Barings BDC, Inc. - Quarter Report: 2014 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________________

Form 10-Q

__________________________________________________________

(Mark One)



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

For the quarterly period ended March 31, 2014



¨	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 814-00733

__________________________________________________________

Triangle Capital Corporation

(Exact name of registrant as specified in its charter)

__________________________________________________________



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

3700 Glenwood Avenue, Suite 530 Raleigh, North Carolina		27612
(Address of principal executive offices)		(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 ý No ¨

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 ¨ No ¨

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	ý	Accelerated filer	¨

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

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

The number of shares outstanding of the registrant’s Common Stock on May 6, 2014 was 27,903,696.

Table of Contents

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 March 31, 2014 and Consolidated Balance Sheet as of December 31, 2013	3
	Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2014 and 2013	4
	Unaudited Consolidated Statements of Changes in Net Assets for the Three Months Ended March 31, 2014 and 2013	5
	Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013	6
	Unaudited Consolidated Schedule of Investments as of March 31, 2014	7
	Consolidated Schedule of Investments as of December 31, 2013	13
	Notes to Unaudited Consolidated Financial Statements	19
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	44

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
Signatures		47
Exhibits

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

TRIANGLE CAPITAL CORPORATION

Consolidated Balance Sheets



	March 31, 2014		December 31, 2013
	(Unaudited)
Assets:
Investments at fair value:
Non-Control / Non-Affiliate investments (cost of $565,681,884 and $528,021,069 at March 31, 2014 and December 31, 2013, respectively)	$	578,923,349	$	546,043,946
Affiliate investments (cost of $96,920,921 and $107,418,051 at March 31, 2014 and December 31, 2013, respectively)	97,897,491		107,536,534
Control investments (cost of $18,254,446 and $18,378,665 at March 31, 2014 and December 31, 2013, respectively)	13,189,579		10,792,709
Total investments at fair value	690,010,419		664,373,189
Cash and cash equivalents	90,838,247		133,304,346
Interest and fees receivable	3,705,941		5,255,760
Prepaid expenses and other current assets	3,473,128		831,544
Deferred financing fees	10,665,772		11,063,716
Property and equipment, net	76,425		60,525
Total assets	$	798,769,932	$	814,889,080
Liabilities:
Accounts payable and accrued liabilities	$	1,743,559	$	7,493,928
Interest payable	1,093,587		3,017,645
Taxes payable	—		1,064,544
Deferred income taxes	3,610,610		3,514,376
Borrowings under credit facility	10,860,711		11,221,246
Notes	149,500,000		149,500,000
SBA-guaranteed debentures payable	193,330,441		193,285,211
Total liabilities	360,138,908		369,096,950
Net Assets:
Common stock, $0.001 par value per share (150,000,000 shares authorized, 27,903,696 and 27,697,483 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively)	27,904		27,697
Additional paid in capital	408,613,927		409,042,893
Investment income in excess of distributions	7,134,163		8,610,735
Accumulated realized gains	16,547,531		20,665,371
Net unrealized appreciation	6,307,499		7,445,434
Total net assets	438,631,024		445,792,130
Total liabilities and net assets	$	798,769,932	$	814,889,080
Net asset value per share	$	15.72	$	16.10

See accompanying notes.

Table of Contents

TRIANGLE CAPITAL CORPORATION

Unaudited Consolidated Statements of Operations



	Three Months Ended			Three Months Ended
	March 31, 2014			March 31, 2013
Investment income:
Loan interest, fee and dividend income:
Non-Control / Non-Affiliate investments	$	16,507,765		$	17,187,501
Affiliate investments	3,576,791			2,963,029
Control investments	145,360			49,371
Total loan interest, fee and dividend income	20,229,916			20,199,901
Payment-in-kind interest income:
Non-Control / Non-Affiliate investments	2,997,777			3,250,548
Affiliate investments	730,657			958,379
Control investments	5,987			5,867
Total payment-in-kind interest income	3,734,421			4,214,794
Interest income from cash and cash equivalent investments	74,608			51,240
Total investment income	24,038,945			24,465,935
Operating expenses:
Interest and other financing fees	5,139,512			5,111,512
General and administrative expenses	5,056,092			4,120,958
Total operating expenses	10,195,604			9,232,470
Net investment income	13,843,341			15,233,465
Realized and unrealized gains (losses) on investments and foreign currency borrowings:
Net realized gains (losses):
Non-Control / Non-Affiliate investments	272,201			578,782
Affiliate investments	—			1,274,000
Control investments	(208,553		)	—
Net realized gains (losses)	63,648			1,852,782
Net unrealized appreciation (depreciation):
Investments	(1,498,470		)	1,766,545
Foreign currency borrowings	360,535			—
Net unrealized appreciation (depreciation)	(1,137,935		)	1,766,545
Net realized and unrealized gains (losses) on investments and foreign currency borrowings	(1,074,287		)	3,619,327
Loss on extinguishment of debt	—			(412,673		)
Provision for taxes	(266,555		)	(20,303		)
Net increase in net assets resulting from operations	$	12,502,499		$	18,419,816
Net investment income per share—basic and diluted	$	0.50		$	0.56
Net increase in net assets resulting from operations per share—basic and diluted	$	0.45		$	0.67
Dividends per share	$	0.54		$	0.54
Capital gain distributions per share	$	0.15		$	—
Weighted average number of shares outstanding—basic and diluted	27,805,108			27,433,290

See accompanying notes.

Table of Contents

TRIANGLE CAPITAL CORPORATION

Unaudited Consolidated Statements of Changes in Net Assets



	Common Stock			Additional Paid In Capital			Investment Income in Excess of Distributions			Accumulated Realized Gains on Investments		Net Unrealized Appreciation			Total Net Assets
	Number of Shares	Par Value		Additional Paid In Capital			Investment Income in Excess of Distributions			Accumulated Realized Gains on Investments		Net Unrealized Appreciation			Total Net Assets
Balance, December 31, 2012	27,284,798	$	27,285	$	403,322,097		$	6,783,161		$	1,972,940	$	5,229,761		$	417,335,244
Net investment income	—	—		—			15,233,465			—		—			15,233,465
Stock-based compensation	—	—		630,006			—			—		—			630,006
Realized gain (loss) on investments	—	—		—			—			1,852,782		(1,274,000		)	578,782
Net unrealized gains on investments / foreign currency	—	—		—			—			—		3,040,545			3,040,545
Loss on extinguishment of debt	—	—		—			(412,673		)	—		—			(412,673		)
Provision for taxes	—	—		—			(20,303		)	—		—			(20,303		)
Dividends / distributions	28,577	28		796,999			(14,868,791		)	—		—			(14,071,764		)
Issuance of restricted stock	250,000	250		(250		)	—			—		—			—
Balance, March 31, 2013	27,563,375	$	27,563	$	404,748,852		$	6,714,859		$	3,825,722	$	6,996,306		$	422,313,302



	Common Stock					Additional Paid In Capital			Investment Income in Excess of Distributions			Accumulated Realized Gains on Investments			Net Unrealized Appreciation			Total Net Assets
	Number of Shares		Par Value			Additional Paid In Capital			Investment Income in Excess of Distributions			Accumulated Realized Gains on Investments			Net Unrealized Appreciation			Total Net Assets
Balance, December 31, 2013	27,697,483		$	27,697		$	409,042,893		$	8,610,735		$	20,665,371		$	7,445,434		$	445,792,130
Net investment income	—		—			—			13,843,341			—			—			13,843,341
Stock-based compensation	—		—			1,338,072			—			—			—			1,338,072
Realized gain (loss) on investments	—		—			—			—			63,648			(555,390		)	(491,742		)
Net unrealized loss on investments / foreign currency	—		—			—			—			—			(582,545		)	(582,545		)
Provision for taxes	—		—			—			(266,555		)	—			—			(266,555		)
Dividends / distributions	27,108		27			707,263			(15,053,358		)	(4,181,488		)	—			(18,527,556		)
Issuance of restricted stock	273,000		273			(273		)	—			—			—			—
Common stock withheld for payroll taxes upon vesting of restricted stock	(93,895	)	(93		)	(2,474,028		)	—			—			—			(2,474,121		)
Balance, March 31, 2014	27,903,696		$	27,904		$	408,613,927		$	7,134,163		$	16,547,531		$	6,307,499		$	438,631,024

See accompanying notes.

Table of Contents

TRIANGLE CAPITAL CORPORATION

Unaudited Consolidated Statements of Cash Flows



	Three Months Ended			Three Months Ended
	March 31, 2014			March 31, 2013
Cash flows from operating activities:
Net increase in net assets resulting from operations	$	12,502,499		$	18,419,816
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
Purchases of portfolio investments	(77,498,482		)	(10,259,545		)
Repayments received/sales of portfolio investments	51,808,786			9,274,946
Loan origination and other fees received	1,367,819			255,159
Net realized gain on investments	(63,648		)	(1,852,782		)
Net unrealized (appreciation) depreciation on investments	1,402,236			(1,325,156		)
Net unrealized depreciation on foreign currency borrowings	(360,535		)	—
Deferred income taxes	96,234			(441,389		)
Payment-in-kind interest accrued, net of payments received	(1,472,204		)	(3,685,061		)
Amortization of deferred financing fees	397,944			389,394
Loss on extinguishment of debt	—			412,673
Accretion of loan origination and other fees	(835,536		)	(734,094		)
Accretion of loan discounts	(346,201		)	(396,661		)
Accretion of discount on SBA-guaranteed debentures payable	45,230			44,259
Depreciation expense	9,652			9,172
Stock-based compensation	1,338,072			630,006
Changes in operating assets and liabilities:
Interest and fees receivable	1,549,819			(1,481,469		)
Prepaid expenses and other current assets	(2,641,584		)	(190,613		)
Accounts payable and accrued liabilities	(5,750,369		)	(4,698,321		)
Interest payable	(1,924,058		)	(2,070,906		)
Taxes payable	(1,064,544		)	(2,976,193		)
Net cash used in operating activities	(21,438,870		)	(676,765		)
Cash flows from investing activities:
Purchases of property and equipment	(25,552		)	(10,220		)
Net cash used in investing activities	(25,552		)	(10,220		)
Cash flows from financing activities:
Repayments of SBA-guaranteed debentures payable	—			(20,500,000		)
Common stock withheld for payroll taxes upon vesting of restricted stock	(2,474,121		)	—
Cash dividends/distributions paid	(18,527,556		)	(14,071,764		)
Net cash used in financing activities	(21,001,677		)	(34,571,764		)
Net decrease in cash and cash equivalents	(42,466,099		)	(35,258,749		)
Cash and cash equivalents, beginning of period	133,304,346			72,300,423
Cash and cash equivalents, end of period	$	90,838,247		$	37,041,674
Supplemental disclosure of cash flow information:
Cash paid for interest	$	6,404,312		$	6,594,078
Summary of non-cash financing transactions:
Dividends/distributions paid through DRIP share issuances	$	707,290		$	797,027

See accompanying notes.

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TRIANGLE CAPITAL CORPORATION Unaudited Consolidated Schedule of Investments March 31, 2014

Portfolio Company	Industry	Type of Investment⁽¹⁾⁽²⁾	Principal Amount		Cost		Fair Value⁽³⁾
Non–Control / Non–Affiliate Investments:
Agilex Flavors & Fragrances, Inc. (3%)*	Custom Fragrance Producers	Subordinated Note (12% Cash, 1.5% PIK, Due 06/19)	$	12,745,683	$	12,530,110	$	12,530,110
		Common Units (1,250 units)			1,250,000		1,565,000
			12,745,683		13,780,110		14,095,110

AGM Automotive, LLC (3%)*	Auto Industry Interior Components Supplier	Subordinated Note (10% Cash, 3% PIK, Due 07/19)	12,060,075		11,828,390		11,828,390
		Class A Units (500 units)			500,000		500,000
			12,060,075		12,328,390		12,328,390

Ambient Air Corporation (0%)*	Specialty Trade Contractors	Subordinated Note (0% Cash, 8% PIK, Due 06/20)	483,500		66,993		142,000
			483,500		66,993		142,000

Applied-Cleveland Holdings, Inc. (5%)*	Oil and Gas Pipeline Infrastructure Inspection Services	Subordinated Note (10% Cash, 2% PIK, Due 06/19)	18,000,000		17,712,461		17,712,461
		Class A Preferred Units (2,129,032 units)			2,129,032		2,129,032
			18,000,000		19,841,493		19,841,493

Assurance Operations Corporation (0%)*	Metal Fabrication	Common Stock (517 shares)			516,867		1,159,000
					516,867		1,159,000

Audio and Video Labs Holdings, Inc. (3%)*	Manufacturer and Distributor for Independent Artists and Authors	Subordinated Note (12% Cash, 2% PIK, Due 06/18)	13,335,479		13,120,683		13,120,683
		Common Units (138 units)			1,300,000		1,531,000
			13,335,479		14,420,683		14,651,683

BFN Operations LLC (4%)*	Wholesale Grower and Distributor of Container Grown Shrubs, Trees and Plants	Subordinated Note (13% Cash, 4% PIK, Due 11/17)	17,725,664		17,392,688		17,392,688
			17,725,664		17,392,688		17,392,688

Botanical Laboratories, Inc. (0%)*	Nutritional Supplement Manufacturing and Distribution	Common Unit Warrants (998,680 units)			237,301		240,000
					237,301		240,000

Cafe Enterprises, Inc. (3%)*	Restaurant	Subordinated Note (12% Cash, 2% PIK, Due 09/19)	12,006,667		11,766,667		11,766,667
		Series C Preferred Stock (10,000 shares)			1,000,000		1,000,000
			12,006,667		12,766,667		12,766,667

Capital Contractors, Inc. (2%)*	Janitorial and Facilities Maintenance Services	Subordinated Notes (12% Cash, 2% PIK, Due 12/15)	9,613,505		9,332,086		9,332,086
		Common Stock Warrants (20 shares)			492,000		250,000
			9,613,505		9,824,086		9,582,086

Carepoint Resources, Inc. (5%)*	Business Process Outsourcing Provider	Subordinated Note (12% Cash, 2.5% PIK, Due 06/18)	23,661,777		23,302,602		23,302,602
			23,661,777		23,302,602		23,302,602

Carolina Beverage Group, LLC (0%)*	Beverage Manufacturing and Packaging	Class B Units (11,974 units)			119,735		1,549,000
					119,735		1,549,000

Chromaflo Technologies Parent LP (3%)*	Colorant Manufacturer and Distributor	Subordinated Note (8.3% Cash, Due 06/20)	10,000,000		9,951,473		9,951,473
		Class A Units (22,561 units)			—		2,239,000
			10,000,000		9,951,473		12,190,473

Comverge, Inc. (4%)*	Provider of Intelligent Energy Management Solutions	Senior Note (12% Cash, Due 05/18)	15,505,583		15,265,377		15,265,377
		Preferred Units (900 units)			900,000		1,001,000
		Common Units (1,000,000 units)			100,000		138,000
			15,505,583		16,265,377		16,404,377

Continental Anesthesia Management, LLC (2%)*	Physicians Management Services	Subordinated Note (14% Cash, Due 09/14)	9,762,500		9,689,754		9,266,000
		Warrant (263 shares)			276,100		—
			9,762,500		9,965,854		9,266,000

CRS Reprocessing, LLC (6%)*	Fluid Reprocessing Services	Subordinated Note (12% Cash, 2% PIK, Due 11/15)	12,069,344		11,974,073		11,974,073
		Subordinated Note (12% Cash, 2% PIK, Due 11/15)	13,310,223		12,539,268		12,539,268
		Series C Preferred Units (30 units)			288,342		446,000
		Common Unit Warrant (664 units)			1,759,556		2,649,000
		Series D Preferred Units (16 units)			107,074		174,000
		Series E Preferred Units (5 units)			31,651		47,000
			25,379,567		26,699,964		27,829,341

Table of Contents

TRIANGLE CAPITAL CORPORATION Unaudited Consolidated Schedule of Investments March 31, 2014

Portfolio Company	Industry	Type of Investment⁽¹⁾⁽²⁾	Principal Amount		Cost		Fair Value⁽³⁾

Danville Materials, LLC (2%)*	Manufacturer of Dental Products	Senior Note (10% Cash, Due 12/18)	$	8,000,000	$	7,846,682	$	7,846,682
		Common Units (45,492 units)			500,000		500,000
			8,000,000		8,346,682		8,346,682

DataSource Incorporated (1%)*	Print Supply Chain Management Services	Subordinated Note (12% Cash, 2% PIK, Due 01/18)	4,791,459		4,664,116		4,664,116
		Common Units (47 units)			1,000,000		1,037,000
			4,791,459		5,664,116		5,701,116

DCWV Acquisition Corporation (1%)*	Arts & Crafts and Home Decor Products Designer and Supplier	Subordinated Note (12% Cash, 3% PIK, Due 09/17)	6,288,363		6,150,322		3,962,000
			6,288,363		6,150,322		3,962,000

