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TABLE OF CONTENTS

		Page
	Part I. Financial Information
Item 1.	Financial Statements	1
	Balance Sheets as of September 30, 2008 (unaudited) and December 31, 2007	1
	Statements of Operations for the three and nine months ended September 30, 2008 and 2007 (unaudited)	2
	Statements of Changes in Net Assets for the nine months ended September 30, 2008 and 2007 (unaudited)	3
	Statements of Cash Flows for the nine months ended September 30, 2008 and 2007 (unaudited)	4
	Schedules of Investments as of September 30, 2008 (unaudited) and December 31, 2007	5
	Financial Highlights for the nine months ended September 30, 2008 and 2007 (unaudited)	29
	Notes to Financial Statements (unaudited)	30
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64
Item 4.	Controls and Procedures	65
	Part II. Other Information
Item 1.	Legal Proceedings	66
Item 1A.	Risk Factors	66
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Submission of Matters to a Vote of Security Holders	66
Item 5.	Other Information	66
Item 6.	Exhibits	66
Signatures		67

 

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KOHLBERG CAPITAL CORPORATION

 

BALANCE SHEETS

		As of September 30, 2008			As of December 31, 2007
		(unaudited)
ASSETS
Investments at fair value:
Investments in debt securities (cost: 2008 - 423,271,710; 2007 - 423,439,764)		$	395,742,187		$	410,954,082
Investments in CLO fund securities managed by non-affiliates (cost: 2008 - 15,541,828; 2007 - 15,385,580)			10,670,000			9,900,000
Investments in CLO fund securities managed by affiliate (cost: 2008 - 50,466,193; 2007 - 20,675,684)			49,025,236			21,120,000
Investments in equity securities (cost: 2008 - 5,096,298; 2007 - 5,043,950)			4,491,265			4,752,250
Investments in asset manager affiliates (cost: 2008 - 35,877,203; 2007 - 33,469,995)			65,821,689			58,585,360
Total Investments at fair value			525,750,377			505,311,692
Cash and cash equivalents			40,207,188			12,088,529
Restricted cash			8,024,985			7,114,364
Interest and dividends receivable			3,798,708			5,592,637
Due from affiliates			1,248,072			540,773
Other assets			1,956,675			2,493,964
Total assets		$	580,986,005		$	533,141,959
LIABILITIES
Borrowings			270,000,000			255,000,000
Payable for open trades			23,147,846			5,905,000
Accounts Payable and accrued expenses			3,721,993			6,141,892
Dividend payable			7,586,831			7,026,903
Total liabilities		$	304,456,670		$	274,073,795
Commitments and contingencies (note 8)
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share, 100,000,000 common shares authorized; 21,676,660 and 21,326,410 common shares issued and outstanding at September 30, 2008 and 18,017,699 issued and outstanding at December 31, 2007			213,264			180,177
Capital in excess of par value			282,789,209			253,253,152
Distributions in excess of net investment income			(1,361,655	)		(1,661,884	)
Accumulated net realized losses			(608,628	)		-
Net unrealized appreciation (depreciation) on investments			(4,502,855	)		7,296,719
Total stockholders' equity		$	276,529,335		$	259,068,164
Total liabilities and stockholders' equity		$	580,986,005		$	533,141,959
NET ASSET VALUE PER SHARE		$	12.97		$	14.38

See accompanying notes to financial statements.

1

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KOHLBERG CAPITAL CORPORATION

STATEMENTS OF OPERATIONS

(unaudited)

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2008			2007			2008			2007
Investment Income:
Interest from investments in debt securities		$	7,925,084		$	8,542,653		$	25,089,244		$	19,624,938
Interest from cash and cash equivalents			57,330			141,535			200,902			425,630
Dividends from investments in CLO fund securities managed by non-affiliates			962,864			1,154,919			4,712,758			3,324,205
Dividends from investments in CLO fund securities managed by affiliate			1,248,378			534,137			5,175,570			1,790,876
Dividends from affiliate asset manager			1,000,000			—			1,350,000			—
Capital structuring service fees			134,897			110,000			1,398,445			430,526
Total investment income			11,328,553			10,483,244			37,926,919			25,596,175
Expenses:
Interest and amortization of debt issuance costs			2,430,839			2,311,203			8,176,051			3,510,696
Compensation			747,339			1,399,717			3,456,054			3,133,903
Professional fees			367,367			406,377			1,287,441			1,785,105
Insurance			64,766			41,369			203,181			122,885
Administrative and other			263,898			254,200			914,917			873,904
Total expenses			3,874,209			4,412,866			14,037,644			9,426,493
Net Investment Income			7,454,344			6,070,378			23,889,275			16,169,682
Realized And Unrealized Gains (Losses) On Investments:
Net realized gains (losses) from investment transactions			13,365			(52,203	)		(608,628	)		167,258
Net change in unrealized losses on debt securities			(6,968,233	)		(7,959,601	)		(15,043,841	)		(7,854,708	)
Net change in unrealized gains (losses) on equity securities			885,968			—			(313,333	)		—
Net change in unrealized gains (losses) on CLO fund securities managed by affiliate			(657,815	)		929,887			(1,885,273	)		1,029,887
Net change in unrealized gains (losses) on CLO fund securities managed by non-affiliates			3,132,273			(2,701,130	)		613,752			(3,751,130	)
Net change in unrealized gains (losses) on affiliate asset manager investments			128,634			(971,020	)		4,829,121			20,444,831
Net realized and unrealized gains (losses) on investments			(3,465,808	)		(10,754,067	)		(12,408,202	)		10,036,138
Net Increase (Decrease) In Stockholders’ Equity Resulting From Operations		$	3,988,536		$	(4,683,689	)	$	11,481,073		$	26,205,820
Earnings (losses) per Common Share—Basic		$	0.19		$	(0.26	)	$	0.58		$	1.46
Earnings (losses) per Common Share—Diluted		$	0.18		$	(0.26	)	$	0.57		$	1.46
Net Investment Income Per Common Share—Basic		$	0.35		$	0.34		$	1.20		$	0.90
Net Investment Income Per Common Share—Diluted		$	0.34		$	0.34		$	1.19		$	0.90
Net Investment Income and Net Realized Gains Per Common Share—Basic		$	0.35		$	0.33		$	1.17		$	0.91
Net Investment Income and Net Realized Gains Per Common Share—Diluted		$	0.34		$	0.33		$	1.16		$	0.91
Weighted Average Shares of Common Stock Outstanding—Basic			21,299,431			17,989,460			19,897,521			17,965,590
Weighted Average Shares of Common Stock Outstanding—Diluted			21,649,681			17,989,460			20,021,709			18,001,345

See accompanying notes to financial statements.

2

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KOHLBERG CAPITAL CORPORATION

STATEMENTS OF CHANGE IN NET ASSETS

(unaudited)

		Nine Months Ended
		September 30,
		2008			2007
Operations:
Net investment income		$	23,889,275		$	16,169,682
Net realized gains (losses) from investment transactions			(608,628	)		167,258
Net change in unrealized gains (losses) on investments			(11,799,574	)		9,868,880
Net increase in net assets resulting from operations			11,481,073			26,205,820
Shareholder distributions:
Dividends from net investment income			(23,589,046	)		(16,169,682	)
Dividends in excess of net investment income			—			(1,812,769	)
Distributions from realized gains			—			(168,335	)
Net decrease in net assets resulting from shareholder distributions			(23,589,046	)		(18,150,786	)
Capital share transactions:
Issuance of common stock under dividend reinvestment plan			2,041,838			841,498
Issuance of common stock			26,925,213			—
Stock based compensation			602,093			449,980
Net increase in net assets resulting from capital share transactions			29,569,144			1,291,478
Net assets at beginning of period			259,068,164			256,400,423
Net assets at end of period (including distributions in excess of net investment income of $1,361,655 and $1,323,306 in 2008 and 2007, respectively)		$	276,529,335		$	265,746,935
Net asset value per common share		$	12.97		$	14.77
Common shares outstanding at end of period			21,326,410			17,997,611

See accompanying notes to financial statements.

3

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KOHLBERG CAPITAL CORPORATION

STATEMENTS OF CASH FLOWS

(unaudited)

		Nine Months Ended
		September 30,
		2008			2007
OPERATING ACTIVITIES:
Net increase in stockholders’ equity resulting from operations		$	11,481,073		$	26,205,820
Adjustments to reconcile net increase in stockholders’ equity resulting from operations:
Net realized loss (gain) on investment transactions			608,628			(167,258	)
Net unrealized loss (gain) on investments			11,799,574			(9,868,880	)
Net accretion of discount on securities			(1,530,663	)		(355,838	)
Purchases of investments			(79,862,720	)		(252,305,430	)
Payment-in-kind interest			(1,018,923	)		(251,734	)
Proceeds from sale and redemption of investments			66,808,264			60,491,696
Stock based compensation expense			602,093			449,980
Changes in operating assets and liabilities:
Decrease (increase) in interest and dividends receivable			1,793,929			(4,617,909	)
Decrease (increase) in other assets			537,289			(1,249,487	)
Increase in due from affiliate			(707,299	)		(491,923	)
Decrease in due to affiliate			—			(87,832	)
Increase (decrease) in accounts payable and accrued expenses			(2,419,898	)		2,522,234
Net cash provided by (used in) operating activities			8,091,347			(179,726,561	)
FINANCING ACTIVITIES:
Issuance of common stock			26,925,213			—
Dividends paid in cash			(20,987,280	)		(10,650,172	)
Borrowings of debt			15,000,000			170,000,000
Increase in restricted cash			(910,621	)		(5,003,793	)
Net cash provided by financing activities			20,027,312			154,346,035
CHANGE IN CASH AND CASH EQUIVALENTS			28,118,659			(25,380,526	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			12,088,529			32,404,493
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	40,207,188		$	7,023,967
Supplemental Information:
Interest paid during the period		$	6,872,893		$	2,363,746
Non-cash dividends paid during the period under dividend reinvestment plan		$	2,041,838		$	841,499
Cash restricted under terms of secured revolving credit facility		$	8,022,787		$	4,987,123

See accompanying notes to financial statements.

