TO THE DATE HEREOF, SHALL BE DETERMINED BY ARBITRATION AND IN ACCORDANCE WITH THE RULES OF THE FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. (“FINRA”) BEFORE AN ARBITRATION PANEL APPOINTED BY FINRA IN ACCORDANCE WITH ITS RULES, AND SUCH HEARING OR HEARINGS SHALL BE CONDUCTED IN A LOCALE SELECTED BY FINRA. THE AWARD OF THE ARBITRATORS, OR OF THE MAJORITY OF THEM, SHALL BE FINAL, AND JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION.

(b) Notwithstanding the provisions of subparagraph (a) above, either party may, at any time prior to the initial arbitration hearing pertaining to such dispute or controversy, seek by application to the U.S. District Court for the Southern District of New York or the Supreme Court of the State of New York for the County of New York any such temporary or provisional relief or remedy (“Provisional Remedy”) provided for by the laws of the U.S. or the laws of the State of New York as would be available in an action based upon such dispute or controversy in the absence of an agreement to arbitrate. The parties acknowledge and agree that it is their intention to have any such application for a Provisional Remedy decided by the Court to which it is made and that such application shall not be referred to or settled by arbitration. No such application to either said Court for a Provisional Remedy, nor any act or conduct by either party in furtherance of or in opposition to such application, shall constitute a relinquishment or waiver of any right to have the underlying dispute or controversy with respect to which such application is made settled by arbitration in accordance with subparagraph (a) above.

(c) With respect to any application for a Provisional Remedy and any application for judgment on an arbitration award, each party irrevocably (i) submits to the jurisdiction of the U.S. District Court for the Southern District of New York or the Supreme Court of the State of New York for the County of New York, (ii) waives any objection which it may have at any time to the laying of venue of any proceedings brought in any

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such court, waives any claim that such proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such proceedings, that such court does not have any jurisdiction over such party, and (iii) consents to service of process by certified mail, return receipt requested, to the address provided for herein.

(d) The client hereby agrees to receive service of process in connection with any legal matters or actions or proceedings based upon, arising out of or relating in any way to this Agreement by confirmed, return-receipt requested mail and that delivery shall be presumed if such service is mailed to the address maintained by J.P. Morgan in its records.

(e) The client agrees that in any arbitration proceeding with J.P. Morgan, the arbitrators shall be bound by, and obligated to follow, the substantive law of the State of New York and of the United States regardless of where the agreement was executed, except to the extent that such laws would permit the arbitrators to disregard the substantive laws of the State of New York and the United States.

(f) The client agrees that the terms of any settlement or any award determined by arbitration shall be confidential and shall not be disclosed by the client, the client’s attorneys or the client’s representatives under any circumstances unless required by applicable law, judicial proceeding, or self-regulatory organization rule or order.

(g) This arbitration provision may be waived only with the written agreement of J.P. Morgan.

12. Severability

If and to the extent any term or provision herein is or should become invalid or unenforceable, then (i) the remaining terms and provisions hereof shall be unimpaired and remain in full force and effect and (ii) the invalid or unenforceable provision or term shall be replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of such invalid or unenforceable term or provision.

13. Affiliations

If the client is a natural person, the client represents that unless the client has notified J.P. Morgan to the contrary, neither the client nor any member of the client’s immediate family is: (i) an employee or member of any exchange, (ii) an employee or member of FINRA, (iii) an employee of any corporation or firm engaged in the business of dealing, as broker or principal, in securities, options or futures or (iv) an employee of any bank, trust company or insurance company. Persons signing on behalf of others should indicate the titles or capacities in which they are signing. If any of the foregoing information changes, the client agrees to notify J.P. Morgan promptly. If the client is required to obtain his or her employer’s consent before opening a securities account, the client has obtained such consent.

14. Custody

Unless the client specifies otherwise, JPMCB will act as custodian of the Property in all brokerage Accounts in accordance with the provisions relating to the Custody Account in the Asset Account Agreement.

MARGIN DISCLOSURE STATEMENT

This Margin Agreement provides some basic facts about purchasing Securities on margin and will alert the client to certain risks involved with trading Securities in a Margin Account. Before trading Securities in a Margin Account, the client will fully review all terms and conditions of this Margin Agreement and the client will consult J.P. Morgan regarding any questions or concerns the client has about the Margin Account.

When the client purchases Securities, the client may pay for Securities in full unless the client borrows part of the purchase price from J.P. Morgan through a Margin Account. The Securities purchased are J.P. Morgan’s Collateral for the loan extended to the client. If the Securities in the Account decline in value, so does the value of the Collateral supporting the loan and, as a result, J.P. Morgan can take action, including issuing a margin call and/or selling Securities or other assets in any of the client’s Accounts, in order to maintain the required ratio of debt to equity in the Account.

The client fully understands the risks of trading Securities on margin, which are heightened over purchasing them in full with the client’s own existing funds. These risks include, but are not limited to, the following:

• The client can lose more funds than the client deposits in the Margin Account. A decline in the value of Securities that are purchased on margin may require that the client provide additional funds to avoid the forced sale of those Securities or other Securities or assets in the client’s Accounts.

• J.P. Morgan can force the sale of Securities or other assets in the client’s Accounts. If the equity in an Account falls below the margin requirements or J.P. Morgan’s higher “house” requirements, J.P. Morgan can sell the Securities or other assets in the Accounts to cover the margin deficiency. The client will also be responsible for any shortfall in the Account after such a sale.

• J.P. Morgan is not required to contact the client for a margin call to be valid, and J.P. Morgan may liquidate Securities or other assets in Accounts to meet the margin call without contacting the client first or obtaining the client’s permission. J.P. Morgan may take all necessary steps to protect its financial interests, including immediately liquidating Securities or other assets without prior notice to the client and without the client’s consent.

• Because the Securities are collateral for the margin loan, the client is not entitled to choose which Securities or other assets in the Accounts will be liquidated or sold to meet a margin call. J.P. Morgan has the sole right to decide which Securities and assets to sell in order to protect its interests.

• J.P. Morgan can increase its “house” maintenance margin requirements at any time and is not required to provide to the client advance notice, in writing or otherwise. These changes in J.P. Morgan’s policy often take effect immediately and may result in the issuance of a maintenance margin call. The client’s failure to satisfy the call may result in the liquidation or sale of Securities in the client’s Accounts.

• The client is not entitled to an extension of time on a margin call. While an extension of time to meet margin requirements may be available to clients under certain circumstances and at J.P. Morgan’s sole discretion, a client does not have the right to an extension.

MARGIN ACCOUNT AGREEMENT

1. Margin and Other Collateral Requirements

The client agrees (i) to deposit and maintain such margin in the client’s margin Account(s) as J.P. Morgan may in its sole discretion require; (ii) to pay on demand any debit balance owing with respect to any of the client’s margin Account(s); (iii) that margin calls may be communicated orally, without subsequent written confirmation; (iv) to deposit promptly and maintain such other Collateral with J.P. Morgan as is required by applicable law or regulation or by J.P. Morgan under this Agreement or any other agreement; and (v) that no demands, calls, tenders or notices that J.P. Morgan may have made or given in the past shall obligate J.P. Morgan to make or give the same in the future.

2. Breach, Bankruptcy or Default; Remedies

(a) Each J.P. Morgan entity may elect to consider the client in default of any or all agreements the client may then have with it if: (i) the client does not pay any liability or perform any Obligation to any J.P. Morgan entity by the time the client is

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obligated to do so; (ii) the client otherwise breaches, repudiates or defaults under this Agreement or any other agreement the client may have with any J.P. Morgan entity; (iii) the client commences a proceeding in bankruptcy or insolvency or one is commenced against the client; (iv) any guarantor, co-signer or other party (a “Responsible Party”) liable for or providing security for the client’s Obligations to any J.P. Morgan entity defaults in its obligation to J.P. Morgan or commences a proceeding in bankruptcy or insolvency or one is commenced against it; (v) an attachment is made against the client or a Responsible Party’s Account(s) with any J.P. Morgan entity; (vi) a receiver is appointed with respect to the client, any of assets of the client or the assets of a Responsible Party; (vii) if the client is a natural person, the client dies or becomes incompetent, and if the client is an entity, the client merges, liquidates or dissolves; or (viii) an event, circumstance or condition occurs that, in J.P. Morgan’s judgment, materially impairs the client’s creditworthiness, ability to timely perform Obligations to J.P. Morgan or otherwise causes J.P. Morgan to view itself as insecure. The occurrence of any of the foregoing is referred to as an “Event of Default. ”

(b) Upon the election by J.P. Morgan to consider the client in default, each J.P. Morgan entity shall have all of the rights and remedies of a secured party upon default under the NYUCC and other applicable laws and may, without notice to the client among other things, (i) in whole or in part, accelerate, cancel, terminate, liquidate or otherwise close out this Agreement in accordance with the terms of this Agreement and (ii) foreclose, collect, sell or otherwise liquidate any Collateral a J.P. Morgan entity selects in its sole discretion, in any order and at any time, and apply, in a manner determined by J.P. Morgan in its sole discretion, the proceeds to satisfy any of the client’s Obligations to any J.P. Morgan entity and (iii) buy any property that may have been sold short and (iv) retain any Collateral and (v) set-off, net, and/or recoup a J.P. Morgan entity’s obligation to the client against any of the client’s Obligations to any J.P. Morgan entity, and the client’s Obligations to a J.P. Morgan entity shall be deemed performed and discharged to the extent any J.P. Morgan entity has effected a valid and unavoidable set-off, netting or recoupment, and the client expressly waives any requirement of mutuality to allow one J.P. Morgan entity to set-off, net or recoup any Obligation owed by the client to a J.P. Morgan entity against any obligation of a different J.P. Morgan entity to the client and (vi) calculate any obligation due to the client by first deducting any Obligation that the client owes to any J.P. Morgan entity before determining the final amount of any such obligation and (vii) in each J.P. Morgan entity’s discretion, convert at the client’s expense any Obligation from one currency into another currency at such rates as J.P. Morgan shall determine and (viii) take any other action permitted by law or in equity to protect, preserve or enforce J.P. Morgan’s rights or to reduce any risk to J.P. Morgan of loss or delay, including entering into hedging transactions for the client’s Account(s) and risk.

(c) At any sale of Collateral or other sale or purchase permitted hereunder or otherwise, J.P. Morgan may sell or purchase to or from itself or third parties, and the client hereby acknowledges and agrees that the securities subject to such sale or purchase are instruments traded in a recognized market. The client will pay each J.P. Morgan entity for any losses and costs incurred by J.P. Morgan as a result of any default by the client. The client waives marshalling of assets and any similar doctrine dealing with the application of Collateral. J.P. Morgan’s rights and remedies hereunder are cumulative and are in addition to any other rights and remedies available at law or in equity.

3. Short Sales

The client will designate any short sales as such and hereby authorizes J.P. Morgan to mark the order as being “short” or “short exempt.” Short sales are margin transactions and must be conducted in a Margin Account. Short sale transactions are subject to certain regulatory rules and cannot be executed under certain market conditions. J.P. Morgan does not guarantee that it will be able to locate Securities to facilitate a short sale. J.P. Morgan may, in its discretion and without notice to the client, “buy in” Securities to cover any short security position in the client’s Margin Account. If the client is unable to cover a short security position (either through delivery of the Security or through J.P. Morgan “buying in” the Security) in enough time for J.P. Morgan to deliver the Security to its lender (to whom J.P. Morgan is obligated), the client agrees to reimburse J.P. Morgan for the losses J.P. Morgan sustains as a result of the client’s failure to cover.

4. Special Charges for Short Sales In Hard-To-Borrow Securities

With respect to any short sale transactions in securities that are or become hard-to-borrow, the client’s Account(s) also may be charged an amount equal to the sum of (i) the costs and expenses incurred by J.P. Morgan and (ii) a Service Fee in connection with the establishment and/or maintenance of the client’s short positions in that security (together, “Short Sale Charges”). A security is or becomes hard-to-borrow when increased short selling in that security in the market causes an increase in demand to borrow the security, which in turn causes an increase in the cost and expense to J.P. Morgan in establishing and/or maintaining a short position in such security for the client’s Account(s). Short Sale Charges may be disclosed to the client at the time a short position is established or may be imposed or increased from time to time in light of changing market conditions and the client agrees to pay such Short Sale Charges at J.P. Morgan’s then-prevailing rates.

