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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-22832
ALLIED CAPITAL LENDING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
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MARYLAND 52-1081052
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
C/O ALLIED CAPITAL ADVISERS, INC.
1666 K STREET, NW, NINTH FLOOR 20006
WASHINGTON, D.C. (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (202) 331-1112
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.0001 PAR VALUE
(TITLE OF CLASS)
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 X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.[ ]
The aggregate market value of the registrant's common stock held other than by
officers and directors of the registrant, officers of its investment adviser,
and shares held by Allied Capital Corporation as of March 19, 1997 was
approximately $82,476,527 based upon the average bid and asked price for the
registrant's common stock on that date. As of March 19, 1997 there were
5,128,024 shares of the registrant's common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for the year ended
December 31, 1996 are incorporated by reference into Parts II and IV of this
Report. Portions of the registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on May 12, 1997 are incorporated by
reference into Part III of this Report.
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PART I
ITEM 1. BUSINESS.
Allied Capital Lending Corporation (the "Company") was incorporated in
1976 and is engaged in the business of making loans to small businesses,
including loans that are partially guaranteed by the U.S. Small Business
Administration ("SBA") pursuant to the SBA's 7(a) loan program. Allied Capital
Advisers, Inc. ("Advisers") serves as the investment adviser of the Company
under an investment advisory agreement.
The Company is a closed-end management investment company that elected
in 1993 to be regulated as a business development company ("BDC") under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Company is
licensed as a small business lending company ("SBLC") by the SBA, and in April
1995 formed ACLC Limited Partnership (the "Limited Partnership") in order to
participate in the SBA's 504 loan program and make other small business loans
to accompany its 7(a) Loans. In January 1997, the Company effected a
reorganization whereby Allied Capital SBLC Corporation ("SBLC") and Allied
Capital Credit Corporation ("Credit") became its subsidiaries.
Prior to consummation of the Company's initial public offering in
November 1993, the Company was a wholly owned subsidiary of Allied Capital
Corporation ("Allied I"). After that date, Allied I continued to hold a
significant number of the Company's shares, but agreed to divest itself of such
shares by December 31, 1998 through public offerings, private placements,
distributions to Allied I stockholders or otherwise. Allied I's holdings of the
Company's shares represented approximately 16% of the Company's shares
outstanding as of March 21, 1996.
Conduct of Business Through Subsidiaries
Until 1995, the Company's operations were entirely dependent upon the
SBA's 7(a) loan program (discussed below). In December 1994, in a move
unexpected by the Company, the SBA temporarily altered its regulations
concerning the Section 7(a) loan program and announced that it would place a
loan size cap of $500,000 on the loans that it would guarantee under the
Section 7(a) loan program. In late 1995, the SBA altered the regulations again
and restored the maximum guarantee to $750,000 for any one borrower, thus
effectively raising the maximum loan size with a 75% guarantee to $1 million.
The SBA's December 1994 reduction in the maximum loan size under the 7(a) loan
program had no significant impact on the Company's results of operations for
1995 because the Company had a substantial backlog of loans already approved
under prior rules.
The frequency of regulatory changes in 1994 and 1995 prompted the
Company to reevaluate its lending programs and expand its operations with
additional small business loan programs. The Company determined that investing
in loans generated under the SBA's Certified Development Company Program ("504
Loans"), and supplemental loans, not guaranteed by the SBA, to accompany the
Company's 7(a) loans ("7(a) Companion Loans"), would afford it significant
opportunities to diversify its operations and continue its growth. As an SBLC,
however, the Company was prohibited from making 504 Loans and 7(a) Companion
Loans. The Company formed the Limited Partnership to generate 504 Loans and
7(a) Companion Loans. During the fiscal year ended December 31, 1996, the
Limited Partnership participated in the SBA's Certified Development Company
Program and generated supplemental loans, not guaranteed by the SBA, to
accompany the Company's 7(a) Loans.
