Barings BDC, Inc. - Quarter Report: 2010 June (Form 10-Q)

e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-33130

Triangle Capital Corporation

(Exact name of registrant as specified in its charter)


Maryland (State or other jurisdiction of incorporation or organization)		06-1798488 (I.R.S. Employer Identification No.)


3700 Glenwood Avenue, Suite 530 Raleigh, North Carolina (Address of principal executive offices)		27612 (Zip Code)

Registrant’s telephone number, including area code: (919) 719-4770

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o
(Do not check if a smaller reporting company)

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares outstanding of the registrant’s Common Stock on August 2, 2010 was 12,074,184.

TRIANGLE CAPITAL CORPORATION
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q


		Page

PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Consolidated Balance Sheet as of June 30, 2010 and Consolidated Balance Sheet as of December 31, 2009		3
	Unaudited Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2010 and 2009		4
	Unaudited Consolidated Statements of Changes in Net Assets for the Six Months Ended June 30, 2010 and 2009		5
	Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009		6
	Unaudited Consolidated Schedule of Investments as of June 30, 2010		7
	Consolidated Schedule of Investments as of December 31, 2009		12
	Notes to Unaudited Financial Statements		17
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		34
Item 4.	Controls and Procedures		35

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings		36
Item 1A.	Risk Factors		36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3.	Defaults Upon Senior Securities		36
Item 4.	[Removed and Reserved]		36
Item 5.	Other Information		36
Item 6.	Exhibits		37
Signatures			38
Exhibits			39
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

TRIANGLE CAPITAL CORPORATION
Consolidated Balance Sheets


	June 30,			December 31,
	2010			2009
	(Unaudited)
Assets
Investments at fair value:
Non-Control / Non-Affiliate investments (cost of $184,000,602 and $143,239,223 at June 30, 2010 and December 31, 2009, respectively)	$	183,794,529		$	138,281,894
Affiliate investments (cost of $44,081,665 and $47,934,280 at June 30, 2010 and December 31, 2009, respectively)		35,048,700			45,735,905
Control investments (cost of $20,136,340 and $18,767,587 at June 30, 2010 and December 31, 2009, respectively)		22,471,048			17,300,171

Total investments at fair value		241,314,277			201,317,970
Cash and cash equivalents		44,885,473			55,200,421
Interest and fees receivable		1,051,665			676,961
Prepaid expenses and other current assets		261,749			286,790
Deferred financing fees		4,668,738			3,540,492
Property and equipment, net		39,212			28,666

Total assets	$	292,221,114		$	261,051,300


Liabilities
Accounts payable and accrued liabilities	$	1,141,368		$	2,222,177
Interest payable		2,433,873			2,333,952
Dividends payable		—			4,774,534
Taxes payable		52,348			59,178
Deferred revenue		37,500			75,000
Deferred income taxes		246,667			577,267
SBA guaranteed debentures payable		154,500,000			121,910,000

Total liabilities		158,411,756			131,952,108

Net Assets
Common stock, $0.001 par value per share (150,000,000 shares authorized, 12,074,184 and 11,702,511 shares issued and outstanding as of June 30, 2010 and December 31, 2009, respectively)		12,074			11,703
Additional paid-in capital		140,279,496			136,769,259
Investment income in excess of (less than) distributions		(487,035	)		1,070,452
Accumulated realized gains on investments		1,155,817			448,164
Net unrealized depreciation of investments		(7,150,994	)		(9,200,386	)

Total net assets		133,809,358			129,099,192


Total liabilities and net assets	$	292,221,114		$	261,051,300


Net asset value per share	$	11.08		$	11.03
	-

See accompanying notes.

TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Statements of Operations


	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009

Investment income:
Loan interest, fee and dividend income:
Non-Control / Non-Affiliate investments	$	5,217,203		$	4,210,128		$	10,018,845		$	8,401,748
Affiliate investments		1,078,074			909,035			2,108,670			1,840,871
Control investments		369,325			243,021			722,470			480,978

Total loan interest, fee and dividend income		6,664,602			5,362,184			12,849,985			10,723,597

Payment-in-kind interest income:
Non-Control / Non-Affiliate investments		1,135,906			790,578			1,963,507			1,610,520
Affiliate investments		303,246			203,775			565,923			378,036
Control investments		133,909			82,955			259,857			164,078

Total payment-in-kind interest income		1,573,061			1,077,308			2,789,287			2,152,634

Interest income from cash and cash equivalent investments		56,484			136,911			139,782			204,672

Total investment income		8,294,147			6,576,403			15,779,054			13,080,903


Expenses:
Interest expense		1,838,004			1,730,575			3,577,984			3,387,566
Amortization of deferred financing fees		99,630			87,649			196,061			178,310
General and administrative expenses		1,797,889			1,508,882			3,652,701			3,228,148

Total expenses		3,735,523			3,327,106			7,426,746			6,794,024

Net investment income		4,558,624			3,249,297			8,352,308			6,286,879

Net realized gains (losses) on investments — Non-Control/Non-Affiliate		(3,032,785	)		848,164			(2,833,585	)		848,164
Realized gain on investment — Affiliate		3,541,238			—			3,541,238			—
Net unrealized appreciation (depreciation) of investments		1,840,049			(6,918,419	)		2,049,392			(10,523,563	)

Total net gain (loss) on investments before income taxes		2,348,502			(6,070,255	)		2,757,045			(9,675,399	)
Provision for taxes		39,846			30,899			92,744			46,694

Net increase (decrease) in net assets resulting from operations	$	6,867,280		$	(2,851,857	)	$	11,016,609		$	(3,435,214	)


Net investment income per share — basic and diluted	$	0.38		$	0.41		$	0.70		$	0.84

Net increase (decrease) in net assets resulting from operations per share — basic and diluted	$	0.57		$	(0.36	)	$	0.92		$	(0.46	)

Dividends declared per common share	$	0.41		$	0.40		$	0.82		$	0.80

Distributions of capital gains declared per common share	$	—		$	—		$	—		$	0.05

Weighted average number of shares outstanding — basic and diluted		12,003,068			7,924,772			11,940,724			7,463,653

See accompanying notes.

TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Statements of Changes in Net Assets


																Net
										Investment			Accumulated			Unrealized
	Common Stock						Additional			Income			Realized			Appreciation			Total
	Number			Par			Paid In			in Excess of			Gains on			(Depreciation) of			Net
	of Shares			Value			Capital			Distributions			Investments			Investments			Assets


Balance, January 1, 2009		6,917,363		$	6,917		$	87,836,786		$	2,115,157		$	356,495		$	1,109,808		$	91,425,163
Net investment income		—			—			—			6,286,879			—			—			6,286,879
Net realized gains on investments		—			—			—			—			848,164			(557,316	)		290,848
Stock-based compensation		—			—			323,295			—			—			—			323,295
Net unrealized losses on investments		—			—			—			—			—			(9,966,247	)		(9,966,247	)
Provision for taxes		—			—			—			(46,694	)		—			—			(46,694	)
Dividends/distributions declared		—			—			—			(6,150,077	)		(352,366	)		—			(6,502,443	)
Public offering of common stock		1,280,000			1,280			12,535,181			—			—			—			12,536,461
Issuance of restricted stock		144,812			145			(145	)		—			—			—			—
Common stock withheld for payroll taxes upon vesting of restricted stock		(6,533	)		(6	)		(66,894	)		—			—			—			(66,900	)
Forfeiture of restricted stock		(2,700	)		(3	)		3			—			—			—			—

Balance, June 30, 2009		8,332,942		$	8,333		$	100,628,226		$	2,205,265		$	852,293		$	(9,413,755	)	$	94,280,362


										Investment			Accumulated		Net
	Common Stock						Additional			Income in			Realized		Unrealized			Total
	Number			Par			Paid In			Excess of (less than)			Gains on		Depreciation of			Net
	of Shares			Value			Capital			Distributions			Investments		Investments			Assets


Balance, January 1, 2010		11,702,511		$	11,703		$	136,769,259		$	1,070,452		$	448,164	$	(9,200,386	)	$	129,099,192
Net investment income		—			—			—			8,352,308			—		—			8,352,308
Stock-based compensation		—			—			545,670			—			—		—			545,670
Net realized gains on investments		—			—			—			—			707,653		(188,682	)		518,971
Net unrealized gains on investments		—			—			—			—			—		2,238,074			2,238,074
Provision for taxes		—			—			—			(92,744	)		—		—			(92,744	)
Dividends/distributions declared		237,346			237			3,220,614			(9,817,051	)		—		—			(6,596,200	)
Expenses related to public offerings of common stock		—			—			(21,001	)		—			—		—			(21,001	)
Issuance of restricted stock		152,944			153			(153	)		—			—		—			—
Common stock withheld for payroll taxes upon vesting of restricted stock		(18,617	)		(19	)		(234,893	)		—			—		—			(234,912	)

Balance, June 30, 2010		12,074,184		$	12,074		$	140,279,496		$	(487,035	)	$	1,155,817	$	(7,150,994	)	$	133,809,358

See accompanying notes.

TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Statements of Cash Flows


	Six Months Ended			Six Months Ended
	June 30,			June 30,
	2010			2009

Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations	$	11,016,609		$	(3,435,214	)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchases of portfolio investments		(58,216,292	)		(9,193,735	)
Repayments received/sales of portfolio investments		21,702,621			6,791,961
Loan origination and other fees received		1,157,860			175,000
Net realized gain on investments		(707,653	)		(848,164	)
Net unrealized depreciation (appreciation) of investments		(1,718,790	)		10,854,802
Deferred income taxes		(330,600	)		(331,240	)
Payment-in-kind interest accrued, net of payments received		(1,483,865	)		(1,655,206	)
Amortization of deferred financing fees		196,061			178,310
Accretion of loan origination and other fees		(418,082	)		(310,902	)
Accretion of loan discounts		(312,106	)		(203,742	)
Depreciation expense		9,609			11,141
Stock-based compensation		545,670			323,295
Changes in operating assets and liabilities:
Interest and fees receivable		(374,704	)		159,417
Prepaid expenses		25,041			(131,520	)
Accounts payable and accrued liabilities		(1,080,809	)		(585,250	)
Interest payable		99,921			361,147
Deferred revenue		(37,500	)		37,500
Taxes payable		(6,830	)		(5,537	)

Net cash provided by (used in) operating activities		(29,933,839	)		2,192,063


Cash flows from investing activities:
Purchases of property and equipment		(20,155	)		—

Net cash used in investing activities		(20,155	)		—


Cash flows from financing activities:
Borrowings under SBA guaranteed debentures payable		32,590,000			—
Financing fees paid		(1,324,307	)		—
Proceeds from public stock offerings, net of expenses		(21,001	)		12,536,461
Common stock withheld for payroll taxes upon vesting of restricted stock		(234,912	)		(66,900	)
Cash dividends paid		(11,370,734	)		(5,583,845	)
Cash distributions paid		—			(352,366	)

Net cash provided by (used in) financing activities		19,639,046			6,533,350

Net increase (decrease) in cash and cash equivalents		(10,314,948	)		8,725,413
Cash and cash equivalents, beginning of period		55,200,421			27,193,287

Cash and cash equivalents, end of period	$	44,885,473		$	35,918,700


Supplemental disclosure of cash flow information:
Cash paid for interest	$	3,478,064		$	3,026,419

See accompanying notes.

TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments
June 30, 2010


		Type of Investment	Principal				Fair
Portfolio Company	Industry	(1) (2)	Amount		Cost		Value (3)
Non-Control / Non-Affiliate Investments:
Ambient Air Corporation (“AA”) and Peaden-Hobbs Mechanical, LLC (“PHM”) (4%)*	Specialty Trade Contractors	Subordinated Note-AA (15% Cash, 3% PIK, Due 06/13)	$	4,419,823	$	4,375,713	$	4,375,713
		Common Stock-PHM (128,571 shares)				128,571		127,700
		Common Stock Warrants-AA (455 shares)				142,361		629,300

				4,419,823		4,646,645		5,132,713
American De-Rosa Lamparts, LLC and Hallmark Lighting (3%)*	Wholesale and Distribution	Subordinated Note (5% PIK, Due 10/13)		5,337,283		5,125,073		3,985,700
		Membership Units (6,516 Units)				350,000		—

				5,337,283		5,475,073		3,985,700
American Direct Marketing Resources, LLC (3%)*	Direct Marketing Services	Subordinated Note (12% Cash, 3% PIK, Due 03/15)		4,220,054		4,155,955		4,155,955

				4,220,054		4,155,955		4,155,955
Assurance Operations Corporation (0%)*	Metal Fabrication	Common Stock (517 shares)				516,867		404,100

						516,867		404,100
Botanical Laboratories, Inc. (8%)*	Nutritional Supplement	Senior Notes (14% Cash, Due 02/15)		10,500,000		9,788,964		9,788,964
	Manufacturing and Distribution	Common Unit Warrants (998,680 Units)				474,600		931,400

				10,500,000		10,263,564		10,720,364
CRS Reprocessing, LLC (5%)*	Fluid Reprocessing Services	Subordinated Note (12% Cash, 2% PIK, Due 11/14)		6,547,075		6,402,510		6,402,510
		Common Unit Warrant (174 Units)				38,513		123,300

				6,547,075		6,441,023		6,525,810
CV Holdings, LLC (9%)*	Specialty Healthcare Products	Subordinated Note (12% Cash, 4% PIK, Due 09/13)		11,449,249		10,709,824		10,709,824
	Manufacturer	Royalty rights				874,400		983,600

				11,449,249		11,584,224		11,693,424
Electronic Systems Protection, Inc. (3%)*	Power Protection Systems	Subordinated Note (12% Cash, 2% PIK, Due 12/15)		3,152,201		3,129,493		2,910,100
	Manufacturing	Senior Note (8.3% Cash, Due 01/14)		849,711		849,711		849,711
		Common Stock (500 shares)				285,000		97,900

				4,001,912		4,264,204		3,857,711
Energy Hardware Holdings, LLC (0%)*	Machined Parts Distribution	Voting Units (4,833 units)				4,833		596,500

						4,833		596,500
Energy Solutions International, Inc. (7%)*	Pipeline Management Software	Subordinated Note (12% Cash, 5.5% PIK, Due 6/15)		8,535,063		8,365,063		8,365,063
		Limited Partnership Interest (4.39%)				1,000,000		1,345,100

				8,535,063		9,365,063		9,710,163


		Type of Investment	Principal				Fair
Portfolio Company	Industry	(1) (2)	Amount		Cost		Value (3)
Fire Sprinkler Systems, Inc. (1%)*	Specialty Trade Contractors	Subordinated Notes (2% PIK, Due 04/11)	$	2,869,604	$	2,451,849	$	750,000
		Common Stock (295 shares)				294,624		—

				2,869,604		2,746,473		750,000
Frozen Specialties, Inc. (6%)*	Frozen Foods Manufacturer	Subordinated Note (13% Cash, 5% PIK, Due 07/14)		7,857,527		7,730,379		7,730,379

				7,857,527		7,730,379		7,730,379
Garden Fresh Restaurant Corp. (1%)*	Restaurant	Membership Units (5,000 units)				500,000		869,400

						500,000		869,400
Gerli & Company (1%)*	Specialty Woven Fabrics Manufacturer	Subordinated Note (0.69% PIK, Due 08/11)		3,702,582		3,142,576		1,664,000
		Subordinated Note (6.25% Cash, 11.75% PIK, Due 08/11)		127,758		120,000		120,000
		Royalty rights				—		61,700
		Common Stock Warrants (56,559 shares)				83,414		—

				3,830,340		3,345,990		1,845,700
Great Expressions Group Holdings, LLC (4%)*	Dental Practice Management	Subordinated Note (12% Cash, 4% PIK, Due 08/15)		4,515,000		4,447,500		4,447,500
		Class A Units (225 Units)				450,000		450,000

				4,515,000		4,897,500		4,897,500
Grindmaster-Cecilware Corp. (4%)*	Food Services Equipment Manufacturer	Subordinated Note (11% Cash, 3% PIK, Due 03/15)		5,888,616		5,785,561		5,785,561
		Royalty rights				—		146,700

				5,888,616		5,785,561		5,932,261
Inland Pipe Rehabilitation Holding Company LLC (12%)*	Cleaning and Repair Services	Subordinated Note (10% Cash, 4% PIK, Due 01/14)		8,190,905		7,451,935		7,451,935
		Subordinated Note (10% Cash, 8% PIK, Due 01/14)		3,826,346		3,773,520		3,773,520
		Subordinated Note (10% Cash, 5% PIK, Due 01/14)		302,421		302,421		302,421
		Membership Interest Purchase Warrant (2.9%)				853,500		3,856,400

				12,319,672		12,381,376		15,384,276
Jenkins Service, LLC (7%)*	Restoration Services	Subordinated Note (10.25% Cash, 7.25% PIK, Due 04/14)		7,791,657		7,680,637		7,680,637
		Convertible Note (10%, Due 04/14)		1,375,000		1,345,924		1,561,100

				9,166,657		9,026,561		9,241,737
Library Systems & Services, LLC (4%)*	Municipal Business Services	Subordinated Note (12.5% Cash, 4.5% PIK, Due 06/15)		5,263,125		5,105,625		5,105,625
		Common Stock Warrants (112 shares)				58,995		607,300

				5,263,125		5,164,620		5,712,925


		Type of Investment	Principal				Fair
Portfolio Company	Industry	(1) (2)	Amount		Cost		Value (3)
Media Temple, Inc. (9%)*	Web Hosting Services	Subordinated Note (12% Cash, 4% PIK, Due 04/15)	$	8,800,000	$	8,609,369	$	8,609,369
		Convertible Note (8% Cash, 4% PIK, Due 04/15)		3,200,000		2,617,023		2,617,023
		Common Stock Purchase Warrant (28,000 Shares)				536,000		536,000

				12,000,000		11,762,392		11,762,392
Minco Technology Labs, LLC (4%)*	Semiconductor Distribution	Subordinated Note (13% Cash, 3.25% PIK, Due 05/16)		5,018,507		4,893,507		4,893,507
		Class A Units (5,000 Units)				500,000		500,000

				5,018,507		5,393,507		5,393,507
Novolyte Technologies, Inc. (6%)*	Specialty Manufacturing	Subordinated Note (12% Cash, 5.5% PIK, Due 04/15)		7,571,396		7,453,665		7,453,665
		Preferred Units (641 units)				640,818		640,818
		Common Units (24,522 units)				160,204		115,582

				7,571,396		8,254,687		8,210,065
Syrgis Holdings, Inc. (3%)*	Specialty Chemical Manufacturer	Senior Notes (7.75%-10.75% Cash, Due 08/12-02/14)		3,123,426		3,104,335		3,104,335
		Common Units (2,114 units)				1,000,000		892,200

				3,123,426		4,104,335		3,996,535
TBG Anesthesia Management, LLC (6%)*	Physician Management	Senior Note (14% Cash, Due 11/14)		8,000,000		7,611,801		7,611,801
	Services	Warrant (263 shares)				276,100		333,200

				8,000,000		7,887,901		7,945,001
TrustHouse Services Group, Inc. (4%)*	Food Management Services	Subordinated Note (12% Cash, 2% PIK, Due 09/15)		4,395,496		4,331,374		4,331,374
		Class A Units (1,495 units)				475,000		380,200
		Class B Units (79 units)				25,000		—

				4,395,496		4,831,374		4,711,574
Tulsa Inspection Resources, Inc. (“TIR”) and Regent TIR Partners, LLC (“RTIR”) (4%)*	Pipeline Inspection Services	Subordinated Note (14% Cash, Due 03/14)		5,000,000		4,658,831		4,658,831
		Common Units — RTIR (11 units)				200,000		7,100
		Common Stock Warrants — TIR (7 shares)				321,000		31,900

				5,000,000		5,179,831		4,697,831
Twin-Star International, Inc. (4%)*	Consumer Home Furnishings	Subordinated Note (12% Cash, 3% PIK, Due 04/14)		4,500,000		4,455,984		4,455,984
	Manufacturer	Senior Note (4.29%, Due 04/13)		1,177,781		1,177,781		1,177,781

				5,677,781		5,633,765		5,633,765
Wholesale Floors, Inc. (2%)*	Commercial Services	Subordinated Note (12.5%Cash, 1.5% PIK, Due 06/14)		3,500,000		3,375,058		3,148,200
		Membership Interest Purchase Warrant (4.0%)				132,800		—

				3,500,000		3,507,858		3,148,200


		Type of Investment	Principal				Fair
Portfolio Company	Industry	(1) (2)	Amount		Cost		Value (3)
Yellowstone Landscape Group, Inc. (8%)*	Landscaping Services	Subordinated Note (12% Cash, 3% PIK, Due 04/14)	$	11,464,755	$	11,270,906	$	11,270,906

				11,464,755		11,270,906		11,270,906
Zoom Systems (6%)*	Retail Kiosk Operator	Subordinated Note (12.5 Cash, 1.5% PIK, Due 12/14)		8,063,207		7,878,135		7,878,135

				8,063,207		7,878,135		7,878,135


Subtotal Non-Control / Non-Affiliate Investments				180,535,568		184,000,602		183,794,529

Affiliate Investments:
Asset Point, LLC (4%)*	Asset Management Software	Senior Note (12% Cash, 7% PIK, Due 03/13)		5,611,325		5,549,131		5,549,131
	Provider	Membership Units (10 units)				500,000		—

				5,611,325		6,049,131		5,549,131
Axxiom Manufacturing, Inc. (1%)*	Industrial Equipment	Common Stock (34,100 shares)				200,000		719,200
	Manufacturer	Common Stock Warrant (1,000 shares)				—		21,100

						200,000		740,300
Brantley Transportation, LLC (“Brantley Transportation”) and Pine Street Holdings, LLC (“Pine Street”) (4) (2%)*	Oil and Gas Services	Subordinated Note — Brantley Transportation (14% Cash, Due 12/12)		3,800,000		3,725,656		3,141,300
		Common Unit Warrants — Brantley Transportation (4,560 common units)				33,600		—
		Preferred Units — Pine Street (200 units)				200,000		—
		Common Unit Warrants — Pine Street (2,220 units)				—		—

				3,800,000		3,959,256		3,141,300
Dyson Corporation (6%)*	Custom Forging and Fastener	Subordinated Note (12% Cash, 3% PIK, Due 12/13)		6,000,000		5,909,387		5,909,387
	Supplies	Class A Units (1,000,000 units)				1,000,000		2,164,800

				6,000,000		6,909,387		8,074,187
Equisales, LLC (5%)*	Energy Products and Services	Subordinated Note (13% Cash, 4% PIK, Due 04/12)		6,000,000		5,945,560		5,945,560
		Class A Units (500,000 units)				500,000		480,900

				6,000,000		6,445,560		6,426,460
Genapure Corporation (0%)*	Lab Testing Services	Genapure Common Stock (5,594 shares)				563,602		566,400

						563,602		566,400
Technology Crops International (4%)*	Supply Chain Management Services	Subordinated Note (12% Cash, 5% PIK, Due 03/15)		5,199,301		5,109,422		5,109,422
		Common Units (50 Units)				500,000		525,000

				5,199,301		5,609,422		5,634,422


		Type of Investment	Principal				Fair
Portfolio Company	Industry	(1) (2)	Amount		Cost		Value (3)
Waste Recyclers Holdings, LLC (4%)*	Environmental and Facilities Services	Subordinated Note (8% Cash, 7.5% PIK, Due 08/13)	$	4,463,608	$	4,058,669	$	4,058,669
		Subordinated Note (3% Cash, 12.5% PIK, Due 08/13)		6,666,420		6,120,483		857,831
		Class A Preferred Units (300 Units)				2,251,100		—
		Class B Preferred Units (985,372 Units)				985,372		—
		Common Unit Purchase Warrant (1,170,083 Units)				748,900		—
		Common Units (153,219 Units)				180,783		—

				11,130,028		14,345,307		4,916,500


Subtotal Affiliate Investments				37,740,654		44,081,665		35,048,700

Control Investments:
FCL Graphics, Inc. (2%)*	Commercial Printing Services	Senior Note (3.85% Cash, 2% PIK, Due 9/11)		1,502,459		1,498,947		1,066,400
		Senior Note (7.75% Cash, 2% PIK, Due 9/11)		2,024,443		2,019,628		1,441,200
		2^nd Lien Note (2.75% Cash, 8% PIK, Due 12/11)		3,331,630		2,995,277		—
		Preferred Shares (35,000 shares)				—		—
		Common Shares (4,000 shares)				—		—
		Members Interests (3,839 Units)				—		—

				6,858,532		6,513,852		2,507,600
Fischbein, LLC (14%)*	Packaging and Materials Handling	Subordinated Note (13% Cash, 5.5% PIK, Due 05/13)		7,808,147		7,716,360		7,716,360
	Equipment Manufacturer	Class A-1 Common Units (52.5% of Units)				558,140		1,662,300
		Class A Common Units (4,200,000 units)				4,200,000		9,436,800

				7,808,147		12,474,500		18,815,460
Weave Textiles, LLC (1%)*	Specialty Woven Fabrics	Senior Note (12% PIK, Due 01/11)		292,988		292,988		292,988
	Manufacturer	Membership Units (425 units)				855,000		855,000

				292,988		1,147,988		1,147,988


Subtotal Control Investments				14,959,667		20,136,340		22,471,048


Total Investments, June 30, 2010 (180%)*			$	233,235,889	$	248,218,607	$	241,314,277


*		Value as a percent of net assets

(1)		All debt investments are income producing. Common stock, preferred stock and all warrants are non-income producing.

(2)		Disclosures of interest rates on notes include cash interest rates and payment-in-kind (“PIK”) interest rates.

(3)		All investments are restricted as to resale and were valued at fair value as determined in good faith by the Board of Directors.

(4)		Pine Street Holdings, LLC is the majority owner of Brantley Transportation, LLC and its sole business purpose is its ownership of Brantley Transportation, LLC.

