NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Organization. Allied Capital Lending Corporation (the Company) is a closed-end management investment
company that has elected to be regulated as a business development company under the Investment Company
Act of 1940. The Company is an authorized small business lending company and engages in the business of
originating loans to qualified small businesses throughout the United States. The Company raised net proceeds of
approximately $27,500,000 in equity through an initial public offering (IPO) in November 1993. Prior to the
IPO, the Company was a wholly owned subsidiary of Allied Capital Corporation (former Parent). As of March
31, 1996 and December 31, 1995, Allied Capital Corporation owned approximately 28 percent of the
Company's outstanding common stock.
The Company has an investment advisory agreement with Allied Capital Advisers, Inc. (Advisers), whereby
Advisers manages the investments of the Company subject to the supervision and control of the Company's
board of directors. Certain directors and officers of Advisers are also directors and officers of the Company.
Basis of Presentation. In April 1995, ACLC Limited Partnership (Subsidiary) was formed so the Company could
participate in the U.S. Small Business Administration (SBA) 504 loan program and originate other types of small
business loans. The Company is the general partner and has a 99 percent interest in the subsidiary. Accordingly,
the consolidated financial statements of the Company include the accounts of the Company and this majority
owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
In the opinion of management, the unaudited consolidated financial statements of the Company presented contain
all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Company's
consolidated financial position as of March 31, 1996 and the results of opera