ALLIED CAPITAL LENDING CORP, N-2/A, 1996-07-19

ALLIED CAPITAL LENDING CORP
N-2/A, 1996-07-19

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 1996

FILE NO. 333-02185
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-2

(Check appropriate box or boxes)
/ / REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/ / PRE-EFFECTIVE AMENDMENT NO.

/X/ POST-EFFECTIVE AMENDMENT NO. 2

ALLIED CAPITAL LENDING CORPORATION
Exact Name of Registrant as Specified in Charter

C/O ALLIED CAPITAL ADVISERS, INC.
1666 K STREET, N.W., 9TH FLOOR
WASHINGTON, D.C. 20006-2803
Address of Principal Executive Offices (Number, Street, City, State, Zip Code)

(202) 331-1112
Registrant's Telephone Number, Including Area Code

DAVID GLADSTONE, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ALLIED CAPITAL ADVISERS, INC.
1666 K STREET, N.W., 9TH FLOOR
WASHINGTON, D.C. 20006-2803
Name and Address of Agent For Service (Number, Street, City, State, Zip Code)

Copy to:

STEVEN B. BOEHM, ESQUIRE
SUTHERLAND, ASBILL & BRENNAN
1275 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004-2404

Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of the registration statement.

If any securities being registered on this form will be offered on a delayed or
continuous basis in reliance on Rule 415 under the Securities Act of 1933, other
than securities offered in connection with a dividend reinvestment plan, check
the following box: /X/

It is proposed that this filing will become effective (check appropriate box)

/ / when declared effective pursuant to section 8(c)

/ / This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, and the Securities Act
registration statement number of the earlier effective registration statement
for the same offering is - .

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
OFFERING PRICE AGGREGATE
TITLE OF SECURITIES AMOUNT BEING PER OFFERING AMOUNT OF
BEING REGISTERED REGISTERED SHARE PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.0001 par value... 722,410 shares $14.625 (1) $10,565,246.25(1) $ 3,643.19(2)
Common Stock, $0.0001 par value... 835 shares $14.5625(3) $ 12,159.69(3) $ 100.00(2)
</TABLE>

- --------------------------------------------------------------------------------
(1) Estimated for purposes of calculating the registration fee pursuant to Rule
457(c) under the Securities Act of 1933, as amended (the "1933 Act"), based
on the average of the high and low prices per share on March 28, 1996 on the
Nasdaq National Market.

(2) Previously paid.

(3) Estimated for purposes of calculating the registration fee pursuant to Rule
457(c) and the 1933 Act based on the average of the high and low prices per
share on April 23, 1996 on the Nasdaq National Market.

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

CROSS REFERENCE SHEET
Pursuant to Rule 495(a) under the Securities Act of 1933

Showing the Location of Information Required by Form N-2 in
Part A (Prospectus), Part B (Statement of Additional Information), and
Part C (Other Information) of the Registration Statement

<TABLE>
<CAPTION>
ITEM OF FORM N-2 CAPTION OR LOCATION IN PROSPECTUS
- ------------------------------------------------- ------------------------------------------
PART A: INFORMATION REQUIRED IN A PROSPECTUS
<C> <S> <C>
1. Outside Front Cover Outside Front Cover Page; [Supplement]
2. Inside Front and Outside Back Cover Page Outside Front Cover Page
3. Fee Table and Synopsis Summary; Fees and Expenses; Available
Information
4. Financial Highlights Financial Highlights; Management's
Discussion and Analysis of Financial
Condition and Results of Operations
5. Plan of Distribution The Offer; [Supplement]
6. Selling Shareholders (Not Applicable)
7. Use of Proceeds Use of Proceeds
8. General Description of the Registrant The Company; Public Trading and Net Asset
Value Information; Financial Statements;
[Supplement]
9. Management Management; Custodian, Transfer and
Dividend Paying Agent and Registrar
10. Capital Stock, Long-Term Debt, and Other Authorized Classes of Securities;
Securities Description of Common Stock; The
Company; [Supplement]
11. Defaults and Arrears on Senior Securities (Not Applicable)
12. Legal Proceedings (Not Applicable)
13. Table of Contents of the Statement of Table of Contents of the Statement of
Additional Information Additional Information

<CAPTION>
PART B: INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<C> <S> <C>
14. Cover Page Outside Front Cover Page
15. Table of Contents Table of Contents
16. General Information and History Not Applicable
17. Investment Objective and Policies [Prospectus:] The Company
18. Management Management
19. Control Persons and Principal Holders of Control Persons and Principal Holders of
Securities Securities
20. Investment Advisory and Other Services Investment Advisory and Other Services
21. Brokerage Allocation and Other Practices [Prospectus:] The Company
22. Tax Status Tax Status
23. Financial Statements [Prospectus:] Financial Statements
<CAPTION>
PART C: OTHER INFORMATION
<C> <S> <C>
24. Financial Statements and Exhibits Financial Statements and Exhibits
25. Marketing Arrangements (Not Applicable)
26. Other Expenses of Issuance and Other Expenses of Issuance and
Distribution Distribution
27. Persons Controlled by or Under Common Persons Controlled by or Under Common
Control Control
28. Number of Holders of Securities Number of Holders of Securities
29. Indemnification Indemnification
30. Business and Other Connections of Business and Other Connections of
Investment Adviser Investment Adviser
31. Location of Accounts and Records Locations of Accounts and Records
32. Management Services Management Services
33. Undertakings Undertakings
</TABLE>
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION:
THE DATE OF ISSUANCE OF THIS PRELIMINARY PROSPECTUS, AS SUPPLEMENTED HEREBY, IS
JULY 19, 1996.

SUPPLEMENT DATED JULY , 1996,
TO PROSPECTUS DATED APRIL 29, 1996

ALLIED CAPITAL LENDING CORPORATION

The Company has received from existing stockholders, during the
Subscription Period (from May 6, 1996 through June 4, 1996) for the rights
offering of the Company's common stock just completed (the "Offer" or "Rights
Offering"), subscriptions for 548,887 Shares at a Subscription Price of $13.04
per Share, which was 95% of the average of the last reported sales price of a
share of the Company's common stock on the Nasdaq National Market on each of the
last five trading days of the Subscription Period. The gross proceeds from the
Rights Offering were approximately $7,157,500 before deducting the solicitation
fees of approximately $132,000 (equal to 2.50% of the Subscription Price for
each Share issued as a result of the soliciting efforts of broker-dealers that
have executed and delivered a Soliciting Dealer Agreement to the Company) and
before deducting the offering costs payable by the Company. The net proceeds to
the Company from the Rights Offering (after deducting the solicitation fees but
before deducting the offering costs) were approximately $7,025,500.

As disclosed in the prospectus dated April 29, 1996 (the "Prospectus"), the
Company reserved the right to offer and sell to Additional Offerees any Shares
not subscribed for in the Rights Offering ("unsubscribed-for Shares") (see
Prospectus page 16--"Sales of Shares Subsequent to the Offer"). Having exercised
its discretion to increase the number of shares offered (see Prospectus page 2)
by 15% (i.e., 94,336 Shares in addition to the original 628,909 Shares for an
aggregate total of 723,245 Shares), the Company intends now to proceed with a
public offering of the total 174,358 unsubscribed-for Shares (the "Public
Offering").

Following the completion of the Rights Offering and the subsequent issuance
of additional shares of the Company's common stock in connection with the
payment of its quarterly dividend (see Prospectus page 26-- "Dividend
Reinvestment Plan"), 4,943,163 shares of the Company's common stock were
outstanding, 25.2% of which continued to be owned by Allied I. Following the
completion of the Public Offering, Allied I's ownership of the Company's common
stock is anticipated to represent 24.3% of the Company's shares then
outstanding. (See Prospectus page 17--"Organization".)

In the Public Offering, the Shares of the Company's common stock are
offered by Lehman Brothers Inc. (the "Underwriter"), subject to prior sale,
when, as and if delivered to and accepted by the Underwriter, and subject to its
right to reject orders in whole or in part. The principal business address of
Lehman Brothers Inc. is Three World Financial Center, New York, New York
10285-1900. Lehman Brothers Inc. is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. ("NASD").

