Selected Consolidated Financial Data

                                                         Nine Month           Nine Month
                                                        Period Ended         Period Ended          Year Ended
                                                          July 31,             July 31,           October 31,
                                                            2008                 2007                 2007
                                                         (Unaudited)          (Unaudited)
                                                                (In thousands, except per share data)
Operating Data:
Interest and related portfolio income:
Interest and dividend income                            $      20,458        $      15,982        $     22,826
Fee income                                                      2,888                2,278               3,750
Other income                                                      435                  252                 374


Total operating income                                         23,781               18,512              26,950

Expenses:
Incentive compensation (Note 9)                                 9,326               10,042              10,813
Administrative                                                  2,321                1,929               2,559
Interest, fees and other borrowing costs                        3,274                3,636               4,859
Management fee                                                  6,479                5,105               7,034


Total operating expenses                                       21,400               20,712              25,265


Net operating income (loss) before taxes                        2,381               (2,200 )             1,685

Tax benefit                                                      (106 )               (452 )              (375 )


Net operating income (loss)                                     2,487               (1,748 )             2,060

Net realized and unrealized gains (losses):
Net realized gains (losses)                                     1,419               65,850              66,944
Net change in unrealized appreciation
(depreciation)                                                 52,689               (6,914 )            (3,302 )


Net realized and unrealized gains on investments               54,108               58,936              63,642


Net increase in net assets resulting from
operations                                              $      56,595        $      57,188        $     65,702


Per Share:
Net increase in net assets per share resulting
from operations                                         $        2.33        $        2.57        $       2.92
Dividends per share                                     $        0.36        $        0.42        $       0.54

Balance Sheet Data:
Portfolio at fair value                                 $     453,301        $     316,867        $    379,168
Portfolio at cost                                             414,874              334,740             393,428
Total assets                                                  585,051              436,549             470,491
Shareholders' equity                                          417,429              363,453             369,097
Shareholders' equity per share (net asset value)        $       17.18        $       14.98        $      15.21
Common shares outstanding at period end                        24,297               24,262              24,265
Other Data:
Number of Investments funded in period                             11                   22                  26
Investments funded ($) in period                        $      93,471        $     100,700        $    167,134

                                       2008                                                       2007                                                                2006
                     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                6,804            8,081            8,896            8,438            7,030            6,073            5,409            6,104           4,607            3,915            3,882
Incentive
compensation          3,929            3,740            1,657              771            1,618            4,898            3,526            1,338           1,161            2,005            1,551
Interest,
fees and
other
borrowing
costs                 1,022            1,081            1,171            1,223            1,252            1,256            1,128              910             636               39                9
Management
fee                   2,276            2,185            2,018            1,929            1,616            1,854            1,635                -               -                -                -
Other
expenses                887              753              681              630              608              652              669            2,117           1,676            1,739            1,387
Tax expense
(benefit)                58             (186 )             22               77              (78 )           (394 )             20               16              62              (24 )            105
Net operating
income
(loss) before
net realized
and
unrealized
gains                (1,368 )            508            3,347            3,808            2,014           (2,193 )         (1,569 )          1,723           1,072              156              830
Net increase
in net assets
resulting
from
operations           18,682           17,158           20,813            8,514           13,788           24,323           19,077           15,866           8,046           11,117           12,307
Net increase
in net assets
resulting
from
operations
per share              0.77             0.70             0.86             0.35             0.57             1.00             1.00             0.83            0.42             0.58             0.65
Net asset
value per
share                 17.18            16.53            15.95            15.21            14.98            14.53            13.23            12.41           11.70            11.40            10.94