DLR Restaurants, LLC (0%)*	Restaurant	Royalty Rights			—		—
					—		—

Dyno Acquiror, Inc. (2%)*	Sewing Products and Seasonal Decorative Products Supplier	Subordinated Note (12% Cash, 2% PIK, Due 11/18)	7,128,619		7,003,709		7,003,709
		Preferred series A Units (600,000 units)			600,000		357,000
			7,128,619		7,603,709		7,360,709

Eckler's Holdings, Inc. (2%)*	Restoration Parts and Accessories for Classic Cars and Trucks	Subordinated Note (11% Cash, 4% PIK, Due 07/18)	7,156,402		7,024,688		7,024,688
		Common Stock (18,029 shares)			183,562		—
		Preferred Stock A (1,596 shares)			1,596,126		1,569,000
			7,156,402		8,804,376		8,593,688

Electronic Systems Protection, Inc. (0%)*	Power Protection Systems Manufacturing	Common Stock (570 shares)			285,000		296,000
					285,000		296,000

Flowchem Ltd. (2%)*	Provider of Support Services to Crude Oil Pipeline Operators	Subordinated Note (11% Cash, 2% PIK, Due 06/19)	7,799,315		7,649,536		7,649,536
		Common Units (1,000,000 Units)			1,000,000		1,000,000
			7,799,315		8,649,536		8,649,536

Foodstate, Inc. (1%)*	Nutritional Supplement Manufacturing and Distribution	Subordinated Note (12% Cash, 3.8% PIK, Due 10/16)	5,745,066		5,684,976		5,684,976
			5,745,066		5,684,976		5,684,976

FrontStream Payments, Inc. (3%)*	Payment and Donation Management Product Service Provider	Senior Note (8% Cash, 6% PIK, Due 08/18)	11,201,738		10,999,232		10,999,232
			11,201,738		10,999,232		10,999,232

Frontstreet Facility Solutions, Inc. (2%)*	Retail, Restaurant and Commercial Facilities Maintenance	Subordinated Note (10% Cash, 3% PIK, Due 07/18)	8,398,937		8,287,852		6,955,000
		Convertible Preferred Units (2,500 units)			250,000		—
			8,398,937		8,537,852		6,955,000

Frozen Specialties, Inc. (2%)*	Frozen Foods Manufacturer	Subordinated Note (11% Cash, 5% PIK, Due 05/17)	11,059,204		10,912,118		7,427,000
			11,059,204		10,912,118		7,427,000

Garden Fresh Restaurant Holding, LLC (0%)*	Restaurant	Class A Units (5,000 units)			500,000		246,000
					500,000		246,000

Grindmaster-Cecilware Corp. (2%)*	Food Services Equipment Manufacturer	Subordinated Note (12% Cash, 6% PIK, Due 04/16)	7,191,916		7,165,604		7,165,604
			7,191,916		7,165,604		7,165,604

Hatch Chile Co., LLC (2%)*	Food Products Distributor	Senior Note (19% Cash, Due 11/18)	3,071,250		3,032,725		3,032,725
		Subordinated Note (14% Cash, Due 11/18)	3,363,750		3,116,715		3,116,715
		Unit Purchase Warrant (7,817 units)			295,800		686,000
			6,435,000		6,445,240		6,835,440

Infrastructure Corporation of America, Inc. (3%)*	Roadway Maintenance, Repair and Engineering Services	Subordinated Note (12% Cash, 2% PIK, Due 09/18)	11,248,546		9,823,600		9,823,600
		Common Stock Purchase Warrant (487,877 shares)			2,411,000		2,201,000
			11,248,546		12,234,600		12,024,600

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TRIANGLE CAPITAL CORPORATION Unaudited Consolidated Schedule of Investments March 31, 2014

Portfolio Company	Industry	Type of Investment⁽¹⁾⁽²⁾	Principal Amount		Cost		Fair Value⁽³⁾
Inland Pipe Rehabilitation Holding Company LLC (2%)*	Cleaning and Repair Services	Subordinated Note (13% Cash, 2.5% PIK, Due 12/16)	$	8,442,465	$	8,266,345	$	8,266,345
		Membership Interest Purchase Warrant (3.0%)			853,500		1,127,000
			8,442,465		9,119,845		9,393,345

IOS Acquisitions, Inc. (5%)*	Provider of Oil Country Tubular Goods Inspections and Repair Services	Subordinated Note (12% Cash, 3.8% PIK, Due 06/18)	19,685,778		19,366,411		19,366,411
		Common Units (7,314 Class A Units)			1,699,847		1,325,000
			19,685,778		21,066,258		20,691,411

Justrite Manufacturing Company, LLC (3%)*	Storage Product Developer and Supplier for Hazardous Materials	Subordinated Note (10% Cash, 2% PIK, Due 07/19)	14,553,972		14,344,008		14,344,008
		Class A Common Units (1,268 Units)			118,110		118,110
		Class A Preferred Units (132 Units)			131,890		131,890
			14,553,972		14,594,008		14,594,008

Library Systems & Services, LLC (0%)*	Municipal Business Services	Common Stock Warrants (112 shares)			58,995		1,884,000
					58,995		1,884,000

Magpul Industries Corp. (2%)*	Firearm Accessories Manufacturer and Distributor	Preferred Units (1,470 units)			1,470,000		2,074,000
		Common Units (30,000 units)			30,000		7,771,000
					1,500,000		9,845,000

Media Storm, LLC (3%)*	Marketing Services	Subordinated Note (10% Cash, Due 08/19)	11,000,000		10,915,763		10,915,763
		Membership Units (1,216,204 units)			1,176,957		1,688,000
			11,000,000		12,092,720		12,603,763

Micross Solutions LLC (3%)*	Provider of Semiconductor Products and Services	Subordinated Note (12% Cash, 2% PIK, Due 06/18)	10,886,830		10,755,474		10,755,474
		Class A-2 Common Units (1,580,559 units)			1,580,599		1,378,000
			10,886,830		12,336,073		12,133,474

Minco Technology Labs, LLC (0%)*	Semiconductor Distribution	Subordinated Note (6.5% Cash, 3.5% PIK, Due 12/16)	5,881,876		5,478,942		1,994,000
		Class A Units (5,000 HoldCo. units)			500,000		—
		Class A Units (3,907 OpCo. units)			3,907		—
			5,881,876		5,982,849		1,994,000

My Alarm Center, LLC (0%)*	Security Company	Preferred Units (2,000,000 units)			2,000,000		2,079,000
					2,000,000		2,079,000

Novolyte Technologies, Inc. (0%)*	Specialty Manufacturing	Common Units (24,522 units)			43,905		41,000
					43,905		41,000

On Event Services, LLC (2%)*	Equipment Rentals to Conference Venues and Live Events	Subordinated Note (10% Cash, 2% PIK, Due 01/19)	9,796,042		9,608,676		9,608,676
			9,796,042		9,608,676		9,608,676

Performance Health & Wellness Holdings, Inc. (2%)*	Designer and Manufacturer of Rehabilitation and Wellness Products	Subordinated Note (12% Cash, 1% PIK, Due 04/19)	6,684,660		6,522,378		6,522,378
		Class A Limited Partnership Units (15,000 units)			1,500,000		1,604,000
			6,684,660		8,022,378		8,126,378

PetroLiance, LLC (3%)*	Lubricant, Fuel and Ancillary Products Distributor	Subordinated Note (12% Cash, 1% PIK, Due 08/19)	12,015,004		11,782,863		11,782,863
		Class A Units (1,142,857 Units)			1,200,000		1,200,000
			12,015,004		12,982,863		12,982,863

PowerDirect Marketing, LLC (2%)*	Marketing Services	Subordinated Note (13% Cash, 2% PIK, Due 12/16)	7,346,980		6,937,261		6,937,261
		Common Unit Purchase Warrants			590,200		644,000
			7,346,980		7,527,461		7,581,261

Sheplers, Inc. (3%)*	Western Apparel Retailer	Subordinated Note (13.2% Cash, Due 12/16)	8,750,000		8,612,574		8,612,574
		Subordinated Note (10% Cash, 7% PIK, Due 12/17)	4,389,464		4,343,691		4,343,691
			13,139,464		12,956,265		12,956,265

Table of Contents

TRIANGLE CAPITAL CORPORATION Unaudited Consolidated Schedule of Investments March 31, 2014

Portfolio Company	Industry	Type of Investment⁽¹⁾⁽²⁾	Principal Amount		Cost		Fair Value⁽³⁾
Snacks Holding Corporation (2%)*	Trail Mixes and Nut Manufacturer and Marketer	Subordinated Note (12% Cash, 1% PIK, Due 05/20)	$	5,043,470	$	5,008,670	$	5,008,670
		Preferred A Units (22,368 units)			1,053,897		2,588,000
		Preferred B Units (10,380 units)			25,337		226,000
		Common Units (190,935 units)			150,000		1,654,000
		Common Stock Warrants (14,558 shares)			14,558		179,000
			5,043,470		6,252,462		9,655,670

SPC Partners V, LP (0%)*⁽⁴⁾	Multi-Sector Holdings	0.7% Limited Partnership Interest			545,801		545,801
					545,801		545,801

Specialized Desanders, Inc. (3%)* ⁽⁴⁾	Sand and Particulate Removal Equipment Provider for Oil and Gas Companies	Subordinated Notes (12% Cash, 2% PIK, Due 03/19)	11,750,144		11,533,108		11,129,920
		Common C Shares (2,000,000 shares)			1,937,421		1,832,000
			11,750,144		13,470,529		12,961,920

Stella Environmental Services, LLC (0%)*	Waste Transfer Stations	Common Stock Purchase Warrants			20,000		478,000
					20,000		478,000

The Krystal Company (0%)*	Restaurant	Class A Units of Limited Partnership (2,000 units)			—		2,075,000
					—		2,075,000

Tomich Brothers, LLC (3%)*	Squid and Wetfish Processor and Distributor	Subordinated Note (5% Cash, 10% PIK, Due 04/16)	12,699,312		12,535,569		11,065,000
			12,699,312		12,535,569		11,065,000

Top Knobs USA, Inc. (0%)*	Hardware Designer and Distributor	Common Stock (26,593 shares)			402,828		1,428,828
					402,828		1,428,828

Trinity Consultants Holdings, Inc. (2%)*	Air Quality Consulting Services	Subordinated Note (12% Cash, 2% PIK, Due 04/19)	8,368,775		8,254,742		8,254,742
		Series A Preferred Stock (10,000 units)			785,775		989,000
		Common Stock (50,000 units)			50,000		787,000
			8,368,775		9,090,517		10,030,742

TrustHouse Services Group, Inc. (0%)*	Food Management Services	Class A Units (1,557 units)			69,302		195,881
		Class B Units (82 units)			3,647		7,089
		Class E Units (838 units)			101,532		112,555
					174,481		315,525

United Biologics, LLC (3%)*	Allergy Immunotherapy	Subordinated Note (12% Cash, 2% PIK, Due 03/17)	12,675,846		11,931,277		11,931,277
		Class A Common Stock (177,935 shares)			1,999,989		851,000
		Class A-1 Common Stock (18,818 shares)			137,324		137,000
		Class A-1 Common Kicker Stock (14,114 shares)			—		—
		Class A & Class B Unit Purchase Warrants			838,117		200,000
			12,675,846		14,906,707		13,119,277

United Retirement Plan Consultants, Inc. (3%)*	Retirement Plan Administrator	Subordinated Note (12% Cash, 4% PIK, Due 09/16)	12,976,436		12,827,752		12,827,752
		Preferred A Units (90,000 units)			900,000		978,000
		Common Units (10,000 units)			100,000		—
			12,976,436		13,827,752		13,805,752

Water Pik, Inc. (2%)*	Branded Oral Health and Replacement Shower Head Supplier	Second Lien Term Loan (9.8% Cash, Due 01/21)	10,000,000		9,673,630		9,673,630
			10,000,000		9,673,630		9,673,630

Workforce Software, LLC (5%)*	Software Provider	Subordinated Note (11% Cash, 5% PIK, Due 11/16)	8,000,000		7,293,099		8,000,000
		Class B Preferred Units (1,020,000 units)			1,020,000		1,214,000
		Class C Preferred Units (624,253 units)			1,250,000		2,739,000
		Common Unit Purchase Warrants (2,434,749 units)			952,300		10,000,000
			8,000,000		10,515,399		21,953,000

Table of Contents

TRIANGLE CAPITAL CORPORATION Unaudited Consolidated Schedule of Investments March 31, 2014

Portfolio Company	Industry	Type of Investment⁽¹⁾⁽²⁾	Principal Amount		Cost		Fair Value⁽³⁾
WSO Holdings, LP (5%)*	Organic/Fair Trade Sugar, Syrup, Nectar and Honey Producer	Subordinated Note (12% Cash, 2% PIK, Due 10/17)	$	20,198,264	$	19,985,624	$	19,985,624
		Common Points (3,000 points)			3,000,000		2,306,000
			20,198,264		22,985,624		22,291,624

Xchange Technology Group, LLC (0%)*	Used and Refurbished IT Asset Supplier	Subordinated Note (8% Cash, Due 06/15)	6,658,231		5,904,000		—
		Royalty Rights			—		—
			6,658,231		5,904,000		—

Yellowstone Landscape Group, Inc. (5%)*	Landscaping Services	Subordinated Note (10% Cash, 2.5% PIK, Due 02/19)	20,000,001		20,020,643		20,020,643
			20,000,001		20,020,643		20,020,643

Subtotal Non–Control / Non–Affiliate Investments			530,528,115		565,681,884		578,923,349


Affiliate Investments:
All Aboard America! Holdings Inc. (2%)*	Motor Coach Operator	Subordinated Note (12% Cash, 3% PIK, Due (10/17)	8,964,289		8,839,713		8,839,713
		Convertible Preferred Interest in LLC			1,500,000		1,500,000
			8,964,289		10,339,713		10,339,713

American De-Rosa Lamparts, LLC and Hallmark Lighting (2%)*	Lighting Wholesale and Distribution	Subordinated Note (12% Cash, 6% PIK, Due 06/16)	6,942,541		6,920,471		6,920,471
		Membership Units (8,364 units)			620,653		—
			6,942,541		7,541,124		6,920,471

AP Services, Inc. (0%)*	Fluid Sealing Supplies and Services	Class A Units (933 units)			156,953		253,004
		Class B Units (496 units)			—		134,381
					156,953		387,385

Asset Point, LLC (2%)*	Asset Management Software Provider	Senior Note (12% Cash, 5% PIK, Due 03/14)	6,716,285		6,716,283		6,716,283
		Subordinated Note (12% Cash, 2% PIK, Due 07/15)	646,368		646,368		584,000
		Subordinated Note (7% Cash, Due 03/14)	941,798		941,798		941,798
		Membership Units (1,000,000 units)			8,203		—
		Options to Purchase Membership Units (342,407 units)			500,000		146,000
		Membership Unit Warrants (356,506 units)			—		—
			8,304,451		8,812,652		8,388,081

Captek Softgel International, Inc. (2%)*	Nutraceutical Manufacturer	Subordinated Note (12% Cash, 4% PIK, Due 08/16)	9,066,289		8,980,649		8,980,649
		Class A Units (80,000 units)			800,000		930,000
			9,066,289		9,780,649		9,910,649

CIS Secure Computing Inc. (2%)*	Secure Communications and Computing Solutions Provider	Subordinated Note (12% Cash, 4% PIK, Due 06/17)	10,562,599		10,444,995		10,444,995
		Common Stock (84 shares)			502,320		168,000
			10,562,599		10,947,315		10,612,995

Dyson Corporation (0%)*	Custom Forging and Fastener Supplies	Class A Units (1,000,000 units)			1,000,000		1,001,000
					1,000,000		1,001,000

Main Street Gourmet, LLC (0%)*	Baked Goods Provider	Jr. Subordinated Notes (8% Cash, 2% PIK, Due 04/17)	751,293		740,110		740,110
		Preferred Units (233 units)			211,867		310,000
		Common B Units (3,000 units)			23,140		470,000
		Common A Units (1,652 units)			14,993		259,000
			751,293		990,110		1,779,110

PartsNow!, LLC (3%)*	Printer Parts Distributor	Subordinated Note (12% Cash, 3% PIK, Due 08/17)	11,542,096		11,380,882		11,380,882
		Member Units (1,000,000 units)			1,000,000		852,000
		Royalty Rights			—		—
			11,542,096		12,380,882		12,232,882

Pine Street Holdings, LLC (0%)*	Oil and Gas Services	Preferred Units (200 units)			200,000		—
		Common Unit Warrants (2,220 units)			—		—
					200,000		—

Table of Contents

TRIANGLE CAPITAL CORPORATION Unaudited Consolidated Schedule of Investments March 31, 2014

