e11vk
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
þ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2006
OR
o TRANSITION
REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-22832
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
ALLIED CAPITAL 401(k) PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
ALLIED CAPITAL CORPORATION
1919 Pennsylvania Avenue, N.W.
Washington D.C. 20006
Telephone: (202) 721-6100
ALLIED CAPITAL 401(k) PLAN
Table of Contents
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Report of Independent Registered Public Accounting Firm |
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1 |
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Financial Statements: |
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Statements of Net Assets Available for Plan Benefits |
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2 |
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Statements of Changes in Net Assets Available for Plan Benefits |
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3 |
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Notes to Financial Statements |
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4 |
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Supplemental Schedule: |
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Schedule H,
Line 4(i) — Schedule of Assets (Held at End of Year) |
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8 |
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The other schedules required by Department of Labor Form 5500, Annual Return/Report of Employee
Benefit Plan, are not applicable and are therefore omitted.
Report of Independent Registered Public Accounting Firm
The Plan Administrator
Allied Capital 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits of Allied Capital
401(k) Plan (the Plan) as of December 31, 2006 and 2005, and the related
statements of changes in net assets available for benefits for the years then ended. These
financial statements are the responsibility of the Plan’s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the net assets available for benefits of the Plan as of
December 31, 2006 and 2005, and the changes in net assets available for benefits for
the years then ended in conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic financial statements
taken as a whole. The supplemental schedule of assets (held at end of year) is presented for the
purpose of additional analysis and is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor’s Rules and Regulations for Reporting
and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule
is the responsibility of the Plan’s management and has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a whole.
/s/ KPMG
LLP
Washington,
DC
June 22, 2007
1
ALLIED CAPITAL 401(k) PLAN
Statements of Net Assets Available for Benefits
December 31,
2006 and 2005
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2006 |
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2005 |
Assets: |
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Non-interest bearing cash |
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$ |
— |
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$ |
5,856 |
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Investments at fair value (note 4): |
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Common stock
of Allied Capital Corporation |
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7,503,212 |
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5,948,452 |
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Mutual funds |
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8,671,596 |
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5,764,819 |
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Common/collective trusts |
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1,016,047 |
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1,006,098 |
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Cash and cash equivalents |
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1,298,839 |
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1,653,286 |
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Participant loans |
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161,652 |
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79,159 |
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Total Investments |
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18,651,346 |
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14,451,814 |
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Receivables: |
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Employer contributions |
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1,178,009 |
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986,839 |
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Due from
broker for securities sold |
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4,073 |
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— |
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Total assets |
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19,833,428 |
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15,444,509 |
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Liabilities: |
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Due to broker for securities purchased |
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4,073 |
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5,856 |
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Other |
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— |
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1,096 |
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Net assets available for benefits |
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$ |
19,829,355 |
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$ |
15,437,557 |
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See
accompanying notes to financial statements.
2
ALLIED CAPITAL 401(k) PLAN
Statements of Changes in Net Assets Available for Benefits
Years
ended December 31, 2006 and 2005
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2006 |
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2005 |
Additions: |
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Investment income: |
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Dividends and interest |
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$ |
985,443 |
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$ |
668,881 |
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Net appreciation in fair value of investments |
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1,524,732 |
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1,074,915 |
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2,510,175 |
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1,743,796 |
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Contributions: |
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Participants |
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1,519,963 |
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1,434,483 |
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Employer |
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1,178,009 |
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986,839 |
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Rollover |
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171,263 |
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25,690 |
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2,869,235 |
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2,447,012 |
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Total additions |
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5,379,410 |
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4,190,808 |
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Deductions: |
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Benefits paid to participants |
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965,674 |
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1,335,845 |
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Administrative expenses |
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21,938 |
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19,263 |
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Total deductions |
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987,612 |
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1,355,108 |
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Net
increase |
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4,391,798 |
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2,835,700 |
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Net assets available for plan benefits: |
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Beginning of year |
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15,437,557 |
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12,601,857 |
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End of year |
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$ |
19,829,355 |
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$ |
15,437,557 |
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See accompanying notes to financial statements.
3
ALLIED CAPITAL 401(k) PLAN
Notes to Financial Statements
December 31,
2006 and 2005
| (1) |
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Summary of Significant Accounting Policies |
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(a) |
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Basis of Presentation |
The accompanying financial statements of Allied Capital 401(k) Plan (the Plan) have been prepared on the accrual basis and present the net assets available
for benefits and the changes in those net assets.
