Oxford Square Capital Corp. - 6 (OXSQ) 10-K 2014 FY Annual report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 10-K

 

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014

OR

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

FOR THE TRANSITION PERIOD FROM          TO         

COMMISSION FILE NUMBER: 0-50398

 

TICC CAPITAL CORP.

(Exact name of registrant as specified in its charter)

 

Maryland	20-0188736
(State of Incorporation)	(I.R.S. Employer Identification Number)

8 Sound Shore Drive, Suite 255
Greenwich, CT 06830

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (203) 983-5275

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange On Which Registered
Common Stock, par value $0.01 per share	NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yeso Nox.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yeso Nox.

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.Yesx Noo.

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yeso Noo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o

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

Large accelerated filero	Accelerated filerx
Non-accelerated filero (Do not check if a smaller reporting company)	Smaller reporting companyo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yeso Nox.

The aggregate market value of common stock held by non-affiliates of the Registrant on June 30, 2014, based on the closing price on that date of $9.90 on the NASDAQ Global Select Market, was $586,745,914. For the purposes of calculating this amount only, all directors and executive officers of the Registrant have been treated as affiliates. There were 59,987,986 shares of the Registrant’s common stock outstanding as of March 3, 2015.

Documents Incorporated by Reference

Portions of the registrant’s definitive Proxy Statement relating to the registrant’s 2015 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company’s fiscal year, are incorporated by reference in Part III of this Annual Report on Form 10-K as indicated herein.

TICC CAPITAL CORP.
FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2014

TABLE OF CONTENTS

	Page
PART I
ITEM 1. BUSINESS		1
ITEM 1A. RISK FACTORS		24
ITEM 1B. UNRESOLVED STAFF COMMENTS		50
ITEM 2. PROPERTIES		50
ITEM 3. LEGAL PROCEEDINGS		50
ITEM 4. MINE SAFETY DISCLOSURES		50
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER   MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		51
ITEM 6. SELECTED FINANCIAL AND OTHER DATA		54
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION   AND RESULTS OF OPERATIONS		55
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		93
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		94
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT REGISTERED   PUBLIC ACCOUNTING FIRM ON ACCOUNTING AND FINANCIAL   DISCLOSURE		145
ITEM 9A. CONTROLS AND PROCEDURES		145
ITEM 9B. OTHER INFORMATION		145
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		146
ITEM 11. EXECUTIVE COMPENSATION		146
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND   MANAGEMENT AND RELATED STOCKHOLDER MATTERS		146
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR   INDEPENDENCE		146
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES		146
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES		147
SIGNATURES		151

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PART I

Item 1. Business

TICC Capital Corp. (“TICC,” “Company,” “we,” “us,” or “our”) is a closed-end, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Our investment objective is to maximize our portfolio’s total return. Our primary focus is to seek current income by investing primarily in corporate debt securities. Our debt investments may include bilateral loans (loans where we hold the entirety of a particular loan) and syndicated loans (those where multiple investors hold portions of that loan). We have and may continue to invest in structured finance investments, including collateralized loan obligation (“CLO”) investment vehicles, that own debt securities. CLO investments may also include warehouse facilities, which are financing structures intended to aggregate loans that may be used to form the basis of a CLO vehicle. We may also invest in publicly traded debt and/or equity securities. As a BDC, we may not acquire any asset other than “qualifying assets” unless, at the time we make the acquisition, the value of our qualifying assets represents at least 70% of the value of our total assets.

Our capital is generally used by corporate borrowers to finance organic growth, acquisitions, recapitalizations and working capital. Our investment decisions are based on extensive analysis of potential portfolio companies’ business operations supported by an in-depth understanding of the quality of their recurring revenues and cash flow, variability of costs and the inherent value of their assets, including proprietary intangible assets and intellectual property. In making our CLO investments, we consider the indenture structure for that vehicle, its operating characteristics and compliance with its various indenture provisions, as well as its corporate loan-based collateral pool.

We generally expect to invest between $5.0 million and $50.0 million in each of our portfolio investments, although this investment size may vary as the size of our capital base changes and market conditions warrant, and to accrue interest at fixed or variable rates. We expect that our investment portfolio will be diversified among a large number of investments with few investments, if any, exceeding 5% of the total portfolio.

The structures of our investments will vary and we invest across a wide range of different industries. We seek to invest in entities that, as a general matter, have been operating for at least one year prior to the date of our investment and that will, at the time of our investment, have employees and revenues, and which are cash flow positive. Many of these companies will have financial backing provided by other financial or strategic sponsors at the time we make an investment. The portfolio companies in which we invest, however, will generally be considered below investment grade, and their debt securities may in turn be referred to as “junk.” A portion of our investment portfolio may consist of debt investments for which issuers are not required to make significant principal payments until the maturity of the senior loans, which could result in a substantial loss to us if such issuers are unable to refinance or repay their debt at maturity. In addition, many of the debt securities we hold typically contain interest reset provisions that may make it more difficult for a borrower to repay the loan, heightening the risk that we may lose all or part of our investment.

We also purchase portions of equity and junior debt tranches of collateralized loan obligation (“CLO”) vehicles. Substantially all of the CLO vehicles in which we may invest would be deemed to be investment companies under the 1940 Act but for the exceptions set forth in section 3(c)(1) or section 3(c)(7). Structurally, CLO vehicles are entities that were formed to originate and manage a portfolio of loans. The loans within the CLO vehicle are limited to loans which meet established credit criteria and are subject to concentration limitations in order to limit a CLO vehicle’s exposure to a single credit. A CLO vehicle is formed by raising various classes or “tranches” of debt (with the most senior tranches being rated “AAA” to the most junior tranches typically being rated “BB” or “B”) and equity. The CLO vehicles which we focus on are collateralized primarily by senior secured loans made to companies whose debt is unrated or is rated below investment grade, and generally have very little or no exposure to real estate, mortgage loans or to pools of consumer-based debt, such as credit card receivables or auto loans. Our investment strategy may also include warehouse facilities, which are financing structures intended to aggregate loans that may be used to form the basis of a CLO vehicle.

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We have historically and may continue to borrow funds to make investments. As a result, we may be exposed to the risks of leverage, which may be considered a speculative investment technique. Borrowings, also known as leverage, magnify the potential for gain and loss on amounts invested and therefore increase the risks associated with investing in our securities. In addition, the costs associated with our borrowings, including any increase in the management fee payable to our investment adviser, TICC Management, LLC (“TICC Management”), will be borne by our common stockholders.

Securitization Vehicle

On August 23, 2012, the Company completed a $160.0 million debt securitization financing transaction, consisting of $120.0 million in secured notes and $40.0 million of subordinated notes. The secured and subordinated notes were issued by TICC CLO 2012-1 LLC (“2012 Securitization Issuer” or “TICC CLO 2012-1”), which is a special purpose vehicle that is a wholly-owned subsidiary of TICC. TICC presently owns all of the subordinated notes (the “2012 Subordinated Notes”) issued in the CLO transaction. On February 25, 2013 and May 28, 2013, TICC CLO 2012-1 LLC issued additional secured notes totaling an aggregate of $120 million and subordinated notes totaling an aggregate of $40.0 million, which subordinated notes were purchased by the Company, under the “accordion” feature of the debt securitization which allowed, under certain circumstances and subject to the satisfaction of certain conditions, for an increase in the amount of secured and subordinated notes. It is not necessary that the Company own all or any of the notes permitted by this feature, which may affect the accounting treatment of the debt securitization financing transaction.

As of December 31, 2014 the secured notes of the 2012 Securitization Issuer have an aggregate face amount of $240.0 million and were issued in four classes. The class A-1 notes have a current face amount of $176.0 million, are rated AAA(sf)/Aaa(sf) by S&P and Moody’s, respectively, and bear interest at three-month LIBOR plus 1.75%. The class B-1 notes have a current face amount of $20.0 million, are rated AA(sf)/Aa2(sf) by S&P and Moody’s, respectively, and bear interest at three-month LIBOR plus 3.50%. The class C-1 notes have a current initial face amount of $23.0 million, are rated A(sf)/A2(sf) by S&P and Moody’s, respectively, and bear interest at three-month LIBOR plus 4.75%. The class D-1 notes have a current face amount of $21.0 million, are rated BBB(sf)/Baa2(sf) by S&P and Moody’s, respectively, and bear interest at three-month LIBOR plus 5.75%. The LIBOR rate which is the basis of the total interest rate on the secured notes that were issued by the 2012 Securitization Issuer was measured on a six-month basis until February 2013. The secured notes of the 2012 Securitization Issuer have a stated maturity date of August 25, 2023 and are subject to a two year non-call period, during which the notes may not be repaid. This CLO has a four year reinvestment period, during which the proceeds from the repayment of its underlying investments may be reinvested in new portfolio securities.

The 2012 Securitization Issuer was formed to provide us with access to additional capital for investment by permitting us to issue debt securities to securitize a portion of our existing portfolio investments, selected by us, that were originated using our typical investment process. The debt securities were issued by the 2012 Securitization Issuer in connection with its formation in a private placement transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”). In addition, because the 2012 Securitization Issuer is a consolidated subsidiary, we did not recognize any gain or loss on the transfer of any of our portfolio assets to it. However, while not expressly named, TICC Management, our investment adviser, and BDC Partners, LLC (“BDC Partners”), our administrator, may be entitled to indemnification under certain agreements we entered into to serve as collateral manager for the 2012 Securitization Issuer as a result of its affiliation with us. Although we have no present plans to do so, we may elect to securitize additional portfolio investments in the future.

Convertible Notes

On September 26, 2012, we completed a private placement of 5-year unsecured 7.50% Senior Convertible Notes Due 2017 (the “Convertible Notes”). A total of $105.0 million aggregate principal amount of the Convertible Notes were issued at the closing. An additional $10.0 million aggregate principal amount of the Convertible Notes were issued on October 22, 2012 pursuant to the exercise of the initial purchasers’ option to purchase additional Convertible Notes. The Convertible Notes are convertible into shares of our common stock based on an initial conversion rate of 87.2448 shares of our common stock per $1,000

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principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $11.46 per share of common stock. The conversion price for the Convertible Notes will be reduced for quarterly cash dividends paid to common shares to the extent that the quarterly dividend exceeds $0.29 cents per share, subject to adjustment. The Convertible Notes mature on November 1, 2017, unless previously converted in accordance with their terms. The Company does not have the right to redeem the Convertible notes prior to maturity. The Convertible Notes are our general unsecured obligations, rank equally in right of payment with our future senior unsecured debt, and rank senior in right of payment to any potential subordinated debt, should any be issued in the future.

Credit Facility

On October 27, 2014, TICC Funding, LLC (“TICC Funding”), a special purpose vehicle and wholly-owned subsidiary of the Company, entered into a revolving credit facility (the “Facility”) with Citibank, N.A. Subject to certain exceptions, pricing under the Facility is based on the London interbank offered rate (“LIBOR”) for an interest period equal to three months plus a spread of 1.50% per annum. Pursuant to the terms of the credit agreement governing the Facility, TICC Funding has borrowed, on a revolving basis, the maximum aggregate principal amount of $150,000,000. The revolving basis period will end on October 27, 2016 (“Reinvestment Period”), subject to certain exceptions. Post Reinvestment Period, the Facility has a mandatory amortization schedule such that twenty-five percent (25.0%) and fifty percent (50.0%) of the principal amount outstanding as of October 27, 2016 will be due and payable, on January 18, 2017 and April 18, 2017, respectively, and the remaining principal amount outstanding and accrued and unpaid interest thereunder will be due and payable, on October 27, 2017. The Company used part of the proceeds from the Facility to redeem all of the $101.25 million of Class A secured notes issued by TICC CLO LLC on August 10, 2011. The secured notes previously issued under TICC CLO LLC were based on LIBOR for an interest period of three months plus a spread of 2.25% per annum. In connection with the redemption of the secured notes issued by TICC CLO LLC, the Company wrote-off approximately $3.1 million of previously unaccreted discount and unamortized costs.

The Facility is secured by a pool of loans initially consisting of loans sold by TICC CLO LLC to TICC Funding, loans sold and contributed by the Company to TICC Funding, and loans purchased by TICC Funding from unaffiliated third parties. The Company may sell and contribute additional loans to TICC Funding from time to time. The Company will act as the collateral manager of the loans owned by TICC Funding, and has retained the residual economic interest through its ownership of TICC Funding.

Organizational and Regulatory Structure

Our investment activities are managed by TICC Management. TICC Management is an investment adviser registered under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). TICC Management is owned by BDC Partners, its managing member, and Charles M. Royce, our non-executive Chairman who holds a minority, non-controlling interest in TICC Management. Jonathan H. Cohen, our Chief Executive Officer, and Saul B. Rosenthal, our President and Chief Operating Officer, directly or indirectly, own or control all of the outstanding equity interests of BDC Partners. Under our investment advisory agreement with TICC Management (the “Investment Advisory Agreement”), we have agreed to pay TICC Management an annual base management fee based on our gross assets as well as an incentive fee based on our performance.

We were founded in July 2003 and completed an initial public offering of shares of our common stock in November 2003. We are a Maryland corporation and a closed-end, non-diversified management investment company that has elected to be regulated as a BDC under the 1940 Act. As a BDC, we are required to meet certain regulatory tests, including the requirement to invest at least 70% of our total assets in eligible portfolio companies. In addition, we have elected to be treated for federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

Each of TICC CLO 2012-1 and TICC Funding are consolidated subsidiaries of TICC. The Company consolidated the results of its wholly-owned subsidiaries in its consolidated financial statements as the subsidiaries are operated solely for investment activities of the Company, and the Company has substantial equity at risk. The creditors of TICC CLO 2012-1 and TICC Funding have received security interests in the

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assets owned by TICC CLO 2012-1 and TICC Funding, respectively, and such assets are not intended to be available to the creditors of TICC (or any other affiliate of TICC).

Set forth below is a chart detailing our organizational structure.

Our headquarters are located at 8 Sound Shore Drive, Suite 255, Greenwich, Connecticut and our telephone number is (203) 983-5275.

We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). You can inspect any materials we file with the SEC, without charge, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. The information we file with the SEC is available free of charge by contacting us at 8 Sound Shore Drive, Suite 255, Greenwich, CT 06830 or by telephone at (203) 983-5275 or on our website athttp://www.ticc.com. The SEC also maintains a website that contains reports, proxy statements and other information regarding registrants, including us, that file such information electronically with the SEC. The address of the SEC’s web site ishttp://www.sec.gov. Information contained on our website or on the SEC’s web site about us is not incorporated into this report and you should not consider information contained on our website or on the SEC’s website to be part of this report.

MARKET OPPORTUNITY

Over the past several years, the market for debt and credit-related investments has become more competitive and yields have generally decreased. We expect the market for new corporate debt investments to remain generally competitive in 2015, especially with regard to the larger company portion of the corporate loan market. In view of that perspective, we continue to invest with a focus on smaller broadly-syndicated and middle-market loans, and we continue to be focused on certain structured finance investments, including collateralized loan obligation investment vehicles.

We believe that the syndicated leveraged corporate loan market is relatively large and remains largely inaccessible, on a direct basis, to a significant portion of investors that are not lenders or approved institutions. The CLO market also permits exposure to syndicated senior loans, but this market is almost exclusively private and predominantly institutional.

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The senior loan market is characterized by various factors, including:

• Seniority. A senior loan typically ranks senior in a company’s capital structure to all other forms of debt or equity. As such, that loan maintains the senior-most claim on the company’s assets and cash flow, and, we believe should, all other things being equal, offer the prospect of a relatively more stable and lower-risk holding.

• Floating rate instruments. A senior loan typically contains a floating versus a fixed interest rate, which we believe provides some measure of protection against the risk of interest rate fluctuation.

• Frequency of interest payments. A senior loan typically provides for scheduled interest payments no less frequently than quarterly.

In the current environment, we believe the above attributes seem particularly desirable.

COMPETITIVE ADVANTAGES

We believe that we are well positioned to provide financing to corporate borrowers and structured finance vehicles that, in turn, provide capital to corporate borrowers for the following reasons:

• Expertise in credit analysis and monitoring investments; and

• Established transaction sourcing network.

Expertise in credit analysis and monitoring investments

While our investment focus is on middle-market companies, we have invested, and in the future will likely continue to invest, in larger and smaller companies and in other investment structures on an opportunistic basis. Most recently, we have invested in a number of CLO investment vehicles. We believe our experience in analyzing middle-market companies and CLO investment structures, as detailed in the biographies of TICC Management’s senior investment professionals, affords us a sustainable competitive advantage over lenders with limited experience in investing in these markets. In particular, we have expertise in evaluating the operating characteristics of middle-market companies as well as the structural features of CLO investments, and monitoring the credit risk of such investments after closing until full repayment.

• Jonathan H. Cohen, our Chief Executive Officer, has more than 23 years of experience in debt and equity research and investment. Mr. Cohen is also the Chief Executive Officer of T2 Advisers, LLC, which serves as collateral manager of T2 Income Fund CLO I Ltd. Mr. Cohen has also served as Chief Executive Officer and a Director of Oxford Lane Capital Corp. (NasdaqGS: OXLC), a registered closed-end fund, and as Chief Executive Officer of its investment adviser, Oxford Lane Management, LLC (“Oxford Lane Management”), since 2010. Mr. Cohen previously managed technology equity research groups at Wit Capital, Merrill Lynch, UBS and Smith Barney. Mr. Cohen is a member of the Board of Trustees of Connecticut College. Mr. Cohen received a B.A. in Economics from Connecticut College and an M.B.A. from Columbia University.

• Saul B. Rosenthal, our President and Chief Operating Officer, has 16 years of experience in the capital markets, with a focus on middle-market transactions. Mr. Rosenthal is also the President of T2 Advisers, LLC, which serves as collateral manager of T2 Income Fund CLO I Ltd. In addition, Mr. Rosenthal has served as President and a Director of Oxford Lane Capital Corp. (NasdaqGS: OXLC), a registered closed-end fund, and as President of Oxford Lane Management, since 2010. Mr. Rosenthal was previously an attorney at the law firm of Shearman & Sterling LLP. Mr. Rosenthal serves on the board of Algorithmic Implementations, Inc. (d/b/a Ai Squared) and is a member of the board of the National Museum of Mathematics and the New York City chapter of the Young Presidents’ Organization. Mr. Rosenthal received a B.S., magna cum laude, from the Wharton School of the University of Pennsylvania, a J.D. from Columbia University Law School, where he was a Harlan Fiske Stone Scholar, and a LL.M. (Taxation) from New York University School of Law.

• Darryl Monasebian is the Executive Vice President and head of portfolio management of TICC Management, and also holds those same positions at Oxford Lane Management, the investment adviser to Oxford Lane Capital Corp. Mr. Monasebian has also served since 2005 as the senior

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managing director and head of portfolio management of T2 Advisers, LLC, which serves as collateral manager of T2 Income Fund CLO I Ltd. Mr. Monasebian serves on the board of Algorithmic Implementations, Inc. (d/b/a Ai Squared). Prior to joining TICC Management, Mr. Monasebian was a director in the Merchant Banking Group at BNP Paribas, and prior to that he was a director at Swiss Bank Corporation and a senior account officer at Citibank. He began his business career at Metropolitan Life Insurance Company as an investment analyst in the Corporate Investments Department. Mr. Monasebian received a B.S. in Management Science/Operations Research from Case Western Reserve University and a Masters of Business Administration from Boston University’s Graduate School of Management.

• Hari Srinivasan is a Managing Director and portfolio manager of TICC Management, and also holds those same positions at Oxford Lane Management, the investment adviser to Oxford Lane Capital Corp., and at T2 Advisers, LLC, which serves as collateral manager of T2 Income Fund CLO I Ltd. Previously, Mr. Srinivasan was a credit manager at Lucent Technologies from 2002 to 2005, focusing on restructuring and monetization of distressed assets in Lucent’s vendor finance portfolio, and credit analysis of Lucent’s telecom customers. Prior to that, Mr. Srinivasan was an analyst in the fixed income group at Lehman Brothers from 1998 to 2002. Mr. Srinivasan received a B.S. in Computer Science from Poona University, India and a Masters of Business Administration from New York University’s Stern School of Business.

• Debdeep Maji is a Managing Director of TICC Management, and also holds the same position at Oxford Lane Management, the investment adviser to Oxford Lane Capital Corp., and at T2 Advisers, LLC, which serves as collateral manager of T2 Income Fund CLO I Ltd. Mr. Maji graduated from the Jerome Fisher Program in Management and Technology at the University of Pennsylvania where he received a Bachelor of Science degree in Economics from the Wharton School (and was designated a Joseph Wharton Scholar) and a Bachelor of Applied Science from the School of Engineering.

Established deal sourcing network

Through the investment professionals of TICC Management, we have extensive contacts and sources from which to generate investment opportunities. These contacts and sources include private equity funds, companies, brokers and bankers. We believe that senior professionals of TICC Management have developed strong relationships within the investment community over their years within the banking, investment management and equity research field.

INVESTMENT PROCESS

Identification

We identify opportunities in the CLO market through our network of brokers, dealers, agent banks, collateral mangers and sponsors that we have been working with for several years. The CLO vehicles which we focus on are collateralized primarily by senior secured loans made to companies whose debt is unrated or is rated below investment grade, and generally have very little or no exposure to real estate, mortgage loans or to pools of consumer-based debt, such as credit card receivables or auto loans.

We identify and source new prospective corporate debt investments through a network of funds, investment banks, accounting and law firms and direct company relationships. We have identified several criteria that we believe are important in seeking our investment objective. These criteria provide general guidelines for our investment decisions; however, we do not require each prospective investment to meet all or any specific number of these criteria.

• Experienced management.  We generally require that our portfolio companies have an experienced management team. We also prefer the portfolio companies to have in place proper incentives to induce management to succeed and to act in concert with our interests as investors, including having significant equity interests.

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• Significant financial or strategic sponsor and/or strategic partner.  We prefer to invest in companies in which established private equity or venture capital funds or other financial or strategic sponsors have previously invested and are willing to make an ongoing contribution to the management of the business, including participation as board members or as business advisers.

• Strong competitive position in industry.  We seek to invest in companies that have developed a strong competitive position within their respective sector or niche of a specific industry.

• Profitable on a cash flow basis.  We focus on companies that are profitable or nearly profitable on an operating cash flow basis. Typically, we would not expect to invest in start-up companies.

• Clearly defined exit strategy.  Prior to making an investment in a debt security that is accompanied by an equity-based security in a portfolio company, we analyze the potential for that company to increase the liquidity of its common equity through a future event that would enable us to realize appreciation, if any, in the value of our equity interest. Liquidity events may include an initial public offering, a merger or an acquisition of the company, a private sale of our equity interest to a third party, or a purchase of our equity position by the company or one of its stockholders.

• Liquidation value of assets.  Although we do not operate as an asset-based lender, the prospective liquidation value of the assets, if any, collateralizing the debt securities that we hold is an important factor in our credit analysis. We emphasize both tangible assets, such as accounts receivable, inventory and equipment, and intangible assets, such as intellectual property, software code, customer lists, networks and databases.

Due diligence

Our due diligence process generally includes some or all of the following elements:

Corporate Loans

Management team and financial sponsor

• management assessment including a review of management’s track record with respect to product development, sales and marketing, mergers and acquisitions, alliances, collaborations, research and development outsourcing and other strategic activities; and

• financial sponsor reputation, track record, experience and knowledge (where a financial sponsor is present in a transaction).

Business

• industry and competitive analysis;

• customer and vendor interviews to assess both business prospects and standard practices of the company;

• assessment of likely exit strategies; and

• potential regulatory/legal issues.

Financial condition

• detailed review of the historical financial performance and the quality of earnings;

• development of detailed pro forma financial projections;

• review of internal controls and accounting systems; and

• review of assets and liabilities, including contingent liabilities.

Structured Finance Vehicles

• review of indenture structures;

• review of underlying collateral loans;

• analysis of projected future cash flows; and

• analysis of compliance with covenants.

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Contemporaneous with our due diligence process, the investment team prepares a detailed credit memorandum for presentation to our Investment Committee, which currently consists of Messrs. Cohen, Rosenthal and Monasebian. Our Investment Committee reviews and approves each of our portfolio investments.

Investment Characteristics

In identifying corporate debt investments, we seek to ascertain the asset quality as well as the earnings quality of our prospective portfolio companies. Frequently, we obtain a senior secured position and thus receive a perfected, first priority security interest in substantially all of our portfolio companies’ assets, which entitles us to a preferred position on payments in the event of liquidation, and in many cases a pledge of the equity by the equity owners. It should be noted, however, that because we are not primarily an asset-based lender, in the current economic environment, the value of collateral and security interests may dissipate rapidly. In addition, we seek substantial loan covenants or to participate in syndicated loans that incorporate loan covenants that assist in the management of risk. Our loan documents may include affirmative covenants that require the portfolio company to take specific actions such as periodic financial reporting, notification of material events and compliance with laws, restrictive covenants that prevent portfolio companies from taking a range of significant actions such as incurring additional indebtedness or making acquisitions without our consent, covenants requiring the portfolio company to maintain or achieve specified financial ratios such as debt to cash flow and interest coverage, and operating covenants requiring them to maintain certain operational benchmarks such as minimum revenue or minimum cash flow. Our loan documents also provide protection against customary events of default such as non-payment, breach of covenant, insolvency and change of control.

MONITORING RELATIONSHIPS WITH PORTFOLIO COMPANIES

Monitoring

We monitor the financial trends of each portfolio company to assess the appropriate course of action for each company and to evaluate overall portfolio quality. We closely monitor the status and performance of each individual company on at least a quarterly and, in most cases, a monthly basis.

We have several methods of evaluating and monitoring the performance of our bilateral and syndicated debt and equity positions, including but not limited to the following:

• assessment of business development success, including product development, profitability and the portfolio company’s overall adherence to its business plan; and

• review of monthly and quarterly financial statements and financial projections for portfolio companies.

In addition, we may from time to time identify investments that require closer monitoring or become workout assets. In such cases, we will develop a strategy for workout assets and periodically gauge our progress against that strategy. As a private equity holder, we may incur losses from our investing activities from time to time, however we attempt where possible to work with troubled portfolio companies in order to recover as much of our investments as is practicable.

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Portfolio Grading

We have developed a credit grading system to monitor the quality of our debt investment portfolio. We use an investment rating scale of 1 to 5. The following table provides a description of the conditions associated with each debt investment. Equity securities are not graded.

Grade	Summary Description
1	Company is ahead of expectations and/or outperforming financial covenant requirements of the specified tranche and such trend is expected to continue.
2	Full repayment of the outstanding amount of TICC’s cost basis and interest is expected for the specific tranche.
3	Closer monitoring is required. Full repayment of the outstanding amount of TICC’s cost basis and interest is expected for the specific tranche.
4	A reduction of interest income has occurred or is expected to occur. Full repayment of the outstanding amount of TICC’s cost basis is expected for the specific tranche.
5	Full repayment of the outstanding amount of TICC’s cost basis is not expected for the specific tranche.

Managerial Assistance

As a business development company, we are required to offer managerial assistance to portfolio companies. This assistance typically involves monitoring the operations of portfolio companies, participating in their board and management meetings, consulting with and advising their officers and providing other organizational and financial guidance.

Portfolio Overview

We seek to create a portfolio that includes primarily senior secured loans, senior subordinated and junior subordinated debt investments, as well as warrants and other equity instruments we may receive in connection with such debt investments. We generally expect to invest between $5 million and $50 million in each of our portfolio companies. We expect that our investment portfolio will be diversified among a large number of investments with few investments, if any, exceeding 5% of the total portfolio.

The following is a representative list of the industries in which we have invested:

• Structured finance

• Telecommunication services

• Business services

• Financial intermediaries

• Software

• Printing and publishing

• Consumer services

• Enterprise software

• Education

• Computer hardware

During 2014 we saw significant price volatility for corporate loans consistent with many other parts of the debt and equity markets. Although corporate loan prices may still be below historical averages, our view is that certain, primarily larger-issuer, broadly syndicated corporate loans still may not adequately reflect the spreads necessary to compensate investors for the risks involved. In view of the above circumstances, we continue to focus more heavily on middle-market issuers and to a limited extent larger issuers, and, opportunistically, on certain structured finance investments, including CLO investment vehicles. During the fiscal year ended December 31, 2014, we invested approximately $556.7 million comprised of approximately 73.2% in senior secured notes, 26.4% in CLO equity, and 0.4% in common equity. At December 31, 2014, our portfolio was invested in approximately 70.8% in senior secured notes, 26.4% in CLO equity, 1.1% in CLO debt, 1.0% in equity, and 0.7% in senior unsecured notes.

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TEN LARGEST PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 2014

Our ten largest portfolio company investments at December 31, 2014, based on the combined fair value of the debt and equity securities we hold in each portfolio company, were as follows:

			At December 31, 2014
			($ in millions)
Portfolio Company	Industry		Cost		Fair Value		Fair Value Percentage of Total Portfolio
SourceHov, LLC		Business services	$	31.9	$	31.7		3.2	%
Help Systems Holding, Inc.		Software		29.5		29.4		3.0	%
Aricent Technologies, Inc.		Telecommunication services		28.9		28.9		2.9	%
Merrill Communications, LLC		Printing and publishing		24.2		27.6		2.8	%
Integra Telecom Holdings, Inc.		Telecommunication services		20.9		23.1		2.3	%
Benefit Street Partners CLO II, Ltd		Structured finance		24.7		22.8		2.3	%
Carlyle Global Market Strategies CLO 2014-4, Ltd		Structured finance		22.7		21.9		2.2	%
Jackson Hewitt Tax Service, Inc.		Consumer services		20.2		20.6		2.1	%
Serena Software Inc.		Enterprise software		19.6		19.8		2.0	%
Stratus Technologies		Computer hardware		18.9		18.9		1.9	%
			$	241.5	$	244.7		24.7	%

For a description of the factors relevant to the changes in the value of the above portfolio investments for the year ended December 31, 2014, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Portfolio Grading.”

Set forth below are descriptions of the ten largest portfolio investments as of December 31, 2014:

SourceHov LLC

SourceHov, LLC (“SourceHov”) is a business processing outsourcing company focused on healthcare, financial services and government verticals.

In October 2014, we acquired $18.0 million of the first lien senior secured notes of SourceHov and $15.0 million of the second lien secured notes. As of December 31, 2014, $18.0 million remained outstanding on our investment in the first lien senior secured notes and $15.0 million remained outstanding on our investment in the second lien senior secured notes.

Help/Systems Holdings, Inc.

Help/Systems Holdings, Inc. (“Help/Systems”) is a leading third-party provider of IT infrastructure software solutions in Systems & Network Management, Business Intelligence and Security & Compliance.

In June 2013, we acquired $15.0 million of the first lien senior secured notes and $15.0 million of the second lien senior secured notes issued by Help/Systems. As of December 31, 2014, approximately $14.8 million remained outstanding on our first lien investment and $15.0 million remained outstanding on our investment in the second lien senior secured notes.

Aricent Technologies, Inc.

Aricent US Inc. (“Aricent”) is a leading global engineering services and software company with specialized communications domain expertise.

In April 2014, we acquired $10.0 million of the Aricent first lien senior secured notes and $18.0 million of the second lien senior secured notes. In October 2014, we purchased approximately $5.0 million of additional first lien senior secured notes. In November 2014 we sold $4.0 million of the second lien notes. As of December 31, 2014, approximately $14.9 million remained outstanding on our first lien investment and $14.0 million remained outstanding on our second lien investment.

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Merrill Corporation

Merrill Corporation (“Merrill”) is a provider of complex information management and business solutions, including document and data management, litigation support, branded communications programs, fulfillment, imaging and printing.

In January 2011, we acquired approximately $6.1 million of second lien senior secured PIK notes issued by Merrill. In March 2013, Merrill completed a restructuring of its debt and our investment, which had an outstanding balance of approximately $6.6 million at the time of the restructuring, was paid down by approximately $1.1 million and the remaining balance of approximately $5.5 million was converted into a senior unsecured PIK note. Also, in conjunction with this restructuring, we received common equity shares issued by Merrill. Furthermore, in March 2013, we also purchased approximately $14.0 million of first lien senior secured notes. In August 2013, we purchased approximately $3.6 million of additional first lien senior secured notes. In October 2014, we purchased another $2.0 million of additional first lien senior secured notes. As of December 31, 2014, approximately $23.4 million remained outstanding on our combined debt investments in Merrill.

Integra Telecom Holdings, Inc.

Integra Telecom Holdings, Inc. (“Integra”) is a facilities-based competitive communications provider offering voice and data services to small and mid-sized enterprises in the northwest and mid-west states of the US.

In March 2013, we acquired approximately $7.5 million of the first lien senior secured notes and $7.0 million of the second lien senior secured notes issued by Integra. In April 2014, we purchased approximately an additional $1.9 million of the second lien notes. In October 2014, we purchased an additional $3.0 million of the first lien notes.

As of December 31, 2014, approximately $10.3 million remained outstanding on our first lien investment and approximately $8.9 million remained outstanding on our investment in the second lien senior secured notes. We hold 775,846 shares of common equity in Integra from a previously held second lien note which was converted in November 2009.

Benefit Street Partners CLO II, Ltd.

Benefit Street Partners CLO II, Ltd. (“BSP”) is a collateralized loan obligation (“CLO”) investing primarily in U.S.-based senior secured loans and bonds.

In May 2013, we acquired $13.0 million of an equity tranche of the BSP CLO. In May 2014, we purchased approximately an additional $10.5 million of the equity tranche. As of December 31, 2014, approximately $23.5 million remained outstanding on our investment.

Carlyle Global Market Strategies CLO 2014-4, Ltd.

Carlyle Global Market Strategies CLO 2014-4, Ltd. (“Carlyle”) is a collateralized loan obligation (“CLO”) investing primarily in U.S.-based senior secured loans.

In September 2014, we acquired $25.8 million of the equity tranche of the Carlyle CLO. As of December 31, 2014, approximately $25.8 million remained outstanding on our investment.

Jackson Hewitt Tax Service, Inc.

Jackson Hewitt Tax Service, Inc. (“Jackson Hewitt”) is a provider of federal and state tax return preparation services through franchised and company-owned retail stores and kiosks located throughout the United States.

In October 2012, we acquired $25.0 million of first lien senior secured notes issued by Jackson Hewitt. In February 2014, we sold $2.0 million of the first lien notes. As of December 31, 2014, approximately $20.7 million remained outstanding on our investment.

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Serena Software Inc

Serena Technologies, Inc. (“Serena”) is an enterprise software provider focused on selling and maintaining a suite of Application Lifestyle Management (“ALM”) products for both mainframe and distributed systems.

In April 2014, we acquired $20.0 million of the first lien senior secured notes issued by Serena. As of December 31, 2014, $20.0 million remained outstanding on our investment.

Stratus Technologies, Inc.

Stratus Technologies Group Inc. (“Stratus”) provides fault tolerant products, servers and services for companies to run their mission critical businesses.

In April 2014, we acquired $21.0 million of the first lien senior secured notes issued by Stratus. As of December 31, 2014, approximately $19.1 million remained outstanding on our investment.

INVESTMENT ADVISORY AGREEMENT

Management Services

TICC Management serves as our investment adviser. TICC Management is registered as our investment adviser under the Advisers Act. Subject to the overall supervision of our Board of Directors, TICC Management manages our day-to-day operations of, and provides investment advisory services to us. Under the terms of the Investment Advisory Agreement, TICC Management:

• determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;

• identifies, evaluates and negotiates the structure of the investments we make;

• closes, monitors and services the investments we make; and

• determines what securities we will purchase, retain or sell.

TICC Management’s services under the Investment Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired. TICC Management has agreed that, during the term of its Investment Advisory Agreement with us, it will not serve as investment adviser to any other public or private entity that utilizes a principal investment strategy of providing debt financing to middle-market companies similar to those we target.

Management Fee

We pay TICC Management a fee for its services under the Investment Advisory Agreement consisting of two components — a base management fee and an incentive fee. The cost of both the base management fee payable to TICC Management and any incentive fees earned by TICC Management are ultimately borne by our common stockholders.

The base management fee (the “Base Fee”) is calculated at an annual rate of 2.00% of our gross assets. For services rendered under the Investment Advisory Agreement, the Base Fee is payable quarterly in arrears, and is calculated based on the average value of our gross assets at the end of the two most recently completed calendar quarters, and appropriately adjusted for any equity or debt capital raises, repurchases or redemptions during the current calendar quarter. The Base Fee for any partial quarter will be appropriately pro rated.

The incentive fee has two parts. The first part is calculated and payable quarterly in arrears based on our “Pre-Incentive Fee Net Investment Income” for the immediately preceding calendar quarter. For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter minus our operating expenses for the quarter (including the Base Fee, expenses payable under our administration agreement with BDC Partners (the “Administration Agreement”), and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income

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includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Pre-Incentive Fee Net Investment Income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to one-fourth of an annual “hurdle rate.”

For each year commencing on or after January 1, 2005, the annual hurdle rate has been determined as of the immediately preceding December 31^st by adding 5.0% to the interest rate then payable on the most recently issued five-year U.S. Treasury Notes, up to a maximum annual hurdle rate of 10.0%. The annual hurdle rate for the 2013 calendar year was 5.72% and the annual hurdle rate for the 2014 calendar year was 6.75%. The current hurdle rate for the 2015 calendar year, calculated as of December 31, 2014, is 6.65%. Our net investment income (to the extent not distributed to our shareholders) used to calculate this part of the incentive fee is also included in the amount of our gross assets used to calculate the 2% base management fee. In addition, in the event we recognize PIK loan interest in excess of our available capital, we may be required to liquidate assets in order to pay a portion of the incentive fee. TICC Management, however, is not required to reimburse us for the portion of any fees attributable to accrued deferred loan interest in the event of a default by the obligor. The operation of the incentive fee with respect to our Pre-Incentive Fee Net Investment Income for each quarter is as follows:

• no incentive fee is payable to TICC Management in any calendar quarter in which our Pre-Incentive Fee Net Investment Income does not exceed one fourth of the annual hurdle rate (currently 6.65% for the 2015 calendar year).

• 20% of the amount of our Pre-Incentive Fee Net Investment Income, if any, that exceeds one-fourth of the annual hurdle rate (currently 6.65% for the 2015 calendar year) in any calendar quarter is payable to TICC Management (i.e., once the hurdle rate is reached, 20% of all Pre-Incentive Fee Net Investment Income thereafter is allocated to TICC Management).

For example, for the quarter ended December 31, 2014, pre-incentive fee net investment income of $13.6 million exceeded the hurdle of $9.6 million (based upon net assets of $567.3 million at September 30, 2014 and the quarterly hurdle rate of 1.6875%). The incentive fee rate of 20% resulted in an incentive fee of approximately $0.8 million for the quarter.

The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20% of our “Incentive Fee Capital Gains,” which consist of our realized capital gains for each calendar year, computed net of all realized capital losses and unrealized capital depreciation for that calendar year. For accounting purposes only, in order to reflect the theoretical capital gains incentive fee that would be payable for a given period as if all unrealized gains were realized, we will accrue a capital gains incentive fee based upon net realized capital gains and unrealized capital depreciation for that calendar year (in accordance with the terms of the Investment Advisory Agreement), plus unrealized capital appreciation on investments held at the end of the period. It should be noted that a fee so calculated and accrued would not necessarily be payable under the Investment Advisory Agreement, and may never be paid based upon the computation of capital gains incentive fees in subsequent periods. Amounts paid under the Investment Advisory Agreement will be consistent with the formula reflected in the Investment Advisory Agreement.

Example 1: Income Related Portion of Incentive Fee for Each Calendar Quarter^(*)

Alternative 1

Assumptions

Investment income (including interest, dividends, fees, etc.) = 1.25%

Quarterly Hurdle rate⁽¹⁾ = 1.6625%

Management fee⁽²⁾ = 0.5%

Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.2%

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Pre-Incentive Fee Net Investment Income

(investment income – (management fee + other expenses)) = 0.55%

Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate, therefore there is no income-related incentive fee.

Alternative 2

Assumptions

Investment income (including interest, dividends, fees, etc.) = 4.0%

Quarterly Hurdle rate⁽¹⁾ = 1.6625%

Management fee⁽²⁾ = 0.5%

Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.2%

Pre-Incentive Fee Net Investment Income

(investment income – (management fee + other expenses)) = 3.3%

Incentive fee	= 20% x Pre-Incentive Fee Net Investment Income in excess of the hurdle rate
	= 20% x (3.3% – 1.6625%)
	= 20% x 1.6375%
	= 0.3275%

Pre-Incentive Fee Net Investment Income exceeds hurdle rate, therefore the income-related incentive fee is 0.3275%

(1) Represents 6.65% annualized hurdle rate for 2015 calendar year.

(2) Represents 2% annualized management fee.

Example 2: Capital Gains Portion of Incentive Fee^(*)

Capital Gains Incentive Fee = 20% x Incentive Fee Capital Gains(i.e., our realized capital gains for each calendar year, computed net of all realized capital losses and unrealized capital depreciation for that calendar year)

Assumptions:

Year 1 = no realized capital gains or losses

Year 2 = 9% realized capital gains, 0% realized capital losses, 1% unrealized depreciation and 0% unrealized appreciation

Year 3 = 12% realized capital gains, 0% realized capital losses, 2% unrealized depreciation and 2% unrealized appreciation

Year 1 incentive fee	• Total Incentive Fee Capital Gains = 0
	• No capital gains incentive fee paid to TICC Management in Year 1
Year 2 incentive fee	• Total Incentive Fee Capital Gains = 8%
	(9% realized capital gains less 1% unrealized depreciation)
	• Total capital gains incentive fee paid to TICC Management in Year 2
	= 20% x 8%
	= 1.6%
Year 3 incentive fee	• Total Incentive Fee Capital Gains = 10%
	(12% realized capital gains less 2% unrealized depreciation; unrealized appreciation has no effect)
	• Total capital gains incentive fee paid to TICC Management in Year 3
	= 20% x 10%
	= 2%

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(*) The hypothetical amount of returns shown are based on a percentage of our total net assets and assumes no leverage. There is no guarantee that positive returns will be realized and actual returns may vary from those shown in this example.

Payment of our Expenses

Our primary operating expenses are the payment of a base management fee and any incentive fees under the Investment Advisory Agreement and the allocable portion of overhead and other expenses incurred by BDC Partners in performing its obligations under the Administration Agreement. Our investment management fee compensates TICC Management for its work in identifying, evaluating, negotiating, executing and servicing our investments. We bear all other expenses of our operations and transactions, including (without limitation) fees and expenses relating to:

• expenses of offering our debt and equity securities;

• the investigation and monitoring of our investments, including expenses and travel fees incurred in connection with investment due diligence and on-site visits;

• the cost of calculating our net asset value;

• the cost of effecting sales and repurchases of shares of our common stock and other securities;

• management and incentive fees payable pursuant to the Investment Advisory Agreement;

• fees payable to third parties relating to, or associated with, making investments and valuing investments (including third-party valuation firms);

• transfer agent, trustee and custodial fees;

• interest payments and other costs related to our borrowings;

• fees and expenses associated with our website, public relations and marketing efforts (including attendance at industry and investor conferences and similar events);

• federal and state registration fees;

• any exchange listing fees;

• federal, state and local taxes;

• independent directors’ fees and expenses, including travel expenses, and other costs of Board of Directors’ meetings;

• brokerage commissions;

• costs of preparing and mailing proxy statements, stockholders’ reports and notices;

• costs of preparing government filings, including periodic and current reports with the SEC;

• fidelity bond, directors and officers/errors and omissions liability insurance and other insurance premiums; and

• direct costs such as printing, mailing, long distance telephone, staff, independent audits and outside legal costs and all other expenses incurred by either BDC Partners or us in connection with administering our business, including payments under the Administration Agreement that will be based upon our allocable portion of overhead and other expenses incurred by BDC Partners in performing its obligations under the Administration Agreement, including a portion of the rent and the compensation of our Chief Financial Officer, Chief Compliance Officer, Controller and other administrative support personnel.

All of these expenses are ultimately borne by our common stockholders.

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All personnel of our investment adviser when and to the extent engaged in providing investment advisory services, and the compensation and expenses of such personnel allocable to such services, will be provided and paid for by BDC Partners, the investment adviser’s managing member.

Duration and Termination

Unless earlier terminated as described below, the Investment Advisory Agreement will remain in effect if approved annually by our Board of Directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested persons. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. See “Risk Factors — Risks relating to our business and structure — We are dependent upon TICC Management’s key management personnel for our future success, particularly Jonathan H. Cohen and Saul B. Rosenthal.”

Indemnification

The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of their respective duties or by reason of the reckless disregard of their respective duties and obligations, TICC Management and its officers, managers, agents, employees, controlling persons, members and any other person or entity affiliated with it, including without limitation BDC Partners, are entitled to indemnification from TICC for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of TICC Management’s services under the Investment Advisory Agreement or otherwise as an investment adviser of TICC.