THE FOLLOWING SECTIONS REGARDING THE LOAN, PLEDGE OR USE OF SECURITIES AND FREE CREDIT BALANCES APPLY ONLY TO MARGIN ACCOUNTS WITH A J.P. MORGAN ENTITY AND NOT TO ANY OTHER ACCOUNT

5. Consent to Loan, Pledge or Use Securities in Margin Accounts

(a) To the greatest extent permitted under Applicable Laws, the client hereby authorizes J.P. Morgan to lend either to itself or to others and to otherwise use, sell or pledge any securities held by J.P. Morgan in any of the client’s Margin Account(s), to convey therewith all attendant rights of ownership (including voting rights) and to use all such property as Collateral for J.P. Morgan’s general loans and/or other obligations or with respect to repurchase transactions. Any such property, together with all attendant rights of ownership, may be pledged, repledged, sold, hypothecated, rehypothecated, become subject to a repurchase transaction either separately or in common with other property for any amounts due to J.P. Morgan thereon, and for a greater sum than, and for periods longer than, any Obligation that the client owes to J.P. Morgan, and J.P. Morgan shall have no obligation to retain a like amount of similar property in its possession and control. The client hereby acknowledges that, as a result of such activities, (i) J.P. Morgan may receive and retain certain benefits to which the client will not be entitled and (ii) the securities in a margin Account(s) may be used as Collateral by J.P. Morgan for loans made to it in excess of the client’s indebtedness to J.P. Morgan.

(b) In certain circumstances, such loans or other use may limit, in whole or in part, the client’s ability to receive dividends directly from the issuing company and/or the client’s right to exercise voting and other attendant rights of ownership with respect to the loaned, sold or pledged securities. Such circumstances include, but are not limited to, loans of securities that the client owns in margin Account(s) that continue over record dates for voting purposes and ex-dividend dates for dividend distributions. Record dates and ex-dividend dates are declared by the issuing company. If J.P. Morgan does not receive dividends directly from the company, the client may receive payments-in-lieu of dividends which may

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cause the client to lose the benefit of the preferential tax treatment accorded to dividends.

6. Free Credit Balances

The client hereby authorizes J.P. Morgan to use any free credit balance in any of the client’s Margin Account(s) in accordance with all applicable laws and to pay interest thereon at such rate or rates and under such conditions as are established from time to time by J.P. Morgan for such Margin Account(s) and for the amounts of cash so used. In accordance with applicable regulations, free credit balances are carried in clients’ Margin Accounts pending, and with a view towards, reinvestment. J.P. Morgan may determine not to pay interest on free credit balances (i) representing either uncollected funds (i.e., any deposited non-cash items (e.g., checks) for which J.P. Morgan has not yet received credit) or funds that is deposited and subsequently withdrawn prior to the expiration of the minimum time period required by J.P. Morgan, or (ii) where prohibited by applicable law.

7. Custody

A J.P. Morgan entity will act as custodian of all Collateral and/or Property held pursuant to this Margin Account Agreement.

8. General Terms; Definitions

This Agreement is subject to the General Terms for Accounts and Services (the “General Terms”) and to the terms and conditions, including, without limitation, those pertaining to arbitration, contained in the Brokerage Account Agreement (other than terms pertaining to custody). References to the Brokerage Account shall be deemed to be references to the Margin Account and references to the Brokerage Account Agreement shall be deemed to be references to this Agreement.

Capitalized terms not defined in this Agreement have the meanings given to them in the General Terms and the Brokerage Account Agreement. To the extent there are any conflicts between the General Terms and the terms of this Agreement or between the Brokerage Account Agreement and this Agreement, this Agreement will prevail.

DISCLOSURE TO CLIENTS IN COMPLIANCE WITH FINRA RULE 4370 REGARDING CONTINUITY AND CONTINGENCY PLANS AND EMERGENCY CONTACT INFORMATION FOR J.P. MORGAN

J.P. Morgan adheres to a Resiliency Risk Management (“RRM”) Program which is an integral part of JPMorgan Chase & Co. normal business operations, and as such, is part of business planning and a critical responsibility of management. The RRM Program establishes and assesses the criticality of business processes, in addition to documenting strategies, gathering recovery information, identifying resources, and developing and maintaining a plan for action to recover business processes in a timely manner following a disruption, and to meet local and country regulatory requirements. The Resiliency Plans (contingency plans) are designed to respond to a worst-case scenario. This means the loss of a single location or an entire zone. Also, pursuant to the Resiliency Risk Management Policy, J.P. Morgan establishes minimum requirements for supporting and sustaining business resiliency services at levels commensurate with the associated business impact.

The following business continuity control practices are in place: A recovery plan designed to restore the J.P. Morgan environment, which includes alternative work spaces and back-up computer systems. The recovery plan is subject to periodic review, examination and/or testing by internal and independent auditors. The recovery test utilizes, in part, off-site copies of data, applications, and system software and synchronous or asynchronous systems. A regular review of resource needs is performed to update processing and storage requirements.

J.P. Morgan’s risk mitigation strategies are commensurate with our obligations to our clients, markets and regulators. J.P. Morgan will endeavor to sustain business on behalf of its clients on that same business day or, where applicable, on a best efforts basis, during any and all contingency events, recognizing that service may be impacted for longer periods depending upon the seriousness of the event. In addition, in that J.P. Morgan is dependent upon various infrastructures (e.g. transportation, telecommunications, exchanges, industry utilities, etc.) J.P. Morgan’s ability to implement its plans may be impacted by issues with these infrastructures.

The recovery and business continuity plans of J.P. Morgan are subject to modification without notice. Updates will be posted to the Morgan OnLine website and customers may request this information by contacting their J.P. Morgan representative.

RISKS OF CERTAIN INVESTMENTS

The types of investments below involve special risks that should be evaluated carefully before a decision is made to invest directly in a self-directed brokerage account at J.P. Morgan Securities Inc. or to include type of investment in guidelines for an investment management account at JPMCB or one of its banking affiliates. Not all of the risks and other significant aspects of these investments are discussed here. Clients are advised to consult with their own legal, tax, financial and accounting advisors to the extent deemed necessary and are expected to rely upon their own evaluation of information they receive when making investment decisions.

1. Over-The-Counter Derivatives

Most Over-the-Counter (“OTC”) Derivatives are contracts that take one of four basic forms, although the forms can be overlapping and one transaction can involve elements of all four forms. These basic forms are (1) swaps, (2) options, (3) forwards and (4) hybrid instruments (which are debt obligations or other securities with embedded swaps, options or forwards). OTC Derivatives may be structured to be settled in a variety of ways, including in cash or by physical delivery of property against cash. No matter what form is involved, a common feature of OTC Derivatives is that the obligations of one or both of the parties are based on the value or market price of one or more underlying financial or commodity markets, to which the transaction is linked. A Client should not enter into an OTC Derivative unless the Client understands, at a minimum:

• The fundamentals of the market underlying such OTC Derivative;

• The legal terms and conditions of the documentation for such OTC Derivative;

• The extent of the economic risk to which the Client is exposed as a result of such OTC Derivative;

• The tax treatment of such OTC Derivative; and

• The regulatory treatment of such OTC Derivative. The Client must determine that such investment and its risk are suitable in the light of the Client’s financial circumstances and objectives.

The following points should be considered in deciding whether to enter into a particular OTC Derivative:

• Market risk. To the extent the obligations or rights in respect of an OTC Derivative are linked to prices or values in a particular market, the Client will be exposed to a risk of loss as a result of price or value movements in that market.

• Credit Risk. JPMorgan Chase Bank, N.A. or one of its affiliates (a “Morgan Affiliate,” and together with JPMorgan Chase Bank, N.A., “JPMCB”) will generally be the counterparty in an OTC Derivative arranged by any Morgan Affiliate, including J.P. Morgan Securities Inc. (“JPMSI”). The Client therefore will be dependent upon the financial capacity of JPMCB to meet its obligations under each OTC Derivative contract prior to settlement, and may be unsecured with respect to those obligations of JPMCB (as opposed to being a creditor of a central clearing corporation as may generally be the case with exchange traded futures

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• Non-Transferability and Non-Marketability. OTC Derivatives will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), or under the securities laws of any state or other country unless otherwise specified in writing. OTC Derivatives will ordinarily be sold and offered in a transaction that is intended to be exempt from registration under the Securities Act by virtue of Section 4(2) of the Securities Act and/or Regulation D thereunder. There will be no public market for OTC Derivatives. In this regard, the Client will be required to represent that OTC Derivatives, or any securities underlying the OTC Derivatives, are being acquired for investment purposes only and not with a view to resale or distribution. OTC Derivatives generally cannot be assigned or transferred by a party without the prior written consent of the other party. JPMCB may, but is not obligated to, consent to the early termination of an OTC Derivative prior to its scheduled maturity at a negotiated price.It therefore may be impossible for the Client to liquidate a position in an OTC Derivative prior to maturity. Because OTC Derivatives are not standardized, engaging in another OTC Derivative transaction to offset an OTC derivative the Client has entered into with JPMCB will not automatically close out those positions (as may be true in the case of exchange-traded futures and options) and will not necessarily function as an effective hedge. The Client will continue to be obligated with respect to an OTC Derivative until it matures or is otherwise terminated.

• Price Transparency. Because the prices and characteristics of OTC Derivatives are individually negotiated and there is no central source for obtaining prices, dealers in OTC Derivatives may quote different prices for similar transactions. JPMCB does not warrant that its prices will always be the best prices available.

• Option Risk. Option transactions can be very risky. The risk of selling (writing) options is considerably greater than the risk involved in buying options. If the Client buys an option, the Client cannot lose more than the premium. If the Client sells (writes) an option, the risk can be unlimited. Fluctuations in currency exchange rates may affect the value of any OTC Option on securities trading in or denominated in a foreign currency, as well as the value of any payment or delivery of securities in connection with such OTC Option. Fluctuations in currency exchange rates may affect the value of any payment or delivery of securities in connection with such OTC Option.

• Leverage Risk. Certain derivatives can be structured to allow for significant leverage. The use of leverage may have the effect of magnifying an investor’s losses or gains and causing an investor to be highly exposed to risk with very little capital or cash investment. As a result, a relatively small, unexpected change in the notional amount of an investor’s position could have a much larger adverse impact on the principal amount invested.

• Collateral. Collateral may be required to support the Client’s obligations under OTC Derivatives. Additional collateral may be required after the Client has entered into an OTC Derivative. JPMCB and JPMSI will not provide the collateral for any OTC Derivative transaction.

Clients should not rely upon J.P. Morgan for an understanding of the risks, terms and conditions of OTC Derivatives, and the Client must review carefully the documentation for any OTC Derivative with a personal attorney or other adviser. J.P. Morgan will assume that when the Client enters into OTC Derivatives, the Client understands the characteristics and risk associated with such transactions.

2. Uncovered Options (Permitted Only in Self-Directed Accounts at JPMSI)

An uncovered (or “naked”) option transaction occurs when an investor buys or sells (writes) an option without having a position in the underlying asset. There are special risks associated with uncovered option writing which expose the investor to potentially significant loss. Therefore, this type of strategy may not be suitable for all clients, including those generally approved for options transactions.

The potential loss of uncovered call writing is unlimited. The writer of an uncovered call is in an extremely risky position, and may incur large losses if the value of the underlying instrument increases above the exercise price.

As with writing uncovered calls, the risk of writing uncovered put options is substantial. The writer of an uncovered put option bears a risk of loss if the value of the underlying instrument declines below the exercise price. Such loss could be substantial if there is a significant decline in the value of the underlying instrument.

Uncovered option writing thus is suitable only for the knowledgeable investor who understands the risks, has the financial capacity and willingness to incur potentially unlimited losses, and has sufficient liquid assets to meet applicable margin requirements. In this regard, if the value of the underlying instrument moves against an uncovered writer’s options position, JPMSI may liquidate stock or options positions in the Client’s account, with little or no prior notice in accordance with the Client’s Margin Agreement.

For combination writing, where the investor writes both a put and a call on the same underlying instrument, the potential risk also is unlimited.

If a secondary market in options were to become unavailable, investors could not engage in closing transactions, and an option writer would remain obligated until expiration or assignment.