On January 1, 1997, the Company effected a reorganization of its
internal structure to provide a more effective corporate structure to support
the origination of 7(a) loans, 7(a) Companion Loans and 504 Loans. Pursuant to
this reorganization, the Company transferred, as a capital contribution, all or
substantially all of its assets related to 7(a) loan origination activity and
its SBA-issued license to SBLC in exchange for 100% of SBLC's common stock. The
Company dissolved the Limited Partnership and purchased the 1% limited
partnership interest not owned by the Company, and assumed all the
Partnership's assets and liabilities upon the dissolution.
SBLC and Credit were organized under the laws of Maryland on March 29,
1996. SBLC and Credit each elected to be regulated as a BDC pursuant to Section
54(a) of the 1940 Act on December 24, 1996. On January 1, 1997, SBLC and Credit
became wholly owned subsidiaries of the Company. The Company, SBLC and Credit
intend to operate
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as one company and engage in consolidated reporting. The Company continues to
explore other financial products and is actively pursuing entry into other loan
programs to diversify its portfolio.
The Section 7(a) Loan Program
Pursuant to Section 7(a) of the Small Business Act of 1958, as
amended, the SBA will guarantee 80% of any qualified loan up to $100,000
regardless of maturity, and 75% of any such loan over $100,000 regardless of
maturity, to a maximum guarantee of $750,000 for any one borrower. SBA
regulations define qualified small businesses generally as businesses with no
more than $5 million in annual sales and no more than 500 employees.
The SBA designates certain participants in the Section 7(a) loan
program as "preferred lenders" in designated markets. As of December 31, 1996,
the Company was a preferred lender in 47 regional markets. The SBA also
designates certain participants in the Section 7(a) loan program as "certified
lenders." Applications for loan guarantees submitted by preferred and certified
lenders receive expedited processing by the SBA. The SBA has designated the
Company as a certified lender in all markets in which it is a preferred lender.
As permitted by SBA regulations, the Company (currently through SBLC)
systematically sells to investors, without recourse, the guaranteed portion of
its loans. Under legislation adopted in 1993, a fee at the rate of 0.4% per
annum on the outstanding principal balance of such loans sold in the secondary
market is payable to the SBA. Such loan sales by the Company generally take
place approximately three months after the closing of the loan and, under
current market conditions, are made at a price of approximately 110% of the
principal amount of the portion of the loan sold. In October 1995, the SBA
amended its regulations and raised the annual fee on the guaranteed portion of
loans approved by the SBA after October 12, 1995 to 0.5% per annum regardless
of sale to the secondary market. The SBA also is entitled to a fee of 50% of
any cash premium in excess of 10% received on loan sales. The Company, through
SBLC, continues to service loans sold for a normal servicing fee of
approximately 0.4% per annum of the outstanding principal amount of such loans.
To the extent that the Company receives any higher servicing fee, the value of
such additional servicing fee is accrued as an excess servicing asset. At
December 31, 1996, the Company was servicing approximately $169 million
aggregate principal amount of loans, of which approximately 64% had been sold
to investors.
The Company requires capital to make loans, to carry those loans for
approximately three months until sale occurs, and to carry the unsold portion
of the principal amount of those loans to maturity. For the purpose of carrying
the guaranteed portions of such loans pending their sale, the Company has
obtained a line of credit aggregating $25 million from a commercial bank that
expires in May 1998.
Section 7(a) loans may be made to qualifying small businesses for the
purposes of acquiring real estate, purchasing machinery or equipment or to
provide working capital. Such loans made to acquire real estate may have
maturities of up to 25 years; loans made for the purpose of purchasing
machinery and equipment may have maturities of up to 15 years; and loans made
to provide working capital may have maturities of up to seven years. These
loans are secured by a mortgage or other lien on the assets of the borrower
and, frequently, of its principals. The Company generally does not make
unsecured working capital loans. In all cases, the principals of the small
businesses must personally guarantee the payment of interest and principal on
the loans.
The Company may, from time to time, concentrate its loans in
particular industries, but the Company does not intend to concentrate its loans
in any industry. At December 31, 1996, the Company had in its portfolio or was
servicing loans to, among others, hotels and motels, restaurants,
manufacturers, retail shops, food stores, professional services, laundries and
cleaners, home furnishings concerns, gasoline stations, business services
firms, recreational services providers, automobile exhaust repair shops,
personal services providers and automotive repair concerns.