Organization of the Investment Adviser

TICC Management is a Delaware limited liability company that is registered as an investment adviser under the Advisers Act. BDC Partners, a Delaware limited liability company, is its managing member and provides our investment adviser with all personnel necessary to manage our day-to-day operations and provide the services under the Investment Advisory Agreement. The principal address of TICC Management and of BDC Partners is 8 Sound Shore Drive, Suite 255, Greenwich, Connecticut 06830.

During 2011, Royce and Associates, a Delaware limited liability company, transferred to Mr. Charles M. Royce its membership interest in TICC Management. Following this transaction, Mr. Royce became a non-managing member of TICC Management.

ADMINISTRATION AGREEMENT

Pursuant to a separate Administration Agreement, BDC Partners furnishes us with office facilities, together with equipment and clerical, bookkeeping and record keeping services at such facilities. Under the Administration Agreement, BDC Partners also performs, or oversees the performance of our required administrative services, which includes being responsible for the financial records which we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, BDC Partners assists us in determining and publishing our net asset value, overseeing the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others. Payments under the Administration Agreement are based upon our allocable portion of overhead and other expenses incurred by BDC Partners in performing its obligations under the Administration Agreement, including a portion of the rent and the compensation of our Chief Financial Officer, Chief Compliance Officer, Controller and other administrative support personnel. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party.

The Administration Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of their respective duties or by reason of the reckless disregard of their respective duties and obligations, BDC Partners and its officers, manager, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from TICC for any damages, liabilities,

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costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of BDC Partners’ services under the Administration Agreement or otherwise as administrator for TICC.

COMPETITION

Our primary competitors to provide financing to primarily non-public small- and medium-sized companies include private equity and venture capital funds, other equity and non-equity based investment funds, including other business development companies, and investment banks and other sources of financing, including traditional financial services companies such as commercial banks and specialty finance companies. Many of these entities have greater financial and managerial resources than we will have. For additional information concerning the competitive risks we face, see “Risk Factors — Risks Relating to Our Business and Structure — We operate in a highly competitive market for investment opportunities.”

EMPLOYEES

We have no employees. Our day-to-day investment operations are managed by our investment adviser. In addition, we reimburse BDC Partners for an allocable portion of expenses incurred by it in performing its obligations under the Administration Agreement, including a portion of the rent and the compensation of our Chief Financial Officer, Chief Compliance Officer, Controller and other administrative support personnel.

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

As a BDC, we have elected to be treated, and intend to qualify annually, as a RIC under Subchapter M of the Code, beginning with our 2003 taxable year. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute to our stockholders as dividends. To continue to qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, to qualify for RIC tax treatment we must distribute to our stockholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our ordinary income plus the excess of our realized net short-term capital gains over our realized net long-term capital losses (the “Annual Distribution Requirement”).

Taxation as a RIC

If we:

• qualify as a RIC; and

• satisfy the Annual Distribution Requirement,

then we will not be subject to U.S. federal income tax on the portion of our investment company taxable income and net capital gain (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) we distribute to stockholders. We will be subject to U.S. federal income tax at the regular corporate rates on any income or capital gains not distributed (or deemed distributed) to our stockholders.

We will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless we distribute in a timely manner an amount at least equal to the sum of (1) 98% of our net ordinary income for each calendar year, (2) 98.2% of our capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, and on which we paid no U.S. federal income tax, in preceding years (the “Excise Tax Avoidance Requirement”). We generally will endeavor in each taxable year to make sufficient distributions to our stockholders to satisfy the Excise Tax Avoidance Requirement.

In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things:

• continue to qualify as a business development company under the 1940 Act at all times during each taxable year;

• derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities, net income from certain “qualified publicly traded partnerships,” or other income derived with respect to our business of investing in such stock or securities (the “90% Income Test”); and

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• diversify our holdings so that at the end of each quarter of the taxable year:

• at least 50% of the value of our assets consists of cash, cash equivalents, U.S. Government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and

• no more than 25% of the value of our assets is invested in the securities, other than U.S. Government securities or securities of other RICs, of one issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly traded partnerships” (the “Diversification Tests”).

We may be required to recognize taxable income in 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 with PIK interest or, in certain cases, increasing interest rates or issued with warrants), we must include in income 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 income other amounts that we have not yet received in cash, such as PIK interest and deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount. In addition, we may be required to accrue for U.S. federal income tax purposes amounts attributable to our investment in CLOs that may differ from the distributions received in respect of such investments. Although we do not presently expect to do so, we are authorized to borrow funds, to sell assets and to make taxable distributions of our stock and debt securities in order to satisfy distribution requirements. Our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our status as a RIC, including the Diversification Tests. If we dispose of assets in order to meet the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous. If we are unable to obtain cash from other sources to satisfy the Annual Distribution Requirement, we may fail to qualify as a RIC and become subject to tax as an ordinary corporation.

Under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met. If we are prohibited to make distributions, we may fail to qualify as a RIC and become subject to tax as an ordinary corporation.

We have purchased and may in the future purchase residual or subordinated interests in CLOs that are treated for U.S. federal income tax purposes as shares in a “passive foreign investment company” (a “PFIC”). We may be subject to U.S. federal income tax on our allocable share of a portion of any “excess distribution” received on, or any gain from the disposition of, such shares even if our allocable share of such income is distributed as a taxable dividend to the PFIC’s stockholders. Additional charges, in the nature of interest, generally will be imposed on us in respect of deferred taxes arising from any such excess distribution or gain. If we elect to treat a PFIC as a “qualified electing fund” under the Code (a “QEF”), in lieu of the foregoing requirements, we will be required to include in income each year our proportionate share of the ordinary earnings and net capital gain of the QEF, even if such income is not distributed by the QEF. Alternatively, we may be able to elect to mark-to-market at the end of each taxable year our shares in a PFIC; in this case, we will recognize as ordinary income our allocable share of any increase in the value of such shares, and as ordinary loss our allocable share of any decrease in such value to the extent that any such decrease does not exceed prior increases included in our income. Under either election, we may be required to recognize in a year income in excess of distributions from PFICs and proceeds from dispositions of PFIC shares during that year, and such income will nevertheless be subject to the Annual Distribution Requirement and will be taken into account for purposes of the 4% excise tax.

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Under certain circumstances, a CLO may be treated as a controlled foreign corporation (“CFC”) for U.S. federal income tax purposes. If a CLO is treated as a CFC, and we are considered to own 10% or more of total voting power in such CLO, we would be required to include in income each year any “subpart F income” generated by such CLO, which would generally include its net investment income, regardless of whether we received any distributions with respect to such income.

Although the Code generally provides that income inclusions from a QEF and subpart F income will be “good income” for purposes of the 90% Income Test to the extent it is distributed to a RIC in the year it is included in the RIC’s income, the Code does not specifically provide whether income inclusions from a QEF and subpart F income for which no distribution is received during the RIC’s taxable year would be “good income” for the 90% Income Test. The IRS has issued a series of private rulings in which it has concluded that all income inclusions from a QEF and subpart F income included in a RIC’s income would constitute “good income” for purposes of the 90% Income Test. Such rulings are not binding on the IRS except with respect to the taxpayer to whom such rulings were issued. Accordingly, although we believe that the income inclusions from a QEF and subpart F income of a CLO that we are required to include in our taxable income would be “good income” for purposes of the 90% Income Test, no guaranty can be made that the IRS would not assert that such income would not be “good income” for purposes of the 90% Income Test. If such income were not considered “good income” for purposes of the 90% Income Test, we may fail to qualify as a RIC.

Failure to Qualify as a Regulated Investment Company

If we were unable to qualify for treatment as a RIC, we would be subject to tax on all of our taxable income at regular corporate rates, regardless of whether we make any distributions to our stockholders. Distributions would not be required, and any distributions made would be taxable to our stockholders as ordinary dividend income that, subject to certain limitations, may be eligible for the 20.0% maximum rate to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the Code, corporate distributees would be eligible for the dividends-received deduction. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain.

REGULATION AS A BUSINESS DEVELOPMENT COMPANY

General

A business development company is regulated by the 1940 Act. A business development company must be organized in the United States for the purpose of investing in or lending to primarily private companies and making managerial assistance available to them. A business development company may use capital provided by public stockholders and from other sources to invest in long-term, private investments in businesses. A business development company provides stockholders the ability to retain the liquidity of a publicly traded stock, while sharing in the possible benefits, if any, of investing in primarily privately owned companies.

We may not change the nature of our business so as to cease to be, or withdraw our election as, a business development company unless authorized by vote of a majority of the outstanding voting securities, as required by the 1940 Act. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (i) 67% or more of such company’s voting securities present at a meeting if more than 50% of the outstanding voting securities of such company are present or represented by proxy, or (ii) more than 50% of the outstanding voting securities of such company. We do not anticipate any substantial change in the nature of our business.

As with other companies regulated by the 1940 Act, a business development company must adhere to certain substantive regulatory requirements. A majority of our directors must be persons who are not interested persons, as that term is defined in the 1940 Act. Additionally, we are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect the business development company. Furthermore, as a business development company, we are prohibited from protecting any director or officer against any liability to the company or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.

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As a business development company, we are required to meet a coverage ratio of the value of total assets to total senior securities, which include all of our borrowings and any preferred stock we may issue in the future, of at least 200%. We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, prior approval by the SEC.

We are not generally able to sell our common stock at a price below net asset value per share. See “Risk Factors — Risks Relating to our Business and Structure — Regulations governing our operation as a business development company affect our ability to, and the way in which we raise additional capital which may expose us to risks, including the typical risks associated with leverage.” We may, however, sell our common stock at a price below net asset value per share (i) in connection with a rights offering to our existing stockholders, (ii) with the consent of the majority of our common stockholders, or (iii) under such other circumstances as the SEC may permit. For example, we may sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then current net asset value of our common stock if our Board of Directors determines that such sale is in our best interests and the best interests of our stockholders, and our stockholders approve our policy and practice of making such sales. In any such case, under such circumstances, the price at which our common stock to be issued and sold may not be less than a price which, in the determination of our Board of Directors, closely approximates the market value of such common stock. In addition, we may generally issue new shares of our common stock at a price below net asset value in rights offerings to existing stockholders, in payment of dividends and in certain other limited circumstances.

We may be examined by the SEC for compliance with the 1940 Act.

As a business development company, we are subject to certain risks and uncertainties. See “Risk Factors — Risks Relating to our Business and Structure.”

Qualifying Assets

As a business development company, we may not acquire any asset other than “qualifying assets” unless, at the time we make the acquisition, the value of our qualifying assets represent at least 70% of the value of our total assets. The principal categories of qualifying assets relevant to our business are:

• Securities purchased in transactions not involving any public offering, the issuer of which is an eligible portfolio company;

• Securities received in exchange for or distributed with respect to securities described in the bullet above or pursuant to the exercise of options, warrants or rights relating to such securities; and

• Cash, cash items, government securities or high quality debt securities (within the meaning of the 1940 Act), maturing in one year or less from the time of investment.

An eligible portfolio company is generally a domestic company that is not an investment company (other than a small business investment company wholly owned by a business development company) and that:

• does not have a class of securities with respect to which a broker may extend margin credit at the time the acquisition is made;

• is controlled by the business development company and has an affiliate of the business development company on its board of directors;

• does not have any class of securities listed on a national securities exchange;

• is a public company that lists its securities on a national securities exchange with a market capitalization of less than $250 million; or

• meets such other criteria as may be established by the SEC.

Control, as defined by the 1940 Act, is presumed to exist where a business development company beneficially owns more than 25% of the outstanding voting securities of the portfolio company.

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In addition, a business development company must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in eligible portfolio companies, or in other securities that are consistent with its purpose as a business development company.

Significant Managerial Assistance

Business development companies generally must offer to make available to the issuer of the securities significant managerial assistance, except in circumstances where either (i) the business development company controls such issuer of securities or (ii) the business development company purchases such securities in conjunction with one or more other persons acting together and one of the other persons in the group makes available such managerial assistance. We offer to provide managerial assistance to our portfolio companies.

Code of Ethics

As required by the 1940 Act, we maintain a Code of Ethics that establishes procedures for personal investments and restricts certain transactions by our personnel. See “Risk Factors — Risks Relating to our Business and Structure — There are significant potential conflicts of interest.” Our Code of Ethics generally does not permit investments by our employees in securities that may be purchased or held by us. You may read and copy the Code of Ethics at the SEC’s Public Reference Room in Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the Code of Ethics is available on the EDGAR Database on the SEC’s Internet site athttp://www.sec.gov. You may obtain copies of the Code of Ethics, after paying a duplicating fee, by electronic request at the following Email address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, 100 F Street, N.E., Washington, D.C. 20549. Our code of ethics is also available on our website athttp://www.ticc.com.

Compliance Policies and Procedures

We and our investment adviser have adopted and implemented written policies and procedures reasonably designed to prevent violation of the federal securities laws, and are required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation, and designate a Chief Compliance Officer to be responsible for administering the policies and procedures.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) imposes a wide variety of new regulatory requirements on publicly-held companies and their insiders. Many of these requirements affect us. For example:

• Pursuant to Rule 13a-14 of the 1934 Act, our Chief Executive Officer and Chief Financial Officer must certify the accuracy of the consolidated financial statements contained in our periodic reports;

• Pursuant to Item 307 of Regulation S-K, our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures;

• Pursuant to Rule 13a-15 of the 1934 Act, our management must prepare a report regarding its assessment of our internal control over financial reporting; and

• Pursuant to Item 308 of Regulation S-K and Rule 13a-15 of the 1934 Act, our periodic reports must disclose whether there were significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder. We will continue to monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance therewith.

Fundamental Investment Policies

The restrictions identified as fundamental below, along with our investment objective of seeking to maximize total return, are our only fundamental policies. Fundamental policies may not be changed without

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the approval of the holders of a majority of our outstanding voting securities, as defined in the 1940 Act. The percentage restrictions set forth below, apply at the time a transaction is effected, and a subsequent change in a percentage resulting from market fluctuations or any cause will not require us to dispose of portfolio securities or to take other action to satisfy the percentage restriction.

As a matter of fundamental policy, we will not: (1) act as an underwriter of securities of other issuers (except to the extent that we may be deemed an “underwriter” of securities we purchase that must be registered under the 1933 Act before they may be offered or sold to the public); (2) purchase or sell real estate or interests in real estate or real estate investment trusts (except that we may (A) purchase and sell real estate or interests in real estate in connection with the orderly liquidation of investments, or in connection with foreclosure on collateral, (B) own the securities of companies that are in the business of buying, selling or developing real estate or (C) finance the purchase of real estate by our portfolio companies); (3) sell securities short (except with regard to managing the risks associated with publicly-traded securities issued by our portfolio companies); (4) purchase securities on margin (except to the extent that we may purchase securities with borrowed money); or (5) engage in the purchase or sale of commodities or commodity contracts, including futures contracts (except where necessary in working out distressed loan or investment situations or in hedging the risks associated with interest rate fluctuations), and, in such cases, only after all necessary registrations (or exemptions from registration) with the Commodity Futures Trading Commission have been obtained.

We may invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions. With respect to such securities, we may, for the purpose of public resale, be deemed an “underwriter” as that term is defined in the 1933 Act. Our intention is to not write (sell) or buy put or call options to manage risks associated with the publicly-traded securities of our portfolio companies, except that we may enter into hedging transactions to manage the risks associated with interest rate fluctuations, and, in such cases, only after all necessary registrations (or exemptions from registration) with the Commodity Futures Trading Commission have been obtained. However, we may purchase or otherwise receive warrants to purchase the common stock or other equity securities of our portfolio companies in connection with acquisition financing or other investment. Similarly, in connection with an acquisition, we may acquire rights to require the issuers of acquired securities or their affiliates to repurchase them under certain circumstances. We also do not intend to acquire securities issued by any investment company that exceed the limits imposed by the 1940 Act. Under these limits, unless otherwise permitted by the 1940 Act, we currently cannot acquire more than 3% of the voting securities of any registered investment company, invest more than 5% of the value of our total assets in the securities of one investment company or invest, in the aggregate, in excess of 10% of the value of our total assets in the securities of one or more investment companies. With regard to that portion of our portfolio invested in securities issued by investment companies, it should be noted that such investments might subject our stockholders to additional expenses.

Proxy Voting Policies and Procedures

We have delegated our proxy voting responsibility to our investment adviser, TICC Management. The Proxy Voting Policies and Procedures of TICC Management are set forth below. The guidelines are reviewed periodically by TICC Management and our non-interested directors, and, accordingly, are subject to change. For purposes of these Proxy Voting Policies and Procedures described below, “we” “our” and “us” refers to TICC Management.

Introduction

As an investment adviser registered under the Advisers Act, we have a fiduciary duty to act solely in the best interests of our clients. As part of this duty, we recognize that we must vote client securities in a timely manner free of conflicts of interest and in the best interests of our clients.

These policies and procedures for voting proxies for our investment advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.

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Proxy Policies

We vote proxies relating to our portfolio securities in the best interests of our clients’ shareholders. We review on a case-by-case basis each proposal submitted to a shareholder vote to determine its impact on the portfolio securities held by our clients. Although we generally vote against proposals that may have a negative impact on our clients’ portfolio securities, we may vote for such a proposal if there exist compelling long-term reasons to do so.

Our proxy voting decisions are made by the senior officers who are responsible for monitoring each of our clients’ investments. To ensure that our vote is not the product of a conflict of interest, we require that: (i) anyone involved in the decision making process disclose to our Chief Compliance Officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (ii) employees involved in the decision making process or vote administration are prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence from interested parties.

Proxy Voting Records

You may obtain information about how we voted proxies by making a written request for proxy voting information to: Chief Compliance Officer, TICC Management, LLC, 8 Sound Shore Drive, Suite 255, Greenwich, CT 06830.

Periodic Reporting and Audited Financial Statements

We have registered our common stock under the Securities Exchange Act of 1934, and have reporting obligations thereunder, including the requirement that we file annual and quarterly reports with the SEC. In accordance with the requirements of the Securities Exchange Act of 1934, this annual report contains consolidated financial statements audited and reported on by our independent registered public accounting firm. You may obtain our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K on our website athttp://www.ticc.com free of charge as soon as reasonably practicable after we file such reports electronically with the SEC.

NASDAQ Global Select Market Requirements

We have adopted certain policies and procedures intended to comply with the NASDAQ Global Select Market’s corporate governance rules. We will continue to monitor our compliance with all future listing standards that are approved by the SEC and will take actions necessary to ensure that we are in compliance therewith.

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Item 1A. Risk Factors

An investment in our securities involves certain risks relating to our structure and investment objectives. The risks set forth below are not the only risks we face, and we face other risks which we have not yet identified, which we do not currently deem material or which are not yet predictable. If any of the following events occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our net asset value and the trading price of our common stock could decline, and you may lose all or part of your investment.

RISKS RELATING TO OUR BUSINESS AND STRUCTURE

Any failure on our part to maintain our status as a business development company would reduce our operating flexibility, including our ability to borrow money.

If we do not remain a BDC, we might be regulated as a closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions under the 1940 Act and correspondingly decrease our operating flexibility, including our ability to borrow money.

We are dependent upon TICC Management’s key management personnel for our future success, particularly Jonathan H. Cohen and Saul B. Rosenthal.

We depend on the diligence, skill and network of business contacts of the senior management of TICC Management. The senior management, together with other investment professionals, will evaluate, negotiate, structure, close, monitor and service our investments. Our future success will depend to a significant extent on the continued service and coordination of the senior management team, particularly Jonathan H. Cohen, the Chief Executive Officer of TICC Management, and Saul B. Rosenthal, the President and Chief Operating Officer of TICC Management. Neither Mr. Cohen nor Mr. Rosenthal will devote all of their business time to our operations, and both will have other demands on their time as a result of their other activities. Neither Mr. Cohen nor Mr. Rosenthal is subject to an employment contract. The departure of either of these individuals could have a material adverse effect on our ability to achieve our investment objective.

Our financial condition and results of operations will depend on our ability to manage our existing portfolio and future growth effectively.

Our ability to achieve our investment objective will depend on our ability to manage our existing investment portfolio and to grow, which will depend, in turn, on our investment adviser’s ability to identify, analyze, invest in and finance companies that meet our investment criteria, and our ability to raise and retain debt and equity capital. Accomplishing this result on a cost-effective basis is largely a function of our investment adviser’s structuring of the investment process, its ability to provide competent, attentive and efficient services to us and our access to financing on acceptable terms.

We and TICC Management, through its managing member, BDC Partners, will need to continue to hire, train, supervise and manage new employees. Failure to manage our future growth effectively could have a material adverse effect on our business, financial condition and results of operations.

We operate in a highly competitive market for investment opportunities.

A large number of entities compete with us to make the types of investments that we make. We compete with a large number of hedge funds and CLO investment vehicles, other equity and non-equity based investment funds, including other business development companies, investment banks and other sources of financing, including traditional financial services companies such as commercial banks and specialty finance companies. Many of our competitors are substantially larger than us and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a business development company. If we are unable to source attractive investments, we may hold a greater percentage of our assets in cash than anticipated, which could impact potential returns on our portfolio. There can be no assurance that the

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competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are consistent with our investment objective.

Our business model depends to a significant extent upon strong referral relationships with financial sponsors, and the inability of the senior investment professionals of our investment adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.

We expect that the principals of our investment adviser will maintain and develop their relationships with financial sponsors, and we will rely to a significant extent upon these relationships to provide us with potential investment opportunities. If the senior investment professionals of our investment adviser fail to maintain their existing relationships or develop new relationships with other sponsors or sources of investment opportunities, we will not be able to grow our investment portfolio. In addition, individuals with whom the senior investment professionals of our investment adviser have relationships are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us. If our investment adviser is unable to source investment opportunities, we may hold a greater percentage of our assets in cash than anticipated, which could impact potential returns on our portfolio.

We may not realize gains from our equity investments.

When we invest in debt securities, we may acquire warrants or other equity securities as well. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.

Because our investments are generally not in publicly traded securities, there is uncertainty regarding the fair value of our investments, which could adversely affect the determination of our net asset value.

Our portfolio investments are generally not in publicly traded securities. As a result, the fair value of these securities is not readily determinable. We value these securities at fair value as determined in good faith by our Board of Directors based upon the recommendation of the Board’s Valuation Committee. In connection with that determination, members of TICC Management’s portfolio management team prepare portfolio company valuations using the most recent portfolio company financial statements and forecasts. We utilize the services of a third party valuation firm which prepares valuations for each of our bilateral portfolio securities that, when combined with all other investments in the same portfolio company (i) have a value as of the previous quarter of greater than or equal to 2.5% of our total assets as of the previous quarter, and (ii) have a value as of the current quarter of greater than or equal to 2.5% of our total assets as of the previous quarter, after taking into account any repayment of principal during the current quarter. In addition, the frequency of the third party valuations of our bilateral portfolio securities is based upon the grade assigned to each such security under our credit grading system as follows: Grade 1, at least annually; Grade 2, at least semi-annually; Grades 3, 4, and 5, at least quarterly. In addition, investments having original issue discount, PIK interest and deferred loan origination fees may have a higher degree of estimation uncertainty regarding valuation because their continuing accruals require ongoing judgments about the collectability of the deferred payments and the value of any associated collateral.

TICC Management also retains the authority to seek, on our behalf, additional third party valuations with respect to both our bilateral portfolio securities and our syndicated loan investments. In accordance with ASC 820-10-35, our valuation procedures specifically provide for the review of indicative quotes supplied by the large agent banks that make a market for each security. However, the marketplace from which we obtain indicative bid quotes for purposes of determining the fair value of our syndicated loan investments have shown the attributes of illiquidity as described by ASC-820-10-35. Due to limited market liquidity in the syndicated loan market, TICC believes that the non-binding indicative bids received from agent banks for certain syndicated investments that we own may not be determinative of their fair value and therefore alternative valuation procedures may need to be undertaken. As a result, TICC has engaged third-party valuation firms to provide assistance in valuing certain syndicated investments that we own. In addition,

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bnnbnTICC Management prepares an analysis of each syndicated loan, including a financial summary, covenant compliance review, recent trading activity in the security, if known, and other business developments related to the portfolio company. All available information, including non-binding indicative bids which may not be determinative of fair value, is presented to the Valuation Committee to consider in its determination of fair value. In some instances, there may be limited trading activity in a security even though the market for the security is considered not active. In such cases the Valuation Committee will consider the number of trades, the size and timing of each trade, and other circumstances around such trades, to the extent such information is available, in its determination of fair value. The Valuation Committee will evaluate the impact of such additional information, and factor it into its consideration of the fair value that is indicated by the analysis provided by third-party valuation firms, if any. We have considered the factors described in ASC 820-10 and have determined that we are properly valuing the securities in our portfolio.

During the past several years, TICC has acquired a number of debt and equity positions in collateralized loan obligation (“CLO”) investment vehicles and more recently CLO warehouse investments. These investments are special purpose financing vehicles. In valuing such investments, TICC considers the operating metrics of the specific investment vehicle, including compliance with collateralization tests, defaulted and restructured securities, and payment defaults, if any. In addition, TICC considers the indicative prices provided by a recognized industry pricing service as a primary source, and the implied yield of such marks, supplemented by actual trades executed in the market at or around period-end, as well as the indicative prices provided by the broker who arranges transactions in such investment vehicles. TICC also considers those instances in which the record date for an equity distribution payment falls on the last day of the period, and the likelihood that a prospective purchaser would require a downward adjustment to the indicative price representing substantially all of the pending distribution. Additional factors include any available information on other relevant transactions including firm bids and offers in the market and information resulting from bids-wanted-in-competition. TICC Management or the Valuation Committee may request an additional analysis by a third-party firm to assist in the valuation process of CLO investment vehicles. All information is presented to TICC’s Board of Directors for its determination of fair value of these investments.

Our Board of Directors retains ultimate authority as to the third-party review cycle as well as the appropriate valuation of each investment. The types of factors that the Valuation Committee takes into account in providing its fair value recommendation to our Board of Directors includes, as relevant, the nature and value of any collateral, the portfolio company’s ability to make payments and its earnings, the markets in which the portfolio company does business, comparison to valuations of publicly traded companies, comparisons to recent sales of comparable companies, the discounted value of the cash flows of the portfolio company and other relevant factors. Because such valuations are inherently uncertain and may be based on estimates, our determinations of fair value may differ materially from the values that would be assessed if a readily available market for these securities existed.

The lack of liquidity in our investments may adversely affect our business.

As stated above, our investments are generally not in publicly traded securities. Substantially all of these securities are subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. Also, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments.

In addition, because we generally invest in debt securities with a term of up to seven years and generally intend to hold such investments until maturity of the debt, we do not expect realization events, if any, to occur in the near-term. We expect that our holdings of equity securities may require several years to appreciate in value, and we can offer no assurance that such appreciation will occur.

We may experience fluctuations in our operating results for any period, and as a result, our financial results for any period should not be relied upon as being indicative of performance in future periods.

We may experience fluctuations in our operating results due to a number of factors, including the rate at which we make new investments, the interest rates payable on the debt securities we acquire, the default rate on such securities, the level of our expenses, variations in and the timing of the recognition of realized and

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unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

If we cannot obtain additional capital because of either regulatory or market price constraints, we could be forced to curtail or cease our new lending and investment activities, our net asset value could decrease and our level of distributions and liquidity could be affected adversely.

Our ability to secure additional financing and satisfy our financial obligations under indebtedness outstanding from time to time will depend upon our future operating performance, which is subject to the prevailing general economic and credit market conditions, including interest rate levels and the availability of credit generally, and financial, business and other factors, many of which are beyond our control. The prolonged continuation or worsening of current economic and capital market conditions could have a material adverse effect on our ability to secure financing on favorable terms, if at all.

If we are unable to obtain debt capital, then our equity investors will not benefit from the potential for increased returns on equity resulting from leverage to the extent that our investment strategy is successful and we may be limited in our ability to make new commitments or fundings to our portfolio companies.

Market conditions affect debt and equity capital markets in the U.S. and abroad and may in the future have a negative impact on our business and operations.

Equity capital may be difficult to raise because, subject to some limited exceptions which apply to us, as a BDC we are generally not able to issue additional shares of our common stock at a price less than net asset value. In addition, our ability to incur indebtedness (including by issuing preferred stock) is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must equal at least 200% immediately after each time we incur indebtedness. The debt capital that will be available, if at all, may be at a higher cost and on less favorable terms and conditions in the future. Any inability to raise capital could have a negative effect on our business, financial condition and results of operations.

The illiquidity of our investments may make it difficult for us to sell such investments if required. As a result, we may realize significantly less than the value at which we have recorded our investments. In addition, significant changes in the capital markets, including the recent period of extreme volatility and disruption, have had, and may in the future have, a negative effect on the valuations of our investments and on the potential for liquidity events involving our investments. An inability to raise capital, and any required sale of our investments for liquidity purposes, could have a material adverse impact on our business, financial condition or results of operations.

Economic recessions or downturns could impair our portfolio companies and harm our operating results.

Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our loans during these periods. Therefore, our non-performing assets may increase and the value of our portfolio may decrease during these periods as we are required to record the values of our investments. Adverse economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments at fair value. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing investments and harm our operating results.

A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, acceleration of the time when the loans are due and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize the portfolio company’s ability to meet its obligations under the debt that we hold. We may incur additional expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, including the extent to which we actually provided significant managerial assistance to that portfolio company,

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a bankruptcy court might recharacterize our debt holding and subordinate all or a portion of our claim to that of other creditors. These events could harm our financial condition and operating results.

Our portfolio companies may face intense competition, including competition from companies with greater financial resources, more extensive research and development, manufacturing, marketing and service capabilities and greater number of qualified and experienced managerial and technical personnel. They may need additional financing which they are unable to secure and which we are unable or unwilling to provide, or they may be subject to adverse developments unrelated to the technologies they acquire.

Uncertainty about the financial stability of the United States and of several countries in the European Union (EU) could have a significant adverse effect on our business, results of operations and financial condition.

Due to federal budget deficit concerns, S&P downgraded the federal government’s credit rating from AAA to AA+ for the first time in history on August 5, 2011. Further, Moody’s and Fitch have warned that they may downgrade the federal government’s credit rating. Further downgrades or warnings by S&P or other rating agencies, and the government’s credit and deficit concerns in general, could cause interest rates and borrowing costs to rise, which may negatively impact both the perception of credit risk associated with our debt portfolio and our ability to access the debt markets on favorable terms. In addition, a decreased credit rating could create broader financial turmoil and uncertainty, which may weigh heavily on our financial performance and the value of our common stock.

In 2010, a financial crisis emerged in Europe, triggered by high budget deficits and rising direct and contingent sovereign debt in Greece, Ireland, Italy, Portugal and Spain, which created concerns about the ability of these nations to continue to service their sovereign debt obligations. Risks and ongoing concerns resulting from the debt crisis in Europe could have a detrimental impact on the global economic recovery, sovereign and non-sovereign debt in these countries and the financial condition of European financial institutions. Market and economic disruptions have affected, and may continue to affect, consumer confidence levels and spending, personal bankruptcy rates, levels of incurrence and default on consumer debt and home prices, among other factors. We cannot assure you that the market disruptions in Europe, including the increased cost of funding for certain governments and financial institutions, will not spread, and we cannot assure you that future assistance packages will be available, or if available, sufficient to stabilize the affected countries and markets in Europe or elsewhere. To the extent uncertainty regarding any economic recovery in Europe continues to negatively impact consumer confidence and consumer credit factors, our business and results of operations could be significantly and adversely affected.

In October 2014, the U.S. Federal Reserve announced that it has terminated its bond-buying program, or quantitative easing, which was designed to stimulate the economy and expand the Federal Reserve’s holdings of long-term securities until key economic indicators, such as the unemployment rate, showed signs of improvement. It is unclear what effect, if any, the Federal Reserve’s termination of quantitative easing will have on the value of our investments. However, it is possible that without quantitative easing by the Federal Reserve, these developments, along with the European sovereign debt crisis, could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms.

The effect of global climate change may impact the operations of our portfolio companies.

There may be evidence of global climate change. Climate change creates physical and financial risk and some of our portfolio companies may be adversely affected by climate change. For example, the needs of customers of energy companies vary with weather conditions, primarily temperature and humidity. To the extent weather conditions are affected by climate change, energy use could increase or decrease depending on the duration and magnitude of any changes. Increases in the cost of energy could adversely affect the cost of operations of our portfolio companies if the use of energy products or services is material to their business. A decrease in energy use due to weather changes may affect some of our portfolio companies’ financial condition, through decreased revenues. Extreme weather conditions in general require more system backup, adding to costs, and can contribute to increased system stresses, including service interruptions.

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The impact of recent financial reform legislation on us is uncertain.

In light of recent conditions in the U.S. and global financial markets and the U.S. and global economy, legislators, the presidential administration and regulators have increased their focus on the regulation of the financial services industry. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Reform Act”) became effective on July 21, 2010, although many provisions of the Dodd-Frank Reform Act have delayed effectiveness or will not become effective until the relevant federal agencies issue new rules to implement the Dodd-Frank Reform Act. Nevertheless, the Dodd-Frank Reform Act may have a material adverse impact on the financial services industry as a whole and on our business, results of operations and financial condition. Accordingly, we cannot predict the effect the Dodd-Frank Act or its implementing regulations will have on our business, results of operations or financial condition.

Our business is subject to increasingly complex corporate governance, public disclosure and accounting requirements that could adversely affect our business and financial results.

We are subject to changing rules and regulations of federal and state government as well as the stock exchange on which our common stock is listed. These entities, including the Public Company Accounting Oversight Board, the SEC and the NASDAQ Stock Market, have issued a significant number of new and increasingly complex requirements and regulations over the course of the last several years and continue to develop additional regulations and requirements in response to laws enacted by Congress. On July 21, 2010, the Dodd-Frank Wall Street Reform and Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance-related provisions in the Dodd-Frank Act, and the SEC has adopted additional rules and regulations that may impact us. Our efforts to comply with these requirements have resulted in, and are likely to continue to result in, an increase in expenses and a diversion of management’s time from other business activities.

Uncertainty relating to the LIBOR calculation process may adversely affect the value of our portfolio of the LIBOR-indexed, floating-rate debt securities.

Concerns have been publicized that some of the member banks surveyed by the British Bankers’ Association (“BBA”) in connection with the calculation of LIBOR across a range of maturities and currencies may have been under-reporting or otherwise manipulating the inter-bank lending rate applicable to them in order to profit on their derivatives positions or to avoid an appearance of capital insufficiency or adverse reputational or other consequences that may have resulted from reporting inter-bank lending rates higher than those they actually submitted. A number of BBA member banks have entered into settlements with their regulators and law enforcement agencies with respect to alleged manipulation of LIBOR, and investigations by regulators and governmental authorities in various jurisdictions are ongoing.

Actions by the BBA, regulators or law enforcement agencies may result in changes to the manner in which LIBOR is determined. Uncertainty as to the nature of such potential changes may adversely affect the market for LIBOR-based securities, including our portfolio of LIBOR-indexed, floating-rate debt securities. In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based securities or the value of our portfolio of LIBOR-indexed, floating-rate debt securities.

A disruption in the capital markets and the credit markets could negatively affect our business.

As a BDC, we seek to maintain our ability to raise additional capital for investment purposes. Without sufficient access to the capital markets or credit markets, we may not be able to pursue new business opportunities. Disruptive conditions in the financial industry and the impact of new legislation in response to those conditions could restrict our business operations and could adversely impact our results of operations and financial condition.

Our ability to grow our business could be impaired by an inability to access the capital markets or to enter into new credit facilities. At various times over the past three years, reflecting concern about the stability of the financial markets, many lenders and institutional investors have reduced or ceased providing funding to borrowers. This market disruption and tightening of credit has led to increased market volatility and

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widespread reduction of business activity generally. If we are unable to raise additional equity capital or consummate new credit facilities on terms that are acceptable to us, we may not be able to initiate significant originations.

These situations may arise due to circumstances that we may be unable to control, such as access to the credit markets, a severe decline in the value of the U.S. dollar, a further economic downturn or an operational problem that affects third parties or us, and could materially harm our business. Even though such conditions have improved broadly and significantly over the short-term, adverse conditions in particular sectors of the financial markets could adversely impact our business over the long-term.

Price declines and illiquidity in the corporate debt markets have adversely affected, and may continue to adversely affect, the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation. Any unrealized depreciation that we experience on our loan portfolio may be an indication of future realized losses, which could reduce our income available for distribution and could adversely affect our ability to service our outstanding borrowings.

As a BDC, we are required to carry our investments at fair value as determined in good faith by or under the direction of our Board of Directors. Decreases in fair values of our investments are recorded as unrealized depreciation. Any unrealized depreciation in our loan portfolio could be an indication of a portfolio company’s inability to meet its repayment obligations to us with respect to the affected loans. This could result in realized losses in the future and ultimately in reductions of our income available for distribution in future periods and could materially adversely affect our ability to service our outstanding borrowings. The unprecedented declines in prices and liquidity in the corporate debt markets from 2008 through mid-2010 resulted in significant net unrealized depreciation in our portfolio, reducing our net asset value. Depending on market conditions, we may incur substantial losses in future periods, which could have a material adverse impact on our business, financial condition and results of operations.

Even in the event the value of your investment declines, the management fee and, in certain circumstances, the incentive fee will still be payable.

The management fee is calculated as 2.0% of the value of our gross assets at a specific time. Accordingly, the management fee will be payable regardless of whether the value of our gross assets and/or your investment have decreased. Moreover, a portion of the incentive fee is payable if our net investment income for a calendar quarter exceeds a designated hurdle rate. This portion of the incentive fee is payable without regard to any capital gain, capital loss or unrealized depreciation that may occur during the quarter. Accordingly, this portion of our adviser’s incentive fee may also be payable notwithstanding a decline in net asset value that quarter. In addition, in the event we recognize deferred loan interest income in excess of our available capital as a result of our receipt of payment-in-kind, or “PIK” interest, we may be required to liquidate assets in order to pay a portion of the incentive fee. TICC Management, however, is not required to reimburse us for the portion of any incentive fees attributable to deferred loan interest income in the event of a subsequent default.

PIK interest payments we receive will increase our assets under management and, as a result, will increase the amount of base management fees and incentive fees payable by us to our investment adviser.

Certain of our debt investments contain provisions providing for the payment of contractual PIK interest. Because PIK interest results in an increase in the size of the loan balance of the underlying loan, the receipt by us of PIK interest will have the effect of increasing our assets under management. As a result, because the base management fee that we pay to our investment adviser is based on the value of our gross assets, the receipt by us of PIK interest will result in an increase in the amount of the base management fee payable by us. In addition, any such increase in a loan balance due to the receipt of PIK interest will cause such loan to accrue interest on the higher loan balance, which will result in an increase in our pre-incentive fee net investment income and, as a result, an increase in incentive fees that are payable by us to our investment adviser.

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Our investment adviser is not obligated to reimburse us for any part of the incentive fee it receives that is based on accrued income that we never receive.

Part of the incentive fee payable by us to our investment adviser that relates to our net investment income is computed and paid on income that may include interest that has been accrued but not yet received in cash, such as market discount, debt instruments with PIK interest, preferred stock with PIK dividends and zero coupon securities. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously used in the calculation of the incentive fee will become uncollectible. Our investment adviser will not be under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never receive as a result of a default by an entity on the obligation that resulted in the accrual of such income.

Our investment adviser can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.

Our investment adviser has the right, under our investment advisory agreement, to resign at any time upon 60 days’ written notice, whether we have found a replacement or not. If our investment adviser resigns, we may not be able to find a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline. In addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our investment adviser and its affiliates. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our financial condition, business and results of operations.

We are permitted to borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us.

The Company has completed a debt securitization financing transaction, presently consisting of $240 million in secured notes and $80 million of subordinated notes, which subordinated notes were purchased by the Company. The secured notes bear interest at variable rates based upon three-month LIBOR.

We also completed a private placement of 5-year unsecured 7.50% Senior Convertible Notes Due 2017 (the “Convertible Notes”) totalling $115 million. The Convertible Notes bear interest at an annual rate of 7.50%, payable semiannually in arrears on May 1 and November 1 of each year, beginning May 1, 2013. The Convertible Notes mature on November 1, 2017, unless previously converted in accordance with their terms. The Convertible Notes are our general unsecured obligations, rank equally in right of payment with our future senior unsecured debt, and rank senior in right of payment to any potential subordinated debt, should any be issued in the future.

On October 27, 2014, TICC Funding, LLC (“TICC Funding”), a special purpose vehicle and wholly-owned subsidiary of the Company, entered into a revolving credit facility (the “Facility”) with Citibank, N.A. Subject to certain exceptions, pricing under the Facility is based on the London interbank offered rate (“LIBOR”) for an interest period equal to three months plus a spread of 1.50% per annum. Pursuant to the terms of the credit agreement governing the Facility, TICC Funding has borrowed, on a revolving basis, the maximum aggregate principal amount of $150,000,000. The revolving basis period will end on October 27, 2016 (“Reinvestment Period”), subject to certain exceptions. Post Reinvestment Period, the Facility has a mandatory amortization schedule such that twenty-five percent (25.0%) and fifty percent (50.0%) of the principal amount outstanding as of October 27, 2016 will be due and payable, on January 18, 2017 and April 18, 2017, respectively, and the remaining principal amount outstanding and accrued and unpaid interest thereunder will be due and payable, on October 27, 2017. The Company used part of the proceeds from the Facility to redeem all of the $101.25 million of Class A secured notes issued by TICC CLO LLC. The secured notes previously issued under TICC CLO LLC were based on LIBOR for an interest period

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of three months plus a spread of 2.25% per annum. The Facility is secured by a pool of loans initially consisting of loans sold by TICC CLO LLC to TICC Funding, loans sold and contributed by the Company to TICC Funding, and loans purchased by TICC Funding from unaffiliated third parties.

Borrowings (including through the securitization transactions described above, which are consolidated in our financial statements), also known as leverage, magnify the potential for gain or loss on amounts invested and, therefore, increase the risks associated with investing in our securities. We may borrow from and issue senior debt securities to banks, insurance companies, and other lenders. Lenders of these senior securities have fixed dollar claims on our assets that are superior to the claims of our common stockholders. If the value of our assets increases, then leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net income to increase more than it would without the leverage, while any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make common stock distribution payments. Leverage is generally considered a speculative investment technique. Our ability to service any debt that we incur will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive pressures. Moreover, as the management fee payable to TICC Management will be payable on our gross assets, including those assets acquired through the use of leverage, TICC Management may have a financial incentive to incur leverage which may not be consistent with our stockholders’ interests. In addition, our common stockholders will bear the burden of any increase in our expenses as a result of leverage, including any increase in the management fee payable to TICC Management.

Illustration.  The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns on the portfolio, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing in the table below.

	Assumed total return on our portfolio (net of expenses)
	(10.0)%			(5.0)%			0.0%			5.0%			10.0%
Corresponding return to stockholder(1)		(22.7	)%		(13.0	)%		(3.3	)%		6.4	%		16.1	%

(1) Assumes $1,042.6 million in total assets and $505.0 million in total debt outstanding, which reflects our total assets and total debt outstanding as of December 31, 2014, and a cost of funds of approximately 3.54%.

Pending legislation may allow us to incur additional leverage.

Under the 1940 Act, a BDC generally will not be permitted to incur indebtedness unless immediately after such borrowing the BDC has an asset coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of total assets). Legislation introduced in Congress, if passed, would modify this section of the 1940 Act and increase the amount of debt that BDCs may incur by modifying the percentage from 200% to 150%. As a result, we may be able to incur additional indebtedness in the future, and therefore your risk of an investment in us may increase.

We are subject to risks associated with our debt securitization financing transactions.

As a result of the debt securitization financing transaction that we completed on August 23, 2012, we are subject to a variety of risks, including those set forth below:

We are subject to certain risks as a result of our direct interests in the subordinated notes and membership interests of the 2012 Securitization Issuer.

Under the terms of the master loan sale agreement governing TICC CLO 2012-1, we sold directly to the 2012 Securitization Issuer all of our ownership interest in our portfolio loans and participations for the purchase price and other consideration set forth in the master loan sale agreement. Following these transfers, the 2012 Securitization Issuer, and not us, held all of the ownership interest in such portfolio loans and participations. As a result of TICC CLO 2012-1, we hold directly the 2012 Subordinated Notes as well as

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membership interests, which comprise 100% of the equity interests, in the 2012 Securitization Issuer. As a result, we consolidate the financial statements of the 2012 Securitization Issuer in our consolidated financial statements. Because the 2012 Securitization Issuer is disregarded as an entity separate from its owner for U.S. federal income tax purposes, the sale of portfolio loans by us to the 2012 Securitization Issuer, did not constitute a taxable event for U.S. federal income tax purposes. If the U.S. Internal Revenue Service were to take a contrary position, there could be a material adverse effect on our business, financial condition, results of operations or cash flows. The securities issued by the 2012 Securitization Issuer, or by any securitization vehicle we sponsor in the future, could be acquired by another business development company or securitization vehicle subject to the satisfaction of certain conditions. We may also, from time to time, hold asset-backed securities, or the economic equivalent thereof, issued by a securitization vehicle sponsored by another business development company to the extent permitted under the 1940 Act.