The Underwriter has advised the Company that it proposes to offer the
Shares to the public at $12.74 per Share. The price to be paid by the public of
$12.74 per Share in the Public Offering is $0.30 per Share less than the
Subscription Price paid by existing stockholders in the Rights Offering and
thereby reflects the cash dividend of that amount paid on June 28, 1996, to
stockholders of record as of June 14, 1996. The last sale price for a share of
the Company's common stock on Nasdaq on July 18, 1996 was $13.75. There can be
no assurance that the Shares will trade subsequent to the Public Offering at or
above this price. After the Public Offering of the Shares, the Underwriter may
change the price at which the Shares are offered to the public.

The Company will allow underwriting discounts of $0.326 per Share, or 2.56%
of the offering price, to the Underwriter for sales of Shares in the Public
Offering. Accordingly, the "Sales Load (as a percentage of offering price)" set
forth under "Fees and Expenses" on Prospectus page 4 is 2.56% in the Public
Offering as opposed to 2.50% in the Rights Offering.

In the Public Offering, the aggregate Subscription Price, Sales Load, and
Proceeds (before deduction of offering costs) to the Company will be $2,221,321,
$56,841, and $2,164,480, respectively. Offering costs incurred in connection
with both the Rights Offering and the Public Offering are currently estimated to
be $272,000.

The Underwriter has agreed, subject to the terms and conditions set forth
in the underwriting agreement by and among the Company, Advisers, and the
Underwriter (the "Underwriting Agreement"), to purchase from the Company, and
the Company has agreed to sell to the Underwriter, the 174,358 unsubscribed-for
Shares.
<PAGE> 4

The Underwriting Agreement provides that the obligations of the Underwriter
to purchase the Shares listed above are subject to certain conditions. The
Underwriting Agreement also provides that the Underwriter is committed to
purchase, and the Company is obligated to sell, all of the unsubscribed-for
Shares offered by the Prospectus, as supplemented hereby, if any of the Shares
being sold pursuant to the Underwriting Agreement are purchased.

The Underwriter has informed the Company that it does not intend to confirm
sales to any account over which it exercises discretionary authority. During the
Subscription Period, the Underwriter purchased 33,303 shares and sold 40,744
shares in its capacity as a market maker in the Company's common stock.

The Company and Advisers, as its investment adviser, have agreed to
indemnify the Underwriter against certain liabilities, including liabilities
under the Securities Act of 1933, or to contribute to payments that the
Underwriter may be required to make in respect thereof.

Lehman Brothers Inc., which is acting as Underwriter in the Public
Offering, from time to time offers investment banking services to the Company,
for which it receives customary compensation. Lehman Brothers Inc. is the lender
on the Company's $20 million line of credit expiring September 27, 1996 (see
Prospectus page 23). Anthony T. Garcia, a Director of the Company, is Senior
Vice President of Lehman Brothers Inc.

By letter dated June 7, 1996, the Company has received notification from
the SBA that it could proceed with the reorganization described on Prospectus
page 17. Exemptive relief being sought from the Commission for the
reorganization is still pending.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

S-2
<PAGE> 5

The Prospectus dated April 29, 1996, which the preceding pages supplement,
is incorporated herein by reference from the Prospectus included in
Pre-Effective Amendment No. 2 to the Company's registration statement on Form
N-2 (File No. 333-02185), as filed with the Commission on April 29, 1996
(Accession No. 0000950133-96-000425).

<PAGE> 6

PART B

INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 7

SUBJECT TO COMPLETION:

THE DATE OF ISSUANCE OF THIS PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION IS
JULY 19, 1996.

723,245 SHARES

ALLIED CAPITAL LENDING CORPORATION
COMMON STOCK
------------------------

STATEMENT OF ADDITIONAL INFORMATION

JULY , 1996

This Statement of Additional Information is not a prospectus. It should be
read with the prospectus dated April 29, 1996 relating to this offering (the
"Prospectus") and the supplement thereto dated July , 1996, which may be
obtained by calling the Company at (202) 973-6326 and asking for Investor
Relations. Terms not defined herein have the same meaning as given to them in
the Prospectus.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE IN THE LOCATION
STATEMENT OF RELATED
OF ADDITIONAL DISCLOSURE IN
INFORMATION THE PROSPECTUS
------------- --------------
<S> <C> <C>
CHANGE OF NAME...................................................... B-2 17
MANAGEMENT.......................................................... B-2 24
Directors and Certain Officers.................................... B-2 --
Compensation...................................................... B-5 --
Stock Options..................................................... B-7 --
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES................. B-7 --
INVESTMENT ADVISORY AND OTHER SERVICES.............................. B-8 --
Investment Advisory Agreement..................................... B-8 24-25
Custodian Services................................................ B-9 27
Accounting Services............................................... B-9 27
TAX STATUS.......................................................... B-10 26
</TABLE>
<PAGE> 8

CHANGE OF NAME

The Company changed its name from "Allied Lending Corporation" to "Allied
Capital Lending Corporation" in September 1993 in anticipation of its initial
public offering in November 1993.

MANAGEMENT

DIRECTORS AND CERTAIN OFFICERS

The directors and certain officers of the Company as of July 8, 1996 are
listed below together with their respective positions with the Company and a
brief statement of their principal occupations during the past five years and
any positions held with affiliates of the Company:

<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING PAST FIVE
NAME, ADDRESS(1) AND AGE WITH THE COMPANY (5) YEARS
- -------------------------- ------------------------- -----------------------------------------
<S> <C> <C>
David Gladstone* Chairman of the Board and Employed by Allied Capital Corporation
(Age 54) Chief Executive ("Allied I") or Allied Capital Advisers,
Officer(2) Inc. ("Advisers") since 1974; Chairman
and Chief Executive Officer of Allied I,
Allied Capital Corporation II ("Allied
II"), Allied Capital Commercial
Corporation ("Allied Commercial"), and
Advisers; Director, President, and Chief
Executive Officer of Business Mortgage
Investors, Inc. ("BMI") and Allied
Capital Mortgage Corporation ("Allied
Mortgage"); Director of The Riggs
National Corporation (bank holding
company); Trustee of The George
Washington University. He has served as a
director of the Company since 1976.
George C. Williams*(3) Director Employed by Allied I or Advisers from
(Age 70) 1959 to July 5, 1996; Director of Allied
I, Allied II, Allied Commercial, BMI,
Allied Mortgage and Advisers; Vice
Chairman of Allied I, Allied II, Allied
Commercial, and Advisers until May 1996.
Chairman of Allied Mortgage and BMI until
May 1996. He has served as a director of
the Company since 1976.
Katherine C. Marien* Director, President and Employed by Advisers since 1992;
(Age 47) Chief Operating Executive Vice President of Allied I,
Officer(2) Allied II, Allied Commercial, BMI, Allied
Mortgage and Advisers; Executive Vice
President of the Company from 1992 to
1994; Financial Consultant with Wilks &
Schwartz Broadcasting from 1990 to 1992;
Financial Consultant to USA Mobile
Communications, Inc. from 1991 to 1992;
Senior Vice President of Communications
Equity Associates from 1989 to 1991. She
has served as a director of the Company
since 1995.
</TABLE>

B-2
<PAGE> 9

<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING PAST FIVE
NAME, ADDRESS(1) AND AGE WITH THE COMPANY (5) YEARS
- -------------------------- ------------------------- -----------------------------------------
<S> <C> <C>
Jon W. Barker Director Associate with Grubb & Ellis (commercial
(Age 52) real estate firm) since 1993; Vice
President of Shannon & Luchs Company
(commercial real estate firm) from 1979
to 1993. He has served as a director of
the Company since 1993.
Eleanor Deane Bierbower Director(2) Financial consultant since 1992; Managing
(Age 39) Partner of Deane Investment Company L.P.
since 1992; Chief Credit Officer of
Palmer National Bank from 1988 to 1992.
She has served as a director of the
Company since 1993.
Robert V. Fleming II Director(2) Principal of Hoskinson Davis & Fleming
(Age 43) (real estate firm) since 1984; Member of
the Board of Consultants of Riggs Bank
N.A.; Trustee of the National Child
Research Center; Member of the Associates
Board of National Rehabilitation
Hospital. He has served as a director of
the Company since 1993.
Anthony T. Garcia* Director Senior Vice President of Lehman Brothers
(Age 39) Inc.; Director of Allied Commercial. He
has served as a director of the Company
since 1993.
Arthur H. Keeney III Director President, Chief Executive Officer,
(Age 52) Chairman of the Executive Committee and
Director of The East Carolina Bank since
1995; Vice President and General Manager
of The OMG Company (manufacturer of
electronic training devices) from 1994 to
1995; Recruiting Consultant with Don
Richards and Associates, Inc. (personnel
services provider) from 1993 to 1994;
Executive Director of the American
Foundation for Urologic Disease from 1991
to 1993; Executive Vice President at
Signet Bank from 1983 to 1991. He has
served as a director of the Company since
1995.
Robin B. Martin Director(2) President and Chief Executive Officer of
(Age 47) The Deer River Group (broadcasting
consulting firm) since 1978. Trustee,
Rensselaer Polytechnic Institute since
1986; Chairman Emeritus, The Corcoran
Gallery of Art. He has served as a
director of the Company since May 1996.
G. Cabell Williams III(3) Executive Vice President Employed by Advisers since 1981;
(Age 42) Director, Chief Operating Officer and
President of Allied I; Executive Vice
President of Allied II, Allied
Commercial, Advisers, Allied Mortgage and
BMI.
</TABLE>

B-3
<PAGE> 10

- ---------------

* These directors are, or may be deemed to be, "interested persons" of the
Company, as that term is defined in the Investment Company Act of 1940, as
amended (the "1940 Act").