At December 31, 1996, $17.6 million, or 29% of the Company's
outstanding loans, were invested in the hotel and motel industry (Hospitality
Loans). At December 31, 1996, Hospitality Loans included $4.1 million of loans
held for sale. Hospitality Loans not held for sale at December 31, 1996
represented 22% of the Company's outstanding loans. In the event of a downturn
in the hotel and motel industry, the ability of such borrowers to satisfy their
debt service obligations to the Company could be adversely affected. In
addition, existing competing establishments, new hotels or motel construction
which could saturate the market in a geographic area, or declining trends in
travel could adversely affect the ability of these borrowers to service their
debts to the Company.
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The interest on loans recently made by the Company generally is at a
variable rate, which is generally 2.25% to 2.75% per annum above the prime
rate, as published in The Wall Street Journal or other financial newspaper,
adjusted monthly.
All loans are payable in equal monthly installments of principal and
interest from the dates on which the loans are made (or the first day of the
month following any month in which there occurs an interest rate adjustment) to
their respective maturities.
504 Loan Program and Companion Loans
During 1996, as part of the Company's efforts to diversify its lending
activities, the Company, through the Limited Partnership, continued its
participation in the SBA's 504 loan programs. In January 1997 the Company
succeeded to the Limited Partnership's 504 loans and Companion Loans business
and its portfolio of investments.
Under the SBA's 504 loan program, qualified small businesses can
purchase or build real estate with favorable long-term debt. Loans made under
this program are structured such that the entrepreneur provides at least 10% of
the project cost in equity, the Company (in 1996, through the Limited
Partnership, and beginning in 1997, through itself) provides 50% of the project
cost in a 20-year adjustable rate first mortgage and a local certified
development company ("CDC") provides a 20-year fixed rate second mortgage for
the remaining 40% of the project cost. Both loans are fully amortizing and the
total project cost can be as large as $2.5 million.
In addition to partnering with local CDCs to finance projects that
require up to $2.5 million in financing, beginning in 1995 the Company, through
the Limited Partnership or itself, as applicable, also provided companion or
"piggyback" loans in conjunction with traditional SBA 7(a) loans (i.e., the
7(a) Companion Loans). For this type of financing, the Company provides an
unguaranteed first mortgage loan for up to 50% of the real estate value and a
second mortgage loan through the 7(a) program with a 75% SBA guarantee. The
total of the two loans is generally 80% or less of the appraised value of the
real estate. The Company also partners with local banks by providing second
mortgage loans that are partially guaranteed by the SBA in conjunction with the
banks' conventional first mortgage loans to qualifying small businesses.
The Company finances its SBA 504 loans and 7(a) Companion Loans with a
line of credit from a commercial bank. The line of credit, as amended January
1, 1997, had a $15 million capacity of which $8.1 million had been borrowed.
The interest rate on this facility is equal to LIBOR plus 1.6% per annum, and
the facility expires May, 1998.
Loan Generation
The Company has made arrangements with certain financial consulting
organizations, or regional associates, to refer to the Company potential loans
to small businesses in certain designated territories. Any prospective loan
referred to the Company by any regional associate is reviewed by the Company's
portfolio manager and its credit committee and is not closed unless approved or
ratified by the Board of Directors of the Company and, in the case of Section
7(a) loans, by the SBA. If and when a loan referred by a regional associate is
closed, such organization is compensated by an origination fee calculated using
a formula agreed upon by the Company and such regional associate. The
origination fees currently paid by the Company to its regional associates range
from 0.5% to 5% of the principal amount of each loan made by the Company that
was referred by the respective regional associate. The regional associates from
time to time may assist the Company in monitoring any loans referred by them or
otherwise made in their territories. For those services, the regional
associates are compensated with a fixed fee per visit.