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, 2007, the Company made ten new investments and 16 follow-on investments in existing portfolio companies, committing capital totaling approximately $167.1 million pursuant to our current investment objective. During the nine month period ended July 31, 2008, the Company made two new investments and nine follow-on investments in existing portfolio companies, committing capital totaling approximately $93.5 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, 2008, 3.56% 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, during fiscal year 2006, we established MVC Partners for this purpose. Furthermore, our board of directors is currently considering authorizing the establishment of one or more investment vehicles that would have the ability, among other things, to make Non-Diversified Investments. Additionally, we may also 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, 2008 and 2007. Total operating income was $23.8 million for the nine month period ended July 31, 2008 and $18.5 million for the nine month period ended July 31, 2007, an increase of $5.3 million.
For the Nine Month Period Ended July 31, 2008 Total operating income was $23.8 million for the nine month period ended July 31, 2008. The increase in operating income over the same period last year was primarily due to the increase in the number of investments that provide the Company with current income. 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 $19.6 million in interest and dividend income from investments in portfolio companies. Of the $19.6 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 2% to 17%. Also, the Company earned approximately $830,000 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 $2.9 million and $436,000, respectively.
For the Nine Month Period Ended July 31, 2007 Total operating income was $18.5 million for the nine month period ended July 31, 2007. The increase in operating income over the same period last year was primarily due to the increase in the number of investments that provide the Company with current income. The main components of investment income were the interest and dividend income earned on loans to portfolio companies and the receipt of closing and monitoring fees from certain portfolio companies by the Company and MVCFS. The Company earned approximately $15.5 million in interest and dividend income from investments in portfolio companies. Of the $15.5 million recorded in interest/dividend income, approximately $2.4 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 0% to 27%. Also, the Company earned approximately $508,000 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 $2.3 million and $252,000, respectively.
OPERATING EXPENSES
For the Nine Month Periods Ended July 31, 2008 and 2007. Operating expenses were $21.4 million for the nine month period ended July 31, 2008 and $20.7 million for the nine month period ended July 31, 2007, an increase of $700,000.
For the Nine Month Period Ended July 31, 2008 Operating expenses were $21.4 million or 7.30% of the Company's average net assets, when annualized, for the nine month period ended July 31, 2008. Significant components of operating expenses for the nine month period ended July 31, 2008, included the estimated provision for incentive compensation expense of approximately $9.3 million, the management fee of $6.5 million, and interest expense and other borrowing costs of $3.3 million. The estimated provision for incentive compensation expense is a non-cash, not yet payable, provisional expense relating to the Advisory Agreement.

The $700,000 increase in the Company's operating expenses for the nine month period ended July 31, 2008 compared to the nine month period ended July 31, 2007, was primarily due to the $1.4 million increase in the management fee expense offset by the decrease of $700,000 in the provision for estimated incentive compensation. It should be noted, in this regard, that 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 extraordinary expenses taken as a percentage of the Company's average net assets) to 3.25% in each of the 2007 and 2008 fiscal years. For fiscal year 2007, the expense ratio was 3.0% (taking into account the same carve outs as those applicable to the expense cap).
Pursuant to the terms of the Advisory Agreement, during the nine month period ended July 31, 2008, the estimated provision for incentive compensation on the balance sheet, was decreased by a net amount of $3,576,743 to $14,298,753. The amount of the provision reflects the Valuation Committee's determination to increase the fair values of nine of the Company's portfolio investments: U.S. Gas, Vitality, Summit, Tekers, SGDA, Custom Alloy, MVC Automotive, PreVisor and Velocitius by a total of $50.3 million. The provision also reflects the Valuation Committee's determination to increase the fair value of the Ohio Medical preferred stock by approximately $2.9 million due to a PIK distribution which was treated as a return of capital. The net decrease in the provision for incentive compensation during the nine month period ended July 31, 2008 was a result of the incentive compensation payment to TTG Advisers of $12.9 million due to the sale of Baltic Motors and BM Auto (20% of the realized gain from the sale less unrealized depreciation on the portfolio). Pursuant to the Advisory Agreement, incentive compensation payments will be made only upon the occurrence of a realization event (such as the sale of shares of Baltic Motors and BM Auto). Without this reserve for incentive compensation, operating expenses would have been approximately $12.1 million or 4.06% of average net assets when annualized as compared to 7.24%, which is reported on the Consolidated Per Share Data and Ratios, for the nine month period ended July 31, 2008. The net decrease also reflects the Valuation Committee's determination to decrease the fair values of two of the Company's portfolio investments (Timberland and Vestal) by a total of $4.6 million. During the nine month period ended July 31, 2008, 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.
In February 2008, the Company renewed its Directors & Officers/Professional Liability Insurance policies at an annual premium expense of approximately $362,000, which is amortized over the twelve month life of the policy. The prior policy premium was $381,000.
For the Nine Month Period Ended July 31, 2007 Operating expenses were $20.7 million or 9.05% of the Company's average net assets, when annualized, for the nine month period ended July 31, 2007. Significant components of operating expenses for the nine month period ended July 31, 2007 included the estimated provision for incentive compensation expense of approximately $10.0 million, management fee of $5.1 million, and interest expense and other borrowing costs of $3.6 million. The estimated provision for incentive compensation expense is a non-cash, not yet payable, provisional expense relating to the Advisory Agreement.
The $10.5 million increase in the Company's operating expenses in the nine month period ended July 31, 2007 compared to the nine month period ended July 31, 2006, was primarily due to the $5.3 million increase in the provision for estimated incentive compensation, the $2.9 million increase in the Company's interest expense and other borrowings, and the $2.3 million increase in the management fee expense compared to the facilities and employee compensation and benefits expense incurred when the Company was internally managed. It should be noted, in this regard, that 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 extraordinary expenses taken as a percentage of the Company's average net assets) to 3.25% in a given fiscal year.