The writer of an American-style option is subject to being assigned an exercise at any time after he has written the option until the option expires. By contrast, the writer of a European-style option is subject to exercise assignment only during a specified exercise period.

Note: This brief discussion is not intended to enumerate all of the risks entailed in writing uncovered options. It is expected that the Client also will read the booklet entitled Characteristics and Risks of Standardized Options available from JPMSI. In particular, the Client’s attention is directed to the chapter entitled Risks of Buying and Writing Options. If the Client enters into an option contract, the Client thereby will confirm that the Client has received and read the aforementioned booklet.

3. Emerging Markets

Emerging markets securities and transactions involving emerging markets securities are subject to substantial risk arising from a number of factors including, but not limited to: (1) economic and political instability in the regions where emerging markets issuers conduct business, (2) significant volatility in the markets for emerging markets securities and the currencies in which they may be denominated and (3) the potential for loss of the Client’s entire investment as a result of insolvency, market or government action, or other similar factors which could render the securities valueless.

Generally less information is publicly available with respect to emerging markets issuers and obligors than is available with respect to United States companies. Many emerging markets companies are not subject to the uniform accounting and

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financial reporting requirements applicable to issuers and obligors in the United States; additionally, accounting, auditing, financial and other reporting standards in emerging markets jurisdictions are often not equivalent to the standards established in the United States and therefore disclosure of certain material information may not be made.

There may exist only small markets for certain emerging markets securities, resulting in low or non-existent volumes of trading in such assets, and therefore a lack of liquidity and price volatility of such assets. Settlement periods for transactions of emerging markets securities may also be longer than settlement times for assets of United States issuers, and settlement systems may be unreliable.

This may also affect the liquidity and price volatility of emerging markets securities.

The risks are significantly more pronounced in derivative instruments (options, swaps, futures, etc.) on emerging markets securities.

4. Non-Traditional Investment Strategies

Non-traditional, or alternative, investment strategies include investments in hedge funds, private equity funds, real estate funds, and funds comprised of such funds. Such funds are sometimes referred to as private investments because they are typically organized pursuant to exemptions from registration under federal securities laws and therefore are not offered to the general public. They are appropriate for certain qualified investors only. Such funds: (1) often engage in leveraging and other speculative investment practices that may increase the risk of the complete loss of the investment; (2) can be highly illiquid because of the absence of any trading market and restrictions on resale as a result of regulatory or contractual provisions; (3) are not required to provide periodic pricing or valuation information to investors; (4) may involve complex tax structures and delays in distributing important tax information; (5) are not subject to the same regulatory requirements as mutual funds; (6) often charge high fees; (7) may be exposed significantly to foreign currency and investment risk; and (8) may experience high return volatility. In addition, any number of conflicts of interest may exist in connection with the sale, distribution, management or operation of such funds.

Although interests in private investment funds sometimes may be resold in privately negotiated transactions, the prices realized on these sales could be less than the original investment. It is a condition of many fund investments offered through J.P. Morgan that the Client maintain an investment management, trust, or custody/asset account at JPMCB or one of its affiliates for so long as the Client owns the investment.

Private funds are offered only by confidential private placement memorandum or similar document (the “PPM”).The PPM provides important detailed information regarding fees, merits, risks, investment objectives, and other matters of interest, and must be read carefully before a decision is made on whether to invest. However, generally no PPM will be delivered to the Client for whom JPMCB exercises investment discretion. JPMCB will provide a copy of the PPM to a discretionary Client upon request.

Morgan Affiliates may be the issuer of interests in these funds or may provide advisory, management, administrative or other services to issuers, including issuers who also are Morgan Affiliates, and may be compensated separately for such functions. JPMSI or another Morgan Affiliate may act as placement agent for such interests and may be compensated by the issuer for providing placement services. Such compensation is in addition to fees and commissions the Client pays in connection with purchasing an interest or in connection with the Client’s investment management, brokerage or custody account. Investments in private funds entail the execution and delivery of a subscription agreement. If JPMCB is investing on behalf of a discretionary Client, JPMCB will complete and execute the subscription agreement on the Client’s behalf. The subscription agreement will require JPMCB to make certain representations and warranties relating to the Client. Such representations and warranties relate to, but are not limited to, the Client’s status as an “accredited investor,” a “qualified purchaser,” a “qualified eligible person,” or “U.S. person” within the meaning of applicable securities laws; whether the Client or the Client’s account is subject to the Employee Retirement Income Security Act of 1974 (“ERISA”); organizational data if the Client is an entity; whether the Client is a regulated institution that is subject to legal or regulatory restrictions or limitations on the nature of its investments (such as a bank or an insurance company); whether the Client is restricted by rules of the National Association of Securities Dealers from participating in initial public offerings by reason of the Client’s association with any broker, dealer, bank or other securities business; and whether the Client falls into a category of person whose ability to do business with a financial institution is limited by laws intended to prevent money laundering and terrorist financing. JPMCB will rely on information provided to it by the Client in making all representations and warranties contained in a subscription agreement and may be liable to a fund if any such representation or warranty is untrue. In the event of such liability, the Client will be required to indemnify JPMCB and its affiliates for all loss and damage, including attorneys’ fees. Clients who invest in private funds through their self-directed brokerage accounts at JPMSI will sign subscription agreements containing the same representations and warranties.

5. Complementary/Structured Strategies

Structured strategies are securities in which swaps, options, futures, forwards or other combinations or types of derivatives are embedded. Their returns typically are linked to the performance of one or more underlying U.S. or international securities, indices, rates, currencies, or commodities (please see Section 11 below for a discussion of the special risks of investing in commodities and Section 12 below for a discussion of the special risks of investing in currencies), and may incorporate leverage.

Investments in structured strategies may not be suitable for all investors. These types of investments entail varying degrees of risk, and while some structured strategies offer full or partial principal protection, others can subject the Client to the loss of the full amount invested. Structured strategies offered by J.P. Morgan (referred to herein as “Structures”) may be structured using unsecured and unsubordinated debt obligations of JPMorgan Chase & Co. or its affiliates (“JPM”) or various non-Morgan affiliate issuers, and may also take the form of deposits (which may or may not be insured or guaranteed by the Federal Deposit Insurance Corporation or any other government authority), equity or partnership interests, certificates, warrants or interests in special purpose vehicles. The Client therefore will be dependent upon the issuer’s financial capacity to meet its obligations under a Structure. Structures may or may not be registered under the Securities Act of 1933, as amended (the “Securities Act”), or under the securities laws of any state or other country and if not registered, will be sold and offered in a transaction that is intended to be exempt from registration under the Securities Act. Structures may or may not be publicly listed or traded on an exchange and therefore may be illiquid investments. Prior to maturity Structures issued by JPM may be repurchased by JPM only and only upon terms and conditions acceptable to it, and in most cases the Structures are not-transferable and are nonnegotiable.

In the event that JPM consents to early liquidation, the Client will likely not fully participate in any benefits of the Structure, such as principal protection, buffers, or enhanced returns.

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Structures will be offered by prospectus, term sheet or offering memorandum (collectively, an “offering document”), and the offering document will provide more detailed information regarding the Structures. The applicable offering document must be read carefully before a decision is made to invest. However, generally no offering document will be delivered to a Client for whom J.P. Morgan exercises investment discretion.

The issue price of a Structure will include the cost of hedging the issuer’s obligations under such Structure, which includes an estimated profit component. It also will include compensation paid to JPM for structuring, underwriting and marketing work involved in packaging a Structure as one instrument. Compensation paid to JPM will vary with each Structure but is not expected to exceed, on an annual basis, two percent. If, however, a Structure has an early redemption feature and is redeemed prior to maturity, the compensation will not be prorated and limited to the period during which the Structure was outstanding, and in such event, the compensation paid will be higher. A Structure may also include an annual fee embedded in an index or calculation, payable to the issuer or index sponsor (which may be JPM or a non-Morgan affiliate issuer) for structuring or calculating a proprietary index or formula.

JPM also generally acts as calculation agent for Structures and determines the amount, if any, that will be paid to the Client at maturity. In performing its duties as calculation agent, JPM may have interests adverse to the interest of the holders of the Structures, which may affect the Client’s return on a Structure, particularly where JPM, as the calculation agent, is entitled to exercise discretion.

If JPMCB invests in a Structure on behalf of a Client for whom it exercises investment discretion, JPMCB may be required to make certain representations and warranties relating to the Client. Such representations and warranties relate to, but are not limited to, the Client’s status as an “accredited investor” as defined by the Securities Act. JPMCB will rely on information provided to it by the Client in making all required representations and warranties and may be liable to the issuer or the issuer’s placement agent if any such representation or warranty is untrue. In the event of such liability, the Client will be required to indemnify JPMCB and its affiliates for all loss and damage, including attorneys’ fees.

6. Mutual Funds

Mutual funds are sold only by prospectus, and the prospectus contains important information regarding the fund’s investment objectives, merits, risks, charges, expenses and other matters of interest. Mutual funds may not be suitable for all investors and the Client agrees to request the prospectus and read it carefully before deciding to invest. However, no prospectus will be delivered to the Client prior to an investment if JPMCB is investing on behalf of a Client for whom it exercises investment discretion. JPMCB will provide a copy of the prospectus to a discretionary Client upon request.

Although most mutual funds available through J.P. Morgan will follow a traditional long-only investment strategy, some mutual funds may utilize investment strategies similar to those employed by private funds. Such funds may or may not have the liquidity of traditional mutual funds, provide periodic pricing or valuation information to investors, and are subject to the same regulatory requirements as traditional mutual funds, but they engage in leveraging and other speculative investment practices commonly used by hedge funds that may increase the risk of the complete loss of the investment. Such funds generally also charge higher fees than traditional mutual funds and have higher expenses. The use of leverage increases risk to a fund, and the more a fund invests in leveraged instruments, the more it could magnify gains or losses to those investments.

JPMCB, JPMSI or their affiliates may provide administrative, custodial, sales, distribution or shareholder services to funds established, sponsored, advised, or managed by their affiliates as well as by third parties, and JPMCB, JPMSI or their affiliates may be compensated for such services.

7. Municipal Bonds

Municipal bonds are offered by an official statement and may not be suitable for all investors. A Client should consult with an independent tax advisor regarding whether municipal bonds are appropriate for the Client’s particular situation.

JPMSI or Morgan Affiliates may hold a position or act as market maker in the financial instruments of any issue the Client may invest in, or act as underwriter, placement agent, advisor, or lender to an issuer. If municipal bonds are sold prior to maturity, prices may be higher or lower than the original purchase price and actual yields may be higher or lower than the yields indicated at the time of my investment. Yield quotations and market values will thus fluctuate over time and in certain instances interest from some municipal bonds will be subject to the Alternative Minimum Tax (AMT).

8. Real Estate

Real estate investments are likely to be risky, illiquid and long-term. Real estate ownership and the real estate industry in general are subject to many risks, including the burdens of ownership of real property; local, national and international economic conditions; supply and demand for properties; the financial condition of tenants, buyers and sellers; changes in interest rates and the availability of mortgage funds; changes in environmental laws and regulations, planning laws and other governmental rules and fiscal and monetary policies; claims arising out of undisclosed or unknown environmental problems or as to which inadequate reserves have been established; changes in real property tax rates; changes in energy prices; force majeure events; terrorist events; and under-insured or uninsurable losses. Real estate assets are subject to long term cycles that gives rise to significant volatility in values.

Illiquidity may result from the absence of an established market for the property. The possibility of partial or total loss of capital will exist and investors should not invest in real estate unless they can readily bear the consequences of such loss. Even if real estate investments are successful, they are unlikely to produce a realized return to the investors for a period of years.

Securities issued by real estate fund companies, including real estate investment trusts (“REITs”) are subject to the risks associated with the direct ownership of real estate as well as the risks associated with the fund company or REIT itself.

Such companies carry the risks of possibly limited operating history, unspecified portfolios, uncertainties in calculating net asset value due to reliance upon appraisals, and restrictions on redemption arising out of the illiquidity of the underlying portfolio. REITs also carry the risk of the possible failure to qualify as a REIT under the Internal Revenue Code of 1986, as amended, which will have adverse tax consequences for investors.

9. Exchange Traded Funds

Exchange traded funds (ETFs) are index funds or trusts that are listed on an exchange. Investors can buy or sell shares in the collective performance of an entire stock or bond portfolio as a single security. Unlike index mutual funds, which have their net asset values calculated at the end of each trading day, ETF prices change within the trading day, fluctuating with supply and demand, so that the price of an ETF may be different than its net asset value.