(1) Unless otherwise indicated, the address of directors and officers of the
Company is 1666 K Street, N.W., 9th Floor, Washington, DC 20006-2803.

(2) Member of the Executive Committee, which is intended, during intervals
between meetings of the Board of Directors, to exercise all powers of the
Board in the management and direction of the business and affairs of the
Company, except where action by the Board is required by applicable law.

(3) George C. Williams is the father of G. Cabell Williams III.

B-4
<PAGE> 11

COMPENSATION

The Company has no employees and does not pay any cash compensation to any
of its officers, other than directors' fees to those of its officers who are
also directors. All of the Company's officers are employed by Advisers, the
Company's investment adviser, which pays their cash compensation. The Company,
from time to time, grants stock options to its officers under the Company's
Stock Option Plan.

During 1995, each director received a fee of $1,000 for each meeting of the
Board of Directors of the Company or each separate committee meeting attended
and $500 for each committee meeting held on the same day as a Board meeting. The
same fees will be paid in 1996. In addition, on December 26, 1995 each
non-officer director (Ms. Bierbower and Messrs. Barker, Fleming, Garcia, Frank
L. Langhammer and Keeney) received a one-time grant of options to purchase
10,000 shares of the Company's common stock at $15.00 per share pursuant to the
Company's Stock Option Plan. On May 13, 1996 Mr. Martin, a non-officer director
first elected to the Board in May 1996, similarly received a one-time grant of
options to purchase 10,000 shares of the Company's common stock at $15.00 per
share. The exercise price of those grants was the minimum provided under the
Company's Stock Option Plan. Mr. Langhammer's unvested options to purchase 6,667
shares were cancelled by their terms when he stepped down as a director in May
1996; his vested options to purchase 3,333 shares expired on July 12, 1996
without being exercised.

The following table sets forth certain details of compensation paid to
directors during 1995, as well as compensation paid for serving as a director of
the two other investment companies to which the Company may be deemed related.

COMPENSATION TABLE

<TABLE>
<CAPTION>
PENSION OR ESTIMATED TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ANNUAL FROM COMPANY AND
COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON RELATED COMPANIES
NAME AND POSITION THE COMPANY(1) COMPANY EXPENSES RETIREMENT PAID TO DIRECTORS(2)
- -------------------------------- ----------------- ------------------- ------------- --------------------
<S> <C> <C> <C> <C>
David Gladstone................. $ 9,000 $ 0 $ 0 $ 25,000
Chairman of the Board and
Chief Executive Officer
George C. Williams.............. 9,000 0 0 24,000
Vice Chairman of the Board(3)
Katherine C. Marien............. 4,000 0 0 4,000
Director, President and Chief
Operating Officer
Jon W. Barker................... 10,000 0 0 10,000
Director
Eleanor Deane Bierbower......... 8,000 0 0 8,000
Director
Robert V. Fleming II............ 10,000 0 0 10,000
Director
Anthony T. Garcia............... 7,000 0 0 7,000
Director
Frank L. Langhammer............. 9,000 0 0 9,000
Director(4)
Arthur H. Keeney III............ 7,000 0 0 7,000
Director
</TABLE>

- ---------------

(1) Consists only of directors' fees.

(2) Comprised solely of amounts paid as compensation to directors by the
Company, Allied I and Allied II.

(3) George C. Williams resigned as Vice Chairman, effective May 1996, but
remains a director of the Company.

(4) Frank L. Langhammer, a former director of the Company, did not stand for
re-election to the Board in May 1996.

B-5
<PAGE> 12

SUMMARY COMPENSATION TABLE

Under Commission rules applicable to BDCs, the Company is required to set
forth certain information regarding compensation paid from the Company during
the last three fiscal years to its Chief Executive Officer and its President and
the four other most highly compensated officers of Advisers, who were also
officers of the Company on December 31, 1995. However, the Company has no
employees and does not pay any cash compensation to any of its officers (other
than directors' fees to those of its officers who are also directors). All of
the Company's officers are employed by Advisers, which pays all of their cash
compensation. The following chart summarizes the grants of options by the
Company to the named executive officers during the past three fiscal years
including the securities underlying those options, and any long term incentive
plan ("LTIP") payouts.

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------
AWARDS
----------------------------
SECURITIES PAYOUTS
RESTRICTED UNDERLYING ------------
NAMES AND PRINCIPAL POSITION YEAR STOCK AWARD(S) OPTIONS LTIP PAYOUTS
- -------------------------------------------------- ---- -------------- ---------- ------------
<S> <C> <C> <C> <C>
David Gladstone................................... 1993 $0 66,660 $0
Chairman and Chief Executive 1994 0 0 0
Officer 1995 0 19,998 0
George C. Williams................................ 1993 $0 13,332 $0
Vice Chairman(1) 1994 0 0 0
1995 0 0 0
Katherine C. Marien............................... 1993 $0 66,660 $0
President and Chief 1994 0 0 0
Operating Officer 1995 0 33,330 0
John M. Scheurer.................................. 1993 $0 6,666 $0
Executive Vice President 1994 0 0 0
1995 0 6,666 0
G. Cabell Williams III............................ 1993 $0 13,332 $0
Executive Vice President 1994 0 0 0
1995 0 6,666 0
Joan M. Sweeney................................... 1993 $0 13,332 $0
Executive Vice President 1994 0 0 0
1995 0 6,666 0
</TABLE>

- ---------------

(1) George C. Williams resigned as an officer of Advisers and the Company,
effective May 1996.

B-6
<PAGE> 13

STOCK OPTIONS

The following table sets forth, for the Company's Chief Executive Officer
and its President and the four other most highly compensated officers of
Advisers, who were also officers of the Company on December 31, 1995, the
details relating to option grants in 1995 and the potential realizable value of
each grant, as prescribed to be calculated by the Commission.

<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
----------------------------------------------------------------------------------
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PERCENT OF PRICE APPRECIATION
NUMBER OF TOTAL OPTIONS OVER 10-YEAR
SECURITIES GRANTED TO EXERCISE TERM(1)
UNDERLYING EMPLOYEES PRICE PER EXPIRATION -------------------
NAME OPTIONS GRANTED IN 1995 SHARE DATE 5% 10%
- ------------------------------- --------------- ------------- --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
David Gladstone................ 19,998 9.7% $ 15.00 02/15/05 $58,351 $270,596
George C. Williams............. 0 N/A N/A N/A N/A N/A
Katherine C. Marien............ 33,330 16.1% $ 15.00 02/15/05 $97,252 $450,994
John M. Scheurer............... 6,666 3.2% $ 15.00 02/15/05 $19,450 $ 90,199
G. Cabell Williams III......... 6,666 3.2% $ 15.00 02/15/05 $19,450 $ 90,199
Joan M. Sweeney................ 6,666 3.2% $ 15.00 02/15/05 $19,450 $ 90,199
</TABLE>

- ---------------

(1) Potential realizable value is net of the option exercise price but before
any tax liabilities that may be incurred. These amounts represent certain
assumed rates of appreciation, as mandated by the Commission. Actual gains,
if any, on stock option exercises are dependent on the future performance
of the shares, overall market conditions, and the continued employment of
the option holder. The potential realizable value may not necessarily be
realized.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of July 8, 1996, there were 4,943,163 shares of the Company's common
stock outstanding. The following table sets forth certain information as of July
8, 1996 regarding the shares of the Company's common stock beneficially owned by
the two persons known by the Company to own beneficially more than 5% of the
Company's common stock, as well as all directors and executive officers as a
group:

<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF PERCENTAGE
OF BENEFICIAL OWNER SHARES OWNED OF CLASS
- --------------------------------------------------------------------- ------------ ----------
<S> <C> <C>
Allied Capital Corporation (Maryland)(1)............................. 1,244,914(2) 25.2%
1666 K Street, NW, Ninth Floor
Washington, DC 20006
Liberty Investment Management........................................ 363,751(3) 7.4%
2502 Rocky Point Drive, Suite 500
Tampa, FL 33607
All directors and executive officers as a group (12 in number)(4).... 193,659 3.9%
</TABLE>

- ---------------

(1) Allied Capital Corporation has agreed to vote its shares on all matters only
in the same proportion as the shares voted by the Company's public
stockholders.