The 2012 Subordinated Notes and membership interests of the 2012 Securitization Issuer are subordinated obligations of the 2012 Securitization Issuer.

The subordinated notes are the junior class of notes issued by the 2012 Securitization Issuer (the “Subordinated Notes”), are subordinated in priority of payment to the secured notes issued by the 2012 Securitization Issuer (the “Secured Notes”), respectively, and are subject to certain payment restrictions set forth in the indenture governing the notes of the 2012 Securitization Issuer. Therefore, for TICC CLO 2012-1, we only receive cash distributions on the Subordinated Notes if the 2012 Securitization Issuer has made all cash interest payments on the Secured Notes it has issued, and we only receive cash distributions in respect of our ownership of the 2012 Securitization Issuer to the extent that funds are available therefor. The Subordinated Notes are also unsecured and rank behind all of the secured creditors, known or unknown, of the 2012 Securitization Issuer, including the holders of the Secured Notes it has issued. Consequently, to the extent that the value of the 2012 Securitization Issuer’s portfolio of loan investments has been reduced as a result of conditions in the credit markets, or as a result of defaulted loans or individual fund assets, the value of the Subordinated Notes at their redemption could be reduced. Accordingly, our investment in the 2012 Securitization Issuer may be subject to complete loss.

The membership interests in the 2012 Securitization Issuer represent all of the equity interest in the 2012 Securitization Issuer. As such, the holder of the membership interests of the 2012 Securitization Issuer is the residual claimant on distributions, if any, made by the 2012 Securitization Issuer after holders of all classes of notes issued by the 2012 Securitization Issuer have been paid in full on each payment date or upon maturity of such notes under the debt securitization financing transaction documents. Such payments may be made by the 2012 Securitization Issuer only to the extent permitted under such documents on any payment date or upon payment in full of the notes issued by the 2012 Securitization Issuer. We cannot assure you that distributions on the assets held by the 2012 Securitization Issuer will be sufficient to make any distributions to us or that such distributions will meet our expectations.

The interests of holders of the senior class of securities issued by the 2012 Securitization Issuer may not be aligned with our interests.

The Secured Notes are the debt obligations ranking senior in right of payment to the Subordinated Notes. As such, there are circumstances in which the interests of holders of the secured notes may not be aligned with the interests of holders of the Subordinated Notes and the membership interests of the 2012 Securitization Issuer. For example, under the terms of the Secured Notes, holders of the Secured Notes have the right to receive payments of principal and interest prior to holders of the Subordinated Notes and the membership interests of the 2012 Securitization Issuer.

For as long as the Secured Notes remain outstanding, holders of the Secured Notes have the right to act, in certain circumstances, with respect to the portfolio loans in ways that may benefit their interests but not the interests of holders of the Subordinated Notes and membership interests of the 2012 Securitization Issuer, including by exercising remedies under the indenture in the debt securitization financing transaction.

If an event of default has occurred and acceleration occurs in accordance with the terms of an indenture, the Secured Notes then outstanding will be paid in full before any further payment or distribution on the Subordinated Notes. In addition, if an event of default occurs, holders of a majority of the most senior class of the Secured Notes then outstanding will be entitled to determine the remedies to be exercised under the indenture, subject to the terms of the indenture. For example, upon the occurrence of an event of default with

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respect to the notes issued by the 2012 Securitization Issuer, the trustee or holders of a majority of the most senior class of the Secured Notes then outstanding may declare the principal, together with any accrued interest, of all the notes of such class and any junior classes to be immediately due and payable. This would have the effect of accelerating the principal on such notes, triggering a repayment obligation on the part of the 2012 Securitization Issuer. If at such time the portfolio loans of the 2012 Securitization Issuer were not performing well, the 2012 Securitization Issuer may not have sufficient proceeds available to enable the trustee under the indenture to repay the obligations of holders of the Subordinated Notes, or to pay a distribution to holders of the membership interests of the 2012 Securitization Issuer.

Remedies pursued by the holders of the Secured Notes could be adverse to the interests of the holders of the Subordinated Notes, and the holders of the Secured Notes will have no obligation to consider any possible adverse effect on such other interests. Thus, any remedies pursued by the holders of the Secured Notes may not be in our best interests and we may not receive payments or distributions upon an acceleration of the Secured Notes. Any failure of the 2012 Securitization Issuer to make distributions on the Subordinated Notes we hold, directly or indirectly, whether as a result of an event of default or otherwise, could have a material adverse effect on our business, financial condition, results of operations and cash flows and may result in an inability of us to make distributions sufficient to allow our qualification as a RIC.

The 2012 Securitization Issuer may fail to meet certain asset coverage tests.

Under the documents governing the 2012 debt securitization financing transaction, there are two coverage tests applicable to the Secured Notes. The first such test compares the amount of interest received on the portfolio loans held by the 2012 Securitization Issuer to the amount of interest payable in respect of the Secured Notes. For the TICC CLO 2012-1, to meet this test at any time, interest received on the portfolio loans must equal at least 120% to 160% (based upon a graduated scale for the class of Secured Notes to which such test is applied as provided for in the indenture) of the interest payable in respect of the Secured Notes. The second such test compares the principal amount of the portfolio loans held by the 2012 Securitization Issuer to the aggregate outstanding principal amount of the Secured Notes. For the TICC CLO 2012-1, to meet this test at any time, the aggregate principal amount of the portfolio loans held by the 2012 Securitization Issuer must equal at least 126% to 152.50% (based upon a graduated scale for the class of Secured Notes to which such test is applied as provided for in the indenture) of the outstanding principal amount of the Secured Notes. If either coverage test is not satisfied, interest and principal received by the 2012 Securitization Issuer are diverted on the following payment date to pay the most senior class or classes of Secured Notes to the extent necessary to cause all coverage tests to be satisfied on a pro forma basis after giving effect to all payments made in respect of the notes, which, with respect to the payment of any principal amount of the Secured Notes, we refer to as a mandatory redemption. For the TICC CLO 2012-1, if any asset coverage test with respect to the Secured Notes is not met or if the 2012 Securitization Issuer fails to obtain a confirmation of the initial ratings of the Secured Notes after the effective date (defined under the indenture as the earlier to occur of January 7, 2013 or the time that the 2012 Securitization Issuer has acquired (or committed to acquire) at least $160.0 million in assets), proceeds from the portfolio of loan investments that otherwise would have been distributed to the 2012 Securitization Issuer and the holders of the Subordinated Notes will instead be used first to redeem the Secured Notes and pay interest and deferred interest (if any) on the Secured Notes, to the extent necessary to satisfy the applicable asset coverage tests or to obtain the necessary ratings confirmation.

We may not receive cash on our equity interests in the 2012 Securitization Issuer.

We receive cash from the 2012 Securitization Issuer only to the extent that we receive payments on the Subordinated Notes or membership interests of the 2012 Securitization Issuers. The 2012 Securitization Issuer may only make payments on such securities to the extent permitted by the payment priority provisions of the respective indentures governing the notes, which generally provide that principal payments on the Subordinated Notes may not be made on any payment date unless all amounts owing under the Secured Notes issued under such indenture are paid in full. In addition, if the 2012 Securitization Issuer does not meet the asset coverage tests set forth in the documents governing the debt securitization financing transaction, cash would be diverted from the Subordinated Notes to first pay the Secured Notes in amounts sufficient to cause such tests to be satisfied. In the event that we fail to directly or indirectly receive cash from the 2012 Securitization Issuer, we could be unable to make such distributions in amounts sufficient to maintain our

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status as a RIC, or at all. We also could be forced to sell investments in portfolio companies at less than their fair value in order to continue making such distributions. However, the indentures place significant restrictions on the 2012 Securitization Issuer’s ability to sell investments. As a result, there may be times or circumstances during which the 2012 Securitization Issuer is unable to sell investments or take other actions that might be in our best interests.

We may incur liability to the 2012 Securitization Issuer.

As part of the TICC CLO 2012-1, we entered into a master loan sale agreement under which we may incur liability to the 2012 Securitization Issuer for a breach of any representation or warranty made by us on the closing date with respect to any loan (or participation interest therein) sold to the 2012 Securitization Issuer thereunder.

In connection with our 2012 debt securitization financing transaction, we transferred all of our interests in certain portfolio loans to the 2012 Securitization Issuer, respectively. In doing so, we transferred any right we previously had to the payments made on such portfolio loans in exchange for 100% of the residual interests in the 2012 Securitization Issuer. As a result, we face a heightened risk of loss due to the impact of leverage utilized by the 2012 Securitization Issuer, which would have the effect of magnifying the impact on us of a loss on any portfolio loan held by the 2012 Securitization Issuer. In addition, while we serve as the collateral manager for the 2012 Securitization Issuer, which provides us with the authority to enforce payment obligations and loan covenants of the portfolio loans that we transferred to the 2012 Securitization Issuer, we are required to exercise such authority for the interests of the 2012 Securitization Issuer, rather than for our own interests alone.

The structure of the 2012 debt securitization financing transaction is intended to prevent, in the event of our bankruptcy, the consolidation for purposes of such bankruptcy proceedings of the 2012 Securitization Issuer with our operations. If the true sale of these assets were not respected in the event of our insolvency, a trustee or debtor-in-possession might reclaim the assets of the 2012 Securitization Issuer for our estate. However, in doing so, we would become directly liable for all of the indebtedness then outstanding under the 2012 debt securitization financing transaction, which would equal the full amount of debt of the 2012 Securitization Issuer reflected on our consolidated balance sheet. In addition, we cannot assure that the recovery in the event we were consolidated with the 2012 Securitization Issuer for purposes of any bankruptcy proceeding would exceed the amount to which we would otherwise be entitled as a direct or indirect holder of the Subordinated Notes had we not been consolidated with the 2012 Securitization Issuer.

We may need to raise additional capital to grow because we must distribute most of our income.

We may need additional capital to fund growth in our investments. We expect to issue equity securities and expect to borrow from financial institutions in the future. A reduction in the availability of new capital could limit our ability to grow. We must distribute at least 90% of our investment company taxable income to our stockholders to maintain our regulated investment company status. As a result, any such cash earnings may not be available to fund investment originations. We expect to borrow from financial institutions and issue additional debt and equity securities. If we fail to obtain funds from such sources or from other sources to fund our investments, it could limit our ability to grow, which may have an adverse effect on the value of our securities. In addition, as a BDC, our ability to borrow or issue preferred stock may be restricted if our total assets are less than 200% of our total borrowings and preferred stock.

Regulations governing our operation as a BDC affect our ability to, and the way in which we raise additional capital, which may expose us to risks, including the typical risks associated with leverage.

Our ability to grow our business requires a substantial amount of capital, which we may acquire from the following sources:

Senior Securities and Other Indebtedness

We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we are permitted, as a business development company, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least

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200% immediately after each issuance of senior securities. This requirement of sustaining a 200% asset coverage ratio limits the amount that we may borrow. Because we will continue to need capital to grow our loan and investment portfolio, this limitation may prevent us from incurring debt. Further additional debt financing may not be available on favorable terms, if at all, or may be restricted by the terms of our debt facilities. If we are unable to incur additional debt, we may be required to raise additional equity at a time when it may be disadvantageous to do so.

As a result of the issuance of senior securities, including preferred stock and debt securities, we are exposed to typical risks associated with leverage, including an increased risk of loss and an increase in expenses, which are ultimately borne by our common stockholders. Because we may incur leverage to make investments, a decrease in the value of our investments would have a greater negative impact on the value of our common stock. When we issue debt securities or preferred stock, it is likely that such securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. In addition, such securities may be rated by rating agencies, and in obtaining a rating for such securities, we may be required to abide by operating and investment guidelines that could further restrict our operating flexibility. See “— We are permitted to borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us” for a description of our outstanding senior securities.

We completed a debt securitization financing transaction on August 23, 2012, which included $240.0 million in secured notes. We also completed a private placement of the Convertible Notes on September 26, 2012, issuing a total of $105.0 million aggregate principal amount of the Convertible Notes at the closing, and an additional $10.0 million aggregate principal amount of the Convertible Notes on October 22, 2012, pursuant to the exercise of the initial purchasers’ option to purchase additional Convertible Notes. We entered into the Credit Facility on October 27, 2014, under which we have borrowed, on a revolving basis, the maximum aggregate principal amount of $150.0 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for more information.

Our ability to pay distributions or issue additional senior securities may be restricted if our asset coverage ratio is not at least 200%. If the value of our assets declines, we may be unable to satisfy this test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. Furthermore, any amounts that we use to service our indebtedness would not be available for distributions to our common stockholders.

Common Stock

We are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value of our common stock if our Board of Directors determines that such sale is in the best interests of TICC and its stockholders, and our stockholders approve such sale.

At our 2014 Annual Stockholders Meeting, subject to certain determinations required to be made by our board of directors, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock immediately prior to each such offering, at a price below the then current net asset value per share during a period beginning on June 26, 2014 and expiring on the earlier of the one year anniversary of the date of the 2014 Annual Stockholders Meeting and the date of our 2015 Annual Stockholders Meeting, which is expected to be held in June 2015.

In certain limited circumstances, pursuant to an SEC staff interpretation, we may also issue shares at a price below net asset value in connection with a transferable rights offering so long as: (1) the offer does not discriminate among stockholders; (2) we use our best efforts to ensure an adequate trading market exists for the rights; and (3) the ratio of the offering does not exceed one new share for each three rights held. If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, the percentage ownership of our stockholders at that time would decrease and they may experience dilution. Moreover, we can offer no assurance that we will be able to issue and sell additional equity securities in the future, on favorable terms or at all.

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Our Board of Directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners.

Our charter permits our Board of Directors to reclassify any authorized but unissued shares of stock into one or more classes of preferred stock. We are currently authorized to issue up to 100,000,000 shares of common stock, of which 59,987,986 shares are issued and outstanding as of March 3, 2015. In the event our Board of Directors opts to reclassify a portion of our unissued shares of common stock into a class of preferred stock, those preferred shares would have a preference over our common stock with respect to distributions and liquidation. The cost of any such reclassification would be borne by our existing common stockholders. The class voting rights of any preferred shares we may issue could make it more difficult for us to take some actions that may, in the future, be proposed by our Board of Directors and/or the holders of our common stock, such as a merger, exchange of securities, liquidation, or alteration of the rights of a class of our securities, if these actions were perceived by the holders of preferred shares as not in their best interests. The issuance of preferred shares convertible into shares of common stock might also reduce the net income and net asset value per share of our common stock upon conversion. These effects, among others, could have an adverse effect on your investment in our common stock.

A change in interest rates may adversely affect our profitability and we may expose ourselves to risks if we engage in hedging transactions to mitigate changes in interest rates.

Currently, only two of the debt investments in our investment portfolio are at a fixed rate, while the others are at variable rates. In addition, our CLO equity investments are sensitive to risks associated with changes in interest rates. Although we have not done so in the past, we may in the future choose to hedge against interest rate fluctuations by using standard hedging instruments such as futures, forward contracts, options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in market interest rates. Hedging against a decline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, such hedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for gain if the values of the underlying portfolio positions should increase. It may not be possible to hedge against an interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price.

The success of our hedging transactions will depend on our ability to correctly predict movements in interest rates. Therefore, while we may enter into such transactions to seek to reduce interest rate risks, unanticipated changes in interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. To the extent we engage in hedging transactions, we also face the risk that counterparties to the derivative instruments we hold may default, which may expose us to unexpected losses from positions where we believed that our risk had been appropriately hedged. These activities may limit our ability to participate in the benefits of lower interest rates with respect to the hedged portfolio. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. Also, we have limited experience in entering into hedging transactions, and we will initially have to purchase or develop such expertise if we choose to employ hedging strategies in the future.

We will be subject to corporate-level U.S. federal income tax if we are unable to qualify as a RIC for U.S. federal income tax purposes.

To remain entitled to the tax benefits accorded to RICs under the Code, we must meet certain income source, asset diversification and annual distribution requirements. In order to qualify as a RIC, we must derive each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale of stock or other securities, or other income derived with respect to our

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business of investing in such stock or securities. The annual distribution requirement for a RIC is satisfied if we distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, to our stockholders on an annual basis. Because we use debt financing, we are subject to certain asset coverage ratio requirements under the 1940 Act and financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the annual distribution requirement. If we are unable to obtain cash from other sources, we may fail to qualify for special tax treatment as a RIC and, thus, may be subject to corporate-level U.S. federal income tax on all of our income.

To qualify as a RIC, we must also meet certain asset diversification requirements at the end of each calendar quarter. Failure to meet these tests may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments will be in private companies, any such dispositions could be made at disadvantageous prices and may result in substantial losses. If we fail to qualify as a RIC for any reason and remain or become subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Such a failure would have a material adverse effect on us and our stockholders.

Our investments in CLOs may be subject to special anti-deferral provisions that could result in us incurring tax or recognizing income prior to receiving cash distributions related to such income.

We have purchased and may in the future purchase residual or subordinated interests in CLOs that are treated for U.S. federal income tax purposes as shares in a “passive foreign investment company” (a “PFIC”). If we acquire shares in a PFIC (including equity tranche investments in CLOs that are PFICs), we may be subject to U.S. federal income tax on a portion of any “excess distribution” or gain from the disposition of such shares even if such income is distributed as a taxable distribution by us to our stockholders. Certain elections may be available to mitigate or eliminate such tax on excess distributions, but such elections (if available) will generally require us to recognize our share of the PFICs income for each year regardless of whether we receive any distributions from such PFICs. We must nonetheless distribute such income to maintain our status as a RIC.

If we hold more than 10% of the shares in a foreign corporation that is treated as a controlled foreign corporation (“CFC”) (including equity tranche investments in a CLO treated as CFC), we may be treated as receiving a deemed distribution (taxable as ordinary income) each year from such foreign corporation in an amount equal to our pro rata share of the corporation’s income for the tax year (including both ordinary earnings and capital gains). If we are required to include such deemed distributions from a CFC in our income, we will be required to distribute such income to maintain our RIC status regardless of whether or not the CFC makes an actual distribution during such year.

If we are required to include amounts in income prior to receiving distributions representing such income, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax.

The CLOs in which we invest may be subject to withholding tax if they fail to comply with certain reporting requirements.

Legislation commonly referred to as the “Foreign Account Tax Compliance Act,” or FATCA, imposes a withholding tax of 30% on payments of U.S. source interest and distributions, and gross proceeds from the disposition of an instrument that produces U.S. source interest or distributions paid after December 31, 2016, to certain non-U.S. entities, including certain non-U.S. financial institutions and investment funds, unless such non-U.S. entity complies with certain reporting requirements regarding its U.S. account holders and its U.S. owners. Most CLO vehicles in which we invest will be treated as non-U.S. financial entities for this purpose, and therefore will be required to comply with these reporting requirements to avoid the 30% withholding. If a CLO vehicle in which we invest fails to properly comply with these reporting requirements, it could reduce the amounts available to distribute to equity and junior debt holders in such CLO vehicle, which could materially and adversely affect our operating results and cash flows.

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We may choose to pay distributions in our own common stock, in which case, our stockholders may be required to pay U.S. federal income taxes in excess of the cash distributions they receive.

We may distribute taxable distributions that are payable in cash or shares of our common stock at the election of each stockholder. Under certain applicable provisions of the Code and the Treasury regulations, distributions payable in cash or in shares of stock at the election of stockholders are treated as taxable distributions. The Internal Revenue Service has issued private rulings indicating that this rule will apply even where the total amount of cash that may be distributed is limited to no more than 20% of the total distribution. Under these rulings, if too many stockholders elect to receive their distributions in cash, each such stockholder would receive a pro rata share of the total cash to be distributed and would receive the remainder of their distribution in shares of stock. If we decide to make any distributions consistent with these rulings that are payable in part in our stock, taxable stockholders receiving such distributions will be required to include the full amount of the distribution (whether received in cash, our stock, or a combination thereof) as ordinary income (or as long-term capital gain to the extent such distribution is properly reported as a capital gain distribution) to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such distributions in excess of any cash received. If a U.S. stockholder sells the stock it receives as a distribution in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such distributions, including in respect of all or a portion of such distribution that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on distributions, it may put downward pressure on the trading price of our stock.

We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.

For U.S. federal income tax purposes, we will include in income certain amounts that we have not yet received in cash, such as original issue discount, which may arise if we receive warrants in connection with the making of a loan or possibly in other circumstances, or contracted PIK interest, which represents contractual interest added to the loan balance and due at the end of the loan term. In addition, we may be required to accrue for U.S. federal income tax purposes amounts attributable to our investment in CLOs that may differ from the distributions received in respect of such investments. We also may be required to include in income certain other amounts that we will not receive in cash.

Because in certain cases we may recognize income before or without receiving cash representing such income, we may have difficulty satisfying the annual distribution requirement applicable to RICs. Accordingly, we may have to sell some of our investments at times we would not consider advantageous, raise additional debt or equity capital, reduce new investments or make taxable distributions of our stock or debt securities to meet that distribution requirement. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus be subject to corporate-level U.S. federal income tax.

In addition, original issue discount income for certain portfolio investments may or may not be included as a factor in the determination of the fair value of such investments.

There are significant potential conflicts of interest between TICC and our management team.

In the course of our investing activities, we pay management and incentive fees to TICC Management, and reimburse BDC Partners for certain expenses it incurs. As a result, investors in our common stock invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in, among other things, a lower rate of return than one might achieve through direct investments. As a result of this arrangement, there may be times when the management team of TICC Management has interests that differ from those of our stockholders, giving rise to a conflict.

TICC Management receives a quarterly incentive fee based, in part, on our “Pre-Incentive Fee Net Investment Income,” if any, for the immediately preceding calendar quarter. This incentive fee is subject to a quarterly hurdle rate before providing an incentive fee return to TICC Management. To the extent we or

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TICC Management are able to exert influence over our portfolio companies, the quarterly pre-incentive fee may provide TICC Management with an incentive to induce our portfolio companies to accelerate or defer interest or other obligations owed to us from one calendar quarter to another.

In addition, our executive officers and directors, and the executive officers of TICC Management, and its managing member, BDC Partners, serve or may serve as officers and directors of entities that operate in a line of business similar to our own. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of us or our stockholders. Charles M. Royce, the non-executive Chairman of our Board of Directors, holds a minority, non-controlling interest in our investment adviser.

Messrs. Cohen and Rosenthal also currently serve as Chief Executive Officer and President, respectively, for T2 Advisers, LLC, which serves as the Collateral Manager of T2 Income Fund CLO I Ltd. BDC Partners is the managing member of T2 Advisers, LLC. Further, Messrs. Cohen and Rosenthal currently serve as Chief Executive Officer and President, respectively, of Oxford Lane Capital Corp., a non-diversified closed-end management investment company that currently invests primarily in CLO debt and equity tranches, and its investment adviser, Oxford Lane Management. BDC Partners provides Oxford Lane Capital Corp. with office facilities and administrative services pursuant to an administration agreement and also serves as the managing member of Oxford Lane Management. In addition, Patrick F. Conroy, the Chief Financial Officer, Chief Compliance Officer and Corporate Secretary of TICC Management, BDC Partners and TICC, serves in the same capacities for Oxford Lane Capital Corp. and Oxford Lane Management and also serves as the Chief Financial Officer, Chief Compliance Officer and Treasurer of T2 Advisers, LLC. Because of these possible conflicts of interest, these individuals may direct potential business and investment opportunities to other entities rather than to us or such individuals may undertake or otherwise engage in activities or conduct on behalf of such other entities that is not in, or which may be adverse to, our best interests.

BDC Partners has adopted a written policy with respect to the allocation of investment opportunities among TICC, Oxford Lane Capital Corp. and T2 Income Fund CLO I Ltd. in view of the potential conflicts of interest raised by the relationships described above.

In the ordinary course of business, we may enter into transactions with portfolio companies that may be considered related party transactions. In order to ensure that we do not engage in any prohibited transactions with any persons affiliated with us, we have implemented certain policies and procedures whereby our executive officers screen each of our transactions for any possible affiliations between the proposed portfolio investment, us, companies controlled by us and our employees and directors. We will not enter into any agreements unless and until we are satisfied that doing so will not raise concerns under the 1940 Act or, if such concerns exist, we have taken appropriate actions to seek board review and approval or exemptive relief for such transaction. Our Board of Directors reviews these procedures on an annual basis.

We have also adopted a Code of Ethics which applies to, among others, our senior officers, including our Chief Executive Officer and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Pursuant to our Code of Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our Chief Compliance Officer. Our Audit Committee is charged with approving any waivers under our Code of Ethics. As required by the NASDAQ Global Select Market corporate governance listing standards, the Audit Committee of our Board of Directors is also required to review and approve any transactions with related parties (as such term is defined in Item 404 of Regulation S-K).

Changes in laws or regulations governing our operations may adversely affect our business.

We and our portfolio companies are subject to regulation by laws at the local, state and federal levels. These laws and regulations, as well as their interpretation, may be changed from time to time. Any change in these laws or regulations could have a material adverse effect on our business. In particular, legislative initiatives relating to climate change, healthcare reform and similar public policy matters may impact the portfolio companies in which we invest to the extent they operate in industries that may be subject to such changes.

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If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a business development company or be precluded from investing according to our current business strategy.

As a business development company, we may not acquire any assets other than “qualifying assets” unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets.

We believe that most of our portfolio investments will constitute qualifying assets. However, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could lose our status as a BDC, which would have a material adverse effect on our business, financial condition and results of operations. Similarly, these rules could prevent us from making follow-on investments in existing portfolio companies (which could result in the dilution of our position) or could require us to dispose of investments at inappropriate times in order to comply with the 1940 Act. If we need to dispose of such investments quickly, it would be difficult to dispose of such investments on favorable terms. For example, we may have difficulty in finding a buyer and, even if we do find a buyer, we may have to sell the investments at a substantial loss.

Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.

The Maryland General Corporation Law and our charter and bylaws contain provisions that may discourage, delay or make more difficult a change in control of TICC or the removal of our directors. We are subject to the Maryland Business Combination Act, subject to any applicable requirements of the 1940 Act. Our board of directors has adopted a resolution exempting from the Business Combination Act any business combination between us and any other person, subject to prior approval of such business combination by our board, including approval by a majority of our disinterested directors. If the resolution exempting business combinations is repealed or our board does not approve a business combination, the Business Combination Act may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer. Our bylaws exempt from the Maryland Control Share Acquisition Act acquisitions of our stock by any person. If we amend our bylaws to repeal the exemption from the Control Share Acquisition Act, the Control Share Acquisition Act also may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such a transaction. However, we will amend our bylaws to be subject to the Control Share Acquisition Act only if our board of directors determines that it would be in our best interests and if the SEC staff does not object to our determination that our being subject to the Control Share Acquisition Act does not conflict with the 1940 Act. The SEC staff has issued informal guidance setting forth its position that certain provisions of the Control Share Acquisition Act would, if implemented, violate Section 18(i) of the 1940 Act.

We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our charter classifying our board of directors in three classes serving staggered three-year terms, and authorizing our board of directors to classify or reclassify shares of our stock in one or more classes or series, to cause the issuance of additional shares of our stock and to amend our charter without stockholder approval to increase or decrease the number of shares of stock that we have authority to issue. These provisions, as well as other provisions of our charter and bylaws, may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders.

The foregoing provisions are expected to discourage certain coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to negotiate first with our Board of Directors. However, these provisions may deprive a shareholder of the opportunity to sell such shareholder’s shares at a premium to a potential acquirer. We believe that the benefits of these provisions outweigh the potential disadvantages of discouraging any such acquisition proposals because, among other things, the negotiation of such proposals may improve their terms. Our Board of Directors has considered both the positive and negative effects of the foregoing provisions and determined that they are in the best interest of our shareholders.

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The failure in cyber security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning could impair our ability to conduct business effectively.

The occurrence of a disaster such as a cyber attack, a natural catastrophe, an industrial accident, a terrorist attack or war, events unanticipated in our disaster recovery systems, or a support failure from external providers, could have an adverse effect on our ability to conduct business and on our results of operations and financial condition, particularly if those events affect our computer-based data processing, transmission, storage, and retrieval systems or destroy data. If a significant number of our managers were unavailable in the event of a disaster, our ability to effectively conduct our business could be severely compromised.

We depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of security measures, our computer systems could be subject to cyber attacks and unauthorized access, such as physical and electronic break-ins or unauthorized tampering. Like other companies, we may experience threats to our data and systems, including malware and computer virus attacks, unauthorized access, system failures and disruptions. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations, which could result in damage to our reputation, financial losses, litigation, increased costs, regulatory penalties and/or customer dissatisfaction or loss.

We are highly dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay distributions.

Our business is highly dependent on our and third parties’ communications and information systems. Any failure or interruption of those systems, including as a result of the termination of an agreement with any third-party service providers, could cause delays or other problems in our activities. Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control and adversely affect our business. There could be:

• sudden electrical or telecommunications outages;

• natural disasters such as earthquakes, tornadoes and hurricanes;

• disease pandemics;

• events arising from local or larger scale political or social matters, including terrorist acts; and

• cyber attacks.

These events, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our common stock and our ability to pay distributions to our stockholders.

Our board of directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.

Our board of directors has the authority to modify or waive certain of our operating policies and strategies without prior notice (except as required by the 1940 Act) and without stockholder approval. However, absent stockholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as a BDC. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and value of our stock. Nevertheless, the effects may adversely affect our business and impact our ability to make distributions.

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RISKS RELATED TO OUR INVESTMENTS

Our investment portfolio may be concentrated in a limited number of portfolio companies, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt securities that we hold or if the sectors in which we invest experience a market downturn.

A consequence of our limited number of investments is that the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment. Beyond our income tax asset diversification requirements, we do not have fixed guidelines for diversification, and our investments could be concentrated in relatively few issuers. While we have historically focused on the technology sector, we are actively seeking new investment opportunities outside this sector that otherwise meet our investment criteria. As a result, a market downturn, including a downturn in the sectors in which we invest, could materially adversely affect us.

Most of our debt investments will not fully amortize during their lifetime, which may subject us to the risk of loss of our principal in the event a portfolio company is unable to repay us prior to maturity.

Most of our debt investments are not structured to fully amortize during their lifetime. Accordingly, if a portfolio company has not previously pre-paid its debt investment to us, a significant portion of the principal amount due on such a debt investment may be due at maturity. In order to create liquidity to pay the final principal payment, a portfolio company typically must raise additional capital. If they are unable to raise sufficient funds to repay us, the debt investment may go into default, which may compel us to foreclose on the borrower’s assets, even if the debt investment was otherwise performing prior to maturity. This may deprive us from immediately obtaining full recovery on the debt investment and may prevent or delay the reinvestment of the investment proceeds in other, possibly more profitable investments.

Our equity investment distributions from CLO vehicles will likely be materially reduced if three month LIBOR increases modestly.

An increase in LIBOR would materially increase the CLO vehicles’ financing costs. Since most of the collateral positions within the CLO investments have LIBOR floors, there may not be corresponding increases in investment income (if LIBOR increases but stays below the LIBOR floor rate of such investments) resulting in materially smaller distribution payments to the equity investors.

To illustrate the potential impact of a change in the underlying interest rate on our total investment income as it pertains to our CLO equity investments, we have assumed a 1% increase in the underlying three-month LIBOR, and no other change in our CLO portfolio, or to any of the credit, spread, default rate or other factors, as of December 31, 2014. Under this analysis, we currently estimate the effect on total investment income to equal a decrease of approximately $21.6 million on an annualized basis, reflecting the portfolio assets held within these CLO vehicles which have implied floors that would be unaffected by a 1% change in the underlying interest rate, compared to the debt carried by those CLO vehicles which are at variable rates and which would be affected by a change in three-month LIBOR. Although we believe that this analysis is broadly indicative of our existing LIBOR sensitivity, it does not adjust for changes in any of the other assumptions that could affect the return on CLO equity investments, both positively and negatively (and which could accompany changes to the three-month LIBOR rate), such as default rates, recovery rates, prepayment rates, reinvestment rates, and other factors that could affect the net increase (or decrease) in net assets resulting from operations. Accordingly, it is highly probable that actual results would differ materially from the results under the above hypothetical analysis.

We may in the future hedge against interest rate fluctuations by using hedging instruments such as futures, options and forward contracts. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to the investments in our portfolio with fixed interest rates. See “— A change in interest rates may adversely affect our profitability and we may expose ourselves to risks if we engage in hedging transactions to mitigate changes in interest rates.”

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The sectors in which we invest are subject to many risks, including volatility, intense competition, decreasing life cycles and periodic downturns which could result in a heightened risk of loss on your investment.

We invest in companies which may have relatively short operating histories. The revenues, income (or losses) and valuations of these companies can and often do fluctuate suddenly and dramatically. Also, the technology-related sector, on which we have historically focused, in particular, is generally characterized by abrupt business cycles and intense competition. The recent cyclical economic downturn has resulted in substantial decreases in the market capitalization of many companies. While such valuations have recovered to some extent, we can offer no assurance that such decreases in market capitalizations will not recur, or that any future decreases in valuations will be insubstantial or temporary in nature. Therefore, our portfolio companies may face considerably more risk of loss than companies in other industry sectors.

Our investments in the companies that we target may be extremely risky and we could lose all or part of our investments.

Although a prospective portfolio company’s assets are one component of our analysis when determining whether to provide debt capital, we generally do not base investment decisions primarily on the liquidation value of a company’s balance sheet assets. Instead, given the nature of the companies that we invest in, we also review the company’s historical and projected cash flows, equity capital and “soft” assets, including intellectual property (patented and non-patented), databases, business relationships (both contractual and non-contractual) and the like. Accordingly, considerably higher levels of overall risk will likely be associated with our portfolio compared with that of a traditional asset-based lender whose security consists primarily of receivables, inventories, equipment and other tangible assets. Interest rates payable by our portfolio companies may not compensate for these additional risks, any of which could cause us to lose part or all of our investment.

Specifically, investment in certain of the companies that we are invested in involves a number of significant risks, including:

• these companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any value from the liquidation of such collateral;

• they may have limited operating histories, narrower product lines and smaller market shares than larger businesses, which may tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns;

• because many of them tend to be privately owned, there is generally little publicly available information about these businesses; therefore, although TICC Management’s agents will perform “due diligence” investigations on these portfolio companies, their operations and their prospects, we may not learn all of the material information we need to know regarding these businesses;

• some of these companies are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;

• some of these companies may have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position; and

• many of these companies may be more susceptible to economic recessions or downturns than other better capitalized companies that operate in less capital intensive industries.

A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its assets, which could trigger cross-defaults under other agreements and jeopardize our portfolio company’s ability to meet its

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obligations under the debt securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, if a portfolio company goes bankrupt, even though we may have structured our interest as senior debt, depending on the facts and circumstances, including the extent to which we actually provided significant “managerial assistance” to that portfolio company, a bankruptcy court might recharacterize our debt holding and subordinate all or a portion of our claim to that of other creditors.

Our failure to make follow-on investments in our portfolio companies could impair the value of our investment portfolio.

Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments, in order to: (i) increase or maintain in whole or in part our equity ownership percentage; (ii) exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or (iii) attempt to preserve or enhance the value of our investment.

We may elect not to make follow-on investments or otherwise lack sufficient funds to make those investments. We have the discretion to make any follow-on investments, subject to the availability of capital resources. The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our concentration of risk, because we prefer other opportunities, or because we are inhibited by compliance with business development company requirements or the desire to maintain our tax status.

Our incentive fee may induce TICC Management to use leverage and to make speculative investments.

The incentive fee payable by us to TICC Management may create an incentive for TICC Management to use leverage and to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The way in which the incentive fee on “Pre-Incentive Fee Net Investment Income” is determined, which is calculated as a percentage of the return on invested capital, may encourage TICC Management to use leverage to increase the return on our equity capital. Under certain circumstances, the use of leverage may increase the likelihood of default, which would disfavor holders of our common stock. Similarly, because TICC Management may also receive an incentive fee based, in part, upon the capital gains realized on our investments, the investment adviser may invest more than would otherwise be appropriate in companies whose securities are likely to yield capital gains, as compared to income producing securities. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during an economic downturn.

Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.

We intend to invest primarily in senior debt securities, but may also invest in subordinated debt securities, issued by our portfolio companies. In some cases, portfolio companies will be permitted to have other debt that ranks equally with, or senior to, the debt securities in which we invest. By their terms, such debt instruments may provide that the holders thereof are entitled to receive payment of interest or principal on or before the dates on which we are entitled to receive payments in respect of the debt securities in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligations to us. In the case of debt ranking equally with debt securities in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company. In addition, we will not be in a position to control any portfolio company by investing in its debt securities. As a result, we are subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree and the management of such companies, as representatives of the holders of their common equity, may take risks or otherwise act in ways that do not best serve our interests as debt investors.

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Because we generally do not hold controlling equity interests in our portfolio companies, we may not be in a position to exercise control over our portfolio companies or to prevent decisions by the managements of our portfolio companies that could decrease the value of our investments.

Although we have taken and may in the future take controlling equity positions in our portfolio companies from time to time, we generally do not do so. As a result, we are subject to the risk that a portfolio company may make business decisions with which we disagree, and the stockholders and management of a portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity for the debt and equity investments that we typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company, and may therefore suffer a decrease in the value of our investments.

Our investments in CLO vehicles may be riskier and less transparent than direct investments in portfolio companies.

From time to time we have invested and may in the future invest in debt and residual value interests of CLO vehicles. Generally, there may be less information available to us regarding the underlying debt investments held by such CLOs than if we had invested directly in the underlying companies. Our CLO investments will also be subject to the risk of leverage associated with the debt issued by such CLOs and the repayment priority of debt holders senior to us in such CLOs.

Some instruments issued by CLO vehicles may not be readily marketable and may be subject to restrictions on resale. Securities issued by CLO vehicles are generally not listed on any U.S. national securities exchange and no active trading market may exist for the securities of CLO vehicles in which we may invest. Although a secondary market may exist for our investments in CLO vehicles, the market for our investments in CLO vehicles may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods. As a result, these types of investments may be more difficult to value.

Failure by a CLO vehicle in which we are invested to satisfy certain tests will harm our operating results.

The failure by a CLO vehicle in which we invest to satisfy financial covenants, including with respect to adequate collateralization and/or interest coverage tests, could lead to a reduction in its payments to us. In the event that a CLO vehicle fails certain tests, holders of debt senior to us may be entitled to additional payments that would, in turn, reduce the payments we would otherwise be entitled to receive. Separately, we may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, with a defaulting CLO vehicle or any other investment we may make. If any of these occur, it could materially and adversely affect our operating results and cash flows.

Our financial results may be affected adversely if one or more of our significant equity or junior debt investments in a CLO vehicle defaults on its payment obligations or fails to perform as we expect or if the market price fluctuates significantly in such illiquid investments.

Up to 30% of our portfolio may consist of equity and junior debt investments in CLO vehicles, which involves a number of significant risks. CLO vehicles that we invest in are typically very highly levered (10 – 14 times), and therefore, the junior debt and equity tranches that we invest in are subject to a higher degree of risk of total loss. In particular, investors in CLO vehicles indirectly bear risks of the underlying debt investments held by such CLO vehicles. We will generally have the right to receive payments only from the CLO vehicles, and will generally not have direct rights against the underlying borrowers or the entity that sponsored the CLO vehicle. While the CLO vehicles we have and continue to target generally enable the investor to acquire interests in a pool of leveraged corporate loans without the expenses associated with directly holding the same investments, when we invest in an equity tranche of a CLO vehicle we will generally pay a proportionate share of the CLO vehicles’ administrative and other expenses. Although it is difficult to predict whether the prices of indices and securities underlying CLO vehicles will rise or fall, these prices (and, therefore, the prices of the CLO vehicles) will be influenced by the same types of political and economic events that affect issuers of securities and capital markets generally.

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The interests we intend to acquire in CLO vehicles will likely be thinly traded or have only a limited trading market. CLO vehicles are typically privately offered and sold, even in the secondary market. As a result, investments in CLO vehicles may be characterized as illiquid securities. In addition to the general risks associated with investing in debt securities, CLO vehicles carry additional risks, including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) the fact that our investments in CLO tranches will likely be subordinate to other senior classes of note tranches thereof; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the CLO vehicle or unexpected investment results.

Investments in structured vehicles, including equity and junior debt instruments issued by CLO vehicles, involve risks, including credit risk and market risk. Changes in interest rates and credit quality may cause significant price fluctuations. Additionally, changes in the underlying leveraged corporate loans held by a CLO vehicle may cause payments on the instruments we hold to be reduced, either temporarily or permanently.

Structured investments, particularly the subordinated interests in which we intend to invest, are less liquid than many other types of securities and may be more volatile than the leveraged corporate loans underlying the CLO vehicles we intend to target. Fluctuations in interest rates may also cause payments on the tranches of CLO vehicles that we hold to be reduced, either temporarily or permanently.

Investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.

Our investment strategy involves investments in securities issued by foreign entities, including foreign CLO vehicles that are formed under the laws of the Cayman Islands. Investing in foreign entities may expose us to additional risks not typically associated with investing in U.S. issues. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the U.S., higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility. Further, we, and the CLO vehicles in which we invest, may have difficulty enforcing creditor’s rights in foreign jurisdictions, such as the Cayman Islands. In addition, the underlying companies of the CLO vehicles in which we invest may be foreign, which may create greater exposure for us to foreign economic developments.

Although we expect that most of our investments will be U.S. dollar-denominated, any investments denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments. We may employ hedging techniques to minimize these risks, but we can offer no assurance that we will, in fact, hedge currency risk, or that if we do, such strategies will be effective.

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RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES

Our common stock price may be volatile.

The trading price of our common stock may fluctuate substantially depending on many factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include, but are not limited to, the following:

• price and volume fluctuations in the overall stock market from time to time;

• significant volatility in the market price and trading volume of securities of regulated investment companies, business development companies or other financial services companies;

• exclusion of our common stock from certain indices, such as the Russell 2000 Financial Services Index, which could reduce the ability of certain investment funds to own our common stock and put short-term selling pressure on our common stock;

• changes in regulatory policies or tax guidelines with respect to regulated investment companies or business development companies;

• actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the expectations of securities analysts;

• general economic conditions and trends;

• loss of a major funding source; or

• departures of key personnel.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Due to the potential volatility of our stock price, we may therefore be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business.

Our shares of common stock have traded at a discount from net asset value and may do so in the future.

Shares of closed-end investment companies have frequently traded at a market price that is less than the net asset value that is attributable to those shares. In part as a result of adverse economic conditions and increasing pressure within the financial sector of which we are a part, our common stock traded below our net asset value per share during some periods from 2010 through 2014. Our common stock could trade at a discount to net asset value at any time in the future. The possibility that our shares of common stock may trade at a discount from net asset value over the long term is separate and distinct from the risk that our net asset value will decrease. We cannot predict whether shares of our common stock will trade above, at or below our net asset value. If our common stock trades below its net asset value, we will generally not be able to issue additional shares of our common stock at its market price without first obtaining the approval for such issuance from our stockholders and our independent directors. If additional funds are not available to us, we could be forced to curtail or cease our new lending and investment activities, and our net asset value could decrease and our level of distributions could be impacted. Our net asset value may also decline over time if our principal recovery with respect to CLO equity investments is less than the price that we paid for those investments.

You may not receive distributions or our distributions may decline or may not grow over time.

We cannot assure you that we will achieve investment results or maintain a tax status that will allow or require any specified level of cash distributions or year-to-year increases in cash distributions. In particular, our future distributions are dependent upon the investment income we receive on our portfolio investments, including our higher-yielding CLO equity investments. To the extent such investment income, including income from our CLO equity investments (which we expect to decline as those vehicles de-leverage after the end of their respective re-investment periods), declines or if we transition our portfolio into lower-yielding investments, our ability to pay future distributions may be harmed.

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Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering.

In the event we issue subscription rights to purchase shares of our common stock, stockholders who do not fully exercise their rights should expect that they will, at the completion of the offer, own a smaller proportional interest in us than would otherwise be the case if they fully exercised their rights. We cannot state precisely the amount of any such dilution in share ownership because we do not know at this time what proportion of the shares will be purchased as a result of the offer.

In addition, if the subscription price is less than our net asset value per share, then our stockholders would experience an immediate dilution of the aggregate net asset value of their shares as a result of the offer. The amount of any decrease in net asset value is not predictable because it is not known at this time what the subscription price and net asset value per share will be on the expiration date of the rights offering or what proportion of the shares will be purchased as a result of the offer. Such dilution could be substantial.