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(b) |
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Trust Fund Management and Investments |
Allied
Capital Corporation (the Company) is the sponsor of the Plan.
Wachovia Bank, N.A., the Trustee of the
Plan, has authority to execute investment transactions based upon the
investment elections of plan participants.
The
Plan’s investments are stated at fair value. Investments in
mutual funds are based on quoted market information. Investments in
common/collective trust funds are valued at the net asset value based on amounts reported by
the fund manager. Shares of common stock of the Company are
valued at the last sale price on the principal exchange on which they
are traded. Participant loans
are recorded at cost, which approximates fair value. Purchases and sales of investments
are recorded on a trade-date basis. Appreciation and depreciation in the fair values of
investments are recognized in the financial statements in the periods in which such
changes occur. Interest income is recorded on the accrual basis. Dividends are recorded
on the ex-dividend date.
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(c) |
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Administrative Expenses |
Trustee fees and loan administration expenses are deducted directly from the
participants’ accounts. Other administrative expenses of the Plan are paid by the Company.
Benefits are recorded when paid.
The preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires the Plan’s management to make estimates and assumptions
that affect the reported amounts of net assets and changes therein and disclosure of
contingent assets and liabilities at the date of the financial statements. Actual results
could differ from those estimates.
| (2) |
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Description of the Plan |
The following brief description of the Plan provides only general information. Participants
should refer to the Plan document for a more complete description of the Plan’s provisions.
The Plan was established effective September 1, 1999, and is a defined contribution plan
covering substantially all full-time employees who are age 21 or older. The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
(Continued)
4
ALLIED CAPITAL 401(k) PLAN
Notes to Financial Statements
December 31,
2006 and 2005
Participants may contribute up to 100% of their eligible annual compensation subject to
the limits established by the Internal Revenue Code. Participants who have attained age
50 before the end of the plan year are eligible to make catch-up contributions.
Participants may also contribute amounts representing distributions from other qualified
defined benefit or defined contribution plans. Participants are able to defer payment of
taxes on their contributions to the Plan, related contributions by the Company and all
income realized on accounts maintained under the Plan.
Participant contributions to the Plan are allocated among the various investment
options based on their instructions. Participants may
change their allocation instructions and transfer accumulated savings between funds on a
daily basis, subject to certain restrictions.
The
Company makes annual safe-harbor non-elective contributions to each participant’s account
equal to 3% of eligible compensation as defined by the Plan. The Company also makes an
additional non-elective contribution equal to 2% of eligible compensation to participants
who have completed at least 1,000 hours of service and were employed on the last day of
the plan year.
Each participant’s account is credited with the participant’s contributions, allocations
of the Company’s contributions and earnings on related investments. Allocations of
Company contributions are made once per year based on each participant’s eligible
compensation. Allocations of earnings are calculated daily based on participant account
balances. The plan benefit to which a participant is entitled is the benefit that can be
provided from the participant’s vested account.
Participants are immediately 100% vested in their own
contributions, any direct rollovers and in
employer non-elective contributions made into the Plan, plus any earnings thereon.
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum
equal to the lesser of $50,000 or 50% of their vested account balance. The loans are
secured by the balance in the participant’s account and bear interest at 1/2% above the
prime rate at the time the loan is secured. Principal and interest is paid ratably
through bi-weekly payroll deductions.
Upon termination of service, a participant whose vested account balance exceeds $5,000 may elect
either a lump sum payment equal to the value of the participant’s vested interest in his or her
account or elect to receive payments in monthly, quarterly, or annual installments over a fixed
reasonable period of time, not exceeding the life expectancy of the participant.
For a participant whose vested account balance exceeds $1,000 but does not exceed $5,000, an Automatic Rollover IRA will be opened for the participant unless the participant has affirmatively elected to have his or her amount paid in a direct rollover to an eligible retirement plan or to receive the distribution directly.
The trustee will distribute in a lump sum a terminated participant’s vested account balance not exceeding $1,000.
(Continued)
5
ALLIED CAPITAL 401(k) PLAN
Notes to Financial Statements
December 31,
2006 and 2005
While the Company has not expressed any intent to terminate the Plan, it is free to do so at
any time. In the event of termination of the Plan, the Plan’s assets would be distributed to
the participants in accordance with the Plan agreement.