Portfolio Company	Industry	Type of Investment⁽¹⁾⁽²⁾	Principal Amount		Cost		Fair Value⁽³⁾
Plantation Products, LLC (4%)*	Seed Manufacturing	Subordinated Notes (12% Cash, 2% PIK, Due 10/17)	$	6,084,629	$	5,925,499	$	5,925,499
		Preferred Units (4,312 units)			4,312,000		5,129,000
		Common Units (352,000 units)			88,000		5,639,000
			6,084,629		10,325,499		16,693,499

QC Holdings, Inc. (0%)*	Lab Testing Services	Common Stock (5,594 shares)			563,602		545,000
					563,602		545,000

Technology Crops International (2%)*	Supply Chain Management Services	Subordinated Note (12% Cash, 5% PIK, Due 03/15)	10,297,031		10,193,706		10,193,706
		Common Units (50 units)			500,000		105,000
			10,297,031		10,693,706		10,298,706

Venture Technology Groups, Inc. (0%)*	Fluid and Gas Handling Products Distributor	Subordinated Note (12.5% Cash, 4% PIK, Due 09/16)	7,332,463		5,703,715		317,000
		Class A Units (1,000,000 units)			1,000,000		—
			7,332,463		6,703,715		317,000

Waste Recyclers Holdings, LLC (0%)*	Environmental and Facilities Services	Class A Preferred Units (280 units)			2,251,100		—
		Class B Preferred Units (11,484,867 units)			3,304,218		1,355,000
		Common Unit Purchase Warrant (1,170,083 units)			748,900		—
		Common Units (153,219 units)			180,783		—
					6,485,001		1,355,000

Wythe Will Tzetzo, LLC (2%)*	Confectionery Goods Distributor	Series A Preferred Units (74,764 units)			—		5,329,000
		Common Unit Purchase Warrants (25,065 units)			—		1,787,000
					—		7,116,000

Subtotal Affiliate Investments			79,847,681		96,920,921		97,897,491

Control Investments:
Buckingham SRC, Inc. (0%)*	Specialty Chemical Manufacturer	Subordinated Note (10.8% Cash, 0.25% PIK, Due 12/14)	2,160,348		250,000		—
		Common Stock Purchase Warrants			123,800		—
			2,160,348		373,800		—

FCL Graphics, Inc. (“FCL”) and FCL Holding SPV, LLC (“SPV”) (1%)*	Commercial Printing Services	Senior Note-FCL (4.8% Cash, Due 09/16)	1,252,579		1,252,579		1,252,579
		Senior Note-FCL (7.8% Cash, 2% PIK, Due 09/16)	1,201,357		1,201,355		1,078,000
		Senior Note-SPV (2.0% Cash, 5.3% PIK, Due 09/16)	1,078,064		1,007,272		115,000
		Members Interests-SPV (299,875 units)			—		—
			3,532,000		3,461,206		2,445,579

Gerli & Company (0%)*	Specialty Woven Fabrics Manufacturer	Subordinated Note (13% Cash, Due 07/15)	453,637		375,000		375,000
		Subordinated Note (8.5% Cash, Due 07/15)	3,874,465		3,000,000		441,000
		Class A Preferred Shares (1,211 shares)			855,000		—
		Class C Preferred Shares (744 shares)			—		—
		Class E Preferred Shares (400 shares)			161,440		—
		Common Stock (300 shares)			100,000		—
			4,328,102		4,491,440		816,000

SRC, Inc. (2%)*	Specialty Chemical Manufacturer	Common Stock (5,000 shares)			9,928,000		9,928,000
					9,928,000		9,928,000


Subtotal Control Investments			10,020,450		18,254,446		13,189,579

Total Investments, March 31, 2014 (157%)*			$	620,396,246	$	680,857,251	$	690,010,419

* Fair value as a percent of net assets


(1)	All debt investments are income producing. Equity and equity-linked investments 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)	Investment is not a qualifying investment as defined under Section 55(a) of the Investment Company Act of 1940. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets.

See accompanying notes.

Table of Contents

TRIANGLE CAPITAL CORPORATION Consolidated Schedule of Investments December 31, 2013

Portfolio Company	Industry	Type of Investment⁽¹⁾⁽²⁾	Principal Amount		Cost		Fair Value⁽³⁾
Non–Control / Non–Affiliate Investments:
Agilex Flavors & Fragrances, Inc. (3%)*	Custom Fragrance Producers	Subordinated Note (12% Cash, 1.5% PIK, Due 06/19)	$	12,698,065	$	12,475,194	$	12,475,194
		Common Units (1,250 units)			1,250,000		1,398,000
			12,698,065		13,725,194		13,873,194

Ambient Air Corporation (0%)*	Specialty Trade Contractors	Subordinated Note (0% Cash, 8% PIK, Due 06/20)	473,958		66,993		200,000
			473,958		66,993		200,000

Applied-Cleveland Holdings, Inc. (4%)*	Oil and Gas Pipeline Infrastructure Inspection Services	Subordinated Note (10% Cash, 2% PIK, Due 06/19)	18,000,000		17,700,961		17,700,961
		Class A Preferred (2,000,000 units)			2,000,000		2,000,000
			18,000,000		19,700,961		19,700,961

Assurance Operations Corporation (0%)*	Metal Fabrication	Common Stock (517 shares)			516,867		1,076,000
					516,867		1,076,000

Audio and Video Labs Holdings, Inc. (3%)*	Manufacturer and Distributor for Independent Artists and Authors	Subordinated Note (12% Cash, 2% PIK, Due 06/18)	13,269,023		13,044,644		13,044,644
		Common Units (138 units)			1,300,000		1,406,000
			13,269,023		14,344,644		14,450,644

Berry Family Nursery Operations LLC (4%)*	Wholesale Grower and Distributor of Container Grown Shrubs, Trees and Plants	Subordinated Note (13% Cash, 3% PIK, Due 11/17)	17,549,583		17,199,583		17,199,583
			17,549,583		17,199,583		17,199,583

Botanical Laboratories, Inc. (0%)*	Nutritional Supplement Manufacturing and Distribution	Common Unit Warrants (998,680 units)			237,301		580,603
					237,301		580,603

Capital Contractors, Inc. (2%)*	Janitorial and Facilities Maintenance Services	Subordinated Notes (12% Cash, 2% PIK, Due 12/15)	9,565,598		9,248,522		9,248,522
		Common Stock Warrants (20 shares)			492,000		361,000
			9,565,598		9,740,522		9,609,522

Carepoint Resources, Inc. (5%)*	Business Process Outsourcing Provider	Subordinated Note (12% Cash, 2.5% PIK, Due 06/18)	23,514,505		23,139,305		23,139,305
			23,514,505		23,139,305		23,139,305

Carolina Beverage Group, LLC (1%)*	Beverage Manufacturing and Packaging	Class B Units (11,974 units)			119,735		2,266,000
					119,735		2,266,000

Chromaflo Technologies Parent LP (3%)*	Colorant Manufacturer and Distributor	Subordinated Note (8.3% Cash, Due 06/20)	10,000,000		9,950,000		9,950,000
		Class A Units (22,561 units)			—		2,239,000
			10,000,000		9,950,000		12,189,000

Comverge, Inc. (4%)*	Provider of Intelligent Energy Management Solutions	Senior Note (12% Cash, Due 05/18)	15,505,583		15,254,660		15,254,660
		Preferred Units (900 units)			900,000		981,000
		Common Units (1,000,000 units)			100,000		225,000
			15,505,583		16,254,660		16,460,660

Continental Anesthesia Management, LLC (2%)*	Physicians Management Services	Subordinated Note (14% Cash, Due 9/14)	9,825,000		9,722,773		9,176,000
		Warrant (263 shares)			276,100		—
			9,825,000		9,998,873		9,176,000

CRS Reprocessing, LLC (6%)*	Fluid Reprocessing Services	Subordinated Note (12% Cash, 2% PIK, Due 11/15)	12,009,198		11,884,003		11,884,003
		Subordinated Note (12% Cash, 2% PIK, Due 11/15)	13,243,893		12,376,217		12,376,217
		Series C Preferred Units (30 units)			288,342		443,000
		Common Unit Warrant (664 units)			1,759,556		2,755,000
		Series D Preferred Units (16 units)			107,074		175,000
		Series E Preferred Units (5 units)			31,651		48,000
			25,253,091		26,446,843		27,681,220

Danville Materials, LLC (2%)*	Manufacturer of Dental Products	Senior Note (10% Cash, Due 12/18)	8,000,000		7,840,000		7,840,000
		Common Units (45,492 units)			500,000		500,000
			8,000,000		8,340,000		8,340,000

Table of Contents

TRIANGLE CAPITAL CORPORATION Consolidated Schedule of Investments December 31, 2013

Portfolio Company	Industry	Type of Investment⁽¹⁾⁽²⁾	Principal Amount		Cost		Fair Value⁽³⁾
DataSource Incorporated (2%)*	Print Supply Chain Management Services	Subordinated Note (12% Cash, 2% PIK, Due 01/18)	$	8,759,661	$	8,625,671	$	8,625,671
		Common Units (47 units)			1,000,000		965,000
			8,759,661		9,625,671		9,590,671

DCWV Acquisition Corporation (1%)*	Arts & Crafts and Home Decor Products Designer and Supplier	Subordinated Note (12% Cash, 3% PIK, Due 09/17)	6,241,435		6,145,145		4,505,000
			6,241,435		6,145,145		4,505,000

DLR Restaurants, LLC (0%)*	Restaurant	Royalty Rights			—		—
					—		—

Dyno Acquiror, Inc. (2%)*	Sewing Products and Seasonal Decorative Products Supplier	Subordinated Note (12% Cash, 2% PIK, Due 11/18)	7,093,094		6,963,005		6,963,005
		Preferred series A Units (600,000 units)			600,000		594,000
			7,093,094		7,563,005		7,557,005

Eckler's Holdings, Inc. (2%)*	Restoration Parts and Accessories for Classic Cars and Trucks	Subordinated Note (11% Cash, 4% PIK, Due 07/18)	7,084,528		6,947,215		6,947,215
		Common Stock (18,029 shares)			183,562		6,000
		Preferred Stock A (1,596 shares)			1,596,126		1,794,000
			7,084,528		8,726,903		8,747,215

Electronic Systems Protection, Inc. (0%)*	Power Protection Systems Manufacturing	Common Stock (570 shares)			285,000		309,000
					285,000		309,000

Flowchem Ltd. (2%)*	Provider of Support Services to Crude Oil Pipeline Operators	Subordinated Note (11% Cash, 2% PIK, Due 06/19)	7,761,041		7,606,041		7,606,041
		Common Units (1,000,000 Units)			1,000,000		1,000,000
			7,761,041		8,606,041		8,606,041

Foodstate, Inc. (1%)*	Nutritional Supplement Manufacturing and Distribution	Subordinated Note (12% Cash, 3.8% PIK, Due 10/16)	5,691,706		5,627,061		5,627,061
			5,691,706		5,627,061		5,627,061

FrontStream Payments, Inc. (2%)*	Payment and Donation Management Product Service Provider	Senior Note (8% Cash, 6% PIK, Due 08/18)	7,161,823		7,027,585		7,027,585
			7,161,823		7,027,585		7,027,585

Frontstreet Facility Solutions, Inc. (2%)*	Retail, Restaurant and Commercial Facilities Maintenance	Subordinated Note (10% Cash, 3% PIK, Due 07/18)	8,336,414		8,220,061		6,887,000
		Convertible Preferred Units (2,500 units)			250,000		—
			8,336,414		8,470,061		6,887,000

Frozen Specialties, Inc. (2%)*	Frozen Foods Manufacturer	Subordinated Note (11% Cash, 5% PIK, Due 05/17)	10,922,109		10,902,440		10,902,440
			10,922,109		10,902,440		10,902,440

Garden Fresh Restaurant Corp. (0%)*	Restaurant	Membership Units (5,000 units)			500,000		285,000
					500,000		285,000

Grindmaster-Cecilware Corp. (2%)*	Food Services Equipment Manufacturer	Subordinated Note (12% Cash, 6% PIK, Due 04/16)	7,085,108		7,052,652		7,052,652
			7,085,108		7,052,652		7,052,652

Hatch Chile Co., LLC (2%)*	Food Products Distributor	Senior Note (19% Cash, Due 11/18)	3,150,000		3,104,786		3,104,786
		Subordinated Note (14% Cash, Due 11/18)	3,450,000		3,185,408		3,185,408
		Unit Purchase Warrant (7,817 units)			295,800		672,000
			6,600,000		6,585,994		6,962,194

Infrastructure Corporation of America, Inc. (3%)*	Roadway Maintenance, Repair and Engineering Services	Subordinated Note (12% Cash, 2% PIK, Due 09/18)	11,192,490		9,708,459		9,708,459
		Common Stock Purchase Warrant (417,593 shares)			2,411,000		2,257,000
			11,192,490		12,119,459		11,965,459

Inland Pipe Rehabilitation Holding Company LLC (2%)*	Cleaning and Repair Services	Subordinated Note (13% Cash, 2.0% PIK, Due 12/16)	8,363,431		8,174,163		8,174,163
		Membership Interest Purchase Warrant (3.0%)			853,500		1,254,000
			8,363,431		9,027,663		9,428,163

IOS Acquisitions, Inc. (5%)*	Provider of Oil Country Tubular Goods Inspections and Repair Services	Subordinated Note (12% Cash, 3.5% PIK, Due 06/18)	19,502,372		19,168,757		19,168,757
		Common Units (7,314 Class A Units)			1,699,847		1,231,000
			19,502,372		20,868,604		20,399,757

Table of Contents

TRIANGLE CAPITAL CORPORATION Consolidated Schedule of Investments December 31, 2013

Portfolio Company	Industry	Type of Investment⁽¹⁾⁽²⁾	Principal Amount		Cost		Fair Value⁽³⁾

Library Systems & Services, LLC (0%)*	Municipal Business Services	Common Stock Warrants (112 shares)			$	58,995	$	1,820,000
					58,995		1,820,000

Magpul Industries Corp. (2%)*	Firearm Accessories Manufacturer and Distributor	Preferred Units (1,470 units)			1,470,000		2,006,000
		Common Units (30,000 units)			30,000		7,839,000
					1,500,000		9,845,000

Marine Acquisition Corp. (3%)*	Boat Steering System and Driver Control Provider	Subordinated Note (11.5% Cash, 2% PIK, Due 05/17)	$	12,000,000	11,787,615		12,000,000
			12,000,000		11,787,615		12,000,000

Media Storm, LLC (2%)*	Marketing Services	Subordinated Note (12% Cash, 2% PIK, Due 10/17)	8,219,009		8,159,092		8,159,092
		Membership Units (1,216,204 units)			1,176,957		1,416,000
			8,219,009		9,336,049		9,575,092

Micross Solutions LLC (3%)*	Provider of Semiconductor Products and Services	Subordinated Note (12% Cash, 2% PIK, Due 06/18)	10,832,577		10,695,361		10,695,361
		Class A-2 Common Units (1,580,559 units)			1,580,599		1,190,000
			10,832,577		12,275,960		11,885,361

Minco Technology Labs, LLC (0%)*	Semiconductor Distribution	Subordinated Note (6.5% Cash, 3.5% PIK, Due 12/16)	5,830,856		5,473,436		1,994,000
		Class A Units (5,000 HoldCo. units)			500,000		—
		Class A Units (3,907 OpCo. units)			3,907		—
			5,830,856		5,977,343		1,994,000

My Alarm Center, LLC (3%)*	Security Company	Subordinated Note (12% Cash, 2.5% PIK, Due 04/19)	10,329,382		10,250,068		10,329,382
		Preferred Units (2,000,000 units)			2,000,000		2,079,000
			10,329,382		12,250,068		12,408,382

Novolyte Technologies, Inc. (0%)*	Specialty Manufacturing	Common Units (24,522 units)			43,905		178,801
					43,905		178,801

Performance Health & Wellness Holdings, Inc. (3%)*	Designer and Manufacturer of Rehabilitation and Wellness Products	Subordinated Note (12% Cash, 1% PIK, Due 04/19)	13,161,867		12,993,721		12,993,721
		Class A Limited Partnership Units (15,000 units)			1,500,000		1,440,000
			13,161,867		14,493,721		14,433,721

PowerDirect Marketing, LLC (2%)*	Marketing Services	Subordinated Note (13% Cash, 2% PIK, Due 12/16)	7,310,361		6,861,977		6,861,977
		Common Unit Purchase Warrants			590,200		1,131,000
			7,310,361		7,452,177		7,992,977

Sheplers, Inc. (3%)*	Western Apparel Retailer	Subordinated Note (13.2% Cash, Due 12/16)	8,750,000		8,602,331		8,602,331
		Subordinated Note (10% Cash, 7% PIK, Due 12/17)	4,315,809		4,266,459		4,266,459
			13,065,809		12,868,790		12,868,790