4

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KOHLBERG CAPITAL CORPORATION

SCHEDULE OF INVESTMENTS

As of September 30, 2008

(unaudited)

Debt Securities and Bond Portfolio

Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Advanced Lighting Technologies, Inc.6 Home and Office Furnishings, Housewares, and Durable Consumer Products			Senior Secured Loan — Deferred Draw Term Loan (First Lien) 6.6%, Due 6/13		$	357,718		$	357,718		$	357,718
Advanced Lighting Technologies, Inc. Home and Office Furnishings, Housewares, and Durable Consumer Products			Senior Secured Loan — Revolving Loan 6.8%, Due 6/13			400,000			392,162			400,000
Advanced Lighting Technologies, Inc.6 Home and Office Furnishings, Housewares, and Durable Consumer Products			Junior Secured Loan — Second Lien Term Loan Note8.7%, Due 6/14			5,000,000			5,000,000			5,000,000
Advanced Lighting Technologies, Inc.6 Home and Office Furnishings, Housewares, and Durable Consumer Products			Senior Secured Loan — Term Loan (First Lien) 5.5%, Due 6/13			1,960,487			1,960,487			1,960,487
Aero Products International, Inc.6 Personal and Non Durable Consumer Products (Mfg. Only)			Senior Secured Loan — Term Loan 7.4%, Due 4/12			3,118,560			3,118,560			3,118,560
Aerostructures Acquisition LLC6 Aerospace and Defense			Senior Secured Loan — Delayed Draw Term Loan 7.6%, Due 3/13			487,500			487,500			487,500
Aerostructures Acquisition LLC6 Aerospace and Defense			Senior Secured Loan — Term Loan 8.5%, Due 3/13			6,175,000			6,175,000			6,175,000
AGA Medical Corporation6 Healthcare, Education and Childcare			Senior Secured Loan — Tranche B Term Loan 4.9%, Due 4/13			3,832,209			3,829,747			3,458,569
AGS LLC6 Hotels, Motels, Inns, and Gaming			Senior Secured Loan — Delayed Draw Term Loan 6.7%, Due 5/13			443,162			437,619			421,004
AGS LLC6 Hotels, Motels, Inns, and Gaming			Senior Secured Loan — Initial Term Loan 6.7%, Due 5/13			3,167,363			3,127,747			3,008,994
AmerCable Incorporated6 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Senior Secured Loan — Initial Term Loan  7.3%, Due 6/14			5,915,088			5,915,088			5,915,088
Astoria Generating Company Acquisitions, L.L.C.6 Utilities			Junior Secured Loan — Second Lien Term Loan C 7.0%, Due 8/13			4,000,000			4,042,859			3,613,340

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Atlantic Marine Holding Company6 Cargo Transport			Senior Secured Loan — Term Loan 6.3%, Due 3/14		$	1,726,320		$	1,736,037		$	1,726,320
Aurora Diagnostics, LLC6 Healthcare, Education and Childcare			Senior Secured Loan — Tranche A Term Loan (First Lien) 6.9%, Due 12/12			4,320,182			4,283,920			4,320,182
Awesome Acquisition Company (CiCi's Pizza)6 Personal, Food and Miscellaneous Services			Junior Secured Loan — Term Loan (Second Lien) 8.5%, Due 6/14			4,000,000			3,976,551			3,820,000
AZ Chem US Inc. Chemicals, Plastics and Rubber			Junior Secured Loan — Second Lien Term Loan 8.3%, Due 2/14			3,300,000			2,617,667			2,640,000
AZ Chem US Inc.6 Chemicals, Plastics and Rubber			Junior Secured Loan — Second Lien Term Loan 8.3%, Due 2/14			4,000,000			3,961,870			3,200,000
Bankruptcy Management Solutions, Inc.6 Diversified/Conglomerate Service			Senior Secured Loan — First Lien Term Loan 7.7%, Due 7/12			1,960,000			1,970,017			1,808,100
Bankruptcy Management Solutions, Inc.6 Diversified/Conglomerate Service			Junior Secured Loan — Loan (Second Lien) 10.0%, Due 7/13			2,450,000			2,481,697			1,911,000
Bicent Power LLC6 Utilities			Junior Secured Loan — Advance (Second Lien) 7.8%, Due 12/14			4,000,000			4,000,000			3,730,000
BP Metals, LLC6 Mining, Steel, Iron and Non-Precious Metals			Senior Secured Loan — First Lien Term Loan (June 2008) 10.0%, Due 6/13			4,937,500			4,937,500			4,937,500
Broadlane, Inc.6 Healthcare, Education and Childcare			Senior Secured Loan — Term Loan 8.5%, Due 8/13			5,000,000			4,926,770			5,000,000
Caribe Information Investments Incorporated6 Printing and Publishing			Senior Secured Loan — Term Loan 5.5%, Due 3/13			1,694,554			1,688,185			1,364,116
Cast & Crew Payroll, LLC (Payroll Acquisition)6 Leisure, Amusement, Motion Pictures, Entertainment			Senior Secured Loan — Initial Term Loan 6.8%, Due 9/12			9,978,100			10,009,117			9,978,100
CEI Holdings, Inc. (Cosmetic Essence)6 Personal and Non Durable Consumer Products (Mfg. Only)			Senior Secured Loan — Term Loan 4.9%, Due 3/14			1,473,062			1,404,092			1,325,755
Centaur, LLC6 Hotels, Motels, Inns, and Gaming			Senior Secured Loan — Term Loan 9.8%, Due 9/13			2,792,043			2,761,566			2,652,440

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Charlie Acquisition Corp. Personal, Food and Miscellaneous Services			Mezzanine Investment — Senior Subordinated Notes 15.5%, Due 6/13		$	10,478,342		$	10,321,043		$	8,382,674
Clarke American Corp.6 Printing and Publishing			Senior Secured Loan — Tranche B Term Loan 6.0%, Due 6/14			2,962,500			2,962,500			2,301,863
CoActive Technologies, Inc.6 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Senior Secured Loan — Term Loan (First Lien) 6.8%, Due 7/14			3,970,000			3,953,289			3,970,000
CoActive Technologies, Inc.6 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Junior Secured Loan — Term Loan (Second Lien) 10.5%, Due 1/15			2,000,000			1,965,358			2,000,000
Coastal Concrete Southeast, LLC Buildings and Real Estate4			Mezzanine Investment — Mezzanine Term Loan 10.0%, Due 3/13			8,668,972			8,319,229			7,802,075
Cooper-Standard Automotive Inc6 Automobile			Senior Unsecured Bond — 8.4%, Due 12/14			4,000,000			3,228,150			2,800,000
DaimlerChrysler Financial Services Americas LLC6 Finance			Senior Secured Loan — Term Loan (First Lien) 6.8%, Due 8/12			3,969,950			3,716,206			2,778,965
Dealer Computer Services, Inc. (Reynolds & Reynolds)6 Electronics			Junior Secured Loan — Term Loan (Second Lien) 9.2%, Due 10/13			1,000,000			1,008,313			990,000
Dealer Computer Services, Inc. (Reynolds & Reynolds)6 Electronics			Junior Secured Loan — Term Loan (Third Lien) 11.2%, Due 4/14			7,700,000			7,491,816			6,747,125
Delta Educational Systems, Inc.6 Healthcare, Education and Childcare			Senior Secured Loan — Term Loan 8.3%, Due 6/12			2,780,135			2,780,135			2,780,135
Dex Media West LLC Printing and Publishing			Senior Secured Loan — Tranche B Term Loan 7.4%, Due 10/14			7,000,000			6,290,000			6,290,000
Dresser, Inc.6 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Junior Secured Loan — Term Loan (Second Lien) 8.6%, Due 5/15			3,000,000			2,963,219			2,830,005
DRI Holdings, Inc.6 Healthcare, Education and Childcare			Junior Secured Loan — US Term Loan (Second Lien) 10.1%, Due 7/15			6,000,000			5,388,990			5,700,000
Edgestone CD Acquisition Corp. (Custom Direct)6 Printing and Publishing			Junior Secured Loan — Loan (Second Lien) 9.8%, Due 12/14			5,000,000			5,000,000			5,000,000

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Edgestone CD Acquisition Corp. (Custom Direct)6 Printing and Publishing			Senior Secured Loan — Term Loan (First Lien) 6.5%, Due 12/13		$	4,467,166		$	4,471,745		$	4,467,166
eInstruction Corporation6 Healthcare, Education and Childcare			Senior Secured Loan — Initial Term Loan 7.8%, Due 7/13			4,932,624			4,932,624			4,932,624
eInstruction Corporation6 Healthcare, Education and Childcare			Junior Secured Loan — Term Loan (Second Lien) 11.3%, Due 7/14			10,000,000			10,000,000			10,000,000
Emerson Reinsurance Ltd.3 Insurance			Senior Secured Loan — Series C Loan 8.1%, Due 12/11			1,000,000			1,000,000			1,000,000
Endeavor Energy Resources, L.P.6 Oil and Gas			Junior Secured Loan — Initial Loan (Second Lien) 7.3%, Due 4/12			4,000,000			4,000,000			4,000,000
Fasteners For Retail, Inc.6 Diversified/Conglomerate Manufacturing			Senior Secured Loan — Term Loan 7.3%, Due 12/12			4,332,064			4,338,720			4,288,743
FD Alpha Acquisition LLC (Fort Dearborn)6 Printing and Publishing			Senior Secured Loan — US Term Loan 5.7%, Due 11/12			1,744,442			1,620,901			1,718,276
First American Payment Systems, L.P.6 Finance			Senior Secured Loan — Term Loan 6.0%, Due 10/13			3,536,000			3,536,000			3,536,000
First Data Corporation Finance			Senior Secured Loan — Initial Tranche B-2 Term Loan 6.0%, Due 9/14			4,987,406			4,532,305			4,532,305
Flatiron Re Ltd.3, 6 Insurance			Senior Secured Loan — Closing Date Term Loan 8.0%, Due 12/10			243,482			244,836			243,482
Flatiron Re Ltd.3, 6 Insurance			Senior Secured Loan — Delayed Draw Term Loan 8.0%, Due 12/10			117,937			118,592			111,450
Ford Motor Company6 Automobile			Senior Secured Loan — Term Loan 5.5%, Due 12/13			1,974,874			1,972,796			1,382,412
Freescale Semiconductor, Inc. Electronics			Senior Subordinated Bond — 10.1%, Due 12/16			3,000,000			3,008,457			2,287,500
Frontier Drilling USA, Inc.6 Oil and Gas			Senior Secured Loan — Term B Advance 9.3%, Due 6/13			2,000,000			1,998,165			1,870,000

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Getty Images, Inc.. Printing and Publishing			Senior Secured Loan — Initial Term Loan 7.3%, Due 7/15		$	3,000,000		$	3,000,000		$	2,670,000
Ginn LA Conduit Lender, Inc.10 Buildings and Real Estate4			Senior Secured Loan — First Lien Tranche A Credit-Linked Deposit 8.5%, Due 6/11			1,257,143			1,224,101			628,571
Ginn LA Conduit Lender, Inc.10 Buildings and Real Estate4			Senior Secured Loan — First Lien Tranche B Term Loan 8.5%, Due 6/11			2,694,857			2,624,028			1,347,429
Ginn LA Conduit Lender, Inc.10 Buildings and Real Estate4			Junior Secured Loan — Second Lien Term Loan 12.5%, Due 6/12			3,000,000			2,715,997			225,000
Gleason Works, The6 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Senior Secured Loan — New US Term Loan 4.6%, Due 6/13			2,437,280			2,443,789			2,205,739
Hawkeye Renewables, LLC6 Farming and Agriculture			Senior Secured Loan — Term Loan (First Lien) 6.9%, Due 6/12			2,908,544			2,852,764			2,181,408
HMSC Corporation (aka Swett and Crawford)6 Insurance			Junior Secured Loan — Loan (Second Lien) 8.3%, Due 10/14			5,000,000			4,824,563			4,550,000
Huish Detergents Inc.6 Personal and Non Durable Consumer Products (Mfg. Only)			Junior Secured Loan — Loan (Second Lien) 8.0%, Due 10/14			1,000,000			1,000,000			765,000
Hunter Fan Company6 Home and Office Furnishings, Housewares, and Durable Consumer Products			Senior Secured Loan — Initial Term Loan (First Lien) 5.3%, Due 4/14			4,023,929			3,858,641			3,420,339
Hunter Fan Company6 Home and Office Furnishings, Housewares, and Durable Consumer Products			Junior Secured Loan — Loan (Second Lien) 9.6%, Due 10/14			3,000,000			3,000,000			2,347,500
IAL Acquisition Co. (International Aluminum Corporation)6 Mining, Steel, Iron and Non-Precious Metals			Senior Secured Loan — Term Loan 6.5%, Due 3/13			3,009,286			3,009,286			3,009,286
Infiltrator Systems, Inc.6 Ecological			Senior Secured Loan — Term Loan 8.9%, Due 9/12			3,920,000			3,909,848			3,920,000
Inmar, Inc.6 Retail Stores			Senior Secured Loan — Term Loan 6.0%, Due 4/13			3,755,829			3,755,829			3,755,829
Intrapac Corporation/Corona Holdco6 Containers, Packaging and Glass			Senior Secured Loan — 1st Lien Term Loan 6.3%, Due 5/12			4,316,295			4,330,450			4,316,295