Leveraged or inverse ETFs are highly complex financial instruments and, due to the effects of compounding, their performance over longer periods of time can differ significantly from their stated daily objective. Leveraged and inverse ETFs typically are designed to achieve their stated performance

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objectives on a daily basis. Some investors might invest in these ETFs with the expectation that the ETFs may meet their stated daily performance objectives over the long term as well. Investors should be aware that performance of these ETFs over a period longer than one day can differ significantly from their stated daily performance objectives. Leveraged and inverse ETFs may pursue a range of investment strategies through the use of swaps, futures contracts and other derivative instruments, and are inherently more volatile then their underlying benchmark or index. Additionally, leveraged ETFs positions will be subject to applicable maintenance margin requirements which may be greater or differ from margin requirements on their non-leveraged counterparts.

Exchange traded funds are sold by prospectus. The prospectus contains important information regarding the investment objectives of the ETF, its merits, risks, charges, expenses and other matters of interest, and must be read carefully before a decision is made to invest. However, no prospectus will be delivered to the Client prior to an investment if JPMCB makes the investment on the Client’s behalf pursuant to a discretionary portfolio mandate. JPMCB will provide a copy of the prospectus to a discretionary Client upon request.

ETFs are subject to risks similar to those of stocks. Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost. In addition, there is no guarantee that an ETF will track the exact performance of its index.

ETFs, including leveraged or inverse ETFs, may not be suitable for all investors.

10. High Yield Fixed Income Securities

High yield fixed income securities come in many forms. Common ones are high yield bonds, asset-backed securities, mortgage-backed securities, mezzanine securities, and collateralized bond obligations (“CBOs”).

High yield bonds (sometimes known as “junk” bonds) are non-investment grade bonds of varying maturities. They generally will be in the lower rating categories of the major rating agencies or may be unrated. High yield bonds typically pay more interest than other bonds because they involve a greater risk that the issuer will default in the timely payment of interest and principal. Issuers of high yield bonds may have a lot of debt. During an economic downturn, a period of rising interest rates or a recession, high yield issuers with a lot of debt may experience financial problems leading to a default, and high yield bonds tend to fall in price during such periods. They also may have other creditors with the right to be paid before the high yield bond holder. High yield bonds fluctuate more widely in price and yield than investment grade bonds and are not as liquid.

Asset-backed securities are bonds backed by a pool of assets, usually loans such as installment sale contracts or credit card receivables. The loans underlying asset-backed securities may be unsecured, with no collateral to seize if the underlying borrower defaults. Asset-backed securities may be prepaid at any time, which will reduce their yield and market value. When interest rates fall, prepayment rates rise as borrowers pay off existing debt and refinance at new lower rates. As a result, reinvestment of the prepayment proceeds generally will be at a lower rate of return than the return on the assets that were prepaid.

Mortgage-backed securities are subject to the same risks as asset-backed securities except that the underlying loans generally will be secured by real property.

Mezzanine investments are subordinated debt securities which receive payments of interest and principal after more senior secured creditors are paid. They generally are issued in private placements in connection with an investment in an equity security. They carry the risk that the issuer will default on payment of interest and principal and that the equity securities purchased with the proceeds of mezzanine investments will lose value.

CBOs are securities backed by a diversified pool of high yield securities and are subject to the same risks as the high yield securities in the pool.

11. Commodities

(a) In General Commodities include hard assets, such as agricultural products, metals, or petroleum as well as securities futures based on common stock, certain exchange-traded funds and American Depositary Receipts, and securities indices.

Commodity futures contracts can be used for speculation, hedging, and risk management. Commodity futures contracts are not appropriate investments for all investors. When they are used for speculation, it is possible to realize substantial profits in a short period of time, but it is also possible to incur substantial losses in a short period of time. Such losses may be larger than the initial commitment of capital because futures trading is highly leveraged.

Because of the leverage involved and the nature of futures contract transactions, losses may be felt immediately because gains and losses are credited or debited to the investor’s account, at a minimum, on a daily basis. The purchase or sale of a futures contract requires the investor to make an initial deposit of money, known as margin. Margin, in the context of futures trading, is different than the margin involved in the purchase of stocks. The purchase of stocks on margin involves a cash down payment and credit extended by the broker for the purchase. The margin required to buy or sell a futures contract is a deposit of money that can be drawn on by the broker to cover any daily losses. If movements in the markets for futures contracts or the underlying commodity decrease the value of the investor’s positions in futures contracts, the investor may be required to deposit additional funds in his or her account as margin. If an account is under the minimum margin requirements set by the exchange or the investor’s broker, the position may be liquidated at a loss, and the investor will be liable for any deficit in the account. Minimum margin requirements for a particular futures contract at a particular time are set by the exchange on which the contract is traded and are subject to modification based on market conditions. An increase in market volatility and the range of daily price movements is frequently a reason for raising margins.

Futures contracts cannot be sold like stocks or bonds. They generally must be liquidated by the investor entering into an equivalent but opposite position in another contract month, on another market, or in the underlying commodity. If a position in a futures contract cannot be liquidated, the investor may not be able to realize a gain in the value of the position or prevent losses from mounting. An inability to liquidate could occur, for example, if trading is halted due to unusual trading activity in either the futures contract or the underlying commodity; if trading is halted due to recent news events involving the issuer of the underlying commodity; if systems failures occur on an exchange or at the investor’s broker; or if the position is on an illiquid market. An exchange may set a maximum daily limit on market price increases and decreases, and will halt trading when the limit is reached. In the event prices have risen or fallen by the maximum daily limit, and there is no trading in the contract permitted (known as a “lock limit” market), it may not be possible to execute an order at any price. Markets may be lock limit for more than one day, resulting in substantial losses to futures investors who may find it impossible to liquidate losing futures positions.

Even if the investor can liquidate the position, it may be at a price that involves a large loss. For the same reasons, it may also be difficult or impossible to manage risk from open futures positions by entering into offsetting positions.

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An alternative method of participating in futures trading is through a commodity pool, which is a pooled investment vehicle that invests in commodities (and, typically, securities as well). A commodity pool participant will not have an individual trading account. Instead, the funds of all pool participants are combined and traded as a single account. Each investor shares in the profits or losses of the pool in proportion to his or her investment in the pool. Although commodity pools can offer benefits such as greater diversification among commodities than an investor might obtain in an individual trading account, the absence of margin calls, and a limitation on losses to the amount invested, the risks a pool incurs in any given futures transaction are no different than the risks incurred by an individual trader. The pool still trades in futures contracts which are highly leveraged and in markets that can be highly volatile. And like an individual trader, the pool can suffer substantial losses as well as realize substantial profits.

(b) Securities Futures

Trading in security futures contracts requires knowledge of both the securities and the futures markets. Under certain market conditions, the prices of security futures contracts may not maintain their customary or anticipated relationships to the prices of the underlying security or index. These pricing disparities could occur, for example, when the market for the security futures contract is illiquid, when the primary market for the underlying security is closed, or when the reporting of transactions in the underlying security has been delayed. For index products, it could also occur when trading is delayed or halted in some or all of the securities that make up the index. The investor may be required to settle certain security futures contracts with physical delivery of the underlying security. If a position in a physically settled security futures contract is held until the end of the last trading day prior to expiration, the investor will be obligated to make or take delivery of the underlying securities, which could involve additional costs. The actual settlement terms may vary from contract to contract and exchange to exchange.

Although security futures contracts share some characteristics with options on securities (options contracts), these products are also different in a number of ways.

The purchaser of an options contract has the right, but not the obligation, to buy or sell a security prior to the expiration date. The seller of an options contract has the obligation to buy or sell a security prior to the expiration date. By contrast, if an investor has a position in a security futures contract (either long or short), the investor has both the right and the obligation to buy or sell a security at a future date. The only way to avoid the obligation incurred by the security futures contract is to liquidate the position with an offsetting contract.

A person purchasing an options contract runs the risk of losing the purchase price (premium) for the option contract. Because it is a wasting asset, the purchaser of an options contract who neither liquidates the options contract in the secondary market nor exercises it at or prior to expiration will necessarily lose his or her entire investment in the options contract. However, a purchaser of an options contract cannot lose more than the amount of the premium. Conversely, the seller of an options contract receives the premium and assumes the risk that he or she will be required to buy or sell the underlying security on or prior to the expiration date, in which event his or her losses may exceed the amount of the premium received. Although the seller of an options contract is required to deposit margin to reflect the risk of its obligation, he or she may lose many times his or her initial margin deposit. By contrast, the purchaser and seller of a security futures contract each enter into an agreement to buy or sell a specific quantity of shares in the underlying security. Based upon the movement in prices of the underlying security, a person who holds a position in a security futures contract can gain or lose many times his or her initial margin deposit. In this respect, the benefits of a security futures contract are similar to the benefits of purchasing an option, while the risks of entering into a security futures contract are similar to the risks of selling an option.

12. Currencies and Foreign Exchange

Foreign currencies or baskets of currencies may be very volatile and may experience significant drops in value over a short period of time. The value of a foreign currency will depend, among other economic indicators, on movements in exchange rates. Risks and special considerations with respect to foreign currencies include, but are not limited to, economic uncertainties, currency devaluations, political and social uncertainties, exchange control regulations, high rates of interest, a history of government and private sector defaults, significant government influence on the economy, less rigorous regulatory and accounting standards than in the United States, relatively less developed financial and other systems and limited liquidity and higher price volatility of the related securities markets.

APPENDIX: ASSET ACCOUNT AND DEPOSIT ACCOUNT — FUNDS AVAILABILITY POLICY STATEMENT

General Policy: Wire transfers, electronic direct deposits, and cash deposits made with a banker or at an ATM that does not require a deposit envelope will be available on the day we receive your deposit. Except as described later in this policy, when you make other deposits, the funds are available on the first business day after the day we receive your deposit. Available funds may be withdrawn in cash or used to pay checks and other items.

When Your Deposit Is Received: If you make a deposit on a business day before our cutoff times at a Chase branch or ATM, we will consider that day to be the day of your deposit. However, if you make a deposit after the cutoff time, or on a day that is not a business day, we will consider the deposit to have been made on the next business day.

• For determining the availability of your deposits, every day is a business day, except Saturdays, Sundays, and federal holidays.

• Cutoff times for branch deposits vary by location. For most branches, the cutoff time will be the end of the business day. If it is different, the branch will post signs indicating the earlier cutoff time. The cutoff time will be no earlier than 2 p.m. local time.

For example: You make your deposit on Friday at 5:45 p.m. and the cutoff time for that branch is 5:00 p.m. We consider the deposit to be received on the next business day, which is Monday. But if Monday is a holiday, we consider the deposit to be received on Tuesday.

• For deposits at most ATMs, the cutoff time is 11 p.m. Eastern time. For ATMs with an earlier cutoff, the ATM screen will notify you of the cutoff time. For all ATM transfers between accounts, the cutoff time will be determined by where your account is located, regardless of the location of the ATM, as follows:

State Where Account is Located	Cutoff Time (all p.m.)
CT, FL, GA, IN, KY,	9:00 ET
MI, OH, NJ, NY, WV
IL, LA, OK, TX, WI	9:00 CT
AZ	9:00 MST (when Daylight Savings Time is in effect, 8:00 MST)
CO, ID, UT	9:00 MT
CA, NV, OR, WA	8:00 PT

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• Deposits placed in a night depository are considered received when we remove them from the night depository. We will remove deposits not later than the next business day.

• Branches in some locations may be closed on business days in observance of a state holiday or because of an emergency, and deposits made when those branches are closed (either at a night depository or at an ATM that requires an envelope for deposits) will be considered received on the next business day when the branch is open.

• All deposits made by mail and addressed to Chase without using a specific branch name and street address will be considered received by the Chase-By-Mail facility in Louisville, Kentucky as of the date such deposit is received by this facility.

Longer Delays May Apply: In some cases, we may not make all of the funds that you deposited by check available by the first business day after the day of your deposit. Funds may not be available until the second business day after the day of your deposit. However, at least the first $100 of these deposits will be available on the first business day after the day of your deposit.