If we issue preferred stock, the net asset value and market value of our common stock will likely become more volatile.

We cannot assure you that the issuance of preferred stock would result in a higher yield or return to the holders of the common stock. The issuance of preferred stock would likely cause the net asset value and market value of the common stock to become more volatile. If the distribution rate on the preferred stock were to approach the net rate of return on our investment portfolio, the benefit of leverage to the holders of the common stock would be reduced. If the distribution rate on the preferred stock were to exceed the net rate of return on our portfolio, the leverage would result in a lower rate of return to the holders of common stock than if we had not issued preferred stock. Any decline in the net asset value of our investments would be borne entirely by the holders of common stock. Therefore, if the market value of our portfolio were to decline, the leverage would result in a greater decrease in net asset value to the holders of common stock than if we were not leveraged through the issuance of preferred stock. This greater net asset value decrease would also tend to cause a greater decline in the market price for the common stock. We might be in danger of failing to maintain the required asset coverage of the preferred stock or of losing our ratings, if any, on the preferred stock or, in an extreme case, our current investment income might not be sufficient to meet the distribution requirements on the preferred stock. In order to counteract such an event, we might need to liquidate investments in order to fund a redemption of some or all of the preferred stock. In addition, we would pay (and the holders of common stock would bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred stock, including higher advisory fees if our total return exceeds the distribution rate on the preferred stock. Holders of preferred stock may have different interests than holders of common stock and may at times have disproportionate influence over our affairs.

Holders of any preferred stock we might issue would have the right to elect members of our Board of Directors and class voting rights on certain matters.

Holders of any preferred stock we might issue, voting separately as a single class, would have the right to elect two members of our Board of Directors at all times and in the event distributions become two full years in arrears would have the right to elect a majority of the directors until such arrearage is completely eliminated. In addition, preferred stockholders have class voting rights on certain matters, including changes in fundamental investment restrictions and conversion to open-end status, and accordingly can veto any such changes. Restrictions imposed on the declarations and payment of distributions or other distributions to the holders of our common stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies, if any, or the terms of our credit facilities, if any, might impair our ability to maintain our qualification as a RIC for U.S. federal income tax purposes. While we would intend to redeem our preferred stock to the extent necessary to enable us to distribute our income as required to maintain our qualification as a RIC, there can be no assurance that such actions could be effected in time to meet the tax requirements.

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The net asset value per share of our common stock may be diluted if we sell shares of our common stock in one or more offerings at prices below the then current net asset value per share of our common stock.

At our 2014 Annual Stockholders Meeting, subject to certain determinations required to be made by our board of directors, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock immediately prior to each such offering, at a price below the then current net asset value per share during a period beginning on June 26, 2014 and expiring on the earlier of the one-year anniversary of the date of the 2014 Annual Stockholders Meeting and the date of our 2015 Annual Stockholders Meeting, which is expected to be held in June 2015.

Any decision to sell shares of our common stock below its then current net asset value per share would be subject to the determination by our board of directors that such issuance is in our and our stockholders’ best interests.

If we were to sell shares of our common stock below its then current net asset value per share; such sales would result in an immediate dilution to the net asset value per share of our common stock. This dilution would occur as a result of the sale of shares at a price below the then current net asset value per share of our common stock and a proportionately greater decrease in the stockholders’ interest in our earnings and assets and their voting interest in us than the increase in our assets resulting from such issuance. Because the number of shares of common stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive effect cannot be predicted.

Further, if our current stockholders do not purchase any shares to maintain their percentage interest, regardless of whether such offering is above or below the then current net asset value per share, their voting power will be diluted. For example, if we sell an additional 10% of our common shares at a 10% discount from net asset value, a stockholder who does not participate in that offering for its proportionate interest will suffer net asset value dilution of up to 1.0% or $10 per $1,000 of net asset value. For additional information and hypothetical examples of these risks, see “Sale of Common Stock Below Net Asset Value” in the prospectus supplement pursuant to which such sale is made.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

We do not own any real estate or other physical properties materially important to our operation. Our headquarters are located at 8 Sound Shore Drive, Suite 255, Greenwich, Connecticut, where we occupy our office space pursuant to our Administration Agreement with BDC Partners, LLC. We believe that our office facilities are suitable and adequate for our business as it is presently conducted.

Item 3. Legal Proceedings

We and our consolidated subsidiaries are not currently subject to any material legal proceedings. From time to time, we and our consolidated subsidiaries may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Item 4. Mine Safety Disclosures.

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the NASDAQ Global Select Market under the symbol “TICC.” The following table sets forth the range of high and low sales prices of our common stock as reported on the NASDAQ Global Select Market and our net asset value per share as determined as of the last day of each quarter over the last two years:

			Price Range
	NAV(a)		High		Low
Fiscal 2014
Fourth quarter	$	8.64	$	8.96	$	7.26
Third quarter		9.40		10.05		8.83
Second quarter		9.71		9.91		9.18
First quarter		9.78		10.57		9.75
Fiscal 2013
Fourth quarter	$	9.85	$	10.85	$	9.53
Third quarter		9.90		10.19		9.45
Second quarter		9.75		10.19		8.96
First quarter		10.02		10.85		9.74

(a) Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low sales prices. The net asset values shown are based on outstanding shares at the end of each period.

The last reported sale price for our common stock on the NASDAQ Global Select Market on February 27, 2015 was $7.29 per share. As of February 27, 2015, we had 168 shareholders of record.

Dividends

We currently intend to distribute a minimum of 90% of our ordinary income and short-term capital gains, if any, on a quarterly basis to our stockholders, in accordance with our election to be treated, and intention to qualify annually, as a RIC under Subchapter M of the Code. For a more detailed discussion of the requirements under Subchapter M, please refer to the discussion in “Business — Certain U.S. Federal Income Tax Considerations” set forth above. The following table reflects the cash distributions, including dividends, dividends reinvested and returns of capital, if any, per share that we have declared on our common stock since 2013:

Date Declared	Record Date		Payment Date		Amount
Fiscal 2015
February 19, 2015		March 17, 2015		March 31, 2015	$	0.27
Fiscal 2014
October 30, 2014		December 17, 2014		December 31, 2014	$	0.29
July 31, 2014		September 16, 2014		September 30, 2014		0.29
May 1, 2014		June 16, 2014		June 30, 2014		0.29
March 5, 2014		March 25, 2014		March 31, 2014		0.29
Total (2014)					$	1.16
Fiscal 2013
October 29, 2013		December 17, 2013		December 31, 2013	$	0.29
July 30, 2013		September 16, 2013		September 30, 2013		0.29
April 30, 2013		June 14, 2013		June 28, 2013		0.29
February 28, 2013		March 22, 2013		March 29, 2013		0.29
Total (2013)					$	1.16

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In order to qualify as a RIC and to avoid corporate level tax on the income we distribute to our stockholders, we are required, under Subchapter M of the Code, to distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses to our stockholders on an annual basis.

To the extent our taxable earnings fall below the total amount of our distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to our stockholders. Thus, the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our taxable ordinary income or capital gains. Stockholders should read any written disclosure accompanying a dividend payment carefully and should not assume that the source of any distribution is our taxable ordinary income or capital gains.

During the year ended December 31, 2014, our distributions were made largely from net investment income but also included a tax return of capital. A written statement identifying the nature of these distributions for tax reporting purposes for the year was posted on our website. We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage requirements applicable to us as a business development company under the 1940 Act. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of favorable regulated investment company tax treatment. We cannot assure shareholders that they will receive any distributions.

Recent Sales of Unregistered Securities

While we did not engage in any sales of unregistered securities during the fiscal year ended December 31, 2014, we issued a total of 307,624 shares of common stock under our dividend reinvestment plan. This issuance was not subject to the registration requirements of the Securities Act of 1933, as amended. The aggregate valuation price for the shares of common stock issued under the dividend reinvestment plan was approximately $2.6 million.

Issuer Purchases of Equity Securities

On December 18, 2014, our board of directors authorized a repurchase program to be in place until the earlier of June 30, 2015 or until $50 million of our outstanding shares of common stock have been repurchased. Under the repurchase program, we may, but we are not obligated to, repurchase our outstanding common stock in the open market from time to time provided that we comply with the prohibitions under our Insider Trading Policies and Procedures and the guidelines specified in Rule 10b-18 of the Securities Exchange Act of 1934, as amended, including certain price, market volume and timing constraints. In addition, any repurchases will be conducted in accordance with the Investment Company Act of 1940, as amended. During the year ended December 31, 2014, we repurchased 154,600 shares at a weighted average price of approximately $7.58 per share, inclusive of commissions. This represents a discount of approximately 12.3% of the net asset value per share at December 31, 2014. The total dollar amount of shares repurchased in this period is approximately $1.2 million, leaving a maximum of approximately $48.8 million available for future program purchases. The following table discloses on a monthly basis for the year ended December 31, 2014, the total number of shares repurchased (including the total number of shares repurchased under this program), the weighted average price paid per share, and the maximum number of shares (or approximate dollar value) of shares that may yet be repurchased under the program.

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Program		(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Program
December 18, 2014 – December 31, 2014		154,600	$	7.58		154,600	$	48.8 million

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Performance Graph

This graph compares the return on our common stock with that of the NASDAQ Composite Index and the NASDAQ Financial 100, as we do not believe there is an appropriate index of companies with an investment strategy similar to our own with which to compare the return on our common stock, for the period from December 31, 2009 through December 31, 2014. The graph assumes that, on December 31, 2009, a person invested $100 in each of our common stock, the NASDAQ Composite Index and the NASDAQ Financial 100, which includes the 100 largest domestic and international financial organizations listed on the NASDAQ Stock Market based on market capitalization. The NASDAQ Financial 100 contains banks and savings institutions and related holding companies, insurance companies, broker-dealers, investment companies and financial services organizations.

The graph measures total shareholder return, which takes into account both changes in stock price and dividends. It assumes that dividends paid are reinvested in like securities.

The graph and the information furnished under this Part II Item 5 of this Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the 1934 Act. The stock price performance included in the above graph is not necessarily indicative of future stock price performance.

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Item 6. Selected Financial and Other Data

The following selected financial data for the years ended December 31, 2014, 2013, 2012, 2011 and 2010 is derived from our consolidated financial statements which have been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm. The data should be read in conjunction with our consolidated financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report.

	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Total Investment Income	$	117,324,740		$	105,092,143		$	71,174,920		$	45,188,190		$	33,506,591
Total Expenses	$	51,866,896		$	49,299,511		$	33,997,566		$	15,188,049		$	9,263,094
Net Investment Income	$	65,457,844		$	55,792,632		$	37,177,354		$	30,000,141		$	24,243,497
Net (Decrease) Increase in Net Assets Resulting from Operations	$	(3,348,400	)	$	58,944,734		$	68,323,188		$	14,208,865		$	63,947,441
Per Share Data:
Net Increase in Net Assets Resulting from Net Investment Income per common share (Basic)	$	1.11		$	1.09		$	0.98		$	0.92		$	0.89
Net Increase in Net Assets Resulting from Net Investment Income per common share (Diluted)	$	1.06		$	1.03		$	0.96		$	0.92		$	0.89
Net (Decrease) Increase in Net Assets Resulting from Operations per common share (Basic)	$	(0.06	)	$	1.15		$	1.80		$	0.44		$	2.35
Net (Decrease) Increase in Net Assets Resulting from Operations per common share (Diluted)(1)	$	(0.06	)	$	1.09		$	1.73		$	0.44		$	2.35
Distributions Declared per Share	$	1.16		$	1.16		$	1.12		$	0.99		$	0.81
Balance Sheet Data:
Total Assets	$	1,042,641,192		$	998,165,741		$	756,023,040		$	424,119,570		$	317,900,083
Total Long Term Debt	$	501,075,775		$	450,676,340		$	330,334,446		$	99,710,826		$	—
Total Net Assets	$	520,813,061		$	526,242,427		$	409,602,529		$	305,101,991		$	314,117,541
Other Data:
Number of Portfolio Companies at Period End		77			91			89			82			50
Purchases of Loan Originations	$	556,700,000		$	577,500,000		$	494,600,000		$	272,500,000		$	129,800,000
Loan Repayments	$	311,900,000		$	203,900,000		$	191,200,000		$	107,900,000		$	73,800,000
Proceeds from Loan Sales	$	127,500,000		$	118,500,000		$	69,300,000		$	11,300,000		$	54,800,000
Total Return(2)		(17.22	)%		14.68	%		30.49	%		(14.19	)%		102.39	%
Weighted Average Yield on Debt Investments at Period End(3)		7.8	%		8.7	%		9.4	%		11.3	%		14.1	%

(1) Due to the anti-dilutive effect on the computation of diluted earnings per share for the year ended December 31, 2014, the adjustments for interest on convertible senior notes, base management fees, deferred issuance costs and incentive fees as well as weighted average common shares outstanding adjustments for the dilutive effect of convertible notes were excluded from the respective period’s diluted earnings per share computation.

(2) Total return equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value per share, assuming dividend reinvestment at prices obtained under our dividend reinvestment plan, excluding any discounts.

(3) Weighted average yield calculation includes the impact of any loans on non-accrual status as of the year end.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about TICC, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this Annual Report on Form 10-K involve risks and uncertainties, including statements as to:

• our future operating results;

• our business prospects and the prospects of our portfolio companies;

• the impact of investments that we expect to make;

• our contractual arrangements and relationships with third parties;

• the dependence of our future success on the general economy and its impact on the industries in which we invest;

• 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.

These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

• an economic downturn could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

• a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities;

• interest rate volatility could adversely affect our results, particularly if we elect to use leverage as part of our investment strategy;

• currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars; and

• the risks, uncertainties and other factors we identify in “Risk Factors” and elsewhere in this Annual Report on Form 10-K and in our filings with the SEC.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this annual report on Form 10-K should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in “Risk Factors” and elsewhere in this annual report on Form 10-K. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this annual report on Form 10-K.

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The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this Form 10-K.

OVERVIEW

Our investment objective is to maximize our portfolio’s total return. Our primary focus is to seek current income by investing in corporate debt securities. We have also invested and may continue to invest in structured finance investments, including CLO vehicles, which own debt securities. We may also invest in publicly traded debt and/or equity securities. We operate as a closed-end, non-diversified management investment company and have elected to be treated as a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”). We have elected to be treated for tax purposes as a regulated investment company (“RIC”), under the Internal Revenue Code of 1986, as amended (the “Code”), beginning with our 2003 taxable year.

Our investment activities are managed by TICC Management, LLC (“TICC Management”) a registered investment adviser under the Investment Advisers Act of 1940, as amended. TICC Management is owned by BDC Partners, LLC (“BDC Partners”) its managing member, and Charles M. Royce, our non-executive Chairman, who holds a minority, non-controlling interest in TICC Management. Jonathan H. Cohen, our Chief Executive Officer, and Saul B. Rosenthal, our President and Chief Operating Officer, are the controlling members of BDC Partners. Under an investment advisory agreement (the “Investment Advisory Agreement”), we have agreed to pay TICC Management an annual base fee calculated on gross assets, and an incentive fee based upon our performance. Under an amended and restated administration agreement (the “Administration Agreement”), we have agreed to pay or reimburse BDC Partners, as administrator, for certain expenses incurred in operating TICC. Our executive officers and directors, and the executive officers of TICC Management and BDC Partners, serve or may serve as officers and directors of entities that operate in a line of business similar to our own. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of us or our stockholders.

We generally expect to invest between $5 million and $50 million in each of our portfolio companies, although this investment size may vary proportionately as the size of our capital base changes and market conditions warrant, and accrue interest at fixed or variable rates. We expect that our investment portfolio will be diversified among a large number of investments with few investments, if any, exceeding 5.0% of the total portfolio. As of December 31, 2014, our debt investments had stated interest rates of between 4.0% and 11.5% and maturity dates of between 19 and 124 months. In addition, our total portfolio had a weighted average yield on debt investments of approximately 7.8%.

Our loans may carry a provision for deferral of some or all of the interest payments and amendment fees, which will be added to the principal amount of the loan. This form of deferred income is referred to as “payment-in-kind,” or “PIK,” interest or other income and, when earned, is recorded as interest or other income and an increase in the principal amount of the loan. For the year ended December 31, 2014, we recognized approximately $1.2 million from PIK interest income associated with our investments in Merrill Communications, LLC, Unitek Global Services, Inc., RBS Holding Company and Nextag, Inc. compared to PIK interest of approximately $2.2 million for the year ended December 31, 2013. In the event we recognize deferred loan interest income in excess of our available capital as a result of our receipt of PIK income, we may be required to liquidate assets in order to pay a portion of the incentive fee due to TICC Management.

We have historically borrowed funds to make investments and may continue to borrow funds to make investments. As a result, we are exposed to the risks of leverage, which may be considered a speculative investment technique. Borrowings, also known as leverage, magnify the potential for gain and loss on amounts invested and therefore increase the risks associated with investing in our securities. In addition, the costs associated with our borrowings, including any increase in the management fee payable to TICC Management, will be borne by our common stockholders.

On August 23, 2012, we completed a $160.0 million debt securitization financing. On February 25, 2013 and on May 28, 2013, we issued an aggregate of $120.0 million of additional secured notes and an aggregate of $40.0 million of subordinated notes in connection with this transaction. On September 26, 2012, we completed a private placement of 5-year unsecured 7.50% Senior Convertible Notes Due 2017 (the

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“Convertible Notes”). A total of $105.0 million aggregate principal amount of the Convertible Notes were issued at the closing. An additional $10.0 million aggregate principal amount of the Convertible Notes were issued on October 22, 2012 pursuant to the exercise of the initial purchasers’ option to purchase additional Convertible Notes. On October 27, 2014, TICC Funding, LLC (“TICC Funding”), a special purpose vehicle and wholly-owned subsidiary of the Company, entered into a revolving credit facility (the “Facility”) with Citibank, N.A. Subject to certain exceptions, pricing under the Facility is based on the London interbank offered rate (“LIBOR”) for an interest period equal to three months plus a spread of 1.50% per annum. Pursuant to the terms of the credit agreement governing the Facility, TICC Funding has borrowed, on a revolving basis, the maximum aggregate principal amount of $150,000,000. The revolving basis period will end on October 27, 2016 (“Reinvestment Period”), subject to certain exceptions. Post Reinvestment Period, the Facility has a mandatory amortization schedule such that twenty-five percent (25.0%) and fifty percent (50.0%) of the principal amount outstanding as of October 27, 2016 will be due and payable, on January 18, 2017 and April 18, 2017, respectively, and the remaining principal amount outstanding and accrued and unpaid interest thereunder will be due and payable, on October 27, 2017. On August 10, 2011, we completed a $225.0 million debt securitization financing transaction; the Class A notes issued by this securitization were fully redeemed on October 27, 2014 using a portion of the borrowings under the Facility. The secured notes previously issued under TICC CLO LLC were based on LIBOR for an interest period of three months plus a spread of 2.25% per annum. For more information about these transactions, see “— Liquidity and Capital Resources — Borrowings.”

In addition, as a BDC under the 1940 Act, we are required to make available significant managerial assistance, for which we may receive fees, to our portfolio companies. These fees would be generally non-recurring, however in some instances they may have a recurring component. We have received no fee income for managerial assistance to date.

Prior to making an investment, we may enter into a non-binding term sheet with the potential portfolio company. These term sheets are generally subject to a number of conditions, including but not limited to the satisfactory completion of our due diligence investigations of the company’s business and legal documentation for the loan.

To the extent possible, we will generally seek to invest in loans that are collateralized by a security interest in the borrower’s assets or guaranteed by a principal to the transaction. Interest payments, if not deferred, are normally payable quarterly with most debt investments having scheduled principal payments on a monthly or quarterly basis. When we receive a warrant to purchase stock in a portfolio company, the warrant will typically have a nominal strike price, and will entitle us to purchase a modest percentage of the borrower’s stock.

During the year ended December 31, 2014, we closed approximately $556.7 million in portfolio investments, including additional investments of approximately $203.7 million in existing portfolio companies and approximately $353.0 million in new portfolio companies. During the year ended December 31, 2014, we recognized a total of $311.9 million from principal repayments on debt investments, and we recognized approximately $127.5 million from the sale of portfolio investments. We realized net losses on investments during the year ended December 31, 2014 in the amount of approximately $19.5 million. For the year ended December 31, 2014, we had net unrealized depreciation of approximately $49.3 million.

Current Market and Economic Conditions

Over the past several years, the market for debt and credit-related investments has become more competitive and yields have generally decreased. We expect the market for new corporate debt investments to remain generally competitive in 2015, especially with regard to the larger company portion of the corporate loan market. In view of that perspective, we continue to invest with a focus on smaller broadly-syndicated and middle-market loans, and we continue to be focused on certain structured finance investments, including collateralized loan obligation investment vehicles.

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PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY

The total value of our investments was approximately $984.2 million and $931.6 million at December 31, 2014 and December 31, 2013, respectively. The increase in the value of investments during the year ended December 31, 2014 was due to purchases of portfolio investments of approximately $556.7 million, debt repayments and sales of securities of approximately $439.4 million, and due to the fair value adjustments on our portfolio. The value of cash and cash equivalents increased by approximately $5.6 million during the year ended December 31, 2014. Our gross originations totaled approximately $577.5 million during the year ended December 31, 2013.

In certain instances we receive payments in our loan portfolio based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our loans prior to their scheduled maturity date. The frequency or volume of these repayments may fluctuate significantly from period to period.

For the years ended December 31, 2014 and December 31, 2013, we had approximately $311.9 million and approximately $203.9 million, respectively, of loan repayments. The most significant repayments during the year ended December 31, 2014 were as follows (in millions):

Portfolio Company	2014 Repayments
Attachmate Corporation	$	24.5
Sumtotal Systems Inc		15.9
SourceHov, LLC		15.8
New Breed Logistics		15.7
Wall Street Systems		15.1
Sportsman’s Warehouse Holdings		14.9
Waupaca Foundry Inc		14.9
Travelclick Inc		14.3
Technimark LLC		14.1
Carlyle Global Markets CLO 2014-4, Ltd.		14.0
HHI Holdings LLC		12.6
Stratus Technologies Inc		11.2
NAB Holdings LLC		9.9
JHCI Holdings Inc		8.8
Columbus Park CDO Ltd		8.0
Net all other		102.2
Total repayments	$	311.9

Portfolio activity also reflects sales of securities in the amounts of approximately $127.5 million and approximately $118.5 million for 2014 and 2013, respectively. The most significant sales during the year ended December 31, 2014 were as follows (in millions):

Portfolio Company	2014 Sales
Otter Products LLC	$	11.0
Emporia Preferred Funding III, Ltd		9.8
Cedar Funding II CLO, Ltd		8.3
Stone Tower CLO VII Ltd		8.3
Mmodal, Inc		7.4
Galaxy XV CLO, Ltd		7.2
ACA CLO 2007-1, Ltd.		6.9
Compucom Systems, Inc		6.6
Dell International LLC		6.0
Jersey Street CLO, Ltd		5.8
Catamaran CLO 2012-1 Ltd		5.7
North End CLO, Ltd		4.8
Renfro Corporation		4.5

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Portfolio Company	2014 Sales
Aricent Technologies, Inc		4.1
Sheridan Square CLO, Ltd		4.0
Net all other		27.1
Total sales	$	127.5

At December 31, 2014, we had investments in debt securities or loans to 57 portfolio companies with a fair value of approximately $714.7 million, and equity investments of approximately $269.5 million. These debt investments included approximately $1.2 million in accrued PIK interest, which, as described in “Overview” above, is added to the carrying value of our investments, reduced by repayments of principal.

At December 31, 2013, we had investments in debt securities or loans to 68 portfolio companies with a fair value of approximately $679.4 million, and equity investments of approximately $252.2 million. These debt investments included approximately $2.1 million in accrued PIK interest, which, as described in “Overview” above, is added to the carrying value of our investments, reduced by repayments of principal.

A reconciliation of the investment portfolio for the years ended December 31, 2014 and 2013 follows:

	December 31, 2014			December 31, 2013
	(dollars in millions)			(dollars in millions)
Beginning Investment Portfolio	$	931.6		$	667.5
Portfolio Investments Acquired		556.7			577.5
Debt repayments		(311.9	)		(203.9	)
Sales of securities		(127.5	)		(118.5	)
Payment in Kind(1)		1.3			2.1
Original Issue Discount(2)		2.8			3.7
Net Unrealized Appreciation (Depreciation)		(49.3	)		(3.2	)
Net Realized Gains (Losses)		(19.5 )			6.4
Ending Investment Portfolio	$	984.2		$	931.6

(1) Includes rounding adjustment to reconcile ending investment portfolio at December 31, 2014 and December 31, 2013.

(2) Includes rounding adjustment to reconcile ending investment portfolio at December 31, 2014.

The following table indicates the quarterly portfolio investment activity for the years ended December 31, 2014 and 2013:

	New Investments		Debt Repayments		Sales of Securities
	(dollars in millions)		(dollars in millions)		(dollars in millions)
Quarter ended
December 31, 2014	$	193.8	$	87.3	$	24.7
September 30, 2014		97.6		73.7		48.3
June 30, 2014		178.3		116.6		33.4
March 31, 2014		87.0		34.3		21.1
Total	$	556.7	$	311.9	$	127.5
December 31, 2013	$	85.2	$	66.0	$	26.2
September 30, 2013		85.0		22.3		39.6
June 30, 2013		190.8		85.8		17.7
March 31, 2013		216.5		29.8		35.0
Total	$	577.5	$	203.9	$	118.5

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The following table shows the fair value of our portfolio of investments by asset class as of December 31, 2014 and 2013:

	2014					2013
	Investments at Fair Value		Percentage of Total Portfolio			Investments at Fair Value		Percentage of Total Portfolio
	(dollars in millions)					(dollars in millions)
Senior Secured Notes	$	697.0		70.8	%	$	644.7		69.2	%
Senior Unsecured Notes		6.4		0.7	%		5.8		0.6	%
CLO Equity		259.8		26.4	%		237.1		25.5	%
CLO Debt		11.3		1.1	%		28.9		3.1	%
Equity		9.7		1.0	%		15.1		1.6	%
Total	$	984.2		100.0	%	$	931.6		100.0	%

The following table shows our portfolio of investments by industry at fair value, in thousands, as of December 31, 2014 and 2013:

	December 31, 2014					December 31, 2013
	Investments at Fair Value		Percentage of Fair Value			Investments at Fair Value		Percentage of Fair Value
	(dollars in millions)					(dollars in millions)
Structured finance(1)	$	271.2		27.6	%	$	266.0		28.6	%
Telecommunication services		115.7		11.8	%		51.7		5.5	%
Business services		105.4		10.7	%		69.5		7.4	%
Financial intermediaries		89.4		9.1	%		71.7		7.7	%
Software		87.5		8.9	%		77.2		8.3	%
Printing and publishing		73.4		7.5	%		69.9		7.5	%
Consumer services		36.0		3.7	%		24.0		2.6	%
Enterprise software		34.3		3.5	%		38.9		4.2	%
Education		22.1		2.2	%		6.6		0.7	%
Computer hardware		18.9		1.9	%		9.7		1.0	%
Travel		15.1		1.5	%		26.3		2.8	%
Radio and television		14.2		1.4	%		10.3		1.1	%
Retail		13.9		1.4	%		39.0		4.2	%
Logistics		13.9		1.4	%		20.5		2.2	%
Healthcare		13.2		1.3	%		23.0		2.5	%
Grocery		13.0		1.3	%		6.9		0.7	%
Aerospace and defense		12.7		1.3	%		0.0		0.0	%
Utilities		9.6		1.0	%		10.0		1.1	%
Leisure goods		9.6		1.0	%		10.0		1.1	%
IT consulting		6.7		0.7	%		26.8		2.9	%
Pharmaceutical		5.0		0.5	%		3.5		0.4	%
Electronics		3.4		0.3	%		3.9		0.4	%
Chemicals and plastics		0.0		0.0	%		28.6		3.1	%
Auto parts manufacturer		0.0		0.0	%		12.0		1.3	%
IT outsourcing		0.0		0.0	%		6.9		0.7	%
Advertising		0.0		0.0	%		5.1		0.5	%
Packaging and containers		0.0		0.0	%		5.0		0.5	%
Clothing		0.0		0.0	%		4.6		0.5	%
Insurance		0.0		0.0	%		3.5		0.4	%
IT value-added reseller		0.0		0.0	%		0.5		0.1	%
Total	$	984.2		100.0	%	$	931.6		100.0	%

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Since our inception in 2003, our portfolio has consisted generally of senior loans to middle-market companies. We have also invested in publicly traded debt and/or equity securities or take controlling interests in portfolio companies in certain limited circumstances, as well as syndicated corporate loans and structured finance investments. On December 3, 2007, we changed our name from Technology Investment Capital Corp. to TICC Capital Corp. We expect to actively seek new investment opportunities both within and outside the technology sector that otherwise meet our investment criteria.

(1) Reflects our debt and equity investments in CLOs as of December 31, 2014 and December 31, 2013, respectively.

The following tables present the top ten industries (based upon Moody’s industry classifications) of the aggregate holdings of the CLOs included in our portfolio, based on par value, as of December 31, 2014 and December 31, 2013.

Top Ten Industries	At December 31, 2014
Healthcare and pharmaceuticals		9.60	%
High tech industries		6.69	%
Services: business		6.45	%
Media: broadcasting and subscription		6.37	%
Banking, finance, insurance, and real estate		5.49	%
Hotel, gaming, and leisure		5.46	%
Retail		4.65	%
Chemicals, plastics, and rubber		4.43	%
Telecommunications		4.32	%
Beverage, food, and tobacco		4.11	%
Total		57.57	%

Top Ten Industries	At December 31, 2013
Healthcare, education and childcare		10.67	%
Broadcasting and entertainment		6.28	%
Electronics		5.89	%
Telecommunications		4.98	%
Hotels, motels, inns, and gaming		4.71	%
Retail stores		4.49	%
Automobile		4.21	%
Banking		4.12	%
Chemicals, plastics, and rubber		4.10	%
Business equipment, and services		3.67	%
Total		53.12	%

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PORTFOLIO GRADING

We have adopted a credit grading system to monitor the quality of our debt investment portfolio. Equity securities are not graded. As of December 31, 2014 and 2013 our portfolio had a weighted average grade of 2.1 and 2.1, respectively, based upon the fair value of the debt investments in the portfolio.

At December 31, 2014 and 2013, our debt investment portfolio was graded as follows:

			December 31, 2014
Grade	Summary Description		Principal Value		Percentage of Total Portfolio			Portfolio at Fair Value		Percentage of Total Portfolio
			(dollars in millions)					(dollars in millions)
1		Company is ahead of expectations and/or outperforming financial covenant requirements and such trend is expected to continue.	$	—		0.0	%	$	—		0.0	%
2		Full repayment of the outstanding amount of TICC’s cost basis and interest is expected, for the specific tranche.		675.8		91.1	%		662.8		92.8	%
3		Closer monitoring is required. Full repayment of the outstanding amount of TICC’s cost basis and interest is expected for the specific tranche.		51.2		6.9	%		43.5		6.1	%
4		A reduction of interest income has occurred or is expected to occur. Full repayment of the outstanding amount of TICC’s cost basis is expected for the specific tranche.		—		0.0	%		—		0.0	%
5		Full repayment of the outstanding amount of TICC’s cost basis is not expected for the specific tranche.		15.0		2.0	%		8.3		1.1	%
			$	742.0		100.0	%	$	714.6		100.0	%

			December 31, 2013
Grade	Summary Description		Principal Value		Percentage of Total Portfolio			Portfolio at Fair Value		Percentage of Total Portfolio
			(dollars in millions)					(dollars in millions)
1		Company is ahead of expectations and/or outperforming financial covenant requirements and such trend is expected to continue.	$	—		0.0	%	$	—		0.0	%
2		Full repayment of the outstanding amount of TICC’s cost basis and interest is expected, for the specific tranche.		593.6		85.3	%		589.1		86.7	%
3		Closer monitoring is required. Full repayment of the outstanding amount of TICC’s cost basis and interest is expected for the specific tranche.		91.9		13.2	%		84.8		12.5	%
4		A reduction of interest income has occurred or is expected to occur. Full repayment of the outstanding amount of TICC’s cost basis is expected for the specific tranche.		—		0.0	%		—		0.0	%
5		Full repayment of the outstanding amount of TICC’s cost basis is not expected for the specific tranche.		10.0		1.5	%		5.5		0.8	%
			$	695.5		100.0	%	$	679.4		100.0	%

We expect that a portion of our investments will be in the Grades 3, 4 or 5 categories from time to time, and, as such, we will be required to work with troubled portfolio companies to improve their business and protect our investment. The number and amount of investments included in Grade 3, 4 or 5 may fluctuate from year to year.

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RESULTS OF OPERATIONS

Set forth below is a comparison of our results of operations for the years ended December 31, 2014, 2013 and 2012.

Comparison of the years ended December 31, 2014 and December 31, 2013

Investment Income

As of December 31, 2014, our debt investments had stated interest rates of between 4.0% and 11.5% and maturity dates of between 19 and 124 months. In addition, our total portfolio had a weighted average yield on debt investments of approximately 7.8%, compared with 8.7% as of December 31, 2013. Investment income for the year ended December 31, 2014 was approximately $117.3 million compared to approximately $105.1 million for the period ended December 31, 2013.

For the year ended December 31, 2014, investment income consisted of approximately $48.1 million in coupon interest from portfolio investments, approximately $2.7 million in amortization of original issue discount and market discount, approximately $0.2 million of discount income derived from unscheduled principal cash remittances at par on discounted debt securities, approximately $59.5 million in distributions from the equity interest in securitized vehicle investments and other equity investments, as well approximately $1.2 million in PIK interest income.

Interest Income

As of December 31, 2014, interest income of approximately $52.4 million was recorded, compared to interest income of approximately $53.6 million for the year ended December 31, 2013, representing a decline of approximately $1.2 million. This decrease was due to less income associated with our CLO debt investment portfolio of approximately $2.0 million resulting from lower yields and decreased principal outstanding which was partially offset by increased income associated with our syndicated investment portfolio of approximately $0.8 million.

The total principal value of income producing debt investments as of December 31, 2014 was approximately $729.3 million compared to an income producing principal balance as of December 31, 2013 of $685.5 million, representing an increase of approximately $43.8 million. This increase in the size of our debt portfolio is primarily attributable to funds provided through the Facility.

Distributions from Securitized Vehicles and Equity Investments

For the year ended December 31, 2014, we recorded distributions from the equity interests in our CLO vehicle investments of approximately $59.5 million, compared to $47.2 for the year ended December 31, 2013. This increase was directly related to the increased size of our CLO equity portfolio during 2014.

Other Income

For the year ended December 31, 2014, fee income of approximately $5.5 million was recorded, compared to fee income of approximately $4.3 million for the year ended December 31, 2013. Fee income consists of non-recurring fees in connection with our investments in portfolio companies, including, primarily fee letters, success fees and loan prepayment fees. The increase of fee income during the year ended December 31, 2014, was due to increased fees associated with our warehouse facility investment of approximately $1.0 million and side letter agreements of approximately $1.3 million.

Operating Expenses

Total expenses for the year ended December 31, 2014 were approximately $51.9 million, which includes the capital gains incentive fee accrual reduction of approximately $3.9 million.

Expenses before incentive fees, for the year ended December 31, 2014, were approximately $50.1 million. This amount consisted primarily of investment advisory fees, interest expense and other debt financing expenses, professional fees, compensation expense, and general and administrative expenses.

Expenses before incentive fees increased approximately $6.2 million from the year ended December 31, 2013, attributable primarily to higher interest expense associated with the senior notes issued under our

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collateralized loan obligation transactions and credit facility, higher investment advisory fees (consisting of the base management fee) as well as increased compensation expense and professional fees associated with our legal and audit expenses. Expenses before incentive fees for the year ended December 31, 2013 were approximately $43.9 million.

The investment advisory fee for the year ended December 31, 2014 was approximately $21.2 million, representing the base fee as provided for in the Investment Advisory Agreement. The investment advisory fee in the comparable period in 2013 was approximately $19.1 million. The increase of approximately $2.1 million is due to an increase in average gross assets. At each of December 31, 2014 and December 31, 2013, respectively, approximately $6.2 million and $7.1 million of investment advisory fees remained payable to TICC Management, including the net investment income incentive fee discussed below.

Interest expense and other debt financing expenses for the year ended December 31, 2014 were approximately $22.9 million, which was directly related to our debt securitization financing transactions, Convertible Notes issuance and Facility, compared with interest expense of approximately $19.0 million for the year ended December 31, 2013. This increase was directly attributable to the accelerated costs of approximately $3.1 million, described below. The accrued interest payable at December 31, 2014 on the Class A notes issued by TICC CLO LLC was $0 and for the year ended December 31, 2014, the amortization of discount on the issued notes was approximately $1.2 million (including the write-off of previously unaccreted discount of approximately $1.1 million) and the amortization of deferred debt issuance costs was approximately $2.3 million (including the write-off of deferred debt issuance costs of approximately $2.0 million). At December 31, 2014, a $0 balance of interest expense remained payable. As of December 31, 2014, TICC CLO LLC had remaining 2 investments in portfolio companies with a total fair value of approximately $5.6 million. The aggregate accrued interest payable on the notes of TICC CLO 2012-1 LLC at December 31, 2014 was approximately $682,000. Additionally, for the year ended December 31, 2014, the aggregate amortization of discount on the notes issued by TICC CLO 2012-1 LLC was approximately $441,000 and the amortization of deferred debt issuance costs was approximately $344,000. The accrued interest payable on the Convertible Notes at December 31, 2014 was approximately $1.4 million. Additionally, for the year ended December 31, 2014, the amortization of deferred issuance costs was approximately $619,000. The aggregate accrued interest payable on the Facility at December 31, 2014 was approximately $477,000. Additionally, for the year ended December 31, 2014, the amortization of deferred debt issuance costs was approximately $83,000.

The table below summarizes the components of interest expense for the year ended December 31, 2014 and 2013:

	Year Ended December 31, 2014								Year Ended December 31, 2013
(dollars in thousands)	Stated Interest Expense(1)		Note Discount Expense(2)		Amortization of Deferred Debt Issuance Costs		Total		Stated Interest Expense(1)		Note Discount Expense(2)		Amortization of Deferred Debt Issuance Costs		Total
TICC CLO LLC Class A Notes	$	2,089.0	$	1,208.8	$	2,290.0	$	5,587.8	$	2,592.2	$	158.6	$	302.5	$	3,053.3
TICC CLO 2012-1 LLC Class A-1 Notes		3,538.9		198.1		—		3,737.0		3,164.0		193.8		—		3,357.8
TICC CLO 2012-1 LLC Class B-1 Notes		757.0		53.7		—		810.7		665.3		52.9		—		718.2
TICC CLO 2012-1 LLC Class C-1 Notes		1,162.0		89.2		—		1,251.2		1,016.3		90.1		—		1,106.4
TICC CLO 2012-1 LLC Class D-1 Notes		1,273.9		99.7		—		1,373.6		1,111.4		100.4		—		1,211.8
TICC CLO 2012-1 amortization of deferred debt issuance costs		—		—		343.8		343.8		—		—		315.2		315.2
2017 Convertible Notes		8,625.0		—		619.0		9,244.0		8,577.1		—		620.9		9,198.0
TICC Funding LLC Revolving Credit Facility		476.8		—		83.0		559.8		—		—		—		—
Total	$	17,922.6	$	1,649.5	$	3,335.8	$	22,907.9	$	17,126.3	$	595.8	$	1,238.6	$	18,960.7

(1) Stated Interest Expense represents the interest amount payable based on the face amount of the notes at the interest rate stated for a particular class of notes.

(2) Note Discount Expense represents the expense associated with the accretion of the difference between the face amount of the notes and the amount at which the notes were sold.

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For further information on our borrowings, see “— Liquidity and Capital Resources — Borrowings.”

Professional fees, consisting of legal, valuation, audit and tax fees, were approximately $2.1 million for the year ended December 31, 2014, compared to approximately $2.0 million for the year ended December 31, 2013. This increase was a result of the timing of certain professional services.

Compensation expense was approximately $1.9 million for the year ended December 31, 2014, compared to approximately $1.6 million for the period ended December 31, 2013, reflecting the allocation of compensation expenses for the services of our chief financial officer, chief compliance officer, controller, accounting staff and administrative support personnel. At December 31, 2014 and December 31, 2013 respectively, approximately $0 and $24,000 of compensation expenses remained payable.

General and administrative expenses, consisting primarily of printing expenses, listing fees, facilities costs and other expenses were approximately $1.4 million for the year ended December 31, 2014 compared to approximately $1.6 million for 2013. Office supplies, facilities costs and other expenses are allocated to us under the terms of the Administration Agreement.

Incentive Fees

The net investment income incentive fee for the year ended December 31, 2014 was approximately $5.6 million compared to $6.6 million for the period ended December 31, 2013. The net investment income incentive fee is calculated and payable quarterly in arrears based on our “Pre-Incentive Fee Net Investment Income” for the immediately preceding calendar quarter subject to a hurdle rate which is determined as of December 31 of the preceding year. For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income accrued during the calendar quarter minus our operating expenses for the quarter (including the base fee, expenses payable under the Administration Agreement with BDC Partners, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee).

The capital gains incentive fee expense, as reported under generally accepted accounting principles, is calculated on the basis of net realized and unrealized gains and losses at the end of each period. The expense related to the hypothetical liquidation of the portfolio (and assuming no other changes in realized or unrealized gains and losses) would only become payable to our investment adviser in the event of a complete liquidation of our portfolio as of year end. The capital gains incentive fee expense for the year ended December 31, 2014 resulted in an accrual reversal of approximately $3.9 million as a result of the impact of net unrealized depreciation and net realized losses on our portfolio for the year ended December 31, 2014. For year ended December 31, 2013, an accrual reversal of approximately $1.2 million was recorded under the hypothetical liquidation calculation.

The amount of the capital gains incentive fee which will actually be payable is determined in accordance with the terms of the Investment Advisory Agreement and is calculated as of the end of each calendar year (or upon termination of the Investment Advisory Agreement). The terms of the Investment Advisory Agreement state that the capital gains incentive fee calculation is based on net realized gains, if any, offset by gross unrealized depreciation for the calendar year. No effect is given to gross unrealized appreciation in this calculation. For the year ended December 31, 2014, such an accrual was not required under the terms of the Investment Advisory Agreement. For the year ended December 31, 2013, such an accrual was not required under the terms of the Investment Advisory Agreement.

Realized and Unrealized Gains/Losses on Investments

For the year ended December 31, 2014, we recorded net realized capital losses on investments of approximately $19.5 million, which largely represents the net loss on the sale of several of our CLO debt and equity investments which totaled approximately $13.2 million as well as the loss associated with the restructuring of our investment in Nextag, Inc. senior secured notes of approximately $4.7 million.

Based upon the fair value determinations made in good faith by the Board of Directors, during the year ended December 31, 2014, we had net unrealized losses of approximately $49.3 million, comprised of $1.4 million in gross unrealized appreciation, $60.8 million in gross unrealized depreciation and approximately $10.1 million relating to the reversal of prior period net unrealized depreciation as certain investments were

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realized. The most significant changes in net unrealized appreciation and depreciation during the year ended December 31, 2014 were as follows (in millions):

Portfolio Company	Changes in Unrealized Appreciation (Depreciation)
Stone Tower CLO VII Ltd	$	4.0
ACA CLO 2007-1, Ltd		2.4
Lightpoint CLO VIII, Ltd		1.3
Nextag, Inc		1.2
Mmodal, Inc		1.2
Newmark Capital Funding 2013-1 CLO Ltd		(1.0	)
Mountain Hawk III CLO, Ltd		(1.2	)
Edmentum, Inc		(1.2	)
AMMC CLO XII, Ltd		(1.4	)
Cedar Funding II CLO, Ltd		(1.4	)
Catamaran CLO 2013-1 Ltd		(1.4	)
Marea CLO, Ltd		(1.5	)
Emporia Preferred Funding III, Ltd		(1.5	)
Ares XXV CLO Ltd		(1.6	)
Carlyle Global Market Strategies CLO 2013-2, Ltd		(1.7	)
Telos CLO 2014-5, Ltd		(1.8	)
Telos CLO 2013-3, Ltd		(1.8	)
Ivy Hill Middle Market Credit Fund VII, Ltd		(1.9	)
Shackleton 2013-III CLO, Ltd		(2.5	)
RBS Holding Company		(2.6	)
Shackleton 2013-IV CLO, Ltd		(2.9	)
Catamaran CLO 2012-1 Ltd		(3.4	)
Merrill Communications, LLC		(3.5	)
Ares XXVI CLO Ltd		(3.9	)
Benefit Street Partners CLO II, Ltd		(4.9	)
Unitek Global Services, Inc		(5.5	)
Net all other(1)		(10.8	)
Total	$	(49.3	)

(1) Unrealized gains and losses less than $1.0 million have been combined.