9

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Intrapac Corporation/Corona Holdco6 Containers, Packaging and Glass			Junior Secured Loan — Term Loans (Second Lien) 10.3%, Due 5/13		$	3,000,000		$	3,018,851		$	3,000,000
Jones Stephens Corp.6 Buildings and Real Estate4			Senior Secured Loan — Term Loan 6.5%, Due 9/12			10,129,104			10,105,720			10,129,104
JW Aluminum Company6 Mining, Steel, Iron and Non-Precious Metals			Junior Secured Loan — Term Loan (Second Lien) 10.5%, Due 12/13			5,371,429			5,387,968			5,210,286
Kepler Holdings Limited3, 6 Insurance			Senior Secured Loan — Loan 9.3%, Due 6/09			5,000,000			5,010,033			5,000,000
KIK Custom Products Inc.6 Personal and Non Durable Consumer Products (Mfg. Only)			Junior Secured Loan — Loan (Second Lien) 8.2%, Due 12/14			5,000,000			5,000,000			3,400,000
La Paloma Generating Company, LLC6 Utilities			Junior Secured Loan — Loan (Second Lien) 7.3%, Due 8/13			2,000,000			2,014,907			2,000,000
LBREP/L-Suncal Master I LLC6, 10 Buildings and Real Estate4			Senior Secured Loan — Term Loan (First Lien) 6.3%, Due 1/10			3,875,156			3,826,251			1,937,578
LBREP/L-Suncal Master I LLC6, 10 Buildings and Real Estate4			Junior Secured Loan — Term Loan (Second Lien) 10.3%, Due 1/11			2,000,000			1,920,194			200,000
LBREP/L-Suncal Master I LLC10 Buildings and Real Estate4			Junior Secured Loan — Term Loan (Third Lien) 12.0%, Due 2/12			2,332,868			2,332,868			116,643
Lear Corporation Automobile			Senior Secured Loan — First Lien Term Loan B 6.1%, Due 4/12			2,000,000			1,700,000			1,700,000
Legacy Cabinets, Inc.6 Home and Office Furnishings, Housewares, and Durable Consumer Products			Senior Secured Loan — Term Loan 8.1%, Due 8/12			2,275,644			2,275,644			2,275,644
Levlad, LLC & Arbonne International, LLC6 Personal and Non Durable Consumer Products (Mfg. Only)			Senior Secured Loan — Term Loan 5.5%, Due 3/14			2,738,738			2,738,738			1,698,017
LN Acquisition Corp. (Lincoln Industrial)6 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Junior Secured Loan — Initial Term Loan (Second Lien) 8.2%, Due 1/15			2,000,000			2,000,000			1,970,000
LPL Holdings, Inc.6 Finance			Senior Secured Loan — Tranche D Term Loan 5.5%, Due 6/13			3,313,410			3,333,832			3,147,739

10

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Manitowoc Company Inc., The Diversified/Conglomerate Manufacturing			Senior Secured Loan — Term B Loan 7.6%, Due 8/14		$	2,000,000		$	1,955,000		$	1,817,500
MCCI Group Holdings, LLC6 Healthcare, Education and Childcare			Senior Secured Loan — Term Loan (First Lien) 6.6%, Due 12/12			5,914,948			5,898,085			5,914,948
MCCI Group Holdings, LLC6 Healthcare, Education and Childcare			Junior Secured Loan — Term Loan (Second Lien) 10.1%, Due 6/13			1,000,000			1,000,000			1,000,000
Murray Energy Corporation6 Mining, Steel, Iron and Non-Precious Metals			Senior Secured Loan — Tranche B Term Loan (First Lien) 6.9%, Due 1/10			1,954,430			1,960,664			1,915,342
Mylan Inc. Healthcare, Education and Childcare			Senior Secured Loan — U.S. Tranche B Term Loan 7.0%, Due 10/14			1,994,975			1,935,126			1,935,126
National Interest Security Company, L.L.C.6 Aerospace and Defense			Senior Secured Loan — Term Loan - 1st Lien 7.8%, Due 12/12			8,181,250			8,181,250			8,181,250
Northeast Biofuels, LP6 Farming and Agriculture			Senior Secured Loan — Construction Term Loan 7.8%, Due 6/13			1,376,689			1,379,168			1,239,020
Northeast Biofuels, LP6 Farming and Agriculture			Senior Secured Loan — Synthetic LC Term Loan 7.6%, Due 6/13			57,157			57,260			51,441
PAS Technologies Inc. Aerospace and Defense			Senior Secured Loan — Incremental Term Loan Add On 7.3%, Due 6/11			772,472			772,472			772,472
PAS Technologies Inc.6 Aerospace and Defense			Senior Secured Loan — Term Loan 7.3%, Due 6/11			3,819,444			3,802,118			3,819,444
Pegasus Solutions, Inc. Leisure, Amusement, Motion Pictures, Entertainment			Senior Unsecured Bond — 10.5%, Due 4/15			2,000,000			2,000,000			2,000,000
Pegasus Solutions, Inc.6 Leisure, Amusement, Motion Pictures, Entertainment			Senior Secured Loan — Term Loan 7.0%, Due 4/13			5,710,000			5,710,000			5,710,000
Primus International Inc.6 Aerospace and Defense			Senior Secured Loan — Term Loan 5.0%, Due 6/12			1,249,744			1,251,846			1,218,500
QA Direct Holdings, LLC6 Printing and Publishing			Senior Secured Loan — Term Loan 6.6%, Due 8/14			4,949,875			4,906,870			4,949,875

11

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Resco Products, Inc.6 Mining, Steel, Iron and Non-Precious Metals			Junior Secured Loan — Term Loan (Second Lien) 10.8%, Due 6/14		$	6,650,000		$	6,462,960		$	6,517,000
Rhodes Companies, LLC, The6 Buildings and Real Estate4			Senior Secured Loan — First Lien Term Loan 11.3%, Due 11/10			1,728,610			1,662,625			1,331,030
Rhodes Companies, LLC, The6 Buildings and Real Estate4			Junior Secured Loan — Second Lien Term Loan 12.5%, Due 11/11			2,008,843			2,017,869			1,305,748
San Juan Cable, LLC6 Broadcasting and Entertainment			Junior Secured Loan — Second Lien Term Loan 8.3%, Due 10/13			3,000,000			2,981,700			2,850,000
Schneller LLC6 Aerospace and Defense			Senior Secured Loan — Term Loan 6.3%, Due 6/13			4,706,475			4,667,992			4,706,475
Seismic Micro-Technology, Inc. (SMT)6 Electronics			Senior Secured Loan — Term Loan 5.0%, Due 6/12			953,333			951,365			953,333
Seismic Micro-Technology, Inc. (SMT)6 Electronics			Senior Secured Loan — Term Loan 5.0%, Due 6/12			1,430,000			1,427,048			1,430,000
Specialized Technology Resources, Inc.6 Diversified/Conglomerate Service			Junior Secured Loan — Loan (Second Lien) 10.7%, Due 12/14			7,500,000			7,500,000			7,500,000
Specialized Technology Resources, Inc.6 Diversified/Conglomerate Service			Senior Secured Loan — Term Loan (First Lien) 6.2%, Due 6/14			3,940,075			3,940,075			3,940,075
Standard Steel, LLC6 Cargo Transport			Senior Secured Loan — Delayed Draw Term Loan 6.2%, Due 7/12			784,663			789,117			784,663
Standard Steel, LLC6 Cargo Transport			Senior Secured Loan — Initial Term Loan 6.3%, Due 7/12			3,893,442			3,915,543			3,893,442
Standard Steel, LLC6 Cargo Transport			Junior Secured Loan — Loan (Second Lien) 9.8%, Due 7/13			1,750,000			1,758,842			1,750,000
Texas Competitive Electric Holdings Company, LLC (TXU) Utilities			Senior Secured Loan — Initial Tranche B-2 Term Loan 7.6%, Due 10/14			1,994,962			1,815,416			1,815,416
TPF Generation Holdings, LLC6 Utilities			Junior Secured Loan — Second Lien Term Loan 8.0%, Due 12/14			2,000,000			2,029,526			1,900,000

12

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
TransAxle LLC Automobile			Senior Secured Loan — Revolver 7.8%, Due 8/11		$	363,636		$	360,424		$	362,469
TransAxle LLC Automobile			Senior Secured Loan — Term Loan 7.2%, Due 9/12			1,498,365			1,498,365			1,498,365
TUI University, LLC6 Healthcare, Education and Childcare			Senior Secured Loan — Term Loan 6.1%, Due 10/14			3,960,000			3,786,935			3,781,800
Twin-Star International, Inc.6 Home and Office Furnishings, Housewares, and Durable Consumer Products			Senior Secured Loan — Term Loan 7.9%, Due 4/13			4,350,750			4,350,750			4,350,750
United Maritime Group, LLC (fka Teco Transport Corporation)6 Cargo Transport			Junior Secured Loan — Term Loan (Second Lien) 11.2%, Due 12/13			6,500,000			6,485,624			6,500,000
Walker Group Holdings LLC6 Cargo Transport			Junior Secured Loan — Term Loan B 12.5%, Due 12/12			5,000,000			5,000,000			5,000,000
Water PIK, Inc.6 Personal and Non Durable Consumer Products (Mfg. Only)			Senior Secured Loan — Loan (First Lien) 6.0%, Due 6/13			1,970,038			1,959,095			1,970,038
Wesco Aircraft Hardware Corp. Aerospace and Defense			Junior Secured Loan — Second Lien Term Loan 9.5%, Due 3/14			2,000,000			1,920,000			1,845,000
Wesco Aircraft Hardware Corp.6 Aerospace and Defense			Junior Secured Loan — Second Lien Term Loan 9.5%, Due 3/14			4,132,887			4,162,410			4,070,894
WireCo WorldGroup Inc. 6 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Mezzanine Investment — 11.0%, Due 2/15			10,000,000			10,000,000			10,000,000
WireCo WorldGroup Inc. Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Mezzanine Investment — 11.0%, Due 2/15			5,000,000			4,787,142			5,000,000
Wolf Hollow I, LP6 Utilities			Senior Secured Loan — Acquisition Term Loan 6.0%, Due 6/12			777,713			768,509			731,050
Wolf Hollow I, LP6 Utilities			Senior Secured Loan — Synthetic Letter of Credit 4.7%, Due 6/12			668,412			660,501			628,307
Wolf Hollow I, LP6 Utilities			Senior Secured Loan — Synthetic Revolver Deposit 6.0%, Due 6/12			167,103			165,124			157,079