See accompanying notes.

TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments
December 31, 2009


		Type of Investment	Principal				Fair
Portfolio Company	Industry	(1) (2)	Amount		Cost		Value (3)
Non—Control / Non—Affiliate Investments:
Ambient Air Corporation (“AA”) and Peaden-Hobbs Mechanical, LLC (“PHM”) (5%)*	Specialty Trade Contractors	Subordinated Note-AA (12% Cash, 2% PIK, Due 03/11)	$	3,236,386	$	3,173,098	$	3,173,098
		Subordinated Note-AA (14% Cash, 4% PIK, Due 03/11)		1,982,791		1,965,757		1,965,757
		Common Stock-PHM (128,571 shares)				128,571		106,900
		Common Stock Warrants-AA (455 shares)				142,361		656,700

				5,219,177		5,409,787		5,902,455
American De-Rosa Lamparts, LLC and Hallmark Lighting (3%)*	Wholesale and Distribution	Subordinated Note (11.5% Cash, 3.75% PIK, Due 10/13)		8,861,819		8,244,709		3,893,299

				8,861,819		8,244,709		3,893,299
American Direct Marketing Resources, LLC (3%)*	Direct Marketing Services	Subordinated Note (12% Cash, 3% PIK, Due 03/15)		4,157,458		4,088,475		4,088,475

				4,157,458		4,088,475		4,088,475
Art Headquarters, LLC (2%)*	Retail, Wholesale and Distribution	Subordinated Note (12% Cash, 2% PIK, Due 01/10)		2,116,822		2,116,822		2,116,822
		Membership unit warrants (15% of units (150 units))				40,800		220,000

				2,116,822		2,157,622		2,336,822
Assurance Operations Corporation (2%)*	Auto Components /Metal	Senior Note (6% Cash, Due 06/11)		2,484,000		2,034,000		2,034,000
	Fabrication	Common Stock (300 shares)				300,000		—

				2,484,000		2,334,000		2,034,000
CRS Reprocessing, LLC (2%)*	Fluid Reprocessing Services	Subordinated Note (12% Cash, 2% PIK, Due 11/14)		3,005,333		2,929,233		2,929,233
		Common Unit Warrant (107 Units)				23,600		23,600

				3,005,333		2,952,833		2,952,833
CV Holdings, LLC (9%)*	Specialty Healthcare Products	Subordinated Note (12% Cash, 4% PIK, Due 09/13)		11,221,670		10,391,652		10,391,652
	Manufacturer	Royalty rights				874,400		949,300

				11,221,670		11,266,052		11,340,952
Electronic Systems Protection, Inc. (3%)*	Power Protection Systems Manufacturing	Subordinated Note (12% Cash, 2% PIK, Due 12/15)		3,120,913		3,096,783		2,869,000
		Senior Note (8.3% Cash, Due 01/14)		895,953		895,953		895,953
		Common Stock (500 shares)				285,000		31,300

				4,016,866		4,277,736		3,796,253
Energy Hardware Holdings, LLC (0%)*	Machined Parts Distribution	Voting Units (4,833 units)				4,833		572,300

						4,833		572,300


		Type of Investment	Principal				Fair
Portfolio Company	Industry	(1) (2)	Amount		Cost		Value (3)
Fire Sprinkler Systems, Inc. (1%)*	Specialty Trade Contractors	Subordinated Notes (11%-12.5% PIK, Due 04/11)	$	2,765,917	$	2,369,744	$	750,000
		Common Stock (295 shares)				294,624		—

				2,765,917		2,664,368		750,000
Frozen Specialties, Inc. (6%)*	Frozen Foods Manufacturer	Subordinated Note (13% Cash, 5% PIK, Due 07/14)		7,662,863		7,523,924		7,523,924

				7,662,863		7,523,924		7,523,924
Garden Fresh Restaurant Corp. (3%)*	Restaurant	2^nd Lien Note (7.8% Cash, Due 12/11)		3,000,000		3,000,000		3,000,000
		Membership Units (5,000 units)				500,000		811,300

				3,000,000		3,500,000		3,811,300
Gerli & Company (1%)*	Specialty Woven Fabrics Manufacturer	Subordinated Note (0.69% PIK, Due 08/11)		3,630,774		3,124,893		1,442,000
		Subordinated Note (6.25% Cash, 11.75% PIK, Due 08/11)		122,389		120,000		120,000
		Common Stock Warrants (56,559 shares)				83,414		—

				3,753,163		3,328,307		1,562,000
Grindmaster-Cecilware Corp. (4%)*	Food Services Equipment Manufacturer	Subordinated Note (11% Cash, 3% PIK, Due 03/15)		5,800,791		5,689,665		5,689,665

				5,800,791		5,689,665		5,689,665
Inland Pipe Rehabilitation Holding Company LLC (11%)*	Cleaning and Repair Services	Subordinated Note (14% Cash, Due 01/14)		8,108,641		7,279,341		7,279,341
		Subordinated Note (18% Cash, Due 01/14)		3,750,000		3,699,679		3,699,679
		Membership Interest Purchase Warrant (2.9%)				853,500		3,742,900

				11,858,641		11,832,520		14,721,920
Jenkins Service, LLC (7%)*	Restoration Services	Subordinated Note (10.25% Cash, 7.25% PIK, Due 04/14)		7,515,221		7,392,334		7,392,334
		Convertible Note (10%, Due 04/14)		1,375,000		1,342,799		1,342,799

				8,890,221		8,735,133		8,735,133
Library Systems & Services, LLC (2%)*	Municipal Business Services	Subordinated Note (12% Cash, Due 03/11)		1,000,000		972,768		972,768
		Common Stock Warrants (112 shares)				58,995		1,242,800

				1,000,000		1,031,763		2,215,568
Novolyte Technologies, Inc. (6%)*	Specialty Manufacturing	Subordinated Note (12% Cash, 5.5% PIK, Due 04/15)		7,366,289		7,230,970		7,230,970
		Preferred Units (600 units)				600,000		545,900
		Common Units (22,960 units)				150,000		—

				7,366,289		7,980,970		7,776,870


		Type of Investment	Principal				Fair
Portfolio Company	Industry	(1) (2)	Amount		Cost		Value (3)
Syrgis Holdings, Inc. (3%)*	Specialty Chemical Manufacturer	Senior Notes (7.75%-10.75% Cash, Due 08/12-02/14)	$	3,337,740	$	3,314,933	$	3,314,933
		Common Units (2,114 units)				1,000,000		447,800

				3,337,740		4,314,933		3,762,733
TBG Anesthesia Management, LLC (6%)*	Physician Management	Senior Note (14% Cash, Due11/14)		8,000,000		7,579,320		7,579,320
	Services	Warrant (263 shares)				276,100		276,100

				8,000,000		7,855,420		7,855,420
TrustHouse Services Group, Inc. (4%)*	Food Management Services	Subordinated Note (12% Cash, 2% PIK, Due 09/15)		4,351,628		4,282,621		4,282,621
		Class A Units (1,495 units)				475,000		409,700
		Class B Units (79 units)				25,000		—

				4,351,628		4,782,621		4,692,321
Tulsa Inspection Resources, Inc. (“TIR”) and Regent TIR Partners, LLC (“RTIR”) (4%)*	Pipeline Inspection Services	Subordinated Note (14% Cash, Due 03/14)		5,000,000		4,625,242		4,625,242
		Common Units — RTIR (11 units)				200,000		8,000
		Common Stock Warrants — TIR (7 shares)				321,000		34,700

				5,000,000		5,146,242		4,667,942
Twin-Star International, Inc. (4%)*	Consumer Home Furnishings	Subordinated Note (12% Cash, 3% PIK, Due 04/14)		4,500,000		4,450,037		4,168,000
	Manufacturer	Senior Note (4.29%, Due 04/13)		1,287,564		1,287,564		1,145,000

				5,787,564		5,737,601		5,313,000
Wholesale Floors, Inc. (3%)*	Commercial Services	Subordinated Note (12.5%Cash, 1.5% PIK, Due 06/14)		3,500,000		3,363,335		3,363,335
		Membership Interest Purchase Warrant (4.0%)				132,800		39,800

				3,500,000		3,496,135		3,403,135
Yellowstone Landscape Group, Inc. (9%)*	Landscaping Services	Subordinated Note (12% Cash, 3% PIK, Due 04/14)		11,294,699		11,080,907		11,080,907

				11,294,699		11,080,907		11,080,907
Zoom Systems (6%)*	Retail Kiosk Operator	Subordinated Note (12.5 Cash, 1.5% PIK, Due 12/14)		8,002,667		7,802,667		7,802,667

				8,002,667		7,802,667		7,802,667

Subtotal Non—Control /Non—Affiliate Investments				142,455,328		143,239,223		138,281,894


		Type of Investment	Principal				Fair
Portfolio Company	Industry	(1) (2)	Amount		Cost		Value (3)
Affiliate Investments:
Asset Point, LLC (4%)*	Asset Management Software	Subordinated Note (12% Cash, 7% PIK, Due 03/13)	$	5,417,830	$	5,346,346	$	5,346,346
	Provider	Membership Units (10 units)				500,000		173,600

				5,417,830		5,846,346		5,519,946
Axxiom Manufacturing, Inc. (0%)*	Industrial Equipment	Common Stock (34,100 shares)				200,000		542,400
	Manufacturer	Common Stock Warrant (1,000 shares)				—		14,000

						200,000		556,400
Brantley Transportation, LLC (“Brantley Transportation”) and Pine Street Holdings, LLC (“Pine Street”) (4) (1%)*	Oil and Gas Services	Subordinated Note — Brantley Transportation (14% Cash, Due 12/12)		3,800,000		3,713,247		1,400,000
		Common Unit Warrants — Brantley Transportation (4,560 common units)				33,600		—
		Preferred Units — Pine Street (200 units)				200,000		—
		Common Unit Warrants — Pine Street (2,220 units)				—		—

				3,800,000		3,946,847		1,400,000
Dyson Corporation (10%)*	Custom Forging and Fastener Supplies	Subordinated Note (12% Cash, 3% PIK, Due 12/13)		10,000,000		9,833,080		9,833,080
		Class A Units (1,000,000 units)				1,000,000		2,634,700

				10,000,000		10,833,080		12,467,780
Equisales, LLC (6%)*	Energy Products and Services	Subordinated Note (13% Cash, 4% PIK, Due 04/12)		6,547,511		6,479,476		6,479,476
		Class A Units (500,000 units)				500,000		1,375,700

				6,547,511		6,979,476		7,855,176
Flint Acquisition Corporation (2%)*	Specialty Chemical Manufacturer	Preferred Stock (9,875 shares)				308,333		2,571,600

						308,333		2,571,600
Genapure Corporation (0%)*	Lab Testing Services	Genapure Common Stock (5,594 shares)				563,602		641,300

						563,602		641,300
Technology Crops International (4%)*	Supply Chain Management Services	Subordinated Note (12% Cash, 5% PIK, Due 03/15)		5,070,492		4,973,767		4,973,767
		Common Units (50 Units)				500,000		500,000

				5,070,492		5,473,767		5,473,767


		Type of Investment	Principal				Fair
Portfolio Company	Industry	(1) (2)	Amount		Cost		Value (3)
Waste Recyclers Holdings, LLC (7%)*	Environmental and Facilities Services	Subordinated Note (8% Cash, 7.5% PIK, Due 08/13)	$	4,116,978	$	4,048,936	$	4,048,936
		Subordinated Note (3% Cash, 12.5% PIK, Due 08/13)		5,734,318		5,666,275		4,920,000
		Class A Preferred Units (300 Units)				2,251,100		—
		Class B Preferred Units (886,835 Units)				886,835		281,000
		Common Unit Purchase Warrant (1,170,083 Units)				748,900		—
		Common Units (153,219 Units)				180,783		—

				9,851,296		13,782,829		9,249,936


Subtotal Affiliate Investments				40,687,129		47,934,280		45,735,905

Control Investments:
FCL Graphics, Inc. (3%)*	Commercial Printing Services	Senior Note (3.76% Cash, 2% PIK, Due 9/11)		1,562,891		1,558,472		1,514,200
		Senior Note (7.76% Cash, 2% PIK, Due 9/11)		2,005,114		1,999,592		1,943,800
		2^nd Lien Note (2.76% Cash, 8% PIK, Due 12/11)		3,200,672		2,994,352		823,000
		Preferred Shares (35,000 shares)				—		—
		Common Shares (4,000 shares)				—		—
		Members Interests (3,839 Units)				—		—

				6,768,677		6,552,416		4,281,000
Fischbein, LLC (10%)*	Packaging and Materials Handling	Subordinated Note (12% Cash, 6.5% PIK, Due 05/13)		7,595,671		7,490,171		7,490,171
	Equipment Manufacturer	Class A-1 Common Units (52.5% of Units)				525,000		1,122,300
		Class A Common Units (4,200,000 units)				4,200,000		4,406,700

				7,595,671		12,215,171		13,019,171


Subtotal Control Investments				14,364,348		18,767,587		17,300,171


Total Investments, December 31, 2009 (156%)*			$	197,506,805	$	209,941,090	$	201,317,970


*		Value as a percent of net assets

(1)		All debt investments are income producing. Common stock, preferred stock and all warrants are non-income producing.