Snacks Holding Corporation (2%)*	Trail Mixes and Nut Manufacturer and Marketer	Subordinated Note (12% Cash, 1% PIK, Due 05/20)	5,030,893		4,995,166		4,995,166
		Preferred A Units (22,368 units)			1,053,897		2,485,000
		Preferred B Units (10,380 units)			25,337		201,000
		Common Units (190,935 units)			150,000		1,471,000
		Common Stock Warrants (14,558 shares)			14,558		160,000
			5,030,893		6,238,958		9,312,166

Specialized Desanders, Inc. (3%)* ⁽⁴⁾	Sand and Particulate Removal Equipment Provider for Oil and Gas Companies	Subordinated Notes (12% Cash, 2% PIK, Due 03/19)	11,695,386		11,470,508		11,065,626
		Common C Shares (2,000,000 shares)			1,937,421		1,870,208
			11,695,386		13,407,929		12,935,834

Stella Environmental Services, LLC (0%)*	Waste Transfer Stations	Common Stock Purchase Warrants			20,000		406,000
					20,000		406,000

Syrgis Holdings, Inc. (0%)*	Specialty Chemical Manufacturer	Class C Units (2,114 units)			111,037		201,281
					111,037		201,281

The Krystal Company (0%)*	Restaurant	Class A Units of Limited Partnership (2,000 units)			—		1,709,000
					—		1,709,000

Table of Contents

TRIANGLE CAPITAL CORPORATION Consolidated Schedule of Investments December 31, 2013

	Portfolio Company	Industry	Type of Investment⁽¹⁾⁽²⁾	Principal Amount		Cost		Fair Value⁽³⁾

	TMR Automotive Service Supply, LLC (1%)*	Automotive Supplies	Subordinated Note (12% Cash, 1% PIK, Due 03/16)	$	4,250,000	$	4,095,611	$	4,095,611
			Unit Purchase Warrant (316,858 units)			195,000		577,000
				4,250,000		4,290,611		4,672,611

	Tomich Brothers, LLC (2%)*	Squid and Wetfish Processor and Distributor	Subordinated Note (5% Cash, 10% PIK, Due 04/16)	12,315,529		12,133,908		10,622,000
				12,315,529		12,133,908		10,622,000

	Top Knobs USA, Inc. (0%)*	Hardware Designer and Distributor	Common Stock (26,593 shares)			402,828		1,296,828
						402,828		1,296,828

	Trinity Consultants Holdings, Inc. (2%)*	Air Quality Consulting Services	Subordinated Note (12% Cash, 2% PIK, Due 04/19)	8,327,070		8,207,084		8,207,084
			Series A Preferred Stock (10,000 units)			785,775		968,000
			Common Stock (50,000 units)			50,000		819,000
				8,327,070		9,042,859		9,994,084

	TrustHouse Services Group, Inc. (0%)*	Food Management Services	Class A Units (1,557 units)			69,302		242,996
			Class B Units (82 units)			3,647		8,794
			Class E Units (838 units)			101,532		139,628
						174,481		391,418

	United Biologics, LLC (2%)*	Allergy Immunotherapy	Subordinated Note (12% Cash, 2% PIK, Due 03/17)	10,123,339		9,381,255		9,381,255
			Class A Common Stock (177,935 shares)			1,999,989		1,198,001
			Class A-1 Common Stock (18,818 shares)			137,324		137,324
			Class A-1 Common Kicker Stock (14,114 shares)			—		—
			Class A & Class B Unit Purchase Warrants			838,117		262,000
				10,123,339		12,356,685		10,978,580

	United Retirement Plan Consultants, Inc. (3%)*	Retirement Plan Administrator	Subordinated Note (12% Cash, 4% PIK, Due 09/16)	12,847,956		12,686,503		12,686,503
			Preferred A Units (90,000 units)			900,000		835,000
			Common Units (10,000 units)			100,000		—
				12,847,956		13,686,503		13,521,503

	Water Pik, Inc. (2%)*	Branded Oral Health and Replacement Shower Head Supplier	Second Lien Term Loan (9.8% Cash, Due 01/21)	10,000,000		9,665,563		9,665,563
				10,000,000		9,665,563		9,665,563

	Workforce Software, LLC (5%)*	Software Provider	Subordinated Note (11% Cash, 5% PIK, Due 11/16)	8,000,000		7,238,689		7,238,689
			Class B Preferred Units (1,020,000 units)			1,020,000		1,256,000
			Class C Preferred Units (624,253 units)			1,250,000		2,764,000
			Common Unit Purchase Warrants (2,434,749 units)			952,300		9,778,000
				8,000,000		10,460,989		21,036,689

	WSO Holdings, LP (5%)*	Organic/Fair Trade Sugar, Syrup, Nectar and Honey Producer	Subordinated Note (12% Cash, 2% PIK, Due 10/17)	20,198,264		19,973,542		19,973,542

			Common Points (3,000 points)			3,000,000		2,338,000
				20,198,264		22,973,542		22,311,542

	Xchange Technology Group, LLC (0%)*	Used and Refurbished IT Asset Supplier	Subordinated Note (8% Cash, Due 06/15)	6,527,677		5,904,000		—
			Royalty Rights			—		—
				6,527,677		5,904,000		—

	Yellowstone Landscape Group, Inc. (5%)*	Landscaping Services	Subordinated Note (10% Cash, 2.5% PIK, Due 02/19)	20,181,603		20,191,788		20,191,788
				20,181,603		20,191,788		20,191,788

	Subtotal Non–Control / Non–Affiliate Investments			495,697,196		528,021,069		546,043,946


	Affiliate Investments:
	All Aboard America! Holdings Inc. (2%)*	Motor Coach Operator	Subordinated Note (12% Cash, 3% PIK, Due (10/17)	8,897,392		8,765,737		8,765,737
			Convertible Preferred Interest in LLC			1,500,000		1,002,000
				8,897,392		10,265,737		9,767,737

Table of Contents

TRIANGLE CAPITAL CORPORATION Consolidated Schedule of Investments December 31, 2013

Portfolio Company	Industry	Type of Investment⁽¹⁾⁽²⁾	Principal Amount		Cost		Fair Value⁽³⁾
American De-Rosa Lamparts, LLC and Hallmark Lighting (2%)*	Lighting Wholesale and Distribution	Subordinated Note (12% Cash, 6% PIK, Due 06/16)	$	6,839,436	$	6,815,257	$	6,815,257
		Membership Units (8,364 units)			620,653		39,000
			6,839,436		7,435,910		6,854,257

AP Services, Inc. (0%)*	Fluid Sealing Supplies and Services	Class A Units (933 units)			156,953		253,004
		Class B Units (496 units)			—		134,381
					156,953		387,385

Asset Point, LLC (2%)*	Asset Management Software Provider	Senior Note (12% Cash, 5% PIK, Due 03/14)	6,633,027		6,633,025		6,633,025
		Subordinated Note (12% Cash, 2% PIK, Due 07/15)	643,147		643,147		606,000
		Subordinated Note (7% Cash, Due 03/14)	941,798		941,798		786,000
		Membership Units (1,000,000 units)			8,203		725,000
		Options to Purchase Membership Units (342,407 units)			500,000		227,000
		Membership Unit Warrants (356,506 units)			—		—
			8,217,972		8,726,173		8,977,025

Captek Softgel International, Inc. (2%)*	Nutraceutical Manufacturer	Subordinated Note (12% Cash, 4% PIK, Due 08/16)	8,976,227		8,883,334		8,883,334
		Class A Units (80,000 units)			800,000		694,000
			8,976,227		9,683,334		9,577,334

CIS Secure Computing Inc. (2%)*	Secure Communications and Computing Solutions Provider	Subordinated Note (12% Cash, 3% PIK, Due 06/17)	10,457,673		10,327,229		10,327,229
		Common Stock (84 shares)			502,320		213,000
			10,457,673		10,829,549		10,540,229

Dyson Corporation (0%)*	Custom Forging and Fastener Supplies	Class A Units (1,000,000 units)			1,000,000		1,555,000
					1,000,000		1,555,000

Main Street Gourmet, LLC (1%)*	Baked Goods Provider	Subordinated Notes (12% Cash, 4.5% PIK, Due 10/16)	4,528,839		4,482,393		4,482,393
		Jr. Subordinated Notes (8% Cash, 2% PIK, Due 04/17)	1,056,922		1,044,922		1,044,922
		Preferred Units (233 units)			211,867		303,000
		Common B Units (3,000 units)			23,140		440,000
		Common A Units (1,652 units)			14,993		242,000
			5,585,761		5,777,315		6,512,315

PartsNow!, LLC (3%)*	Printer Parts Distributor	Subordinated Note (12% Cash, 3% PIK, Due 08/17)	11,455,962		11,285,587		11,285,587
		Member Units (1,000,000 units)			1,000,000		1,351,000
		Royalty Rights			—		73,000
			11,455,962		12,285,587		12,709,587

Pine Street Holdings, LLC (0%)*	Oil and Gas Services	Preferred Units (200 units)			200,000		—
		Common Unit Warrants (2,220 units)			—		—
					200,000		—

Plantation Products, LLC (5%)*	Seed Manufacturing	Subordinated Notes (12% Cash, 2% PIK, Due 11/17)	14,591,557		14,423,858		14,423,858
		Preferred Units (4,312 units)			4,312,000		5,033,000
		Common Units (352,000 units)			88,000		4,241,000
			14,591,557		18,823,858		23,697,858

QC Holdings, Inc. (0%)*	Lab Testing Services	Common Stock (5,594 shares)			563,602		470,000
					563,602		470,000

Technology Crops International (1%)*	Supply Chain Management Services	Subordinated Note (12% Cash, 5% PIK, Due 03/15)	6,208,545		6,179,807		6,179,807
		Common Units (50 units)			500,000		—
			6,208,545		6,679,807		6,179,807

Venture Technology Groups, Inc. (0%)*	Fluid and Gas Handling Products Distributor	Subordinated Note (12.5% Cash, 4% PIK, Due 09/16)	7,038,134		5,703,715		411,000
		Class A Units (1,000,000 units)			1,000,000		—
			7,038,134		6,703,715		411,000

Table of Contents

TRIANGLE CAPITAL CORPORATION Consolidated Schedule of Investments December 31, 2013

Portfolio Company	Industry	Type of Investment⁽¹⁾⁽²⁾	Principal Amount		Cost		Fair Value⁽³⁾
Waste Recyclers Holdings, LLC (0%)*	Environmental and Facilities Services	Class A Preferred Units (280 units)			$	2,251,100	$	—
		Class B Preferred Units (11,484,867 units)			3,304,218		1,482,000
		Common Unit Purchase Warrant (1,170,083 units)			748,900		—
		Common Units (153,219 units)			180,783		—
					6,485,001		1,482,000

Wythe Will Tzetzo, LLC (2%)*	Confectionery Goods Distributor	Series A Preferred Units (74,764 units)			1,500,000		6,500,000
		Common Unit Purchase Warrants (25,065 units)			301,510		1,915,000
					1,801,510		8,415,000

Subtotal Affiliate Investments			$	88,268,659	107,418,051		107,536,534

Control Investments:
FCL Graphics, Inc. (“FCL”) and FCL Holding SPV, LLC (“SPV”) (1%)*	Commercial Printing Services	Senior Note-FCL (4.8% Cash, Due 09/16)	1,271,233		1,271,233		1,271,233
		Senior Note-FCL (7.8% Cash, 2% PIK, Due 09/16)	1,195,370		1,195,368		1,062,000
		Senior Note-SPV (2.0% Cash, 5.3% PIK, Due 09/16)	1,064,061		1,007,272		9,000
		Members Interests-SPV (299,875 units)			—		—
			3,530,664		3,473,873		2,342,233

Gerli & Company (0%)*	Specialty Woven Fabrics Manufacturer	Subordinated Note (13% Cash, Due 07/15)	439,358		375,000		375,000
		Subordinated Note (8.5% Cash, Due 07/15)	3,793,846		3,000,000		358,000
		Class A Preferred Shares (1,211 shares)			855,000		—
		Class C Preferred Shares (744 shares)			—		—
		Class E Preferred Shares (400 shares)			161,440		—
		Common Stock (300 shares)			100,000		—
			4,233,204		4,491,440		733,000

SRC, Inc. (2%)*	Specialty Chemical Manufacturer	Subordinated Note (10.8% Cash, 0.25% PIK, Due 12/14)	2,160,348		250,000		—
		Senior Revolver (9.3% Cash, Due 05/14)	374,999		376,195		376,195
		Senior Term Loan (10.3% Cash, Due 05/14)	1,900,000		1,907,481		1,907,481
		Debtor in Possession Loan (8.0% Cash, Due 01/14)	1,491,800		1,491,800		1,491,800
		Subordinated Notes (12% Cash, 2% PIK, Due 09/14)	6,331,199		6,264,076		3,942,000
		Common Stock Purchase Warrants			123,800		—
			12,258,346		10,413,352		7,717,476

Subtotal Control Investments			20,022,214		18,378,665		10,792,709

Total Investments, December 31, 2013 (149%)*			$	603,988,069	$	653,817,785	$	664,373,189

* Fair value as a percent of net assets


(1)	All debt investments are income producing. Equity and equity-linked investments 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)	Investment is not a qualifying investment as defined under Section 55(a) of the Investment Company Act of 1940. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets.

See accompanying notes.

Table of Contents

TRIANGLE CAPITAL CORPORATION

Notes to Unaudited Consolidated Financial Statements

1. ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION

Organization and Business

Triangle Capital Corporation and its wholly owned subsidiaries, including Triangle Mezzanine Fund LLLP (“Triangle SBIC”) and Triangle Mezzanine Fund II LP (“Triangle SBIC II”) (collectively, the “Company”), operate as a Business Development Company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). Triangle SBIC and Triangle SBIC II are specialty finance limited partnerships formed to make investments primarily in lower middle market companies located throughout the United States. On September 11, 2003, Triangle SBIC 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, Triangle SBIC II obtained its license to operate as an SBIC. As SBICs, both Triangle SBIC and Triangle SBIC 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 Triangle Capital Corporation and its wholly-owned subsidiaries, including Triangle SBIC and Triangle SBIC II. Triangle Capital Corporation, Triangle SBIC and Triangle SBIC II do not consolidate 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 adjustments necessary for the fair presentation of financial statements for the interim period, have been reflected in the unaudited consolidated financial statements. The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. Additionally, 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, 2013. 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.

2. INVESTMENTS

Portfolio Composition

The Company primarily invests in subordinated debt securities of privately held companies, generally secured by second lien security interests in portfolio company assets. In addition, the Company generally invests in an equity instrument of the borrower, such as warrants to purchase common stock in the portfolio company or direct preferred or common equity interests. On a more limited basis, the Company also invests in senior debt securities secured by first lien security interests in portfolio companies. The Company's investments generally range from $5.0 million to $35.0 million per portfolio company.

Table of Contents

The cost basis of the Company's debt investments includes any unamortized original issue discount, unamortized loan origination fees and payment-in-kind (“PIK”) interest, if any. Summaries of the composition of the Company’s investment portfolio at cost and fair value, and as a percentage of total investments, are shown in the following tables:



	Cost		Percentage of Total Portfolio		Fair Value		Percentage of Total Portfolio
March 31, 2014:
Subordinated debt and 2^nd lien notes	$	555,943,162	82	%	$	528,881,970	77	%
Senior debt and 1^st lien notes	46,314,233		7		46,190,878		7
Equity shares	68,927,729		10		92,612,571		13
Equity warrants	9,672,127		1		22,325,000		3
Royalty rights	—		—		—		—
	$	680,857,251	100	%	$	690,010,419	100	%
December 31, 2013:
Subordinated debt and 2^nd lien notes	$	540,561,082	83	%	$	514,467,575	77	%
Senior debt and 1^st lien notes	46,102,133		7		45,968,765		7
Equity shares	56,985,933		9		79,935,246		12
Equity warrants	10,168,637		1		23,928,603		4
Royalty rights	—		—		73,000		—
	$	653,817,785	100	%	$	664,373,189	100	%

During the three months ended March 31, 2014, the Company made six new investments totaling approximately $63.7 million and six investments in existing portfolio companies totaling approximately $13.8 million. During the three months ended March 31, 2013, the Company made six investments in existing portfolio companies totaling approximately $10.3 million.

Investment Valuation Process

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 the 1940 Act and FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”). Under ASC Topic 820, a financial instrument is categorized within the ASC Topic 820 valuation hierarchy based upon the lowest level of input to the valuation process that is significant to the fair value measurement. The three levels of valuation inputs established by ASC Topic 820 are as follows:

Level 1 Inputs – include quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 Inputs – 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 – include inputs that 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 or other inputs falling within the categories of Level 1 and Level 2 are not available. Therefore, the Company determines the fair value of its investments in good faith using Level 3 inputs, pursuant to a valuation policy and process that is established by the management of the Company with the assistance of certain third-party advisors and subsequently approved by the Company’s Board of Directors. There is no single standard for determining fair value in good faith, as fair value depends upon the specific circumstances of each individual investment. The recorded fair values of the Company’s investments may differ significantly from fair values that would have been used had an active market for the securities existed. 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.