If we are not going to make all of the funds from your deposit available on the first business day, we will notify you at the time you make your deposit. We will also tell you when the funds will be available. If your deposit is not made directly to our employee, or if we decide to take this action after you complete your deposit, we will mail you the notice by the day after we receive your deposit. If you will need the funds from a deposit right away, you should ask us when the funds will be available.

Funds you deposited by check may be delayed for longer than two business days under the following circumstances:

• We believe a check you deposited will not be paid;

• You deposited checks totaling more than $5,000 in any one day;

• You re-deposited a check that has been returned unpaid;

• You have overdrawn your account repeatedly in the last six months; or

• There is an emergency, such as failure of communications or computer equipment.

We will notify you if we delay your ability to withdraw funds for any of these reasons, and we will tell you when the funds will be available. They will generally be available no later than the seventh business day after the day of your deposit.

Special Rules for New Accounts: If you are a new account customer, the following special rules may apply during the first 30 days your account is open:

• Funds from deposits of the first $5,000 of a day’s total deposits of cashier’s, certified, teller’s, traveler’s, and federal, state, and local government checks will be available on the first business day after the day of your deposit if the deposit meets certain conditions. For example, the checks must be payable to you. The excess over $5,000 will be available on the ninth business day after the day of your deposit. If your deposit of these checks (other than U.S. Treasury checks) is not made in person to one of our employees, the first $5,000 will not be available until the second business day after the day of your deposit; and

• Funds from all other check deposits will be available no later than the fifteenth business day after the day of your deposit.

Holds on Other Funds: If we cash a check for you that is drawn on another bank, we may withhold the availability of a corresponding amount of funds that are already in your Account. Those funds will be available at the time funds from the check we cashed would have been available if you had deposited it.

APPENDIX: OTHER BANKING SERVICES RELATING TO ACCOUNTS

A. FUNDS/WIRE TRANSFERS

1. Definitions

A “funds transfer” means a series of transactions, beginning when an originator issues a payment order for the purpose of paying the beneficiary of such order (the “beneficiary”), but does not include payments made by check or credit card, a debit transfer made through the Automated Clearing House System (“ACH”) or transfers governed by the federal Electronic Fund Transfer Act. The term “payment order” means an instruction to a receiving bank transmitted orally, electronically, or in writing to pay a fixed or determinable amount to a beneficiary.

2. Payment Orders

I may issue payment orders orally, electronically or in writing, as arranged, against my Accounts, subject to your acceptance. You will receive and process payment orders only on your Business Days, and within your established cutoff hours. You may debit any of my Accounts for the amount of each payment order you accept and all associated fees. No restrictions upon your acceptance of payment orders or upon the Accounts which you may debit shall be binding unless agreed to by you in writing. Unless otherwise agreed, communications requesting cancellation or amendment of payment orders must be received no later than 4:00 p.m. on the Business Day preceding the day you are to execute my payment order.

Notwithstanding any instructions by me to the contrary, you reserve the right to utilize any funds transfer system and any intermediary bank you choose in the execution of any payment order you accept and may otherwise use any means of executing the payment order which you deem reasonable under the circumstances.

3. Security Procedure

All payment orders, and communications requesting cancellation or amendment of payment orders, issued in my name are subject to verification by you pursuant to a mutually agreed upon security procedure. Unless otherwise agreed, you may furnish confidential security procedure material to any person authorized on my Account or to any other person you reasonably believe to be authorized to receive such information. I must safeguard any such security procedure materials and make them available only to persons who are authorized to give instructions using such procedures.

Unless you and I have agreed in writing to an alternate security procedure, the authenticity of oral or written (including writings transmitted by facsimile) wire transfer payment orders may, at your discretion, be verified by telephonic call-back confirmation with an individual purporting to be a person reflected on your records as having authority to initiate wire transfers. I agree that this security procedure is a commercially reasonable security procedure for those wire transfer payment orders.

4. Foreign Currency Transfers

If I issue, and you accept, a payment order for payment outside the U.S. in a currency other than the U.S. dollar, you shall debit my Account for the U.S. dollar equivalent of the amount of the foreign currency transferred at your then prevailing rate of exchange or as otherwise agreed. In processing my funds transfers, other banks may deduct their fees from the payment orders issued to them. If the beneficiary’s bank is instructed to pay in a currency other than its local currency, payment may be made by the beneficiary’s bank at its rate of exchange on the date of its payment. In connection with each funds transfer, I shall be responsible for complying with all local currency restrictions and any other local law governing the transaction.

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5 . Identification Numbers

In accepting a payment order issued in my name, you may rely upon the identifying number (such as a Fedwire routing number or account number) of the beneficiary, the beneficiary’s bank or any intermediary bank and use only such numbers in executing the order. Also, the beneficiary’s bank in the payment order may make payment on the basis of the identifying number even though it identifies a person different from the named beneficiary. Accordingly, I shall be responsible for the consequences of any inconsistency between the name and identifying number, as instructed, of any party in a payment order.

6. Funds Transfer Notices

In any funds transfer where I am the recipient or beneficiary of the transfer, you shall not be obligated to notify me of any such payment to my Account, other than to record such payment in my next regular statement of account. In the event that you send me an additional notice of the receipt of such a funds transfer for my account, I may not withdraw such funds until you have received payment from the sender of such transfer.

7. Other Procedures

You may from time to time provide me with operational procedures or instructions regarding your funds transfer service.

8. Direct Deposit

I may designate you as the bank to receive deposits made directly by any payor to any of my Accounts. These direct deposits may include, for example, my salary, Social Security benefits, and pension or annuity payments.

If you receive a demand for reimbursement from any payor claiming that I was not entitled to certain payment(s), you are authorized to charge my Accounts for the amount of the claim. Any action by you for reimbursement from me may also be made against my estate, heirs and legal representatives, who shall be liable for any claims made against and/or expenses incurred by you. You may terminate any direct deposit service at any time without notice and/or make this service subject to other conditions, at your discretion.

9. Limitations On Liability

Your liability for payment orders that are not authorized and not effective as my order or that are not enforceable against me shall be limited to a refund of the amount paid pursuant to such payment order, and if applicable law requires, interest on the refundable amount. Under no circumstances will you or any Morgan Affiliate be liable for any indirect, incidental, special or consequential damages, regardless of the form of action and even if you or such Morgan Affiliate has been advised of the possibility of such damages, nor shall you or any Morgan Affiliate be liable for any attorneys’ fees I incur.

B. RECEIPT OF AUTOMATED CLEARING HOUSE ENTRIES

All Automated Clearing House (“ACH”) credits and debits received for my account will be received by you subject to the rules of the National Automated Clearing House Association and any other applicable ACH rules. I agree to be bound by the ACH rules. Any credit given by you to me for an ACH credit shall be provisional until you receive final payment. If you do not get paid, you may revoke the provisional credit and charge the amount to my Account or obtain a refund from me, in which case the originator of the credit entry shall not be deemed to have paid me the amount of such entry. Unless you otherwise agree in writing, you shall not notify me of your receipt of ACH transactions other than as recorded in my next regular Account statement.

APPENDIX: GENERAL RULES AND REGULATIONS FOR DEPOSIT ACCOUNTS

A. DEPOSITS IN AND CHARGES AGAINST MY ACCOUNT

1. Final Payment of Checks, Drafts and Other Instruments

Any Item I deposit is received for collection only, even if you cash the Item (in whole or in part by a deposit less cash) or give me credit for it. All Items are credited or cashed subject to final payment.

You choose the method of obtaining final payment of an Item for me and may use other banks in the process. You are not responsible for actions taken by other banks, nor for the loss or destruction of any Item in the possession of other banks or in transit. I agree that you have used due care in selecting any collecting agent that is (i) a bank or savings institution insured by the Federal Deposit Insurance Corporation or other governmental entity, (ii) a Federal Reserve Bank, or (iii) any clearinghouse association. Any bank may refuse to honor a deposited Item or may honor one refused by another bank. You are not responsible for any act or failure to act that is reasonable under the circumstances or that is taken or omitted under the laws, rules, regulations, or practices referenced herein.

2. Returned Items and Notices of Claims

If any Items are returned by the payor bank for any reason, or if any instrument you or a subsequent collecting agent receives in payment for collection Items is not paid, or if any Item drawn on you is not paid, you may charge the Item back to my Account. If the payor bank on any Item returns the Item to you or makes a claim against you based on an asserted unauthorized signature or endorsement or an asserted alteration, you may accept that return or pay that claim and charge my Account for all or any part of the amount of the Item, even if the claim is made after the payor bank’s return deadline. If I deposit or cash an Item drawn on you and the Item or any endorsement is asserted to be altered, forged or unauthorized, you may charge back all or any part of the amount of the Item, even if the charge back is made after your midnight deadline. If you determine to charge my Account(s), you shall notify me in a timely manner. You may exchange information with others concerning any such claim made against you. If you receive notice that an Item deposited in my Account or that I cashed has not been paid, you may either immediately charge back my Account or place a hold on my Account and charge my Account for the Item when the Item is returned to you. If a returned Item is one that you cashed for me, you may charge back or hold funds in any of my Accounts with you, including joint accounts. Any Item lost in the mail or transit or chargeable back to me for any other cause may be charged back whether or not the original Item itself can be returned.

3. Account Debiting

(a) General

My Account may be debited on the day an Item is presented to you or at such earlier time as notification is received by you by electronic or other means that an Item drawn on my Account has been deposited for collection in another financial institution. A determination of my Account balance for purposes of making a decision to dishonor an Item for insufficiency of available funds may be made at any time between the receipt of such presentment or notice and the time of return of the Item, and no more than one such determination need be made.

(b) Facsimile Signature and Signatures with a Symbol You may in your discretion agree to open an account with facsimile signatures or signatures with a symbol. A “facsimile signature” is any signature made other than by the signer’s

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manual writing, and includes any signature made by any device (including a manual stamp) or machine (including a computer-generated copy or photocopy of a manual signature). A “signature with a symbol” is any signature made by an “X” or any other set of marks, or any signature containing a symbol, in each case other than the name of the person signing. If you open an account with authorized facsimile signatures, I authorize you to pay any Item bearing a facsimile that resembles the signature on file. If you open an account allowing a signature with a symbol, I authorize you to pay any Item bearing the same or any similar symbol in the signature line. I agree that there is no commercially reasonable way for you to determine whether facsimile signatures or signatures with a symbol are authentic or authorized. If I request an account to bear facsimile signatures or a symbol as a signature, I assume all risk of forged or unauthorized Items bearing a facsimile signature or a signature with a symbol.

(c) Electronic Instructions

You may honor any instruction received by telecopier, computer or other electronic transmissions so long as this complies with your internal policies and procedures if you reasonably believe such instruction to be genuine or if such instructions are received in accordance with any security procedures agreed upon by you and me or in accordance with any other agreements you may have with me regarding the acceptance of such instructions.

(d) Preauthorized Drafts

From time to time, you may receive Items generated by third parties for payment against my Account that do not bear my signature. Typically, such Items (known as “preauthorized drafts”) are used to pay for merchandise or other debts owed by me to the third party. I authorize you to pay such Items if presented for payment against my Account. In addition, your charging of this type of Item to my Account, without timely objection by me pursuant to this Agreement, shall constitute authorization by me to charge against my Account any subsequent Item generated by the same third party, whether or not I state to you after payment that such subsequent Item was not authorized by me, unless I have notified you in writing a reasonable time before any such subsequent Items are presented to you for payment that you should no longer charge to my Account Items generated by that third party.

(e) Insufficient Funds and Returned Item Fees

You may charge a fee for any item presented when my account is overdrawn, whether or not you pay the item. If you pay the item, you will charge an Insufficient Funds fee. If you return the item, you will charge a Returned Item fee. You will not charge an Insufficient Funds Fee for a non-repeating (“everyday”) debit card transaction in two cases: if I have notified you not to pay debit card overdrafts or, for personal accounts, if I have not notified you to do so by August 15, 2010.

You may limit the number of Returned Item and Insufficient Funds fees you charge for a business day. You will not charge Insufficient Funds fees if my ending account balance is overdrawn by $5.00 or less.

I will refer to my fee schedule for information about what fees apply and how fees are calculated for my account.