(2)		Disclosures of interest rates on subordinated notes include cash interest rates and payment-in-kind (“PIK”) interest rates.

(3)		All investments are restricted as to resale and were valued at fair value as determined in good faith by the Board of Directors.

(4)		Pine Street Holdings, LLC is the majority owner of Brantley Transportation, LLC and its sole business purpose is its ownership of Brantley Transportation, LLC.

See accompanying notes.

TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements

1. ORGANIZATION, BASIS OF PRESENTATION AND BUSINESS

Organization

Triangle Capital Corporation and its wholly owned subsidiaries, including Triangle Mezzanine Fund LLLP (the “Fund”) and Triangle Mezzanine Fund II LP (“Fund II”) (collectively, the “Company”) operate as a Business Development Company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). The Fund and Fund II are specialty finance limited partnerships formed to make investments primarily in middle market companies located throughout the United States. On September 11, 2003, the Fund was licensed to operate as a Small Business Investment Company (“SBIC”) under the authority of the United States Small Business Administration (“SBA”). On May 26, 2010, Fund II obtained its license to operate as an SBIC. As SBICs, both the Fund and Fund II are subject to a variety of regulations concerning, among other things, the size and nature of the companies in which they may invest and the structure of those investments.

The Company currently operates as a closed-end, non-diversified investment company and has elected to be treated as a BDC under the 1940 Act. The Company is internally managed by its executive officers under the supervision of its board of directors. The Company does not pay management or advisory fees, but instead incurs the operating costs associated with employing executive management and investment and portfolio management professionals.

Basis of Presentation

The financial statements of the Company include the accounts of the Company and its wholly-owned subsidiaries, including the Fund and Fund II. Neither the Fund nor Fund II consolidates portfolio company investments. The effects of all intercompany transactions between the Company and its subsidiaries have been eliminated in consolidation.

The accompanying unaudited financial statements are presented in conformity with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual consolidated financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, all adjustments, consisting solely of normal recurring accruals considered necessary for the fair presentation of financial statements for the interim period, have been included. The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. Therefore, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the period ended December 31, 2009. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

Recently Issued Accounting Standards

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2010-06, Fair Value Measurements and Disclosures (Topic 820). This update improves disclosure requirements related to Fair Value Measurements and Disclosures-Overall Subtopic (Subtopic 820-10) of the FASB Standards Codification, originally issued as FASB Statement No. 157, Fair Value Measurements. These improved disclosure requirements will provide a greater level of disaggregated information and more robust disclosures about valuation techniques and inputs to fair value measurements. The Company adopted these changes beginning with its financial statements for the quarter ended March 31, 2010. The adoption of these changes did not have a material impact on the Company’s financial position or results of operations.

2. INVESTMENTS

Summaries of the composition of the Company’s investment portfolio at cost and fair value as a percentage of total investments are shown in the following tables:


			Percentage of					Percentage of
	Cost		Total Portfolio			Fair Value		Total Portfolio

June 30, 2010:
Subordinated debt, Unitranche and 2^nd lien notes	$	215,676,120		87	%	$	202,282,962		84	%
Senior debt		8,943,390		4			7,932,415		3
Equity shares		19,024,914		8			22,837,000		9
Equity warrants		3,699,783		1			7,069,900		3
Royalty rights		874,400		—			1,192,000		1

	$	248,218,607		100	%	$	241,314,277		100	%


December 31, 2009:
Subordinated debt, Unitranche and 2^nd lien notes	$	179,482,425		86	%	$	166,087,684		83	%
Senior debt		11,090,514		5			10,847,886		5
Equity shares		15,778,681		8			17,182,500		9
Equity warrants		2,715,070		1			6,250,600		3
Royalty rights		874,400		—			949,300		—

	$	209,941,090		100	%	$	201,317,970		100	%

During the three months ended June 30, 2010, the Company made four new investments totaling approximately $32.0 million and seven investments in existing portfolio companies totaling approximately $12.1 million. During the six months ended June 30, 2010, the Company made six new investments totaling approximately $43.6 million and ten investments in existing portfolio companies totaling approximately $14.6 million.

The Company made no new investments during the three months ended June 30, 2009. During the six months ended June 30, 2009, the Company made one new investment totaling approximately $5.2 million and five investments in existing portfolio companies totaling approximately $4.0 million.

Valuation of Investments

The Company has established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring basis in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”). Under ASC Topic 820, a financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of valuation hierarchy established by ASC TOPIC 820 are defined as follows:

Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company’s investment portfolio is comprised of debt and equity instruments of privately held companies for which quoted prices falling within the categories of Level 1 and Level 2 inputs are not available. Therefore, the Company values all of its investments at fair value, as determined in good faith by the Board of Directors (Level 3 inputs, as further described below). Due to the inherent uncertainty in the valuation process, the Board of Directors’ estimate of fair value may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.

Debt and equity securities that are not publicly traded and for which a limited market does not exist are valued at fair value as determined in good faith by the Board of Directors. There is no single standard for determining fair value in good faith, as fair value depends upon circumstances of each individual case. In general, fair value is the amount that the Company might reasonably expect to receive upon the current sale of the security.

Management evaluates the investments in portfolio companies using the most recent portfolio company financial statements and forecasts. Management also consults with the portfolio company’s senior management to obtain further updates on the portfolio company’s performance, including information such as industry trends, new product development and other operational issues.

In making the good faith determination of the value of debt securities, the Company starts with the cost basis of the security, which includes the amortized original issue discount, and payment-in-kind (PIK) interest, if any. The Company also uses a risk rating system to estimate the probability of default on the debt securities and the probability of loss if there is a default. The risk rating system covers both qualitative and quantitative aspects of the business and the securities held. In valuing debt securities, management utilizes an “income approach” model that considers factors including, but not limited to, (i) the portfolio investment’s current risk rating, (ii) the portfolio company’s current trailing twelve months’ (“TTM”) results of operations as compared to the portfolio company’s TTM results of operations as of the date the investment was made and the portfolio company’s anticipated results for the next twelve months of operations, (iii) the portfolio company’s current leverage as compared to its leverage as of the date the investment was made, (iv) publicly available information regarding current pricing and credit metrics for similar proposed and executed investment transactions of private companies and, (v) when management believes a relevant comparison exists, current pricing and credit metrics for similar proposed and executed investment transactions of publicly traded debt.

In valuing equity securities of private companies, the Company considers valuation methodologies consistent with industry practice, including but not limited to (i) valuation using a valuation model based on original transaction multiples and the portfolio company’s recent financial performance, (ii) publicly available information regarding the valuation of the securities based on recent sales in comparable transactions of private companies and, (iii) when management believes there are similar companies that are publicly traded, a review of these publicly traded companies and the market multiple of their equity securities.

The following table presents the Company’s financial instruments carried at fair value as of June 30, 2010 and December 31, 2009, on the consolidated balance sheet by ASC Topic 820 valuation hierarchy, as previously described:


	Fair Value at June 30, 2010
	Level 1		Level 2		Level 3		Total


Portfolio company investments	$	—	$	—	$	241,314,277	$	241,314,277

	$	—	$	—	$	241,314,277	$	241,314,277


	Fair Value at December 31, 2009
	Level 1		Level 2		Level 3		Total


Portfolio company investments	$	—	$	—	$	201,317,970	$	201,317,970

	$	—	$	—	$	201,317,970	$	201,317,970

The following table reconciles the beginning and ending balances of our portfolio company investments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2010 and 2009:


	Six Months Ended			Six Months Ended
	June 30, 2010			June 30, 2009


Fair value of portfolio, beginning of period	$	201,317,970		$	182,105,291
New investments		58,216,292			9,193,735
Loan origination fees received		(1,157,860	)		(175,000	)
Proceeds from sale of investment		(4,089,571	)		(1,888,384	)
Net gains on sale of investment		707,653			848,164
Principal repayments received		(17,613,050	)		(4,903,577	)
Payment-in-kind interest earned		2,789,287			2,152,633
Payment-in-kind interest received		(1,305,422	)		(497,427	)
Accretion of loan discounts		312,106			203,742
Accretion of deferred loan origination revenue		418,082			310,902
Unrealized gains (losses) on investments		1,718,790			(10,854,802	)


Fair value of portfolio, end of period	$	241,314,277		$	176,495,277

All realized and unrealized gains and losses are included in earnings (changes in net assets) and are reported on separate line items within the Company’s statements of operations. Net unrealized gains on investments of $1,482,000 and $1,128,000, respectively, during the three and six months ended June 30, 2010 are related to portfolio company investments that were still held by the Company as of June 30, 2010. Net unrealized losses on investments of $6,692,000 and $10,929,000, respectively, during the three and six months ended June 30, 2009 are related to portfolio company investments that were still held by the Company as of June 30, 2009.

Duff & Phelps, LLC (“Duff & Phelps”), an independent valuation firm, provides third party valuation consulting services to the Company which consist of certain limited procedures that the Company identified and requested Duff & Phelps to perform (hereinafter referred to as the “procedures”). We generally request Duff & Phelps to perform the procedures on each portfolio company at least once in every calendar year and for new portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, we may determine that it is not cost-effective, and as a result is not in our stockholders’ best interest, to request Duff & Phelps to perform the procedures on one or more portfolio companies. Such instances include, but are not limited to, situations where the fair value of our investment in the portfolio company is determined to be insignificant relative to our total investment portfolio.

For the quarter ended March 31, 2010, the Company asked Duff & Phelps to perform the procedures on investments in seven portfolio companies comprising approximately 25% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of March 31, 2010. For the quarter ended June 30, 2010, the Company asked Duff & Phelps to perform the procedures on investments in eight portfolio companies comprising approximately 29% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of June 30, 2010.

For the quarter ended March 31, 2009, the Company asked Duff & Phelps to perform the procedures on investments in seven portfolio companies comprising approximately 26% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of March 31, 2009. For the quarter ended June 30, 2009, the Company asked Duff & Phelps to perform the procedures on investments in six portfolio companies comprising approximately 20% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of June 30, 2009.

Upon completion of the procedures, Duff & Phelps concluded that the fair value, as determined by the Board of Directors, of those investments subjected to the procedures did not appear to be unreasonable. The Board of Directors of Triangle Capital Corporation is ultimately and solely responsible for determining the fair value of the Company’s investments in good faith.

Warrants

When originating a debt security, the Company will sometimes receive warrants or other equity-related securities from the borrower. The Company determines the cost basis of the warrants or other equity-related securities received based upon their respective fair values on the date of receipt in proportion to the total fair value of the debt and warrants or other equity-related securities received. Any resulting difference between the face amount of the debt and its recorded fair value resulting from the assignment of value to the warrant or other equity instruments is treated as original issue discount and accreted into interest income over the life of the loan.

Realized Gain or Loss and Unrealized Appreciation or Depreciation of Portfolio Investments

Realized gains or losses are recorded upon the sale or liquidation of investments and calculated as the difference between the net proceeds from the sale or liquidation, if any, and the cost basis of the investment using the specific identification method. Unrealized appreciation or depreciation reflects the difference between the fair value of the investments and the cost basis of the investments.

Investment Classification

In accordance with the provisions of the 1940 Act, the Company classifies investments by level of control. As defined in the 1940 Act, “Control Investments” are investments in those companies that the Company is deemed to “Control.” “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the 1940 Act, other than Control Investments. “Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments. Generally, under the 1940 Act, the Company is deemed to control a company in which it has invested if the Company owns more than 25.0% of the voting securities of such company or has greater than 50.0% representation on its board. The Company is deemed to be an affiliate of a company in which the Company has invested if it owns between 5.0% and 25.0% of the voting securities of such company.

Investment Income

Interest income, adjusted for amortization of premium and accretion of original issue discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Generally, when interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing interest income on that loan until all principal and interest has been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The Company writes off any previously accrued and uncollected interest when it is determined that interest is no longer considered collectible. Dividend income is recorded on the ex-dividend date.

Fee Income

Loan origination, facility, commitment, consent and other advance fees received in connection with loan agreements are recorded as deferred income and recognized as income over the term of the loan. Loan prepayment penalties and loan amendment fees are recorded into income when the respective prepayment or loan amendment occurs. Any previously deferred fees are immediately recorded into income upon prepayment of the related loan.

Payment-in-Kind Interest

The Company holds loans in its portfolio that contain a payment-in-kind (“PIK”) interest provision. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment.

To maintain the Company’s status as a Regulated Investment Company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as Amended (the “Code”), this non-cash source of income must be paid out to stockholders in the form of dividends, even though the Company has not yet collected the cash. Generally, when current cash interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing PIK interest income on that loan for financial reporting purposes until all principal and interest has been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The Company writes off any accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible.