(2) Shares owned of record.

(3) Shares owned beneficially.

(4) Included in the total number of shares beneficially owned are 153,318 shares
underlying unexercised stock options that are exercisable within 60 days of
July 8, 1996, and 6,000 shares owned by the Allied Employee Stock Ownership
Plan, for which David Gladstone and G. Cabell Williams III are co-trustees
and share voting power.

B-7
<PAGE> 14

INVESTMENT ADVISORY AND OTHER SERVICES

Subject to the supervision and control of its Board of Directors, the
investments of the Company are managed by Allied Capital Advisers, Inc., a
publicly owned investment adviser located at 1666 K Street, N.W., 9th Floor,
Washington, D.C. 20006-2803, telephone (202) 331-1112. Advisers is registered
with the Commission under the Investment Advisers Act of 1940. The shares of
Advisers are traded on the Nasdaq National Market (symbol: ALLA).

As of July 8, 1996, Advisers employed thirty-three (33) investment and
other professionals, as well as thirty-six (36) other employees. David Gladstone
has 22 years of experience in making the types of investments made by the
Company. Mr. Gladstone holds an MBA degree from the Harvard Business School and
worked for Price Waterhouse and ITT Corporation before joining the Allied
Capital organization in 1974. He is the author of Venture Capital Handbook and
Venture Capital Investing, both published by Simon & Schuster/Prentice Hall.

All investments of the Company must be approved by a credit committee
composed of the senior investment officers of Advisers, including David
Gladstone and Katherine C. Marien. Additionally, the Board of Directors of the
Company reviews and approves all loans made by the Company.

Among the Company's directors, David Gladstone, Katherine C. Marien and
Anthony T. Garcia are each, and George C. Williams may be deemed to be, an
"interested person," as that term is defined in the 1940 Act, of the Company and
its investment adviser.

Advisers is at this time a party to investment advisory agreements with the
Company and with Allied I and Allied II, both business development companies
which, directly or through one or more small business investment company
subsidiaries, specialize in making loans with equity features to and equity
investments in small business concerns. Advisers is the general partner of a
private limited partnership which itself is the general partner of two privately
funded venture capital limited partnerships, Allied Venture and Allied
Technology, engaging in the same business as the Allied I and Allied II but no
longer making new investments. Advisers serves as the investment adviser to
those two limited partnerships. All of these entities co-invest with one
another. In addition, Advisers is the investment manager of Allied Commercial, a
publicly held real estate investment trust (a "REIT"), and the co-manager of
BMI, a privately held REIT. Allied Commercial and BMI participate with one
another in buying interest-paying business loans secured by real estate. At
March 31, 1996, total assets under Advisers' management were over $721 million.

INVESTMENT ADVISORY AGREEMENT

In May 1995, the Company's stockholders approved a new investment advisory
agreement with Advisers (the "current agreement"). The current agreement will
remain in effect from year to year as long as its continuance is approved at
least annually by the Board of Directors, including a majority of the
disinterested directors, or by the vote of the holders of a majority, as defined
in the 1940 Act, of the outstanding voting securities of the Company. The
current agreement may, however, be terminated at any time on sixty (60) days'
notice, without the payment of any penalty, by the Board of Directors or by vote
of a majority of the Company's outstanding voting securities, as defined, and
will terminate automatically in the event of its assignment.

Advisers is the investment adviser of the Company pursuant to an investment
advisory agreement. Under that agreement, Advisers manages the loans made by the
Company, subject to the supervision and control of the Board of Directors of the
Company, and evaluates, structures, closes and monitors those loans made by the
Company. The Company will not make any loan or other investment that has not
been recommended by Advisers. Except as to those investment decisions that
require specific approval by the Company's Board, Advisers has the authority to
effect loans and sales of portions of loans for the Company's account. Some of
the directors and officers of Advisers are also directors and officers of the
Company.

B-8
<PAGE> 15

The current agreement provides that the Company will pay all of its own
operating expenses, except those specifically required to be borne by Advisers.
The expenses paid by Advisers include the compensation of its officers and the
cost of office space, equipment, and other personnel necessary for day-to-day
operations. The expenses that are paid by the Company include the Company's
share of transaction costs (including legal and accounting fees) incident to the
acquisition and disposition of investments, regular legal and auditing fees and
expenses, the fees and expenses of the Company's directors, the costs of
printing and distributing proxy statements and other communications to
stockholders, the costs of promoting the Company's stock, and the fees and
expenses of the Company's custodian and transfer agent. The Company, rather than
Advisers, is also required to pay expenses associated with litigation and other
extraordinary or non-recurring expenses with respect to its operations and
investments, as well as expenses of required and optional insurance and bonding.
Advisers is, however, entitled to retain for its own account any fees paid by or
for the account of any company, including a portfolio company, for special
investment banking or consulting work performed for that company which is not
related to the Company's such investment transaction or follow-on managerial
assistance. Advisers will report to the Board of Directors not less often than
quarterly all fees received by Advisers from any source whatever and whether, in
its opinion, any such fee is one that Advisers is entitled to retain under the
provisions of the current agreement. In the event that any member of the Board
of Directors should disagree, the matter will be conclusively resolved by a
majority of the Board of Directors, including a majority of the independent
Directors. If the Company uses the services of attorneys or paraprofessionals on
the staff of Advisers for the Company's corporate purposes in lieu of outside
counsel, the Company will reimburse Advisers for such services at hourly rates
calculated to cover the cost of such services, as well as for incidental
disbursements by Advisers in connection with such services.

As compensation for its services to and the expenses paid for the account
of the Company, Advisers is entitled to be paid quarterly, in arrears, a fee
equal to 0.625% per quarter of the quarter-end value of the Company's total
assets (other than Interim Investments and cash) and 0.125% per quarter of the
quarter-end value of the Company's Interim Investments and cash. Such fees on an
annual basis equal approximately 2.5% of the Company's total assets (other than
Interim Investments and cash) and 0.5% of the Company's Interim Investments and
cash. For the purposes of calculating the fee, the values of the Company's
assets are determined as of the end of each calendar quarter. The quarterly fee
is paid as soon as practicable after the values have been determined.

CUSTODIAN SERVICES

Under a Custodian Agreement, Riggs Bank N.A., whose principal business
address is 808 17th Street, N.W., Washington, D.C. 20006, holds all securities
of the Company, provides record keeping services, and serves as the Company's
custodian.

ACCOUNTING SERVICES

The firm of Matthews, Carter and Boyce was the independent accountant for
the Company for the year ended December 31, 1995 and has been selected to serve
as such for the year ending December 31, 1996 by the Board of Directors and such
selection was ratified by the shareholders of the Company. Its business address
is: 8200 Greensboro Drive, Suite 1000, McLean, Virginia 22102-3864. Its phone
number is (703) 761-4600. Matthews, Carter and Boyce is also the independent
accountant for the Company's subsidiary.

Matthews, Carter and Boyce, or its predecessor, has served as the Company's
independent accountant since its inception and has no financial interest in the
Company. The expense recorded during the fiscal year ended December 31, 1995,
for the professional services provided to the Company by Matthews, Carter and
Boyce consisted of fees for audit services (which included the audit of the
consolidated financial statements of the Company and review of the filings by
the Company of reports and registration statements with the Commission, the SBA
or other regulatory authorities) and for non-audit services, the fees for which
the latter aggregated approximately 17% of the total fees. The non-audit
services, which were arranged for by management without prior consideration by
the Board of Directors, consisted of non-audit related consultation and the
preparation of tax returns for the Company.