The Company’s valuation process is led by the Company’s executive officers and managing directors. The Company’s valuation process begins with a quarterly review of each investment in the Company’s investment portfolio by the Company’s executive officers and investment committee. Valuations of each portfolio security are then prepared by the Company’s investment professionals, who have direct responsibility for the origination, management and monitoring of each investment. Under the Company’s valuation policy, each investment valuation is subject to (i) a review by the lead investment officer responsible for the portfolio company investment and (ii) a peer review by a second investment officer or executive officer of

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the Company. Generally, any investment that is valued below cost is subjected to review by one of the Company’s executive officers. After the peer review is complete, the Company engages two independent valuation firms, Duff & Phelps, LLC and Lincoln Partners Advisors LLC (collectively, the “Valuation Firms”), to provide third-party reviews of certain investments, as described further below. Finally, the Board of Directors has the responsibility for reviewing and approving, in good faith, the fair value of the Company’s investments in accordance with the 1940 Act.

The Valuation Firms provide third party valuation consulting services to the Company which consist of certain procedures that the Company identified and requested the Valuation Firms to perform (hereinafter referred to as the “Procedures”). The Procedures are performed with respect to 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 addition, the Procedures are generally performed with respect to a portfolio company when there has been a significant change in the fair value of the investment. In certain instances, the Company may determine that it is not cost-effective, and as a result is not in the Company’s stockholders’ best interest, to request the Valuation Firms to perform the Procedures on one or more portfolio companies. Such instances include, but are not limited to, situations where the fair value of the investment in the portfolio company is determined to be insignificant relative to the total investment portfolio.

The total number of investments and the percentage of the investment portfolio on which the Procedures were performed are summarized below by period:



For the quarter ended:	Total companies	Percent of total investments at fair value⁽¹⁾
March 31, 2013	17	23%
June 30, 2013	13	27%
September 30, 2013	14	28%
December 31, 2013	14	21%
March 31, 2014	15	25%


(1)	Exclusive of the fair value of new investments made during the quarter.

Upon completion of the Procedures, the Valuation Firms concluded that, with respect to each investment reviewed by each Valuation Firm, the fair value of those investments subjected to the Procedures appeared reasonable. The Company’s Board of Directors is ultimately responsible for determining the fair value of the Company’s investments in good faith.

Investment Valuation Inputs

Under ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between a willing buyer and a willing seller at the measurement date. For the Company’s portfolio securities, fair value is generally the amount that the Company might reasonably expect to receive upon the current sale of the security. Under ASC Topic 820, the fair value measurement assumes that the sale occurs in the principal market for the security, or in the absence of a principal market, in the most advantageous market for the security. Under ASC Topic 820, if no market for the security exists or if the Company does not have access to the principal market, the security should be valued based on the sale occurring in a hypothetical market. The securities in which the Company invests are generally only purchased and sold in merger and acquisition transactions, in which case the entire portfolio company is sold to a third-party purchaser. As a result, unless the Company has the ability to control such a transaction, the assumed principal market for the Company’s securities is a hypothetical secondary market. The Level 3 inputs to the Company’s valuation process reflect the Company’s best estimate of the assumptions that would be used by market participants in pricing the investment in a transaction in a hypothetical secondary market.

Enterprise Value Waterfall Approach

In valuing equity securities (including warrants), the Company estimates fair value using an “Enterprise Value Waterfall” valuation model. The Company estimates the enterprise value of a portfolio company and then allocates the enterprise value to the portfolio company’s securities in order of their relative liquidation preference. In addition, the Company assumes that any outstanding debt or other securities that are senior to the Company’s equity securities are required to be repaid at par. Additionally, the Company estimates the fair value of a limited number of its debt securities using the Enterprise Value Waterfall approach in cases where the Company does not expect to receive full repayment.

To estimate the enterprise value of the portfolio company, the Company primarily uses a valuation model based on a transaction multiple, which generally is the original transaction multiple, and measures of the portfolio company’s financial

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performance. In addition, the Company considers other factors, including but not limited to (i) offers from third-parties to purchase the portfolio company, (ii) the implied value of recent investments in the equity securities of the portfolio company, (iii) publicly available information regarding recent sales of private companies in comparable transactions and (iv) when the Company believes there are comparable companies that are publicly traded, the Company performs a review of these publicly traded companies and the market multiple of their equity securities.

The significant Level 3 inputs to the Enterprise Value Waterfall model are (i) an appropriate transaction multiple and (ii) a measure of the portfolio company’s financial performance, which generally is either earnings before interest, taxes, depreciation and amortization, as adjusted (“Adjusted EBITDA”) or revenues. Such inputs can be based on historical operating results, projections of future operating results or a combination thereof. The operating results of a portfolio company may be unaudited, projected or pro forma financial information and may require adjustments for certain non-recurring items. In determining the operating results input, the Company utilizes the most recent portfolio company financial statements and forecasts available as of the valuation date. The Company also consults with the portfolio company’s senior management to obtain updates on the portfolio company’s performance, including information such as industry trends, new product development, loss of customers and other operational issues. Fair value measurements using the Enterprise Value Waterfall model can be sensitive to significant changes in one or more of the inputs. A significant increase (decrease) in either the transaction multiple, Adjusted EBITDA or revenues for a particular equity security would result in a higher (lower) fair value for that security.

Income Approach

In valuing debt securities, the Company utilizes an “Income Approach” model that considers factors including, but not limited to, (i) the stated yield on the debt security, (ii) the portfolio company’s current Adjusted EBITDA as compared to the portfolio company’s historical or projected Adjusted EBITDA as of the date the investment was made and the portfolio company’s anticipated Adjusted EBITDA for the next twelve months of operations, (iii) the portfolio company’s current Leverage Ratio (defined as the portfolio company’s total indebtedness divided by Adjusted EBITDA) as compared to its Leverage Ratio 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 the Company believes a relevant comparison exists, current pricing and credit metrics for similar proposed and executed investment transactions of publicly traded debt. In addition, the Company 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. This risk rating system covers both qualitative and quantitative aspects of the business and the securities held.

The Company considers the factors above, particularly any significant changes in the portfolio company’s results of operations and leverage, and develops an expectation of the yield that a hypothetical market participant would require when purchasing the debt investment (the “Required Rate of Return”). The Required Rate of Return, along with the Leverage Ratio and Adjusted EBITDA, are the significant Level 3 inputs to the Income Approach model. For investments where the Leverage Ratio and Adjusted EBITDA have not fluctuated significantly from the date the investment was made or have not fluctuated significantly from the Company’s expectations as of the date the investment was made, and where there have been no significant fluctuations in the market pricing for such investments, the Company may conclude that the Required Rate of Return is equal to the stated rate on the investment and therefore, the debt security is appropriately priced. In instances where the Company determines that the Required Rate of Return is different from the stated rate on the investment, the Company discounts the contractual cash flows on the debt instrument using the Required Rate of Return in order to estimate the fair value of the debt security.

Fair value measurements using the Income Approach model can be sensitive to significant changes in one or more of the inputs. A significant increase (decrease) in the Required Rate of Return or Leverage Ratio inputs for a particular debt security may result in a lower (higher) fair value for that security. A significant increase (decrease) in the Adjusted EBITDA input for a particular debt security may result in a higher (lower) fair value for that security.

The fair value of the Company’s royalty rights are calculated based on specific provisions contained in the pertinent operating or royalty agreements. The determination of the fair value of such royalty rights is not a significant component of the Company’s valuation process.

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The ranges and weighted average values of the significant Level 3 inputs used in the valuation of the Company’s debt and equity securities at March 31, 2014 and December 31, 2013 are summarized as follows:



March 31, 2014:	Fair Value		Valuation Model	Level 3 Inputs	Range of Inputs	Weighted Average
Subordinated debt and 2^nd lien notes	$	515,383,970	Income Approach	Required Rate of Return	7.0% – 30.0%	14.4%
				Leverage Ratio	0.8x – 7.5x	3.8x
				Adjusted EBITDA	$1.3 million – $77.0 million	$16.1 million
Subordinated debt and 2^nd lien notes	13,498,000		Enterprise Value Waterfall Approach	Adjusted EBITDA Multiple	5.3x – 6.0x	5.7x
			Enterprise Value Waterfall Approach	Adjusted EBITDA	$0.5 million – $4.6 million	$0.9 million
Senior debt and 1^st lien notes	46,190,878		Income Approach	Required Rate of Return	4.7% – 19.0%	13.3%
				Leverage Ratio	0.0x – 5.8x	2.6x
				Adjusted EBITDA	$1.3 million – $4.7 million	$3.3 million
Equity shares and warrants	114,937,571		Enterprise Value Waterfall Approach	Adjusted EBITDA Multiple	3.8x – 10.0x	6.3x
			Enterprise Value Waterfall Approach	Adjusted EBITDA	$0.5 million – $77.0 million	$13.8 million
				Revenue Multiple	1.3x – 4.2x	3.9x
				Revenues	$8.8 million – $59.5 million	$50.9 million



December 31, 2013:	Fair Value		Valuation Model	Level 3 Input	Range of Inputs	Weighted Average
Subordinated debt and 2^nd lien notes	$	508,522,575	Income Approach	Required Rate of Return	8.3% – 30.0%	14.7%
				Leverage Ratio	0.8x – 6.7x	3.9x
				Adjusted EBITDA	$1.0 million – $77.0 million	$17.0 million
Subordinated debt and 2^nd lien notes	5,945,000		Enterprise Value Waterfall Approach	Adjusted EBITDA Multiple	4.5x – 5.5x	4.9x
			Enterprise Value Waterfall Approach	Adjusted EBITDA	$0.5 million – $4.7 million	$1.4 million
Senior debt and 1^st lien notes	45,968,765		Income Approach	Required Rate of Return	4.8% – 19.0%	12.9%
				Leverage Ratio	0.0x – 6.4x	2.9x
				Adjusted EBITDA	$1.0 million – $4.7 million	$2.8 million
Equity shares and warrants	103,863,849		Enterprise Value Waterfall Approach	Adjusted EBITDA Multiple	3.8x – 10.0x	6.4x
			Enterprise Value Waterfall Approach	Adjusted EBITDA	$0.5 million – $77.0 million	$15.9 million
				Revenue Multiple	1.5x – 4.2x	3.9x
				Revenues	$8.5 million – $59.5 million	$50.8 million

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The following table presents the Company’s investment portfolio at fair value as of March 31, 2014 and December 31, 2013, categorized by the ASC Topic 820 valuation hierarchy, as previously described:



	Fair Value as of March 31, 2014
	Level 1		Level 2		Level 3		Total
Subordinated debt and 2^nd lien notes	$	—	$	—	$	528,881,970	$	528,881,970
Senior debt and 1^st lien notes	—		—		46,190,878		46,190,878
Equity shares	—		—		92,612,571		92,612,571
Equity warrants	—		—		22,325,000		22,325,000
Royalty rights	—		—		—		—
	$	—	$	—	$	690,010,419	$	690,010,419

	Fair Value as of December 31, 2013
	Level 1		Level 2		Level 3		Total
Subordinated debt and 2^nd lien notes	$	—	$	—	$	514,467,575	$	514,467,575
Senior debt and 1^st lien notes	—		—		45,968,765		45,968,765
Equity shares	—		—		79,935,246		79,935,246
Equity warrants	—		—		23,928,603		23,928,603
Royalty rights	—		—		73,000		73,000
	$	—	$	—	$	664,373,189	$	664,373,189

The following tables reconcile the beginning and ending balances of the Company’s investment portfolio measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2014 and 2013:



Three Months Ended March 31, 2014:	Subordinated Debt and 2^nd Lien Notes			Senior Debt and 1^st Lien Notes			Equity Shares			Equity Warrants			Royalty Rights			Total
Fair value, beginning of period	$	514,467,575		$	45,968,765		$	79,935,246		$	23,928,603		$	73,000		$	664,373,189
New investments	69,887,760			3,985,889			3,624,833			—			—			77,498,482
Reclassifications	(6,055,524		)	(3,872,476		)	9,928,000			—			—			—
Proceeds from sales of investments	—			—			(1,700,120		)	(1,020,255		)	—			(2,720,375		)
Loan origination fees received	(1,290,041		)	(77,778		)	—			—			—			(1,367,819		)
Principal repayments received	(48,991,007		)	(97,404		)	—			—			—			(49,088,411		)
PIK interest earned	3,494,150			240,271			—			—			—			3,734,421
PIK interest payments received	(2,262,217		)	—			—			—			—			(2,262,217		)
Accretion of loan discounts	346,201			—			—			—			—			346,201
Accretion of deferred loan origination revenue	801,938			33,598			—			—			—			835,536
Realized gain	(549,180		)	—			89,083			523,745			—			63,648
Unrealized gain (loss)	(967,685		)	10,013			735,529			(1,107,093		)	(73,000		)	(1,402,236		)
Fair value, end of period	$	528,881,970		$	46,190,878		$	92,612,571		$	22,325,000		$	—		$	690,010,419

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Three Months Ended March 31, 2013:	Subordinated Debt and 2^nd Lien Notes			Senior Debt and 1^st Lien Notes			Equity Shares			Equity Warrants			Royalty Rights			Total
Fair value, beginning of period	$	559,355,550		$	46,576,994		$	78,979,179		$	21,759,000		$	132,000		$	706,802,723
New investments	5,513,545			1,500,000			1,100,000			2,146,000			—			10,259,545
Reclassifications	18,570,523			(18,570,523		)	—			—			—			—
Proceeds from sales of investments	—			—			(1,437,000		)	(37,000		)	—			(1,474,000		)
Loan origination fees received	(255,159		)	—			—			—			—			(255,159		)
Principal repayments received	(7,577,746		)	(223,200		)	—			—			—			(7,800,946		)
PIK interest earned	4,017,911			196,883			—			—			—			4,214,794
PIK interest payments received	(529,733		)	—			—			—			—			(529,733		)
Accretion of loan discounts	396,661			—			—			—			—			396,661
Accretion of deferred loan origination revenue	706,745			27,349			—			—			—			734,094
Realized gains	578,782			—			1,237,000			37,000			—			1,852,782
Unrealized gain (loss)	595,323			5,622			929,217			(181,006		)	(24,000		)	1,325,156
Fair value, end of period	$	581,372,402		$	29,513,125		$	80,808,396		$	23,723,994		$	108,000		$	715,525,917

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. Pre-tax net unrealized losses on investments of $0.8 million during the three months ended March 31, 2014 were related to portfolio company investments that were still held by the Company as of March 31, 2014. Pre-tax net unrealized gains on investments of $2.6 million during the three months ended March 31, 2013 were related to portfolio company investments that were still held by the Company as of March 31, 2013.

The Company’s primary investment objective is to generate current income and capital appreciation by investing directly in privately-held lower middle market companies to help these companies fund acquisitions, growth or refinancing. During the three months ended March 31, 2014, the Company made investments of approximately $13.7 million in portfolio companies to which it was not previously contractually committed to provide the financial support. During the three months ended March 31, 2014, the Company made investments of $0.6 million in companies to which it was previously committed to provide the financial support. The details of the Company’s investments have been disclosed on the Unaudited Consolidated Schedule of Investments. In addition to the investments that the Company has made, the Company has unfunded commitments to provide additional financings totaling approximately $9.3 million as of March 31, 2014.

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 are 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

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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, has greater than 50.0% representation on its board or has the power to exercise control over management or policies of such portfolio company. 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 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 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

Origination, facility, commitment, consent and other advance fees received in connection with loan agreements ("Loan Origination Fees") are recorded as deferred income and recognized as investment income over the term of the loan. Upon prepayment of a loan, any unamortized Loan Origination Fees are recorded as investment income. In the general course of its business, the Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, certain investment banking and structuring fees and loan waiver and amendment fees, and are recorded as investment income when earned.

Payment-in-Kind Interest

The Company currently holds, and expects to hold in the future, some 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, rather than being paid to the Company 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.

PIK interest, which is a non-cash source of income, is included in the Company’s taxable income and therefore affects the amount the Company is required to distribute to its stockholders to maintain its qualification as a regulated investment company ("RIC") for federal income tax purposes, 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 have 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 investments are generally in lower middle market companies in a variety of industries. As of both March 31, 2014 and December 31, 2013, there were no individual investments greater than 10% of the fair value of the Company’s portfolio. As of March 31, 2014 and December 31, 2013, the Company’s largest single portfolio company investment represented approximately 4.0% and 4.2%, respectively, 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: (i) investing in lower middle market companies which may have limited financial resources and may have limited operating histories, (ii) investing in senior subordinated debt which ranks equal to or lower than debt held by other investors and (iii) 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.