Concentration of Credit Risk

The Company’s investees are generally lower middle-market companies in a variety of industries. At both June 30, 2010 and December 31, 2009, there were no individual investments greater than 10% of the fair value of the Company’s portfolio. Income, consisting of interest, dividends, fees, other investment income, and realization of gains or losses on equity interests, can fluctuate dramatically upon repayment of an investment or sale of an equity interest and in any given year can be highly concentrated among several investees.

The Company’s investments carry a number of risks including, but not limited to: 1) investing in lower middle market companies which have a limited operating history and financial resources; 2) investing in senior subordinated debt which ranks equal to or lower than debt held by other investors; 3) holding investments that are not publicly traded and are subject to legal and other restrictions on resale and other risks common to investing in below investment grade debt and equity instruments.

3. INCOME TAXES

Triangle Capital Corporation has elected for federal income tax purposes to be treated as a RIC under Subchapter M of the Code. As a RIC, so long as certain minimum distribution, source-of-income and asset diversification requirements are met, income taxes are generally required to be paid only on the portion of taxable income and gains that are not distributed (actually or constructively) and on certain built-in gains.

The Company has certain wholly owned taxable subsidiaries (the “Taxable Subsidiaries”) each of which holds one or more of the Company’s portfolio investments that are listed on the Consolidated Schedule of Investments. The Taxable Subsidiaries are consolidated for financial reporting purposes, such that the Company’s consolidated financial statements reflect the Company’s investments in the portfolio companies owned by the Taxable Subsidiaries. The purpose of the Taxable Subsidiaries is to permit the Company to hold certain portfolio companies that are organized as limited liability companies (“LLCs”) (or other forms of pass-through entities) and still satisfy the RIC tax requirement that at least 90% of the RIC’s gross revenue for income tax purposes must consist of qualifying investment income. Absent the Taxable Subsidiaries, a proportionate amount of any gross income of an LLC (or other pass-through entity) portfolio investment would flow through directly to the RIC. To the extent that such income did not consist of qualifying investment income, it could jeopardize the Company’s ability to qualify as a RIC and therefore cause the Company to

incur significant amounts of federal income taxes. When LLCs (or other pass-through entities) are owned by the Taxable Subsidiaries, their income is taxed to the Taxable Subsidiaries and does not flow through to the RIC, thereby helping the Company preserve its RIC status and resultant tax advantages. The Taxable Subsidiaries are not consolidated for income tax purposes and may generate income tax expense as a result of their ownership of the portfolio companies. This income tax expense is reflected in the Company’s Statements of Operations.

For federal income tax purposes, the cost of investments owned at June 30, 2010 was approximately $250.2 million.

4. LONG-TERM DEBT

At June 30, 2010 and December 31, 2009, the Company had the following debentures guaranteed by the SBA outstanding:


		Prioritized
		Return			June 30,		December 31,
Issuance/Pooling Date	Maturity Date	(Interest) Rate			2010		2009


September 22, 2004	September 1, 2014		5.539	%	$	8,700,000	$	8,700,000
March 23, 2005	March 1, 2015		5.893	%		13,600,000		13,600,000
September 28, 2005	September 1, 2015		5.796	%		9,500,000		9,500,000
March 28, 2007	March 1, 2017		6.231	%		4,000,000		4,000,000
March 26, 2008	March 1, 2018		6.191	%		6,410,000		6,410,000
September 24, 2008	September 1, 2018		6.580	%		4,840,000		4,840,000
September 24, 2008	September 1, 2018		6.442	%		46,060,000		46,060,000
March 25, 2009	March 1, 2019		5.337	%		22,000,000		22,000,000
March 24, 2010	March 1, 2020		4.825	%		6,800,000		6,800,000
April 14, 2010	September 1, 2020		1.425	%		3,690,000		—
June 8, 2010	September 1, 2020		1.586	%		5,000,000		—
June 8, 2010	September 1, 2020		1.275	%		5,000,000		—
June 18, 2010	September 1, 2020		1.249	%		5,000,000		—
June 25, 2010	September 1, 2020		1.225	%		5,000,000		—
June 25, 2010	September 1, 2020		1.225	%		4,400,000		—
June 28, 2010	September 1, 2020		1.096	%		4,500,000		—


					$	154,500,000	$	121,910,000

Interest payments are payable semi-annually. There are no principal payments required on these issues prior to maturity. Debentures issued prior to September 2006 were subject to prepayment penalties during their first five years. Those pre-payment penalties no longer apply to debentures issued after September 1, 2006.

Under the Small Business Investment Act and current SBA policy applicable to SBICs, an SBIC (or group of SBICs under common control) can have outstanding at any time SBA guaranteed debentures up to three times the amount of its regulatory capital. As of June 30, 2010, the maximum statutory limit on the dollar amount of outstanding SBA guaranteed debentures that can be issued by a single SBIC is $150.0 million and by a group of SBICs under common control is $225.0 million. As of June 30, 2010, the Fund has issued the maximum $150.0 million of SBA guaranteed debentures. As of June 30, 2010, Fund II has issued $4.5 million of SBA guaranteed debentures and has the current capacity to issue up to the statutory maximum of $75.0 million, subject to SBA approval. In addition to a one-time 1.0% fee on the total commitment from the SBA, the Company also pays a one-time 2.425% fee on the amount of each debenture issued. These fees are capitalized as deferred financing costs and are amortized over the term of the debt agreements using the effective interest method. The weighted average interest rates for all SBA guaranteed debentures as of June 30, 2010, and December 31, 2009 were 4.98% and 5.77%, respectively. The weighted average interest rate as of June 30, 2010, included $121.9 million of pooled SBA-guaranteed debentures with a weighted average fixed interest rate of 5.96% and $32.6 million of unpooled SBA-guaranteed debentures with a weighted average interim interest rate of 1.30%. The weighted average interest rate as of December 31, 2009, included $115.1 million of pooled SBA-guaranteed debentures with a weighted average fixed interest rate of 6.03% and $6.8 million of unpooled SBA-guaranteed debentures with a weighted average interim interest rate of 1.41%.

5. EQUITY-BASED COMPENSATION

The Company’s Board of Directors and stockholders have approved the Triangle Capital Corporation Amended and Restated 2007 Equity Incentive Plan (the “Plan”), under which there are 900,000 shares of the Company’s Common Stock authorized for issuance. Under the Plan, the Board of Directors (or compensation committee, if delegated administrative authority by the Board of Directors) may award stock options, restricted stock or other stock based incentive awards to executive officers, employees and directors. Equity-based awards granted under the Plan to independent directors generally will vest over a one-year period and equity-based awards granted under the Plan to executive officers and employees generally will vest ratably over a four-year period.

The Company accounts for its equity-based compensation plan using the fair value method, as prescribed by ASC Topic 718, Stock Compensation. Accordingly, for restricted stock awards, we measure the grant date fair value based upon the market price of our common stock on the date of the grant and amortize this fair value to compensation expense over the requisite service period or vesting term.

The following table presents information with respect to the Plan for the six months ended June 30, 2010 and 2009:


	Six Months Ended					Six Months Ended
	June 30, 2010					June 30, 2009
				Weighted-Average					Weighted-Average
	Number of			Grant-Date Fair		Number of			Grant-Date Fair
	Shares			Value per Share		Shares			Value per Share


Unvested shares, beginning of period		219,813		$	10.76		110,800		$	11.11
Shares granted during the period		152,944		$	12.01		144,812		$	10.58
Shares vested during the period		(70,059	)	$	10.72		(35,799	)	$	11.11

Unvested shares, end of period		302,698		$	11.40		219,813		$	10.76

In the three and six months ended June 30, 2010, the Company recognized equity-based compensation expense of approximately $0.3 million and $0.5 million, respectively. In the three and six months ended June 30, 2009, the Company recognized equity-based compensation expense of approximately $0.2 million and $0.3 million, respectively. This expense is included in general and administrative expenses in the Company’s consolidated statements of operations.

As of June 30, 2010, there was approximately $3.1 million of total unrecognized compensation cost, related to the Company’s non-vested restricted shares. This cost is expected to be recognized over a weighted-average period of approximately 2.7 years.

6. FINANCIAL HIGHLIGHTS

The following is a schedule of financial highlights for the six months ended June 30, 2010 and 2009:


	Six Months Ended June 30,
	2010			2009

Per share data:
Net asset value at beginning of period	$	11.03		$	13.22
Net investment income(1)		0.70			0.84
Net realized gain on investments(1)		0.06			0.11
Net unrealized appreciation (depreciation) on investments(1)		0.17			(1.41	)

Total increase (decrease) from investment operations(1)		0.93			(0.46	)

Cash dividends/distributions declared		(0.82	)		(0.85	)
Shares issued pursuant to Dividend Reinvestment Plan		0.05			—
Common stock offering		—			(0.41	)
Stock-based compensation		0.05			0.04
Income tax provision(1)		(0.01	)		(0.01	)
Grant of restricted shares		(0.14	)		(0.20	)
Other(2)		(0.01	)		(0.02	)


Net asset value at end of period	$	11.08		$	11.31

Market value at end of period(3)	$	14.22		$	10.92


Shares outstanding at end of period		12,074,184			8,332,942
Net assets at end of period	$	133,809,358		$	94,280,362
Average net assets	$	132,201,696		$	93,022,600
Ratio of total expenses to average net assets (annualized)		11	%		15	%
Ratio of net investment income to average net assets (annualized)		13	%		14	%
Portfolio turnover ratio		11	%		4	%
Total Return(4)		24	%		15	%


(1)		Weighted average basic per share data.

(2)		Represents the impact of the different share amounts used in calculating per share data as a result of calculating certain per share data based upon the weighted average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.

(3)		Represents the closing price of the Company’s common stock on the last day of the period.

(4)		Total return equals the change in the ending market value of the Company’s common stock during the period, plus dividends declared per share during the period, divided by the market value of the Company’s common stock on the first day of the period. Total return is not annualized.

7. SUBSEQUENT EVENT

In July 2010, the Company invested $5.5 million in subordinated debt and warrants of Hatch Chile Co., LLC, food products company that distributes cooking sauces and related products for retail customers, primarily in the Southwestern United States. Under the terms of the investments, Hatch Chile Co., LLC will pay interest on the subordinated debt at a rate of 18% per annum.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion is designed to provide a better understanding of our unaudited consolidated financial statements, including a brief discussion of our business, key factors that impacted our performance and a summary of our operating results. The following discussion should be read in conjunction with the Unaudited Financial Statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q, and the Consolidated Financial Statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2009. Historical results and percentage relationships among any amounts in the financial statements are not necessarily indicative of trends in operating results for any future periods.

Forward-Looking Statements

Some of the statements in this Quarterly Report constitute forward-looking statements because they relate to future events or our future performance or financial condition. Forward-looking statements may include, among other things, statements as to our future operating results, our business prospects and the prospects of our portfolio companies, the impact of the investments that we expect to make, the ability of our portfolio companies to achieve their objectives, our expected financings and investments, the adequacy of our cash resources and working capital, and the timing of cash flows, if any, from the operations of our portfolio companies. Words such as “expect,” “anticipate,” “target,” “goals,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “continue,” “forecast,” “may,” “should,” “potential,” variations of such words, and similar expressions indicate a forward-looking statement, although not all forward-looking statements include these words. Readers are cautioned that the forward-looking statements contained in this Quarterly Report are only predictions, are not guarantees of future performance, and are subject to risks, events, uncertainties and assumptions that are difficult to predict. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors discussed in Item 1A entitled “Risk Factors” in Part I of our 2009 Annual Report on Form 10-K. Other factors that could cause actual results to differ materially include changes in the economy, risks associated with possible disruption due to terrorism in our operations or the economy generally, and future changes in laws or regulations and conditions in our operating areas. These statements are based on our current expectations, estimates, forecasts, information and projections about the industry in which we operate and the beliefs and assumptions of our management as of the date of this Quarterly Report. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless we are required to do so by law. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Overview of Our Business

We are a Maryland corporation which has elected to be treated and operates as an internally managed business development company, or BDC, under the Investment Company Act of 1940, or 1940 Act. Our wholly owned subsidiaries, Triangle Mezzanine Fund LLLP, or the Fund, and Triangle Mezzanine Fund II LP, or Fund II, are licensed as small business investment companies, or SBICs, by the United States Small Business Administration, or SBA. In addition, the Fund has also elected to be treated as a BDC under the 1940 Act. We, the Fund and Fund II invest primarily in debt instruments, equity investments, warrants and other securities of lower middle market privately held companies located in the United States.

Our business is to provide capital to lower middle market companies in the United States. We define lower middle market companies as those with annual revenues between $10.0 and $100.0 million. We focus on investments in companies with a history of generating revenues and positive cash flows, an established market position and a proven management team with a strong operating discipline. Our target portfolio company has annual revenues between $20.0 and $75.0 million and annual earnings before interest, taxes, depreciation and amortization, or EBITDA, between $3.0 and $20.0 million.

We invest primarily in senior and subordinated debt securities secured by first and second lien security interests in portfolio company assets, coupled with equity interests. Our investments generally range from $5.0 to $15.0 million per portfolio company. In certain situations, we have partnered with other funds to provide larger financing commitments.