B-9
<PAGE> 16

TAX STATUS

The Company, which has elected to be treated as a "business development
company" under the 1940 Act, has qualified and expects to continue to qualify as
a regulated investment company ("RIC") under the Internal Revenue Code of 1986,
as amended ("Code"). As such, the Company is not subject to Federal income tax
on that part of its investment company taxable income (consisting generally of
net investment income and net short-term capital gains, if any) and any net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) that it distributes to its shareholders. It is the Company's
intention to distribute substantially all such income and gains.

The "Distribution Requirement," in order to qualify for that treatment, is
that the Company must distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income. The Company must also meet
the following additional requirements: (1) The Company must derive at least 90%
of its gross income each taxable year from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from options,
futures, or forward contracts) derived with respect to its business of investing
in securities or those currencies ("Income Requirement"); (2) The Company must
derive less than 30% of its gross income each taxable year from gains (without
including losses) on the sale or other disposition of securities, or any of the
following, that were held for less than three months--options, futures, or
forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures, or forwards thereon) that are not directly
related to the Company's principal business of investing in securities (or
options and futures with respect thereto) ("Short-Short Limitation"); (3) At the
close of each quarter of the Company's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RIC's, and other securities that, with respect
to any one issuer, do not exceed 5% of the value of the Company's total assets
and that do not represent more than 10% of the outstanding voting securities of
the issuer; and (4) At the close of each quarter of the Company's taxable year,
not more than 25% of the value of its total assets may be invested in securities
(other than U.S. Government securities or the securities of other RIC's) of any
one issuer.

The Company will be subject to a nondeductible 4% excise tax on amounts not
distributed to shareholders on a timely basis or if the Company does not
distribute at least 98% of its net investment income and net capital gains. The
Company intends to make sufficient distributions to avoid this 4% excise tax.

The Company, formerly a wholly owned subsidiary of Allied I, originates
loans which are partially guaranteed by the SBA. The Company then sells the
guaranteed portion of these loans in the secondary market. In connection with
the sale of the guaranteed portion of loans in 1992, the Internal Revenue
Service may assert that these transactions subject the Company to a liability
for income taxes of up to $845,000 for that year. If the Internal Revenue
Service in the future asserts such a claim, management and tax counsel believe
that the Company has valid defenses for the position that such transactions do
not subject the Company to a liability for additional income taxes; however, the
Company has an agreement with the former Parent pursuant to which the Company is
indemnified against such liability if asserted.

Although the Company presently does not expect to do so, it is authorized
to borrow funds and to sell assets in order to satisfy its distribution
requirements. However, under the 1940 Act, the Company will not be permitted to
make distributions to stockholders while the Company's debt obligations and
other senior securities are outstanding unless certain "asset coverage" tests
are met. Moreover, the Company's ability to dispose of assets to meet its
distribution requirements may be limited by other requirements relating to its
tax status as a RIC, including the Short-Short Limitation and the
diversification requirements. If the Company disposes of assets in order to meet
its distribution requirements, it may make such dispositions at times which,
from an investment standpoint, are not advantageous.

If the Company fails to satisfy the Distribution Requirement or otherwise
fails to qualify as a RIC in any taxable year, it will be subject to tax in such
year on all of its taxable income, regardless of whether the Company makes any
distributions to its stockholders. In addition, in that case, all of the
Company's distributions to its stockholders will be characterized as ordinary
income (to the extent of the Company's

B-10
<PAGE> 17

current and accumulated earnings and profits). In contrast, as explained below,
if the Company qualifies as a RIC, a portion of its distributions may be
characterized as long-term capital gain in the hands of stockholders.

Dividends paid by the Company from net investment income, the excess of net
short-term capital gain over net long-term capital loss, and original issue
discount or certain market discount income will be taxable to stockholders as
ordinary income to the extent of the Company's current or accumulated earnings
and profits. Distributions paid by the Company from the excess of net long-term
capital gain over net short-term capital loss will be taxable as long-term
capital gains regardless of the stockholder's holding period for his or her
shares.

To the extent that the Company retains any net capital gain, it may
designate such retained gain as "deemed distributions" and pay a tax thereon for
the benefit of its stockholders. In that event, the stockholders will be
required to report their share of retained net capital gain on their tax returns
as if it had been distributed to them and report a credit for the tax paid
thereon by the Company. The amount of the deemed distribution net of such tax
would be added to the stockholder's cost basis for his shares. Since the Company
expects to pay tax on net capital gain at the regular corporate tax rate of 35%
and the maximum rate payable by individuals on net capital gain is 28%, the
amount of credit that individual stockholders may report would exceed the amount
of tax that they would be required to pay on net capital gain. Stockholders who
are not subject to federal income tax or tax on capital gains should be able to
file a Form 990T or other appropriate form that allows them to recover the
excess taxes paid on their behalf.

Any dividend declared by the Company in October, November, or December of
any calendar year, payable to stockholders of record on a specified date in such
a month and actually paid during January of the following year, will be treated
as if it had been received by the stockholders on December 31 of the year in
which the dividend was declared.

Investors should be careful to consider the tax implications of buying
shares just prior to a distribution. Even if the price of the shares includes
the amount of the forthcoming distribution, the stockholder generally will be
taxed upon receipt of the distribution and will not be entitled to offset the
distribution against the tax basis in his shares.

A stockholder may recognize taxable gain or loss if he sells or exchanges
his shares. Any gain arising from (or, in the case of distributions in excess of
earnings and profits, treated as arising from) the sale or exchange of shares
generally will be a capital gain or loss except in the case of dealers or
certain financial institutions. This capital gain or loss normally will be
treated as a long-term capital gain or loss if the stockholder has held his
shares for more than one year; otherwise, it will be classified as short-term
capital gain or loss. However, any capital loss arising from the sale or
exchange of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received with
respect to such shares and, for this purpose, the special rules of Section
246(c)(3) and (4) of the Code generally apply in determining the holding period
of shares. Net capital gain of noncorporate taxpayers is currently subject to a
maximum federal income tax rate of 28% while other income may be taxed at rates
as high as 39.6%. Corporate taxpayers are currently subject to federal income
tax on net capital gain at the maximum 35% rate also applied to ordinary income.
Tax rates imposed by states and local jurisdictions on capital gain and ordinary
income may differ.

The Company may be required to withhold U.S. federal income tax at the rate
of 31% of all taxable dividends and distributions payable to stockholders who
fail to provide the Company with their correct taxpayer identification number.
Withholding from dividends and distributions also is required for shareholders
who otherwise are subject to backup withholding. Backup withholding is not an
additional tax, and any amounts withheld may be credited against a stockholder's
U.S. federal income tax liability.

Federal withholding taxes at a 30% rate (or a lesser treaty rate) may apply
to distributions to stockholders that are nonresident aliens or foreign
partnerships, trusts, or corporations. Foreign investors should consult their
tax advisors with respect to the possible U.S. federal, state, and local tax
consequences and foreign tax consequences of an investment in the Company.

B-11
<PAGE> 18

The Company will send to each of the stockholders, as promptly as possible
after the end of each fiscal year, a notice detailing, on a per share and per
distribution basis, the amounts includible in such stockholder's taxable income
for such year as ordinary income and as long-term capital gain. In addition, the
federal tax status of each year's distributions generally will be reported to
the Internal Revenue Service.

The foregoing is only a general summary of some of the important federal
income tax considerations generally affecting the Company and its shareholders.
No attempt is made to present a complete explanation of the federal tax
treatment of the Company's activities. Potential investors are urged to consult
their own tax advisers for more detailed information and for information
regarding any applicable state, local, or foreign taxes.