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The Company's Operation as a BDC
As BDCs, the Company, SBLC and Credit may not acquire any investment
assets other than "Qualifying Assets" unless, at the time the acquisition is
made, Qualifying Assets represent at least 70% of the value of each such
entity's total investment assets. The principal categories of Qualifying Assets
relevant to the business of the Company, SBLC and Credit are the following:
(1) Securities purchased in transactions not involving any public offering
from the issuer of such securities, an affiliated person of the
issuer, or any other person (subject to Securities and Exchange
Commission rule-making), provided the issuer is an eligible portfolio
company. An eligible portfolio company is defined as any issuer that
(a) is organized and has its principal place of business in the United
States, (b) is not an investment company other than an SBIC wholly
owned by the BDC (the Company's investments in and advances to SBLC
and Credit are Qualifying Assets), and (C) either: (I) does not have
any class of publicly traded securities with respect to which a broker
may extend margin credit or (ii) is controlled by the BDC.
(2) Cash, cash items, government securities, or high quality debt
securities maturing in one year or less from the time of
investment.
In addition, to treat securities described in (1) above as a
Qualifying Asset for the purpose of the 70% test, a BDC must make available to
the issuer of those securities significant managerial assistance. Making
available significant managerial assistance means, among other things, any
arrangement whereby the BDC, through its directors, officers or employees,
offers to provide, and, if accepted, does provide, significant guidance and
counsel concerning the management, operations or business objectives and
policies of a portfolio company. Managerial assistance is made available to the
portfolio companies by the Company's officers (who are also the officers of
SBLC and Credit) and the investment officers of Advisers who manage the
Company's investments. Each portfolio company is assigned for monitoring
purposes to an investment officer and is contacted and counseled if it appears
to be encountering business or financial difficulties. The Company (either
directly or through its subsidiaries) also provides management assistance and
counseling on a continuing basis to any portfolio company that requests it,
whether or not difficulties are perceived. The Company's officers and directors
are highly experienced in providing this type of managerial assistance to small
businesses. The Company, SBLC and Credit each may not change the nature of its
business so as to cease to be, or withdraw its election as, a BDC unless
authorized by vote of a majority (as defined in the 1940 Act) of the Company's
shares. As a BDC, the Company is entitled to borrow money and issue senior
securities representing indebtedness as long as its indebtedness representing
senior securities has asset coverage to the extent of at least 200%.
Competition
There are several other SBLCs (non-bank lenders) as well as a large
number of banks that participate in the Section 7(a) loan program. All of these
participants compete for the business of eligible borrowers. From time to time,
these competitors will offer loans at a lower rate of interest than the
2.75%-above-prime maximum rate permitted by the SBA, which is the rate at which
the Company generally offers loans. However, such lower-cost loans are
generally offered with shorter maturities than those which the Company is
prepared to offer for its loans. Moreover, unlike SBLCs such as the Company,
banks are frequently under different regulatory constraints on the types of
loans that they are able to offer.
Investment Adviser
Advisers is the investment adviser of the Company pursuant to an
investment advisory agreement. Under that agreement, Advisers manages the loans
made by the Company, subject to the supervision and control of the Board of
Directors of the Company, and evaluates, structures, closes and monitors those
loans made by the Company. The Company will not make any loan or other
investment that has not been recommended by Advisers. Except as to those
investment decisions that require specific approval by the Company's Board,
Advisers has the authority to effect loans and sales of portions of loans for
the Company's account. Some of the directors and officers of Advisers are also
directors and officers of the Company.
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The advisory agreement provides that the Company will pay all of its
own operating expenses, except those specifically required to be borne by
Advisers. The expenses paid by Advisers include the compensation of its
officers and the cost of office space, equipment, and other personnel necessary
for day-to-day operations. The expenses that are paid by the Company include
the Company's share of transaction costs (including legal and auditing)
incident to the acquisition and disposition of investments, regular legal and
auditing fees and expenses, the fees and expenses of the Company's directors,
the costs of printing and distributing proxy statements and other
communications to stockholders, the costs of promoting the Company's stock, and
the fees and expenses of the Company's custodian and transfer agent. The
Company, rather than Advisers, is also required to pay expenses associated with
litigation and other extraordinary or non-recurring expenses with respect to
its operations and investments, as well as expenses of required and optional
insurance and bonding. All fees paid by or for the account of an actual or
prospective portfolio company in connection with an investment transaction in
which the Company participates are treated as commitment fees or management
fees and are received by the Company, pro rata to its participation in such
transaction, rather than by Advisers. Advisers is, however, entitled to retain
for its own account any fees paid by or for the account of any company,
including a portfolio company, for special investment banking or consulting
work performed for that company which is not related to such investment
transaction or management assistance. Advisers will report to the Board of
Directors not less often than quarterly all fees received by Advisers from any
source whatever and whether, in its opinion, any such fee is one that Advisers
is entitled to retain under the provisions of the advisory agreement. In the
event that any member of the Board of Directors should disagree, the matter
will be conclusively resolved by a majority of the Board of Directors,
including a majority of the independent Directors.