13

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Wolf Hollow I, LP6 Utilities			Junior Secured Loan — Term Loan (Second Lien) 8.3%, Due 12/12		$	2,683,177		$	2,687,888		$	2,468,522
X-Rite, Incorporated6 Electronics			Junior Secured Loan — Loan (Second Lien) 13.3%, Due 10/13			1,000,000			1,000,000			1,000,000
X-Rite, Incorporated6 Electronics			Senior Secured Loan — Term Loan (First Lien) 9.5%, Due 10/12			975,833			971,839			975,833
Total Investment in Debt Securities and Bonds (143% of net asset value at fair value)					$	430,083,555		$	423,271,710		$	395,742,187

Equity Portfolio

Portfolio Company / Principal Business		Investment			Percentage Interest			Cost			Value2
Aerostructures Holdings L.P.7 Aerospace and Defense			Partnership Interests			1.2	%	$	1,000,000		$	1,000,000
Allen-Vanguard Corporation3, 7 Aerospace and Defense			Common Shares			0.0	%		42,541			13,648
Coastal Concrete Southeast, LLC7, 8 Buildings and Real Estate4			Warrants			3.5	%		474,140			—
eInstruction Acquisition, LLC7 Healthcare, Education and Childcare			Membership Units			1.1	%		1,079,617			1,079,617
FP WRCA Coinvestment Fund VII, Ltd.3, 7 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Class A Shares			0.7	%		1,500,000			2,398,000
Park Avenue Coastal Holding, LLC7 Buildings and Real Estate4			Common Interests			2.0	%		1,000,000			—
Total Investment in Equity Securities (2% of net asset value at fair value)								$	5,096,298		$	4,491,265

14

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CLO Fund Securities

Portfolio Company / Principal Business		Investment			Percentage Interest			Cost			Value2
Grant Grove CLO, Ltd.3			Subordinated Securities			22.2	%	$	4,571,828		$	4,250,000
Katonah III, Ltd.3			Preferred Shares			23.1	%		4,500,000			1,830,000
Katonah IV, Ltd.3			Preferred Shares			17.1	%		3,150,000			2,754,000
Katonah V, Ltd.3			Preferred Shares			26.7	%		3,320,000			1,836,000
Katonah VII CLO Ltd.3, 9			Subordinated Securities			16.4	%		4,500,000			3,437,000
Katonah VIII CLO Ltd3, 9			Subordinated Securities			10.3	%		3,400,000			2,829,000
Katonah IX CLO Ltd3, 9			Prefered Shares			6.9	%		2,000,000			2,025,000
Katonah X CLO Ltd 3, 9			Subordinated Securities			33.3	%		11,191,631			11,875,000
Katonah 2007-I CLO Ltd.3, 9			Preferred Shares			100.0	%		29,374,562			28,859,236
Total Investment in CLO Fund Securities (21% of net asset value at fair value)								$	66,008,021		$	59,695,236

Portfolio Company / Principal Business		Investment			Percentage Interest			Cost			Value2
Katonah Debt Advisors Asset Management Company			Membership Interests			100	%	$	34,151,495		$	64,095,981
PKSIL Class A Asset Management Company			Class A Shares			100	%		1,722,208			1,722,208
PKSIL Class B Asset Management Company			Class B Shares			35	%		3,500			3,500
Total Investment in Portfolio Companies (24% of net asset value at fair value)								$	35,877,203		$	65,821,689
Total Investments5 (190% of net asset value at fair value)								$	530,253,232		$	525,750,377

1

A majority of the variable rate loans to our portfolio companies bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly. For each such loan, we have provided the weighted average annual stated interest rate in effect at September 30, 2008.

2

Reflects the fair market value of all existing investments as of September 30, 2008, as determined by our Board of Directors.

3

Non-U.S. company or principal place of business outside the U.S.

4

Buildings and real estate relate to real estate ownership, builders, managers and developers and excludes mortgage debt investments and mortgage lenders or originators. As of September 30, 2008, we had no exposure to mortgage securities (residential mortgage bonds, commercial mortgage backed securities, or related asset backed securities), companies providing mortgage lending or emerging markets investments either directly or through our investments in CLO funds.

15

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5

The aggregate cost of investments for federal income tax purposes is approximately $530 million. The aggregate gross unrealized appreciation is approximately $33 million and the aggregate gross unrealized depreciation is approximately $37 million.

6

Pledged as collateral for the secured revolving credit facility (see Note 6 to the financial statements).

7

Non-income producing.

8

Warrants having a strike price of $0.01 and expiration date of March 2017.

9

An affiliate CLO Fund managed by Katonah Debt Advisors or its affiliate.

10

Loan or debt security is on non-accrual status and therefore is considered non-income producing.

16

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KOHLBERG CAPITAL CORPORATION

SCHEDULE OF INVESTMENTS

As of December 31, 2007

Debt Securities and Bond Portfolio

Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Advanced Lighting Technologies, Inc. Home and Office Furnishings, Housewares, and Durable Consumer Products			Senior Secured Loan — Revolving Loan 7.5%, Due 6/13		$	—		$	—		$	—
Advanced Lighting Technologies, Inc.6 Home and Office Furnishings, Housewares, and Durable Consumer Products			Junior Secured Loan — Second Lien Term Loan Note 11.1%, Due 6/14			5,000,000			4,990,905			5,000,000
Advanced Lighting Technologies, Inc.6 Home and Office Furnishings, Housewares, and Durable Consumer Products			Senior Secured Loan — Term Loan (First Lien) 7.9%, Due 6/13			3,573,000			3,573,000			3,573,000
Advanced Lighting Technologies, Inc.6 Home and Office Furnishings, Housewares, and Durable Consumer Products			Senior Secured Loan — Deferred Draw Term Loan (First Lien) 7.5%, Due 6/13			650,268			650,268			650,268
Aero Products International, Inc.6 Personal and Non Durable Consumer Products (Mfg. Only)			Senior Secured Loan — Term Loan 8.8%, Due 4/12			3,700,000			3,700,000			3,681,500
Aerostructures Acquisition LLC6 Aerospace and Defense			Senior Secured Loan — Delayed Draw Term Loan 7.9%, Due 3/13			500,000			500,000			497,500
Aerostructures Acquisition LLC6 Aerospace and Defense			Senior Secured Loan — Term Loan 7.8%, Due 3/13			6,378,125			6,378,125			6,378,125
AGA Medical Corporation6 Healthcare, Education and Childcare			Senior Secured Loan — Tranche B Term Loan 7.2%, Due 4/13			3,832,209			3,829,343			3,654,970
AGS LLC6 Hotels, Motels, Inns, and Gaming			Senior Secured Loan — Delayed Draw Term Loan 7.7%, Due 5/13			579,194			562,331			550,234
AGS LLC6 Hotels, Motels, Inns, and Gaming			Senior Secured Loan — Initial Term Loan 7.9%, Due 5/13			4,802,419			4,732,592			4,562,298
Allen-Vanguard Corporation3 Aerospace and Defense			Senior Secured Loan — US Term Loan 12.0%, Due 9/12			2,309,736			2,277,028			2,277,028
AmerCable Incorporated6 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Senior Secured Loan — Initial Term Loan 8.4%, Due 6/14			6,965,000			6,965,000			6,965,000

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Astoria Generating Company Acquisitions, LLC6 Utilities			Junior Secured Loan — Second Lien Term Loan C 8.7%, Due 8/13		$	4,000,000		$	4,049,430		$	3,900,000
Atlantic Marine Holding Company6 Cargo Transport			Senior Secured Loan — Term Loan 7.1%, Due 3/14			1,739,465			1,750,599			1,730,768
Aurora Diagnostics, LLC6 Healthcare, Education and Childcare			Senior Secured Loan — Tranche A Term Loan (First Lien) 9.0%, Due 12/12			4,060,000			4,010,521			4,019,823
Awesome Acquisition Company (CiCi's Pizza)6 Personal, Food and Miscellaneous Services			Junior Secured Loan — Term Loan (Second Lien) 9.8%, Due 6/14			4,000,000			3,973,451			3,820,000
AZ Chem US Inc.6 Chemicals, Plastics and Rubber			Junior Secured Loan — Second Lien Term Loan 10.6%, Due 2/14			4,000,000			3,956,582			3,220,000
Bankruptcy Management Solutions, Inc.6 Diversified/Conglomerate Service			Senior Secured Loan — First Lien Term Loan 7.6%, Due 7/12			1,975,000			1,987,070			1,846,625
Bankruptcy Management Solutions, Inc.6 Diversified/Conglomerate Service			Junior Secured Loan — Loan (Second Lien) 11.1%, Due 7/13			2,468,750			2,505,651			1,987,344
Bay Point Re Limited3, 6 Insurance			Senior Secured Loan — Loan 9.6%, Due 12/10			3,000,000			3,019,487			3,019,487
Bicent Power LLC6 Utilities			Junior Secured Loan — Advance (Second Lien) 8.8%, Due 12/14			4,000,000			4,000,000			3,730,000
Byram Healthcare Centers, Inc. Healthcare, Education and Childcare			Senior Secured Loan — Term Loan A 10.1%, Due 11/11			3,733,691			3,733,691			3,733,691
Byram Healthcare Centers, Inc. Healthcare, Education and Childcare			Senior Secured Loan — Revolving Loan 9.7%, Due 11/10			375,000			375,000			375,000
Caribe Information Investments Incorporated6 Printing and Publishing			Senior Secured Loan — Term Loan 7.3%, Due 3/13			2,815,534			2,803,185			2,709,951
Cast & Crew Payroll, LLC (Payroll Acquisition)6 Leisure, Amusement, Motion Pictures, Entertainment			Senior Secured Loan — Initial Term Loan 7.8%, Due 9/12			10,608,400			10,647,600			10,647,600
CEI Holdings, Inc. (Cosmetic Essence)6 Personal and Non Durable Consumer Products (Mfg. Only)			Senior Secured Loan — Term Loan 7.5%, Due 3/14			1,850,051			1,751,546			1,665,046