We generate revenues in the form of interest income, primarily from our investments in debt securities, loan origination and other fees and dividend income. Fees generated in connection with our debt investments are recognized over the life of the loan using the effective interest method or, in some cases, recognized as earned. In addition, we generate revenue in the form of capital gains, if any, on warrants or other equity-related securities that we acquire from our portfolio companies. Our debt investments generally have a term of between three and seven years and typically bear interest at fixed rates between 12.0% and 17.0% per annum. Certain of our debt investments have a form of interest, referred to as payment-in-kind, or PIK, interest, that is not paid currently but that is accrued and added to the loan balance and paid at the end of the term. In our negotiations with potential portfolio companies, we generally seek to minimize PIK interest. Cash interest on our debt investments is generally payable monthly; however, some of our debt investments pay cash interest on a quarterly basis. As of June 30, 2010, and December 31, 2009, the weighted average yield on our

outstanding debt investments other than non-accrual debt investments (including PIK interest) was approximately 15.4% and 14.7%, respectively. The weighted average yield on all of our outstanding investments (including equity and equity-linked investments but excluding non-accrual debt investments) was approximately 14.0% and 13.5% as of June 30, 2010 and December 31, 2009, respectively. The weighted average yield on all of our outstanding investments (including equity and equity-linked investments and non-accrual debt investments) was approximately 12.6% and 12.5% as of June 30, 2010 and December 31, 2009, respectively.

The Fund and Fund II are eligible to sell debentures guaranteed by the SBA in the capital markets at favorable interest rates and invest these funds in portfolio companies. We intend to continue to operate the Fund and Fund II as SBICs, subject to SBA approval, and to utilize the proceeds of the sale of SBA-guaranteed debentures, referred to herein as SBA leverage, to enhance returns to our stockholders.

Portfolio Composition

The total value of our investment portfolio was $241.3 million as of June 30, 2010, as compared to $201.3 million as of December 31, 2009. As of June 30, 2010, we had investments in 41 portfolio companies with an aggregate cost of $248.2 million. As of December 31, 2009, we had investments in 37 portfolio companies with an aggregate cost of $209.9 million. As of both June 30, 2010 and December 31, 2009, none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio.

As of June 30, 2010 and December 31, 2009, our investment portfolio consisted of the following investments:


			Percentage of					Percentage of
	Cost		Total Portfolio			Fair Value		Total Portfolio

June 30, 2010:
Subordinated debt, Unitranche and 2^nd lien notes	$	215,676,120		87	%	$	202,282,962		84	%
Senior debt		8,943,390		4			7,932,415		3
Equity shares		19,024,914		8			22,837,000		9
Equity warrants		3,699,783		1			7,069,900		3
Royalty rights		874,400		—			1,192,000		1

	$	248,218,607		100	%	$	241,314,277		100	%


December 31, 2009:
Subordinated debt, Unitranche and 2^nd lien notes	$	179,482,425		86	%	$	166,087,684		83	%
Senior debt		11,090,514		5			10,847,886		5
Equity shares		15,778,681		8			17,182,500		9
Equity warrants		2,715,070		1			6,250,600		3
Royalty rights		874,400		—			949,300		—

	$	209,941,090		100	%	$	201,317,970		100	%

Investment Activity

During the six months ended June 30, 2010, we made six new investments totaling approximately $43.6 million, six additional debt investments in existing portfolio companies totaling approximately $13.9 million and five additional equity investments in existing portfolio companies totaling approximately $0.7 million. In addition, we sold two equity investments in portfolio companies for total proceeds of approximately $4.1 million, resulting in realized gains totaling approximately $3.7 million, and converted a subordinated debt investment in one portfolio company to equity, resulting in a realized loss of approximately $3.0 million. We had five portfolio company loans repaid at par totaling approximately $13.2 million and received normal principal repayments and partial loan prepayments totaling approximately $4.4 million in the six months ended June 30, 2010.

During the six months ended June 30, 2009, we made one new investment totaling $5.2 million and five additional investments in existing portfolio companies totaling approximately $4.0 million. We sold investments in two portfolio companies for total proceeds of approximately $1.9 million and recognized a net gain on these sales of approximately $1.8 million. In addition, we received a full repayment from one portfolio company totaling approximately $2.0 million and received partial repayments of loans from two portfolio companies totaling approximately $2.0 million. In addition, we received normal principal repayments totaling approximately $0.9 million in the six months ended June 30, 2009.

Total portfolio investment activity for the six months ended June 30, 2010 and 2009 was as follows:


	Six Months Ended			Six Months Ended
	June 30, 2010			June 30, 2009


Fair value of portfolio, beginning of period	$	201,317,970		$	182,105,291
New investments		58,216,292			9,193,735
Loan origination fees received		(1,157,860	)		(175,000	)
Proceeds from sale of investment		(4,089,571	)		(1,888,384	)
Net gains on sale of investment		707,653			848,164
Principal repayments received		(17,613,050	)		(4,903,577	)
Payment—in—kind interest earned		2,789,287			2,152,633
Payment—in—kind interest received		(1,305,422	)		(497,427	)
Accretion of loan discounts		312,106			203,742
Accretion of deferred loan origination revenue		418,082			310,902
Unrealized gains (losses) on investments		1,718,790			(10,854,802	)


Fair value of portfolio, end of period	$	241,314,277		$	176,495,277

Weighted average yield on debt investments at end of period(1)		15.4	%		14.3	%

Weighted average yield on total investments at end of period(1)		14.0	%		13.1	%

Weighted average yield on total investments at end of period		12.6	%		12.7	%


(1)		Excludes non-accrual debt investments.

Non-Accrual Assets

As of June 30, 2010, the fair value of our non-accrual assets was approximately $11.4 million, which comprised 4.7% of the total fair value of our portfolio, and the cost of our non-accrual assets was approximately $24.0 million, which comprised 9.7% of the total cost of our portfolio. Our non-accrual assets as of June 30, 2010 are as follows:

Gerli and Company

In November 2008, we placed our debt investment in Gerli and Company, or Gerli, on non-accrual status. As a result, under generally accepted accounting principles in the United States, or U.S. GAAP, we no longer recognize interest income on our debt investment in Gerli for financial reporting purposes. During 2008, we recognized an unrealized loss on our debt investment in Gerli of $1.2 million and in the year ended December 31, 2009, we recognized an additional unrealized loss on our debt investment in Gerli of $0.5 million. In the six months ended June 30, 2010, we recognized an unrealized gain on our debt investment in Gerli of approximately $0.2 million. As of June 30, 2010, the cost of our debt investment in Gerli is $3.3 million and the fair value of such investment is $1.8 million.

Fire Sprinkler Systems, Inc.

In October 2008, we placed our debt investment in Fire Sprinkler Systems, Inc., or Fire Sprinkler Systems, on non-accrual status. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investment in Fire Sprinkler Systems for financial reporting purposes. During 2008, we recognized an unrealized loss of $1.4 million on our subordinated note investment in Fire Sprinkler Systems. In the year ended December 31, 2009, we recognized an additional unrealized loss on our debt investment in Fire Sprinkler Systems of $0.3 million and in the six months ended June 30, 2010, we recognized an additional unrealized loss on our debt investment in Fire Sprinkler Systems of $0.1 million. As of June 30, 2010, the cost of our debt investment in Fire Sprinkler Systems is $2.5 million and the fair value of such investment is $0.8 million.

American De-Rosa Lamparts, LLC and Hallmark Lighting

In 2008, we recognized an unrealized loss of $1.2 million on our subordinated note investment in American De-Rosa Lamparts, LLC and Hallmark Lighting, or collectively, ADL. This unrealized loss reduced the fair value of our investment in ADL to $6.9 million as of December 31, 2008. Through August 31, 2009, we continued to receive interest payments from ADL in accordance with the loan agreement. In September 2009, we received notification from ADL’s senior lender that ADL was blocked from making interest payments to us. As a result, we placed our investment in ADL on non-accrual status and under U.S. GAAP, we no longer recognize interest income on our investment in ADL for financial reporting purposes. In the year ended December 31, 2009, we recognized an additional unrealized loss on our investment in ADL of $3.2 million and in the first quarter of 2010, we recognized an unrealized gain on our investment in ADL of approximately $0.1 million. In June 2010, we converted approximately $3.0 million of our subordinated debt in ADL to equity as part of a restructuring, resulting in realized loss of approximately $3.0 million. As of June 30, 2010, the

cost of our investment in ADL was approximately $5.1 million and the fair value of such investment was approximately $4.0 million.

FCL Graphics, Inc. 2nd Lien Note

During the first eight months of 2009, we received cash interest on our 2nd Lien note in FCL Graphics, Inc., or FCL, at the stated contractual rate (20% per annum as of September 30, 2009). In September 2009, FCL did not make the scheduled interest payments on its 2nd Lien notes. As a result, we placed our 2nd Lien note in FCL on non-accrual status and therefore, under U.S. GAAP, we no longer recognized interest income on our 2nd Lien note investment in FCL for financial reporting purposes. In November 2009, we amended the terms of our note with FCL. The terms of the amendment provide for cash interest at a rate of LIBOR plus 250 basis points per annum and PIK interest at a rate of 8% per annum. In addition, we exchanged approximately $0.4 million of unpaid PIK interest on our FCL 2nd Lien note for common equity in FCL Graphics, resulting in a $0.4 million realized loss. While we are currently recognizing cash interest on our 2nd Lien investment in FCL, we have placed the PIK component of this note on non-accrual status. In the year ended December 31, 2009, we recognized an unrealized loss on our 2nd Lien note investment in FCL of approximately $2.2 million and in the first six months of 2010, we recognized an unrealized loss on our 2^nd Lien note investment in FCL of approximately $0.8 million. As of June 30, 2010, the cost of our 2^nd Lien note investment in FCL was approximately $3.0 million and the fair value of our 2nd Lien note investment in FCL was zero.

Waste Recyclers Holdings, LLC

In 2009, in an effort to address liquidity and working capital constraints at Waste Recyclers Holdings, LLC, or Waste Recyclers, we restructured our debt investments in Waste Recyclers to provide for a lower rate of current cash interest and a higher rate of PIK interest. In addition, in 2009, we recognized an unrealized loss on our debt investments in Waste Recyclers of approximately $0.7 million. We continued to receive scheduled cash interest payments from Waste Recyclers during 2009. In March 2010, Waste Recyclers did not make its scheduled cash interest payments for the first quarter of 2010 and in April 2010, we received notification from Waste Recycler’s senior lender that Waste Recyclers was blocked from making interest payments to us for a period of 180 days. As a result, we placed our debt investments in Waste Recyclers on non-accrual status and under U.S. GAAP, we no longer recognize interest income on our debt investments in Waste Recyclers for financial reporting purposes. In the first six months of 2010, we recognized an unrealized loss on our debt investments in Waste Recyclers of approximately $4.5 million. As of June 30, 2010, the cost of our debt investments in Waste Recyclers was approximately $10.2 million and the fair value of our debt investments in Waste Recyclers was approximately $4.9 million.

We are currently in negotiations with the Waste Recyclers investor group regarding various restructuring alternatives, including converting some or all of our existing debt investments to an equity security. While there can be no assurance that these negotiations will result in terms that are acceptable to us, the Waste Recyclers investor group is working diligently toward an acceptable restructuring.

Results of Operations

Comparison of three months ended June 30, 2010 and June 30, 2009

Investment Income

For the three months ended June 30, 2010, total investment income was $8.3 million, a 26% increase from $6.6 million of total investment income for the three months ended June 30, 2009. This increase was primarily attributable to a $1.8 million increase in total loan interest, fee and dividend income (including PIK interest income). The increase in total loan interest, fee and dividend income was due to 1) a net increase in our portfolio investments from June 30, 2009, to June 30, 2010, and 2) an increase in non-recurring fee income of approximately $0.4 million, offset by a decrease in interest income from cash and cash equivalent investments of $0.1 million which resulted from lower average cash balances and lower interest rates in the second quarter of 2010 as compared to the corresponding period in 2009. Non-recurring fee income was approximately $0.4 million for the three months ended June 30, 2010. We had no non-recurring fee income in the three months ended June 30, 2009.

Expenses

For the three months ended June 30, 2010, expenses increased by 12% to $3.7 million from $3.3 million for the three months ended June 30, 2009. The increase in expenses was primarily attributable to a $0.1 million increase in interest expense and a $0.3 million increase in general and administrative expenses. The increase in interest expense is related to higher average balances of SBA-guaranteed debentures outstanding during the three months ended June 30, 2010 than in the comparable period in 2009. The increase in general and administrative costs in the second quarter of 2010 as compared to the second quarter of 2009 was primarily related to increased compensation costs (including equity-based compensation).

Net Investment Income

As a result of the $1.7 million increase in total investment income and the $0.4 million increase in expenses, net investment income for the three months ended June 30, 2010 was $4.6 million compared to net investment income of $3.2 million during the three months ended June 30, 2009.