In fiscal year 2006, when the Company was still internally managed and not subject to the expense cap, the expense ratio was 3.22% (taking into account the same carve outs as those applicable to the expense cap). For the nine month period ended July 31, 2007, the expense ratio was 3.07% (taking into account the same carve outs as those applicable to the expense cap).
Pursuant to the terms of the Advisory Agreement, during the nine month period ended July 31, 2007, the provision for incentive compensation was increased by a net amount of $9,931,942 to $17,104,294. The increase in the provision for incentive compensation during the nine month period ended July 31, 2007 primarily resulted from the sale of Baltic Motors and BM Auto for a combined realized gain of $65.5 million, which was a $52.3 million increase from the carrying value at October 31, 2006. The Valuation Committee also determined to increase the fair values of five of the Company's portfolio investments (Dakota, Octagon, SGDA, PreVisor and Vitality) by a total of $5.8 million and decrease the fair value of Ohio by $9.0 million. During the year ended October 31, 2006, Mr. Tokarz was paid no cash or other compensation. However, on October 2, 2006, the Company realized a gain of $551,092 from the sale of a portion of the Company's LLC membership interest in Octagon. This transaction triggered an incentive compensation payment obligation of $110,218 to Mr. Tokarz, which was paid on January 12, 2007. After the increase in the provision for incentive compensation due to the sale of Baltic Motors and BM Auto and the decrease in the provision due to the Valuation Committee's determinations and payment made to Mr. Tokarz, the reserve balance at July 31, 2007 was $17,104,294. This reserve balance of $17,104,294 will remain unpaid until net capital gains are realized, if ever, by the Company. Pursuant to the Advisory Agreement, incentive compensation payments will be made only upon the occurrence of a realization event (such as the sale of shares of Baltic Motors and BM Auto). Without this reserve for incentive compensation, operating expenses would have been approximately $10.7 million or 4.47% of average net assets when annualized as compared to 8.86%, which is reported on the Consolidated Per Share Data and Ratios, for the nine month period ended July 31, 2007. During the nine month period ended July 31, 2007, 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, 2008 and 2007. Net realized gains for the nine month period ended July 31, 2008 were $1.4 million and $65.8 million for the nine month period ended July 31, 2007, a decrease of approximately $64.4 million.
For the Nine Month Period Ended July 31, 2008 Net realized gains for the nine month period ended July 31, 2008 were $1.4 million. The significant component of the Company's net realized gains for the nine month period ended July 31, 2008 was primarily due to the gain on the sale of Genevac common stock and Phoenix Coal common stock. On January 2, 2008, Genevac repaid its senior subordinated loan in full including all accrued interest. The total amount received was $11.9 million. The Company, at this time, sold 140 shares of Genevac common stock for $1.7 million, resulting in a capital gain of $595,000. On July 23, 2008, the Company sold 500,000 shares of Phoenix Coal. The total amount received from the sale net of commission was approximately $512,000, resulting in a realized gain of approximately $262,000. On July 29, 2008, the Company sold 500,000 more shares of Phoenix Coal. The total amount received from the sale net of commission was approximately $484,000, resulting in a realized gain of approximately $234,000. The Company also received a distribution related to the sale of Baltic of approximately $283,000.
The Company also realized a gain on foreign currency of approximately $60,000.

For the Nine Month Period Ended July, 2007 Net realized gains for the nine month period ended July 31, 2007 were $65.8 million. The significant component of the Company's net realized gains for the nine month period ended July 31, 2007 was primarily due to the gain on the sale of Baltic and BM Auto. On July 24, 2007, the Company sold the common stock of Baltic Motors and BM Auto. The amount received from the sale of the 60,684 common shares of Baltic Motors was approximately $62.0 million, net of closing and other transaction costs, working capital adjustments and a reserve established by the Company to satisfy certain post-closing conditions requiring capital and other expenditures. Baltic Motors repaid all debt from the Company in full including all accrued interest. The total amount received from the repayment of the debt was approximately $10.2 million including all accrued interest. The remaining $51.8 million less the $8.0 million cost basis of Baltic resulted in $43.8 million recorded as realized gain. The difference between the $51.8 million received from the Baltic equity and the carrying value at October 31, 2006 is $30.6 million and the amount of the increase in net assets attributable to fiscal year 2007. The portion of the capital gain related to the equity investment made on June 24, 2004 ($40.9 million), will be treated as long-term capital gain and the portion related to the equity investment made on September 28, 2006 ($2.9 million) will be treated as a short-term capital gain. The amount received from the sale of the 47,300 common shares of BM Auto was approximately $29.7 million, net of closing and other transaction costs, working . . .