18

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Centaur, LLC6 Hotels, Motels, Inns, and Gaming			Senior Secured Loan — Term Loan (First Lien) 8.8%, Due 10/12		$	4,122,807		$	4,069,243		$	3,978,509
Centaur, LLC6 Hotels, Motels, Inns, and Gaming			Senior Secured Loan — Delayed Draw Term Loan 8.7%, Due 10/12			—			—			—
Charlie Acquisition Corp. Personal, Food and Miscellaneous Services			Mezzanine Investment — Senior Subordinated Notes 15.5%, Due 6/13			10,127,500			9,945,201			9,945,201
Clarke American Corp.6 Printing and Publishing			Senior Secured Loan — Tranche B Term Loan 7.3%, Due 6/14			2,985,000			2,985,000			2,693,963
Clayton Holdings, Inc6 Finance			Senior Secured Loan — Term Loan 7.0%, Due 12/11			614,320			616,752			552,888
Coastal Concrete Southeast, LLC Buildings and Real Estate4			Mezzanine Investment — Mezzanine Term Loan 15.0%, Due 3/13			8,120,914			7,711,760			8,120,914
Concord Re Limited3 Insurance			Senior Secured Loan — Term Loan 9.2%, Due 2/12			3,000,000			3,024,013			3,000,000
CST Industries, Inc.6 Diversified/Conglomerate Manufacturing			Senior Secured Loan — Term Loan 7.9%, Due 8/13			987,500			990,623			990,623
DaimlerChrysler Financial Services Americas LLC6 Finance			Senior Secured Loan — Term Loan (First Lien) 9.0%, Due 8/12			1,995,000			1,903,193			1,923,519
Dealer Computer Services, Inc. (Reynolds & Reynolds)6 Electronics			Junior Secured Loan — Term Loan (Third Lien) 12.3%, Due 4/14			3,500,000			3,537,846			3,491,250
Dealer Computer Services, Inc. (Reynolds & Reynolds)6 Electronics			Junior Secured Loan — Term Loan (Second Lien) 10.3%, Due 10/13			1,000,000			1,009,544			990,000
Delta Educational Systems, Inc.6 Healthcare, Education and Childcare			Senior Secured Loan — Term Loan 8.3%, Due 6/12			2,876,053			2,876,053			2,876,053
DeltaTech Controls, Inc.6 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Senior Secured Loan — Term Loan (First Lien) 8.0%, Due 7/14			4,000,000			3,980,991			3,980,991
DeltaTech Controls, Inc.6 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Junior Secured Loan — Term Loan (Second Lien) 11.7%, Due 1/15			2,000,000			1,961,246			1,961,246

19

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Dresser, Inc.6 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Junior Secured Loan — Term Loan (Second Lien) 11.1%, Due 5/15		$	3,000,000		$	2,959,031		$	2,861,250
Edgestone CD Acquisition Corp. (Custom Direct)6 Printing and Publishing			Junior Secured Loan — Loan (Second Lien) 10.8%, Due 12/14			5,000,000			5,000,000			5,000,000
Edgestone CD Acquisition Corp. (Custom Direct)6 Printing and Publishing			Senior Secured Loan — Term Loan (First Lien) 7.6%, Due 12/13			4,975,000			4,980,828			4,980,828
eInstruction Corporation6 Healthcare, Education and Childcare			Junior Secured Loan — Second Lien Term Loan (Dec. 2007) 12.5%, Due 7/14			10,000,000			10,000,000			10,000,000
eInstruction Corporation6 Healthcare, Education and Childcare			Senior Secured Loan — Initial Term Loan (Dec. 2007) 9.0%, Due 7/13			4,970,013			4,970,013			4,970,013
Emerson Reinsurance Ltd.3 Insurance			Senior Secured Loan — Series C Loan 10.2%, Due 12/11			3,000,000			3,000,000			2,985,000
Endeavor Energy Resources, L.P. Oil and Gas			Junior Secured Loan — Second Lien Term Loan 9.6%, Due 3/12			4,000,000			4,000,000			4,000,000
Fasteners For Retail, Inc.6 Diversified/Conglomerate Manufacturing			Senior Secured Loan — Term Loan 7.9%, Due 12/12			7,926,391			7,940,720			7,728,231
FD Alpha Acquisition LLC (Fort Dearborn)6 Printing and Publishing			Senior Secured Loan — US Term Loan 8.3%, Due 11/12			915,400			915,400			901,669
First American Payment Systems, L.P.6 Finance			Senior Secured Loan — Term Loan 8.2%, Due 10/13			3,694,000			3,694,000			3,601,650
Flatiron Re Ltd.3 Insurance			Senior Secured Loan — Closing Date Term Loan 9.1%, Due 12/10			3,664,488			3,691,697			3,646,165
Flatiron Re Ltd.3 Insurance			Senior Secured Loan — Delayed Draw Term Loan 9.1%, Due 12/10			1,774,986			1,788,166			1,766,111
Ford Motor Company6 Automobile			Senior Secured Loan — Term Loan 8.0%, Due 12/13			1,989,950			1,987,554			1,845,678
Freescale Semiconductor, Inc. Electronics			Senior Subordinated Bond — 10.1%, Due 12/16			3,000,000			3,009,230			2,490,000

20

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Frontier Drilling USA, Inc.6 Oil and Gas			Senior Secured Loan — Term B Advance 8.7%, Due 6/13		$	2,000,000		$	1,997,874		$	1,960,000
Ginn LA Conduit Lender, Inc. Buildings and Real Estate4			Senior Secured Loan — First Lien Tranche A Credit-Linked Deposit 8.2%, Due 6/11			1,257,143			1,218,578			1,026,143
Ginn LA Conduit Lender, Inc. Buildings and Real Estate4			Senior Secured Loan — First Lien Tranche B Term Loan 8.3%, Due 6/11			2,701,714			2,618,835			2,205,274
Ginn LA Conduit Lender, Inc. Buildings and Real Estate4			Junior Secured Loan — Second Lien Term Loan 12.3%, Due 6/12			3,000,000			2,680,274			1,925,010
Gleason Works, The6 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Senior Secured Loan — New US Term Loan 6.8%, Due 6/13			2,437,280			2,444,818			2,324,556
Hawkeye Renewables, LLC6 Farming and Agriculture			Senior Secured Loan — Term Loan (First Lien) 9.0%, Due 6/12			2,962,406			2,894,213			2,346,640
HealthSouth Corporation Healthcare, Education and Childcare			Senior Secured Loan — Term Loan 7.7%, Due 3/13			1,262,594			1,266,540			1,208,403
HMSC Corporation (aka Swett and Crawford)6 Insurance			Junior Secured Loan — Loan (Second Lien) 10.7%, Due 10/14			5,000,000			4,803,383			4,550,000
Huish Detergents Inc.6 Personal and Non Durable Consumer Products (Mfg. Only)			Junior Secured Loan — Loan (Second Lien) 9.1%, Due 10/14			1,000,000			1,000,000			811,660
Hunter Fan Company6 Home and Office Furnishings, Housewares, and Durable Consumer Products			Senior Secured Loan — Initial Term Loan (First Lien) 7.4%, Due 4/14			4,161,071			3,947,013			3,682,548
Hunter Fan Company6 Home and Office Furnishings, Housewares, and Durable Consumer Products			Junior Secured Loan — Loan (Second Lien) 11.6%, Due 10/14			3,000,000			3,000,000			2,430,000
Hunter Fan Company6 Home and Office Furnishings, Housewares, and Durable Consumer Products			Senior Secured Loan — Delayed Draw Term Loan 7.2%, Due 4/14			—			—			—
IAL Acquisition Co. (International Aluminum Corporation)6 Mining, Steel, Iron and Non-Precious Metals			Senior Secured Loan — Term Loan 7.6%, Due 3/13			4,039,700			4,039,700			4,039,700
Infiltrator Systems, Inc.6 Ecological			Senior Secured Loan — Term Loan 8.4%, Due 9/12			3,950,000			3,937,850			3,937,850

21

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Inmar, Inc.6 Retail Stores			Senior Secured Loan — Term Loan 7.3%, Due 4/13		$	4,962,500		$	4,962,500		$	4,813,625
Intrapac Corporation/Corona Holdco6 Containers, Packaging and Glass			Senior Secured Loan — 1st Lien Term Loan 8.5%, Due 5/12			5,850,000			5,873,152			5,873,152
Intrapac Corporation/Corona Holdco6 Containers, Packaging and Glass			Junior Secured Loan — Term Loans (Second Lien) 12.5%, Due 5/13			3,000,000			3,021,907			3,021,907
Jones Stephens Corp.6 Buildings and Real Estate4			Senior Secured Loan — Term Loan 8.8%, Due 9/12			10,245,530			10,217,367			10,217,367
JW Aluminum Company6 Mining, Steel, Iron and Non-Precious Metals			Junior Secured Loan — Term Loan (2nd Lien) 11.1%, Due 12/13			5,371,429			5,390,350			5,210,286
Kepler Holdings Limited3 Insurance			Senior Secured Loan — Loan 10.3%, Due 6/09			3,000,000			3,000,000			2,985,000
Kepler Holdings Limited3, 6 Insurance			Senior Secured Loan — Loan 10.3%, Due 6/09			2,000,000			2,020,139			1,990,000
KIK Custom Products Inc.6 Personal and Non Durable Consumer Products (Mfg. Only)			Junior Secured Loan — Loan (Second Lien) 9.8%, Due 12/14			5,000,000			5,000,000			3,400,000
La Paloma Generating Company, LLC Utilities			Junior Secured Loan — Loan (Second Lien) 8.3%, Due 8/13			2,000,000			2,017,210			1,890,000
LBREP/L-Suncal Master I LLC Buildings and Real Estate4			Junior Secured Loan — Term Loan (Third Lien) 13.8%, Due 2/12			2,254,068			2,254,068			2,006,120
LBREP/L-Suncal Master I LLC6 Buildings and Real Estate4			Senior Secured Loan — Term Loan (First Lien) 8.2%, Due 1/10			3,920,000			3,842,022			3,567,200
LBREP/L-Suncal Master I LLC6 Buildings and Real Estate4			Junior Secured Loan — Term Loan (Second Lien) 12.2%, Due 1/11			2,000,000			1,918,000			1,780,000
Legacy Cabinets, Inc. Home and Office Furnishings, Housewares, and Durable Consumer Products			Senior Secured Loan — First Lien Term Loan 8.6%, Due 8/12			2,955,000			2,955,000			2,955,000
Levlad, LLC & Arbonne International, LLC6 Personal and Non Durable Consumer Products (Mfg. Only)			Senior Secured Loan — Term Loan 7.2%, Due 3/14			2,898,451			2,898,451			2,266,589