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Investments Denominated in Foreign Currency

As of both March 31, 2014 and December 31, 2013, the Company held investments in one portfolio company that were denominated in Canadian dollars.

At each balance sheet date, portfolio company investments denominated in foreign currencies are translated into United States dollars using the spot exchange rate on the last business day of the period. Purchases and sales of foreign portfolio company investments, and any income from such investments, are translated into United States dollars using the rates of exchange prevailing on the respective dates of such transactions.

Although the fair values of foreign portfolio company investments and the fluctuation in such fair values are translated into United States dollars using the applicable foreign exchange rates described above, the Company does not isolate that portion of the change in fair values resulting from foreign currency exchange rates fluctuations from the change in fair values of the underlying investment. All fluctuations in fair value are included in net unrealized appreciation (depreciation) of investments in the Company's Unaudited Consolidated Statements of Operations.

Investments denominated in foreign currencies and foreign currency transactions may involve certain considerations and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the United States dollar.

3. INCOME TAXES

The Company elected for federal income tax purposes to be treated as a RIC under the Internal Revenue Code of 1986, as amended (the "Code") commencing with its taxable year ended December 31, 2007. In order to maintain its qualification as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute (actually or constructively) and certain built-in gains. The Company has historically met its minimum distribution requirements and continually monitors its distribution requirements with the goal of ensuring compliance with the Code.

The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company 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 that 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. The Company may be required to recognize ICTI in certain circumstances in which it does not receive cash. For example, if the Company holds debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants), the Company 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 the Company in the same taxable year. The Company may also have to include in ICTI other amounts that it has not yet received in cash, such as (i) PIK interest income and (ii) 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 the Company’s ICTI for the year of accrual, the Company may be required to make a distribution to its stockholders in order to satisfy the minimum distribution requirements, even though the Company 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.

The Company has certain wholly-owned taxable subsidiaries (the “Taxable Subsidiaries”), each of which holds one or more of its 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 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 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

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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 Consolidated Statements of Operations.

For federal income tax purposes, the cost of investments owned as of March 31, 2014 and December 31, 2013 was approximately $683.2 million and $656.6 million, respectively.

4. BORROWINGS

The Company had the following borrowings outstanding as of March 31, 2014 and December 31, 2013:



Issuance/Pooling Date	Maturity Date	Interest Rate as of March 31, 2014	March 31, 2014		December 31, 2013
SBA-Guaranteed Debentures:
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
September 22, 2010	September 1, 2020	3.687%	32,590,000		32,590,000
March 29, 2011	March 1, 2021	4.474%	75,400,000		75,400,000
September 21, 2011	September 1, 2021	3.392%	19,100,000		19,100,000
March 27, 2013	March 1, 2023	3.155%	30,000,000		30,000,000
SBA-Guaranteed LMI Debenture:
September 14, 2010	March 1, 2016	2.508%	7,440,441		7,395,211
Credit Facility:
June 26, 2013	September 17, 2017	4.014%	10,860,711		11,221,246
Notes:
March 2, 2012	March 15, 2019	7.000%	69,000,000		69,000,000
October 19, 2012	December 15, 2022	6.375%	80,500,000		80,500,000
			$	353,691,152	$	354,006,457

SBA and SBA LMI Debentures

Interest payments on SBA-guaranteed debentures are payable semi-annually and there are no principal payments required on these debentures prior to maturity, nor do the debentures carry any prepayment penalties. The Company’s SBA-guaranteed Low or Moderate Income (“LMI”) debenture is a five-year deferred interest debenture that was issued at a discount to par. The accretion of discount on the SBA-guaranteed LMI debenture is classified as interest expense in the Company’s consolidated financial statements.

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 and SBA-guaranteed LMI debentures (collectively, SBA-guaranteed debentures) up to two times (and in certain cases, up to three times) the amount of its regulatory capital. As of March 31, 2014, the maximum statutory limit on the dollar amount of outstanding SBA-guaranteed debentures that can be issued by a single SBIC was $150.0 million and by a group of SBICs under common control was $225.0 million. As of March 31, 2014, Triangle SBIC had issued $118.7 million of SBA-guaranteed debentures and had the current capacity to issue up to the statutory maximum of $150.0 million, subject to SBA approval. As of March 31, 2014, Triangle SBIC II had issued $75.0 million in face amount of SBA-guaranteed debentures. The weighted average interest rate for all SBA-guaranteed debentures as of both March 31, 2014 and December 31, 2013 was 4.07%. As of both March 31, 2014 and December 31, 2013, all SBA debentures were pooled.

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 SBA-guaranteed debenture issued and a one-time 2.0% fee on the amount of each SBA-guaranteed LMI 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. Upon prepayment of an SBA-guaranteed debenture, any unamortized deferred financing costs related to the SBA-guaranteed debenture are written off and recognized as a loss on extinguishment of debt in the Consolidated Statements of Operations. In the three months ended March 31, 2013 the Company prepaid approximately $20.5

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million of SBA-guaranteed debentures and recognized losses on extinguishment of debt of approximately $0.4 million. respectively.

The fair values of the SBA-guaranteed debentures are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. As of both March 31, 2014 and December 31, 2013, the carrying amounts of the SBA-guaranteed debentures were approximately $193.3 million. As of March 31, 2014 and December 31, 2013, the fair values of the SBA-guaranteed debentures were $204.4 million and $206.6 million, respectively.

Credit Facility

In June 2013, the Company entered into a second amended and restated senior secured credit facility (the “Credit Facility”) to provide liquidity in support of its investment and operational activities. The Credit Facility, which has an initial commitment of $165.0 million supported by nine financial institutions, replaced the Company's $165.0 million senior secured credit facility entered into in September 2012. The Credit Facility, which matures on September 17, 2017, allows the Company to borrow foreign currencies (initially Canadian dollars) directly under the Credit Facility.

The Credit Facility has an accordion feature that allows for an increase in the total commitment size up to $215.0 million, subject to certain conditions, and also contains a one-year extension option to September 17, 2018. The Credit Facility, which is structured to operate like a revolving credit facility, is secured primarily by the Company's assets, excluding the assets of Triangle SBIC and Triangle SBIC II.

Borrowings under the Credit Facility bear interest, subject to the Company's election, on a per annum basis equal to (i) the applicable base rate plus 1.75%, (ii) the applicable LIBOR rate plus 2.75%, or (iii) for borrowings denominated in Canadian dollars, the applicable Canadian Dealer Offered Rate plus 2.75%. The applicable base rate is equal to the greater of (i) the prime rate, (ii) the federal funds rate plus 0.5% or (iii) the adjusted one-month LIBOR rate plus 2.0%. The Company pays a commitment fee of 0.375% per annum on undrawn amounts, which is included with interest and other financing fees on the Company's Consolidated Statements of Operations. Borrowings under the Credit Facility are also limited to a borrowing base, which includes certain cash and a portion of eligible debt investments.

As of March 31, 2014, the Company had non-United States dollar borrowings denominated in Canadian dollars of $12.0 million ($10.9 million United States dollars) outstanding under the Credit Facility with an interest rate of 4.01%. The borrowings denominated in Canadian dollars are translated into United States dollars based on the spot rate at each balance sheet date. The impact resulting from changes in foreign exchange rates on the Credit Facility borrowings is included in unrealized appreciation (depreciation) on foreign currency borrowings in the Company's Consolidated Statements of Operations. The borrowings denominated in Canadian dollars may be positively or negatively affected by movements in the rate of exchange between the United States dollar and the Canadian dollar. This movement is beyond the control of the Company and cannot be predicted. As of December 31, 2013, the Company had non-United States dollar borrowings denominated in Canadian dollars of $12.0 million ($11.2 million United States dollars) outstanding under the Credit Facility with an interest rate of 4.03%,

The fair value of the borrowings outstanding under the Credit Facility are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. As of March 31, 2014 and December 31, 2013, the fair values of the borrowings outstanding under the Credit Facility were $10.9 million and $11.2 million, respectively.

The Credit Facility contains certain affirmative and negative covenants, including but not limited to (i) maintaining a minimum interest coverage ratio, (ii) maintaining minimum consolidated tangible net worth and (iii) maintaining its status as a regulated investment company and as a BDC. As of March 31, 2014, the Company was in compliance with all covenants of the Credit Facility.

Notes

In March 2012, the Company issued $69.0 million of unsecured notes due 2019 (the “2019 Notes”). The 2019 Notes mature on March 15, 2019, and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after March 15, 2015. The 2019 Notes bear interest at a rate of 7.00% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning June 15, 2012. The net proceeds to the Company from the sale of the 2019 Notes, after underwriting discounts and offering expenses, were approximately $66.7 million. As of both March 31, 2014 and December 31, 2013, the carrying amount of the 2019 Notes was approximately $69.0 million. As of March 31, 2014 and December 31, 2013, the fair values of the 2019 Notes were $70.8 million and $71.6 million, respectively.

In October 2012, the Company issued $70.0 million of unsecured notes due 2022 (the "2022 Notes") and in November 2012, issued $10.5 million of 2022 Notes pursuant to the exercise of an over-allotment option. The 2022 Notes mature on

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December 15, 2022, and may be redeemed in whole or in part at any time or from time to time at the Company's option on or after December 15, 2015. The 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning December 15, 2012. The net proceeds to the Company from the sale of the 2022 Notes, after underwriting discounts and offering expenses, were approximately $77.8 million. As of both March 31, 2014 and December 31, 2013, the carrying amount of the 2022 Notes was approximately $80.5 million. As of March 31, 2014 and December 31, 2013, the fair values of the 2022 Notes were $79.5 million and $76.7 million, respectively. The fair values of the 2019 Notes and the 2022 Notes are based on the closing prices of each respective security on the New York Stock Exchange, which are Level 1 inputs under ASC 820.

The indenture and supplements thereto relating to the 2019 Notes and the 2022 Notes contain certain covenants, including but not limited to (i) a requirement that the Company comply with the asset coverage requirements of the 1940 Act or any successor provisions, and (ii) a requirement to provide financial information to the holders of the notes and the trustee under the indenture if the Company should no longer be subject to the reporting requirements under the Securities Exchange Act of 1934, as amended.

5. EQUITY-BASED AND OTHER COMPENSATION PLANS

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 2,400,000 shares of the Company’s Common Stock authorized for issuance. Under the Plan, the Board (or compensation committee, if delegated administrative authority by the Board) 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, the Company measures the grant date fair value based upon the market price of the Company’s common stock on the date of the grant and amortizes this fair value to compensation expense ratably over the requisite service period or vesting term.

The following table presents information with respect to the Plan for the three months ended March 31, 2014 and 2013:



	Three Months Ended March 31, 2014			Three Months Ended March 31, 2013
	Number of Shares		Weighted Average Grant Date Fair Value per Share	Number of Shares	Weighted Average Grant Date Fair Value per Share
Unvested shares, beginning of period	592,173		$23.80	290,198	$18.52
Shares granted during the period	273,000		$26.09	250,000	$28.47
Shares vested during the period	(193,224	)	$21.03	—	$—
Unvested shares, end of period	671,949		$25.53	540,198	$23.13

In the three months ended March 31, 2014, the Company recognized equity-based compensation expense of approximately $1.3 million. In the three months ended March 31, 2013, the Company recognized equity-based compensation expense of approximately $0.6 million. This expense is included in general and administrative expenses in the Company’s Unaudited Consolidated Statements of Operations.

As of March 31, 2014, there was approximately $16.0 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 2.6 years.

The Company’s Board of Directors has adopted a nonqualified deferred compensation plan covering the Company’s executive officers and key employees. Any compensation deferred and the Company’s contributions will earn a return based on the returns on certain investments designated by the Compensation Committee of the Company’s Board of Directors. Participants are 100% vested in amounts deferred under the deferred compensation plan and the earnings thereon. Contributions to the plan and earnings thereon vest ratably over a four-year period.

The Company maintains a 401(k) plan in which all full-time employees who are at least 21 years of age and have 90 days of service are eligible to participate and receive employer contributions. Eligible employees may contribute a portion of their

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compensation on a pretax basis into the 401(k) plan up to the maximum amount allowed under the Code, and direct the investment of their contributions.

6. FINANCIAL HIGHLIGHTS

The following is a schedule of financial highlights for the three months ended March 31, 2014 and 2013:



	Three Months Ended March 31,
	2014			2013
Per share data:
Net asset value at beginning of period	$	16.10		$	15.30
Net investment income(1)	0.50			0.56
Net realized gain on investments(1)	—			0.07
Net unrealized appreciation on investments / foreign currency(1)	(0.04		)	0.06
Total increase from investment operations(1)	0.46			0.69
Cash dividends/distributions	(0.69		)	(0.54		)
Shares issued pursuant to Dividend Reinvestment Plan	0.01			0.01
Stock-based compensation	(0.15		)	(0.12		)
Loss on extinguishment of debt(1)	—			(0.02		)
Provision for taxes(1)	(0.01		)	—
Other(2)	—			—
Net asset value at end of period	$	15.72		$	15.32
Market value at end of period(3)	$	25.89		$	27.99
Shares outstanding at end of period	27,903,696			27,563,375
Net assets at end of period	$	438,631,024		$	422,313,302
Average net assets	$	449,549,621		$	423,635,444
Ratio of total expenses to average net assets (annualized)	9.07		%	8.70		%
Ratio of net investment income to average net assets (annualized)	12.32		%	14.40		%
Portfolio turnover ratio	7.95		%	1.40		%
Total return(4)	(3.87		)%	11.90		%
Supplemental Data:
Efficiency ratio(5)	21.03		%	16.84		%


(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.


(5)	Efficiency ratio equals general and administrative expenses divided by total investment income.

7. SUBSEQUENT EVENTS

In April 2014, the Company invested $23.0 million in the subordinated debt and equity of PCX Aerostructures, LLC ("PCX"). PCX manufacturers components and assemblies used in military and civilian aircraft, primarily helicopters. Under the terms of the investment, PCX will pay interest on the subordinated debt at a rate of 14.0%.

In April 2014, the Company exited its investments in Workforce Software, LLC. In connection with the exit, the company received proceeds of $21.4 million and recognized capital gains totaling approximately $11.1 million.

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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 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, 2013. 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 herein and in Item 1A entitled “Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2013. Other factors that could cause actual results to differ materially include, but are not limited to, 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, as amended, or the 1940 Act. Our wholly-owned subsidiaries, Triangle Mezzanine Fund LLLP, or Triangle SBIC, and Triangle Mezzanine Fund II LP, or Triangle SBIC II, are licensed as small business investment companies, or SBICs, by the United States Small Business Administration, or SBA. In addition, Triangle SBIC has also elected to be treated as a BDC under the 1940 Act. We, Triangle SBIC and Triangle SBIC II invest primarily in debt instruments, equity investments, warrants and other securities of lower middle market privately-held companies located primarily in the United States.

Our business is to provide capital to lower middle market companies located primarily in the United States. 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 million and $200.0 million and annual earnings before interest, taxes, depreciation and amortization, or EBITDA, between $3.0 million and $35.0 million.

We invest primarily in subordinated debt securities secured by second lien security interests in portfolio company assets, coupled with equity interests. On a more limited basis, we also invest in senior debt securities secured by first lien security interests in portfolio companies. Our investments generally range from $5.0 million to $35.0 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

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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 is instead 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 March 31, 2014 and December 31, 2013, the weighted average yield on our outstanding debt investments other than non-accrual debt investments was approximately 13.9% and 14.1%, 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 12.4% and 12.8% as of March 31, 2014 and December 31, 2013, respectively. The weighted average yield on all of our outstanding investments (including equity and equity-linked investments and non-accrual debt investments) was approximately 12.0% and 12.4% as of March 31, 2014 and December 31, 2013 respectively.

Triangle SBIC and Triangle SBIC II are eligible to issue debentures to the SBA, which pools these with debentures of other SBICs and sells them in the capital markets at favorable interest rates, in part as a result of the guarantee of payment from the SBA. Triangle SBIC and Triangle SBIC II invest these funds in portfolio companies. We intend to continue to operate Triangle SBIC and Triangle SBIC II as SBICs, subject to SBA approval, and to utilize the proceeds from the issuance of SBA-guaranteed debentures, referred to herein as SBA leverage, to enhance returns to our stockholders.

Portfolio Investment Composition

The total value of our investment portfolio was $690.0 million as of March 31, 2014, as compared to $664.4 million as of December 31, 2013. As of March 31, 2014, we had investments in 83 portfolio companies with an aggregate cost of $680.9 million. As of December 31, 2013, we had investments in 79 portfolio companies with an aggregate cost of $653.8 million. As of both March 31, 2014 and December 31, 2013, none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio.