4. Overdrafts

You may, but are not required to, refuse to pay any item unless my available account balance at the time is equal to or more than the amount of the item, plus all other items received. Even if you have paid overdraft items previously, you will not be required to do so at any future time. You generally will not authorize a non-repeating (“everyday”) debit card transaction if my available account balance is insufficient to pay the transaction in two cases: if I have notified you not to pay debit card overdrafts or, for personal accounts, if I have not notified you to do so by August 15, 2010. My “available account balance” is the balance after deducting (1) deposits that are not yet available for withdrawal under my funds availability policy, (2) debit card or other transactions that you are legally obligated to pay, or have already paid out in cash, (3) other pending transactions like ACH transactions, and (4) any holds on my account to comply with court orders or other legal requirements.

An “overdraft,” or “overdrawing” my account, means that my account balance, minus deposits that are not yet available and minus holds on my account to comply with court orders or other legal requirements, is negative or is less than the total of all items presented on a business day.

You look at my account balance only once from the time you receive an item until you return it to decide whether the item causes an overdraft. You may charge my account for a debit card transaction based on the authorization request.

Generally, for each business day, you will (i) add deposits to my account, (ii) subtract wire transfers, debit card transactions, online banking transactions, ATM withdrawals, teller cash withdrawals, cashed checks and deposited checks drawn on you, in the order in which they were authorized, withdrawn, or deposited, and (iii) subtract all other items in highest to lowest dollar amount. You reserve the right to use a different order in certain states.

It is my responsibility to avoid overdrawing my account. I can talk with a banker to learn about Overdraft Protection services. You also offer Personalized Alerts to keep me informed about the balance and transactions in my account.

I must immediately pay the amount of any overdraft together with any applicable fees or charges. If I fail to do so, I may be charged additional fees or interest. Until I pay such balance in full, I will pay interest on the amount of the overdraft at the rate indicated on the applicable rate schedule. You also may report me to credit reporting agencies, close my account, or both. These actions could affect my ability to open accounts in the future.

I authorize you to apply any subsequent deposit against the amount of any overdraft and resulting fees or charges. Subsequent deposits include any federal or state benefit payments that I choose to deposit in any account (including direct deposit of Social Security). I understand and agree that if I do not want my benefits applied in this way, I may change my direct deposit instructions to the benefits payor at any time.

I agree to pay all costs and expenses, including attorney’s fees, you incur in collecting any overdraft. In addition, if you close my account with an outstanding overdraft and charge off the amount of the overdraft, you may charge a Collection fee. You may still pursue collection of my account (including suing me) after it is charged off.

Cash Sweep Service

I must separately sign up for the Cash Sweep Service as it does not automatically apply to new accounts.

(a) Definitions: As used in this Cash Sweep Service Agreement, the following terms shall have the following meanings: “You” or “Your” means the person(s) or entity who has requested the Cash Sweep Service (“Request”). “Cash Sweep Service” means the automated funds transfer established pursuant to the Request and Agreement. “Funding Account” means the account from which the Cash Sweep transfers are made. “Checking Account” means the personal checking account for which the Cash Sweep Service is requested or the business checking account for which the Cash Sweep is requested. “Checking Account Minimum Balance” means the balance that will trigger the transfer from the Funding Account. “Target Balance” is the balance that will be maintained in the checking account after the transfer from the funding account.

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(b) Cash Sweep Service Request: The Request must specify the Checking Account and the Funding Account. For personal accounts, the Funding Account must be a personal savings account at the Bank. For business accounts, the Funding Account must be a business savings account at the Bank. The Cash Sweep will be effective after the Bank has received your Request and had a reasonable time to act upon it.

(c) Activation: Whenever the Checking Account is below the established minimum balance, such event will constitute a transfer under this Agreement and J.P. Morgan will initiate a transfer (Sweep) from the Funding Account sufficient to increase the Checking Account balance to the prescribed Target Balance. We have no obligation to inform the checking account owner if the status of the Funding Account or actions of the Account owner results in the Cash Sweep Service being unavailable.

(d) Maximum Cash Sweep Transfer Amount: The maximum amount of the Cash Sweep Transfer will be the available balance in the Funding Account. If the amount of the Transfer calculated in paragraph c above exceeds the Maximum Cash Sweep Transfer, then notwithstanding the provisions of paragraph c above the transfer will be the total available balance in the Funding Account.

(e) Limits on Savings Account Transfers: Transfers from savings accounts are considered “preauthorized transfers”. The number of such Transfers that may be made during each month or statement cycle is limited in accordance with federal regulations and our Account Agreement for deposit accounts.

(f) Termination of Cash Sweep Service by the Bank: We may terminate the Cash Sweep Service at any time by sending written notice to the last address for the Checking Account shown on our records. If the Funding Account is closed or blocked for usage, the Cash Sweep Service will not be available. If the Checking Account is closed or blocked for usage, the Cash Sweep Service for that Checking Account will not be available.

(g) Termination of Cash Sweep Service by Clients: The owner of the Checking Account or the Funding Account may cancel the Cash Sweep Service for that Checking Account by requesting the cancellation in person at a branch or by delivering to us written notice of cancellation. Any cancellation under this paragraph seven will be effective after we have received notice of such cancellation and had a reasonable time to act upon it.

(h) Amendment: We may at any time change the terms of this Agreement, by giving at least 30 days’ prior written notice of such change to the owner of the Checking Account.

(i) General Provisions: This agreement is binding on the owner of the Checking Account and the Funding Account.

5. Acceptable Form of Items

I will use checks in a form authorized by you. You may refuse to pay checks drawn in any other form. You will not be responsible for loss, damage, inability to process, or failure to pay nonconforming Items or checks purchased through vendors unassociated with you.

6. Conditional Checks

I will not put any condition, restriction, or legend, such as (without limitation) “void after 60 days” or “full and final settlement,” on any Item. You will not be required to comply with any such condition, restriction or legend, whether pre-printed or otherwise. If any such Item is presented to you for payment, you may, in your discretion, pay the Item or return it unpaid, whether or not the condition, restriction, or legend has been satisfied.

7. Postdated, Stale Dated, or Nonnegotiable Items

You will not be liable for any damages caused by premature payment or certification of a post-dated Item. You will not be required to pay any Item presented more than six months after its date or a non-negotiable Item, but you may pay such an Item and charge my Account for it. If you pay or certify a postdated Item, an Item presented more than six months after its date, or a non-negotiable Item, you will have the rights of a holder in due course of that Item.

8. Cashing of Items

You may, in your discretion, refuse to cash any Item payable to me or indorsed to me. If you cash any such Item and it is returned unpaid, you are authorized to deduct the amount of such Item from any Account maintained by me, whether individually or jointly. In addition, you may, at your discretion, cash Items drawn by me on my Account when presented by the holder. If a payee who is not one of your deposit account clients presents an Item drawn on my Account for cash, you may refuse to cash the Item or may charge the payee an Item cashing fee.

9. Withdrawal Limitations

You may refuse to allow a withdrawal from any Account in certain cases, for example: there is a dispute about my Account (unless a court has ordered you to allow the withdrawal); a legal garnishment or attachment is served; my Account is being used as Collateral to secure an Obligation; any required documentation has not been presented; or I fail to repay an Obligation to a Morgan Affiliate on demand or when due. I will be advised of the reasons for refusal if such action is taken.

In addition, withdrawals from an ATM or by other Card transfers are limited as indicated in the current Banking Card Agreement.

10. Stop Payments

You will accept from me a stop payment order on an Item drawn on my Account provided you have a reasonable opportunity to act on the order. I agree that one Business Day to act upon a stop payment order is a reasonable amount of time, provided, however, that a stop payment order will not be effective on an Item previously certified, issued or paid by you. You will not be able to stop payment on an Item unless I specify the account number, the exact amount of the Item, the Item number, the payee, and its date. Where permitted by law, you may stop a certified Item, or an official check, at your discretion, if the certified Item or official check has been lost, stolen or destroyed and upon my providing an affidavit of fact, a surety bond or other form of security acceptable to you. A stop payment order is effective for 180 days, unless I renew the order in writing within that period.

You shall not be liable for failure to effectuate a stop payment order if: 1) I do not provide you with all the information as enumerated above and with a reasonable opportunity to effectuate the stop payment order; 2) you determine, as permitted by law, not to stop payment on a certified Item or official check; or 3) the Item in question is a postdated Item.

If I wish to stop payment on a preauthorized electronic transfer from or any other electronic charge against my Account, I must write or call you so that you receive my request three (3) Business Days or more before the payment is scheduled. If I call, you may also require me to present my request in writing within 14 days after I call.

11. Service Charges

My Account, whether active or inactive, is subject to various service charges more specifically described in the applicable fee schedule. For example, you may impose service charges for certifying or stopping payment on a check or if balances are below the stated minimum requirements. You will deduct

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service charges from my Account and you may change the amount of charges or the services for which charges will be required from time to time. The fee schedule in effect from time to time is available upon request and is made a part of this Agreement.

12. Endorsements

As a paying bank and as a bank of first deposit, you are required to place your endorsement stamp in prescribed positions on the back of a check. I assume all responsibility and liability for any loss that you may suffer as a result of (i) my endorsement being placed on the back of the check in a place or manner which obscures other endorsements which then causes a delay in the forward processing and/or return processing of the check, or (ii) issuance of a check on my Account in such a manner that information, marks, or bands on the back of the check obscure endorsements. I must place an endorsement on the back of a check only in the area within 1.5 inches from the “trailing edge” of the check. The trailing edge of the check is the left side of the check looking at it from the front. You retain the right to refuse to accept a check for deposit when the back of the check is unreasonably obscured.

13. My Duty to Protect Checks

I agree to protect my blank checks and other instruments from theft or loss, and to notify you promptly if any blank checks or other instruments are lost or stolen. I further agree to register a complaint of any theft of blank checks or other instruments, or any unauthorized use of the Account, with a local law enforcement agency, and to provide you with a copy of the law enforcement agency’s official report.

14. My Duty to Inspect Statements and Advices

You will send my monthly or periodic Deposit Account statement(s) (“Statement(s)”) (which may include a record of transactions and cancelled Items) or advices to the address in your records for me, and I am considered to have received the Statements upon mailing, whether or not I actually receive them. If I have asked that you hold my Statement, I am considered to have received the Statement when you make it available for me to pick up.

I shall exercise reasonable care and promptness in examining the Statement or advice. I shall notify you in writing within 60 calendar days of the mailing of the Statement or advice, or from the time the Statement or advice is made available to me, of any errors, discrepancies or irregularities, including, but not limited to, unauthorized or missing drawer’s signature or alteration, unauthorized transfers or withdrawals of funds by wire or otherwise, or of the nonreceipt of an expected Statement or advice. However, I shall notify you, in writing, within six months of the mailing of the Statement or advice, or from the time the Statement or advice is made available to me, that any endorsement was unauthorized, improper, or missing on any Item drawn on my Account, that any Item payable to me was improperly negotiated by you, or that any deposit was not properly credited to my Account. You will not be responsible for any loss suffered by me if I do not notify you in writing within these stated time periods.

I shall not institute any legal proceeding or action against you for any claim which I may have regarding any such errors, discrepancies or irregularities, including, but not limited to those listed above unless a) I have given the written notice described above, and b) such legal proceeding or action has been commenced: (i) within one year after the date when such Statement or advice was mailed or made available to me in the case of an unauthorized or missing drawer’s signature, an unauthorized transfer or withdrawal of funds by wire or otherwise, or an alteration on the face or back of an Item; (ii) within one and a half years in the case of an unauthorized, improper, or missing endorsement, an Item payable to me that was improperly negotiated by you, or a deposit not properly credited to my account; or (iii) if my account is maintained in Texas, within two years in all cases.

15. Liability

I AGREE THAT YOU SHALL NOT BE LIABLE FOR INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES REGARDLESS OF THE FORM OF ACTION AND EVEN IF YOU HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

Notwithstanding the provisions of the General Terms, except as otherwise provided by law, your liability, if any, in the event of your (i) failure to stop payment on an Item; or (ii) payment of an Item bearing an unauthorized signature, forged drawer’s signature, forged endorsement or alteration, shall be limited to the face amount of the Item.

16. Assignments/Power of Attorney

No Deposit Account may be assigned, except as collateral. No collateral assignment will be effective unless you consent to the assignment in writing. You may refuse to consent in your sole discretion. Any assignment contrary to this paragraph is void.

You may, in your discretion, recognize the authority of someone to whom I have given power of attorney with regard to any of my Deposit Accounts subject to documentation approved by you or as authorized by applicable law.