As compensation for its services to and the expenses paid for the
account of the Company, Advisers is entitled to be paid quarterly, in arrears,
a fee equal to 0.625% per quarter of the quarter-end value of the Company's
consolidated total assets (other than interim investments and cash) and 0.125%
per quarter of the quarter-end value of the Company's interim investments and
cash. Such fees on an annual basis equal approximately 2.5% of the Company's
consolidated total assets (other than interim investments and cash) and 0.5% of
the Company's interim investments and cash. For the purposes of calculating the
fee, the values of the Company's assets are determined as of the end of each
calendar quarter. The quarterly fee is paid as soon as practicable after the
values have been determined.
Because of the Company's practice of selling a significant portion of
the loans that it originates, the Company believes that the fees to Advisers
provided for by the existing advisory agreement are comparable to the fees paid
by other investment companies, notwithstanding the efforts and resources
devoted by Advisers to evaluating, structuring, closing and servicing the types
of private investments in which the Company specializes.
Change of Chairman and Chief Executive Officer
After 22 years with the Allied Capital companies, David Gladstone
stepped down as Chairman and Chief Executive Officer of the Company in early
1997, and the Board appointed William L. Walton to be the Company's new
Chairman and Chief Executive Officer. Mr. Gladstone also resigned as a director
on March 19, 1997 and will not stand for election to the board of directors.
Mr. Walton has been affiliated with the Allied Capital companies for more than
ten years, both as a director of Advisers and as a past director of Allied
Capital Corporation. Mr. Walton's extensive experience in the investment
industry combined with his performance as an entrepreneur provide an excellent
mix of talent for the Company. He previously served as Managing Director of New
York-based Butler Capital Corporation and was the personal venture capital
advisor for William S. Paley, founder and Chairman of CBS. More recently, Mr.
Walton founded two private companies dedicated to improving education for
children with a focus on reading and languages. Mr. Walton has been a
commercial banker, an investment banker with Lehman Brothers Kuhn Loeb, a
private investor and an entrepreneur, and throughout his career has been
involved in the growth and finance of small business.
Employees
The Company has no employees as all of its personnel are furnished by
Advisers.
ITEM 2. PROPERTIES.
The Company does not own or lease any properties or other tangible
assets.
ITEM 3. LEGAL PROCEEDINGS.
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The Company is not a defendant in any material pending legal
proceeding, and no such material proceedings are known by the Company to be
contemplated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth the names, ages and positions of the
executive officers of the Company as of March 1, 1997, as well as certain other
information with respect to those persons:
Positions Currently Principal Occupations
Name Age Held with the Company During Past Five Years
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William L. Walton 47 Chairman and Chief Executive Employed by Advisers since 1997.
Officer Chairman and Chief Executive Officer of
Allied I, Allied Capital Corporation II
("Allied II"), Allied Capital Commercial
Corporation ("Allied Commercial"), and
Advisers; Manager of Allied Capital
Midwest LLC ("Allied Midwest"); Chief
Executive Officer of Success Lab, Inc.
(children's educational services) from 1993
to 1996; Chief Executive Officer of
Language Odyssey (educational publishing
and services) from 1992 to 1996; and
Managing Director of Butler Capital
Corporation from 1987 to 1991.