B-12
<PAGE> 19

PART C

OTHER INFORMATION
<PAGE> 20

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

1. FINANCIAL STATEMENTS

The following financial statements of Allied Capital Lending Corporation
(the "Registrant" or "Company") are incorporated into Part A of this
Post-Effective Amendment No. 2 to the Company's registration statement on
Form N-2 (File No. 333-02185) (the "Registration Statement") by reference
from pages F-1 through F-14 of the Prospectus included in Pre-Effective
Amendment No. 2 to the Registration Statement, as filed with the Commission
on April 29, 1996 (Accession No. 0000950133-96-000425):

Consolidated Balance Sheet -- March 31, 1996 (unaudited) and December 31,
1995 and 1994

Consolidated Statement of Operations -- For the Three Months Ended March
31, 1996 and 1995 (unaudited) and the Years Ended December 31, 1995, 1994
and 1993

Consolidated Statement of Changes in Net Assets -- For the Three Months
Ended March 31, 1996 and 1995 (unaudited) and the Years Ended December 31,
1995, 1994 and 1993

Consolidated Statement of Cash Flows -- For the Three Months Ended March
31, 1996 and 1995 (unaudited) and the Years Ended December 31, 1995, 1994
and 1993

Consolidated Statement of Investments in Small Business Concerns -- March
31, 1996 (unaudited) and December 31, 1995 and 1994

Notes to Consolidated Financial Statements

Report of Independent Accountants

2. EXHIBITS

<TABLE>
<S> <C>
a. Amended and Restated Articles of Incorporation of the Registrant(1)
b. By-Laws of the Registrant, as amended(6)
c. None
d.1. Specimen certificate of Registrant's Common Stock, par value $0.0001, the rights of
holders of which are defined in Exhibits a and b(9)
e. Registrant's Dividend Reinvestment Plan(1)
f. None
g. Investment Advisory Agreement between Registrant and Allied Capital Advisers, Inc.
("Advisers")(2)
h.2. Form of Underwriting Agreement among Lehman Brothers Inc.; the Registrant; and
Advisers(10)
i. Registrant's Incentive Stock Option Plan, as amended(5)
j. Custodian Agreement between Riggs Bank N.A. (formerly known as The Riggs National
Bank of Washington, D.C.) and the Registrant, dated February 27, 1989(4)
k.1. Tax Indemnification Agreement dated November 12, 1993 between the Registrant and
Allied Capital Corporation(3)
k.2. Amended and Restated Line of Credit, Security and Pledge Agreement, dated February
26, 1996 and as amended April 18, 1996, and Promissory Note dated February 26, 1996,
between the Company and Riggs Bank N.A. (formerly known as The Riggs National Bank
of Washington, D.C.)(9)
k.3.A. Promissory Note, dated September 27, 1995, between ACLC Limited Partnership and
Lehman Commercial Paper, Inc.(7)
k.3.B. Loan and Security Agreement, dated September 25, 1995, between ACLC Limited
Partnership and Lehman Commercial Paper Inc.(9)
k.4. Form of agreement between the Company and its regional associates(4)
k.7. Line of Credit, Security and Pledge Agreement and Promissory Note, dated April 18,
1996, between ACLC Limited Partnership and Riggs Bank N.A.(9)
l. Opinion of Sutherland, Asbill & Brennan as to the legality of the common stock being
registered, and Consent to the use of such Opinion*
m. None
n. Consent of Matthews, Carter and Boyce, independent accountants*
o. None
p. None
</TABLE>

C-1
<PAGE> 21

<TABLE>
<S> <C>
q. None
r. Financial Data Schedule*
s.1 Powers of Attorney of certain signatories of this Registration Statement(8)
s.2 Power of Attorney of a signatory of this Registration Statement(10)
</TABLE>

- ---------------

* Filed herewith.

(1) Incorporated by reference to an exhibit of the same designation
accompanying the Company's initial registration statement on Form N-2 (File
No. 33-68836), as filed with the Commission on September 15, 1993.

(2) Incorporated by reference to Exhibit A to the Company's definitive proxy
statement relating to its annual meeting of stockholders held on May 9,
1995 (File No. 0-22832).

(3) Incorporated by reference to Exhibit 10(c) to the Form 10-K filed by Allied
Capital Corporation for the year ended December 31, 1993 (File No. 814-97).

(4) Incorporated by reference to an exhibit accompanying Pre-Effective
Amendment No. 1 to the Company's registration statement on Form N-2 (File
No. 33-68836), as filed with the Commission on November 1, 1993.

(5) Incorporated by reference to Exhibit B to the Company's definitive proxy
statement relating to its annual meeting of stockholders held on May 20,
1994 (File No. 0-22832).

(6) Incorporated by reference to Exhibit 3(ii) filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 (File No.
0-22832).

(7) Incorporated by reference to Exhibit 10(e) filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 (File No.
0-22832).

(8) Incorporated by reference to an exhibit of the same designation
accompanying the Company's initial registration statement on Form N-2 (File
No. 333-02185), as filed with the Commission on April 2, 1996.

(9) Incorporated by reference to an exhibit of the same designation
accompanying Pre-Effective Amendment No. 1 to the Company's registration
statement on Form N-2 (File No. 333-02185), as filed with the Commission on
April 26, 1996.

(10) Incorporated by reference to an exhibit of the same designation
accompanying Post-Effective Amendment No. 1 to the Company's registration
statement on Form N-2 (File No. 333-02185), as filed with the Commission on
July 10, 1996.

ITEM 25. MARKETING ARRANGEMENTS

The Company has no marketing arrangements to be disclosed pursuant to this
Item.

ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses in connection with the distribution of the securities being
offered hereby (including the rights offering and subsequent sales), other than
underwriting discounts and commissions, are estimated as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $ 3,743
NASD Filing Fee................................................... 1,556
Blue Sky Fees and Expenses........................................ 2,840
Information Agent's Fees and Expenses............................. 56,346
Transfer Agent's and Registrar's Fees and Expenses................ 38,500
Expenses of Nominees.............................................. 22,000
Printing and Conversion Expenses.................................. 66,586
Legal Fees and Expenses........................................... 75,000
Accountant's Fees and Expenses.................................... 5,100
--------
Total................................................... $271,671
========
</TABLE>

C-2
<PAGE> 22

ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL

<TABLE>
<S> <C>
Allied Capital Lending Corporation (the Registrant)* -- Maryland
Subsidiary:
ACLC Limited Partnership -- Maryland............................................ 99%
Allied Capital Corporation(1)* -- Maryland
Subsidiaries:
Allied Investment Corporation -- Maryland....................................... 100%
Allied Capital Financial Corporation -- Maryland................................ 100%
Allied Development Corporation -- District of Columbia.......................... 100%
Allied Capital Corporation II* -- Maryland
Subsidiaries:
Allied Investment Corporation II -- Maryland.................................... 100%
Allied Financial Corporation II -- Maryland..................................... 100%
Allied Capital Commercial Corporation* -- Maryland
Subsidiaries:
ALCC Holdings, Inc. -- Maryland................................................. 100%
ALCC Acceptance Corporation -- Maryland......................................... 100%
Business Mortgage Investors, Inc.* -- Maryland
Subsidiaries:
BMI Holdings, Inc. -- Maryland.................................................. 100%
BMI Acceptance Corporation -- Maryland.......................................... 100%
Allied Capital Funding, L.L.C.** -- Delaware
Allied Capital Mortgage Corporation* -- Maryland
Allied Capital Advisers, Inc. -- Maryland
Subsidiary:
Allied Capital Property Corporation -- Maryland................................. 100%
</TABLE>

- ---------------

* Each of these entities is, like the Registrant, advised by Advisers. By so
including these entities herein, the Registrant does not concede that it and
such other entities are "controlled by" Advisers or that such other entities
are "under common control with" the Registrant, as those terms are defined
in the Investment Company Act of 1940, as amended.

** The members of Allied Capital Funding, L.L.C. are ALCC Acceptance
Corporation and BMI Acceptance Corporation.

(1) Allied Capital Corporation owned 1,244,914 shares, or approximately 25.2% of
the Company's outstanding common stock, at July 8, 1996. The Registrant does
not concede that it is controlled by Allied I. On matters requiring a vote
of the Company's stockholders, Allied I has agreed to vote its shares only
in the same proportion as the shares voted by the Company's public
stockholders.

ITEM 28. NUMBER OF HOLDERS OF SECURITIES

The following table presents the number of record holders of each class of
securities of the Company and its Subsidiary outstanding as of June 30, 1996:

<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
--------------------------------------------------------------- --------------
<S> <C>
Common Stock................................................... 1,637*
LIBOR + 2.2% Secured Revolving Line of Credit (The Company).... 1
LIBOR + 2.0% Secured Revolving Line of Credit
(ACLC Limited Partnership)................................... 1
LIBOR + 2.7% Secured Revolving Line of Credit
(ACLC Limited Partnership)................................... 1
</TABLE>

* Estimate. The Company estimates that there are a total of 7,800
beneficial owners of its common stock.

