Highlights for the quarter ended March 31, 2009:

Stockholders' Equity (Net Assets): $54.6 million

Total Portfolio Market Value: $53.7 million

Net Asset Value per share: $3.08

Operating Results (in thousands):

Net decrease in stockholders' equity (net assets) from operations: $5,912

Net investment income: $93

Net realized and unrealized losses on investments: $6,005

Portfolio Investment Activity:

Cost of investments purchased during period: $0.2 million

Proceeds from disposition of investments during period: $13.2 million

Number of portfolio companies as of March 31, 2009: 19

Portfolio and Investment Activity

The following table summarizes the historical composition of our investment portfolio, exclusive of cash and cash equivalents, as a percentage of total investments.

 Exception caught in main. 

Bank debt typically accrues interest at variable rates determined by reference to a base lending rate, such as LIBOR or prime rate, and typically will have maturities of 3 to 5 years. Corporate notes and bonds will typically accrue interest at fixed rates and have stated maturities at origination that range from 5 to 10 years. At March 31, 2009, the weighted average yield of our portfolio investments, exclusive of cash and cash equivalents, was approximately 5.1%. At March 31, 2009, the weighted average yield of our investments in senior loans and corporate notes and bonds was approximately 5.4%. Yields are computed assuming a fully settled portfolio; using interest rates as of the report date and include amortization of senior loan discount points, original issue discount and market premium or discount; weighted by their respective costs when averaged.

As of March 31, 2009, approximately 95.9% of our portfolio consisted of investments in 10 issuers. Additional information regarding these specific investments has been outlined below. This additional information is limited to publicly available information, and does not address the creditworthiness or financial viability of the issuer, or the future plans of the Company as it relates to a specific investment. Furthermore, while the objective of the Company is to invest primarily in financially-troubled or distressed companies, the Company can and does invest in issuers that are not financially-troubled or distressed at the time of investment. The Company may have sold some, or all, of the positions outlined below subsequent to March 31, 2009.

Argatroban Royalty Sub, LLC

Argatroban Royalty Sub, LLC, a wholly-owned subsidiary of Encysive Pharmaceuticals, was established to issue senior secured bonds backed by the royalty cash stream from the sales of Argatroban, a branded pharmaceutical marketed by GlaxoSmithKline plc. Argatroban is a synthetic direct thrombin inhibitor indicated as an anticoagulant for prophylaxis or treatment of thrombosis in patients with heparin-induced thrombocytopenia, or HIT, which is a profound allergic reaction to anticoagulation therapy with heparin. More information can be found at www.argatroban.com.

Azithromycin Royalty Sub, LLC

Azithromycin Royalty Sub, LLC, a wholly-owned subsidiary of InSite Vision Inc., was established to issue senior secured bonds backed by the royalty cash stream from the sales of azithromycin ophthalmic solution, a branded pharmaceutical sold under the brand name AzaSite® and marketed by Inspire Pharmaceuticals, Inc. The solution is used to treat conjunctivitis. More information can be found at www.azasite.com.

Baker & Taylor, Inc.

Baker & Taylor, Inc. ("B&T") is engaged in the distribution of books, music, video and game products. In addition, unique information services built around the B&T's proprietary databases as well as specialized consulting and outsourcing services are provided to customers. Customers include retailers (including Internet retailers), public, academic and school libraries and various departments of federal and local governments. B&T distributes its products throughout the United States and worldwide.

Celtic Pharma Phinco B.V.

Celtic Pharmaceuticals Phinco B.V. ("Celtic Pharma") is a private investment fund with a mandate to purchase a diversified portfolio of novel pharmaceutical products in the later stages of development that have already demonstrated initial proof of principle efficacy in human clinical trials. Celtic Pharma has $250 million of equity commitments in addition to raising $156 million of high-yield bonds. Celtic Pharma has invested in nine drug programs since its 2004 inception. More information can be found at www.celticpharma.com.

Comcorp Broadcasting, Inc.

Communications Corporation of America and its wholly owned subsidiaries, including Comcorp Broadcasting, Inc., (collectively, "CCA") own and operate thirteen television stations in Louisiana, Texas, and Indiana. CCA also provides services to, but does not own, ten television stations under Joint Sales Agreements, Commercial Inventory Arrangements, and/or Local Marketing Agreements. Under these agreements CCA has the right to sell the stations' available airtime. CCA's revenue is primarily derived from the sale of advertising airtime. In addition CCA offers production services and receives a compensation fee under network affiliation agreements. CCA, on June 7, 2006 (the Petition Date), filed for protection against its creditors under Chapter 11 of the United States Bankruptcy Code after it was unable to meet its ongoing debt obligations. CCA and its direct and indirect subsidiaries, exited bankruptcy with an effective date of October 4, 2007 under reorganization plans filed with the United States Bankruptcy Court in the Western District of Louisiana (Case No. 06-50410).

Fontainebleau Florida Hotel, LLC

Fontainebleau Resorts, LLC ("Fontainebleau") is led by Chairman Jeffrey Soffer, who also serves as Chief Executive Officer of Turnberry, Ltd., a creator of luxury condominium and condominium-hotel developments, and President and Chief Financial Officer Glenn Schaeffer, a former Chief Executive Officer of Mandalay Resort Group. Fontainebleau Miami Beach is a resort located in Miami Beach, Florida. Fontainebleau plans to renovate and expand this property into a 22-acre destination resort. More information can be found at www.bleaumiamibeach.com.

Genesys Ventures IA, LP

Genesys Ventures IA, LP, a limited partnership with Genesys Capital Partners of Toronto, Ontario, was established to hold the preferred equity of three late-stage venture healthcare companies.

Lake at Las Vegas Joint Venture, LLC

Lake at Las Vegas Joint Venture, LLC ("LLV") is a 3,592-acre resort and destination community and is one of the larger master-planned communities in Las Vegas, NV.