Investments that represent five percent or more of the fair value of net assets available for
plan benefits are as follows:
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December 31, |
| |
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2006 |
|
2005 |
Common stock: |
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Allied Capital Corporation |
|
$ |
7,503,212 |
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$ |
5,948,452 |
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|
|
|
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|
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Mutual Funds: |
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|
|
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The Growth Fund of America |
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$ |
1,235,660 |
|
|
$ |
875,430 |
|
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Common / Collective Trusts: |
|
|
|
|
|
|
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Enhanced Stock Market Fund |
|
$ |
1,016,047 |
|
|
$ |
1,006,098 |
|
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Money Market: |
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|
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|
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Evergreen Money Market Fund |
|
$ |
1,298,839 |
|
|
$ |
1,653,286 |
|
|
Net appreciation (depreciation) in the fair value of investments is summarized as follows for
the years ended December 31:
|
| |
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2006 |
|
2005 |
Mutual funds |
|
$ |
596,296 |
|
|
$ |
285,146 |
|
Common stock
of Allied Capital Corporation |
|
|
769,608 |
|
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|
732,635 |
|
Common / collective trusts |
|
|
158,828 |
|
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|
57,134 |
|
|
|
|
|
|
|
|
|
|
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$ |
1,524,732 |
|
|
$ |
1,074,915 |
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| (5) |
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Transactions with Parties-in-Interest |
During
the years ended December 31, 2006 and 2005, the Plan invested in shares of Allied
Capital Common Stock.
The
Company pays a portion of the Plan’s administrative
expenses.
Investments
in common/collective trusts are managed by Wachovia Bank, N.A., which
is the Trustee of the Plan. In addition, the Plan invests in certain
mutual funds managed by Wachovia Bank, N.A. Therefore, transactions
related to these investments qualify as party-in-interest
transactions.
| (6) |
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Federal Income Tax Status |
The Plan has adopted a prototype plan designed by Wachovia Bank, N.A. The prototype plan
obtained its latest opinion letter on August 30, 2001, in which the Internal Revenue
Service stated that the plan, as
then designed, was in compliance with the applicable requirements of the Internal Revenue
Code (“IRC”). The Plan has been amended since receiving its
latest opinion letter, however, the
Plan Administrator believes the Plan is designed and being operated in compliance with the
applicable requirements of the IRC.
(Continued)
6
ALLIED CAPITAL 401(k) PLAN
Notes to Financial Statements
December 31,
2006 and 2005
In 2006 the following amendments were made to the Plan: effective January 1, 2006, the Plan was
amended to reflect certain provisions of the final regulations under
Internal Revenue Code Section 401(k) and 401(m)
published on December 29, 2004; effective January 4, 2006, the Plan was amended to permit AC Finance
LLC, a wholly owned subsidiary of the Company, to adopt the Plan and become a participating
employer in the Plan; and effective April 21, 2006, the Plan was amended to clarify the definition
of eligible compensation with regard to the Company’s
non-elective contributions and the employees’
elective deferral.
Subsequent
to the 2006 plan year, the Plan was retroactively amended for the
2004 plan year, to (i)
eliminate the requirements that a participant complete 1,000 hours of
service during the 2004 plan year and
be employed on the last day of the year to share in the allocation of the Company’s non-elective
contribution; and (ii) restore those requirements for the
2005 and subsequent plan years. In connection with this amendment,
the Company contributed approximately $53 thousand to Plan
participants.