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
LN Acquisition Corp. (Lincoln Industrial)6 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Junior Secured Loan — Initial Term Loan (Second Lien) 10.9%, Due 1/15		$	2,000,000		$	2,000,000		$	1,970,000
LPL Holdings, Inc.6 Finance			Senior Secured Loan — Tranche D Term Loan 6.8%, Due 6/13			5,338,639			5,376,752			5,131,767
MCCI Group Holdings, LLC6 Healthcare, Education and Childcare			Junior Secured Loan — Term Loan (Second Lien) 12.7%, Due 6/13			1,000,000			1,000,000			1,000,000
MCCI Group Holdings, LLC6 Healthcare, Education and Childcare			Senior Secured Loan — Term Loan (First Lien) 9.4%, Due 12/12			5,960,018			5,940,018			5,960,018
Murray Energy Corporation6 Mining, Steel, Iron and Non-Precious Metals			Senior Secured Loan — Tranche B Term Loan (First Lien) 7.9%, Due 1/10			1,969,620			1,979,459			1,890,835
National Interest Security Company, L.L.C.6 Aerospace and Defense			Senior Secured Loan — Term Loan 9.7%, Due 12/12			5,000,000			5,000,000			5,000,000
Northeast Biofuels, LP6 Farming and Agriculture			Senior Secured Loan — Construction Term Loan 8.5%, Due 6/13			1,365,854			1,368,725			1,229,268
Northeast Biofuels, LP6   Farming and Agriculture			Senior Secured Loan — Synthetic LC Term Loan 8.1%, Due 6/13			536,585			537,713			482,927
PAS Technologies Inc. Aerospace and Defense			Senior Secured Loan — Incremental Term Loan Add On 8.5%, Due 6/11			856,741			856,741			856,741
PAS Technologies Inc. Aerospace and Defense			Senior Secured Loan — Term Loan 8.4%, Due 6/11			4,236,111			4,211,616			4,211,616
Pegasus Solutions, Inc. Leisure, Amusement, Motion Pictures, Entertainment			Senior Unsecured Bond — 10.5%, Due 4/15			2,000,000			2,000,000			2,000,000
Pegasus Solutions, Inc.6 Leisure, Amusement, Motion Pictures, Entertainment			Senior Secured Loan — Term Loan 8.1%, Due 4/13			5,755,000			5,755,000			5,755,000
Primus International Inc.6 Aerospace and Defense			Senior Secured Loan — Term Loan 7.7%, Due 6/12			3,259,279			3,265,878			3,177,797
QA Direct Holdings, LLC6 Printing and Publishing			Senior Secured Loan — Term Loan 9.6%, Due 8/14			4,987,469			4,938,587			4,950,063

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Resco Products, Inc.6 Mining, Steel, Iron and Non-Precious Metals			Junior Secured Loan — 2nd Lien Term Loan 13.1%, Due 6/14		$	5,000,000		$	4,928,938		$	4,928,938
Rhodes Companies, LLC, The6 Buildings and Real Estate4			Senior Secured Loan — First Lien Term Loan 8.3%, Due 11/10			1,878,788			1,780,166			1,647,077
Rhodes Companies, LLC, The6 Buildings and Real Estate4			Junior Secured Loan — Second Lien Term Loan 12.6%, Due 11/11			2,000,000			2,011,185			1,266,680
San Juan Cable, LLC6 Broadcasting and Entertainment			Junior Secured Loan — Second Lien Term Loan 10.7%, Due 10/13			3,000,000			2,978,999			2,782,500
Schneller LLC6 Aerospace and Defense			Senior Secured Loan — First Lien Term Loan 8.7%, Due 6/13			4,975,000			4,927,882			4,950,125
Seismic Micro-Technology, Inc. (SMT)6 Electronics			Senior Secured Loan — Term Loan 7.6%, Due 6/12			995,000			992,532			992,532
Seismic Micro-Technology, Inc. (SMT)6 Electronics			Senior Secured Loan — Term Loan 7.6%, Due 6/12			1,492,500			1,488,798			1,488,798
Sorenson Communications, Inc.6 Electronics			Senior Secured Loan — Tranche C Term Loan 7.4%, Due 8/13			2,791,551			2,807,105			2,720,897
Specialized Technology Resources, Inc.6 Diversified/Conglomerate Service			Senior Secured Loan — Term Loan (First Lien) 7.3%, Due 6/14			5,970,000			5,970,000			5,970,000
Specialized Technology Resources, Inc.6 Diversified/Conglomerate Service			Junior Secured Loan — Loan (Second Lien) 11.8%, Due 12/14			7,500,000			7,500,000			7,500,000
Standard Steel, LLC6 Cargo Transport			Senior Secured Loan — Delayed Draw Term Loan 7.4%, Due 7/12			825,699			831,324			831,324
Standard Steel, LLC6 Cargo Transport			Senior Secured Loan — Initial Term Loan 7.3%, Due 7/12			4,097,298			4,125,208			4,125,208
Standard Steel, LLC6 Cargo Transport			Junior Secured Loan — Loan (Second Lien) 10.8%, Due 7/13			1,750,000			1,760,240			1,760,240
Stolle Machinery Company6 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Junior Secured Loan — Loan (Second Lien) 11.4%, Due 9/13			1,000,000			1,015,115			975,000

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Stolle Machinery Company6 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Senior Secured Loan — First Lien Term Loan 7.9%, Due 9/12		$	1,975,000		$	1,985,124		$	1,945,375
TLC Funding Corp.6 Healthcare, Education and Childcare			Senior Secured Loan — Term Loan (First Lien) 9.9%, Due 5/12			3,930,000			3,850,590			3,959,475
TPF Generation Holdings, LLC6 Utilities			Junior Secured Loan — Second Lien Term Loan 9.1%, Due 12/14			2,000,000			2,033,096			1,890,000
TransAxle LLC Automobile			Senior Secured Loan — Revolver 8.2%, Due 8/11			490,909			486,678			488,832
TransAxle LLC6 Automobile			Senior Secured Loan — Term Loan 9.2%, Due 9/12			2,812,500			2,812,500			2,812,500
TUI University, LLC6 Healthcare, Education and Childcare			Senior Secured Loan — Term Loan (First Lien) 8.1%, Due 10/14			3,990,000			3,794,292			3,810,450
Twin-Star International, Inc.6 Home and Office Furnishings, Housewares, and Durable Consumer Products			Senior Secured Loan — Term Loan 7.8%, Due 4/13			4,975,000			4,975,000			4,975,000
United Maritime Group, LLC (fka Teco Transport Corporation)6 Cargo Transport			Junior Secured Loan — Term Loan (Second Lien) 12.8%, Due 12/13			4,500,000			4,500,000			4,511,250
United Maritime Group, LLC (fka Teco Transport Corporation)6 Cargo Transport			Senior Secured Loan — 1st Lien Term Loan 9.0%, Due 12/12			2,000,000			2,000,000			2,000,000
Water PIK, Inc.6 Personal and Non Durable Consumer Products (Mfg. Only)			Senior Secured Loan — Loan (First Lien) 8.2%, Due 6/13			2,985,000			2,965,778			2,925,300
Wesco Aircraft Hardware Corp.6 Aerospace and Defense			Junior Secured Loan — Second Lien Term Loan 10.6%, Due 3/14			4,132,887			4,166,447			4,132,887
WireCo WorldGroup Inc. Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Mezzanine Investment — 11.0%, Due 2/15			5,000,000			4,762,014			5,000,000
WireCo WorldGroup Inc. Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Mezzanine Investment — 11.0%, Due 2/15			10,000,000			10,000,000			10,000,000
Wolf Hollow I, LP6 Utilities			Junior Secured Loan — Term Loan (Second Lien) 9.3%, Due 12/12			2,683,177			2,688,724			2,555,726

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Portfolio Company / Principal Business		Investment Interest Rate¹ / Maturity			Principal			Cost			Value2
Wolf Hollow I, LP6 Utilities			Senior Secured Loan — Acquisition Term Loan 7.1%, Due 6/12		$	783,980		$	772,832		$	733,021
Wolf Hollow I, LP6 Utilities			Senior Secured Loan — Synthetic Letter of Credit 7.1%, Due 6/12			668,412			658,900			618,280
Wolf Hollow I, LP6 Utilities			Senior Secured Loan — Synthetic Revolver Deposits 7.1%, Due 6/12			167,103			164,727			154,570
X-Rite, Incorporated6 Electronics			Senior Secured Loan — Term Loan (First Lien) 8.5%, Due 10/12			1,995,000			1,985,328			1,985,025
X-Rite, Incorporated6 Electronics			Junior Secured Loan — Loan (Second Lien) 12.4%, Due 10/13			1,000,000			1,000,000			1,000,000
Total Investment in Debt Securities and Bonds (158% of net asset value at fair value)					$	426,014,170		$	423,439,764		$	410,954,082

Equity Portfolio

Portfolio Company / Principal Business		Investment			Percentage Interest			Cost			Value2
Aerostructures Holdings L.P.7 Aerospace and Defense			Partnership Interest			1.2	%	$	1,000,000		$	1,000,000
eInstruction Acquisition, LLC7 Healthcare, Education and Childcare			Membership Units			1.1	%		1,069,810			1,069,810
FP WRCA Coinvestment Fund VII, Ltd.3, 7 Machinery (Non-Agriculture, Non-Construction, Non-Electronic)			Class A Shares			0.7	%		1,500,000			1,500,000
Park Avenue Coastal Holding, LLC7 Buildings and Real Estate4			Common Interests			2.0	%		1,000,000			803,000
Coastal Concrete Southeast, LLC7, 8 Buildings and Real Estate4			Warrants			0.9	%		474,140			379,440
Total Investment in Equity Securities (2% of net asset value at fair value)								$	5,043,950		$	4,752,250

 

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CLO Fund Securities
Portfolio Company / Principal Business			Investment			Percentage Interest			Cost			Value2
Grant Grove CLO, Ltd.3			Subordinated Securities			22.2	%	$	4,415,580		$	4,250,000
Katonah III, Ltd.3			Preferred Shares			23.1	%		4,500,000			2,810,000
Katonah IV, Ltd.3			Preferred Shares			17.1	%		3,150,000			2,420,000
Katonah V, Ltd.3			Preferred Shares			26.7	%		3,320,000			420,000
Katonah VII CLO Ltd.3, 9			Subordinated Securities			16.4	%		4,500,000			3,950,000
Katonah VIII CLO Ltd3, 9			Subordinated Securities			10.3	%		3,400,000			3,290,000
Katonah IX CLO Ltd3, 9			Preferred Shares			6.9	%		2,000,000			2,000,000
Katonah X CLO Ltd 3, 9			Subordinated Securities			33.3	%		10,775,684			11,880,000
Total Investment in CLO Fund Securities (12% of net asset value at fair value)								$	36,061,264		$	31,020,000

 

Portfolio Company / Principal Business			Investment			Percentage Interest			Cost			Value2
Katonah Debt Advisors Asset Management Company			Membership Interests			100	%	$	33,394,995		$	58,510,360
PKSIL Class A Asset Management Company			Class A Shares			100	%		71,500			71,500
PKSIL Class B Asset Management Company			Class B Shares			35	%		3,500			3,500
Total Investment in Portfolio Companies (23% of net asset value at fair value)								$	33,469,995		$	58,585,360
Total Investments5 (195% of net asset value at fair value)								$	498,014,973		$	505,311,692

1

A majority of the variable rate loans to our portfolio companies bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly. For each such loan, we have provided the weighted average annual stated interest rate in effect at December 31, 2007.

2

Reflects the fair market value of all existing investments as of December 31, 2007, as determined by our Board of Directors.

3

Non-U.S. company or principal place of business outside the U.S.

4

Buildings and real estate relate to real estate ownership, builders, managers and developers and excludes mortgage debt investments and mortgage lenders or originators. As of December 31, 2007, we had no exposure to mortgage securities (residential mortgage bonds, commercial mortgage backed securities, or related asset backed securities), companies providing mortgage lending or emerging markets investments either directly or through our investments in CLO funds.

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5

The aggregate cost of investments for federal income tax purposes is approximately $500 million. The aggregate gross unrealized appreciation is approximately $27 million and the aggregate gross unrealized depreciation is approximately $20 million.

6

Pledged as collateral for the secured revolving credit facility (see Note 6 to the financial statements).

7

Non-income producing.

8

Warrants having a strike price of $0.01 and expiration date of March 2017.

9

An affiliate CLO Fund managed by Katonah Debt Advisors.