As of March 31, 2014 and December 31, 2013, our investment portfolio consisted of the following investments:



	Cost		Percentage of Total Portfolio		Fair Value		Percentage of Total Portfolio
March 31, 2014:
Subordinated debt and 2nd lien notes	$	555,943,162	82	%	$	528,881,970	77	%
Senior debt and 1st lien notes	46,314,233		7		46,190,878		7
Equity shares	68,927,729		10		92,612,571		13
Equity warrants	9,672,127		1		22,325,000		3
Royalty rights	—		—		—		—
	$	680,857,251	100	%	$	690,010,419	100	%
December 31, 2013:
Subordinated debt and 2nd lien notes	$	540,561,082	83	%	$	514,467,575	77	%
Senior debt and 1st lien notes	46,102,133		7		45,968,765		7
Equity shares	56,985,933		9		79,935,246		12
Equity warrants	10,168,637		1		23,928,603		4
Royalty rights	—		—		73,000		—
	$	653,817,785	100	%	$	664,373,189	100	%

Investment Activity

During the three months ended March 31, 2014, we made six new investments totaling approximately $63.7 million, debt investments in five existing portfolio companies totaling approximately $13.6 million and an equity investment in one existing portfolio company totaling approximately $0.1 million. We had four portfolio company loans repaid at par of approximately $30.3 million resulting in realized gains totaling approximately $0.1 million and received normal principal repayments and partial loan prepayments totaling approximately $19.3 million in the three months ended March 31, 2014. We converted debt investments in one portfolio company into an equity investment and recognized a net realized loss on such conversion totaling approximately $0.2 million. In addition, we received proceeds related to the sales of certain equity securities totaling approximately $2.3 million and recognized net realized gains on such sales totaling approximately $0.2 million in the three months ended March 31, 2014.

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During the three months ended March 31, 2013, the Company made debt investments in six existing portfolio companies totaling approximately $8.5 million and equity investments in two existing portfolio companies totaling approximately $1.8 million. We had one portfolio company loan repaid at par of approximately $5.8 million and received normal principal repayments and partial loan prepayments totaling approximately $2.0 million in the three months ended March 31, 2013. In addition, we received proceeds related to the sales of certain equity securities totaling $1.5 million and realized gains totaling approximately $1.3 million in the three months ended March 31, 2013.

Total portfolio investment activity for the three months ended March 31, 2014 and 2013 was as follows:



Three Months Ended March 31, 2014:	Subordinated Debt and 2^nd Lien Notes			Senior Debt and 1^st Lien Notes			Equity Shares			Equity Warrants			Royalty Rights			Total
Fair value, beginning of period	$	514,467,575		$	45,968,765		$	79,935,246		$	23,928,603		$	73,000		$	664,373,189
New investments	69,887,760			3,985,889			3,624,833			—			—			77,498,482
Reclassifications	(6,055,524		)	(3,872,476		)	9,928,000			—			—			—
Proceeds from sales of investments	—			—			(1,700,120		)	(1,020,255		)	—			(2,720,375		)
Loan origination fees received	(1,290,041		)	(77,778		)	—			—			—			(1,367,819		)
Principal repayments received	(48,991,007		)	(97,404		)	—			—			—			(49,088,411		)
PIK interest earned	3,494,150			240,271			—			—			—			3,734,421
PIK interest payments received	(2,262,217		)	—			—			—			—			(2,262,217		)
Accretion of loan discounts	346,201			—			—			—			—			346,201
Accretion of deferred loan origination revenue	801,938			33,598			—			—			—			835,536
Realized gain	(549,180		)	—			89,083			523,745			—			63,648
Unrealized gain (loss)	(967,685		)	10,013			735,529			(1,107,093		)	(73,000		)	(1,402,236		)
Fair value, end of period	$	528,881,970		$	46,190,878		$	92,612,571		$	22,325,000		$	—		$	690,010,419
Weighted average yield on debt investments at end of period(1)																13.9		%
Weighted average yield on total investments at end of period(1)																12.4		%
Weighted average yield on total investments at end of period																12.0		%


(1)	Excludes non-accrual debt investments.

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Three Months Ended March 31, 2013:	Subordinated Debt and 2^nd Lien Notes			Senior Debt and 1^st Lien Notes			Equity Shares			Equity Warrants			Royalty Rights			Total
Fair value, beginning of period	$	559,355,550		$	46,576,994		$	78,979,179		$	21,759,000		$	132,000		$	706,802,723
New investments	5,513,545			1,500,000			1,100,000			2,146,000			—			10,259,545
Reclassifications	18,570,523			(18,570,523		)	—			—			—			—
Proceeds from sales of investments	—			—			(1,437,000		)	(37,000		)	—			(1,474,000		)
Loan origination fees received	(255,159		)	—			—			—			—			(255,159		)
Principal repayments received	(7,577,746		)	(223,200		)	—			—			—			(7,800,946		)
PIK interest earned	4,017,911			196,883			—			—			—			4,214,794
PIK interest payments received	(529,733		)	—			—			—			—			(529,733		)
Accretion of loan discounts	396,661			—			—			—			—			396,661
Accretion of deferred loan origination revenue	706,745			27,349			—			—			—			734,094
Realized gains	578,782			—			1,237,000			37,000			—			1,852,782
Unrealized gain (loss)	595,323			5,622			929,217			(181,006		)	(24,000		)	1,325,156
Fair value, end of period	$	581,372,402		$	29,513,125		$	80,808,396		$	23,723,994		$	108,000		$	715,525,917
Weighted average yield on debt investments at end of period(1)																14.8		%
Weighted average yield on total investments at end of period(1)																13.4		%
Weighted average yield on total investments at end of period																12.8		%


(1)	Excludes non-accrual debt investments.

Non-Accrual Assets

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. As of March 31, 2014, the fair value of our non-accrual assets was approximately $1.1 million, which comprised 0.2% of the total fair value of our portfolio, and the cost of our non-accrual assets was approximately $15.0 million, which comprised 2.2% of the total cost of our portfolio. As of December 31, 2013, the fair value of our non-accrual assets was approximately $7.1 million, which comprised 1.1% of the total fair value of our portfolio, and the cost of our non-accrual assets was approximately $27.0 million, which comprised 4.1% of the total cost of our portfolio.

Our non-accrual assets as of March 31, 2014 were 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. Under the terms of the notes, interest on the notes is payable only if Gerli meets certain covenants, which they were not compliant with as of March 31, 2014. In the three months ended March 31, 2014, we recognized unrealized appreciation on our debt investments in Gerli of approximately $0.1 million. As of March 31, 2014, the cost of our debt investments in Gerli was $3.4 million and the fair value of such investments was $0.8 million.

Venture Technology Groups, Inc.

In November 2012, we placed our debt investment in Venture Technology Groups, Inc., or VTG, on non-accrual status. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investment in VTG for financial reporting purposes. During the three months ended March 31, 2014, we recorded unrealized depreciation of $0.1 million on our debt investment in VTG. As of March 31, 2014, the cost of our debt investment in VTG was $5.7 million and the fair value of such investment was $0.3 million.

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Xchange Technology Groups, LLC

In March 2013, we placed our debt investment in Xchange Technology Groups, LLC, or XTG, on non-accrual status. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investment in XTG for financial reporting purposes. In October 2013, XTG filed for bankruptcy protection under Canada's Bankruptcy and Insolvency Act and under Chapter 15 of the United States Bankruptcy Code. As of March 31, 2014, the cost of our debt investment in XTG was $5.9 million and the fair value of such investment was zero.

PIK Non-Accrual Assets

In addition to our non-accrual assets, as of March 31, 2014, we had debt investments in four portfolio companies (our subordinated notes to DCWV Acquisition Corporation, Frozen Specialties, Inc., Minco Technology Labs, LLC, and FCL Holding SPV, LLC) that were on non-accrual only with respect to the PIK interest component of the loans. As of March 31, 2014, the fair value of these debt investments was approximately $13.5 million, or 2.0% of the total fair value of our portfolio and the cost of these assets was approximately $23.5 million, or 3.5% of the total cost of our portfolio.

Results of Operations

Comparison of three months ended March 31, 2014 and March 31, 2013

Investment Income

For the three months ended March 31, 2014, total investment income was $24.0 million, a 2% decrease from $24.5 million of total investment income for the three months ended March 31, 2013. This decrease was primarily attributable to a $0.5 million decrease in total loan interest (including PIK interest), fee and dividend income. The decrease in total loan interest, fee and dividend income was due to a net decrease in our outstanding loan balances from March 31, 2013 to March 31, 2014, partially offset by (i) an increase in non-recurring fee income of approximately $1.0 million and (ii) an increase in non-recurring dividend income of approximately $1.1 million. Non-recurring fee income was $1.5 million for the three months ended March 31, 2014 as compared to $0.5 million for the three months ended March 31, 2013, and non-recurring dividend income was $1.2 million for the three months ended March 31, 2014 as compared to $0.1 million for the three months ended March 31, 2013.

Operating Expenses

For the three months ended March 31, 2014, operating expenses increased by 10% to $10.2 million from $9.2 million for the three months ended March 31, 2013. Our operating expenses consist of interest and other financing fees and general and administrative expenses. For both the three months ended March 31, 2014 and March 31, 2013, interest and other financing fees was $5.1 million.

Our general and administrative expenses are primarily influenced by compensation, headcount and levels of business activity. Our compensation expenses include salaries, discretionary compensation, equity-based compensation and benefits. Discretionary compensation is significantly impacted by our level of total investment income, our investment results including investment realizations, prevailing labor markets and the external environment. As a result of these and other factors, our compensation expense can fluctuate materially from period to period. Accordingly, the amount of compensation expense recognized in any particular period may not be indicative of compensation expense in a future period.

For the three months ended March 31, 2014, general and administrative expenses increased by 23% to $5.1 million from $4.1 million for the three months ended March 31, 2013. In addition, our efficiency ratio (defined as general and administrative expenses as a percentage of total investment income) increased to 21.0% for the three months ended March 31, 2014 from 16.8% for the three months ended March 31, 2013. The increase in general and administrative expenses in the quarter ended March 31, 2014 was primarily related to increased cash and equity-based compensation expenses.

Net Investment Income

As a result of the $0.4 million decrease in total investment income and the $1.0 million increase in expenses, net investment income decreased by 9% to $13.8 million for the three months ended March 31, 2014 as compared to $15.2 million for the three months ended March 31, 2013.

Net Increase in Net Assets Resulting from Operations

In the three months ended March 31, 2014, we realized gains on the sales/repayments of two non-control/non-affiliate investments totaling approximately $0.7 million, a loss relating to the sale of one non-control/non-affiliate investment totaling approximately $0.4 million and a loss on the restructuring of one control investment totaling approximately $0.2 million. In addition, during the three months ended March 31, 2014, we recorded net unrealized depreciation of investments totaling $1.5

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million, consisting of unrealized depreciation on our current portfolio of approximately $0.9 million and unrealized depreciation reclassification adjustments of $0.6 million related to the realized gains and losses noted above.

In the three months ended March 31, 2013, we realized a gain on the sale of one affiliate investment of approximately $1.3 million and a gain on the refinancing of one non-control/non-affiliate investments totaling approximately $0.6 million. In addition, during the three months ended March 31, 2013, we recorded net unrealized depreciation of investments totaling approximately $1.8 million, consisting of unrealized appreciation on our current portfolio of approximately $3.1 million and unrealized depreciation reclassification adjustments of $1.3 million million related to the realized gains and losses noted above.

In the three months ended March 31, 2013, we recognized a non-cash loss on the extinguishment of debt of approximately $0.4 million related to the prepayment of SBA-guaranteed debentures.

As a result of these events, our net increase in net assets resulting from operations was $12.5 million for the three months ended March 31, 2014, a decrease of 32% from the net increase in net assets resulting from operations of $18.4 million for the three months ended March 31, 2013.

Liquidity and Capital Resources

We believe that our current cash and cash equivalents on hand, our available leverage under our Credit Facility (as defined below) 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 Triangle SBIC’s assets and Triangle SBIC II’s assets pursuant to SBA guidelines, Triangle SBIC and Triangle SBIC 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 three months ended March 31, 2014, we experienced a net decrease in cash and cash equivalents in the amount of $42.5 million. During that period, our operating activities used $21.4 million in cash, consisting primarily of new portfolio investments of $77.5 million, partially offset by repayments received from portfolio companies and proceeds from sales of portfolio investments of approximately $51.8 million. In addition, financing activities reduced cash by $21.0 million, consisting primarily of cash dividends paid in the amount of $14.5 million and cash distributions of capital gains paid in the amount of $4.0 million. As of March 31, 2014, we had $90.8 million of cash and cash equivalents on hand.

For the three months ended March 31, 2013, we experienced a net decrease in cash and cash equivalents in the amount of $35.3 million. During that period, our operating activities used $0.7 million in cash, consisting primarily of portfolio investments of $10.3 million, partially offset by repayments received from portfolio companies totaling $9.3 million. In addition, financing activities reduced cash by $34.6 million, consisting primarily of cash dividends paid in the amount of $14.1 million and voluntary prepayments of SBA-guaranteed debentures of $20.5 million. As of March 31, 2013, we had $37.0 million of cash and cash equivalents on hand.

Financing Transactions

Due to Triangle SBIC’s and Triangle SBIC II’s status as licensed SBICs, Triangle SBIC and Triangle SBIC 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 up to two times (and in certain cases, 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 prepaid at any time, without penalty. Our SBA-guaranteed debentures are collateralized by the assets of Triangle SBIC and Triangle SBIC II.

As of March 31, 2014, Triangle SBIC had issued $118.7 million of SBA-guaranteed debentures and had the current capacity to issue up to the statutory maximum of $150.0 million, subject to SBA approval. As of March 31, 2014, Triangle SBIC II had issued $75.0 million in face amount of SBA-guaranteed debentures. 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 (2.0% for SBA LMI debentures). These fees are capitalized as deferred financing costs and are amortized over the term of the debt

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agreements using the effective interest method. The weighted average interest rate for all SBA-guaranteed debentures as of March 31, 2014 was 4.07%. As of March 31, 2014, all SBA-guaranteed debentures were pooled.

In June 2013, we entered into a second amended and restated senior secured credit facility, or Credit Facility, to provide liquidity in support of our investment and operational activities. The Credit Facility, which has an initial commitment of $165.0 million supported by nine financial institutions, replaced our $165.0 million senior secured credit facility entered into in September 2012. The Credit Facility, which matures on September 17, 2017, allows us to borrow foreign currencies (initially Canadian dollars) directly under the Credit Facility.

The Credit Facility has an accordion feature that allows for an increase in the total commitment size up to $215.0 million, subject to certain conditions, and also contains a one-year extension option to September 17, 2018. The Credit Facility, which is structured to operate like a revolving credit facility, is secured primarily by our assets, excluding the assets of Triangle SBIC and Triangle SBIC II.

Borrowings under the Credit Facility bear interest, subject to our election, on a per annum basis equal to (i) the applicable base rate plus 1.75%, (ii) the applicable LIBOR rate plus 2.75%, or (iii) for borrowings denominated in Canadian dollars, the applicable Canadian Dealer Offered Rate plus 2.75%. The applicable base rate is equal to the greater of (i) the prime rate, (ii) the federal funds rate plus 0.5% or (iii) the adjusted one-month LIBOR rate plus 2.0%. We pay a commitment fee of 0.375% per annum on undrawn amounts, which is included with interest and other financing fees on our Consolidated Statements of Operations. Borrowings under the Credit Facility are also limited to a borrowing base, which includes certain cash and a portion of eligible debt investments.

As of March 31, 2014, we had non-United States dollar borrowings denominated in Canadian dollars of $12.0 million ($10.9 million United States dollars) outstanding under the Credit Facility with an interest rate of 4.01%. The borrowings denominated in Canadian dollars are translated into United States dollars based on the spot rate at each balance sheet date. The impact resulting from changes in foreign exchange rates on the Credit Facility borrowings is included in unrealized appreciation (depreciation) on foreign currency borrowings in our Unaudited Consolidated Statements of Operations. The borrowings denominated in Canadian dollars may be positively or negatively affected by movements in the rate of exchange between the United States dollar and the Canadian dollar. This movement is beyond our control and cannot be predicted.

The Credit Facility contains certain affirmative and negative covenants, including but not limited to (i) maintaining a minimum interest coverage ratio, (ii) maintaining minimum consolidated tangible net worth and (iii) maintaining its status as a regulated investment company and as a BDC. As of March 31, 2014 we were in compliance with all covenants of the Credit Facility.

In March 2012, we issued $69.0 million of 2019 Notes. The 2019 Notes mature on March 15, 2019, and may be redeemed in whole or in part at any time or from time to time at our option on or after March 15, 2015. The 2019 Notes bear interest at a rate of 7.00% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning June 15, 2012. The net proceeds from the sale of the 2019 Notes, after underwriting discounts and offering expenses, were approximately $66.7 million.

In October 2012, we issued $70.0 million of 2022 Notes and in November 2012, we issued $10.5 million of 2022 Notes pursuant to the exercise of an over-allotment option. The 2022 Notes mature on December 15, 2022, and may be redeemed in whole or in part at any time or from time to time at our option on or after December 15, 2015. The 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning December 15, 2012. The net proceeds from the sale of the 2022 Notes, after underwriting discounts and offering expenses, were approximately $77.8 million.