Based upon the fair value determinations made in good faith by the Board of Directors, during the year ended December 31, 2013, we had net unrealized losses of approximately $3.2 million, comprised of $36.3 million in gross unrealized appreciation, $29.6 million in gross unrealized depreciation and approximately $9.9 million relating to the reversal of prior period net unrealized appreciation as certain investments were realized. The most significant changes in net unrealized appreciation and depreciation during the year ended December 31, 2013 were as follows (in millions):

Portfolio Company	Changes in Unrealized Appreciation (Depreciation)
RBS Holding Company	$	8.2
Merrill Communications, LLC		7.8
Genutec Business Solutions		4.7
Benefit Street Partners CLO II, Ltd.		3.0
Integra Telecom Holdings, Inc.		2.2

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Portfolio Company	Changes in Unrealized Appreciation (Depreciation)
Carlyle Global Market Strategies CLO 2013-2, Ltd		1.5
Band Digital, Inc.		1.3
Ares XXVI CLO Ltd.		1.1
Hewetts Island CDO IV, Ltd.		(1.1	)
Pegasus Solutions, Inc.		(1.6	)
Jersey Street CLO, Ltd.		(1.6	)
Canaras Summit CLO Ltd.		(2.0	)
ACA CLO 2006-2, Limited		(2.2	)
GSC Partners 2007-8X CDO		(2.2	)
Hewetts Island CDO III 2005-1, Ltd.		(2.2	)
Catamaran CLO 2012-1 Ltd.		(2.2	)
Lightpoint CLO VIII, Ltd.		(3.0	)
ACA CLO 2007-1, Ltd.		(3.0	)
CS Advisors CLO I Ltd.		(3.7	)
Nextag, Inc.		(3.9	)
Stone Tower CLO VII Ltd.		(4.9	)
Net all other(1)		0.6
Total	$	(3.2	)

(1) Unrealized gains and losses less than $1.0 million have been combined.

For the year ended December 31, 2013, we recorded net realized capital gains on investments of approximately $6.4 million, which represents the gain on the sale of several of our CLO debt and equity investments which totaled approximately $10.4 million partially offset by the loss associated with the write-off of our investment in Genutec Business Solutions of approximately $4.7 million.

Please see “— Portfolio Grading” for more information.

Net Increase in Net Assets Resulting from Net Investment Income

Net investment income for the year ended December 31, 2014 and 2013 was approximately $65.5 million and $55.8 million, respectively. This increase was due in part to an increase in the amount of distributions from the CLO equity investments in our portfolio, as well as lower capital gains incentive fees. These were partially offset by increased interest expense as well as higher base management fees.

Excluding the impact of the capital gains incentive fee accrual reduction of approximately $3.9 million, core net investment income for the year ended December 31, 2014 was approximately $61.6 million compared to approximately $54.6 million for the period ending December 31, 2013.

Based on weighted-average shares outstanding of 58,822,732 (basic) and 68,855,884 (diluted), the net increase in net assets resulting from net investment income per common share for the year ended December 31, 2014 was approximately $1.11 (basic) and $1.06 (diluted), compared to approximately $1.09 per share (basic) and $1.03 (diluted) for the year ended December 31, 2013.

Excluding the impact of the accrued capital gains incentive fee, the net increase in net assets resulting from core net investment income per common share would have been approximately $1.05 (basic) and approximately $1.00 (diluted) for the year ended December 31, 2014 compared to $1.07 per share (basic) and $1.01 (diluted) for the year ended December 31, 2013.

Please see “— Supplemental Information Regarding Core Net Investment Income and Core Net Increase in Net Assets Resulting from Operations” below for more information.

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Net Increase (Decrease) in Net Assets Resulting from Operations

We had a net decrease in net assets resulting from operations of approximately $3.3 million for the year ended December 31, 2014, compared to a net increase of approximately $58.9 million for the year ended December 31, 2013. This decrease was attributable to a meaningful shift in net unrealized depreciation on investments and a significant increase in net realized capital losses. These were partially offset by increased net investment income.

Due to the anti-dilutive effect on the computation of diluted earnings per share for the year ended December 31, 2014, the adjustments for interest on convertible senior notes, base management fees, deferred issuance costs and incentive fees as well as weighted average common shares outstanding adjustments for the dilutive effect of convertible notes were excluded from the respective period’s diluted earnings per share computation. Based on weighted-average shares outstanding of 58,822,732 (basic and diluted), for the year ended December 31, 2014, we had a net decrease in net assets resulting from operations per common share of approximately $0.06 (basic and diluted), compared to a net increase in net assets resulting from operations per share of approximately $1.15 (basic) and $1.09 (diluted) for the year ended December 31, 2013.

Excluding the impact of the accrued capital gains incentive fee, the core net decrease in net assets resulting from operations per common share for the year ended December 31, 2014 would have been approximately $0.12 (basic and diluted), compared to a net increase of $1.13 per share (basic) and $1.07 (diluted) for the year ended December 31, 2013.

Please see “— Supplemental Information Regarding Core Net Investment Income and Core Net Increase in Net Assets Resulting from Operations” below for more information.

Supplemental Information Regarding Core Net Investment Income and Core Net Increase (Decrease) in Net Assets Resulting from Operations

On a supplemental basis, we provide information relating to core net investment income, its ratio to net assets, and core net increase in net assets resulting from operations, which are non-GAAP measures. These measures are provided in addition to, but not as a substitute for, net investment income and net increase in net assets resulting from operations. Our non-GAAP measures may differ from similar measures by other companies, even if similar terms are used to identify such measures. Core net investment income represents net investment income excluding our capital gains incentive fee. Core net increase in net assets resulting from operations represents net increase in net assets resulting from operations excluding the capital gains incentive fee. As the capital gains incentive fee, for generally accepted accounting purposes, is based on the hypothetical liquidation of the entire portfolio (and as any capital gains incentive fee may be non-recurring), we believe that core net investment income and core net increase in net assets resulting from operations are useful indicators of performance during this period. Further, as the capital gains incentive fee may not be fully currently tax deductible and as the RIC requirements are to distribute taxable earnings, the core net investment income provides a better indication of estimated taxable income for the year to date.

The following table provides a reconciliation of net investment income to core net investment income (for the years ended December 31, 2014 and 2013):

	Year Ended December 31, 2014						Year Ended December 31, 2013
	Amount			Per Share Amounts (basic)			Amount			Per Share Amounts (basic)
Net investment income	$	65,457,844		$	1.113		$	55,792,632		$	1.090
Capital gains incentive fee		(3,872,853	)		(0.066	)		(1,192,382	)		(0.020	)
Core net investment income	$	61,584,991		$	1.047		$	54,600,250		$	1.070

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The following table provides a reconciliation of net increase in net assets resulting from operations to core net increase in net assets resulting from operations (for the years ended December 31, 2014 and 2013):

	Year Ended December 31, 2014						Year Ended December 31, 2013
	Amount			Per Share Amounts (basic)			Amount			Per Share Amounts (basic)
Net (decrease) increase in net assets resulting from operations	$	(3,348,400	)	$	(0.057	)	$	58,944,734		$	1.150
Capital gains incentive fee		(3,872,853	)		(0.066	)		(1,192,382	)		(0.020	)
Core net (decrease) increase in net assets resulting from operations	$	(7,221,253	)	$	(0.123	)	$	57,752,352		$	1.130

In addition, the following ratio is presented to supplement the financial highlights included in Note 11 to the consolidated financial statements:

	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Ratio of core net investment income to average net assets, for the years ended December 31, 2014, 2013, 2012, 2011 and 2010, respectively		11.00	%		10.79	%		11.74	%		9.77	%		9.95	%

The following table provides a reconciliation of the ratio of net investment income to average net assets to the ratio of core net investment income to average net assets, for the years ended December 31, 2014, 2013, 2012, 2011 and 2010, respectively.

	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Ratio of net investment income to average net assets		11.69	%		11.02	%		10.23	%		9.42	%		9.95	%
Ratio of capital gain incentive fee to average net assets		(0.69	)%		(0.23	)%		1.51	%		0.35	%		0.00	%
Ratio of core net investment income to average net assets		11.00	%		10.79	%		11.74	%		9.77	%		9.95	%

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Comparison of the years ended December 31, 2013 and December 31, 2012

Investment Income

As of December 31, 2013, our debt investments had stated interest rates of between 3.94% and 15.00% and maturity dates of between 15 and 136 months. In addition, our total portfolio had a weighted average yield on debt investments of approximately 8.7%, compared with 9.4% as of December 31, 2012.

Investment income for the year ended December 31, 2013 was approximately $105.1 million compared to approximately $71.2 million for the period ended December 31, 2012. This increase was due in part to an increase in the distributions from the equity interests in our CLO vehicle investments and the amount of performing assets in the portfolio. The total principal value of income producing debt investments as of December 31, 2013 and December 31, 2012 was approximately $685.5 million and $566.5 million, respectively. For the year ended December 31, 2013, investment income consisted of approximately $47.3 million in cash interest from portfolio investments, approximately $3.7 million in amortization of original issue and market discount, approximately $0.4 million of discount income derived from unscheduled principal cash remittances at par on discounted debt securities, approximately $47.2 million in distributions from the equity interest in securitized vehicle investments and an equity investment, as well as approximately $2.2 million in PIK interest income.

For the year ended December 31, 2013, fee income of approximately $4.3 million was recorded, compared to fee income of approximately $5.2 million for the year ended December 31, 2012. Fee income consists of non-recurring fees in connection with our investments in portfolio companies, including commitment fees, origination fees and amendment fees.

Operating Expenses

Total expenses for the year ended December 31, 2013 were $49.3 million, which includes the capital gains incentive fee accrual reduction of approximately $1.2 million.

Expenses before incentive fees, for the year ended December 31, 2013, were approximately $43.9 million. This amount consisted primarily of investment advisory fees, interest expense and other debt financing expenses, professional fees, compensation expense, and general and administrative expenses.

Expenses before incentive fees increased approximately $20.9 million from the year ended December 31, 2012, attributable primarily to higher interest expense associated with the senior notes issued under our collateralized loan obligation transactions, higher investment advisory fees (consisting of the base management fee) as well as increased compensation expense and professional fees associated with our legal and audit expenses. Expenses before incentive fees for the year ended December 31, 2012 were approximately $23.0 million.

The investment advisory fee for the year ended December 31, 2013 was approximately $19.1 million, representing the base fee as provided for in the Investment Advisory Agreement. The investment advisory fee in the comparable period in 2012 was approximately $11.2 million. The increase of approximately $7.9 million is due to an increase in average gross assets. At each of December 31, 2013 and December 31, 2012, respectively, approximately $7.1 million and $4.9 million of investment advisory fees remained payable to TICC Management, including the net investment income incentive fee discussed below.

Interest expense and other debt financing expenses for the year ended December 31, 2013 was approximately $19.0 million, which was directly related to our debt securitization financing transactions and Convertible Notes issuance, compared with interest expense of approximately $7.3 million for the year ended December 31, 2012. The accrued interest payable at December 31, 2013 on the Class A notes issued by TICC CLO LLC was approximately $476,000. Additionally, for the year ended December 31, 2013, the amortization of discount on the Class A Notes issued by TICC CLO LLC was approximately $159,000 and the amortization of deferred debt issuance costs was approximately $303,000. At December 31, 2012, interest expense of approximately $491,000 remained payable on the Class A Notes issued by TICC CLO LLC. The aggregate accrued interest payable on the notes of TICC CLO 2012-1 LLC at December 31, 2013 was approximately $683,000. Additionally, for the year ended December 31, 2013, the aggregate amortization of discount on the issued notes of TICC CLO 2012-1 LLC was approximately $437,000 and the amortization of deferred debt issuance costs was approximately $315,000. The accrued interest payable on the Convertible

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Notes at December 31, 2013 was approximately $1.4 million. Additionally, for the year ended December 31, 2013, the amortization of deferred issuance costs was approximately $621,000.

The table below summarizes the components of interest expense for the year ended December 31, 2013 and 2012:

	Year Ended December 31, 2013								Year Ended December 31, 2012
(dollars in thousands)	Stated Interest Expense(1)		Note Discount Expense(2)		Amortization of Deferred Debt Issuance Costs		Total		Stated Interest Expense(1)		Note Discount Expense(2)		Amortization of Deferred Debt Issuance Costs		Total
TICC CLO LLC Class A Notes	$	2,592.2	$	158.6	$	302.5	$	3,053.3	$	2,783.1	$	171.8	$	303.3	$	3,258.2
TICC CLO 2012-1 LLC Class A-1 Notes		3,164.0		193.8		—		3,357.8		790.4		61.2		—		851.6
TICC CLO 2012-1 LLC Class B-1 Notes		665.3		52.9		—		718.2		153.5		17.7		—		171.2
TICC CLO 2012-1 LLC Class C-1 Notes		1,016.3		90.1		—		1,106.4		228.8		31.9		—		260.7
TICC CLO 2012-1 LLC Class D-1 Notes		1,111.4		100.4		—		1,211.8		179.8		28.6		—		208.4
TICC CLO 2012-1 amortization of deferred debt issuance costs		—		—		315.2		315.2		—		—		85.8		85.8
2017 Convertible Notes		8,577.1		—		620.9		9,198.0		2,269.8		—		157.0		2,426.8
Total	$	17,126.3	$	595.8	$	1,238.6	$	18,960.7	$	6,405.4	$	311.2	$	546.1	$	7,262.7

(1) Stated Interest Expense represents the interest amount payable based on the face amount of the notes at the interest rate stated for a particular class of notes.

(2) Note Discount Expense represents the expense associated with the accretion of the difference between the face amount of the notes and the amount at which the notes were sold.

For further information on our borrowings, see “— Liquidity and Capital Resources — Borrowrings.”

Professional fees, consisting of legal, valuation, audit and tax fees, were approximately $2.0 million for the year ended December 31, 2013, compared to approximately $1.9 million for the year ended December 31, 2012. This was the result of an increase in audit fees of approximately $443,000. This increase was partially offset by a decrease in fees related to legal services of approximately $329,000 for the period ended December 31, 2013.

Compensation expense was approximately $1.6 million for the year ended December 31, 2013, compared to approximately $1.2 million for the period ended December 31, 2012, reflecting the allocation of compensation expenses for the services of our chief financial officer, chief compliance officer, controller, accounting staff and administrative support personnel. At December 31, 2013 and December 31, 2012 respectively, approximately $24,000 and $0 of compensation expenses remained payable.

General and administrative expenses, consisting primarily of printing expenses, listing fees, facilities costs and other expenses were approximately $1.6 million for the year ended December 31, 2013 compared to approximately $1.0 million for 2012. This increase was largely due to direct charges incurred by our debt securitization vehicles for ratings bureau charges and administrative services. Office supplies, facilities costs and other expenses are allocated to us under the terms of the Administration Agreement.

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Incentive Fees

The net investment income incentive fee for the year ended December 31, 2013 was approximately $6.6 million compared to $5.5 million for the period ended December 31, 2012. The net investment income incentive fee is calculated and payable quarterly in arrears based on our “Pre-Incentive Fee Net Investment Income” for the immediately preceding calendar quarter subject to a hurdle rate which is determined as of December 31 of the preceding year. For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income accrued during the calendar quarter minus our operating expenses for the quarter (including the base fee, expenses payable under the Administration Agreement with BDC Partners, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee).

The capital gains incentive fee expense, as reported under generally accepted accounting principles, is calculated on the basis of net realized and unrealized gains and losses at the end of each period. The expense related to the hypothetical liquidation of the portfolio (and assuming no other changes in realized or unrealized gains and losses) would only become payable to our investment adviser in the event of a complete liquidation of our portfolio as of year end. The capital gains incentive fee expense for the year ended December 31, 2013 resulted in an accrual reversal of approximately $1.2 million as a result of net unrealized depreciation partially offset by net realized gains on our portfolio for the year ended December 31, 2013. For the year ended December 31, 2012, an expense of approximately $5.5 million was recorded under the hypothetical liquidation calculation.

The amount of the capital gains incentive fee which will actually be payable is determined in accordance with the terms of the Investment Advisory Agreement and is calculated as of the end of each calendar year (or upon termination of the Investment Advisory Agreement). The terms of the Investment Advisory Agreement state that the capital gains incentive fee calculation is based on net realized gains, if any, offset by gross unrealized depreciation for the calendar year. No effect is given to gross unrealized appreciation in this calculation. For the year ended December 31, 2013, such an accrual was not required under the terms of the Investment Advisory Agreement. For the year ended December 31, 2012, the amount calculated, and payable, under the terms of the Investment Advisory Agreement was approximately $1.6 million.

Realized and Unrealized Gains/Losses on Investments

For the year ended December 31, 2013, we recorded net realized capital gains on investments of approximately $6.4 million, which represents the gain on the sale of several of our CLO debt and equity investments which totaled approximately $10.4 million partially offset by the loss associated with the write-off of our investment in Genutec Business Solutions of approximately $4.7 million.

Based upon the fair value determinations made in good faith by the Board of Directors, during the year ended December 31, 2013, we had net unrealized losses of approximately $3.2 million, comprised of approximately $36.3 million in gross unrealized appreciation, $29.6 million in gross unrealized depreciation and approximately $9.9 million relating to the reversal of prior period net unrealized appreciation as certain investments were realized. The most significant changes in net unrealized appreciation and depreciation during the year ended December 31, 2013 were as follows (in millions):

Portfolio Company	Changes in Unrealized Appreciation (Depreciation)
RBS Holding Company	$	8.2
Merrill Communications, LLC		7.8
Genutec Business Solutions		4.7
Benefit Street Partners CLO II, Ltd.		3.0
Integra Telecom Holdings, Inc.		2.2
Carlyle Global Market Strategies CLO 2013-2, Ltd		1.5
Band Digital, Inc.		1.3
Ares XXVI CLO Ltd.		1.1
Hewetts Island CDO IV, Ltd.		(1.1	)
Pegasus Solutions, Inc.		(1.6)

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Portfolio Company	Changes in Unrealized Appreciation (Depreciation)
Jersey Street CLO, Ltd.		(1.6	)
Canaras Summit CLO Ltd.		(2.0	)
ACA CLO 2006-2, Limited		(2.2	)
GSC Partners 2007-8X CDO		(2.2	)
Hewetts Island CDO III 2005-1, Ltd.		(2.2	)
Catamaran CLO 2012-1 Ltd.		(2.2	)
Lightpoint CLO VIII, Ltd.		(3.0	)
ACA CLO 2007-1, Ltd.		(3.0	)
CS Advisors CLO I Ltd.		(3.7	)
Nextag, Inc.		(3.9	)
Stone Tower CLO VII Ltd.		(4.9	)
Net all other(1)		0.6
Total	$	(3.2	)

(1) Unrealized gains and losses less than $1.0 million have been combined.

For the year ended December 31, 2012, we recorded net realized capital gains on investments of approximately $16.9 million, which are largely comprised of aggregate gains from the sale of several CLO debt investments ($12.4 million) and the gain on the repayment on our investment in American Integration Technologies, LLC ($1.4 million).

Based upon the fair value determinations made in good faith by the Board of Directors, during the year ended December 31, 2012, we had net unrealized gains of approximately $14.3 million, comprised of $52.4 million in gross unrealized appreciation, $24.0 million in gross unrealized depreciation and approximately $14.1 million relating to the reversal of prior period net unrealized appreciation as certain investments were realized. The most significant changes in net unrealized appreciation and depreciation during the year ended December 31, 2012 were as follows (in millions):

Portfolio Company	Changes in unrealized appreciation (depreciation)
Canaras CLO Equity – 2007-1A, 1X	$	1.9
GSC Partners 2007-8X Sub CDO		1.7
Emporia CLO 2007 3A E		1.7
Hewetts Island CDO IV 2006-4 E		1.5
Integra Telecom Holdings, Inc.		1.5
Jersey Street 2006-1A CLO LTD		1.3
Harbourview – 2006A CLO Equity		1.2
GALE 2007-4A CLO		1.0
Algorithmic Implementations, Inc.		1.0
Band Digital Inc.		(1.3	)
American Integration Technologies, LLC		(1.5	)
RBS Holding Company		(1.5	)
Prospero CLO II BV		(1.6	)
Pegasus Solutions, Inc.		(1.8	)
GenuTec Business Solutions, Inc.		(2.0	)
Net all other(1)		11.2
Total	$	14.3

(1) Unrealized gains and losses less than $1.0 million have been combined.

Please see “— Portfolio Grading” for more information.

73

Net Increase in Net Assets Resulting from Net Investment Income

Net investment income for the year ended December 31, 2013 and 2012 was approximately $55.8 million and $37.2 million, respectively. This increase was due in part to an increase in the amount of performing assets in the portfolio and distributions from the CLO equity investments in our portfolio, as well as lower capital gains incentive fees. These were partially offset by increased interest expense as well as higher base management fees and net investment income incentive fees.

Excluding the impact of the capital gains incentive fee accrual reduction of approximately $1.2 million, core net investment income for the year ended December 31, 2013 was approximately $54.6 million compared to approximately $42.7 million for the period ending December 31, 2012.

Based on weighted-average shares outstanding of 51,073,758 (basic) and 61,106,910 (diluted), the net increase in net assets resulting from net investment income per common share for the year ended December 31, 2013 was approximately $1.09 (basic) and $1.03 (diluted), compared to approximately $0.98 per share (basic) and $0.96 (diluted) for the year ended December 31, 2012. Excluding the impact of the accrued capital gains incentive fee, the net increase in net assets resulting from core net investment income per common share would have been approximately $1.07 (basic) and approximately $1.01 (diluted) for the year ended December 31, 2013, compared to $1.12 per share (basic) and $1.10 (diluted) for the year ended December 31, 2012.

Net Increase in Net Assets Resulting from Operations

We had a net increase in net assets resulting from operations of approximately $58.9 million for the year ended December 31, 2013, compared to a net increase of approximately $68.3 million for the year ended December 31, 2012. This decrease was attributable to a large shift in net unrealized depreciation on investments and a significant decrease in net realized capital gains. These were partially offset by increased net investment income.

Based on weighted-average shares outstanding of 51,073,758 (basic) and 61,106,910 (diluted), the net increase in net assets resulting from operations per common share for year ended December 31, 2013 was approximately $1.15 (basic) and approximately $1.09 (diluted), compared to a net increase in net assets resulting from operations of approximately $1.80 per share (basic) and $1.73 (diluted) for the year ended December 31, 2012. Excluding the impact of the accrued capital gains incentive fee, the core net increase in net assets resulting from operations per common share would have been approximately $1.13 (basic) and approximately $1.07 (diluted) for the year ended December 31, 2013, compared to $1.94 per share (basic) and $1.87 (diluted) for the year ended December 31, 2012.

LIQUIDITY AND CAPITAL RESOURCES

During the year ended December 31, 2014, we issued approximately 6.75 million shares in one equity offering and repurchased 154,600 shares under our share repurchase program.

During the year ended December 31, 2014, cash and cash equivalents increased from approximately $14.9 million at the beginning of the period to approximately $20.5 million at the end of the period. Net cash used by operating activities for the period, consisting primarily of the items described in “— Results of Operations,” was approximately $51.9 million, largely reflecting purchases of new investments of approximately $548.2 million partially offset by proceeds from principal repayments and sales of investments of approximately $435.2 million. Net cash provided by investing activities reflects the change in restricted cash in TICC CLO 2012-1 LLC. During the period, net cash provided by financing activities was approximately $45.6 million, reflecting primarily the net borrowings of approximately $149.0 million under the Facility, net proceeds of approximately $66.4 million from an equity offering, partially offset by the repayment of secured debt issued by TICC CLO LLC of approximately $101.3 million, the distribution of dividends and the repurchase of our common stock at a cost of approximately $1.2 million.

Equity Follow-On Offerings

On March 19, 2014, we completed a public offering of approximately 6.75 million shares of our common stock at a public offering price of $10.14 per share for total gross proceeds of approximately $68.4 million.

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Contractual Obligations

We have certain obligations with respect to the investment advisory and administration services we receive. See “— Overview”. We incurred approximately $21.2 million for investment advisory services, excluding pre-incentive net investment income incentive fees, and approximately $2.1 million for administrative services for the year ended December 31, 2014.

A summary of our significant contractual payment obligations is as follows as of December 31, 2014. See also “Note 9. Borrowings” to our consolidated financial statements.

			Payments Due by Period
Contractual obligations	Total		Less than 1 year		1 – 3 years		3 – 5 years		More than 5 years
Long-term debt obligations:
TICC Funding LLC Revolving Credit Facility	$	150,000,000	$	—	$	150,000,000	$	—	$	—
TICC CLO 2012-1 LLC Notes		240,000,000		—		—		—		240,000,000
TICC Convertible Notes		115,000,000		—		115,000,000		—		—
Total	$	505,000,000	$	—	$	265,000,000	$	—	$	240,000,000

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.

Share Repurchase Program

On December 18, 2014, our board of directors authorized a repurchase program to be in place until the earlier of June 30, 2015 or until $50 million of our outstanding shares of common stock have been repurchased. Under the repurchase program, we may, but we are not obligated to, repurchase our outstanding common stock in the open market from time to time provided that we comply with the prohibitions under our Insider Trading Policies and Procedures and the guidelines specified in Rule 10b-18 of the Securities Exchange Act of 1934, as amended, including certain price, market volume and timing constraints. In addition, any repurchases will be conducted in accordance with the 1940 Act. During the year ended December 31, 2014, we repurchased 154,600 shares at the weighted average price of approximately $7.58 per share, inclusive of commissions. This represents a discount of approximately 12.3% of the net asset value per share at December 31, 2014. The total dollar amount of shares repurchased in this period is approximately $1.2 million, leaving a maximum of approximately $48.8 million available for future program purchases.

Borrowings

In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, is at least 200% immediately after such borrowing. As of December 31, 2014, our asset coverage for borrowed amounts was 202%.

The following are the Company’s outstanding principal amounts, carrying values and fair values of the Company’s borrowings as of December 31, 2014 and December 31, 2013. Fair values of our notes payable are based upon the bid price provided by the placement agent at the measurement date, if available:

	As of
	December 31, 2014							December 31, 2013
($ in thousands)	Principal Amount		Carrying Value			Fair Value		Principal Amount		Carrying Value			Fair Value
TICC CLO LLC 2021 Notes(1)	$	—	$	—		$	—	$	101,250	$	100,041	(2)	$	100,617
TICC CLO 2012-1 LLC Class A-1 2023 Notes		176,000		174,271	(2)		176,000		176,000		174,072	(2)		173,061
TICC CLO 2012-1 LLC Class B-1 2023 Notes		20,000		19,524	(2)		20,000		20,000		19,471	(2)		19,950

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	As of
	December 31, 2014							December 31, 2013
($ in thousands)	Principal Amount		Carrying Value			Fair Value		Principal Amount		Carrying Value			Fair Value
TICC CLO 2012-1 LLC Class C-1 2023 Notes		23,000		22,194	(2)		23,000		23,000		22,105	(2)		23,058
TICC CLO 2012-1 LLC Class D-1 2023 Notes		21,000		20,087	(2)		21,011		21,000		19,987	(2)		21,000
Sub-total TICC CLO 2012-1, LLC		240,000		236,076			240,011		240,000		235,635			237,069
TICC Funding LLC revolving credit facility(3)		150,000		150,000			150,000		—		—			—
2017 Convertible Notes		115,000		115,000			119,025		115,000		115,000			124,631
	$	505,000	$	501,076		$	509,036	$	456,250	$	450,676		$	462,317

(1) On October 27, 2014, we redeemed all of the $101,250 Class A Notes issued by TICC CLO LLC on August 10, 2011. In connection with the redemption, we wrote-off approximately $1,078 of unaccreted discount. For the year ended December 31, 2014, the total discount charged to “interest expense and other debt financing expenses” was approximately $1,209.

(2) Represents the aggregate principal amount outstanding less the unaccreted discount. The total unaccreted discount for the 2023 Class A Notes, the 2023 Class B Notes, the 2023 Class C Notes and the 2023 Class D Notes was approximately $1,729, $476, $806 and $913, respectively. As of December 31, 2013, the total unaccreted discount for the 2021 Notes, the 2023 Class A Notes, the 2023 Class B Notes, the 2023 Class C Notes and the 2023 Class D Notes was approximately $1,209, $1,928, $529, $895 and $1,013, respectively.

(3) TICC Funding LLC revolving credit facility fair value represents the par amount of the debt obligation.

The weighted average stated interest rate and weighted average maturity on all our debt outstanding as of December 31, 2014 were 3.54% and 5.6 years, respectively, and as of December 31, 2013 were 3.90% and 7.7 years, respectively.

Debt Securitizations

Notes Payable-TICC CLO LLC

On August 10, 2011, we completed a $225.0 million debt securitization financing transaction. The Class A Notes and the subordinated notes offered in the debt securitization were issued by TICC CLO LLC (“2011 Securitization Issuer” or “TICC CLO”), a subsidiary of TICC Capital Corp. 2011-1 Holdings, LLC (“Holdings”), which was in turn a direct subsidiary of TICC. The Class A Notes were secured by the assets held by the 2011 Securitization Issuer. The securitization was executed through a private placement of $101.25 million of secured notes rated AAA/Aaa by Standard & Poor’s Rating Service (“S&P”) and Moody’s Investors Service Inc. (“Moody’s”), respectively, and bearing interest at the three-month LIBOR plus 2.25%. Holdings retained all of the subordinated notes, which totaled $123.75 million (the “2011 Subordinated Notes”), and retained all the membership interests in the 2011 Securitization Issuer. The notes were sold at a discount to par, and the amount of the discount was being amortized over the term of the notes.

On October 27, 2014, in conjunction with the Facility, the Company redeemed all of the $101,250,000 Class A secured notes issued by TICC CLO (see discussion on “Credit Facility,” below). The accrued interest payable at December 31, 2014 was $0 and for the year ended December 31, 2014, the amortization of discount on the issued Class A Notes was approximately $1.2 million (including the write-off of previously unaccreted discount of approximately $1.1 million) and the amortization of deferred debt issuance costs was approximately $2.3 million (including the write-off of previously unamortized costs of approximately $2.0 million). As of December 31, 2014, TICC CLO had 2 investments remaining in portfolio companies with a total fair value of approximately $5.6 million. For further information on this securitization, see Note 9 Borrowings in our consolidated financial statements.

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Effective January 1, 2014 and through January 26, 2014, the interest rate of 2.49% charged under the securitization was based on three-month LIBOR of 0.24%. Effective January 27, 2014 and through April 24, 2014, the interest rate of 2.49% charged under the securitization was based on three-month LIBOR of 0.24%. Effective April 25, 2014 and through July 24, 2014, the interest rate of 2.48% charged under the securitization was based on three-month LIBOR of 0.23%. Effective July 25, 2014 and through October 27, 2014, the interest rate of 2.48% charged under the securitization was based on the three-month LIBOR of 0.23%.

The following table sets forth the components of interest expense, effective annualized average interest rates and cash paid for interest for the years ended December 31, 2014, 2013 and 2012, respectively:

TICC CLO LLC	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
Stated interest expense	$	2,089,028		$	2,592,158		$	2,783,113
Amortization of deferred issuance costs		2,290,011			302,517			303,345
Note discount expense		1,208,773			158,599			171,802
Total interest expense	$	5,587,812		$	3,053,274		$	3,258,260
Effective annualized average interest rate		6.72	%		3.02	%		3.21	%
Cash paid for interest	$	2,564,925		$	2,606,865		$	3,368,622

Notes Payable — TICC CLO 2012-1 LLC

On August 23, 2012, we completed a $160 million debt securitization financing transaction, consisting of $120 million in secured notes and $40 million of subordinated notes (the “2012 Subordinated Notes”). On February 25, 2013 and May 28, 2013, TICC CLO 2012-1 LLC (“TICC CLO 2012-1” or “2012 Securitization Issuer”) issued additional secured notes totaling an aggregate of $120 million and 2012 Subordinated Notes totaling an aggregate of $40 million, which 2012 Subordinated Notes were purchased by us, under the “accordion” feature of the debt securitization which allowed, under certain circumstances and subject to the satisfaction of certain conditions, for an increase in the amount of secured and subordinated notes. It is not necessary that we own all or any of the notes permitted by this feature, which may affect the accounting treatment of the debt securitization financing transaction. As of December 31, 2014 the secured notes of the 2012 Securitization Issuer have an aggregate face amount of $240 million and were issued in four classes. The class A-1 notes have a current face amount of $176 million, are rated AAA(sf)/Aaa(sf) by Standard & Poor’s Ratings Services (S&P) and Moody’s Investors Service, Inc. (Moody’s), respectively, and bear interest at three-month LIBOR plus 1.75%. The class B-1 notes have a current face amount of $20 million, are rated AA(sf)/Aa2(sf) by S&P and Moody’s, respectively, and bear interest at three-month LIBOR plus 3.50%. The class C-1 notes have a current face amount of $23 million, are rated A(sf)/A2(sf) by S&P and Moody’s, respectively, and bear interest at three-month LIBOR plus 4.75%. The class D-1 notes have a current face amount of $21 million, are rated BBB(sf)/Baa2(sf) by S&P and Moody’s, respectively, and bear interest at three-month LIBOR plus 5.75%. TICC presently owns all of the 2012 Subordinated Notes, which totaled $80 million as of December 31, 2014.

During a period of up to four years from the closing date, all principal collections received on the underlying collateral may be used by the 2012 Securitization Issuer to purchase new collateral under our direction in our capacity as collateral manager of the 2012 Securitization Issuer and in accordance with our investment strategy, allowing us to maintain the initial leverage in the securitization for such four-year period. All note classes are scheduled to mature on August 25, 2023.

The proceeds of the private placement of the Classes A, B, C, D and 2012 Subordinated Notes of the 2012 Securitization Issuer, net of discount and debt issuance costs, were used for investment purposes. As part of the securitization, we entered into a master loan sale agreement with TICC CLO 2012-1 pursuant to which we agreed to sell or contribute certain senior secured and second lien loans (or participation interests therein) to TICC CLO 2012-1, and to purchase or otherwise acquire the 2012 Subordinated Notes. The Classes A, B, C, D and 2012 Subordinated Notes of the 2012 Securitization Issuer are the secured obligations of TICC CLO 2012-1, and an indenture governing the notes of the 2012 Securitization Issuer includes customary covenants and events of default.

77

As of December 31, 2014, there were 43 investments in portfolio companies with a total fair value of approximately $311.4 million, collateralizing the secured notes of the 2012 Securitization Issuer. The pool of loans in the securitization must meet certain requirements, including asset mix and concentration, collateral coverage, term, agency rating, minimum coupon, minimum spread and sector diversity requirements.

Deferred debt issuance costs consist of fees and expenses incurred in connection with our debt securitization. As of December 31, 2014, we had a deferred debt issuance cost balance of approximately $3.0 million. Aggregate net discount on the notes of the 2012 Securitization Issuer at the time of issuance totaled approximately $4.9 million. These amounts are being amortized and included in interest expense in the consolidated statements of operations over the term of the debt securitization. The following table sets forth the components of interest expense, effective annualized average interest rates and cash paid for interest of the Class A-1, B-1, C-1 and D-1 for the years ended December 31, 2014, 2013 and 2012, respectively:

TICC CLO 2012-1 LLC	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
Stated interest expense	$	6,731,838		$	5,957,008		$	1,352,438
Amortization of deferred issuance costs		343,822			315,259			85,833
Note discount expense		440,659			437,171			139,386
Total interest expense	$	7,516,319		$	6,709,438		$	1,577,657
Effective annualized average interest rate		3.13	%		3.29	%		3.75	%
Cash paid for interest	$	6,733,010		$	6,693,325		$	—

Effective January 1, 2014 and through February 24, 2014, the interest charged under the securitization was based on three-month LIBOR, which was 0.238%. Effective February 25, 2014 and through May 26, 2014, the interest charged under the securitization was based on three month LIBOR, which was approximately 0.235%. Effective May 27, 2014 and through August 24, 2014, the interest charged under the securitization was based on three-month LIBOR, which was approximately 0.227%. Effective August 25, 2014 and through November 24, 2014, the interest charged under the securitization was based on the three-month LIBOR which was approximately 0.235%. Effective November 25, 2014 and through as of December 31, 2014, the interest charged under the securitization was based on three-month LIBOR, which was approximately 0.233%.

The classes, interest rates, spread over LIBOR, cash paid for interest, stated interest expense and note discount expense of each of the Class A-1, B-1, C-1 and D-1 for the year ended December 31, 2014 is as follows:

						Year Ended December 31, 2014
TICC CLO 2012-1 LLC	Stated Interest Rate			LIBOR Spread (basis points)		Cash Paid for Interest		Stated Interest Expense			Note Discount Expense
Class A-1 Notes		1.98285	%		175	$	3,539,726	$	3,538,866		$	198,104
Class B-1 Notes		3.73285	%		350		757,103		757,005			53,669
Class C-1 Notes		4.98285	%		475		1,162,161		1,162,049			89,214
Class D-1 Notes		5.98285	%		575		1,274,020		1,273,918			99,672
Total						$	6,733,010	$	6,731,838	��	$	440,659

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The classes, interest rates, spread over LIBOR, cash paid for interest, stated interest expense and note discount expense of each of the Class A-1, B-1, C-1 and D-1 for the year ended December 31, 2013 is as follows:

						Year Ended December 31, 2013
TICC CLO 2012-1 LLC	Stated Interest Rate			LIBOR Spread (basis points)		Cash Paid for Interest		Stated Interest Expense		Note Discount Expense
Class A-1 Notes		1.98760	%		175	$	3,594,875	$	3,164,054	$	193,812
Class B-1 Notes		3.73760	%		350		741,981		665,315		52,857
Class C-1 Notes		4.98760	%		475		1,127,202		1,016,276		90,094
Class D-1 Notes		5.98760	%		575		1,229,267		1,111,363		100,408
Total						$	6,693,325	$	5,957,008	$	437,171

The classes, interest rates, spread over LIBOR, cash paid for interest, stated interest expense and note discount expense of each of the Class A-1, B-1, C-1 and D-1 for the year ended December 31, 2012 is as follows:

						Year Ended December 31, 2012
TICC CLO 2012-1 LLC	Stated Interest Rate			LIBOR Spread (basis points)		Cash Paid for Interest		Stated Interest Expense		Note Discount Expense
Class A-1 Notes		2.46815	%		175	$	—	$	790,356	$	61,215
Class B-1 Notes		4.21815	%		350		—		153,494		17,692
Class C-1 Notes		5.46815	%		475		—		228,827		31,868
Class D-1 Notes		6.46815	%		575		—		179,761		28,611
Total						$	—	$	1,352,438	$	139,386

The amounts, ratings and interest rates (expressed as a spread to LIBOR) of the Class A-1, B-1, C-1, D-1 and 2012 Subordinated Notes as of December 31, 2014 are as follows:

Description

Class A-1 Notes

Class B-1 Notes

Class C-1 Notes

Class D-1 Notes

Subordinated Notes

Type

Senior Secured Floating Rate

Senior Secured Floating Rate

Secured Deferrable Floating Rate

Secured Deferrable Floating Rate

Subordinated

Amount Outstanding

$

176,000,000

$

20,000,000

$

23,000,000

$

21,000,000

$

80,000,000

Moody’s Rating

“Aaa”

“Aa2”

“A2”

“Baa2”

N/A

Standard & Poor’s Rating

“AAA”

“AA”

“A”

“BBB”

N/A

Interest Rate

LIBOR + 1.75

%

LIBOR + 3.50

%

LIBOR + 4.75

%

LIBOR + 5.75

%

N/A

Stated Maturity

August 25, 2023

August 25, 2023

August 25, 2023

August 25, 2023

August 25, 2023

Junior Classes

B-1, C-1, D-1 and Subordinated

C-1, D-1 and Subordinated

D-1 and Subordinated

Subordinated

None

The amounts, ratings and interest rates (expressed as a spread to LIBOR) of the Class A-1, B-1, C-1, D-1 and 2012 Subordinated Notes as of December 31, 2013 are as follows:

Description

Class A-1 Notes

Class B-1 Notes

Class C-1 Notes

Class D-1 Notes

Subordinated Notes

Type

Senior Secured Floating Rate

Senior Secured Floating Rate

Secured Deferrable Floating Rate

Secured Deferrable Floating Rate

Subordinated

Amount Outstanding

$

176,000,000

$

20,000,000

$

23,000,000

$

21,000,000

$

80,000,000

Moody’s Rating

“Aaa”

“Aa2”

“A2”

“Baa2”

N/A

Standard & Poor’s Rating

“AAA”

“AA”

“A”

“BBB”

N/A

Interest Rate

LIBOR + 1.75

%

LIBOR + 3.50

%

LIBOR + 4.75

%

LIBOR + 5.75

%

N/A

Stated Maturity

August 25, 2023

August 25, 2023

August 25, 2023

August 25, 2023

August 25, 2023

Junior Classes

B-1, C-1, D-1 and Subordinated

C-1, D-1 and Subordinated

D-1 and Subordinated

Subordinated

None

79

The amounts, ratings and interest rates (expressed as a spread to LIBOR) of the Class A-1, B-1, C-1, D-1 and 2012 Subordinated Notes as of December 31, 2012 are as follows:

Description

Class A-1 Notes

Class B-1 Notes

Class C-1 Notes

Class D-1 Notes

Subordinated Notes

Type

Senior Secured Floating Rate

Senior Secured Floating Rate

Secured Deferrable Floating Rate

Secured Deferrable Floating Rate

Subordinated

Amount Outstanding

$

88,000,000

$

10,000,000

$

11,500,000

$

10,500,000

$

40,000,000

Moody’s Rating

“Aaa”

“Aa2”

“A2”

“Baa2”

N/A

Standard & Poor’s Rating

“AAA”

“AA”

“A”

“BBB”

N/A

Interest Rate

LIBOR + 1.75

%

LIBOR + 3.50

%

LIBOR + 4.75

%

LIBOR + 5.75

%

N/A

Stated Maturity

August 25, 2023

August 25, 2023

August 25, 2023

August 25, 2023

August 25, 2023

Junior Classes

B-1, C-1, D-1 and Subordinated

C-1, D-1 and Subordinated

D-1 and Subordinated

Subordinated

None

TICC serves as collateral manager to the 2012 Securitization Issuer under a collateral management agreement. TICC is entitled to a deferred fee for its services as collateral manager. The deferred fee is eliminated in consolidation.

Convertible Notes

On September 26, 2012, we issued $105.0 million aggregate principal amount of the Convertible Notes and an additional $10.0 million aggregate principal amount of the Convertible Notes was issued on October 22, 2012 pursuant to the exercise of the initial purchasers’ option to purchase additional Convertible Notes. The Convertible Notes bear interest at a rate of 7.50% per year, payable semi-annually in arrears on May 1 and November 1 of each year, commencing on May 1, 2013. The Convertible Notes are convertible into shares of our common stock based on an initial conversion rate of 87.2448 shares of our common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $11.46 per share of common stock. The conversion price for the Convertible Notes will be reduced for quarterly cash dividends paid on common shares to the extent that the quarterly dividend exceeds $0.29 cents per share, subject to adjustment. The Convertible Notes mature on November 1, 2017, unless previously converted in accordance with their terms. We do not have the right to redeem the Convertible Notes prior to maturity. Deferred debt issuance costs represent fees and other direct incremental costs incurred in connection with the Convertible Notes. As of December 31, 2014, the Company had a deferred debt issuance balance of approximately $1.8 million. This amount is being amortized and is included in interest expense in the consolidated statements of operations over the term of the Convertible Notes.

The following table sets forth the components of interest expense, effective annualized average interest rates and cash paid for interest on the Convertible Notes for the years ended December 31, 2014, 2013 and 2012, respectively:

Convertible Notes	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
Stated interest expense	$	8,625,000		$	8,577,083		$	2,269,791
Amortization of deferred issuance costs		619,025			620,882			157,006
Total interest expense	$	9,244,025		$	9,197,965		$	2,426,797
Effective annualized average interest rate		8.04	%		8.00	%		8.13	%
Cash paid for interest	$	8,625,000		$	9,463,542		$	—

In certain circumstances, the Convertible Notes will be convertible into shares of our common stock at its initial conversion rate (listed below) subject to customary anti-dilution adjustments and the requirements of its

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indenture, at any time on or prior to the close of business on the business day immediately preceding the maturity date. We will in certain circumstances increase the conversion rate by a number of additional shares.

	Convertible Notes
Conversion premium		10.00	%
Closing stock price	$	10.42
Closing stock price date		September 20, 2012
Initial conversion price	$	11.46
Initial conversion rate (shares per one thousand dollar principal amount)		87.2448
Maturity date		November 1, 2017

As of December 31, 2014, the principal amount of the Convertible Notes exceeded the value of the underlying shares multiplied by the per share closing price of the Company’s common stock.