Net Increase/Decrease in Net Assets Resulting From Operations

In the three months ended June 30, 2010, we realized a gain on the sale of one affiliate investment of approximately $3.5 million and a realized loss on the partial conversion of one non-control/non-affiliate debt investment to equity of approximately $3.0 million. In addition, during the three months ended June 30, 2010, we recorded net unrealized appreciation of investments totaling approximately $1.8 million, comprised of 1) unrealized appreciation on 20 investments totaling approximately $6.6 million and 2) unrealized depreciation on 14 investments totaling approximately $4.8 million.

During the three months ended June 30, 2009, we recorded net realized gains on investments totaling $0.8 million, consisting primarily of 1) a realized gain on the sale of one investment of $1.8 million and 2) a loss on the recapitalization of another investment of $0.9 million. During the three months ended June 30, 2009, we recorded net unrealized depreciation of investments in the amount of $6.9 million, comprised of net unrealized depreciation reclassification adjustments totaling $0.6 million related primarily to the sale of one investment and the recapitalization of another investment noted above, as well as unrealized depreciation on sixteen other investments totaling $6.8 million offset by unrealized appreciation on eight investments totaling $0.5 million.

As a result of these events, our net increase in net assets from operations was $6.9 million for the three months ended June 30, 2010 as compared to a net decrease in net assets from operations of $2.9 million for the three months ended June 30, 2009.

Comparison of six months ended June 30, 2010 and June 30, 2009

Investment Income

For the six months ended June 30, 2010, total investment income was $15.8 million, a 21% increase from $13.1 million of total investment income for the six months ended June 30, 2009. This increase was primarily attributable to a $2.8 million increase in total loan interest, fee and dividend income (including PIK interest income). The increase in total loan interest, fee and dividend income was due to 1) a net increase in our portfolio investments from June 30, 2009, to June 30, 2010, and 2) an increase in non-recurring fee income of approximately $0.7 million, offset by a decrease in interest income from cash and cash equivalent investments of $0.1 million which resulted from lower average cash balances and lower interest rates in the first six months of 2010 as compared to the corresponding period in 2009. Non-recurring fee income was approximately $1.0 million for the six months ended June 30, 2010, as compared to approximately $0.3 million for the six months ended June 30, 2009.

Expenses

For the six months ended June 30, 2010, expenses increased by 9% to $7.4 million from $6.8 million for the six months ended June 30, 2009. The increase in expenses was primarily attributable to a $0.2 million increase in interest expense and a $0.3 million increase in general and administrative expenses. The increase in interest expense is related to higher average balances of SBA-guaranteed debentures outstanding during the six months ended June 30, 2010 than in the comparable period in 2009. The increase in general and administrative costs in the first six months of 2010 was primarily related to increased compensation costs (including equity-based compensation).

Net Investment Income

As a result of the $2.7 million increase in total investment income and the $0.6 million increase in expenses, net investment income for the six months ended June 30, 2010 was $8.4 million compared to net investment income of $6.3 million during the six months ended June 30, 2009.

Net Increase/Decrease in Net Assets Resulting From Operations

In the six months ended June 30, 2010, we realized a gain on the sale of one affiliate investment of approximately $3.5 million, a gain on the sale of one non-control/non-affiliate investment of approximately $0.2 million and a realized loss on the partial conversion of one non-control/non-affiliate debt investment to equity of approximately $3.0 million. In addition, during the six months ended June 30, 2010, we recorded net unrealized appreciation of investments totaling approximately $2.0 million, comprised of 1) unrealized appreciation on 21 investments totaling approximately $11.3 million, 2) unrealized depreciation on 13 investments totaling approximately $9.1 million and 3) a $0.2 million unrealized depreciation reclassification adjustment related to the $0.2 million realized gain noted above.

In the six months ended June 30, 2009, we recorded net realized gains of $0.8 million, consisting primarily of 1) a realized gain on the sale of one investment of $1.8 million and 2) a loss on the recapitalization of another investment of $0.9 million. In the six months ended June 30, 2009, we recorded net unrealized depreciation of investments in the amount of $10.5 million, comprised of net unrealized depreciation reclassification adjustments totaling $0.6 million related to the sale of one investment and the recapitalization of another investment noted above, as well as unrealized depreciation on sixteen investments totaling $12.6 million and unrealized appreciation on eleven investments totaling $2.7 million.

As a result of these events, our net increase in net assets from operations was $11.0 million for the six months ended June 30, 2010 as compared to a net decrease in net assets from operations of $3.4 million during the six months ended June 30, 2009.

Liquidity and Capital Resources

We believe that our current cash and cash equivalents on hand, our available SBA leverage and our anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations for at least the next twelve months.

In the future, depending on the valuation of the Fund’s assets and Fund II’s assets pursuant to SBA guidelines, the Fund and Fund II may be limited by provisions of the Small Business Investment Act of 1958, and SBA regulations governing SBICs, from making certain distributions to Triangle Capital Corporation that may be necessary to enable Triangle Capital Corporation to make the minimum required distributions to its stockholders and qualify as a RIC.

Cash Flows

For the six months ended June 30, 2010, we experienced a net decrease in cash and cash equivalents in the amount of $10.3 million. During that period, our operating activities used $29.9 million in cash, consisting primarily of new portfolio investments of $58.2 million, partially offset by repayments received from portfolio companies of $21.7 million. In addition, financing activities provided $19.6 million of cash, consisting primarily of borrowings under SBA guaranteed debentures payable of $32.6 million, offset by cash dividends paid in the amount of $11.4 million and financing fees paid in the amount of $1.3 million. At June 30, 2010, we had $44.9 million of cash and cash equivalents on hand.

For the six months ended June 30, 2009, we experienced a net increase in cash and cash equivalents in the amount of $8.7 million. During that period, our operating activities provided $2.2 million in cash, consisting primarily of 1) net investment income and 2) sales/repayments of portfolio investments of $6.8 million, offset by purchases of investments totaling $9.2 million. In the six months ended June 30, 2009, financing activities provided $6.5 million of cash, consisting of proceeds from our public stock offering of $12.5 million, net of cash dividends and distributions to stockholders totaling $5.9 million. At June 30, 2009, we had $35.9 million of cash and cash equivalents on hand.

Financing Transactions

Due to the Fund’s and Fund II’s status as licensed SBICs, the Fund and Fund II have the ability to issue debentures guaranteed by the SBA at favorable interest rates. Under the Small Business Investment Act and the SBA rules applicable to SBICs, an SBIC (or group of SBICs under common control) can have outstanding at any time debentures guaranteed by the SBA in an amount up to three times the amount of its regulatory capital, which generally is the amount raised from private investors. The maximum statutory limit on the dollar amount of outstanding debentures guaranteed by the SBA issued by a single SBIC is currently $150.0 million and by a group of SBICs under common control is $225.0 million. Debentures guaranteed by the SBA have a maturity of ten years, with interest payable semi-annually. The principal amount of the debentures is not required to be paid before maturity but may be pre-paid at any time. Debentures issued prior to September 2006, were subject to pre-payment penalties during their first five years. Those pre-payment penalties no longer apply to debentures issued after September 1, 2006.

As of June 30, 2010, the Fund had issued the maximum $150.0 million of SBA guaranteed debentures. As of June 30, 2010, Fund II has issued $4.5 million of SBA guaranteed debentures and has the current capacity to issue up to the statutory maximum of $75.0 million, subject to SBA approval. In addition to the one-time 1.0% fee on the total commitment from the SBA, the Company also pays a one-time 2.425% fee on the amount of each debenture issued. These fees are capitalized as deferred financing costs and are amortized over the term of the debt agreements using the effective interest method. The weighted average interest rate for all SBA guaranteed debentures as of June 30, 2010 was 4.98%. The weighted average interest rate as of June 30, 2010, included $121.9 million of pooled SBA-guaranteed debentures with a weighted average fixed interest rate of 5.96% and $32.6 million of unpooled SBA-guaranteed debentures with a weighted average interim interest rate of 1.30%.

Distributions to Stockholders

We have elected to be treated as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) and intend to make the required distributions to our stockholders as specified therein. In order to qualify as a RIC and to obtain RIC tax benefits, we must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then we are generally required to pay income taxes only on the portion of our taxable income and gains we do not distribute (actually or constructively) and certain built-in gains. We met our minimum distribution requirements for 2009, 2008 and 2007 and continually monitor our distribution requirements with the goal of ensuring compliance with the Code.

The minimum distribution requirements applicable to RICs require us to distribute to our stockholders at least 90% of our investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, we may choose to carry forward ICTI in excess of current year distributions into the next tax year and pay a 4% excise tax on such excess. Any such carryover ICTI must be distributed before the end of the next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. We may be required to recognize ICTI in certain circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants), we must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in ICTI other amounts that we have not yet received in cash, such as 1) PIK interest income and 2) interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. Because any original issue discount or other amounts accrued will be included in our ICTI for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements, even though we will not have received and may not ever receive any corresponding cash amount. ICTI also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.

Current Market Conditions

Since the beginning of 2008, the debt and equity capital markets in the United States have been severely impacted by significant write-offs in the financial services sector relating to subprime mortgages and the re-pricing of credit risk in the broadly syndicated bank loan market, among other factors. These events, along with the deterioration of the housing market, have led to an economic recession in the U.S. and abroad, which could be long-term. Banks, investment companies and others in the financial services industry have continued to report significant write-downs in the fair value of their assets, which has led to the failure of a number of banks and investment companies, a number of distressed mergers and acquisitions, the government take-over of the nation’s two largest government-sponsored mortgage companies, and the passage of the $700 billion Emergency Economic Stabilization Act of 2008 in October 2008 and the passage of the American Recovery and Reinvestment Act of 2009 in February 2009. These events have significantly impacted the financial and credit markets and have reduced the availability of debt and equity capital for the market as a whole, and for financial firms in particular. Notwithstanding recent gains across both the equity and debt markets, these conditions may continue for a prolonged period of time or worsen in the future. While we have capacity to issue additional SBA guaranteed debentures as discussed above, we may not be able to access additional equity capital, which could result in the slowing of our origination activity during the remainder of 2010 and beyond.

In the event that the United States economy remains in a recession, it is possible that the results of some of the middle market companies in which we invest could experience further deterioration, which could ultimately lead to difficulty in meeting debt service requirements and an increase in defaults. There can be no assurance that the performance of certain of our portfolio companies will not be negatively impacted by challenging economic conditions which could have a negative impact on our future results.

Recent Developments

In July 2010, we invested $5.5 million in subordinated debt and warrants of Hatch Chile Co., LLC, a food products company that distributes cooking sauces and related products for retail customers, primarily in the Southwestern United States. Under the terms of the investments, Hatch Chile Co., LLC will pay interest on the subordinated debt at a rate of 18% per annum.

Critical Accounting Policies and Use of Estimates

The preparation of our unaudited financial statements in accordance with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods covered by such financial statements. We have identified investment valuation and revenue recognition as our most critical accounting estimates. On an on-

going basis, we evaluate our estimates, including those related to the matters described below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies follows.

Investment Valuation

The most significant estimate inherent in the preparation of our financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We have established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring (quarterly) basis. As discussed below, we have engaged an independent valuation firm to assist us in our valuation process.

On January 1, 2008, we adopted FASB ASC Topic 820, Fair Value Measurements and Disclosures, or ASC Topic 820, which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.

ASC Topic 820 clarifies that the exchange price is the price in an orderly transaction between market participants to sell an asset or transfer a liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. The transaction to sell the asset or transfer the liability is a hypothetical transaction at the measurement date, considered from the perspective of a market participant that holds the asset or owes the liability. ASC Topic 820 provides a consistent definition of fair value which focuses on exit price and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs. In addition, ASC Topic 820 provides a framework for measuring fair value and establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels of valuation hierarchy established by ASC Topic 820 are defined as follows:

Level 1	—	inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2	—	inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3	—	inputs to the valuation methodology are unobservable and significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Our investment portfolio is comprised of debt and equity instruments of privately held companies for which quoted prices falling within the categories of Level 1 and Level 2 inputs are not available. Therefore, we value all of our investments at fair value, as determined in good faith by our Board of Directors, using Level 3 inputs, as further described below. Due to the inherent uncertainty in the valuation process, our Board of Directors’ estimate of fair value may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.

Debt and equity securities that are not publicly traded and for which a limited market does not exist are valued at fair value as determined in good faith by our Board of Directors. There is no single standard for determining fair value in good faith, as fair value depends upon circumstances of each individual case. In general, fair value is the amount that we might reasonably expect to receive upon the current sale of the security.