The indenture and supplements thereto relating to the 2019 Notes and the 2022 Notes contain certain covenants, including but not limited to (i) a requirement that we comply with the asset coverage requirements of the 1940 Act or any successor provisions, and (ii) a requirement that we provide financial information to the holders of the notes and the trustee under the indenture if we should no longer be subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

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Distributions to Stockholders

We elected to be treated as a RIC under the Internal Revenue Code of 1986, as amended, or the Code, commencing with our taxable year ended December 31, 2007. In order to maintain our qualification 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 have historically met our minimum distribution requirements and continually monitor our distribution requirements with the goal of ensuring compliance with the Code. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and our ability to make distributions will be limited by the asset coverage requirements under the 1940 Act.

The minimum distribution requirements applicable to RICs require us to distribute to our stockholders each year at least 90% of our investment company taxable income, or ICTI, as defined by the Code. 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 (i) PIK interest income and (ii) 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

We were able to secure access to additional liquidity in 2012, including public offerings of common stock and debt securities, new leverage through SBA-guaranteed debentures and entering into an expanded credit facility, and in 2013, were able to amend our credit facility to extend the term by one year. There can be no assurances, however, that the current market conditions will continue and that debt or equity capital will be available to us in the future on favorable terms, if it all. In 2008, the debt and equity capital markets in the United States were 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, led to an economic recession in the U.S. and abroad. Banks, investment companies and others in the financial services industry reported significant write-downs in the fair value of their assets, which led to the failure of a number of banks and investment companies, a number of distressed mergers and acquisitions and the government take-over of the nation's two largest government-sponsored mortgage companies. These events significantly impacted the financial and credit markets and 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, recent U.S. budget deficit concerns and uncertainty regarding potential federal spending cuts and the federal debt ceiling, together with continued signs of deteriorating sovereign debt conditions in Europe, have increased the possibility that these unfavorable conditions in the debt and equity capital markets may reoccur in the future and could then continue for a prolonged period of time.

Recent Developments

In April 2014, we invested $23.0 million in the subordinated debt and equity of PCX Aerostructures, LLC, or PCX. PCX manufacturers components and assemblies used in military and civilian aircraft, primarily helicopters. Under the terms of the investment, PCX will pay interest on the subordinated debt at a rate of 14%.

In April 2014, we exited our investments in Workforce Software, LLC. In connection with the exit, we received proceeds of $21.4 million and recognized capital gains totaling approximately $11.1 million.

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Critical Accounting Policies and Use of Estimates

The preparation of our unaudited financial statements in accordance with U.S. GAAP 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 in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures, or ASC Topic 820. Under ASC Topic 820, a financial instrument is categorized within the ASC Topic 820 valuation hierarchy based upon the lowest level of input to the valuation process that is significant to the fair value measurement. The three levels of valuation inputs established by ASC Topic 820 are as follows:

Level 1 Inputs – include quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 3 Inputs – include inputs that are unobservable and significant to the fair value measurement.

Our investment portfolio is comprised of debt and equity instruments of privately held companies for which quoted prices or other inputs falling within the categories of Level 1 and Level 2 are not available. Therefore, we determine the fair value of our investments in good faith using Level 3 inputs, pursuant to a valuation policy and process that is established by our management with the assistance of certain third-party advisors and subsequently approved by our Board of Directors. There is no single standard for determining fair value in good faith, as fair value depends upon the specific circumstances of each individual investment. The recorded fair values of our investments may differ significantly from fair values that would have been used had an active market for the securities existed. 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.

Our valuation process is led by our executive officers and managing directors. The valuation process begins with a quarterly review of each investment in our investment portfolio by our executive officers and our investment committee. Valuations of each portfolio security are then prepared by our investment professionals, who have direct responsibility for the origination, management and monitoring of each investment. Under our valuation policy, each investment valuation is subject to (i) a review by the lead investment officer responsible for the portfolio company investment and (ii) a peer review by a second investment officer or executive officer. Generally, any investment that is valued below cost is subjected to review by one of our executive officers. After the peer review is complete, we engage two independent valuation firms, Duff & Phelps, LLC and Lincoln Partners Advisors LLC, collectively, the "Valuation Firms," to provide third-party reviews of certain investments, as described further below. Finally, the Board of Directors has the responsibility for reviewing and approving, in good faith, the fair value of our investments in accordance with the 1940 Act.

The Valuation Firms provide third party valuation consulting services to us which consist of certain limited procedures that we identified and requested the Valuation Firms to perform, which we refer herein to as the Procedures. The Procedures are performed with respect to 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 addition, the Procedures are generally performed with respect to a portfolio company when there has been a significant change in the fair value of the 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 the Valuation Firms to perform the Procedures on one or more portfolio companies. Such instances include, but are not limited to, situations where the fair value of the investment in the portfolio company is determined to be insignificant relative to the total investment portfolio.

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The total number of investments and the percentage of our portfolio on which the Procedures were performed are summarized below by period:



For the quarter ended:	Total companies	Percent of total investments at fair value⁽¹⁾
March 31, 2013	17	23%
June 30, 2013	13	27%
September 30, 2013	14	28%
December 31, 2013	14	21%
March 31, 2014	15	25%


(1)	Exclusive of the fair value of new investments made during the quarter.

Upon completion of the Procedures, the Valuation Firms concluded that, with respect to each investment reviewed by each Valuation Firm, the fair value of those investments subjected to the Procedures appeared reasonable. Our Board of Directors is ultimately responsible for determining the fair value of our investments in good faith.

Investment Valuation Inputs

Under ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between a willing buyer and a willing seller at the measurement date. For our portfolio securities, fair value is generally the amount that we might reasonably expect to receive upon the current sale of the security. Under ASC Topic 820, the fair value measurement assumes that the sale occurs in the principal market for the security, or in the absence of a principal market, in the most advantageous market for the security. Under ASC Topic 820, if no market for the security exists or if we do not have access to the principal market, the security should be valued based on the sale occurring in a hypothetical market. The securities in which we invest are generally only purchased and sold in merger and acquisition transactions, in which case the entire portfolio company is sold to a third-party purchaser. As a result, unless we have the ability to control such a transaction, the assumed principal market for our securities is a hypothetical secondary market. The Level 3 inputs to our valuation process reflect management’s best estimate of the assumptions that would be used by market participants in pricing the investment in a transaction in a hypothetical secondary market.

Enterprise Value Waterfall Approach

In valuing equity securities (including warrants), we estimate fair value using an “Enterprise Value Waterfall” valuation model. We estimate the enterprise value of a portfolio company and then allocate the enterprise value to the portfolio company’s securities in order of their relative liquidation preference. In addition, the model assumes that any outstanding debt or other securities that are senior to our equity securities are required to be repaid at par. Additionally, we estimate the fair value of a limited number of its debt securities using the Enterprise Value Waterfall approach in cases where we do not expect to receive full repayment.

To estimate the enterprise value of the portfolio company, we primarily use a valuation model based on a transaction multiple, which generally is the original transaction multiple, and measures of the portfolio company’s financial performance. In addition, we consider other factors, including but not limited to (i) offers from third-parties to purchase the portfolio company, (ii) the implied value of recent investments in the equity securities of the portfolio company, (iii) publicly available information regarding recent sales of private companies in comparable transactions and (iv) when management believes there are comparable companies that are publicly traded, we perform a review of these publicly traded companies and the market multiple of their equity securities.

The significant Level 3 inputs to the Enterprise Value Waterfall model are (i) an appropriate transaction multiple and (ii) a measure of the portfolio company’s financial performance, which generally is either earnings before interest, taxes, depreciation and amortization, as adjusted, or Adjusted EBITDA, or revenues. Such inputs can be based on historical operating results, projections of future operating results or a combination thereof. The operating results of a portfolio company may be unaudited, projected or pro forma financial information and may require adjustments for certain non-recurring items. In determining the operating results input, we utilize the most recent portfolio company financial statements and forecasts available as of the valuation date. Management also consults with the portfolio company’s senior management to obtain updates on the portfolio company’s performance, including information such as industry trends, new product development, loss of customers 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;

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•	the size of the security held;


•	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;


•	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;


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


•	special reports prepared by analysts; and


•	any other factors we deem pertinent with respect to a particular investment.

Fair value measurements using the Enterprise Value Waterfall model can be sensitive to significant changes in one or more of the inputs. A significant increase in either the transaction multiple, Adjusted EBITDA or revenues for a particular equity security would result in a higher fair value for that security.

Income Approach

In valuing debt securities, we utilize an “Income Approach” model that considers factors including, but not limited to, (i) the stated yield on the debt security, (ii) the portfolio company’s current trailing twelve months, or TTM Adjusted EBITDA as compared to the portfolio company’s historical or projected Adjusted EBITDA as of the date the investment was made and the portfolio company’s anticipated Adjusted EBITDA for the next twelve months of operations, (iii) the portfolio company’s current Leverage Ratio (defined as the portfolio company’s total indebtedness divided by Adjusted EBITDA) as compared to its Leverage Ratio 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 addition, we 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. This risk rating system covers both qualitative and quantitative aspects of the business and the securities held.

We consider the factors above, particularly any significant changes in the portfolio company’s results of operations and leverage, and develop an expectation of the yield that a hypothetical market participant would require when purchasing the debt investment, which we refer to herein as the Required Rate of Return. The Required Rate of Return, along with the Leverage Ratio and Adjusted EBITDA, are the significant Level 3 inputs to the Income Approach model. For investments where the Leverage Ratio and Adjusted EBITDA have not fluctuated significantly from the date the investment was made or have not fluctuated significantly from management’s expectations as of the date the investment was made, and where there have been no significant fluctuations in the market pricing for such investments, we may conclude that the Required Rate of Return is equal to the stated rate on the investment and therefore, the debt security is appropriately priced. In instances where we determine that the Required Rate of Return is different from the stated rate on the investment, we discount the contractual cash flows on the debt instrument using the Required Rate of Return in order to estimate the fair value of the debt security.

The fair value of our royalty rights are calculated based on specific provisions contained in the pertinent operating or royalty agreements. The determination of the fair value of such royalty rights is not a significant component of our valuation process.

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Revenue Recognition

Interest and Dividend 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 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. The cessation of recognition of such interest will negatively impact the reported fair value of the investment. 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.

We may have to include in our ICTI interest income, including OID 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. As a result, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements to maintain our RIC status, even though we will not have received and may not ever receive any corresponding cash amount. Additionally, any loss recognized by us for federal income tax purposes on previously accrued interest income will be treated as a capital loss.

Fee Income

Origination, facility, commitment, consent and other advance fees received in connection with the origination of a loan, or Loan Origination Fees, are recorded as deferred income and recognized as investment income over the term of the loan. Upon prepayment of a loan, any unamortized Loan Origination Fees are recorded as investment income. In the general course of our business, we receive certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, certain investment banking and structuring fees and loan waiver and amendment fees, and are recorded as investment income when earned.

Payment-in-Kind (PIK) Interest Income

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 periodically 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.

PIK interest, which is a non-cash source of income, is included in our taxable income and therefore affects the amount we are required to distribute to our stockholders to maintain our qualification as a RIC for federal income tax purposes, 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 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 PIK interest when it is determined that the PIK interest is no longer collectible.

We may have to include in our ICTI, PIK 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. As a result, 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.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are subject to market risk. Market risk includes risks that arise from changes in interest rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. The prices of securities held by us may decline in response to certain events, including those directly involving the companies we invest in; conditions affecting the general economy; overall market changes; legislative reform; local, regional, national or global political, social or economic instability; and interest rate fluctuations.

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The U.S economy recently experienced a severe recession. To the extent that recessionary conditions recur, the economy remains stagnant, any further downgrades to U.S. government’s sovereign credit rating occur, the European credit crisis continues, or the economy fails to return to pre-recession levels, the financial position and results of operations of certain of the lower 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.

As of March 31, 2014, the fair value of our non-accrual assets was approximately $1.1 million, which comprised approximately 0.2% of the total fair value of our portfolio, and the cost of our non-accrual assets was approximately $15.0 million, or 2.2% of the total cost of our portfolio.

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 net investment income is affected by fluctuations in various interest rates, including LIBOR, Canadian Dealer Offered Rate and prime rates. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks. 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 March 31, 2014, we were not a party to any hedging arrangements.

As of March 31, 2014, approximately 92.9%, or $559.3 million (at cost), of our debt portfolio investments bore interest at fixed rates and approximately 7.1%, or $42.9 million (at cost), of our debt portfolio investments bore interest at variable rates, which are either prime-based or LIBOR-based, and all of which are subject to certain floors. A hypothetical 200 basis point increase or decrease in the interest rates on our variable-rate debt investments could increase or decrease, as applicable, our investment income by a maximum of approximately $0.9 million on an annual basis. All of our SBA-guaranteed debentures, our 2019 Notes and our 2022 Notes bear interest at fixed rates. Our Credit Facility bears interest, subject to the Company's election, on a per annum basis equal to (i) the applicable base rate plus 1.75%, (ii) the applicable LIBOR rate plus 2.75%, or (iii) for borrowings denominated in Canadian dollars, the applicable Canadian Dealer Offered Rate plus 2.75%. The applicable base rate is equal to the greater of (i) the prime rate, (ii) the federal funds rate plus 0.5% or (iii) the adjusted one-month LIBOR rate plus 2.0%.

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.

We may also have exposure to foreign currencies (Canadian dollar) related to certain investments. Such investments are translated into United States dollars based on the spot rate at each balance sheet date, exposing us to movements in the exchange rate. In order to reduce our exposure to fluctuations in exchange rates, we generally borrow in Canadian dollars under our Credit Facility to finance such investments. As of March 31, 2014, we had non-United States dollar borrowings denominated in Canadian dollars of $12.0 million ($10.9 million United States dollars) outstanding under the Credit Facility with an interest rate of 4.01%.

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 Exchange Act 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

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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 first quarter of 2014 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, 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, 2013, which could materially affect our business, financial condition or operating results. The risks described 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.

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

Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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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	Fourth Amended and Restated Bylaws of the Registrant (Filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 7, 2014 and incorporated herein by reference).

4.1	Form of Common Stock Certificate (Filed as Exhibit (d) to the Registrant’s Post-Effective Amendment No. 1 to the 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	Dividend Reinvestment Plan of the Registrant (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).

4.4	Indenture, dated March 2, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit (d)(5) to the Registrant’s Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 filed with the Securities and Exchange Commission on March 2, 2012 and incorporated herein by reference).

4.5	First Supplemental Indenture, dated March 2, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit (d)(6) to the Registrant’s Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 filed with the Securities and Exchange Commission on March 2, 2012 and incorporated herein by reference).

4.6	Form of 7.00% Senior Note Due 2019 (Contained in the First Supplemental Indenture filed as Exhibit (d)(6) to the Registrant’s Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 filed with the Securities and Exchange Commission on March 2, 2012 and incorporated herein by reference).

4.7	Second Supplemental Indenture, dated October 19, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2012 and incorporated herein by reference).

4.8	Form of 6.375% Senior Note Due 2022 (Contained in the Second Supplemental Indenture filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2012 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.**


*	Filed Herewith.


**	Furnished Herewith.

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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:	May 7, 2014	/s/ Garland S. Tucker, III
		Garland S. Tucker, III
		Chief Executive Officer and
		Chairman of the Board of Directors

Date:	May 7, 2014	/s/ Steven C. Lilly
		Steven C. Lilly
		Chief Financial Officer and Director

Date:	May 7, 2014	/s/ C. Robert Knox, Jr.
		C. Robert Knox, Jr.
		Principal Accounting Officer

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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	Fourth Amended and Restated Bylaws of the Registrant (Filed as Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 7, 2014 and incorporated herein by reference).

4.1	Form of Common Stock Certificate (Filed as Exhibit (d) to the Registrant's Post-Effective Amendment No. 1 to the 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	Dividend Reinvestment Plan of the Registrant (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).

4.4	Indenture, dated March 2, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit (d)(5) to the Registrant's Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 filed with the Securities and Exchange Commission on March 2, 2012 and incorporated herein by reference).

4.5	First Supplemental Indenture, dated March 2, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit (d)(6) to the Registrant's Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 filed with the Securities and Exchange Commission on March 2, 2012 and incorporated herein by reference).

4.6	Form of 7.00% Senior Note Due 2019 (Contained in the First Supplemental Indenture filed as Exhibit (d)(6) to the Registrant's Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 filed with the Securities and Exchange Commission on March 2, 2012 and incorporated herein by reference).

4.7	Second Supplemental Indenture, dated October 19, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2012 and incorporated herein by reference).

4.8	Form of 6.375% Senior Note Due 2022 (Contained in the Second Supplemental Indenture filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2012 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.**


*	Filed Herewith.


**	Furnished Herewith.