C-3
<PAGE> 23

ITEM 29. INDEMNIFICATION

The Annotated Code of Maryland, Corporations and Associations, Section
2-418 provides that a Maryland corporation may indemnify any director of the
corporation and any person who, while a director of the corporation, is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, or other enterprise or employee benefit plan,
made a party to any proceeding by reason of service in that capacity unless it
is established that the act or omission of the director was material to the
matter giving rise to the proceeding and was committed in bad faith or was the
result of active and deliberate dishonesty; or the director actually received an
improper personal benefit in money, property or services; or, in the case of any
criminal proceeding, the director had reasonable cause to believe that the act
or omission was unlawful. Indemnification may be made against judgments,
penalties, fines, settlements, and reasonable expenses actually incurred by the
director in connection with the proceeding, but if the proceeding was one by or
in the right of the corporation, indemnification may not be made in respect of
any proceeding in which the director shall have been adjudged to be liable to
the corporation. Such indemnification may not be made unless authorized for a
specific proceeding after a determination has been made, in the manner
prescribed by the law, that indemnification is permissible in the circumstances
because the director has met the applicable standard of conduct. On the other
hand, the director must be indemnified for expenses if he has been successful in
the defense of the proceeding or as otherwise ordered by a court. The law also
prescribes the circumstances under which the corporation may advance expenses
to, or obtain insurance or similar cover for, directors.

The law also provides for comparable indemnification for corporate officers
and agents.

The Articles of Incorporation of the Company provide that its directors and
officers shall, and its agents in the discretion of the Board of Directors may,
be indemnified to the fullest extent permitted from time to time by the laws of
Maryland. The Company's By-Laws also, however, provide that the Company may not
indemnify any director or officer against liability to the Registrant or its
security holders to which he might otherwise be subject by reason of such
person's willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office unless a determination is
made by final decision of a court, by vote of a majority of a quorum of
directors who are disinterested, non-party directors or by independent legal
counsel that the liability for which indemnification is sought did not arise out
of such disabling conduct.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described above, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person in the successful defense of
an action, suit or proceeding) is asserted by a director, officer or controlling
person in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of the court of the issue.

The Registrant, in conjunction with its investment adviser and other
entities managed thereby, carries liability insurance for the benefit of its
directors and officers on a claims-made basis of up to $2,500,000, subject to a
$200,000 retention and the other terms thereof.

ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Advisers, the investment adviser of the Registrant, is engaged in the
business of identifying, evaluating, structuring, closing, and monitoring the
investments made by the Registrant as well as other public and private entities
engaged in small business finance. Certain information about the activities of
each current director or

C-4
<PAGE> 24

executive officer of Allied Capital Advisers, Inc., in which he or she is
engaged, or has been engaged at any time during the past two fiscal years ended
December 31, 1995, is set forth below:

<TABLE>
<S> <C>
George C. Williams....... Director and formerly Vice Chairman of the Board, Allied Capital
Advisers, Inc., Allied Capital Corporation, Allied Capital
Corporation II, Allied Capital Lending Corporation, and Allied
Capital Commercial Corporation; Chairman, Business Mortgage
Investors, Inc. and Allied Capital Mortgage Corporation.
Brooks H. Browne......... Director, Allied Capital Advisers, Inc.; President, Environmental
Enterprises Assistance Fund, 1901 N. Moore Street, Suite 1004,
Arlington, VA 22209.
Robert E. Long........... Director, Allied Capital Advisers, Inc.; Chairman and Chief
Executive Officer, Business Network News, Inc., 99 Canal Center
Plaza, Suite 220, Alexandria, VA 22314; Director, American Heavy
Lift Shipping Company, 365 Canal Street, New Orleans, LA 70130;
Global Travel, Inc., 1911 N. Fort Myer Drive, Arlington, VA 22209,
CSC Scientific, Inc., 8315 Lee Highway, Fairfax, VA 22031; Outer
Seal Building Products, Inc., 5114 College Avenue, College Park,
MD 20740; Business News Network, Inc., 99 Canal Center Plaza,
Suite 220, Alexandria, VA 22314; and Ambase Corporation, 51
Weavers Street, Greenwich, CT 06831.
William L. Walton........ Director, Allied Capital Advisers, Inc.; Director and President,
Education Partners, Inc.; Director, Odyssey Publishing Co.;
Chairman, Success Lab, Inc.; and President, Language Odyssey (all
located at 401 N. Michigan Avenue, Suite 3370, Chicago, IL 60611).
Joan M. Sweeney.......... Director, President, and Chief Operating Officer, Allied Capital
Advisers, Inc.; Executive Vice President, Allied Capital
Corporation, Allied Capital Corporation II, Allied Capital Lending
Corporation, Allied Capital Commercial Corporation, Business
Mortgage Investors, Inc. and Allied Capital Mortgage Corporation.
William F. Dunbar........ Executive Vice President, Allied Capital Advisers, Inc.; President
and Chief Operating Officer, Allied Capital Corporation II;
Executive Vice President, Allied Capital Corporation, Allied
Capital Commercial Corporation, Allied Capital Lending
Corporation, and Business Mortgage Investors, Inc.
Katherine C. Marien...... Executive Vice President, Allied Capital Advisers, Inc.; President
and Chief Operating Officer, Allied Capital Lending Corporation;
Executive Vice President, Allied Capital Corporation, Allied
Capital Corporation II, Allied Capital Commercial Corporation, and
Business Mortgage Investors, Inc.
</TABLE>

C-5
<PAGE> 25

<TABLE>
<CAPTION>
NAME AND PRINCIPAL ADDRESS* OF
EACH COMPANY WITH WHICH THE
NAMED PERSON HAS HAD ANY CONNECTION
NAME AND THE NATURE OF SUCH CONNECTION
- ------------------------- ------------------------------------------------------------------
<S> <C>
John M. Scheurer......... Executive Vice President, Allied Capital Advisers, Inc.; President
and Chief Operating Officer, Allied Capital Commercial
Corporation; Executive Vice President, Allied Capital Corporation,
Allied Capital Corporation II, Allied Capital Lending Corporation
and Allied Capital Mortgage Corporation; Executive Vice President
and Chief Operating Officer, Business Mortgage Investors, Inc.
George Stelljes III...... Executive Vice President, Allied Capital Advisers, Inc.; Senior
Vice President, Allied Capital Corporation, Allied Capital
Corporation II, Allied Capital Commercial Corporation, Allied
Capital Lending Corporation, and Business Mortgage Investors,
Inc.; Director, Total Foam, Inc., 80 Rowe Avenue, Unit B, Milford,
CT 06460; and Colorado Directory, Inc., 6061 S. Willow Drive,
Suite 232, Englewood, CO 80111.
G. Cabell Williams III... Executive Vice President, Allied Capital Advisers, Inc.; President
and Chief Operating Officer, Allied Capital Corporation; Executive
Vice President, Allied Capital Corporation II, Allied Capital
Commercial Corporation, Allied Capital Lending Corporation and
Business Mortgage Investors, Inc. Director, President, and
Treasurer, Broadcast Holdings, Inc., 1025 Vermont Avenue, N.W.,
Suite 1030, Washington, DC 20005 and Georgetown Broadcasting
Company, Inc., 1416 Highmarket Street, Georgetown, SC 29442;
Director, Environmental Enterprises Assistance Fund, 1901 N. Moore
Street, Suite 1004, Arlington, VA 22209.
Jon A. DeLuca............ Executive Vice President, Treasurer and Chief Financial Officer,
Allied Capital Advisers, Inc., Allied Capital Corporation, Allied
Capital Corporation II, Allied Capital Lending Corporation, Allied
Capital Commercial Corporation, Business Mortgage Investors, Inc.
and Allied Capital Mortgage Corporation. Manager, Entrepreneurial
Services, Coopers & Lybrand (1986-1994).
</TABLE>

- ---------------

* The business address of Allied Capital Advisers, Inc., Allied Capital
Corporation, Allied Capital Corporation II, Allied Capital Lending
Corporation, Allied Capital Commercial Corporation, Business Mortgage
Investors, Inc., and Allied Capital Mortgage Corporation is c/o Allied Capital
Advisers, Inc., 1666 K Street, N.W., Ninth Floor, Washington, D.C. 20006-2803.

ITEM 31. LOCATIONS OF ACCOUNTS AND RECORDS

All of the accounts and records of the Registrant, including all the
accounts, books and documents required to be maintained by Section 31(a) of the
1940 Act and the rules thereunder, are maintained by Allied Capital Advisers,
Inc., 1666 K Street, N.W., Ninth Floor, Washington, D.C. 20006-2803.

ITEM 32. MANAGEMENT SERVICES

Other than with its investment adviser, the Registrant is not a party to
any contract pursuant to which any person performs management-related services
to the Registrant.