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 KOHLBERG CAPITAL CORPORATION

 FINANCIAL HIGHLIGHTS

 (unaudited)

 ($ per share)

		Nine Months Ended
		September 30,
		2008			2007
Per Share Data:
Net asset value, at beginning of period		$	14.38		$	14.29
Net investment income1			1.20			0.90
Net realized gains			(0.03	)		0.01
Net change in unrealized appreciation on investments			(2.80	)		0.50
Net increase (decrease) in net assets resulting from operations		$	(1.63	)	$	1.41
Distribution from net investment income and realized gains			(1.17	)		(1.01	)
Issuance of common stock under dividend reinvestment plan			0.10			0.05
Issuance of common stock			1.26			—
Stock based compensation expense			0.03			0.03
Net asset value, end of period		$	12.97		$	14.77
Total net asset value return2			(1.7	)%		10.4	%
Ratio/Supplemental Data:
Per share market value at beginning of period		$	12.00		$	17.30
Per share market value at end of period		$	8.59		$	15.06
Total market return3			(18.7	)%		(7.1	)%
Shares outstanding at end of period			21,326,410			17,997,611
Net assets at end of period		$	276,529,335		$	265,746,935
Portfolio turnover rate4			13.2	%		18.2	%
Average debt outstanding		$	242,956,204		$	66,007,326
Average debt outstanding per share		$	11.39		$	3.67
Ratio of net investment income to average net assets5			11.9	%		8.1	%
Ratio of total expenses to average net assets5			7.0	%		4.7	%
Ratio of interest expense to average net assets5			4.1	%		1.8	%
Ratio of non-interest expenses to average net assets5			2.9	%		2.9	%

 

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¹  Based on weighted average number of common shares outstanding for the period

 

²  Total net asset value return (not annualized) equals the change in the net asset value per share over the beginning of period net asset value per share plus dividends, divided by the beginning net asset value per share.

 

³  Total market return (not annualized) equals the change in the ending market value over the beginning of period price per share plus dividends, divided by the beginning price.

 

⁴  Not annualized 

 

⁵  Annualized 

 See accompanying notes to financial statements.

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KOHLBERG CAPITAL CORPORATION

 

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

1. ORGANIZATION

 

Kohlberg Capital Corporation (“Kohlberg Capital” or the “Company”) is an internally managed, non-diversified closed-end investment company that is regulated as a business development company (“BDC”) under the Investment Company Act of 1940. The Company originates, structures and invests in senior secured term loans, mezzanine debt and selected equity securities primarily in privately-held middle market companies. The Company defines the middle market as comprising companies with earnings before interest, taxes, depreciation and amortization (“EBITDA”), of $10 million to $50 million and/or total debt of $25 million to $150 million. The Company was formed as a Delaware LLC on August 8, 2006 and, prior to the issuance of shares of the Company’s common stock in its initial public offering, converted to a corporation incorporated in Delaware on December 11, 2006. Prior to its initial public offering (“IPO”), the Company did not have material operations. The Company’s IPO of 14,462,000 shares of common stock raised net proceeds of approximately $200 million. Prior to the IPO, the Company issued 3,484,333 shares to affiliates of Kohlberg & Co., LLC (“Kohlberg & Co.”), a leading middle market private equity firm, in exchange for the contribution of their ownership interests in Katonah Debt Advisors and in securities issued by collateralized loan obligation funds (“CLO Funds”) managed by Katonah Debt Advisors and two other asset managers to the Company. As of September 30, 2008, Katonah Debt Advisors had approximately $2.3 billion of assets under management. On April 28, 2008 the Company completed a rights offering which resulted in the issuance of 3.1 million common shares and net proceeds of approximately $27 million.

 

The Company’s investment objective is to generate current income and capital appreciation from investments made in senior secured term loans, mezzanine debt and selected equity investments in privately-held middle market companies. The Company also expects to continue to receive distributions of recurring fee income and to generate capital appreciation from its investment in the asset management business of Katonah Debt Advisors. Katonah Debt Advisors manages CLO Funds which invest in broadly syndicated loans, high-yield bonds and other credit instruments. The Company’s investment portfolio as well as the investment portfolios of the CLO Funds in which it has invested and the investment portfolios of the CLO Funds managed by Katonah Debt Advisors consist exclusively of credit instruments and other securities issued by corporations and do not include any asset-backed securities secured by commercial mortgages, residential mortgages or other consumer borrowings.

 

The Company has elected to be treated as a Regulated Investment Company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). To qualify as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. Pursuant to this election, the Company generally will not have to pay corporate-level taxes on any income that it distributes to its stockholders.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The financial statements include the accounts of the Company and the accounts of its special purpose financing subsidiary, Kohlberg Capital Funding LLC I. In accordance with Article 6 of Regulation S-X under the Securities Act of 1933 and Securities Exchange Act of 1934, the Company does not consolidate portfolio company investments, including those in which it has a controlling interest (Katonah Debt Advisors and its affiliates currently is the only company in which the Company has a controlling interest) or its special purpose financing subsidiary.

 

The accompanying unaudited financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required for annual financial statements. The unaudited interim financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2007, as filed with the Securities and Exchange Commission (“SEC”).

 

The financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair presentation of the Company’s results of operations and financial condition for the periods presented. Furthermore, the preparation of the financial statements requires management to make significant estimates and assumptions including the fair value of investments that do not have a readily available market value. Actual results could differ from those estimates. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for the full year.

30

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Certain reclassifications were made to prior year’s presentation to conform to the current year.

 

Investments 

 

Investment transactions are recorded on the applicable trade date. Realized gains or losses are computed using the specific identification method.

 

Valuation of Portfolio Investments. Kohlberg Capital’s Board of Directors is ultimately and solely responsible for making a good faith determination of the fair value of portfolio investments on a quarterly basis. Debt and equity securities for which market quotations are readily available are generally valued at such market quotations. Debt and equity securities that are not publicly traded or whose market price is not readily available are valued by the Board of Directors based on inputs of management, the Valuation Committee of the Board of Directors, and an independent valuation firm that has been engaged at the direction of the Board to assist in the valuation of the portfolio under a consistently applied valuation policy and process. Valuations are conducted on 100% of the investment portfolio at the end of each fiscal quarter.

 

Duff & Phelps, LLC, an independent valuation firm, provided third party valuation consulting services to the Company’s Board of Directors which consists of certain limited procedures that the Company’s Board of Directors identified and requested them to perform. Each quarter, Duff & Phelps, LLC, performs such procedures on the Company’s investment in Katonah Debt Advisors and all CLO Fund securities. In addition, Duff & Phelps, LLC performs its procedures on all illiquid junior and mezzanine securities such that they are reviewed at least once during a trailing 12 month period. Upon completion of the limited procedures, Duff & Phelps, LLC concluded that the fair value of those investments subjected to the limited procedures did not appear to be unreasonable.

 

As part of the valuation process, the Company may take into account the following types of factors, as relevant, in the determination of fair value: the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make debt service payments, its earnings, net cash flows, changes in the interest rate environment and the credit markets that may generally affect the price at which similar investment may be made, the markets in which the portfolio company does business, evaluations to peer comparables, seasoning of the loan and other relevant factors. If possible, the Company will corroborate its valuation of an investment with an external event such as a recent purchase transaction, public offering or sale.

 

The Board of Directors may consider other methods of valuation than those set forth above to determine the fair value of investments as appropriate in conformity with GAAP. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments, and the differences could be material. Further, such investments may be generally subject to legal and other restrictions on resale or otherwise less liquid than publicly traded securities. In addition, changes in the market environment and other events may occur over the life of the investments that may cause the ultimately realized gains or losses on such investments to be different from the currently assigned valuations.

 

The Company’s valuation process at the end of each fiscal quarter is described as follows:

 

1)

Each portfolio company or investment is cross-referenced to an independent pricing service to determine if a current market quote is available;

 

a)

The nature and quality of such quote is reviewed to determine reliability and relevance of the quote – factors considered include if the quote is from a transaction, a broker quote, the date and aging of such quote, if the transaction is arms-length, a liquidation or distressed sale and other factors.

 

2)

If an investment does not have a market quotation on either a broad market exchange or from an independent pricing service, the investment is initially valued by the Company’s investment professionals responsible for the portfolio investment in conjunction with the portfolio management team.

 

3)

Preliminary valuation conclusions are discussed and documented by management.

 

4)

With respect to the valuations of Katonah Debt Advisors, the CLO Fund securities and other illiquid junior and mezzanine securities selected on a rotating quarterly basis such that they are reviewed at least once during a trailing 12 month period, an independent valuation firm, engaged by our Board of Directors, conducts independent valuations and reviews management’s preliminary valuations and makes their own independent valuation assessment.

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5)

The Valuation Committee of the Board of Directors reviews the portfolio valuations, as well as the input and report of the independent valuation firm.

 

6)

Upon approval of the investment valuations by the Valuation Committee of the Board of Directors, the Audit Committee of the Board of Directors reviews the results for inclusion in the Company’s quarterly and annual financial statements.

 

7)

The Board of Directors discusses the valuations and determines in good faith whether the fair values of each investment in the portfolio are reasonable based upon the independent pricing service, input of management, independent valuation firms and the recommendations of the Valuation Committee of the Board of Directors.

 

Loans and Debt Securities. For loans and debt securities for which market quotations are readily available, such as broadly syndicated term loans and bonds, fair value generally is equal to the market price for those loans and securities. For loans and debt securities for which a market quotation is not readily available, such as middle market term loans, second lien term loans and mezzanine debt investments, fair value is determined by evaluating the borrower’s enterprise value and other market or income valuation approaches generally used to determine fair value. The analysis of enterprise value or overall financial condition or other factors or methodologies may lead to a determination of fair value at a different amount other than cost; as a general rule, the Company will value such loans or debt securities at cost, however such loans and debt securities will be subject to fair value write-downs or other adjustment based on other observable market data or analysis of the borrower and investment as well as when the asset is considered impaired.

 

Equity and Equity-Related Securities.  The Company’s equity and equity-related securities in portfolio companies for which there is no liquid public market are carried at fair value based on the enterprise value of the portfolio company, which is determined using various factors, including cash flow from operations of the portfolio company and other pertinent factors, such as recent offers to purchase a portfolio company’s securities or other liquidation events. The determined fair values are generally discounted to account for restrictions on resale and minority ownership positions. The value of the Company’s equity and equity-related securities in public companies for which market quotations are readily available are based upon the closing public market price on the balance sheet date. Securities that carry certain restrictions on sale are typically valued at a discount from the public market value of the security. The Company’s investment in its wholly-owned asset management company, Katonah Debt Advisors, is valued based on standard measures such as the percentage of assets under management and a multiple of operating income used to value other asset management companies.

 

CLO Fund Securities.  The Company typically makes a minority investment in the most junior class of securities of CLO Funds raised and managed by Katonah Debt Advisors and may selectively invest in securities issued by funds managed by other asset management companies (collectively “CLO Investments”). The Company’s CLO Investments relate exclusively to credit instruments issued by corporations and do not include any asset-backed securities secured by commercial mortgages, residential mortgages, or consumer borrowings.