Katherine C. Marien 48 President and Chief Operating Employed by Advisers since 1992;
Officer Executive Vice President of Allied I, Allied
II, Allied Commercial, Business
Mortgage Investors, Inc. ("BMI"),
Allied Midwest and Advisers; Financial
Consultant with Wilks & Schwartz
Broadcasting from 1990 to 1992;
Financial Consultant to USA Mobile
Communications, Inc. from 1991 to 1992;
Senior Vice President of Communications
Equity Associates from 1989 to 1991.
Joan M. Sweeney 37 Executive Vice President Employed by Advisers since 1993;
President and Chief Operating
Officer of Advisers; Executive Vice
President of Allied I, Allied II,
Allied Commercial, BMI, Allied Capital
Mortgage, LLC ("Allied Mortgage") and
Allied Midwest; Senior Manager at Ernst
& Young from 1990 to 1993.
Jon A. DeLuca 34 Executive Vice President, Employed by Advisers since 1994;
Treasurer and Chief Financial Executive Vice President, Treasurer and
Officer Chief Financial Officer of Allied I,
Allied II, Allied Commercial, BMI,
Advisers, Allied Mortgage and Allied
Midwest. Manager of Entrepreneurial
Services at Coopers & Lybrand from 1986
to 1994.
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G. Cabell Williams III 42 Executive Vice President Employed by Advisers since 1981; President
and Chief Operating Officer of Allied I;
Executive Vice President of Allied II, Allied
Commercial, Allied Midwest, Advisers and
BMI.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Information in response to this Item is incorporated by reference to
the "Shareholder Information" and "Quarterly Stock Price and Distributions to
Shareholders" sections of, and to Notes 6 and 8 of the Notes to Consolidated
Financial Statements contained in, the Company's Annual Report to Shareholders
for the year ended December 31, 1996 (the "1996 Annual Report").
ITEM 6. SELECTED FINANCIAL DATA.
Information in response to this Item is incorporated by reference to
the table in the "Consolidated Comparison of Financial Highlights" section of
the 1996 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Information in response to this Item is incorporated by reference to
the "Management's Discussion and Analysis" section of the 1996 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information in response to this Item is incorporated by reference to
the Consolidated Financial Statements, notes thereto and Report of Independent
Accountants thereon contained in the 1996 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information in response to this Item is incorporated by reference to
the identification of directors and nominees contained in the "Election of
Directors" section and the subsection captioned "Compliance with Reporting
Requirements of Section 16(a) of the Securities Exchange Act of 1934" of the
Company's definitive proxy statement in connection with its 1997 Annual Meeting
of Stockholders, scheduled to be held on May 12, 1997 (the "1997 Proxy
Statement"). Information in response to this Item also is included under the
caption "Executive Officers of the Registrant" of this Report.
ITEM 11. EXECUTIVE COMPENSATION.
Information in response to this Item is incorporated by reference to
the subsections captioned "Compensation of Executive Officers and Directors,"
"Incentive Stock Options" and "Compensation of Directors" of the 1997 Proxy
Statement.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information in response to this Item is incorporated by reference to
the subsection captioned "Beneficial Ownership of Common Stock" of the 1997
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information in response to this Item is incorporated by reference to
the subsection captioned "Certain Transactions" of the 1997 Proxy Statement.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this Report:
1. A. The following financial statements are incorporated by reference
to the 1996 Annual Report:
Consolidated Balance Sheet at December 31, 1996 and 1995.
Consolidated Statement of Operations for the years ended December
31, 1996, 1995 and 1994.
Consolidated Statement of Changes in Net Assets for the years ended
December 31, 1996, 1995 and 1994.
Consolidated Statement of Cash Flows for the years ended December
31, 1996, 1995, and 1994.
Consolidated Statement of Investments as of December 31, 1996.
Notes to Consolidated Financial Statements.
B. The Report of Independent Accountants with respect to the
financial statements listed in A. above is incorporated by reference
to the 1996 Annual Report.
2. No financial statement schedules of the Company are filed herewith
because (i) such schedules are not required or (ii) the information
required has been presented in the aforementioned financial
statements.
3. The following exhibits are filed herewith or incorporated by
reference as set forth below:
Exhibit
Number Description
- ------ -----------
3(i)* Articles of Amendment and Restatement to the Articles of
Incorporation
3(ii)(1) By-laws
4 Instruments defining rights of security holders -- See Exhibits
3(i) and 3(ii).