We evaluate the investments in portfolio companies using the most recently available portfolio company financial statements and forecasts. We also consult with the portfolio company’s senior management to obtain further updates on the portfolio company’s performance, including information such as industry trends, new product development and other operational issues. Additionally, we consider some or all of the following factors:

	•		financial standing of the issuer of the security;

	•		comparison of the business and financial plan of the issuer with actual results;

	•		the size of the security held as it relates to the liquidity of the market for such security;

	•		pending public offering of common stock by the issuer of the security;

	•		pending reorganization activity affecting the issuer, such as merger or debt restructuring;

	•		ability of the issuer to obtain needed financing;

	•		changes in the economy affecting the issuer;

	•		financial statements and reports from portfolio company senior management and ownership;

	•		the type of security, the security’s cost at the date of purchase and any contractual restrictions on the disposition of the security;

	•		discount from market value of unrestricted securities of the same class at the time of purchase;

	•		special reports prepared by analysts;

	•		information as to any transactions or offers with respect to the security and/or sales to third parties of similar securities;

	•		the issuer’s ability to make payments and the type of collateral;

	•		the current and forecasted earnings of the issuer;

	•		statistical ratios compared to lending standards and to other similar securities; and

	•		other pertinent factors.

In making the good faith determination of the value of debt securities, we start with the cost basis of the security, which includes the amortized original issue discount, and paid-in-kind (PIK) interest, if any. We also use a risk rating system to estimate the probability of default on the debt securities and the probability of loss if there is a default. The risk rating system covers both qualitative and quantitative aspects of the business and the securities held. In valuing debt securities, we utilize an “income approach” model that considers factors including, but not limited to, (i) the portfolio investment’s current risk rating (discussed below), (ii) the portfolio company’s current trailing twelve months’ (“TTM”) results of operations as compared to the portfolio company’s TTM results of operations as of the date the investment was made and the portfolio company’s anticipated results for the next twelve months of operations, (iii) the portfolio company’s current leverage as compared to its leverage as of the date the investment was made, (iv) publicly available information regarding current pricing and credit metrics for similar proposed and executed investment transactions of private companies and, (v) when management believes a relevant comparison exists, current pricing and credit metrics for similar proposed and executed investment transactions of publicly traded debt.

In valuing equity securities of private companies, we consider valuation methodologies consistent with industry practice, including but not limited to (i) valuation using a valuation model based on original transaction multiples and the portfolio company’s recent financial performance, (ii) publicly available information regarding the valuation of the securities based on recent sales in comparable transactions of private companies and, (iii) when management believes there are similar companies that are publicly traded, a review of these publicly traded companies and the market multiple of their equity securities.

Unrealized appreciation or depreciation on portfolio investments are recorded as increases or decreases in investments on the balance sheets and are separately reflected on the statements of operations in determining net increase or decrease in net assets resulting from operations.

Duff & Phelps, LLC (“Duff & Phelps”), an independent valuation firm, provides third party valuation consulting services to us, which consist of certain limited procedures that we identified and requested Duff & Phelps to perform (hereinafter referred to as the “procedures”). We generally request Duff & Phelps to perform the procedures on each portfolio company at least once in every calendar year and for new portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, we may determine that it is not cost-effective, and as a result is not in our stockholders’ best interest, to request Duff & Phelps to perform the procedures on one or more portfolio companies. Such instances include, but are not limited to, situations where the fair value of our investment in the portfolio company is determined to be insignificant relative to our total investment portfolio.

For the quarter ended March 31, 2010, we asked Duff & Phelps to perform the procedures on investments in seven portfolio companies comprising approximately 25% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of March 31, 2010. For the quarter ended June 30, 2010, we asked Duff & Phelps to perform the procedures on investments in eight portfolio companies comprising approximately 29% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of June 30, 2010. Upon completion of the procedures, Duff & Phelps concluded that the fair value, as determined by the Board of Directors, of those investments subjected to the procedures did not appear to be unreasonable. Our Board of Directors is ultimately and solely responsible for determining the fair value of our investments in good faith.

Revenue Recognition

Interest and Dividend Income

Interest income, adjusted for amortization of premium and accretion of original issue discount, is recorded on an accrual basis to the extent that such amounts are expected to be collected. Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. We write off any previously accrued and uncollected interest when it is determined that interest is no longer considered collectible.

Dividend income is recorded on the ex-dividend date.

Fee Income

Loan origination, facility, commitment, consent and other advance fees received in connection with the origination of a loan are recorded as deferred income and recognized as income over the term of the loan. Loan prepayment penalties and loan amendment fees are recorded into income when received. Any previously deferred fees are immediately recorded into income upon prepayment of the related loan.

Payment-in-Kind Interest (PIK)

We currently hold, and we expect to hold in the future, some loans in our portfolio that contain a PIK interest provision. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan, rather than being paid to us in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment.

To maintain our status as a RIC, this non-cash source of income must be paid out to stockholders in the form of dividends, even though we have not yet collected the cash. Generally, when current cash interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing PIK interest income on that loan for financial reporting purposes until all principal and interest has been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. We write off any previously accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible.

Recently Issued Accounting Standards

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2010-06, Fair Value Measurements and Disclosures (“Topic 820”). This update improves disclosure requirements related to Fair Value Measurements and Disclosures-Overall Subtopic (“Subtopic 820-10”) of the FASB Standards Codification, originally issued as FASB Statement No. 157, Fair Value Measurements. These improved disclosure requirements will provide a greater level of disaggregated information and more robust disclosures about valuation techniques and inputs to fair value measurements. We adopted these changes beginning with its financial statements for the quarter ended March 31, 2010. The adoption of these changes did not have a material impact on our financial position or results of operations.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements.


Item 3.		*Quantitative and Qualitative Disclosures About Market Risk.*

Beginning in late 2007, the United States entered a recession, which many believe could be prolonged. As the economy continued to deteriorate in 2008, spending by both consumers and businesses declined significantly, which has impacted the broader financial and credit markets and has reduced the availability of debt and equity capital for the market as a whole and financial firms in particular. This reduction in spending has had an adverse effect on a number of the industries in which some of our portfolio companies operate, and on certain of our portfolio companies as well.

During 2009, we experienced write-downs in our portfolio, several of which were due to declines in the operating performance of certain portfolio companies. In the first six months of 2010, the fair value of our portfolio as a whole remained relatively flat with the fair value as of December 31, 2009.

As of June 30, 2010, the fair value of our non-accrual assets was approximately $11.4 million, which comprised approximately 4.7% of the total fair value of our portfolio, and the cost of our non-accrual assets was approximately $24.0 million, or 9.7% of the total cost of our portfolio. In addition to these non-accrual assets, as of June 30, 2010, we had, on a fair value basis, approximately $11.7 million of debt investments, or 4.9% of the total fair value of our portfolio, which were current with respect to scheduled principal and interest payments, but which were carried at less than cost. The cost of these assets as of June 30, 2010 was approximately $13.7 million, or 5.5% of the total cost of our portfolio.

While the equity and debt markets have recently improved, these stressed conditions may continue for a prolonged period of time or worsen in the future. In the event that the current recession continues for a significant time or the economy deteriorates further, the financial position and results of operations of certain of the middle-market companies in our portfolio could be further affected adversely, which ultimately could lead to difficulty in our portfolio companies meeting debt service requirements and lead to an increase in defaults. There can be no assurance that the performance of our portfolio companies will not be further impacted by economic conditions, which could have a negative impact on our future results.

In addition, we are subject to interest rate risk. Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio. Our investment income is affected by fluctuations in various interest rates, including LIBOR and prime rates. We regularly measure exposure to interest rate risk and determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates. As of June 30, 2010, we were not a party to any hedging arrangements.

As of June 30, 2010, approximately 94.8%, or $213.0 million of our debt portfolio investments bore interest at fixed rates and approximately 5.2%, or $11.6 million of our debt portfolio investments bore interest at variable rates, which are either Prime-based or LIBOR-based. A 200 basis point increase or decrease in the interest rates on our variable-rate debt investments would increase or decrease, as applicable, our investment income by approximately $0.2 million on an annual basis. All of our pooled SBA-guaranteed debentures bear interest at fixed rates.

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

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective. It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the second quarter of 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION


Item 1.		*Legal Proceedings.*

Neither Triangle Capital Corporation nor any of its subsidiaries is currently a party to any material pending legal proceedings.


Item 1A.		*Risk Factors.*

In addition to the other information set forth in this report and the risk factor below, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, which could materially affect our business, financial condition or operating results. The risks described herein or in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Recent healthcare reform legislation may affect our revenue and financial condition.

On March 23, 2010, the President of the United States signed into law the Patient Protection and Affordable Care Act of 2010 and on March 30, 2010, the President signed into law the Health Care and Education Reconciliation Act, which in part modified the Patient Protection and Affordable Care Act. Together, the two Acts serve as the primary vehicle for comprehensive health care reform in the United States. The Acts are intended to reduce the number of individuals in the United States without health insurance and effect significant other changes to the ways in which health care is organized, delivered and reimbursed. The complexities and ramifications of the new legislation are significant, and will be implemented in a phased approach beginning in 2010 and concluding in 2018. At this time, the effects of health care reform and its impact on our operations and on the business, revenues and financial condition of our portfolio companies are not yet known. Accordingly, the reform could adversely affect the cost of providing healthcare coverage generally and could adversely affect the financial success of both the portfolio companies in which we invest and us.


Item 2.		*Unregistered Sales of Equity Securities and Use of Proceeds.*

Sales of Unregistered Securities

During the six months ended June 30, 2010, we issued a total of 237,346 shares of our common stock under our dividend reinvestment plan pursuant to an exemption from the registration requirements of the Securities Act of 1933. The aggregate offering price for the shares of common stock sold under the dividend reinvestment plan was $3,220,851.

Issuer Purchases of Equity Securities

During the six months ended June 30, 2010, there were elections by employees to surrender 18,617 shares of common stock upon vesting of shares of restricted stock to cover tax withholding obligations. The aggregate purchase price for the shares of common stock was $234,912.

Pursuant to Section 23(c)(1) of the Investment Company Act of 1940, we intend to purchase our common stock in the open market in order to satisfy our Dividend Reinvestment Plan obligations if, at the time of the distribution of any dividend, our common stock is trading at a price per share below net asset value. We did not purchase any shares of our common stock to satisfy our Dividend Reinvestment Plan obligations during the six months ended June 30, 2010.


Item 3.		*Defaults Upon Senior Securities.*

Not applicable.


Item 4.		*[Removed and Reserved.]*


Item 5.		*Other Information.*

Not applicable.


Item 6.		*Exhibits.*


Number		Exhibit

3.1		Articles of Amendment and Restatement of the Registrant (Filed as Exhibit (a)(3) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on December 29, 2006 and incorporated herein by reference).

3.2		Second Amended and Restated Bylaws of the Registrant (Filed as Exhibit 3.4 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission on February 25, 2009 and incorporated herein by reference).

3.3		Certificate of Limited Partnership of Triangle Mezzanine Fund LLLP (Filed as Exhibit (a)(4) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on February 13, 2007 and incorporated herein by reference).

3.4		Second Amended and Restated Agreement of Limited Partnership of Triangle Mezzanine Fund LLLP (Filed as Exhibit 3.4 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 11, 2007 and incorporated herein by reference).

4.1		Form of Common Stock Certificate (Filed as Exhibit (d) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on February 15, 2007 and incorporated herein by reference).

4.2		Triangle Capital Corporation Dividend Reinvestment Plan (Filed as Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission on March 12, 2008 and incorporated herein by reference).

4.3		Agreement to Furnish Certain Instruments (Filed as Exhibit 4.19 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission on February 25, 2009 and incorporated herein by reference).

31.1		Chief Executive Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Chief Financial Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Chief Executive Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Chief Financial Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	TRIANGLE CAPITAL CORPORATION
Date: August 4, 2010	/s/ Garland S. Tucker III
	Garland S. Tucker III
	President, Chief Executive Officer and Chairman of the Board of Directors


Date: August 4, 2010	/s/ Steven C. Lilly
	Steven C. Lilly
	Chief Financial Officer and Director


Date: August 4, 2010	/s/ C. Robert Knox, Jr.
	C. Robert Knox, Jr.
	Principal Accounting Officer

EXHIBIT INDEX


Number		Exhibit

3.1		Articles of Amendment and Restatement of the Registrant (Filed as Exhibit (a)(3) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on December 29, 2006 and incorporated herein by reference).

3.2		Second Amended and Restated Bylaws of the Registrant (Filed as Exhibit 3.4 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission on February 25, 2009 and incorporated herein by reference).

3.3		Certificate of Limited Partnership of Triangle Mezzanine Fund LLLP (Filed as Exhibit (a)(4) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on February 13, 2007 and incorporated herein by reference).

3.4		Second Amended and Restated Agreement of Limited Partnership of Triangle Mezzanine Fund LLLP (Filed as Exhibit 3.4 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 11, 2007 and incorporated herein by reference).

4.1		Form of Common Stock Certificate (Filed as Exhibit (d) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on February 15, 2007 and incorporated herein by reference).

4.2		Triangle Capital Corporation Dividend Reinvestment Plan (Filed as Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission on March 12, 2008 and incorporated herein by reference).

4.3		Agreement to Furnish Certain Instruments (Filed as Exhibit 4.19 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission on February 25, 2009 and incorporated herein by reference).

31.1		Chief Executive Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Chief Financial Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Chief Executive Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Chief Financial Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Barings BDC, Inc. - Quarter Report: 2010 June (Form 10-Q)

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