B. SUBSTITUTE CHECKS AND YOUR RIGHTS

NOTE: FOR PURPOSES OF THIS SECTION B ONLY, “YOU” MEANS THE ACCOUNTHOLDER AND “WE” MEANS JPMCB.

What is a substitute check?

To make check processing faster, federal law permits banks to replace original checks with “substitute checks.” These checks are similar in size to original checks with a slightly reduced image of the front and back of the original check. The front of a substitute check states: “This is a legal copy of your check. You can use it the same way you would use the original check.” You may use a substitute check as proof of payment just like the original check.

Some or all of the checks that you receive back from us may be substitute checks. This notice describes rights you have when you receive substitute checks from us. The rights in this notice do not apply to original checks or to electronic debits to your account. However, you have rights under other law with respect to those transactions.

What are my rights as a consumer regarding substitute checks?

In certain cases, federal law provides a special procedure that allows you to request a refund for losses you suffer if a substitute check is posted to your account (for example, if you think that we withdrew the wrong amount from your account or that we withdrew money from your account more than once for the same check). The losses you may attempt to recover under this procedure may include the amount that was withdrawn from your account and fees that were charged as a result of the withdrawal (for example, bounced check fees).

The amount of your refund under this procedure is limited to the amount of your loss or the amount of the substitute check, whichever is less. You also are entitled to interest on the amount of your refund if your account is an interest-bearing account. If your loss exceeds the amount of the substitute check, you may be able to recover additional amounts under other law.

If you use this procedure, personal accounts may receive up to $2,500 of the refund (plus interest if your account earns interest) within 10 business days after we received your claim and the remainder of your refund (plus interest if your account

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earns interest) not later than 45 calendar days after we received your claim. We may reverse the refund (including any interest on the refund) if we later are able to demonstrate that the substitute check was correctly posted to your account.

How do I make a claim for a refund?

If you believe that you have suffered a loss relating to a substitute check that you received and that was posted to your account, you must give an oral or written claim to your J.P. Morgan representative at the telephone number or address listed on your statement.

You must contact us within 40 calendar days of the date that we mailed (or otherwise delivered by a means to which you agreed) the substitute check in question or the account statement showing that the substitute check was posted to your account, whichever is later. We will extend this time period if you were not able to make a timely claim because of extraordinary circumstances.

Your claim must include:

• A description of why you have suffered a loss (for example, you think the amount withdrawn was incorrect);

• An estimate of the amount of your loss;

• An explanation of why the substitute check you received is insufficient to confirm that you suffered a loss; and

• A copy of the substitute check (and/or) the following information to help us identify the substitute check (the precise amount of the check, the check number, the name of the person or payee to whom you wrote the check, the amount of the check).

APPENDIX: ELECTRONIC FUND TRANSFERS

If I am an individual who uses electronic funds transfer (EFT) services, I have certain rights and responsibilities. These rights and responsibilities are defined by the Electronic Fund Transfer Act (15 U.S.C. 1693, et seq.) and Regulation E of the Federal Reserve Board. One requirement of this Act and the Regulation is that all financial institutions must make certain disclosures to all EFT users. If the EFT transactions that I make are not from an Account established primarily for personal, family or household purposes, or if the type of transaction is not governed by the federal Electronic Fund Transfer Act, the rights described in this Appendix are not applicable to me, except that your liability shall be governed by the section designated “Alternate Liability Provisions.” If I use any of the EFT services referred to below, I will read the appropriate sections carefully. Even if I use only one of your EFT services, I will be sure to read the section entitled General Information.

A. BANKING CARD

1. Services Available at Chase Machines

If I have a Banking Card (a “Card”; the Banking Card which bears a MasterCard or Visa logo is sometimes referred to herein as the “Debit Card”; and the Banking Card which does not bear the MasterCard or Visa logo is sometimes referred to herein as the “ATM Card”), I may use my Cards with my Personal Identification Number (“PIN”) in any of your automated teller machines² with those Accounts I have told you that I want to use for such purposes to:

• Withdraw cash from the Accounts.

• Make deposits to the Accounts³.

• Learn the balance in the Accounts.

• Transfer money among Accounts.

• Make payments to any credit card account by transferring money among Accounts or enclosing payments.

(Some of the above-mentioned services, and access to all of the Accounts, may not be available at all Machines). I may also use my Debit Card to make purchases from merchants which accept Master Card and Visa. Those purchases will be deducted from my Account as if they were a point of sale purchase.

I may receive more than one Account Card in connection with an Account, as in the case of a joint account, but for the purposes of this section, all Cards issued in connection with an Account will be referred to collectively as an Account Card.

Each Card issued in connection with an Account is referred to in this Section as an “Account Card.”

I may use the Banking Card for cash withdrawals at ATMs or merchants for up to $2,000 each day or the available balance of my Account, whichever is lower. Total purchases made with my Banking Card may not exceed $25,000 each day (unless I am otherwise notified in writing) and may be lower in some cases. The day for withdrawal limits starts at 12:00 a.m. each day and ends at 11:59 p.m. the same day.

Generally, deposits made at a Machine on a Business Day before 12 noon will have that day as the day of deposit. Local ATMs will provide the exact cut-off time. For deposits made after that time, or on a day that is not a Business Day, the day of deposit will be the next Business Day.

2. Services Available at Other Institutions’ Machines

Included among the services which you offer is the right to use my Cards not only at your Machines, but at Machines owned or operated by other financial institutions which are participating in various networks of which you are a member (collectively, the “Networks”). When I use my Cards in any Machine in any of the Networks (each, a “Network Machine”), I may not have access to all of my linked Accounts. At some Network Machines, I may not be able to transfer funds between Accounts. Transactions at Network Machines may be subject to a fee assessed by the Machine’s owner.

The services available at Network Machines are more limited than the services available to me at your Machines. Any of the Networks or financial institutions participating in any of the Networks may, from time to time, eliminate or restrict the services described above.

3. Purchase Transactions

I may use my Banking Card to purchase goods and services from certain vendors using PIN-authorized electronic transfers (each, a “PIN Purchase Transaction”). When a PIN Purchase Transaction is made, there will be an immediate electronic withdrawal from the Account I have linked to my Card. I may also use my Debit Card to make purchases at any merchant which accepts Master Card and Visa (a “Debit Card Purchase Transaction”, and collectively with PIN Purchase Transactions, “Purchase Transactions”).

Any PIN Purchase Transaction will be subject to the aggregate daily limitation set out in paragraph A.1 above for cash withdrawals from the Accounts. Debit Card Purchase Transactions are subject to a daily spending limit specified in the current Banking Card Agreement.

If I use my Card to access an Account and the daily authorization limit attached to my Card is exceeded, you may, at your sole discretion, authorize the transaction.

For merchant purchases, you have the right to place a temporary hold on my Account, which may affect available

2	Automated teller machines are also referred to, from time to time, as “ATMs” or “Machines.” The terms “ATM” and “Machine” also apply to devices which provide some, but not all, of the functions described herein.
3	Not all JPMCB ATMs accept deposits.

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balances for purposes of authorizing other transactions or honoring other items posting to my Account, in an amount equal to the authorization amount received through the payment authorization system. Occasionally, merchants do not provide sufficient information with the transaction to allow you to match the final amount to the authorized amount. In these cases the temporary hold will remain on my Account for three business days. If the underlying transaction posts after a temporary hold drops off, you will still have the right to post the transaction against my Account.

4. Transactions Occurring In A Currency Other Than U.S. Dollars

The exchange rate applied by Visa or MasterCard to Card transactions that occurred initially in a different currency will be (i) a rate selected by Visa or MasterCard from the range of rates available in wholesale currency markets for the applicable central processing date, which rate may vary from the rate Visa or MasterCard itself receives, or (ii) the government mandated rate in effect for the applicable central processing date. The rate in effect on the applicable processing date may differ from the rate on the date I used my Card. For purchases, ATM and non-ATM cash transactions, I acknowledge that you will add three percent to the amount provided to you by Visa and MasterCard.

5. Transfers Which Do Not Require the Use of a Card

I may also authorize transfers of funds among Accounts without using my Card (for example, by calling you and requesting a transfer) and I may in certain circumstances also authorize transfers, for example, to make a payment to my credit card account. Those services will be more fully described in those documents provided in connection with the Account that permits such transfers. Transfers made without the use of my Card will be reported on my statement for the Account involved in the same fashion that pre-authorized transfers involving such Accounts are reported.

The transfers described above are in addition to the preauthorized transfers to and from my Account described in Part B below.

6. Unauthorized Transfers

If I believe that any of my Cards has been lost or stolen or someone has transferred or may transfer money from any of my Accounts without my permission, I will refer to Part A.8 and Part D below for instructions as to what to do.

7. Fees

I may be charged a fee for withdrawals of cash under certain circumstances, whether they take place at your Machines or a Network Machine as well as for Purchase Transactions and transfers made without the use of a Card. The circumstances under which such charges may be imposed and the amount of such charges are covered by the fee schedule for the Account from which the funds are withdrawn or transferred. If I use a Network Machine, the ATM operator may charge me a fee for any withdrawal and may also charge a fee for a balance inquiry even if I do not complete a withdrawal.

For purchases, ATM and non-ATM cash transactions that occurred initially in a currency other than U.S. dollars, I acknowledge that you will add three percent to the amount provided to you by Visa and MasterCard.

You reserve the right to impose additional fees and to change fees upon notice to me.

8. My Liability

I shall tell you AT ONCE if I believe any of my Cards and/or PIN have been lost or stolen or that an unauthorized transaction has occurred in my Accounts Telephoning you at the telephone numbers listed in paragraph D.6 or visiting my branch to supply the appropriate information are the best ways of controlling my possible losses (see Part D for further information). If I do not do so, I could lose all the money in my Account, including the amount of any credit or overdraft protection line which can be drawn against by using the lost or stolen Card.

If I believe any of my Cards or PIN have been lost or stolen or that an unauthorized transaction has occurred in any of the Accounts, and I tell you within two (2) Business Days after I discover the loss or theft, I can lose no more than $50 if someone uses that Card without my permission or otherwise does a transaction without my authorization .If I do not tell you within two (2) Business Days after I discover the loss or theft of any of my Cards or PIN or that an unauthorized transaction has occurred in any of the Accounts, and you can prove that you could have stopped someone from using that Card or from otherwise doing a transaction without my authorization if I had told you, I could lose as much as $500. Furthermore, if any Account statement shows transactions that I did not do, I shall tell you AT ONCE. If I do not tell you within 60 days after a statement showing such a transaction was transmitted to me, I may not get back any money I lost after the 60 days if you can prove that you could have stopped someone from taking the money if I had told you in time.

If a good reason, such as a long trip or hospital stay, kept me from telling you, you will extend the time periods.

If an unauthorized individual uses my Card for Purchase Transactions, I will not be liable as long as (1) my Account is in good standing; (2) no more than two incidents of unauthorized use involving my Account have been reported in the last 12 months; and (3) I used reasonable care in safeguarding the Card.

In the case of Debit Card Purchase Transactions where the preceding paragraph does not apply, my liability for transactions involving my Card, where my Card has been lost or stolen, is limited to the amount of liability applicable to credit card losses under the Federal Truth-in-Lending Act, which presently does not exceed $50.

9. Records of Transfers

I will receive or have the option to receive the documentation referred to in paragraph D.3 for any transaction that I do, whether it involves a Card or not, or if it is done at one of your Machines or a Network Machine.

B. AUTOMATIC PAYMENTS

If I have arranged for certain automatic payments from one of my Accounts, such as insurance premiums, or if I have arranged for preauthorized transfers into an Account, such as Social Security or salary direct deposit, the following provisions apply.

1. I Have the Right to Stop Payment

If I have arranged in advance to make regular payments from my Account, I can stop any of these payments. Here’s how:

I can call or write my J.P. Morgan Team at the telephone number and address on my monthly statement so that you receive my request in three (3) Business Days or more before the payment is scheduled. If I call, you may also require me to present my request in writing within 14 days after my call. The charge for each stop payment order will be the then current charge for such service as set out in the schedule of fees for the Account from which such payment was to be made.

If I stop any pre-authorized payment to another party, you may not make further payments to that party until I have provided a new authorization or have requested you in writing to resume making those payments.