ITEM 33. UNDERTAKINGS

1. The Registrant undertakes to suspend the offering of shares until the
Prospectus is amended if: (1) subsequent to the effective date of its
Registration Statement, the net asset value declines more than ten
percent from its net asset value as of the effective date of the
Registration Statement; or (2) the net asset value increases to an
amount greater than its net proceeds as stated in the Prospectus.

2. Not Applicable.

C-6
<PAGE> 26

3. Not Applicable.

4. a. The Registrant undertakes to file, during any period in which offers
or sales are being made, a post-effective amendment to the
Registration Statement:

(1) To include any prospectus required by Section 10(a)(3) of the 1933
Act;

(2) To reflect in the prospectus any fact or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement; and

(3) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;

b. The Registration undertakes that, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof; and

c. The Registrant undertakes to remove from registration by means of a
post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.

5. Not Applicable.

6. The Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery, within two business days of
receipt of a written or oral request, any Statement of Additional
Information.

C-7
<PAGE> 27

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Washington, and District
of Columbia, on the 18th day of July, 1996.

ALLIED CAPITAL LENDING CORPORATION

By: /s/ David Gladstone
----------------------------------------
David Gladstone
Chairman of the Board and Chief
Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ---------------------------------------- --------------
<C> <S> <C>
Chairman of the Board and Chief July 18, 1996
/s/ David Gladstone Executive Officer (Principal Executive
- ------------------------------------- Officer) and Director
David Gladstone

* Director
- -------------------------------------
George C. Williams

* President and Chief Operating Officer
- ------------------------------------- and Director
Katherine C. Marien

* Director
- -------------------------------------
Jon W. Barker

* Director
- -------------------------------------
Eleanor Deane Bierbower

* Director
- -------------------------------------
Robert V. Fleming II

* Director
- -------------------------------------
Anthony T. Garcia

* Director
- -------------------------------------
Arthur H. Keeney III

* Director
- -------------------------------------
Robin B. Martin

* Executive Vice President, Treasurer and
- ------------------------------------- Chief Financial Officer (Principal
Jon A. DeLuca Financial Officer and Principal
Accounting Officer)

* By: /s/ David Gladstone
- -------------------------------------
</TABLE>

David Gladstone, Attorney-in-Fact and Agent, on July 18, 1996, pursuant to
the Powers of Attorney filed as Exhibit s.1 to the initial registration
statement on April 2, 1996, or pursuant to the Power of Attorney filed as
Exhibit s.2 to Post-Effective Amendment No. 1 on July 10, 1996.

<PAGE> 28

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<S> <C>
l. Opinion of Sutherland, Asbill & Brennan as to the legality of the common stock being
registered, and Consent to the use of such Opinion
n. Consent of Matthews, Carter and Boyce, independent accountants
r. Financial Data Schedule
</TABLE>

<PAGE> 1
EXHIBIT l

SUTHERLAND, ASBILL & BRENNAN
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404

STEVEN B. BOEHM TEL: (202) 383-0100
DIRECT LINE: (202) 383-0176 FAX: (202) 637-3593

July 18, 1996

Allied Capital Lending Corporation
c/o Allied Capital Advisers, Inc.
1666 K Street, N.W., Ninth Floor
Washington, D.C. 20006-2803

Ladies and Gentlemen:

We have acted as counsel to Allied Capital Lending
Corporation, a Maryland corporation (the "Company"), in connection with the
registration with the Securities and Exchange Commission of the Company's
proposed offering of shares of its common stock (the "Shares") pursuant to a
registration statement on Form N-2, as amended (File No. 333-02185) (the
"Registration Statement"). The Shares heretofore were offered through the
issuance of nontransferable rights to holders of the Company's common stock of
record on April 29, 1996, and any Shares not purchased during the subscription
period therefor (May 6, 1996, through June 4, 1996) pursuant to such rights
will be offered to the public, in each case as described in the Registration
Statement.

We have participated in the preparation of the Registration
Statement and have examined originals or copies, certified or otherwise
identified to our satisfaction by public officials or officers of the Company
as authentic copies of originals, of (i) the Company's Articles of
Incorporation and its Bylaws, (ii) resolutions of the board of directors of the
Company approving the offer and the issuance of the Shares, and (iii) such
other documents as in our judgment were necessary to enable us to render the
opinions expressed below. In our review and examination of all such documents,
we have assumed the legal capacity of all natural persons, the genuineness of
all signatures, the authenticity of all documents and records submitted to us
as originals, and the conformity with authentic originals of all documents and
records submitted to us as copies. To the extent we have deemed appropriate,
we have relied upon certificates of public officials and certificates and
statements of corporate officers of the Company as to certain factual matters.

This opinion is limited to the laws of the State of Maryland,
and we express no opinion with respect to the laws of any other jurisdiction.
We do not hold ourselves out as experts in the laws of the State of Maryland,
and we have not consulted with Maryland counsel with respect to this opinion
letter. The

<PAGE> 2
Allied Capital Lending Corporation
July 18, 1996
Page 2

opinions expressed in this letter are based on our review of the Maryland
Corporation Law, with which we are familiar.

Based upon and subject to the foregoing and our investigation
of such matters of law as we have considered advisable, we are of the opinion
that:

1. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws
of the State of Maryland.

2. Upon the consummation of sale of Shares and the
payment of the consideration therefor in the manner
described above and in the Registration Statement,
the Shares will be duly authorized, validly issued,
fully paid and nonassessable.

We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. We do not admit by giving this consent that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.

Very truly yours,

SUTHERLAND, ASBILL & BRENNAN

By: /s/ Steven B. Boehm
-------------------------
Steven B. Boehm

<PAGE> 1
EXHIBIT n

Matthews, Carter and Boyce
A Professional Corporation

Allied Capital Lending Corporation
Washington, DC 20006

We hereby consent to the use in the Prospectus incorporated by
reference into this Post-Effective Amendment No. 2 to the Registration
Statement on Form N-2 (File No. 333-02185), in the form in which it becomes
effective, of our report dated February 2, 1996 relating to the financial
statements of Allied Capital Lending Corporation for the years ended December
31, 1995, 1994 and 1993, which appear in such Prospectus. We also consent to
the reference to us under the headings "Financial Highlights" and "Reports and
Independent Accountants" in such Prospectus.

/s/ Matthews, Carter and Boyce

McLean, Virginia
July 18, 1996

Certified Public 8200 Greensboro Drive, Suite 1000 Tel: 703-761-4600
Accountants McLean, Virginia 22102-3864 Fax: 703-761-3139

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY UNAUDITED FINANCIAL INFORMATION EXTRACTED FROM
ALLIED CAPITAL LENDING CORPORATION AND SUBSIDIARY'S CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996 AND CONSOLIDATED STATEMENTS OF OPERATIONS, CHANGES IN NET
ASSETS AND CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCORPORATED INTO PART A OF THIS POST-EFFECTIVE AMENDMENT NO. 2 TO THE COMPANY'S
REGISTRATION STATEMENT ON FORM N-2 (THE "REGISTRATION STATEMENT") BY REFERENCE
FROM PAGES F-1 THROUGH F-14 OF THE PROSPECTUS INCLUDED IN PRE-EFFECTIVE
AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT, AS FILED WITH THE COMMISSION ON
APRIL 29, 1996 (ACCESSION NO. 0000950133-96-000425).
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 44,532
<INVESTMENTS-AT-VALUE> 44,356
<RECEIVABLES> 703
<ASSETS-OTHER> 638
<OTHER-ITEMS-ASSETS> 5,467
<TOTAL-ASSETS> 51,164
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,199
<TOTAL-LIABILITIES> 18,199
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,318
<SHARES-COMMON-STOCK> 4,389
<SHARES-COMMON-PRIOR> 4,385
<ACCUMULATED-NII-CURRENT> (177)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (176)
<NET-ASSETS> 32,965
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,591
<OTHER-INCOME> 662
<EXPENSES-NET> 842
<NET-INVESTMENT-INCOME> 1,411
<REALIZED-GAINS-CURRENT> (60)
<APPREC-INCREASE-CURRENT> (21)
<NET-CHANGE-FROM-OPS> 1,330
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,315
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> 81
<ACCUMULATED-NII-PRIOR> (213)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 314
<INTEREST-EXPENSE> 396
<GROSS-EXPENSE> 842
<AVERAGE-NET-ASSETS> 32,925
<PER-SHARE-NAV-BEGIN> 7.50
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> 0.30
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.51
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 17,461
<AVG-DEBT-PER-SHARE> 3.98

</TABLE>