10.1* Investment Advisory Agreement between the Company and Allied
Capital Advisers, Inc., dated May 9, 1995.
10.2(2) Amended and Restated Line of Credit, Security and Pledge
Agreement, dated February 26, 1996 and as amended April 18,
1996, and Promissory Note dated February 26, 1996, between the
Company and Riggs Bank N.A.
10.3(2) Second Amendment to Amended and Restated Line of Credit,
Security and Pledge Agreement dated November 26, 1996 between
the Company and Riggs Bank N.A.
10.4(2) Line of Credit, Security and Pledge Agreement, and Promissory
Note, dated April 18, 1996 between ACLC Limited Partnership and
Riggs Bank N.A.
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10.5(2) First Amendment to the Line of Credit and Security and Pledge
Agreement, dated October 18, 1996 between ACLC Limited
Partnership and Riggs Bank N.A.
10.6(2) Second Amendment to the Line of Credit and Security and Pledge
Agreement, dated November 26, 1996 between ACLC Limited
Partnership and Riggs Bank N.A.
10.7* Form of regional associate agreement.
10.8* Stock Option Plan
10.9* Dividend Reinvestment Plan
11* Statement regarding computation of per share earnings.
13* Excerpts from the 1996 Annual Report to Shareholders.
21 Subsidiaries of the Company and jurisdiction of incorporation:
ACLC Limited Partnership Maryland
Allied Capital SBLC Corporation (Capitalized 1/1/97) Maryland
Allied Capital Credit Corporation (Capitalized 1/1/97) Maryland
23* Consents of Matthews, Carter and Boyce, independent accountants.
27* Financial Data Schedule
- ------------------------
* Filed herewith.
(1) Incorporated by reference to such document filed as an exhibit of the
same name with the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (File No. 0-22832).
(2) Incorporated by reference to an exhibit of same name with the Company's
N-2, Pre-effective Amendment No. 3, dated December 19, 1996 (File No.
333-15709).
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed for the three months ended
December 31, 1996.
9
11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized on March 27, 1997.
/s/ WILLIAM L. WALTON
-------------------------------------------------
William L. Walton
Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Title
Signature (Capacity) Date
- --------- ---------- ----
/s/ WILLIAM L. WALTON Chairman and March 27, 1997
- ------------------------------------ Chief Executive Officer
William L. Walton (Principal Executive Officer)
/s/ GEORGE C. WILLIAMS Director March 27, 1997
- ------------------------------------
George C. Williams
/s/ KATHERINE C. MARIEN Director, President and March 27, 1997
- ------------------------------------ Chief Operating Officer
Katherine C. Marien
/s/ JON W. BARKER Director March 27, 1997
- ------------------------------------
Jon W. Barker
Director March , 1997
- ------------------------------------ --
Eleanor Deane Bierbower
/s/ ANTHONY T. GARCIA Director March 27, 1997
- ------------------------------------
Anthony T. Garcia
/s/ ROBERT V. FLEMING II Director March 27, 1997
- ------------------------------------
Robert V. Fleming II
/s/ ARTHUR H. KEENEY III Director March 27, 1997
- ------------------------------------
Arthur H. Keeney
/s/ ROBIN B. MARTIN Director March 27, 1997
- ------------------------------------
Robin B. Martin
/s/ JON A. DELUCA Executive Vice President, March 27, 1997
- ------------------------------------ Treasurer, and Chief Financial
Jon A. DeLuca Officer (Principal Financial
and Accounting Officer)
12
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
3(i) Articles of Amendment and Restatement to the Articles of
Incorporation
10.1 Investment Advisory Agreement between the Company and
Allied Capital Advisers, Inc., dated May 9, 1995.
10.7 Form of regional associate agreement.
10.8 Stock Option Plan
10.9 Dividend Reinvestment Plan
11 Statement regarding computation of per share earnings.
13 Excerpts from the 1996 Annual Report to Shareholders
23 Consents of Matthews, Carter and Boyce, independent
accountants.
27 Financial Data Schedule.