| (8) |
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Reconciliation of Financial Statements to Form 5500 |
The following is a reconciliation of net assets available for benefits per the financial
statements to the Form 5500 at December 31:
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2006 |
|
2005 |
Net assets available for benefits per the financial
statements |
|
$ |
19,829,355 |
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$ |
15,437,557 |
|
Less: employer contribution receivable |
|
|
1,178,009 |
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|
|
986,839 |
|
Plus: other payable |
|
|
— |
|
|
|
1,096 |
|
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|
|
|
|
|
|
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Net assets available for benefits per
Form 5500 |
|
$ |
18,651,346 |
|
|
$ |
14,451,814 |
|
|
|
|
|
|
|
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The following is a reconciliation of employer contributions per the financial statements to
the Form 5500 for the years ended December 31:
| |
|
|
|
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| |
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2006 |
|
2005 |
Employer contributions per the financial statements |
|
$ |
1,178,009 |
|
|
$ |
986,839 |
|
Add (less): |
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|
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|
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|
|
2004 employer contributions receivable |
|
|
— |
|
|
|
913,907 |
|
2005 employer contributions receivable |
|
|
986,839 |
|
|
|
(986,839 |
) |
2006 employer contributions receivable |
|
|
(1,178,009 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Employer contributions per Form 5500 |
|
$ |
986,839 |
|
|
$ |
913,907 |
|
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|
|
|
|
|
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The following is a reconciliation of participant contributions per the financial statements to the Form 5500 for the years ended December 31:
| |
|
|
|
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|
|
| |
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2006 |
|
2005 |
Participant contributions per the financial statements |
|
$ |
1,519,963 |
|
|
$ |
1,434,483 |
|
Plus: other payable |
|
|
— |
|
|
|
1,096 |
|
Less: 2005
payable plus gain |
|
|
(1,239 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Participant contribution per Form 5500 |
|
$ |
1,518,724 |
|
|
$ |
1,435,579 |
|
|
|
|
|
|
|
|
|
|
7
Supplemental Schedule
ALLIED CAPITAL 401(k) PLAN
Form 5500 — Schedule H, Part IV, Line 4(i) — Schedule of Assets (Held at End of Year)
December 31, 2006
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(c) Description of investment, |
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| |
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including maturity |
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(b) Identity of |
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date, rate of interest |
|
(e) Current |
| (a) |
|
issuer |
|
par or maturity value |
|
value |
*
|
|
Wachovia Bank
|
|
Enhanced Stock Market Common/Collective Trust Fund
|
|
$ |
1,016,047 |
|
*
|
|
Evergreen Money Market Fund
|
|
Money Market
|
|
|
1,298,839 |
|
*
|
|
Evergreen Asset Allocation Fund
|
|
Mutual Fund
|
|
|
803,459 |
|
|
|
Federated Stock Trust Fund
|
|
Mutual Fund
|
|
|
286,941 |
|
|
|
Janus Aspen Series Worldwide Growth Portfolio Fund
|
|
Mutual Fund
|
|
|
510,594 |
|
*
|
|
Evergreen Selected Special Equity Fund
|
|
Mutual Fund
|
|
| 466,321 |
|
*
|
|
Evergreen Core Bond Fund
|
|
Mutual Fund
|
|
|
297,930 |
|
|
|
Davis New York Venture Fund
|
|
Mutual Fund
|
|
|
789,292 |
|
*
|
|
Evergreen High Yield Bond Fund
|
|
Mutual Fund
|
|
|
116,357 |
|
|
|
Mass Investors Growth Fund
|
|
Mutual Fund
|
|
|
409,769 |
|
|
|
Putnam International Growth Fund
|
|
Mutual Fund
|
|
|
468,744 |
|
|
|
Franklin Mutual Shares Beacon Fund
|
|
Mutual Fund
|
|
|
365,923 |
|
|
|
Goldman Sachs Small Cap Fund
|
|
Mutual Fund
|
|
|
499,914 |
|
|
|
Franklin Small Cap Growth Fund
|
|
Mutual Fund
|
|
|
632,283 |
|
|
|
Van Kampen Equity and Income Fund
|
|
Mutual Fund
|
|
|
930,643 |
|
|
|
The Growth Fund of America
|
|
Mutual Fund
|
|
|
1,235,660 |
|
|
|
MFS International New Discovery Fund
|
|
Mutual Fund
|
|
|
512,339 |
|
|
|
Van Kampen Global Franchise Fund
|
|
Mutual Fund
|
|
|
345,427 |
|
*
|
|
Allied Capital Corporation
|
|
Allied Capital Stock
|
|
|
7,503,212 |
|
*
|
|
Participant loans
|
|
Participant loans at interest rates ranging
from 4.50% to 8.75%
|
|
|
161,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$18,651,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| * |
|
Party-in-interest — refer to Note 5 |
See accompanying report of independent registered public accounting firm.
8
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or
other persons who administer the employee benefit plan) have duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
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Allied Capital 401(k) Plan |
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By: Allied Capital Corporation |
| Date: June 25, 2007 |
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By: /s/ Penni F. Roll
Penni F. Roll
Chief Financial Officer |
INDEX TO EXHIBITS
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| Exhibit No. |
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Description |
23
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Consent of Independent Registered Public Accounting Firm |