The Convertible Notes are our general, unsecured obligations and rank equal in right of payment with all of our existing and future senior, unsecured indebtedness and senior in right of payment to any of our subordinated indebtedness. As a result, the Convertible Notes will be effectively subordinated to our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to any existing and future liabilities and other indebtedness of our subsidiaries.

Credit Facility

On October 27, 2014, TICC Funding, a special purpose vehicle and wholly-owned subsidiary of TICC, entered into the Facility with Citibank, N.A. Subject to certain exceptions, pricing under the Facility is based on LIBOR for an interest period equal to three months plus a spread of 1.50% per annum. Pursuant to the terms of the credit agreement governing the Facility, TICC Funding has borrowed, on a revolving basis, the maximum aggregate principal amount of $150,000,000. The Reinvestment Period will end on October 27, 2016, subject to certain exceptions. Post Reinvestment Period, the Facility has a mandatory amortization schedule such that twenty-five percent (25.0%) and fifty percent (50.0%) of the principal amount outstanding as of October 27, 2016 will be due and payable, on January 18, 2017 and April 18, 2017, respectively, and the remaining principal amount outstanding and accrued and unpaid interest thereunder will be due and payable, on October 27, 2017. We used part of the proceeds from the Facility to redeem all of the $101.25 million of Class A secured notes issued by TICC CLO on August 10, 2011. The secured notes previously issued under TICC CLO LLC were based on LIBOR for an interest period of three months plus a spread of 2.25% per annum. In connection with the redemption of the secured notes issued by TICC CLO, we wrote-off approximately $3.1 million of previously unaccreted discount and unamortized costs.

The Facility is secured by a pool of loans initially consisting of loans sold by TICC CLO to TICC Funding, loans sold and contributed by TICC to TICC Funding, and loans purchased by TICC Funding from unaffiliated third parties. We may sell and contribute additional loans to TICC Funding from time to time. We will act as the collateral manager of the loans owned by TICC Funding, and has retained a residual interest through its ownership of TICC Funding.

As of December 31, 2014, there were 46 investments in portfolio companies with a total fair value of approximately $295.6 million, collateralizing the Facility. The pool of loans in TICC Funding must meet certain requirements, including asset mix and concentration, collateral coverage, term, agency rating, minimum coupon, minimum spread and sector diversity requirements.

The aggregate accrued interest payable on the Facility at December 31, 2014 was approximately $477,000. Deferred debt issuance costs consist of fees and expenses incurred in connection with the credit facility. As of December 31, 2014, we had a deferred debt issuance cost balance of approximately $0.9 million for this facility. This amount is being amortized and included in interest expense in the consolidated statements of operation over the term of the credit facility.

Additionally, for the year ended December 31, 2014, the amortization of deferred debt issuance costs was approximately $83,000. For further information on the revolving credit facility, see Note 9 in the consolidated financial statements.

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The following table sets forth the components of interest expense, effective annualized average interest rates and cash paid for interest of the Facility for the year ended December 31, 2014:

TICC Funding, LLC Revolving Credit Facility	Year Ended December 31, 2014
Stated interest expense	$	476,740
Amortization of deferred issuance costs		83,046
Total interest expense	$	559,786
Effective annualized average interest rate		2.04	%
Cash paid for interest	$	—

Each of TICC CLO LLC, TICC CLO 2012-1 and TICC Funding, are consolidated subsidiaries of TICC. The Company consolidated the results of its wholly-owned subsidiaries in its consolidated financial statements as the subsidiaries are operated solely for investment activities of the Company, and the Company has substantial equity at risk. The creditors of TICC CLO 2012-1 and TICC Funding have received security interests in the assets owned by TICC CLO 2012-1 and TICC Funding, respectively, and such assets are not intended to be available to the creditors of TICC (or any other affiliate of TICC).

Distributions

In order to qualify as a RIC and to avoid corporate level tax on the income we distribute to our stockholders, we are required, under Subchapter M of the Code, to distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses to our stockholders on an annual basis.

For the year ended December 31, 2014 we believe that we did have distributions in excess of our taxable earnings, whereas in 2013 we believe that we did not have distributions in excess of our taxable earnings. For tax purposes, distributions for 2013 were funded from net investment income and capital gains. A written statement identifying the nature of these distributions for tax reporting purposes was posted on our website. We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage requirements applicable to us as a business development company under the 1940 Act. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of favorable regulated investment company tax treatment. We cannot assure shareholders that they will receive any distributions.

To the extent our taxable earnings fall below the total amount of our distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to our stockholders. Thus, the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our taxable ordinary income or capital gains. Stockholders should read any written disclosure accompanying a dividend payment carefully and should not assume that the source of any distribution is our taxable ordinary income or capital gains. The final determination of the nature of our distributions can only be made upon the filing of our tax return.

The following table reflects the cash distributions, including dividends, dividends reinvested and returns of capital, if any, per share that we have declared on our common stock to date:

Date Declared	Record Date		Payment Date		Amount
Fiscal 2015
February 19, 2015		March 17, 2015		March 31, 2015	$	0.27
Fiscal 2014
October 30, 2014		December 17, 2014		December 31, 2014		0.29
July 31, 2014		September 16, 2014		September 30, 2014		0.29
May 1, 2014		June 16, 2014		June 28, 2014		0.29

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Date Declared	Record Date		Payment Date		Amount
March 5, 2014		March 25, 2014		March 29, 2014		0.29
Total (2014)						1.16	(1)
Fiscal 2013
October 29, 2013		December 17, 2013		December 31, 2013		0.29
July 30, 2013		September 16, 2013		September 30, 2013		0.29
April 30, 2013		June 14, 2013		June 28, 2013		0.29
February 28, 2013		March 22, 2013		March 29, 2013		0.29
Total (2013)						1.16	(2)
Fiscal 2012
November 1, 2012		December 17, 2012		December 31, 2012		0.29
July 26, 2012		September 14, 2012		September 28, 2012		0.29
May 2, 2012		June 15, 2012		June 29, 2012		0.27
March 1, 2012		March 21, 2012		March 30, 2012		0.27
Total (2012)						1.12	(2)
Fiscal 2011
November 3, 2011		December 16, 2011		December 30, 2011		0.25
July 28, 2011		September 16, 2011		September 30, 2011		0.25
May 3, 2011		June 16, 2011		June 30, 2011		0.25
March 3, 2011		March 21, 2011		March 31, 2011		0.24
Total (2011)						0.99	(2)
Fiscal 2010
November 2, 2010		December 10, 2010		December 31, 2010		0.24
July 29, 2010		September 10, 2010		September 30, 2010		0.22
April 29, 2010		June 10, 2010		June 30, 2010		0.20
March 4, 2010		March 24, 2010		March 31, 2010		0.15
Total (2010)						0.81	(2)
Fiscal 2009
October 29, 2009		December 10, 2009		December 31, 2009		0.15
July 30, 2009		September 10, 2009		September 30, 2009		0.15
May 5, 2009		June 10, 2009		June 30, 2009		0.15
March 5, 2009		March 17, 2009		March 31, 2009		0.15
Total (2009)						0.60	(2)
Fiscal 2008
October 30, 2008		December 10, 2008		December 31, 2008		0.20
July 31, 2008		September 10, 2008		September 30, 2008		0.20
May 1, 2008		June 16, 2008		June 30, 2008		0.30
March 11, 2008		March 21, 2008		March 31, 2008		0.36
Total (2008)						1.06	(3)
Fiscal 2007
October 25, 2007		December 10, 2007		December 31, 2007		0.36
July 26, 2007		September 7, 2007		September 28, 2007		0.36
April 30, 2007		June 8, 2007		June 29, 2007		0.36
February 27, 2007		March 9, 2007		March 30, 2007		0.36
Total (2007)						1.44(4)

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Date Declared	Record Date		Payment Date		Amount
Fiscal 2006
December 20, 2006		December 29, 2006		January 17, 2007		0.12
October 26, 2006		December 8, 2006		December 29, 2006		0.34
July 26, 2006		September 8, 2006		September 29, 2006		0.32
April 26, 2006		June 9, 2006		June 30, 2006		0.30
February 9, 2006		March 10, 2006		March 31, 2006		0.30
Total (2006)						1.38	(2)
Fiscal 2005
December 7, 2005		December 30, 2005		January 18, 2006		0.12
October 27, 2005		December 9, 2005		December 30, 2005		0.30
July 27, 2005		September 10, 2005		September 30, 2005		0.25
April 27, 2005		June 10, 2005		June 30, 2005		0.20
February 9, 2005		March 10, 2005		March 31, 2005		0.14
Total (2005)						1.01	(2)
Fiscal 2004
October 27, 2004		December 10, 2004		December 31, 2004		0.11
July 28, 2004		September 10, 2004		September 30, 2004		0.11
May 5, 2004		June 10, 2004		June 30, 2004		0.11
February 2, 2004		March 15, 2004		April 5, 2004		0.10
Total (2004)						0.43	(5)
Total Distributions:					$	11.43	(6)

(1) Includes a return of capital of approximately $0.16 per share for tax purposes.

(2) Distributions were funded from undistributed taxable earnings and profits.

(3) Includes a return of capital of approximately $0.08 per share for tax purposes.

(4) Includes a return of capital of approximately $0.02 per share for tax purposes.

(5) Includes a return of capital of approximately $0.10 per share for tax purposes.

(6) We did not declare a dividend for the period ended December 31, 2003.

Related Parties

We have a number of business relationships with affiliated or related parties, including the following:

• We have entered into the Investment Advisory Agreement with TICC Management. TICC Management is controlled by BDC Partners, its managing member. In addition to BDC Partners, TICC Management is owned by Charles M. Royce, our non-executive Chairman, who holds a minority, non-controlling interest in TICC Management as the non-managing member. BDC Partners, as the managing member of TICC Management, manages the business and internal affairs of TICC Management. In addition, BDC Partners provides us with office facilities and administrative services pursuant to the Administration Agreement.

• Messrs. Cohen and Rosenthal currently serve as Chief Executive Officer and President, respectively, for T2 Advisers, LLC, an investment adviser to T2 Income Fund CLO I Ltd. BDC Partners is the managing member of T2 Advisers, LLC. In addition, Mr. Conroy serves as the Chief Financial Officer, Chief Compliance Officer and Treasurer of T2 Advisers, LLC.

• Messrs. Cohen and Rosenthal currently serve as Chief Executive Officer and President, respectively, of Oxford Lane Capital Corp., a non-diversified closed-end management investment company that invests primarily in equity and junior debt tranches of collateralized loan obligation vehicles, and its investment adviser, Oxford Lane Management, LLC. BDC Partners provides Oxford Lane Capital Corp. with office facilities and administrative services pursuant to an administration agreement and

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also serves as the managing member of Oxford Lane Management, LLC. In addition, Patrick F. Conroy serves as the Chief Financial Officer, Chief Compliance Officer and Corporate Secretary of Oxford Lane Capital Corp. and Chief Financial Officer, Chief Compliance Officer and Treasurer of Oxford Lane Management, LLC.

BDC Partners has adopted a written policy with respect to the allocation of investment opportunities among TICC, Oxford Lane Capital Corp. and T2 Income Fund CLO I Limited in view of the potential conflicts of interest raised by the relationships described above.

In the ordinary course of business, we may enter into transactions with portfolio companies that may be considered related party transactions. In order to ensure that we do not engage in any prohibited transactions with any persons affiliated with us, we have implemented certain policies and procedures whereby our executive officers screen each of our transactions for any possible affiliations between the proposed portfolio investment, us, companies controlled by us and our employees and directors. We will not enter into any agreements unless and until we are satisfied that doing so will not raise concerns under the 1940 Act or, if such concerns exist, we have taken appropriate actions to seek board review and approval or exemptive relief for such transaction. Our Board of Directors reviews these procedures on an annual basis.

We have also adopted a Code of Ethics which applies to, among others, our senior officers, including our Chief Executive Officer and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Pursuant to our Code of Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our Chief Compliance Officer. Our Audit Committee is charged with approving any waivers under our Code of Ethics. As required by the NASDAQ Global Select Market corporate governance listing standards, the Audit Committee of our Board of Directors is also required to review and approve any transactions with related parties (as such term is defined in Item 404 of Regulation S-K).

Information concerning related party transactions is included in the consolidated financial statements and related notes, appearing elsewhere in this annual report on Form 10-K.

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements and related disclosures in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified our investment valuation policy as a critical accounting policy.

Investment Valuation

The Company fair values its investment portfolio in accordance with the provisions of ASC 820,Fair Value Measurement and Disclosure. The most significant estimates made in the preparation of TICC’s consolidated financial statements are the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. TICC believes that there is no single definitive method for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments TICC makes.

ASC 820-10 clarified the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820-10 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities in markets that are not active; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. TICC considers the

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attributes of current market conditions on an on-going basis and has determined that due to the general illiquidity of the market for its investment portfolio, whereby little or no market data exists, almost all of TICC’s investments are based upon “Level 3” inputs as of December 31, 2014.

TICC’s Board of Directors determines the value of its investment portfolio each quarter. In connection with that determination, members of TICC Management’s portfolio management team prepare a quarterly analysis of each portfolio investment using the most recent portfolio company financial statements, forecasts and other relevant financial and operational information. Since March 2004, TICC has engaged third-party valuation firms to provide assistance in valuing certain of its syndicated loans and bilateral investments, including related equity investments, although TICC’s Board of Directors ultimately determines the appropriate valuation of each such investment. Changes in fair value, as described above, are recorded in the statement of operations as net change in unrealized appreciation or depreciation.

Syndicated Loans

In accordance with ASC 820-10-35, TICC’s valuation procedures specifically provide for the review of indicative quotes supplied by the large agent banks that make a market for each security. However, the marketplace from which TICC obtains indicative bid quotes for purposes of determining the fair value of its syndicated loan investments has shown attributes of illiquidity as described by ASC-820-10-35. Due to limited market liquidity in the syndicated loan market, TICC believes that the non-binding indicative bids received from agent banks for certain syndicated investments that TICC owns may not be determinative of their fair value and therefore alternative valuation procedures may need to be undertaken. As a result, TICC has engaged third-party valuation firms to provide assistance in valuing certain syndicated investments that TICC owns. In addition, TICC Management prepares an analysis of each syndicated loan, financial summary, covenant compliance review, recent trading activity in the security, if known, and other business developments related to the portfolio company. All available information, including non-binding indicative bids which may not be determinative of fair value, is presented to the Valuation Committee to consider in its determination of fair value. In some instances, there may be limited trading activity in a security even though the market for the security is considered not active. In such cases the Valuation Committee will consider the number of trades, the size and timing of each trade, and other circumstances around such trades, to the extent such information is available, in its determination of fair value. The Valuation Committee will evaluate the impact of such additional information, and factor it into its consideration of the fair value that is indicated by the analysis provided by third-party valuation firms, if any.

Collateralized Loan Obligations—Debt and Equity

During the past several years, TICC has acquired a number of debt and equity positions in collateralized loan obligation (“CLO”) investment vehicles and more recently CLO warehouse investments. These investments are special purpose financing vehicles. In valuing such investments, TICC considers the operating metrics of the specific investment vehicle, including compliance with collateralization tests, defaulted and restructured securities, and payment defaults, if any. In addition, TICC considers the indicative prices provided by a recognized industry pricing service as a primary source, and the implied yield of such marks, supplemented by actual trades executed in the market at or around period-end, as well as the indicative prices provided by the broker who arranges transactions in such investment vehicles. TICC also considers those instances in which the record date for an equity distribution payment falls on the last day of the period, and the likelihood that a prospective purchaser would require a downward adjustment to the indicative price representing substantially all of the pending distribution. Additional factors include any available information on other relevant transactions including firm bids and offers in the market and information resulting from bids-wanted-in-competition. TICC Management or the Valuation Committee may request an additional analysis by a third-party firm to assist in the valuation process of CLO investment vehicles. All information is presented to TICC’s Board of Directors for its determination of fair value of these investments.

Bilateral Investments (Including Equity)

Bilateral investments for which market quotations are readily available are valued by an independent pricing agent or market maker. If such market quotations are not readily available, under the valuation procedures approved by TICC’s Board of Directors, upon the recommendation of the Valuation Committee, a

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third-party valuation firm will prepare valuations for each of TICC’s bilateral investments that, when combined with all other investments in the same portfolio company, (i) have a value as of the previous quarter of greater than or equal to 2.5% of its total assets as of the previous quarter, and (ii) have a value as of the current quarter of greater than or equal to 2.5% of its total assets as of the previous quarter, after taking into account any repayment of principal during the current quarter. In addition, in those instances where a third-party valuation is prepared for a portfolio investment which meets the parameters noted in (i) and (ii) above, the frequency of those third-party valuations is based upon the grade assigned to each such security under its credit grading system as follows: Grade 1, at least annually; Grade 2, at least semi-annually; Grades 3, 4, and 5, at least quarterly. Bilateral investments which do not meet the parameters in (i) and (ii) above are not required to have a third-party valuation and, in those instances, a valuation analysis will be prepared by TICC Management. TICC Management also retains the authority to seek, on TICC’s behalf, additional third party valuations with respect to both TICC’s bilateral portfolio securities and TICC’s syndicated loan investments. TICC’s Board of Directors retains ultimate authority as to the third-party review cycle as well as the appropriate valuation of each investment.

Our assets measured at fair value on a recurring basis at December 31, 2014, were as follows:

($ in millions)	Fair Value Measurements at Reporting Date Using
Assets	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Senior Secured Notes	$	0.0	$	39.3	$	657.7	$	697.0
Senior Unsecured Notes		0.0		0.0		6.4		6.4
CLO Debt		0.0		0.0		11.3		11.3
CLO Equity		0.0		0.0		259.8		259.8
Equity		0.0		0.0		9.7		9.7
Total	$	0.0	$	39.3	$	944.9	$	984.2

Our assets measured at fair value on a recurring basis at December 31, 2013, were as follows:

($ in millions)	Fair Value Measurements at Reporting Date Using
Assets	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Senior Secured Notes	$	0.0	$	16.9	$	627.8	$	644.7
Senior Unsecured Notes		0.0		0.0		5.8		5.8
CLO Debt		0.0		0.0		28.9		28.9
CLO Equity		0.0		0.0		237.1		237.1
Equity		0.0		0.0		15.1		15.1
Total	$	0.0	$	16.9	$	914.7	$	931.6

Significant Unobservable Inputs for Level 3 Investments

The following tables provide quantitative information about our Level 3 fair value measurements as of December 31, 2014 and 2013, respectively. Our valuation policy, as described above, establishes parameters for the sources and types of valuation analysis, as well as the methodologies and inputs that we use in determining fair value. If the Valuation Committee or TICC Management determines that additional techniques, sources or inputs are appropriate or necessary in a given situation, such additional work will be undertaken. The tables, therefore, are not all-inclusive, but provides information on the significant Level 3

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inputs that are pertinent to our fair value measurements. The weighted average calculations in the table below are based on principal balances for all debt related calculations and CLO equity.

($ in millions)	Quantitative Information about Level 3 Fair Value Measurements
Assets	Fair Value as of December 31, 2014		Valuation Techniques/ Methodologies			Unobservable Input			Range/Weighted Average(8)
Corporate debt investments
syndicated	$	563.1		Market quotes			NBIB	(1)		70.0% – 100.3%/98.2	%
	��	39.6		Yield Analysis			NBIB	(1)		96.2% – 99.4%/97.7	%
							Discount Margin			4.10% – 7.90%/ncm	(4)
		19.0		Recent transactions			Actual trade/payoffs	(6)		98.1% – 100.0%/99.1	%
		28.6		Market quotes/			NBIB	(1)		52.2% – 100.0%/68.1	%
				Enterprise value			EBITDA multiples	(2)		4.25x – 6.75x/ncm	(4)
bilateral		13.8		Enterprise value	(7)		EBITDA	(2)	$	2.5/ncm	(4)
							Market multiples	(2)		5.0x – 6.0x/ncm	(4)
							Discount rates (3)			N/A
CLO debt		11.3		Market quotes			NBIB (1)			82.3%  –  85.4%/84.0	%
CLO equity		244.6		Market quotes			NBIB (1)			20.5% – 97.1%/77.2	%
		10.8		Recent transactions			Actual trade	(6)		80.0% – 88.3%/83.2	%
		4.4		Discounted cash flow	(5)		Discount rates	(3)(5)		10.2% – 13.6%/ncm	(4)
Common stock		9.7		Enterprise value(7)/			EBITDA	(2)	$	2.5 – $170.8/ncm	(4)
				Discounted cash	(5)		Market multiples	(2)		4.3x – 9.3x/ncm	(4)
				flow			Discount rates	(3)		20.0%/ncm (4)
Total Fair Value for Level 3 Investments	$	944.9

(1) The Company generally uses prices provided by an independent pricing service, or broker or agent bank non-binding indicative bid prices (NBIB) on or near the valuation date as the primary basis for the fair value determinations for syndicated notes, and CLO debt and equity investments, which may be adjusted for pending equity distributions as of valuation date. These bid prices are non-binding, and may not be determinative of fair value. Each bid price is evaluated by the Valuation Committee in conjunction with additional information compiled by TICC Management, including financial performance, recent business developments, and, in the case of CLO debt and equity investments, performance and covenant compliance information as provided by the independent trustee.

(2) EBITDA, or earnings before interest expense, taxes, depreciation and amortization, is an unobservable input which is generally based on most recently available twelve month financial statements provided by the portfolio company. Market multiples, also an unobservable input, represent an estimation of where market participants might value an enterprise based upon information available for comparable companies in the market.

(3) Discount rate represents the rate at which future cash flows are discounted to calculate a present value, reflecting market assumptions for risk.

(4) The calculation of weighted average for a range of values, for multiple investments within a given asset category, is not considered to provide a meaningful representation (“ncm”).

(5) The Company will calculate the fair value of certain CLO equity investments based upon the net present value of expected contractual payment streams discounted using estimated market yields for the equity tranche of the respective CLO vehicle. TICC will also consider those investments in which the record date for an equity distribution payment falls on the last day of the period, and the likelihood that a prospective purchaser would require an adjustment to the transaction price representing substantially all of the pending distribution.

(6) Prices provided by independent pricing services are evaluated in conjunction with actual trades and payoffs and, in certain cases, the value represented by actual trades or payoffs may be more representative of fair value as determined by the Valuation Committee.

(7) For the our bilateral debt investments and equity investments, third-party valuation firms evaluate the financial and operational information of the portfolio companies that we provide to them, as well as independent market and industry information that they consider appropriate in forming an opinion as to the fair value of our securities. In those instances where the carrying value and/or internal credit rating of

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the investment does not require the use of a third-party valuation firm, a valuation is prepared by TICC Management, which may include liquidation analysis or which may utilize a subsequent transaction to provide an indication of fair value.

(8) Weighted averages are calculated based on fair value of investments.

Significant increases or decreases in any of the unobservable inputs in isolation may result in a significantly lower or higher fair value measurement.

($ in millions)	Quantitative Information about Level 3 Fair Value Measurements
Assets	Fair Value as of December 31, 2013		Valuation Techniques/ Methodologies			Unobservable Input		Range/Weighted Average(7)
Corporate debt investments syndicated	$	619.7		Market quotes			NBIB(1)		55.0% – 102.9%/98.0	%
bilateral		13.9		Enterprise value(2)			EBITDA(3)	$	3.0/ncm(5)
							Market multiples(3)		5.50 – 6.50x/ncm(5)
CLO debt		28.9		Market quotes			NBIB(1)		86.3% – 93.1%/88.9%
CLO equity		237.2		Market quotes/			NBIB(1)		28.0% – 122.0%/83.3	%
				net present value(6)
Other investments		15.0		Enterprise value	(2)		EBITDA(3)	$	2.9 – $184.7/ncm(5)
							Market multiples(3)		3.9 – 8.6x/ncm(5)
							Discount rates(4)		20% – 35.0%/ncm(5)
Total Fair Value for Level 3 Investments	$	914.7

(1) The Company generally uses prices provided by an independent pricing service, or broker or agent bank non-binding indicative bid prices (NBIB) on or near the valuation date as the primary basis for the fair value determinations for syndicated notes, and CLO debt and equity investments. These bid prices are non-binding, and may not be determinative of fair value. Each bid price is evaluated by the Valuation Committee in conjunction with additional information compiled by TICC Management, including financial performance, recent business developments, and, in the case of CLO debt and equity investments, performance and covenant compliance information as provided by the independent trustee.

(2) For the Company’s bilateral debt investments and equity investments, third-party valuation firms evaluate the financial and operational information of the portfolio companies that the Company provides to them, as well as independent market and industry information that they consider appropriate in forming an opinion as to the fair value of the Company’s securities. In those instances where the carrying value and/or internal credit rating of the investment does not require the use of a third-party valuation firm, a valuation is prepared by TICC Management, which may include liquidation analysis or which may utilize a subsequent transaction to provide an indication of fair value.

(3) EBITDA, or earnings before interest expense, taxes, depreciation and amortization, is an unobservable input which is generally based on most recently available twelve month financial statements provided by the portfolio company. Market multiples, also an unobservable input, represent an estimation of where market participants might value an enterprise based upon information available for comparable companies in the market.

(4) Discount rate represents the rate at which future cash flows are discounted to calculate a present value, reflecting market assumptions for risk.

(5) The calculation of weighted average for a range of values, for multiple investments within a given asset category, is not considered to provide a meaningful representation (“ncm”).

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(6) The Company will calculate the fair value of certain CLO equity investments based upon the net present value of expected contractual payment streams discounted using estimated market yields for the equity tranche of the respective CLO vehicle.

(7) Weighted averages are calculated based on fair value of investments.

Significant increases or decreases in any of the unobservable inputs in isolation may result in a significantly lower or higher fair value measurement.

Financial Instruments Disclosed, But Not Carried, At Fair Value

The following table presents the carrying value and fair value of our financial liabilities disclosed, but not carried, at fair value as of December 31, 2014 and the level of each financial liability within the fair value hierarchy:

($ in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
TICC Funding LLC revolving credit facility(1)	$	150,000	$	150,000	$	—	$	—	$	150,000
TICC CLO 2012-1 LLC Class A-1 Notes(2)(3)		174,271		176,000		—		—		176,000
TICC CLO 2012-1 LLC Class B-1 Notes(2)(3)		19,524		20,000		—		—		20,000
TICC CLO 2012-1 LLC Class C-1 Notes(2)(3)		22,194		23,000		—		—		23,000
TICC CLO 2012-1 LLC Class D-1 Notes(2)(3)		20,087		21,011		—		—		21,011
2017 Convertible Notes(3)		115,000		119,025						119,025
Total	$	501,076	$	509,036	$	—	$	—	$	509,036

(1) Fair value of the TICC Funding LLC revolving credit facility is equal to the carrying amount of the Facility due to the variable interest rate and the short term maturity of the Facility.

(2) Carrying value is net of discount.

(3) Fair value is based upon the bid price provided by the placement agent at the measurement date.

A reconciliation of the fair value of investments for the year ending December 31, 2014, utilizing significant unobservable inputs, is as follows:

($ in millions)	Senior Secured Notes			Senior Unsecured Notes			CLO Debt			CLO Equity			Equity			Total
Balance at December 31, 2013	$	627.8		$	5.8		$	28.9		$	237.1		$	15.1		$	914.7
Realized (losses) gains included in earnings		(5.3	)		0.0			2.2			(15.4	)		(1.0	)		(19.5	)
Unrealized (depreciation) appreciation included in earnings (1)		(13.5	)		0.0			(2.7	)		(26.7	)		(6.1 )			(49.0	)
Accretion of discount		2.3			0.1			0.3			0.0			0.0			2.7
Purchases		382.4			0.0			0.0			147.4			2.0			531.8
Repayments and Sales(1)		(332.0	)		(0.1	)		(17.4	)		(82.6	)		(0.3	)		(432.4	)
Payment in Kind income(1)		0.6			0.6			0.0			0.0			0.0			1.2
Transfers in and/or (out) of level 3(2)		(4.6	)		0.0			0.0			0.0			0.0			(4.6	)
Balance at December 31, 2014	$	657.7		$	6.4		$	11.3		$	259.8		$	9.7		$	944.9
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to our Level 3 assets still held at the reporting date and reported within the net change in unrealized gains or losses on investments in our Statement of Operations	$	(16.3	)	$	(0.1	)	$	(0.7	)	$	(35.4	)	$	(6.5	)	$	(59.0	)

(1) Includes rounding adjustments to reconcile period balances.

(2) For the period ended December 31, 2014, TICC determined that a previously established level-three security should be categorized as level-two due to the level of market activity at the end of the reporting period.

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A reconciliation of the fair value of investments for the year ended December 31, 2013, utilizing significant unobservable inputs, is as follows:

($ in millions)	Senior Secured Notes			Senior Unsecured Notes			CLO Debt			CLO Equity			Subordinated Notes			Equity			Total
Balance at December 31, 2012	$	485.1		$	0.0		$	55.6		$	109.3		$	0.1		$	7.6		$	657.7
Realized gains (losses) included in earnings		(1.9	)		0.6			11.1			(0.7	)		0.0			(2.7	)		6.4
Unrealized (depreciation) appreciation included in earnings(1)		9.0			2.8			(7.6	)		(14.7	)		0.0			7.1			(3.4	)
Accretion of discount		2.7			0.0			1.0			0.0			0.0			0.0			3.7
Purchases(1)		378.6			3.1			20.9			159.5			0.0			3.4			565.5
Repayments and Sales(1)		(247.3	)		(1.1	)		(52.1	)		(16.3	)		(0.1	)		(0.5	)		(317.4	)
Payment in Kind income		1.6			0.4			0.0			0.0			0.0			0.2			2.2
Transfers in and/or out of level 3		0.0			0.0			0.0			0.0			0.0			0.0			0.0
Balance at December 31, 2013	$	627.8		$	5.8		$	28.9		$	237.1		$	0.0		$	15.1		$	914.7
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to our Level 3 assets still held at the reporting date and reported within the net change in unrealized gains or losses on investments in our Statement of Operations	$	6.3		$	2.7		$	1.4		$	(10.2	)	$	0.0		$	6.3		$	6.5

(1) Includes rounding adjustments to reconcile period balances.

The following table shows the fair value of TICC’s portfolio of investments by asset class as of December 31, 2014 and 2013:

	2014					2013
	Investments at Fair Value		Percentage of Total Portfolio			Investments at Fair Value		Percentage of Total Portfolio
	(dollars in millions)					(dollars in millions)
Senior Secured Notes	$	697.0		70.8	%	$	644.7		69.2	%
Senior Unsecured Notes		6.4		0.7	%		5.8		0.6	%
CLO Debt		11.3		1.1	%		28.9		3.1	%
CLO Equity		259.8		26.4	%		237.1		25.5	%
Equity		9.7		1.0	%		15.1		1.6	%
Total	$	984.2		100.0	%	$	931.6		100.0	%

Revenue Recognition

Interest Income Recognition

Interest income is recorded on an accrual basis using the contractual rate applicable to each debt investment and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on securities purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortization of premiums, if any.

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 have been brought current through payment or due to restructuring such that the interest income is deemed to be collectible. As of December 31, 2014, the fair value of TICC’s non-accrual assets was approximately $6.7 million, which comprised 0.7% of the total fair value of its portfolio and the cost of TICC’s non-accrual assets was approximately $11.6 million, which comprised approximately 1.1% of the total cost of its portfolio. As of December 31, 2013, the fair value of

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TICC’s non-accrual assets was approximately $5.5 million, which comprised 0.6% of the total fair value of its portfolio and the cost of TICC’s non-accrual assets was approximately $9.4 million, which comprised approximately 1.0% of the total cost of its portfolio.

Payment in Kind Interest

We have investments in our portfolio which contain a contractual payment-in-kind (“PIK”) provision. PIK interest computed at the contractual rate is added to the principal balance of the investment, is accrued into income and reflected as receivable up to the capitalization date. Upon capitalization, PIK is subject to the fair value estimates associated with their related investments. PIK investments on non-accrual status are restored to accrual status if the Company believes that PIK is expected to be realized. To maintain our status as a RIC, this income must be paid out to stockholders in the form of dividends, even though we have not collected any cash. For the year ended December 31, 2014, we recorded PIK income of approximately $1.2 million. For the years ended December 31, 2013 and 2012, we recorded approximately $2.2 million and $5.0 million in PIK income, respectively.

In addition, we recorded original issue discount income of approximately $2.7 million, $3.7 million and $5.8 million for the years ended December 31, 2014, 2013 and 2012, respectively, representing the amortization of the discount attributed to certain debt securities purchased by us, including original issue discount (“OID”) and market discount.

Distributions from securitization vehicles and equity investments

Distribution income on investments in equity tranches of CLO vehicles is recognized as income on the record date for each distribution to the extent that such amounts are payable by the vehicle and are expected to be collected. The amount of each distribution is determined by the respective CLO trustee. Dividend income on equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

In the event the Company determines that a CLO vehicle has been impaired, subsequent distributions are recorded as a reduction of the cost basis. The Company will consider the value of its CLO equity investment to be impaired when, after the end of the CLO's reinvestment cycle, the fair value of the investment has declined significantly and the estimated value of the remaining collateral is insufficient to repay the equity tranche in full.

Other Income

Other income includes distributions from fee letters, closing or origination fees, and success fees associated with portfolio investments. Distributions from fee letters are an enhancement to the return on a CLO equity investment and are based upon a percentage of the collateral manager's fees, and are recorded as other income when earned. Closing or origination fees, if any, are normally paid at closing of an investment, are fully earned and non-refundable, and generally are non-recurring. The Company may also earn success fees associated with its investments in certain securitization vehicles or “CLO warehouse facilities,” which are contingent upon a take-out of the warehouse by a permanent CLO structure; such fees are earned and recognized when the take-out is completed. For the year ended December 31, 2014, we had recognized success fees of approximately $1.0 million and distributions from fee letters of approximately $1.3 million.

RECENT DEVELOPMENTS

From January 2, 2015 through January 20, 2015, an additional 315,783 of our common stock settled through our share repurchase program for an aggregate cost of approximately $2.4 million at a weighted average price per share of common stock of approximately $7.56.

On February 19, 2015, our Board of Directors declared a cash dividend of $0.27 per share payable on March 31, 2015 to holders of record on March 17, 2015.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are subject to financial market risks, including changes in interest rates. As of December 31, 2014, two debt investments in our portfolio were at a fixed rate, and the remaining sixty-eight debt investments were at variable rates, representing approximately $8.6 million and $733.4 million in principal debt, respectively. At December 31, 2014, approximately $720.6 million of our variable rate investments were income producing. The variable rates are based upon the five-year Treasury note, the Prime rate or LIBOR, and, in the case of our non-bilateral investments, generally reset quarterly, whereas our bilateral investments are generally reset annually. We expect that future debt investments will generally be made at variable rates. Many of the variable rate investments contain floors.

To illustrate the potential impact of a change in the underlying interest rate on our net investment income as it pertains to our debt portfolio, we have assumed a 1% increase in the underlying five-year Treasury note, the Prime rate or LIBOR, and no other change in our portfolio as of December 31, 2014. We have also assumed outstanding variable rate borrowings of approximately $390 million. Under this analysis, net investment income would decrease by approximately $2.4 million on an annual basis, reflecting the amount of investments in our portfolio which have implied floors that would be unaffected by a 1% change in the underlying interest rate. However, if the increase in rates was more significant, such as 5%, the net effect on net investment income would be an increase of approximately $10.2 million. To the extent that the rate underlying certain investments, as well as our borrowings, is at a historic low, it is not possible for the underlying rate to decrease by 1% or 5%. If the underlying rate decreased to 0%, it would have a minimal effect on net investment income. Although management believes that this analysis is indicative of our existing interest rate sensitivity, it does not adjust for changes in the credit quality, size and composition of our portfolio, and other business developments, including a change in the level of our borrowings, that could affect the net increase (or decrease) in net assets resulting from operations. Accordingly, no assurances can be given that actual results would not differ materially from the results under this hypothetical analysis.

In addition, to illustrate the impact of a change in the underlying interest rate on our total investment income as it pertains to our CLO equity investments, we have assumed a 1% increase in the underlying three-month LIBOR, and no other change in our CLO portfolio, or to any of the credit, spread, default rate or other factors, as of December 31, 2014. Under this analysis, the effect on total investment income would be a decrease of approximately $21 million to $22 million on an annual basis, reflecting the portfolio assets held within these CLO vehicles which have implied floors that would be unaffected by a 1% change in the underlying interest rate, compared to the debt carried by those CLO vehicles which are at variable rates and which would be affected by a change in three-month LIBOR. If the increase in three-month LIBOR was more significant, such as 5%, the net effect on total investment income would be a decrease of approximately $10 million to $11 million. Although management believes that this analysis is indicative of our existing interest rate sensitivity, it does not adjust for changes in any of the other assumptions that effect the return on CLO equity investments, both positively and negatively (and which could accompany changes to the three-month LIBOR rate), such as default rates, recovery rates, prepayment rates and reinvestment rates, that could affect the net increase (or decrease) in net assets resulting from operations. Accordingly, no assurances can be given that actual results would not differ materially from the results under this hypothetical analysis.

We may in the future hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to the investments in our portfolio with fixed interest rates.

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Item 8. Consolidated Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

	Page
Management’s Report on Internal Control Over Financial Reporting		95
Report of Independent Registered Public Accounting Firm		96
Consolidated Statements of Assets and Liabilities as of December 31, 2014 and December 31, 2013		97
Consolidated Schedule of Investments as of December 31, 2014		98
Consolidated Schedule of Investments as of December 31, 2013		106
Consolidated Statements of Operations for the years ended December 31, 2014, December 31, 2013 and December 31, 2012		111
Consolidated Statements of Changes in Net Assets for the years ended December 31, 2014, December 31, 2013 and December 31, 2012		113
Consolidated Statements of Cash Flows for the years ended December 31, 2014, December 31, 2013 and December 31, 2012		114
Notes to Consolidated Financial Statements		116

94

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2014. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 based upon criteria in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our assessment, management determined that the Company’s internal control over financial reporting was effective as of December 31, 2014 based on the criteria in Internal Control — Integrated Framework issued by COSO. PricewaterhouseCoopers LLP, our independent registered public accounting firm, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014, as stated in its report, which is included herein.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of TICC Capital Corp.:

In our opinion, the accompanying consolidated statements of assets and liabilities including the consolidated schedules of investments, and the related consolidated statements of operations, of changes in net assets, and of cash flows, present fairly, in all material respects, the financial position of TICC Capital Corp. and its subsidiaries (“the Company”) at December 31, 2014 and December 31, 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index under item 15(c) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established inInternal Control —  Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting on page 95. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. Our procedures included confirmation of securities at December 31, 2014 by correspondence with the custodians, and where replies were not received, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP
New York, New York
March 3, 2015

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TICC CAPITAL CORP.
 
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

	December 31, 2014			December 31, 2013
ASSETS
Non-affiliated/non-control investments (cost: $999,433,538 @12/31/14; $901,728,071 @ 12/31/13)	$	967,612,035		$	915,546,744
Affiliated investments (cost: $4,268,722 @ 12/31/14; $0 @ 12/31/13)		1,585,303			—
Control investments (cost: $16,800,000 @ 12/31/14; $16,900,000 @ 12/31/13)		14,960,000			16,050,000
Total investments at fair value (cost: $1,020,502,260 @ 12/31/14; $918,628,071 @ 12/31/13)		984,157,338			931,596,744
Cash and cash equivalents		20,505,323			14,933,074
Restricted cash		20,576,250			32,428,248
Deferred debt issuance costs		5,669,747			7,985,580
Interest and distributions receivable		11,442,289			11,133,972
Other assets		290,245			88,122
Total assets	$	1,042,641,192		$	998,165,740
LIABILITIES
Accrued interest payable	$	2,596,564		$	2,596,893
Investment advisory fee payable to affiliate		6,183,486			7,144,480
Accrued capital gains incentive fee to affiliate		—			3,872,853
Securities purchased not settled		11,343,179			6,994,852
Credit facility		150,000,000			—
Accrued expenses		629,127			637,896
Notes payable – TICC CLO LLC, net of discount		—			100,041,226
Notes payable – TICC CLO 2012-1 LLC, net of discount		236,075,775			235,635,114
Convertible senior notes payable		115,000,000			115,000,000
Total liabilities		521,828,131			471,923,314
COMMITMENTS AND CONTINGENCIES (Note 8)
NET ASSETS
Common stock, $0.01 par value, 100,000,000 share authorized; 60,303,769 and 53,400,745 shares issued and outstanding, respectively		603,038			534,007
Capital in excess of par value		623,018,818			561,336,766
Net unrealized (depreciation) appreciation on investments		(36,344,922	)		12,968,673
Accumulated net realized losses on investments		(63,212,472	)		(45,439,234	)
Distributions in excess of investment income		(3,251,401	)		(3,157,786	)
Total net assets		520,813,061			526,242,426
Total liabilities and net assets	$	1,042,641,192		$	998,165,740
Net asset value per common share	$	8.64		$	9.85

 
 
See Accompanying Notes.

97

TICC CAPITAL CORP.
  
CONSOLIDATED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2014

COMPANY/INVESTMENT(1)	INDUSTRY		PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% of Net Assets
Senior Secured Notes
ABB/Con Cise Optical Group		retail
tranche B term loan, LIBOR + 3.50% (1.00% floor) due February 06, 2019 (4)(5)(6)(10)(16)			$	6,541,775	$	6,517,166	$	6,378,231
Algorithmic Implementations, Inc. (d/b/a “Ai Squared”)		software
senior secured notes, LIBOR + 6.00% (9.84% all-in floor) due September 11, 2016 (4)(5)(6)(10)(17)				13,800,000		13,800,000		13,800,000
Albertson’s LLC		grocery
first lien senior secured notes, 4.50% due April 14, 2021(4)(5)(9)(10)				13,000,000		13,009,539		12,986,480
Amneal Pharmaceuticals LLC		pharmaceuticals
first lien senior secured notes, LIBOR + 4.00% (1.00% floor) due November 01, 2019(4)(5)(9)(10)(18)				4,991,646		4,971,679		4,972,927
Aricent Technologies, Inc.		telecommunication services
first lien senior secured notes, LIBOR + 4.50% (1.00% floor) due April 14, 2021(4)(5)(6)(9)(10)(14)(18)				14,923,753		14,877,921		14,874,057
second lien senior secured notes, LIBOR + 8.50% (1.00% floor) due April 14, 2022(4)(5)(10)(14)(18)				14,000,000		14,005,937		13,982,500
Novitex Enterprise Solutions (F/K/A “Pitney Bowes Management Services, Inc.”)		printing and publishing
first lien senior secured notes, LIBOR + 6.25% (1.25% floor) due October 01, 2019(4)(5)(6)(9)(10)(19)				15,840,300		15,746,596		15,048,285
Ascensus, Inc.		financial intermediaries
senior secured notes, LIBOR + 4.00% (1.00% floor) due December 02, 2019 (4)(5)(6)(10)(16)				9,402,519		9,415,372		9,320,247
second lien senior secured notes, LIBOR + 8.00% (1.00% floor) due December 2, 2020(4)(5)(9)(16)				2,000,000		1,974,098		1,976,260
Birch Communications, Inc.		telecommunication services
first lien senior secured notes, LIBOR + 6.75% (1.00% floor) due July 18, 2020(4)(5)(6)(9)(10)(16)				15,544,444		15,270,572		15,233,555
Blue Coat System, Inc.		software
first lien senior secured notes, LIBOR + 3.00% (1.00% floor) due May 31, 2019(4)(5)(6)(9)(16)				3,979,856		3,996,178		3,832,601
second lien senior secured notes, LIBOR + 8.50% (1.00% floor) due June 28, 2020(4)(5)(6)(9)(16)				15,000,000		14,874,235		14,625,000
BMC Software Finance, Inc.		business services
first lien senior secured notes, LIBOR + 4.00% (1.00% floor) due September 10, 2020(4)(5)(6)(9)(16)				4,776,389		4,791,903		4,636,106
Capstone Logistics Acquisition, Inc.		logistics
first lien senior secured notes, LIBOR + 4.50% (1.00% floor) due June 17, 2020(4)(5)(6)(9)(10)(18)				13,965,000		14,024,103		13,877,719
ConvergeOne Holdings Corp.		business services
first lien senior secured notes, LIBOR + 5.00% (1.00% floor) due June 17, 2020(4)(5)(6)(9)(10)(16)				15,920,000		15,864,439		15,840,400
second lien senior secured notes, LIBOR + 8.00% (1.00% floor) due June 17, 2021(4)(5)(19)				3,000,000		2,971,530		2,910,000

 
 
See Accompanying Notes.

98

TICC CAPITAL CORP.
  
CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)
DECEMBER 31, 2014

COMPANY/INVESTMENT(1)	INDUSTRY		PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% of Net Assets
Senior Secured Notes (continued)
CRCI Holdings, Inc.		utilities
first lien senior secured notes, LIBOR + 4.00% (1.00% floor) due July 10, 2019(4)(5)(6)(9)(10)(16)			$	9,897,500	$	9,866,707	$	9,610,473
CT Technologies Intermediate		healthcare
first lien senior secured notes, LIBOR + 5.00%, (1.00% floor) due December 01, 2021(4)(5)(9)(18)				9,000,000		8,969,867		8,932,500
Deltek Systems, Inc.		enterprise software
first lien senior secured notes, LIBOR + 3.50% (1.00% floor) due October 10, 2018(4)(5)(6)(9)(16)				4,557,000		4,534,433		4,500,038
second lien senior secured notes, LIBOR + 8.75% (1.25% floor) due October 10, 2019(4)(5)(6)(10)(16)				10,000,000		9,899,125		10,025,000
Edmentum, Inc. (F/K/A “Plato, Inc.”)		education
first lien senior secured notes, LIBOR + 4.50% (1.00% floor) due May 17, 2018(4)(5)(6)(9)(10)(16)				6,508,724		6,455,462		5,272,066
First American Payment Systems		financial intermediaries
first lien senior secured notes, LIBOR + 4.50% (1.25% floor) due October 04, 2018(4)(5)(6)(9)(10)(18)				3,035,078		3,044,185		3,002,845
second lien senior secured notes, LIBOR + 9.50% (1.25% floor) due April 12, 2019(4)(5)(6)(9)(10)(18)				13,982,241		13,766,556		13,860,036
First Data Corporation		financial intermediaries
first lien senior secured notes, (LIBOR + 4.00%) due March 24, 2021 (4)(5)(9)(10)(18)				16,050,721		16,007,723		15,797,601
GlobalLogic Holdings Inc.		business services
first lien senior secured notes, LIBOR + 5.25% (1.00% floor) due June 02,2019(4)(5)(6)(9)(10)(16)				17,325,000		17,255,320		17,065,125
Global Tel Link Corp		telecommunication services
first lien senior secured notes, LIBOR + 3.75% (1.25% floor) due May 23, 2020(4)(5)(6)(9)(16)				6,081,329		6,057,284		6,010,360
second lien senior secured notes, LIBOR + 7.75% (1.25% floor) due November 23, 2020(4)(5)(6)(10)(16)				13,000,000		12,862,984		12,685,790
Help/Systems Holdings, Inc.		software
senior secured notes, LIBOR + 4.50 (1.00% floor) due June 28, 2019 (4)(5)(6)(9)(10)(14)(16)				14,812,500		14,688,520		14,590,313
second lien senior secured notes LIBOR + 8.50% (1.00% floor) due June 28, 2020(4)(5)(14)(16)				15,000,000		14,809,418		14,775,000
iEnergizer Limited		printing and publishing
first lien senior secured notes, LIBOR + 6.00% (1.25% floor) due May 01, 2019(4)(5)(6)(10)(11)(12)(18)				6,800,000		6,682,947		6,120,000
Immucor, Inc.		healthcare
senior secured term B notes, LIBOR + 3.75% (1.25% floor) due August 19, 2018(4)(5)(6)(9)(16)				4,355,040		4,257,926		4,291,064
Integra Telecom Holdings, Inc		telecommunication services
first lien senior secured notes, LIBOR + 4.00% (1.25% floor) due February 22, 2019(4)(5)(6)(9)(10)(16)				10,341,486		10,302,601		10,037,757
second lien senior secured notes, LIBOR + 8.50%, (1.25% floor) due February 22, 2020(4)(5)(9)(10)(16)				8,850,000		8,896,162		8,772,563

 
 
See Accompanying Notes.

99

TICC CAPITAL CORP.
  
CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)
DECEMBER 31, 2014

COMPANY/INVESTMENT(1)	INDUSTRY		PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% of Net Assets
Senior Secured Notes (continued)
Jackson Hewitt Tax Service, Inc.		consumer services
first lien senior secured notes, LIBOR + 8.50% (1.25% floor) due October 16, 2017(4)(5)(6)(9)(10)(16)			$	20,682,892	$	20,152,560	$	20,579,478
Knowledge Universe Education		education
first lien senior secured notes, LIBOR + 4.25% (1.00% floor) due March 18, 2021(4)(5)(6)(9)(10)(16)				10,947,425		10,982,820		10,920,056
Merrill Communications, LLC		printing and publishing
first lien senior secured notes, LIBOR + 4.75% (1.00% floor ) due March 08, 2018(4)(5)(6)(10)(14)(18)				17,083,900		17,084,727		16,955,771
NAB Holdings, LLC		financial intermediaries
first lien senior secured notes, LIBOR + 3.75% (1.00% floor) due May 21, 2021(4)(5)(6)(9)(10)(16)				17,915,000		17,784,542		17,803,031
Nextag, Inc.		retail
senior secured notes, Cash 0.00%/9.25% PIK, due June 04, 2019(3)(10)				2,264,719		2,264,720		1,585,303
Novetta, LLC		aerospace and defense
first lien senior secured notes, LIBOR + 5.00% (1.00% floor) due September 29, 2020(4)(5)(6)(9)(10)(16)				12,718,125		12,610,453		12,654,534
PGX Holdings		consumer services
first lien senior secured notes, LIBOR + 5.25% (1.00% floor) due September 29,2020(4)(5)(6)(9)(10)(19)				15,403,125		15,367,784		15,383,871
Petco Animal Supplies, Inc.		retail
first lien senior secured notes, LIBOR + 3.00% (1.00% floor) due November 24, 2017(4)(5)(6)(9)(16)				5,984,416		5,941,589		5,907,097
Presidio IS Corp.		business services
senior secured notes, LIBOR + 4.00% (1.00% floor) due March 31, 2017 (4)(5)(6)(9)(10)(18)				8,331,082		8,315,126		8,305,091
ProQuest LLC		education
senior secured notes, LIBOR + 4.25% (1.00% floor) due October 24, 2021(4)(5)(9)(20)				6,000,000		6,037,262		5,940,000
RBS Holding Company		printing and publishing
second lien senior secured notes, LIBOR + 6.75% (1.50% floor) cash 1.25% PIK due March 23, 2017(3)(4)(5)(6)(16)				22,731,656		12,520,134		15,502,989
Recorded Books, Inc. (F/K/A “Volume Holdings, Inc.”)		printing and publishing
senior secured notes, LIBOR + 4.25% (1.00% floor) due January 31, 2020(4)(5)(6)(10)(16)				9,300,000		9,213,403		9,207,000
Safenet, Inc.		software
first lien senior secured notes PRIME + 3.5% due March 05, 2020(4)(5)(6)(9)(10)				9,925,000		9,837,828		9,925,000
SCS Holdings I Inc. (Sirius Computer Solutions, Inc.)		electronics
first lien senior secured notes, LIBOR + 5.75% (1.25% floor) due December 07, 2018(4)(5)(6)(9)(18)				3,388,942		3,363,761		3,388,942

 
 
See Accompanying Notes.

100

TICC CAPITAL CORP.
  
CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)
DECEMBER 31, 2014

COMPANY/INVESTMENT(1)	INDUSTRY		PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% of Net Assets
Senior Secured Notes (continued)
Securus Technologies, Inc.		telecommunication services
first lien senior secured notes, LIBOR + 3.50% (1.25% floor) due April 30, 2020(4)(5)(6)(9)(16)			$	5,944,956	$	5,898,190	$	5,858,754
second lien senior secured notes, LIBOR + 7.75% (1.25% floor) due April 30, 2021(4)(5)(10)(16)				6,400,000		6,370,703		6,272,000
Sesac Holdco II LLC		radio and television
first lien senior secured notes, LIBOR + 4.00% (1.00% floor) due February 08, 2019(4)(5)(6)(9)(10)(18)				14,384,593		14,397,006		14,231,829
Serena Software Inc.		enterprise software
first lien senior secured notes, LIBOR + 6.50% (1.00% floor) due April 14, 2020(4)(5)(9)(10)(18)				20,000,000		19,640,149		19,768,800
Source Hov, LLC		business services
first lien senior secured notes, LIBOR + 6.75% (1.00% floor) due October 31, 2019(4)(5)(9)(10)(14)(18)				18,000,000		17,471,194		17,460,000
second lien senior secured notes, LIBOR + 10.50% (1.00% floor) due April 30, 2020(4)(5)(9)(10)(14)(18)				15,000,000		14,405,564		14,287,500
STG-Fairway Acquistions		business services
first lien senior secured notes, LIBOR + 5.00% (1.25% floor) due February 28, 2019(4)(5)(6)(9)(10)(16)				9,211,018		9,141,920		9,038,311
Stratus Technologies, Inc.		computer hardware
first lien senior secured notes, LIBOR + 5.00% (1.00% floor) due April 28, 2021(4)(5)(6)(9)(10)(18)				19,075,000		18,909,604		18,939,949
Symphony Teleca Services Inc.		business services
first lien senior secured notes, LIBOR + 4.75% (1.00% floor) due August 07, 2019(4)(5)(9)(10)(18)				16,000,000		15,847,256		15,840,000
Teleguam Holdings LLC		telecommunication services
second lien senior secured notes, LIBOR + 7.50% (1.25% floor) due June 10, 2019(4)(5)(10)(18)				8,000,000		7,962,890		7,952,000
The TOPPS Company, Inc.		leisure goods
first lien senior secured notes, LIBOR + 6.00% (1.25% floor) due October 02, 2018 (4)(5)(6)(9)(10)(16)				9,900,000		9,816,492		9,603,000
Total Merchant Services, Inc.		financial intermediarie
first lien senior secured notes, LIBOR + 5.50% (1.00% floor) due December 5, 2020(4)(5)(9)(10)(16)				16,000,000		15,840,699		15,840,000
Travel Leaders Group, LLC		travel
first lien senior secured notes, LIBOR + 6.00% (1.00% floor) due December 05, 2018(4)(5)(6)(9)(10)(16)				15,200,000		14,934,118		15,124,000
Unitek Global Services, Inc.		IT consulting
tranche B term loan, LIBOR + 13.50%, (1.50% floor) Cash 0.00%/PIK 15.00% due April 15, 2018)(3)(4)(5)(6)(10)(15)(18)				12,772,315		11,608,604		6,667,148
U.S. Telepacific Corp.		telecommunication services
first lien senior secured notes, LIBOR + 5.00% (1.00% floor) due November 25, 2020(4)(5)(9)(10)(18)				10,000,000		9,900,312		9,779,200

 
 
See Accompanying Notes.

101

TICC CAPITAL CORP.
  
CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)
DECEMBER 31, 2014

COMPANY/INVESTMENT(1)	INDUSTRY		PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% of Net Assets
Senior Secured Notes (continued)
US FT HoldCo. Inc. (A/K/A Fundtech)		financial intermediaries
first lien senior secured notes, LIBOR + 3.50% (1.00% floor) due November 30, 2017(4)(5)(6)(9)(16)			$	6,207,712	$	6,227,876	$	6,139,427
Vision Solutions		software
first lien senior secured notes, LIBOR + 4.50% (1.50% floor) due July 23, 2016(4)(5)(6)(9)(10)(18)				5,248,096		5,202,145		5,195,615
second lien senior secured notes, LIBOR + 8.00% (1.50% floor) due July 23, 2016(4)(5)(9)(10)(18)				10,000,000		9,958,342		9,600,000
Wall Street Systems		financial intermediaries
first lien senior secured notes, LIBOR + 3.50% (1.00% floor) due April 30, 2021(4)(5)(6)(9)(18)				5,878,332		5,863,887		5,654,955
Total Senior Secured Notes					$	705,342,148	$	696,953,550		133.8	%
Senior Unsecured Notes
Merrill Communications, LLC		printing and publishing
senior unsecured PIK notes Cash 0.00%/10.00% PIK, due March 08, 2023(3)(5)(6)(14)			$	6,351,153	$	3,724,816	$	6,351,153
Total Senior Unsecured Notes					$	3,724,816	$	6,351,153		1.2	%
Collateralized Loan Obligation – Debt Investments
AMMC CLO XII, Ltd.		structured finance
CLO secured class F notes, LIBOR + 5.05% due May 10, 2025(4)(5)(11)(12)(16)				4,500,000		3,936,123		3,701,250
Carlyle Global Market Strategies CLO 2013-2, Ltd.		structured finance
CLO secured class F notes, LIBOR + 5.40% due April 18, 2025(4)(5)(11)(12)(16)				6,000,000		5,183,376		5,122,200
Telos CLO 2013-3, Ltd.		structured finance
CLO secured class B notes, LIBOR + 5.50% due January 17, 2024(4)(5)(11)(12)(16)				3,000,000		2,744,951		2,521,200
Total Collateralized Loan Obligation — Debt Investments					$	11,864,450	$	11,344,650		2.2	%
Collateralized Loan Obligation — Equity Investments
ACAS CLO 2012-1, Ltd.		structured finance
CLO subordinated notes(11)(12)				—		4,050,000		3,800,000
AMMC CLO XII, Ltd.		structured finance
CLO subordinated notes(11)(12)				—		9,949,500		9,303,429
Ares XXV CLO Ltd.		structured finance
CLO subordinated notes(11)(12)				—		12,620,875		10,850,000
Ares XXVI CLO Ltd.		structured finance
CLO subordinated notes(11)(12)				—		18,295,625		15,479,495
Ares XXIX CLO Ltd.		structured finance
CLO subordinated notes(11)(12)				—		11,156,250		10,784,314
Benefit Street Partners CLO II, Ltd.		structured finance
CLO subordinated notes(11)(12)				—		24,704,625		22,760,050

 
 
See Accompanying Notes.

102

TICC CAPITAL CORP.
  
CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)
DECEMBER 31, 2014

COMPANY/INVESTMENT(1)	INDUSTRY		PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% of Net Assets
Collateralized Loan Obligation – Equity Investments (continued)
Carlyle Global Market Strategies CLO 2013-2, Ltd.		structured finance
CLO subordinated notes(11)(12)			$	—	$	7,955,000	$	7,848,089
Carlyle Global Market Strategies CLO 2014-4, Ltd.		structured finance
CLO subordinated notes(7)(11)(12)				—		22,689,920		21,916,400
Catamaran CLO 2012-1 Ltd.		structured finance
CLO subordinated notes(11)(12)				—		20,075,000		14,520,000
Catamaran CLO 2013-1 Ltd.		structured finance
CLO subordinated notes(11)(12)				—		9,750,000		8,300,000
Cedar Funding II CLO, Ltd.		structured finance
CLO subordinated notes(11)(12)				—		15,631,250		14,062,500
Halcyon Loan Advisors Funding 2012-2 Ltd.		structured finance
CLO subordinated notes(11)(12)				—		6,750,000		7,200,000
Hull Street CLO Ltd.		structured finance
CLO subordinated notes(11)(12)				—		4,412,500		4,412,500
Ivy Hill Middle Market Credit Fund VII, Ltd.		structured finance
CLO subordinated notes (11)(12)				—		13,272,000		11,343,930
Jamestown CLO V Ltd.		structured finance
CLO subordinated notes(11)(12)				—		6,400,000		6,400,000
Marea CLO, Ltd.		structured finance
CLO income notes(11)(12)				—		12,644,215		10,750,460
Mountain Hawk III CLO, Ltd.		structured finance
CLO income notes(11)(12)				—		13,473,000		11,729,070
CLO M notes (11)(12)(13)				—		—		570,082
Newmark Capital Funding 2013-1 CLO Ltd.		structured finance
CLO income notes(11)(12)				—		16,400,000		15,400,000
CS Advisors CLO I Ltd.		structured finance
CLO subordinated notes(7)(11)(12)				—		4,543,935		2,070,500
Shackleton 2013-III CLO, Ltd.		structured finance
CLO subordinated notes(11)(12)				—		13,073,425		10,496,657
Shackleton 2013-IV CLO, Ltd.		structured finance
CLO subordinated notes(11)(12)				—		20,573,750		17,688,284
Telos CLO 2013-3, Ltd.		structured finance
CLO subordinated notes(11)(12)				—		11,558,333		10,639,999
Telos CLO 2014-5, Ltd.		structured finance
CLO subordinated notes(11)(12)				—		9,450,000		7,671,510

 
 
See Accompanying Notes.

103

TICC CAPITAL CORP.
  
CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)
DECEMBER 31, 2014

COMPANY/INVESTMENT(1)	INDUSTRY		PRINCIPAL AMOUNT/SHARES		COST		FAIR VALUE(2)		% of Net Assets
Collateralized Loan Obligation – Equity Investments (continued)
Other CLO equity related investments		structured finance
CLO other(11)(12)(13)				—-		—		3,816,649
Total Collateralized Loan Obligation — Equity Investments					$	289,429,203	$	259,813,918		49.9	%
Common Stock
Algorithmic Implementations, Inc. (d/b/a “Ai Squared”)		software
common stock(7)				100	$	3,000,000	$	1,160,000
Integra Telecom Holdings, Inc.		telecommunication services
common stock(7)				775,846		1,712,397		4,258,112
Merrill Communications, LLC		printing and publishing
common equity(7)(14)				728,442		3,425,244		4,275,955
Nextag, Inc.		retail
common equity(7)				11,226,123		2,004,002		—
Total Common Stock Investments					$	10,141,643	$	9,694,067		1.9	%
Warrants
Unitek Global Services, Inc.		IT consulting
warrants to purchase common stock(7)(10)				309,080		—		—
Total Warrants					$	—	$	—		0.0	%
Total Investments(8)					$	1,020,502,260	$	984,157,338		189.0	%

(1) Other than Algorithmic Implementation, Inc. (d/b/a Ai Squared), which we may be deemed to “control” and Nextag, Inc., of which we are deemed to be an “affiliate.” We do not “control” and are not an “affiliate” of any of our portfolio companies, each as defined in the Investment Company Act of 1940 (the “1940 Act”). In general, under the 1940 Act, we would be presumed to “control” a portfolio company if we owned 25% or more of its voting securities and would be an “affiliate” of a portfolio company if we owned 5% or more of its voting securities.

(2) Fair value is determined in good faith by the Board of Directors of the Company.

(3) Portfolio includes $44,119,843 of principal amount of debt investments which contain a PIK provision.

(4) Notes bear interest at variable rates.

(5) Cost value reflects accretion of original issue discount or market discount.

(6) Cost value reflects repayment of principal.

(7) Non-income producing at the relevant period end.

(8) Aggregate gross unrealized appreciation for federal income tax purposes is $14,859,779; aggregate gross unrealized depreciation for federal income tax purposes is $69,463,970. Net unrealized depreciation is $54,604,191 based upon a tax cost basis of $1,038,761,529.

(9) All or a portion of this investment represents collateral under the revolving credit agreement.

(10) All or a portion of this investment represents TICC CLO 2012-1 LLC collateral.

(11) Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets.

 
 
See Accompanying Notes.

104

TICC CAPITAL CORP.
  
CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)
DECEMBER 31, 2014  
  

(12) Investment not domiciled in the United States.

(13) Fair value represents discounted cash flows associated with fees earned from CLO equity investments.

(14) Aggregate investments represent greater than 5% of net assets on a fair value basis.

(15) Investment is on non-accrual status. During the period ended December 31, 2014, the investment defaulted on its principal and interest payments.

(16) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 90-day LIBOR.

(17) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 1 year LIBOR.

(18) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 30-day LIBOR.

(19) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 180-day LIBOR.

(20) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 60-day LIBOR.

 
 
See Accompanying Notes.

105

TICC CAPITAL CORP.
 
CONSOLIDATED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2013

COMPANY(1)	INDUSTRY		INVESTMENT		PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% of Net Assets
Senior Secured Notes
ABB/Con Cise Optical Group		retail		tranche B term loan(4)(5)(6)(10) (4.50%, due February 06, 2019)	$	6,616,667	$	6,585,774	$	6,612,565
Algorithmic Implementations, Inc. (d/b/a “Ai Squared”)		software		senior secured notes(4)(5)(6) (9.84%, due September 11, 2016)		13,900,000		13,900,000		13,900,000
ARSLOANE Intermediate, LLC (F/K/A “Pitney Bowes Management Services, Inc.”)		printing and publishing		first lien senior secured notes(4)(5)(6)(9)(10) (7.50%, due October 01, 2019)		15,960,000		15,861,012		16,119,600
Ascensus, Inc.		financial intermediaries		senior secured notes(4)(5)(10) (5.00%, due December 02, 2019)		4,500,000		4,477,733		4,516,875
				second lien senior secured notes(4)(5)(9) (9.00%, due December 02, 2020)		2,000,000		1,970,304		2,030,000
Attachmate Corporation		enterprise software		senior secured notes(4)(5)(6)(9)(10) (7.25%, due November 22, 2017)		6,951,181		6,841,638		7,075,746
				second lien senior secured notes(4)(5)(6)(9)(10) (11.00%, due November 22, 2018)		17,514,795		17,293,739		17,076,925
Blue Coat System, Inc.		software		second lien senior secured notes(4)(5) (9.50%, due June 28, 2020)		15,000,000		14,857,231		15,225,000
Compucom Systems, Inc.		IT outsourcing		first lien senior secured notes(4)(5)(6)(10) (4.25%, due May 09, 2020)		6,965,000		6,932,582		6,947,588
CRCI Holdings, Inc.		utilities		first lien senior secured notes(4)(5)(6)(9)(10) (5.00%, due July 10, 2019)		7,730,625		7,691,875		7,537,359
Deltek Systems Inc		enterprise software		first lien senior secured notes(4)(5)(6)(10) (5.00%, due October 10, 2018)		4,603,500		4,579,450		4,615,009
				second lien senior secured notes(4)(5) (10.00%, due October 10, 2019)		10,000,000		9,887,700		10,150,000
DG Fastchannel Inc		advertising		first lien senior secured notes(4)(5)(6)(10)(11) (7.25%, due July 26, 2018)		5,099,200		5,045,528		5,118,322
Edmentum, Inc. (F/K/A “Plato, Inc.”)		education		first lien senior secured notes(4)(5)(6)(9)(10) (5.50%, due May 17, 2018)		6,603,572		6,537,954		6,603,572
First American Payment Systems		financial intermediaries		first lien senior secured notes(4)(5)(6)(10) (5.75%, due October 04, 2018)		3,592,000		3,599,307		3,574,040
				second lien senior secured notes(4)(5)(9)(10) (10.75%, due April 12, 2019)		15,000,000		14,741,562		14,812,500
First Data Corporation		financial intermediaries		first lien senior secured notes(4)(5)(9)(10) (4.16%, due March 24, 2017)		16,050,721		15,999,634		16,062,759
				tranche B term loan(4)(5)(9)(10) (4.16%, due September 24, 2018)		880,952		880,952		881,445
GlobalLogic Holdings Inc.		business services		second lien senior secured notes(4)(5)(9)(10) (6.25%, due June 02, 2019)		14,500,000		14,399,746		14,463,750
Global Tel Link Corp		telecommunication services		second lien senior secured notes(4)(5) (9.00%, due November 23, 2020)		13,000,000		12,849,004		12,317,500
Grede Holdings LLC		auto parts manufacturer		senior secured notes(4)(5)(6)(9)(10) (4.50%, due April 03, 2017)		7,888,043		7,815,360		7,897,903
GXS Worldwide, Inc.		business services		senior secured notes(5)(9) (9.75%, due June 15, 2015)		8,000,000		7,956,899		8,230,000
Harvard Drug Group, LLC		pharmaceutical		senior secured notes(4)(5)(6)(10) (5.00%, due October 29, 2019)		3,482,500		3,482,272		3,506,460
Healogics, Inc. (F/K/A “National Healing Corp.”)		healthcare		senior secured notes(4)(5)(6)(10) (5.25%, due February 05, 2019)		3,308,333		3,293,814		3,325,900
				second lien senior secured notes(4)(5)(10) (9.25%, due February 05, 2020)		4,000,000		3,963,713		4,070,000
Help/Systems Holdings, Inc.		Software		senior secured notes(4)(5)(6)(9)(10)(14) (5.50%, due June 28, 2019)		14,962,500		14,820,777		14,812,875
				second lien senior secured notes(4)(5)(14) (9.50%, due June 28, 2020)		15,000,000		14,784,423		15,000,000

 
 
See Accompanying Notes.

106

TICC CAPITAL CORP.
 
CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)
DECEMBER 31, 2013

COMPANY(1)	INDUSTRY		INVESTMENT		PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% of Net Assets
Senior Secured Notes – (continued)
HHI Holdings LLC		auto parts manufacturer		senior secured notes(4)(5)(6)(10) (5.00%, due October 05, 2018)	$	4,022,989	$	3,992,685	$	4,056,943
Hoffmaster Group, Inc.		retail		first lien senior secured notes(4)(5)(6)(9)(10) (6.50%, due January 03, 2018)		6,684,258		6,662,625		6,667,547
iEnergizer Limited		printing and publishing		first lien senior secured notes(4)(5)(6)(10)(11) (7.25%, due May 01, 2019)		7,600,000		7,461,635		7,493,600
Immucor, Inc.		healthcare		senior secured term B notes(4)(5)(6)(9) (5.00%, due August 19, 2018)		4,399,480		4,272,831		4,418,178
Integra Telecom Holdings, Inc		telecommunication services		first lien senior secured notes(4)(5)(6)(9)(10) (5.25%, due February 22, 2019)		7,423,900		7,377,750		7,513,581
				second lien senior secured notes(4)(5) (9.75%, due February 22, 2020)		7,000,000		7,000,000		7,187,250
Jackson Hewitt Tax Service, Inc.		consumer services		first lien senior secured notes(4)(5)(6)(9)(10) (10.00%, due October 17, 2017)		24,218,750		23,417,067		23,976,563
JHCI Holdings, Inc.		logistics		first lien senior secured notes(4)(5)(6)(10) (7.00%, due July 11, 2019)		8,791,364		8,759,354		8,778,177
Mercury Payment Systems, LLC		financial intermediaries		senior secured notes(4)(6)(9)(10) (5.50%, due July 01, 2017)		4,887,605		4,887,605		4,909,013
Merrill Communications, LLC		printing and publishing		first lien senior secured notes(4)(5)(6)(9)(10)(14) (7.25%, due March 08, 2018)		16,321,045		16,299,279		16,640,611
Mirion Technologies, Inc		utilities		senior secured notes(4)(5)(6)(9) (5.75%, due March 30, 2018)		2,439,635		2,402,608		2,436,585
Mmodal, Inc.		healthcare		first lien senior secured notes(4)(5)(6)(9)(10) (7.75%, due August 17, 2019)		9,541,573		9,441,549		8,253,461
NAB Holdings, LLC		financial intermediaries		first lien senior secured notes(4)(5)(6)(9)(10) (7.00%, due April 24, 2018)		9,805,000		9,793,660		9,854,025
National Vision, Inc.		retail		senior secured term B notes(4)(5)(6)(9)(10) (7.00%, due August 02, 2018)		5,191,111		5,144,171		5,204,089
New Breed Logistics		logistics		senior secured term B notes(4)(5)(6)(9)(10) (8.00%, due October 01, 2019)		11,678,003		11,674,611		11,692,601
Nextag, Inc.		retail		senior secured notes(4)(5)(6)(7)(9)(10) (9.25%, due January 27, 2016)		10,012,180		9,417,380		5,506,699
Otter Products, LLC		chemicals and plastics		first lien senior secured notes(4)(5)(6)(9)(10) (5.25%, due April 30, 2020)		14,664,000		14,662,652		14,590,680
Packaging Coordinators, Inc.		packaging and containers		first lien senior secured notes(4)(5)(6)(10) (5.50%, due May 10, 2020)		4,987,500		4,964,326		4,987,500
Philips Plastics Corporation		healthcare		senior secured notes(4)(5)(6)(9) (4.75%, due February 12, 2017)		2,932,875		2,916,909		2,925,543
Presidio IS Corp.		business services		senior secured notes(4)(5)(6)(9)(10) (5.75%, due March 31, 2017)		9,875,000		9,850,057		9,883,196
RBS Holding Company		printing and publishing		second lien senior secured notes(3)(4)(5)(6)(9) (Cash 8.25%/1.25% PIK, due March 23, 2017)		22,686,300		11,090,554		16,697,117
Renfro Corporation		clothing		senior secured notes(4)(5)(6)(9)(10) (5.75%, due January 30, 2019)		4,631,667		4,658,084		4,625,877
Roundys Supermarkets, Inc.		grocery		term B senior secured notes(4)(5)(6)(10)(11) (5.75%, due February 13, 2019)		6,926,246		6,676,199		6,918,696
SCS Holdings I Inc. (Sirius Computer Solutions, Inc.)		electronics		first lien senior secured notes(4)(5)(6)(9) (7.00%, due December 07, 2018)		3,845,673		3,811,027		3,893,744
Securus Technologies, Inc.		telecommunication services		first lien senior secured notes(4)(5)(6)(9) (4.75%, due April 30, 2020)		3,990,000		3,953,241		3,946,349

 
 
See Accompanying Notes.

107

TICC CAPITAL CORP.
 
CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)
DECEMBER 31, 2013

COMPANY(1)	INDUSTRY		INVESTMENT		PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% of Net Assets
Senior Secured Notes – (continued)
				second lien senior secured notes(4)(5) (9.00%, due April 30, 2021)	$	6,400,000	$	6,369,803	$	6,340,032
Sedgwick Claims Management Services, Inc.		insurance		first lien senior secured notes(4)(6)(10) (4.25%, due June 12, 2018)		1,990,000		1,990,000		1,999,910
				second lien senior secured notes(4)(5)(10) (8.00%, due December 12, 2018)		1,500,000		1,493,075		1,524,375
Sesac Holdco II LLC		radio and television		first lien senior secured notes(4)(5)(6)(10) (5.00%, due February 08, 2019)		8,236,800		8,290,039		8,267,688
				second lien senior secured notes(4)(5)(10) (10.00%, due July 12, 2019)		2,000,000		1,972,970		2,040,000
Skillsoft Corporation		business services		senior secured notes(4)(5)(6)(10) (5.00%, due May 26, 2017)		2,547,640		2,560,457		2,563,563
Source Hov, LLC		business services		first lien senior secured notes(4)(6)(10) (5.25%, due April 30, 2018)		4,776,000		4,775,407		4,801,886
				second lien senior secured notes(4)(10) (8.75%, due April 30, 2019)		2,000,000		1,999,627		2,022,500
Sportsman's Warehouse Holdings		retail		first lien senior secured notes(4)(5)(6)(9)(10) (7.25%, due July 11, 2019)		14,962,500		14,819,558		15,037,313
Sterling Infosystems, Inc.		business services		senior secured notes(4)(5)(6)(9) (5.76%, due February 01, 2018)		2,557,588		2,517,998		2,554,391
STG-Fairway Acquistions		business services		first lien senior secured notes(4)(5)(6)(9)(10) (6.25%, due February 28, 2019)		9,304,704		9,221,643		9,287,304
Stratus Technologies, Inc.		computer hardware		first lien high yield notes(5)(9) (12.00%, due March 29, 2015)		9,282,000		9,010,471		9,282,000
Sumtotal Systems, Inc.		business services		first lien senior secured notes(4)(5)(6)(9) (6.28%, due November 16, 2018)		4,679,730		4,639,832		4,609,534
				second lien senior secured notes(4)(5)(10) (10.25%, due May 16, 2019)		11,250,000		11,050,805		11,053,125
Technimark LLC		chemicals and plastics		senior secured notes(4)(5)(6)(9)(10) (5.50%, due April 17, 2019)		14,109,186		14,063,239		14,038,640
Teleguam Holdings LLC		telecommunication services		second lien senior secured notes(4)(5)(9)(10) (8.75%, due June 10, 2019)		10,000,000		9,923,000		10,000,000
The TOPPS Company, Inc.		leisure goods		first lien senior secured notes(4)(5)(9)(10) (7.25%, due October 02, 2018)		10,000,000		9,903,295		9,975,000
Travelclick Inc		travel		first lien senior secured notes(4)(5)(6)(9)(10) (5.75%, due March 16, 2016)		10,502,287		10,462,173		10,554,798
Travel Leaders Group, LLC		travel		first lien senior secured notes(4)(5)(6)(9)(10) (7.00%, due December 05, 2018)		16,000,000		15,683,843		15,720,000
Unitek Global Services, Inc.		IT consulting		tranche B term loan(3)(4)(5)(6)(9)(10) (Cash 11.00%/PIK 4.00% due April 15, 2018)		11,601,578		11,386,946		11,485,562
Vision Solutions		software		first lien senior secured notes(4)(5)(9)(10) (6.00%, due July 23, 2016)		6,000,000		5,940,000		6,012,000
				second lien senior secured notes(4)(5)(9)(10) (9.50%, due July 23, 2016)		10,000,000		9,936,507		10,050,000
Wall Street Systems		financial intermediaries		first lien senior secured notes(4)(5)(6)(9)(10) (5.75%, due October 25, 2019)		4,950,000		4,885,123		4,971,681
				second lien senior secured notes(4)(5) (9.25%, due October 23, 2020)		10,000,000		9,821,617		10,075,000
Waupaca Foundry, Inc.		IT consulting		senior secured notes(4)(5)(6)(9)(10) (4.50%, due June 29, 2017)		14,902,773		14,843,578		14,902,773
Total Senior Secured Notes							$	639,198,848	$	644,710,393		122.5	%

 
 
See Accompanying Notes.

108

TICC CAPITAL CORP.
 
CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)
DECEMBER 31, 2013

COMPANY(1)	INDUSTRY		INVESTMENT		PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% of Net Assets
Senior Unsecured Notes
Merrill Communications, LLC		printing and publishing		senior unsecured PIK notes(3)(5)(9)(14) (0.00% Cash/10.00% PIK, due March 8, 2023)	$	5,863,406	$	3,068,694	$	5,793,045
Total Senior Unsecured Notes							$	3,068,694	$	5,793,045		1.1	%
Collateralized Loan Obligation – Debt Investments
ACA CLO 2007-1, Ltd.		structured finance		CLO secured class E notes(4)(5)(11)(12) (4.99%, due June 15, 2022)		1,957,994		1,771,170		1,817,997
AMMC CLO XII, Ltd.		structured finance		CLO secured class F notes(4)(5)(11)(12) (5.29%, due May 10, 2025)		4,500,000		3,900,232		3,881,250
Carlyle Global Market Strategies CLO 2013-2, Ltd.		structured finance		CLO secured class F notes(4)(5)(11)(12) (5.65%, due April 18, 2025)		6,000,000		5,134,093		5,344,800
Catamaran CLO 2012-1 Ltd.		structured finance		CLO secured class F notes(4)(5)(11)(12) (6.50%, due December 20, 2023)		6,000,000		5,075,724		5,585,400
Emporia Preferred Funding III, Ltd.		structured finance		CLO secured Class E notes(4)(5)(11)(12) (3.94%, due April 23, 2021)		10,991,000		8,084,311		9,562,170
Telos CLO 2013-3, Ltd.		structured finance		CLO secured class F notes(4)(5)(11)(12) (5.74%, due January 17, 2024)		3,000,000		2,725,546		2,662,200
Total Collateralized Loan Obligation – Debt Investments							$	26,691,076	$	28,853,817		5.5	%
Collateralized Loan Obligation –  Equity Investments
ACA CLO 2007-1, Ltd.		structured finance		CLO subordinated notes(11)(12)		—		10,583,500		8,174,000
ACAS CLO 2012-1, Ltd.		structured finance		CLO subordinated notes(11)(12)		—		4,050,000		4,200,000
AMMC CLO XII, Ltd.		structured finance		CLO subordinated notes(11)(12)		—		9,949,500		10,466,357
Apidos CLO XIV		structured finance		CLO subordinated notes(11)(12)		—		3,569,719		3,863,250
Ares XXV CLO Ltd.		structured finance		CLO subordinated notes(11)(12)		—		12,620,875		12,400,000
Ares XXVI CLO Ltd.		structured finance		CLO subordinated notes(11)(12)		—		15,234,375		16,312,500
Benefit Street Partners CLO II, Ltd.		structured finance		CLO subordinated notes(11)(12)		—		12,870,000		15,860,000
Canaras Summit CLO Ltd.		structured finance		CLO income notes(11)(12)		—		4,355,000		3,780,000
Carlyle Global Market Strategies CLO 2013-2, Ltd.		structured finance		CLO subordinated notes(11)(12)		—		7,955,000		9,250,000
Catamaran CLO 2012-1 Ltd.		structured finance		CLO subordinated notes(11)(12)		—		20,075,000		17,380,000
Cedar Funding II CLO, Ltd.		structured finance		CLO subordinated notes(11)(12)		—		23,981,250		23,862,500
Columbus Park CDO Ltd.		structured finance		CLO subordinated notes(11)(12)		—		8,150,000		7,800,000
Galaxy XV CLO, Ltd.		structured finance		CLO income notes(11)(12)		—		7,012,500		7,095,000
Gale Force 4 CLO, Ltd.		structured finance		CLO income notes(11)(12)		—		1,965,000		2,010,000
Halcyon Loan Advisors Funding 2012-2 Ltd.		structured finance		CLO subordinated notes(11)(12)		—		6,750,000		7,425,000
HarbourView CLO 2006-1		structured finance		CLO subordinated notes(11)(12)		—		3,639,870		3,757,000
Ivy Hill Middle Market Credit Fund VII, Ltd.		structured finance		CLO subordinated notes(11)(12)		—		13,272,000		13,272,000
Jersey Street CLO, Ltd.		structured finance		CLO income notes(11)(12)		—		7,535,613		6,598,800
Lightpoint CLO VIII, Ltd.		structured finance		CLO subordinated notes(11)(12)		—		4,612,500		3,300,000
Marea CLO, Ltd.		structured finance		CLO income notes(11)(12)		—		10,934,215		10,506,620
North End CLO, Ltd.		structured finance		CLO income notes(11)(12)		—		4,615,234		4,887,500
Octagon Investment Partners XI, Ltd.		structured finance		CLO income notes(11)(12)		—		2,434,163		2,403,225
CS Advisors CLO I Ltd.		structured finance		CLO subordinated notes(7)(11)(12)		—		4,812,135		2,828,000
Shackleton 2013-III CLO, Ltd.		structured finance		CLO subordinated notes(11)(12)		—		10,798,425		10,716,619
Sheridan Square CLO, Ltd.		structured finance		CLO subordinated notes(11)(12)		—		4,136,511		4,094,302
Stone Tower CLO VII Ltd.		structured finance		CLO subordinated notes(11)(12)		—		12,739,000		8,775,000
Telos CLO 2013-3, Ltd.		structured finance		CLO subordinated notes(11)(12)		—		11,558,333		12,286,666
Other CLO equity related investments		structured finance		CLO other(13)		—		—		3,862,285
Total Collateralized Loan Obligation – Equity Investments							$	240,209,718	$	237,166,624		45.1	%

 
 
See Accompanying Notes.

109

TICC CAPITAL CORP.
 
CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)
DECEMBER 31, 2013

COMPANY(1)	INDUSTRY		INVESTMENT		PRINCIPAL AMOUNT/ SHARES		COST		FAIR VALUE(2)		% of Net Assets
Common Stock
Algorithmic Implementations, Inc. (d/b/a “Ai Squared”)		software		common stock		100	$	3,000,000	$	2,150,000
Integra Telecom Holdings, Inc.		telecommunication services		common stock(7)		775,846		1,712,397		4,412,302
Merrill Communications, LLC		printing and publishing		common equity(7)		728,442		3,425,244		7,197,009
Stratus Technologies, Inc.		computer hardware		common equity(7)		223,210		379,810		4,464
Total Common Stock Investments							$	8,517,451	$	13,763,775		2.6	%
Preferred Equity
Stratus Technologies, Inc.		computer hardware		preferred equity(7)		50,796		217,284		381,986
Total Preferred Equity Investments							$	217,284	$	381,986		0.1	%
Warrants
Fusionstorm, Inc.		IT value-added reseller		warrants to purchase common stock(7)		540,371		725,000		500,000
Unitek Global Services, Inc.		IT consulting		warrants to purchase common stock(7)		309,080		—		427,105
Total Warrants							$	725,000	$	927,105		0.2	%
Total Investments							$	918,628,071	$	931,596,744		177.0	%

(1) Other than Algorithmic Implementation, Inc. (d/b/a Ai Squared), which we may be deemed to control, we do not “control” and are not an “affiliate” of any of our portfolio companies, each as defined in the Investment Company Act of 1940 (the “1940 Act”). In general, under the 1940 Act, we would be presumed to “control” a portfolio company if we owned 25% or more of its voting securities and would be an “affiliate” of a portfolio company if we owned 5% or more of its voting securities.

(2) Fair value is determined in good faith by the Board of Directors of the Company.

(3) Portfolio includes approximately $40.2 million of principal amount of debt investments which contain a PIK provision.

(4) Notes bear interest at variable rates.

(5) Cost value reflects accretion of original issue discount or market discount.

(6) Cost value reflects repayment of principal.

(7) Non-income producing at the relevant period end.

(8) Aggregate gross unrealized appreciation for federal income tax purposes is $37,039,932; aggregate gross unrealized depreciation for federal income tax purposes is $44,355,411. Net unrealized depreciation is $7,315,479 based upon a tax cost basis of $938,912,223.

(9) All or a portion of this investment represents TICC CLO LLC collateral.

(10) All or a portion of this investment represents TICC CLO 2012-1 LLC collateral.

(11) Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended. Qualifying assets must represent at least 70% of the Company's total assets at the time of acquisition of any additional non-qualifying assets.

(12) Investment not domiciled in the United States.

(13) Fair value represents discounted cash flows associated with fees from CLO equity investments.

(14) Aggregate investments represent greater than 5% of net assets.

 
 
See Accompanying Notes.

110

TICC CAPITAL CORP.
 
CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
INVESTMENT INCOME
From non-affiliated/non-control investments:
Interest income – debt investments	$	50,855,738		$	52,133,176		$	38,597,973
Distributions from securitization vehicles and equity investments		59,516,739			47,241,423			25,755,438
Commitment, amendment and other fee income		5,451,167			4,278,203			5,247,571
Total investment income from non-affiliated/non-control investments		115,823,644			103,652,802			69,600,982
From affiliated investments:
Interest income – debt investments		116,738			—			—
Total investment income from affiliated investments		116,738			—			—
From control investments:
Interest income – debt investments		1,384,358			1,439,341			1,511,897
Distributions from equity investments		—			—			62,041
Total investment income from control investments		1,384,358			1,439,341			1,573,938
Total investment income		117,324,740			105,092,143			71,174,920
EXPENSES
Compensation expense		1,860,683			1,647,971			1,183,056
Investment advisory fees		21,150,190			19,096,229			11,222,713
Professional fees		2,149,699			1,996,290			1,873,892
Interest expense and other debt financing expenses		22,907,942			18,960,677			7,262,714
Insurance		68,638			68,638			68,826
Directors’ Fees		316,500			322,501			261,000
Transfer agent and custodian fees		284,212			229,124			128,692
General and administrative		1,398,064			1,589,758			1,027,606
Total expenses before incentive fees		50,135,928			43,911,188			23,028,499
Net investment income incentive fees		5,603,821			6,580,705			5,460,006
Capital gains incentive fees		(3,872,853	)		(1,192,382	)		5,509,061
Total incentive fees		1,730,968			5,388,323			10,969,067
Total expenses		51,866,896			49,299,511			33,997,566
Net investment income		65,457,844			55,792,632			37,177,354
Net change in unrealized appreciation on investments
Non-Affiliate/non-control investments		(49,550,856	)		(3,199,673	)		14,340,762
Affiliated investments		1,227,261			—			—
Control investments		(990,000	)		(43,821	)		(71,808	)
Total net change in unrealized appreciation on investments		(49,313,595	)		(3,243,494	)		14,268,954
Net realized (losses) gains on investments
Non-Affiliated/non-control investments		(14,788,183	)		6,395,596			16,876,880

 
 
See Accompanying Notes.

111

TICC CAPITAL CORP.
 
CONSOLIDATED STATEMENTS OF OPERATIONS – (continued)

	Year Ended December 31, 2014			Year Ended December 31, 2013		Year Ended December 31, 2012
Affiliated investments		(4,704,466	)		—		—
Total net realized (losses) gains on investments.		(19,492,649	)		6,395,596		16,876,880
Net (decrease) increase in net assets resulting from operations.	$	(3,348,400	)	$	58,944,734	$	68,323,188
Net increase in net assets resulting from net investment income per common share:
Basic	$	1.11		$	1.09	$	0.98
Diluted	$	1.06		$	1.03	$	0.96
Net (decrease) increase in net assets resulting from operations per common share:
Basic	$	(0.06	)	$	1.15	$	1.80
Diluted	$	(0.06	)	$	1.09	$	1.73
Weighted average shares of common stock outstanding:
Basic		58,822,732			51,073,758		37,978,693
Diluted		68,855,884			61,106,910		40,575,776

 
 
See Accompanying Notes.