 

The Company’s investments in CLO Fund securities are carried at fair value, which is based either on (i) the present value of the net expected cash inflows for interest income and principal repayments from underlying assets and the cash outflows for interest expense, debt paydown and other fund costs for the CLO Funds which are approaching or past the end of their reinvestment period and therefore begin to sell assets and/or use principal repayments to pay-down CLO Fund debt, and for which there continue to be net cash distributions to the class of securities owned by the Company, or (ii) the net asset value of the CLO Fund for CLO Funds which are approaching or past the end of their reinvestment period and therefore begin to sell assets and/or use principal repayments to pay-down CLO Fund debt, and for which there are negligible net cash distributions to the class of securities owned by the Company, or (iii) a discounted cash flow model for more recent CLO Funds that utilizes prepayment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow and comparable yields for similar bonds or preferred shares to those in which the Company has invested. The Company recognizes unrealized appreciation or depreciation on our investments in CLO Fund securities as comparable yields in the market change and/or based on changes in net asset values or estimated cash flows resulting from changes in prepayment or loss assumptions in the underlying collateral pool. As each investment in CLO Fund securities ages, the expected amount of losses and the expected timing of recognition of such losses in the underlying collateral pool are updated and the revised cash flows are used in determining the fair value of the CLO Investment. The Company determines the fair value of its investments in CLO Fund securities on an individual security-by-security basis.

 

Cash and Cash Equivalents. The Company defines cash equivalents as demand deposits. Cash and cash equivalents are carried at cost which approximates fair value.

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Restricted Cash.  Restricted cash consists mostly of cash held in an operating account pursuant to the Company’s secured revolving credit facility agreement with its lender.

 

Interest Income.  Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. The Company generally places a loan or security on non-accrual status and ceases recognizing interest income on such loan or security when a loan or security becomes 90 days or more past due or if the Company otherwise does not expect the debtor to be able to service its debt obligations. Non-accrual loans remain in such status until the borrower has demonstrated the ability and intent to pay contractual amounts due or such loans become current. As of September 30, 2008, two issuers representing 1% of total investments at fair value were considered in default.

 

Dividends from Affiliate Asset Manager. The Company records dividend income from its affiliate asset manager on the declaration date.

 

Dividend Income from CLO Fund Securities.  The Company generates dividend income from its investments in the most junior class of securities of CLO Funds (typically preferred shares or subordinated securities) managed by Katonah Debt Advisors and selective investments in securities issued by funds managed by other asset management companies. The Company’s CLO Fund securities are subordinate to senior bond holders who typically receive a fixed rate of return on their investment. The CLO Funds are leveraged funds and any excess cash flow or “excess spread” (interest earned by the underlying securities in the fund less payments made to senior bond holders and less fund expenses and management fees) is paid to the holders of the CLO Fund’s subordinated securities or preferred shares. The Company makes estimated interim accruals of such dividend income based on recent historical distributions and CLO Fund performance and adjusts such accruals on a quarterly basis to reflect actual distributions.

 

Capital Structuring Service Fees. The Company may earn ancillary structuring and other fees related to the origination and or investment in debt and investment securities.

 

Debt Issuance Costs.  Debt issuance costs represent fees and other direct costs incurred in connection with the Company’s borrowings. These amounts are capitalized and amortized ratably over the contractual term of the borrowing. At September 30, 2008, there was an unamortized debt issuance cost of approximately $2 million included in other assets in the accompanying balance sheet. Amortization expense for the nine months ended September 30, 2008 and 2007 was approximately $316,000 and $189,000, respectively.

Expenses. The Company is internally managed and expenses costs, as incurred, with regard to the running of its operations. Primary operating expenses include employee salaries and benefits, the costs of identifying, evaluating, negotiating, closing, monitoring and servicing the Company’s investments and related overhead charges and expenses, including rental expense and any interest expense incurred in connection with borrowings. The Company and its Asset Manager Affiliates share office space and certain other shared operating expenses. The Company has entered into an Overhead Allocation Agreement with its Asset Manager Affiliates which provides for the sharing of such expenses based on an equal sharing of office lease costs and the ratable usage of other shared resources. The aggregate net payments of such expenses under the Overhead Allocation Agreement are not material.

 

Dividends.  Dividends and distributions to common stockholders are recorded on the declaration date. The amount to be paid out as a dividend is determined by the Board of Directors each quarter and is generally based upon the earnings estimated by management for the period and fiscal year.

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

Our business activities contain elements of market risks. We consider our principal market risks to be fluctuations in interest rates and the valuations of our investment portfolio. Managing these risks is essential to our business. Accordingly, we have systems and procedures designed to identify and analyze our risks, to establish appropriate policies and thresholds and to continually monitor these risks and thresholds by means of administrative and information technology systems and other policies and processes.

 

Interest Rate Risk

 

Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio.

 

Our investment income is affected by fluctuations in various interest rates, including LIBOR and prime rates. As of September 30, 2008, approximately 89% of our loans at fair value in our portfolio were at floating rates with a spread to an interest rate index such as LIBOR or the prime rate. We generally expect that future portfolio investments will predominately be floating rate investments. As of September 30, 2008, we had $270 million of borrowings outstanding at a floating rate tied to prevailing commercial paper rates plus a margin of 0.85%.

 

Because we borrow money to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest the funds borrowed. Accordingly, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income if there is not a corresponding increase in interest income generated by floating rate assets in our investment portfolio.

 

We have analyzed the potential impact of changes in interest rates on interest income net of interest expense. Assuming that our balance sheet at September 30, 2008 were to remain constant and no actions were taken to alter the existing interest rate sensitivity, a hypothetical increase or decrease of a 1% change in interest rates would correspondingly affect net interest income proportionately by approximately 1% over a one-year period. Correspondingly, a hypothetical increase or decrease of a 1% change in interest rates would correspondingly affect net interest expense proportionately by approximately 1% over a one-year period. Because most of our investments at September 30, 2008 were floating rate with a spread to an index similar to our financing facility, we would not expect a significant impact on our net interest spread.

 

Although management believes that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size and composition of the assets on the balance sheet and other business developments that could affect a net change in assets resulting from operations or net income. Accordingly, no assurances can be given that actual results would not materially differ from the potential outcome simulated by this estimate.

 

We did not hold any derivative financial instruments for hedging purposes as of September 30, 2008. In connection with the Facility established on February 14, 2007 and as amended on October 1, 2007, our special purpose subsidiary may be required under certain circumstances to enter into interest rate swap agreements or other interest rate hedging transactions.

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Portfolio Valuation

 

We carry our investments at fair value, as determined in good faith by our Board of Directors pursuant to procedures approved by our Board of Directors. Investments for which market quotations are readily available are valued at such market quotations. The Board of Directors has retained an independent valuation firm to provide third-party valuation consulting services, which consist of certain limited procedures that we identify and request the independent valuation firm to perform. During the preceding twelve months ended September 30, 2008, approximately 54% of our investments were investments that were marked to market or for which we utilized the valuation services provided by the independent valuation firm in connection with the determination of fair value by our Board of Directors. Investments for which there is not a readily available market value are valued at fair value as determined in good faith by our Board of Directors under a valuation policy and a consistently applied valuation process. However, due to the inherent uncertainty of determining the fair value of investments that cannot be marked to market, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments or from the values that would have been placed on our assets by other market participants, and the differences could be material. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations that are assigned. The types of factors that we may take into account in fair value pricing of our investments include, as relevant, the nature and realizable value of any collateral, third party valuations, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly-traded securities, recent sales of or offers to buy comparable companies, and other relevant factors.

 

Our Board of Directors is ultimately and solely responsible for determining the fair value of portfolio investments on a quarterly basis in good faith. Duff & Phelps, LLC, an independent valuation firm, provided, third party valuation consulting services to our Board of Directors, which consisted of certain limited procedures that our Board of Directors identified and requested them to perform. Each quarter, Duff & Phelps, LLC, performs such procedures on the Company’s investment in Katonah Debt Advisors and all CLO Fund securities. In addition, Duff & Phelps, LLC performs its procedures on all illiquid junior and mezzanine securities such that they are reviewed at least once during a trailing 12 month period. Upon completion of the limited procedures, Duff & Phelps, LLC concluded that the fair value of those investments subjected to the limited procedures did not appear to be unreasonable. In the future, our Board of Directors may continue to utilize the services of Duff & Phelps, LLC or may use another third party valuation provider.

Item 4.

Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures. The Company’s management, under the supervision and with the participation of various members of management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our CEO and CFO have concluded that our current disclosure controls and procedures are effective as of the end of the period covered by this report.

 

Changes in Internal Control Over Financial Reporting . The Company’s management, under the supervision and with the participation of various members of management, including our CEO and our CFO, has evaluated any change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Management has concluded that there have been no changes in the Company’s internal control over financial reporting identified in connection with this evaluation that occurred during the quarter ended September 30, 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 1.

Legal Proceedings

 

Neither we, nor any of our subsidiaries, are currently a party to any material legal proceedings, other than routine litigation and administrative proceedings arising in the ordinary course of business. Such proceedings are not expected to have a material adverse effect on the business, financial conditions, or results of our operations.

 

Item 1A.

Risk Factors

 

There were no material changes from the risk factors previously disclosed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and as updated in our Form N-2 filed on July 9, 2008.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

Item 3.

Defaults Upon Senior Securities

 

None.

Item 4.

Submission of Matters to a Vote of Security Holders

 

On July 21, 2008, we held a special meeting of shareholders. At the meeting shareholders voted on a proposal to allow us to sell shares of our common stock or warrants, options or rights to acquire our common stock at a price below the then current net asset value per share of common stock.

 

The results of the shares voted with regard to each of these matters are as follows:

 

For		Against		Abstain		Broker Non-Votes
11,288,288		1,760,156		91,678		—

Item 5.

Other Information

 

None.

Item 6.

Exhibits

 

Exhibit Number		Description of Document
31.1*		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer Pursuant to 18 U. S. C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer Pursuant to 18 U. S. C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

________________

*	Submitted herewith.

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Exhibit Index

 

Exhibit Number		Description of Document
31.1*		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer Pursuant to 18 U. S. C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer Pursuant to 18 U. S. C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

_________________

*	Submitted herewith.

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CERTIFICATION PURSUANT TO

RULE 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS AMENDED

 

I, Michael I. Wirth, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2008 of Kohlberg Capital Corporation (the “registrant”);

 

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(s) 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 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(s) 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: November 10, 2008						By:		/ S / M ICHAEL I. W IRTH
								Michael I. Wirth
								Chief Financial Officer and Chief Compliance Officer
								(Principal Financial Officer)

 

 

 

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CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the accompanying Quarterly Report of Kohlberg Capital Corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2008 (the “Report”), I, Dayl W. Pearson, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 10, 2008						By:		/ S / D AYL W. P EARSON
								Dayl W. Pearson
								President and Chief Executive Officer
								(Principal Executive Officer)

 

 

 

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CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the accompanying Quarterly Report of Kohlberg Capital Corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2008 (the “Report”), I, Michael I. Wirth, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 10, 2008						By:		/ S / M ICHAEL I. W IRTH
								Michael I. Wirth
								Chief Financial Officer and Chief Compliance Officer
								(Principal Financial Officer)

 

 

 

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