2. Notice of Varying Amounts

If these regular payments vary in amount, the person or company I am going to pay will tell me 10 days before each

29

payment when it will be made and how much it will be. Instead, I may arrange with the person or company to receive this notice only when the payment would differ by more than a certain amount from the previous payment, or, alternatively, when the amount would fall outside certain limits that I set.

3. Liability for Failure to Stop Payment of a Transfer I Previously Authorized

If I order you to stop one of these payments three (3) Business Days or more before the transfer is scheduled, and you do not do so, you will be liable to me for those losses or damages provided by law.

4. Charges

For each automatic payment from an Account, I may be charged the fee described in the fee schedule for the Account from which such transfer was made.

5. How to Find Out About Transfers to an Account

If I have arranged to have direct deposits made into any Account(s) at least once every 60 days from the same person or company, I can call my J.P. Morgan Team at the number shown on my statement to find out whether the deposit has been made. In addition, I may check my balance in the Account by using the Machines.

6. Limitations on Transfers from Certain Accounts

Automatic payments from a savings or money market account, such as the Money Market Deposit Account, are subject to restrictions under Federal law. If I exceed Federal transfer restrictions, you may return the transfer unpaid, charge me a fee, convert my Account to a non-interest bearing checking account, or do more than one of the above, as set forth in Section 2 of the Money Market Deposit Account Agreement.

C. OTHER EFT SERVICES

You may offer me, or Authorized Persons, other computer or online banking and bill payment services which can be accessed from our home, office or other remote location and if you do so those services will be governed by the agreements and disclosures you provide when I sign up for the services.

Text Message Transfers

If you send me a text message with a transfer option, including an Account balance alert, I may respond to request a transfer between eligible accounts. To use the service, I can follow the transfer options shown via the text message from you. Not all accounts are eligible for transfer via text message request. You must receive a text message transfer before 11 p.m. Eastern time on a business day for the transfer to be effective the same day. Otherwise, the transfer will be effective the next business day.

D. GENERAL INFORMATION

1. Account Information Disclosure

The J.P. Morgan Privacy Policy governs the disclosure of information about my Accounts by J.P. Morgan.

2. Your Liability for Failure to Complete Transactions

If you do not complete a transaction on time or in the correct amount according to your agreement with me, you will be liable for those damages that the law imposes in such cases. However, there are some exceptions. You will not be liable, for instance:

• If, through no fault of yours, I do not have enough money in the Account for the transaction.

• If the transaction would cause me to exceed the credit limit on any overdraft line I may have.

• If the Machine where I am making a withdrawal does not have enough cash.

• If the terminal was not working properly and I knew about the breakdown when I started my transaction.

• If circumstances beyond your control (such as fire or flood) prevent the transaction, despite reasonable precautions that you have taken.

• If other agreements between us such as my Asset Account, Checking Account, or Money Market Deposit Account Agreements, provide other exceptions.

• My Account is not in an active status.

The list of examples set out in this paragraph 2 is meant to illustrate circumstances under which you would not be liable for failing to complete a transaction and is not intended to list all of the circumstances where you would not be liable.

3. Documentation

(a) Periodic statements

I will receive a monthly account statement for each Account to which funds have been credited or in which transactions have been done showing all electronic transfers to or from that Account. In some instances, more than one Account may appear on a statement. I may request, and you may agree to, an adjustment to the frequency of account statements rendered.

(b) Transactions Made at Machines

A transaction record will be offered to me at the time I make any transaction using one of your Machines. It will be the responsibility of the owner or operator of any Network Machine to offer a record to me when the transaction takes place at a Network Machine.

4. Your Business Days

A Business Day is Monday through Friday, excluding state and federal holidays.

5. In Case of Errors or Questions About My Electronic Transfers

I will call or write to you at the address indicated on my Account statement as soon as I can if I think my statement or transaction record is incorrect, or if I need more information. You must hear from me no later than 60 days after you send me the FIRST statement on which the problem or error appeared.

• I will tell you my name and the account number(s) of the Account(s) involved.

• I will describe the error or the transaction I am uncertain about, and explain as clearly as I can why I believe it is an error or why I need more information.

• I will tell you the dollar amount of the suspected error.

If I tell you in person or by telephone, you may require that I send you my complaint or question in writing within 10 Business Days.

You will give me the results of your investigation within 10 Business Days after you hear from me and will correct any error promptly. If you need more time, however, you may take up to 45 days to investigate my complaint or question. If the transaction that I believe to be in error occurred (i) outside of the United States or the Commonwealth of Puerto Rico, (ii) in connection with the use of a Card (other than a Credit Card) at a point-of-sale terminal, or (iii) in a new Account, then you may take up to 90 days to investigate my claim. If you decide to take more than 10 Business Days to investigate, you will recredit the Account in question within 10 Business Days (20 Business Days for a new Account) for the amount I think is in error, so that I will have the use of the money during the time it takes you to complete your investigation. Such recrediting is referred to as a provisional recredit. If you ask me to put my complaint or question in writing and you do not receive it within 10 Business Days, you will not be required to provisionally recredit the Account(s) that was the subject of my complaint. If the transaction complained of involves an Account which is subject to margin requirements or is otherwise covered by Regulation T of the Federal Reserve Board, you will not provisionally recredit the Account involved.

30

If you find there was no error, you will send me a written explanation within 3 Business Days after you finish your investigation. I may ask for copies of the documents that you used in your investigation. If you provisionally recredited my Account you may take back the amount of any credit if you find that an error did not occur.

My liability in connection with any errors or losses that may occur at a Network Machine is the same as it would be had I used one of your Machines. I shall contact you in the same manner in the case of errors or questions about my electronic transfers made at a Network Machine as I would with regard to a transfer made at one of your own Machines.

6. How to Contact You About Lost or Stolen Card(s), a PIN or an Unauthorized Transfer

If I believe my Card(s) and/or PIN have been lost or stolen, or that someone has or may transfer money from any of my Accounts without my permission, I must contact you as follows:

Banking Cards:

Call The Banking Service Line, 24 hour service at 1-800-243-6727 or from overseas at
212-825-0230

Home Banking:

Call you at 1-877-242-7327 or contact my J.P. Morgan Team at the number listed on my Account statement

7. Alternate Liability Provisions

This section, and not the liability provisions of the General Terms, applies to both my and your liability when the Card or other electronic funds transfer service is used with an Account not intended primarily for personal, family or household purposes or the transaction is of a type not covered by the Electronic Fund Transfer Act.

You shall have no liability to me for any errors or losses I sustain in using my Card or other electronic funds transfer service except where you fail to exercise ordinary care in processing any transaction. Your liability in any case shall be limited to the amount of any funds improperly transferred from my Account less any amount which, even with the exercise of ordinary care, would have been lost. In no event will you be liable for any indirect, punitive, or consequential damages howsoever caused or arising.

A failure to report to you any unauthorized transfer from my Account within fourteen (14) days of your providing me with a statement showing such unauthorized transfer shall relieve you of any liability for any losses sustained after the expiration of such fourteen-day period.

Any errors reported to you will be investigated by you and you will advise me of the results of your investigation.

E. ATM SAFETY AND CARD PROTECTION GUIDELINES NOTE: FOR PURPOSES OF THIS SECTION E ONLY, “YOU” MEANS THE ACCOUNTHOLDER

The following tips can help you use your Card in confidence and safety.

1. Memorize your PIN and keep it confidential. NO CHASE EMPLOYEE WILL EVER ASK YOU TO DISCLOSE YOUR PIN. Remember:

• Never give the PIN to anyone

• Don’t write the PIN on your Card

• Avoid carrying the PIN with you.

If you forget your PIN, stop in at any Chase branch and select a new one. There is no charge, and you do not need to change your Account.

2. Be aware that notwithstanding security measures, access to the ATM facility is sometimes obtained by persons who are not authorized cardholders. Close the entry door completely upon entering and exiting an ATM facility. Do not permit entrance to the facility by any unknown person at any time after regular banking hours.

3. The activity within Chase facilities in New York and New Jersey is recorded by surveillance cameras.

4. Remember to remove your Card from the ATM and place withdrawn cash securely upon your person before exiting an ATM facility. Don’t carry money in open view or in night deposit bags that are obvious targets.

5. If you need emergency assistance due to criminal activity or medical emergency, call 911 at the nearest public telephone.

Complaints concerning security in Chase ATM facilities should be directed to the JPMorgan Chase Security Department at 800-900-0001 or, in New York, to the New York State Banking Department at 888-697-2861, or, in New York City, to the NYC Department of Consumer Affairs at 212-487-4444 or, in New Jersey, to the New Jersey Department of Banking at 609-292-7272.

^© JPMorgan Chase & Co. (06/2010)

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EX-10.(B)

Exhibit 10(b)

AMENDMENT TO ASSET ACCOUNT AGREEMENT

AND

GENERAL TERMS FOR ACCOUNTS AND SERVICES

BY AND BETWEEN

JPMORGAN CHASE BANK, N.A.

AND

MVC CAPITAL, INC.

RECITALS

           A. The undersigned client (the “Client”) wishes to maintain a custody account (the “Account”) at JPMorgan Chase Bank, N.A. (“JPM”) for the purpose of holding or disposing of any property received by JPM for the Client. The Asset Account Agreement that governs the terms of the Account (the “Agreement”) is attached hereto and incorporates by reference the JPMorgan Private Bank General Terms for Accounts and Services (the “General Terms”), which also is attached hereto.

          B. JPM wishes to act as custodian for the Account.

          C. In consideration of the foregoing, the parties have agreed to modify and amend the Agreement as indicated below and that the modified and amended terms shall apply to the Account.

AGREED AS SET FORTH

1.	Section 2 of the Agreement is amended in the first sentence of the subsection entitled “Terms of Custody” but inserting the word “separate” in between the words “my” and “account”.
2.	Section 2 of the Agreement is further amended by inserting at the end of the 2d paragraph in the subsection entitled “Terms of Custody” the following:

You will have no power to assign, hypothecate, pledge or otherwise dispose of any Property, except (1) pursuant to instructions given by me or an Authorized Person; or (2) to satisfy an Obligation to you or a Morgan Affiliate as provided in Section 6 of the General Terms for Accounts and Services.

3. Section 2 of the Agreement is further amended by inserting at the beginning of the 7^th paragraph in the subsection entitled “Terms of Custody” the following:

Neither you nor any of your nominees shall vote any of the Securities held hereunder by or for my Account.

4.  In case of any conflict between the terms of this Amendment and the terms of the Agreement or the General Terms, this Amendment will control. The Agreement and the

Amendment to MVC Agmt

General Terms, as amended by this Amendment, supersede any prior agreements entered into by the parties or their predecessors in connection with the Account.

Dated as of July 20, 2010

CLIENT:		CUSTODIAN:
MVC Capital, Inc.		JPMORGAN CHASE BANK, N.A.
By:		By:
	Name:		Name:
	Title:		Title:

Amendment to MVC Agmt

EX-31

EXHIBIT 31

RULE 13a-14(a) CERTIFICATIONS

I, Michael Tokarz, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of MVC Capital, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 8, 2010

/s/ Michael Tokarz  

Michael Tokarz 

In the capacity of the officer who performs the functions of Principal Executive Officer of MVC Capital, Inc. 

I, Peter Seidenberg, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of MVC Capital, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 8, 2010

/s/ Peter Seidenberg  

Peter Seidenberg 

In the capacity of the officer who performs the functions of Principal Financial Officer of MVC Capital, Inc. 

EX-32

EXHIBIT 32

CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Michael Tokarz, in the capacity of the officer who performs the functions of Principal Executive Officer of MVC Capital, Inc., a Delaware corporation (the “Registrant”), certifies that:

1. The Registrant’s Quarterly Report on Form 10-Q for the period ended July 31, 2010 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

In the capacity of the officer who performs the functions
of Principal Executive Officer for

MVC Capital, Inc.

/s/ Michael Tokarz  

Michael Tokarz 

Date: September 8, 2010

Peter Seidenberg, in the capacity of the officer who performs the functions of Principal Financial Officer, of MVC Capital, Inc., a Delaware corporation (the “Registrant”), certifies that:

1. The Registrant’s Quarterly Report on Form 10-Q for the period ended July 31, 2010 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

In the capacity of the officer who performs the functions
of Principal Financial Officer for

MVC Capital, Inc.

/s/ Peter Seidenberg  

Peter Seidenberg 

Date: September 8, 2010