112

TICC CAPITAL CORP.
 
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
Increase in net assets from operations:
Net investment income	$	65,457,844		$	55,792,632		$	37,177,354
Net realized (losses) gains on investments		(19,492,649	)		6,395,596			16,876,880
Net change in unrealized appreciation on investments		(49,313,595	)		(3,243,494	)		14,268,954
Net (decrease) increase in net assets resulting from operations		(3,348,400	)		58,944,734			68,323,188
Distributions to shareholders:
Distributions from net investment income		(60,189,322	)		(61,353,645	)		(44,319,394	)
Tax return of capital distributions		(9,697,552	)		—			—
Total distributions to shareholders		(69,886,874	)		(61,353,645	)		(44,319,394	)
Capital share transactions:
Issuance of common stock (net of offering costs of $2,033,950, $4,603,745 and $3,545,895, respectively)		66,411,050			115,879,644			78,426,107
Repurchase of common stock		(1,172,574	)		—			—
Reinvestment of dividends		2,567,433			3,169,164			2,070,637
Net increase in net assets from capital share transactions		67,805,909			119,048,808			80,496,744
Total (decrease) increase in net assets		(5,429,365	)		116,639,897			104,500,538
Net assets at beginning of period		526,242,426			409,602,529			305,101,991
Net assets at end of period (including over distributed net investment income of $7,586,816, $3,157,786 and $4,274,144, respectively)	$	520,813,061		$	526,242,426		$	409,602,529
Capital share activity:
Shares sold		6,750,000			11,692,173			8,337,500
Shares repurchased		(154,600	)		—			—
Shares issued from reinvestment of dividends		307,624			337,286			215,358
Net increase in capital share activity		6,903,024			12,029,459			8,552,858

 
 
See Accompanying Notes.

113

TICC CAPITAL CORP.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net (decrease) increase in net assets resulting from operations	$	(3,348,400	)	$	58,944,734		$	68,323,188
Adjustments to reconcile net increase in net assets resulting from operations to net cash used by operating activities:
Accretion of discounts on investments		(2,748,786	)		(3,719,841	)		(5,832,504	)
Accretion of discount on notes payable and deferred debt issuance costs		3,907,108			1,834,428			857,372
Increase in investments due to PIK		(1,245,247	)		(2,159,868	)		(4,977,809	)
Purchases of investments		(548,236,541	)		(570,495,775	)		(507,970,743	)
Repayments of principal and reductions to investment cost value		307,774,653			203,949,356			191,200,639
Proceeds from the sale of investments		127,437,411			120,043,085			67,783,437
Net realized losses (gains) on investments		19,492,649			(6,395,596	)		(16,876,880	)
Net change in unrealized appreciation on investments		49,313,595			3,243,494			(14,268,954	)
Increase in interest and distributions receivable		(308,317	)		(5,147,850	)		(4,148,240	)
(Increase) decrease in other assets		(202,123	)		93,666			56,697
(Decrease) increase in accrued interest payable		(329	)		(1,637,483	)		3,158,263
(Decrease) increase in investment advisory fee payable		(960,994	)		2,213,572			2,035,109
(Decrease) increase in accrued capital gains incentive fee		(3,872,853	)		(2,744,957	)		5,509,061
(Decrease) increase in accrued expenses		(8,769	)		334,925			(570,621	)
Net cash used by operating activities		(53,006,943	)		(201,644,110	)		(215,721,985	)
CASH FLOWS FROM INVESTING ACTIVITIES
Change in restricted cash		11,851,998			(11,187,740	)		1,943,190
Net cash provided (used) by investing activities		11,851,998			(11,187,740	)		1,943,190
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of notes payable – TICC CLO 2012-1 LLC
(net of discount of $0, $253,875 and $4,695,162, respectively)		—			119,746,125			115,304,838
Proceeds from the credit facility		150,000,000			—			—
Proceeds from the issuance of convertible senior notes		—			—			115,000,000
Deferred debt issuance costs		(1,020,069	)		(1,069,313	)		(5,805,237	)
Proceeds from the issuance of common stock		68,445,000			120,483,390			81,972,002
Extinguishment of notes payable – TICC CLO LLC		(100,171,772	)		—			—
Offering expenses from the issuance of common stock		(2,033,950	)		(4,603,746	)		(3,545,895	)

 
 
See Accompanying Notes.

114

TICC CAPITAL CORP.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS – (continued)

	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
Distributions paid (net of stock issued under dividend reinvestment plan of
$2,567,433, $3,169,164 and $2,070,637, respectively)		(67,319,441	)		(58,184,481	)		(42,248,757	)
Repurchase of common stock		(1,172,574	)		—			—
Net cash provided by financing activities		46,727,194			176,371,975			260,676,951
Net increase (decrease) in cash and cash equivalents		5,572,249			(36,459,875	)		46,898,156
Cash and cash equivalents, beginning of period		14,933,074			51,392,949			4,494,793
Cash and cash equivalents, end of period	$	20,505,323		$	14,933,074		$	51,392,949
NON-CASH FINANCING ACTIVITIES
Value of shares issued in connection with dividend reinvestment plan	$	2,567,433		$	3,169,164		$	2,070,637
SUPPLEMENTAL DISCLOSURES
Securities sold not settled	$	—		$	—		$	1,516,875
Securities purchased not settled	$	11,343,179		$	6,994,852		$	—
Cash paid for interest	$	17,922,935		$	18,763,732		$	3,368,622

 
 
See Accompanying Notes.

115

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 1. ORGANIZATION

TICC Capital Corp. (“TICC” or the “Company”) was incorporated under the General Corporation Laws of the State of Maryland on July 21, 2003 and is a non-diversified, closed-end investment company. TICC has elected to be treated as a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, TICC has elected to be treated for tax purposes as a regulated investment company (“RIC”), under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company’s investment objective is to maximize its total return, by investing primarily in corporate debt securities.

TICC’s investment activities are managed by TICC Management, LLC, (“TICC Management”), a registered investment adviser under the Investment Advisers Act of 1940, as amended. BDC Partners, LLC (“BDC Partners”) is the managing member of TICC Management and serves as the administrator of TICC.

The Company's operations include the activities of its subsidiaries, TICC CLO LLC, TICC CLO 2012-1 LLC and TICC Funding, LLC. These subsidiaries were formed for the purpose of enabling the Company to obtain debt financing and are operated solely for the investment activities of the Company, and the Company has substantial equity at risk. TICC Funding, LLC was formed on September 17, 2014, for the purpose of entering into a credit and security agreement with Citibank, N.A., to replace the financing previously obtained through TICC CLO LLC. TICC CLO LLC effectively ceased operations on October 27, 2014, and the notes payable by TICC CLO LLC were repaid with borrowings under the debt facility of TICC Funding, LLC. As of year-end, TICC CLO LLC holds a few securities which are being transferred to the Company. See Note 9 Borrowings for additional information on the Company's subsidiaries and their borrowings.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Holdings, and its indirect subsidiary, TICC CLO LLC, TICC CLO 2012-1 LLC, and TICC Funding LLC. All inter-company accounts and transaction have been eliminated in consolidation.

USE OF ESTIMATES

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America that require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates.

In the normal course of business, the Company may enter into contracts that contain a variety of representations and provide indemnifications. The Company’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Company that have not yet occurred. However, based upon experience, the Company expects the risk of loss to be remote.

CONSOLIDATION

As provided under Regulation S-X and ASC Topic 946 — Financial Services — Investment Companies, the Company will generally not consolidate its investment in a company other than a wholly-owned investment company or a controlled operating company whose business consists of providing services to the Company. TICC CLO LLC, TICC CLO 2012-1 LLC, and TICC Funding, LLC would be considered investment companies but for the exceptions under Sections 3(c)(1) and 3(c)(7) under the 1940 Act, and were established solely for the purpose of allowing the Company to borrow funds for the purpose of making investments. The Company owns all of the equity in these entities and controls the decision making power that drives their economic performance. Accordingly, the Company consolidated the results of the Company’s wholly-owned subsidiaries in its financial statements.

116

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Cash and cash equivalents consist of demand deposits and highly liquid investments with original maturities of three months or less. Cash and cash equivalents are carried at cost or amortized cost which approximates fair value. At December 31, 2014 and 2013, cash and cash equivalents consisted solely of demand deposits maintained at well-capitalized financial institutions.

Restricted cash represents the cash held by the trustees of the Company's CLO and special purpose vehicle subsidiaries. These amounts are held by the trustee for payment of interest expense and operating expenses of the entity, principal repayments on borrowings, or new investments, based upon the terms of the respective indenture, and are not available for general corporate purposes.

INVESTMENT VALUATION

The Company fair values its investment portfolio in accordance with the provisions of ASC 820,Fair Value Measurement and Disclosure. The most significant estimates made in the preparation of TICC’s consolidated financial statements are the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. TICC believes that there is no single definitive method for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments TICC makes.

ASC 820-10 clarified the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820-10 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities in markets that are not active; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. TICC considers the attributes of current market conditions on an on-going basis and has determined that due to the general illiquidity of the market for its investment portfolio, whereby little or no market data exists, almost all of TICC’s investments are based upon “Level 3” inputs as of December 31, 2014.

TICC’s Board of Directors determines the value of its investment portfolio each quarter. In connection with that determination, members of TICC Management’s portfolio management team prepare a quarterly analysis of each portfolio investment using the most recent portfolio company financial statements, forecasts and other relevant financial and operational information. Since March 2004, TICC has engaged third-party valuation firms to provide assistance in valuing certain of its syndicated loans and bilateral investments, including related equity investments, although TICC’s Board of Directors ultimately determines the appropriate valuation of each such investment. Changes in fair value, as described above, are recorded in the statement of operations as net change in unrealized appreciation or depreciation.

Syndicated Loans

In accordance with ASC 820-10-35, TICC’s valuation procedures specifically provide for the review of indicative quotes supplied by the large agent banks that make a market for each security. However, the marketplace from which TICC obtains indicative bid quotes for purposes of determining the fair value of its syndicated loan investments has shown attributes of illiquidity as described by ASC-820-10-35. Due to limited market liquidity in the syndicated loan market, TICC believes that the non-binding indicative bids received from agent banks for certain syndicated investments that TICC owns may not be determinative of their fair value and therefore alternative valuation procedures may need to be undertaken. As a result, TICC has

117

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

engaged third-party valuation firms to provide assistance in valuing certain syndicated investments that TICC owns. In addition, TICC Management prepares an analysis of each syndicated loan, financial summary, covenant compliance review, recent trading activity in the security, if known, and other business developments related to the portfolio company. All available information, including non-binding indicative bids which may not be determinative of fair value, is presented to the Valuation Committee to consider in its determination of fair value. In some instances, there may be limited trading activity in a security even though the market for the security is considered not active. In such cases the Valuation Committee will consider the number of trades, the size and timing of each trade, and other circumstances around such trades, to the extent such information is available, in its determination of fair value. The Valuation Committee will evaluate the impact of such additional information, and factor it into its consideration of the fair value that is indicated by the analysis provided by third-party valuation firms, if any.

Collateralized Loan Obligations—Debt and Equity

During the past several years, TICC has acquired a number of debt and equity positions in collateralized loan obligation (“CLO”) investment vehicles and more recently CLO warehouse investments. These investments are special purpose financing vehicles. In valuing such investments, TICC considers the operating metrics of the specific investment vehicle, including compliance with collateralization tests, defaulted and restructured securities, and payment defaults, if any. In addition, TICC considers the indicative prices provided by a recognized industry pricing service as a primary source, and the implied yield of such marks, supplemented by actual trades executed in the market at or around period-end, as well as the indicative prices provided by the broker who arranges transactions in such investment vehicles. TICC also considers those instances in which the record date for an equity distribution payment falls on the last day of the period, and the likelihood that a prospective purchaser would require a downward adjustment to the indicative price representing substantially all of the pending distribution. Additional factors include any available information on other relevant transactions including firm bids and offers in the market and information resulting from bids-wanted-in-competition. TICC Management or the Valuation Committee may request an additional analysis by a third-party firm to assist in the valuation process of CLO investment vehicles. All information is presented to TICC’s Board of Directors for its determination of fair value of these investments.

Bilateral Investments (Including Equity)

Bilateral investments for which market quotations are readily available are valued by an independent pricing agent or market maker. If such market quotations are not readily available, under the valuation procedures approved by TICC’s Board of Directors, upon the recommendation of the Valuation Committee, a third-party valuation firm will prepare valuations for each of TICC’s bilateral investments that, when combined with all other investments in the same portfolio company, (i) have a value as of the previous quarter of greater than or equal to 2.5% of its total assets as of the previous quarter, and (ii) have a value as of the current quarter of greater than or equal to 2.5% of its total assets as of the previous quarter, after taking into account any repayment of principal during the current quarter. In addition, in those instances where a third-party valuation is prepared for a portfolio investment which meets the parameters noted in (i) and (ii) above, the frequency of those third-party valuations is based upon the grade assigned to each such security under its credit grading system as follows: Grade 1, at least annually; Grade 2, at least semi-annually; Grades 3, 4, and 5, at least quarterly. Bilateral investments which do not meet the parameters in (i) and (ii) above are not required to have a third-party valuation and, in those instances, a valuation analysis will be prepared by TICC Management. TICC Management also retains the authority to seek, on TICC’s behalf, additional third party valuations with respect to both TICC’s bilateral portfolio securities and TICC’s syndicated loan investments. TICC’s Board of Directors retains ultimate authority as to the third-party review cycle as well as the appropriate valuation of each investment.

118

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

INVESTMENT INCOME:

Interest Income

Interest income is recorded on an accrual basis using the contractual rate applicable to each debt investment and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on securities purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortization of premiums, if any.

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 have been brought current through payment or due to restructuring such that the interest income is deemed to be collectible. As of December 31, 2014, the fair value of TICC’s non-accrual assets was approximately $6.7 million, which comprised 0.7% of the total fair value of its portfolio and the cost of TICC’s non-accrual assets was approximately $11.6 million, which comprised approximately 1.1% of the total cost of its portfolio. As of December 31, 2013, the fair value of TICC’s non-accrual assets was approximately $5.5 million, which comprised 0.6% of the total fair value of its portfolio and the cost of TICC’s non-accrual assets was approximately $9.4 million, which comprised approximately 1.0% of the total cost of its portfolio.

Payment-In-Kind

TICC has investments in its portfolio which contain a contractual payment-in-kind (“PIK”) provision. PIK interest computed at the contractual rate is accrued into income and added to the principal balance on the capitalization date. Upon capitalization, PIK is subject to the fair value estimates associated with their related investments. PIK investments on non-accrual status are restored to accrual status once it becomes probable that PIK will be realized. To maintain our status as a RIC, this income must be paid out to stockholders in the form of dividends, even though TICC has not collected any cash. Amounts necessary to pay these dividends may come from available cash or the liquidation of certain investments.

In addition, the Company earns income from the discount on debt securities it purchases, including original issue discount (“OID”) and market discount. Original issue discount and market discounts are capitalized and amortized into income using the interest method, as applicable.

Distributions from securitization vehicles and equity investments

Distribution income on investments in equity tranches of CLO vehicles is recognized as income on the record date for each distribution to the extent that such amounts are payable by the vehicle and are expected to be collected. The amount of each distribution is determined by the respective CLO trustee. Dividend income on equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

In the event the Company determines that a CLO vehicle has been impaired, subsequent distributions are recorded as a reduction of the cost basis. The Company will consider the value of its CLO equity investment to be impaired when, after the end of the CLO's reinvestment cycle, the fair value of the investment has declined significantly and the estimated value of the remaining collateral is insufficient to repay the equity tranche in full.

Other Income

Other income includes distributions from fee letters, closing or origination fees, and success fees associated with portfolio investments. Distributions from fee letters are an enhancement to the return on a

119

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

CLO equity investment and are based upon a percentage of the collateral manager's fees, and are recorded as other income when earned. Closing or origination fees, if any, are normally paid at closing of an investment, are fully earned and non-refundable, and generally are non-recurring. The Company may also earn success fees associated with its investments in certain securitization vehicles or “CLO warehouse facilities,” which are contingent upon a take-out of the warehouse by a permanent CLO structure; such fees are earned and recognized when the take-out is completed.

DEFERRED DEBT ISSUANCE COSTS

Deferred debt issuance costs consist of fees and expenses incurred in connection with the closing or amending of credit facilities and debt offerings, and are capitalized at the time of payment. These costs are amortized using the straight line method over the terms of the respective credit facilities and debt securities. This amortization expense is included in interest expense in the Company's financial statements. Upon early termination of debt, or a credit facility, the remaining balance of unaccreted fees related to such debt is accelerated into interest expense.

EQUITY OFFERING COSTS

Equity offering costs consist of fees and expenses incurred in connection with the registration and public offer and sale of the Company's common stock, including legal, accounting and printing fees. These costs are deferred at the time of incurrence and are subsequently charged to capital when the offering takes place or as shares are issued. Deferred costs are periodically reviewed and expensed if the related registration is no longer active.

SHARE REPURCHASES

In connection with the Company's share repurchase program, the cost of shares repurchased is charged to capital on the settlement date.

OTHER ASSETS

Other assets consists of prepaid expenses associated primarily with insurance costs.

U.S. FEDERAL INCOME TAXES

The Company intends to operate so as to qualify to be taxed as a RIC under Subchapter M of the Code and, as such, to not be subject to U.S. federal income tax on the portion of its taxable income and gains distributed to stockholders. To qualify for RIC tax treatment, TICC is required to distribute at least 90% of its investment company taxable income, as defined by the Code.

Because U.S. federal income tax regulations differ from accounting principles generally accepted in the United States, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statement to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

For tax purposes, the cost basis of the portfolio investments at December 31, 2014 and December 31, 2013, was approximately $1,038,761,529 and $938,912,223, respectively.

CONCENTRATION OF CREDIT RISK

The Company places its cash and cash equivalents with financial institutions and, at times, cash held in checking accounts may exceed the Federal Deposit Insurance Corporation insured limit. In addition, the Company’s portfolio may be concentrated in a limited number of portfolio companies, which will subject the

120

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

Company to a risk of significant loss if any of these companies defaults on its obligations under any of its debt securities that the Company holds or if those sectors experience a market downturn.

NOTE 3. FAIR VALUE

The Company’s assets measured at fair value on a recurring basis at December 31, 2014 were as follows:

($ in millions)	Fair Value Measurements at Reporting Date Using
Assets	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Senior Secured Notes	$	0.0	$	39.3	$	657.7	$	697.0
Senior Unsecured Notes		0.0		0.0		6.4		6.4
CLO Debt		0.0		0.0		11.3		11.3
CLO Equity		0.0		0.0		259.8		259.8
Equity		0.0		0.0		9.7		9.7
Total	$	0.0	$	39.3	$	944.9	$	984.2

The Company’s assets measured at fair value on a recurring basis at December 31, 2013 were as follows:

($ in millions)	Fair Value Measurements at Reporting Date Using
Assets	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Senior Secured Notes	$	0.0	$	16.9	$	627.8	$	644.7
Senior Unsecured Notes		0.0		0.0		5.8		5.8
CLO Debt		0.0		0.0		28.9		28.9
CLO Equity		0.0		0.0		237.1		237.1
Equity		0.0		0.0		15.1		15.1
Total	$	0.0	$	16.9	$	914.7	$	931.6

121

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 3. FAIR VALUE – (continued)

Significant Unobservable Inputs for Level 3 Investments

The following tables provide quantitative information about the Company’s Level 3 fair value measurements as of December 31, 2014 and 2013, respectively. The Company’s valuation policy, as described above, establishes parameters for the sources and types of valuation analysis, as well as the methodologies and inputs that the Company uses in determining fair value. If the Valuation Committee or TICC Management determines that additional techniques, sources or inputs are appropriate or necessary in a given situation, such additional work will be undertaken. The tables, therefore, are not all-inclusive, but provides information on the significant Level 3 inputs that are pertinent to the Company’s fair value measurements. The weighted average calculations in the table below are based on principal balances for all debt related calculations and CLO equity.

($ in millions)	Quantitative Information about Level 3 Fair Value Measurements
Assets	Fair Value as of December 31, 2014		Valuation Techniques/ Methodologies			Unobservable Input			Range/Weighted Average(8)
Corporate debt investments
syndicated	$	563.1		Market quotes			NBIB	(1)		70.0% – 100.3%/98.2	%
		39.6		Yield Analysis			NBIB	(1)		96.2% – 99.4%/97.7	%
							Discount Margin			4.10% – 7.90%/ncm	(4)
		19.0		Recent transactions			Actual trade/payoffs	(6)		98.1% – 100.0%/99.1	%
		28.6		Market quotes/			NBIB	(1)		52.2% – 100.0%/68.1	%
				Enterprise value			EBITDA multiples	(2)		4.25x – 6.75x/ncm	(4)
bilateral		13.8		Enterprise value	(7)		EBITDA	(2)	$	2.5/ncm	(4)
							Market multiples	(2)		5.0x – 6.0x/ncm	(4)
							Discount rates (3)			N/A
CLO debt		11.3		Market quotes			NBIB (1)			82.3%  –  85.4%/84.0	%
CLO equity		244.6		Market quotes			NBIB (1)			20.5% – 97.1%/77.2	%
		10.8		Recent transactions			Actual trade	(6)		80.0% – 88.3%/83.2	%
		4.4		Discounted cash flow	(5)		Discount rates	(3)(5)		10.2% – 13.6%/ncm	(4)
Common stock		9.7		Enterprise value(7)/			EBITDA	(2)	$	2.5 – $170.8/ncm	(4)
				Discounted cash	(5)		Market multiples	(2)		4.3x – 9.3x/ncm	(4)
				flow			Discount rates	(3)		20.0%/ncm (4)
Total Fair Value for Level 3 Investments	$	944.9

(1) The Company generally uses prices provided by an independent pricing service, or broker or agent bank non-binding indicative bid prices (NBIB) on or near the valuation date as the primary basis for the fair value determinations for syndicated notes, and CLO debt and equity investments, which may be adjusted for pending equity distributions as of valuation date. These bid prices are non-binding, and may not be determinative of fair value. Each bid price is evaluated by the Valuation Committee in conjunction with additional information compiled by TICC Management, including financial performance, recent business developments, and, in the case of CLO debt and equity investments, performance and covenant compliance information as provided by the independent trustee.

(2) EBITDA, or earnings before interest expense, taxes, depreciation and amortization, is an unobservable input which is generally based on most recently available twelve month financial statements provided by the portfolio company. Market multiples, also an unobservable input, represent an estimation of where market participants might value an enterprise based upon information available for comparable companies in the market.

(3) Discount rate represents the rate at which future cash flows are discounted to calculate a present value, reflecting market assumptions for risk.

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TICC CAPITAL CORP.
 
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DECEMBER 31, 2014

NOTE 3. FAIR VALUE – (continued)

(4) The calculation of weighted average for a range of values, for multiple investments within a given asset category, is not considered to provide a meaningful representation (“ncm”).

(5) The Company will calculate the fair value of certain CLO equity investments based upon the net present value of expected contractual payment streams discounted using estimated market yields for the equity tranche of the respective CLO vehicle. TICC will also consider those investments in which the record date for an equity distribution payment falls on the last day of the period, and the likelihood that a prospective purchaser would require an adjustment to the transaction price representing substantially all of the pending distribution.

(6) Prices provided by independent pricing services are evaluated in conjunction with actual trades and payoffs and, in certain cases, the value represented by actual trades or payoffs may be more representative of fair value as determined by the Valuation Committee.

(7) For the our bilateral debt investments and equity investments, third-party valuation firms evaluate the financial and operational information of the portfolio companies that we provide to them, as well as independent market and industry information that they consider appropriate in forming an opinion as to the fair value of our securities. In those instances where the carrying value and/or internal credit rating of the investment does not require the use of a third-party valuation firm, a valuation is prepared by TICC Management, which may include liquidation analysis or which may utilize a subsequent transaction to provide an indication of fair value.

(8) Weighted averages are calculated based on fair value of investments.

Significant increases or decreases in any of the unobservable inputs in isolation may result in a significantly lower or higher fair value measurement.

($ in millions)	Quantitative Information about Level 3 Fair Value Measurements
Assets	Fair Value as of December 31, 2013		Valuation Techniques/ Methodologies			Unobservable Input		Range/Weighted Average(7)
Corporate debt investments syndicated	$	619.7		Market quotes			NBIB(1)		55.0% – 102.9%/98.0	%
bilateral		13.9		Enterprise value(2)			EBITDA(3)	$	3.0/ncm(5)
							Market multiples(3)		5.50 – 6.50x/ncm(5)
CLO debt		28.9		Market quotes			NBIB(1)		86.3% – 93.1%/88.9%
CLO equity		237.2		Market quotes/			NBIB(1)		28.0% – 122.0%/83.3	%
				net present value(6)
Other investments		15.0		Enterprise value	(2)		EBITDA(3)	$	2.9 – $184.7/ncm(5)
							Market multiples(3)		3.9 – 8.6x/ncm(5)
							Discount rates(4)		20% – 35.0%/ncm(5)
Total Fair Value for Level 3 Investments	$	914.7

(1) The Company generally uses prices provided by an independent pricing service, or broker or agent bank non-binding indicative bid prices (NBIB) on or near the valuation date as the primary basis for the fair value determinations for syndicated notes, and CLO debt and equity investments. These bid prices are non-binding, and may not be determinative of fair value. Each bid price is evaluated by the Valuation Committee in conjunction with additional information compiled by TICC Management, including financial performance, recent business developments, and, in the case of CLO debt and equity investments, performance and covenant compliance information as provided by the independent trustee.

(2) For the Company’s bilateral debt investments and equity investments, third-party valuation firms evaluate the financial and operational information of the portfolio companies that the Company provides to them, as well as independent market and industry information that they consider appropriate in forming an opinion as to the fair value of the Company’s securities. In those instances where the carrying value and/

123

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 3. FAIR VALUE – (continued)

or internal credit rating of the investment does not require the use of a third-party valuation firm, a valuation is prepared by TICC Management, which may include liquidation analysis or which may utilize a subsequent transaction to provide an indication of fair value.

(3) EBITDA, or earnings before interest expense, taxes, depreciation and amortization, is an unobservable input which is generally based on most recently available twelve month financial statements provided by the portfolio company. Market multiples, also an unobservable input, represent an estimation of where market participants might value an enterprise based upon information available for comparable companies in the market.

(4) Discount rate represents the rate at which future cash flows are discounted to calculate a present value, reflecting market assumptions for risk.

(5) The calculation of weighted average for a range of values, for multiple investments within a given asset category, is not considered to provide a meaningful representation (“ncm”).

(6) The Company will calculate the fair value of certain CLO equity investments based upon the net present value of expected contractual payment streams discounted using estimated market yields for the equity tranche of the respective CLO vehicle.

(7) Weighted averages are calculated based on fair value of investments.

Significant increases or decreases in any of the unobservable inputs in isolation may result in a significantly lower or higher fair value measurement.

Financial Instruments Disclosed, But Not Carried, At Fair Value

The following table presents the carrying value and fair value of the Company’s financial liabilities disclosed, but not carried, at fair value as of December 31, 2014 and the level of each financial liability within the fair value hierarchy:

($ in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
TICC Funding LLC revolving credit facility(1)	$	150,000	$	150,000	$	—	$	—	$	150,000
TICC CLO 2012-1 LLC Class A-1 Notes(2)(3)		174,271		176,000		—		—		176,000
TICC CLO 2012-1 LLC Class B-1 Notes(2)(3)		19,524		20,000		—		—		20,000
TICC CLO 2012-1 LLC Class C-1 Notes(2)(3)		22,194		23,000		—		—		23,000
TICC CLO 2012-1 LLC Class D-1 Notes(2)(3)		20,087		21,011		—		—		21,011
2017 Convertible Notes(3)		115,000		119,025						119,025
Total	$	501,076	$	509,036	$	—	$	—	$	509,036

(1) Fair value of the TICC LLC revolving credit facility is equal to the carrying amount of the Facility due to the variable interest rate and the short term maturity of the Facility.

(2) Carrying value is net of discount.

(3) Fair value is based upon the bid price provided by the placement agent at the measurement date.

124

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 3. FAIR VALUE – (continued)

A reconciliation of the fair value of investments for the year ending December 31, 2014, utilizing significant unobservable inputs, is as follows:

($ in millions)	Senior Secured Notes			Senior Unsecured Notes			CLO Debt			CLO Equity			Equity			Total
Balance at December 31, 2013	$	627.8		$	5.8		$	28.9		$	237.1		$	15.1		$	914.7
Realized (losses) gains included in earnings		(5.3	)		0.0			2.2			(15.4	)		(1.0	)		(19.5	)
Unrealized (depreciation) appreciation included in earnings (1)		(13.5	)		0.0			(2.7	)		(26.7	)		(6.1 )			(49.0	)
Accretion of discount		2.3			0.1			0.3			0.0			0.0			2.7
Purchases		382.4			0.0			0.0			147.4			2.0			531.8
Repayments and Sales(1)		(332.0	)		(0.1	)		(17.4	)		(82.6	)		(0.3	)		(432.4	)
Payment in Kind income(1)		0.6			0.6			0.0			0.0			0.0			1.2
Transfers in and/or (out) of level 3(2)		(4.6	)		0.0			0.0			0.0			0.0			(4.6	)
Balance at December 31, 2014	$	657.7		$	6.4		$	11.3		$	259.8		$	9.7		$	944.9
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to our Level 3 assets still held at the reporting date and reported within the net change in unrealized gains or losses on investments in our Statement of Operations	$	(16.3	)	$	(0.1	)	$	(0.7	)	$	(35.4	)	$	(6.5	)	$	(59.0	)

(1) Includes rounding adjustments to reconcile period balances.

(2) For the period ended December 31, 2014, TICC determined that a previously established level-three security should be categorized as level-two due to the level of market activity at the end of the reporting period.

A reconciliation of the fair value of investments for the year ended December 31, 2013, utilizing significant unobservable inputs, is as follows:

($ in millions)	Senior Secured Notes			Senior Unsecured Notes			CLO Debt			CLO Equity			Subordinated Notes			Equity			Total
Balance at December 31, 2012	$	485.1		$	0.0		$	55.6		$	109.3		$	0.1		$	7.6		$	657.7
Realized gains (losses) included in earnings		(1.9	)		0.6			11.1			(0.7	)		0.0			(2.7	)		6.4
Unrealized (depreciation) appreciation included in earnings(1)		9.0			2.8			(7.6	)		(14.7	)		0.0			7.1			(3.4	)
Accretion of discount		2.7			0.0			1.0			0.0			0.0			0.0			3.7
Purchases(1)		378.6			3.1			20.9			159.5			0.0			3.4			565.5
Repayments and Sales(1)		(247.3	)		(1.1	)		(52.1	)		(16.3	)		(0.1	)		(0.5	)		(317.4	)
Payment in Kind income		1.6			0.4			0.0			0.0			0.0			0.2			2.2
Transfers in and/or out of level 3		0.0			0.0			0.0			0.0			0.0			0.0			0.0
Balance at December 31, 2013	$	627.8		$	5.8		$	28.9		$	237.1		$	0.0		$	15.1		$	914.7
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to our Level 3 assets still held at the reporting date and reported within the net change in unrealized gains or losses on investments in our Statement of Operations	$	6.3		$	2.7		$	1.4		$	(10.2	)	$	0.0		$	6.3		$	6.5

(1) Includes rounding adjustments to reconcile period balances.

125

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 3. FAIR VALUE – (continued)

The following table shows the fair value of TICC’s portfolio of investments by asset class as of December 31, 2014 and 2013:

	2014					2013
	Investments at Fair Value		Percentage of Total Portfolio			Investments at Fair Value		Percentage of Total Portfolio
	(dollars in millions)					(dollars in millions)
Senior Secured Notes	$	697.0		70.8	%	$	644.7		69.2	%
Senior Unsecured Notes		6.4		0.7	%		5.8		0.6	%
CLO Debt		11.3		1.1	%		28.9		3.1	%
CLO Equity		259.8		26.4	%		237.1		25.5	%
Subordinated Notes		—		—			—		—
Equity		9.7		1.0	%		15.1		1.6	%
Total	$	984.2		100.0	%	$	931.6		100.0	%

NOTE 4. CASH, CASH EQUIVALENTS AND RESTRICTED CASH

At December 31, 2014 and December 31, 2013, respectively, cash, cash equivalents and restricted cash were as follows:

	December 31, 2014		December 31, 2013
Cash	$	20,505,323	$	14,933,074
Cash Equivalents		—		—
Total Cash and Cash Equivalents	$	20,505,323	$	14,933,074
Restricted Cash	$	20,576,250	$	32,428,248

NOTE 5. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted net increase in net assets resulting from investment income per share for the years ended December 31, 2014, 2013 and 2012:

	Year ended December 31, 2014		Year ended December 31, 2013		Year ended December 31, 2012
Net increase in net assets resulting from net investment income per common share – basic:
Investment income	$	65,457,844	$	55,792,632	$	37,177,354
Weighted average common shares outstanding – basic		58,822,732		51,073,758		37,978,693
Net increase in net assets resulting from net investment income per common share – basic	$	1.11	$	1.09	$	0.98
Net increase in net assets resulting from net investment income per common share – diluted:
Investment income, before adjustments	$	65,457,844	$	55,792,632	$	37,177,354
Adjustments for interest on convertible senior notes, base management fees and incentive fees		7,428,284		7,401,376		1,953,893
Investment income, as adjusted	$	72,886,128	$	63,194,008	$	39,131,247
Weighted average common shares outstanding – basic		58,822,732		51,073,758		37,978,693
Adjustments for dilutive effect of convertible notes		10,033,152		10,033,152		2,597,083
Weighted average common shares outstanding – diluted		68,855,884		61,106,910		40,575,776
Net increase in net assets resulting from net investment income per common share – diluted	$	1.06	$	1.03	$	0.96

126

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 5. EARNINGS PER SHARE  – (continued)

The following table sets forth the computation of basic and diluted net increase in net assets resulting from operations per share for the years ended December 31, 2014, 2013 and 2012:

	Year ended December 31, 2014			Year ended December 31, 2013		Year ended December 31, 2012
Net (decrease) increase in net assets resulting from operations per common share – basic:
Net (decrease) increase in net assets resulting from operations	$	(3,348,400	)	$	58,944,734	$	68,323,188
Weighted average common shares outstanding – basic		58,822,732			51,073,758		37,978,693
Net (decrease) increase in net assets resulting from operations per common share – basic	$	(0.06	)	$	1.15	$	1.80
Net (decrease) increase in net assets resulting from operations per common share – diluted:
Net (decrease) increase in net assets resulting from operations, before adjustments	$	(3,348,400	)	$	58,944,734	$	68,323,188
Adjustments for interest on convertible senior notes, deferred issuance costs and incentive fees		—			7,401,376		1,953,893
Net (decrease) increase in net assets resulting from operations, as adjusted	$	(3,348,400	)	$	66,346,110	$	70,277,081
Weighted average common shares outstanding – basic		58,822,732			51,073,758		37,978,693
Adjustments for dilutive effect of convertible notes		—			10,033,152		2,597,083
Weighted average common shares outstanding – diluted		58,822,732			61,106,910		40,575,776
Net (decrease) increase in net assets resulting from operations per common share – diluted	$	(0.06	)	$	1.09	$	1.73

Due to the anti-dilutive effect on the computation of diluted earnings per share for the year ended December 31, 2014, the adjustments for interest on convertible senior notes, base management fees, deferred issuance costs and incentive fees as well as weighted average common shares outstanding adjustments for the dilutive effect of convertible notes were excluded from the respective period’s diluted earnings per share computation.

NOTE 6. RELATED PARTY TRANSACTIONS

Investment Advisory Fees

TICC has entered into an investment advisory agreement with TICC Management (the “Investment Advisory Agreement”) under which TICC Management, subject to the overall supervision of TICC’s Board of Directors, manages the day-to-day operations of, and provides investment advisory services to, TICC. For providing these services TICC Management receives a fee from TICC, consisting of two components: a base management fee (the “Base Fee”) and an incentive fee. The Base Fee is calculated at an annual rate of 2.00%. The Base Fee is payable quarterly in arrears, and is calculated based on the average value of TICC’s gross assets at the end of the two most recently completed calendar quarters, and appropriately adjusted for any equity or debt capital raises, repurchases or redemptions during the current calendar quarter. Accordingly, the Base Fee will be payable regardless of whether the value of TICC’s gross assets have decreased during the quarter.

The following table represents the investment advisory fees for the years ended December 31, 2014, 2013 and 2012:

	Year ended December 31, 2014		Year ended December 31, 2013		Year ended December 31, 2012
Investment advisory fees	$	21,150,190	$	19,096,229	$	11,222,713

127

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 6. RELATED PARTY TRANSACTIONS  – (continued)

Net Investment Income Incentive Fee

The incentive fee has two parts. The first part is calculated and payable quarterly in arrears based on the Company’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding calendar quarter. For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, distribution income from securitization vehicles and equity investments and any other income (including any other fees that TICC receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses for the quarter (including the Base Fee, expenses payable under the Company’s administration agreement with BDC Partners (the “Administration Agreement”), and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). “Pre-Incentive Fee Net Investment Income” includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income that the Company has not yet received in cash. “Pre-Incentive Fee Net Investment Income” does not include any realized gains, realized losses or unrealized appreciation or depreciation. “Pre-Incentive Fee Net Investment Income,” expressed as a rate of return on the value of the Company’s net assets at the end of the immediately preceding calendar quarter, is compared to one- fourth of an annual “hurdle rate.” Given that this portion of the incentive fee is payable without regard to any gain, loss or unrealized depreciation that may occur during the quarter, this portion of TICC Management’s incentive fee may also be payable notwithstanding a decline in net asset value that quarter.

For each year commencing on or after January 1, 2005, the annual hurdle rate has been determined as of the immediately preceding December 31^st by adding 5.0% to the interest rate then payable on the most recently issued five-year U.S. Treasury Notes, up to a maximum annual hurdle rate of 10.0%. The annual hurdle rate for the 2014, 2013 and 2012 calendar year was 6.75%, 5.72% and 5.83% respectively. The current hurdle rate for the 2015 calendar year, calculated as of December 31, 2014, is 6.65%.

The following table represents the net investment income incentive fee for the years ended December 31, 2014, 2013 and 2012:

	Year ended December 31, 2014		Year ended December 31, 2013		Year ended December 31, 2012
Net investment income incentive fee	$	5,603,821	$	6,580,705	$	5,460,006

The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20% of our “Incentive Fee Capital Gains,” which consist of our realized gains for each calendar year, computed net of all realized losses and unrealized depreciation for that calendar year. For accounting purposes only, in order to reflect the theoretical capital gains incentive fee that would be payable for a given period as if all unrealized gains were realized, we will accrue a capital gains incentive fee based upon net realized gains and unrealized depreciation for that calendar year (in accordance with the terms of the Investment Advisory Agreement), plus unrealized appreciation on investments held at the end of the period. It should be noted that a fee so calculated and accrued would not necessarily be payable under the Investment Advisory Agreement, and may never be paid based upon the computation of capital gains incentive fees in subsequent periods. Amounts paid under the Investment Advisory Agreement will be consistent with the formula reflected in the Investment Advisory Agreement.

Incentive fees, based upon “Pre-Incentive Fee Net Investment Income,” were approximately $5.6 million, $6.6 million and $5.5 million for the years ended December 31, 2014, December 31, 2013 and December 31, 2012, respectively. The terms of the Investment Advisory Agreement state that the capital gains incentive fee calculation is based on net realized gains, if any, offset by gross unrealized depreciation for the calendar year. No effect is given to gross unrealized appreciation in this calculation. For the years ended December 31, 2014

128

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 6. RELATED PARTY TRANSACTIONS  – (continued)

and 2013, respectively, such an accrual was not required under the terms of the Investment Advisory Agreement. For the year ended December 31, 2012, the amount calculated, and payable, under the terms of the Investment Advisory Agreement was approximately $1.6 million.

In addition, in the event the Company recognizes payment-in-kind, or “PIK,” interest income in excess of its available capital, the Company may be required to liquidate assets in order to pay a portion of the incentive fee. TICC Management, however, is not required to reimburse the Company for the portion of any incentive fees attributable to PIK loan interest income in the event of a subsequent default.

Capital Gains Incentive Fees

The capital gains incentive fee expense recorded under the hypothetical liquidation calculation for the years ended December 31, 2014 and 2013 resulted in an accrual reversal of approximately $3.9 million and $1.2 million, respectively. For the year ended December 31, 2012 an expense of approximately $5.5 million was recorded under the hypothetical liquidation calculation. The amount of capital gains incentive fee expense related to the hypothetical liquidation of the portfolio (and assuming no other changes in realized or unrealized gains and losses) would only become payable to TICC Management in the event of a complete liquidation of our portfolio as of period end and the termination of the Investment Advisory Agreement on such date. Also, it should be noted that the capital gains incentive fee expense fluctuates with our overall investment results. The accrued capital gains incentive fee payable for the year ending December 31, 2014 and 2013 was approximately $0 and $3.9 million, respectively.

The following table represents the capital gains incentive fee for the years ended December 31, 2014, 2013 and 2012:

	Year ended December 31, 2014			Year ended December 31, 2013			Year ended December 31, 2012
Capital gains incentive fee	$	(3,872,853	)	$	(1,192,382	)	$	5,509,061

Administration Agreement

The Company has also entered into an administration agreement (the “Administration Agreement”) with BDC Partners under which BDC Partners provides administrative services for TICC. The Company pays BDC Partners an allocable portion of overhead and other expenses incurred by BDC Partners in performing its obligations under the Administration Agreement, including a portion of the rent and the compensation of the chief financial officer, chief compliance officer, controller and other administrative support personnel, which creates potential conflicts of interest that the Board of Directors must monitor.

TICC Management is controlled by BDC Partners, its managing member. Charles M. Royce holds a minority, non-controlling interest in TICC Management. BDC Partners manages the business and internal affairs of TICC Management. Jonathan H. Cohen, the Company’s Chief Executive Officer, as well as a Director, is the managing member of BDC Partners. Saul B. Rosenthal, the Company’s President and Chief Operating Officer, is also the President and Chief Operating Officer of TICC Management and a member of BDC Partners. Messrs. Cohen and Rosenthal have an equal equity interest in BDC Partners. Charles M. Royce, the Company’s non-executive Chairman of the Board of Directors, does not take part in the management or participate in the operations of TICC Management; however, Mr. Royce is expected to be available from time to time to TICC Management to provide certain consulting services without compensation.

For the periods ended December 31, 2014, 2013 and 2012, respectively, TICC incurred base investment advisory fees of approximately $21.2 million, $19.1 million and $11.2 million in accordance with the terms of the Investment Advisory Agreement and incurred approximately $1.9 million, $1.6 million and $1.2 million in compensation expenses for the services of employees allocated to the administrative activities of TICC, pursuant to the Administration Agreement with BDC Partners. In addition, TICC incurred approximately

129

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 6. RELATED PARTY TRANSACTIONS  – (continued)

$78,000, $77,000 and $69,000 for facility costs allocated under the agreement for the years ended December 31, 2014, 2013 and 2012, respectively. At December 31, 2014 and 2013, respectively, approximately $5.4 million and $5.0 million of the base investment advisory fees remained payable to TICC Management. As of December 31, 2014 and December 31, 2013, compensation expense payable was $0 and $24,000, respectively.

NOTE 7. INVESTMENT INCOME

The following tables sets forth the components of investment income for the years ended December 31, 2014, 2013 and 2012, respectively:

	December 31, 2014		December 31, 2013		December 31, 2012
Interest income
Coupon interest income	$	48,122,458	$	47,243,122	$	32,153,234
Original issue discount income		2,748,786		3,719,841		5,832,504
Payment-in-kind income		1,245,247		2,159,868		1,551,809
Discount income derived form unscheduled remittances at par		240,343		449,686		572,323
	$	52,356,834	$	53,572,517	$	40,109,870

	December 31, 2014		December 31, 2013		December 31, 2012
Distributions from securitization vehicles and equity investments
Distributions from securitization vehicles	$	59,516,739	$	47,241,423	$	25,755,438
Distributions from equity investments		—		—		62,041
	$	59,516,739	$	47,241,423	$	25,817,479

	December 31, 2014		December 31, 2013		December 31, 2012
Commitment, amendment and other fee income
Fee letters	$	1,263,200	$	831,194	$	—
Success fees		1,031,360		—		—
Loan prepayment and bond call fees		2,464,176		1,644,431		1,087,954
All other fees(1)		692,431		1,802,578		4,159,617
	$	5,451,167	$	4,278,203	$	5,247,571

(1) During the year ended December 31, 2012, TICC recorded approximately $3.4 million of PIK fee income in association with the exit of its investment in American Integration Technologies, LLC.

The 1940 Act requires that a business development company offer managerial assistance to its portfolio companies. The Company may receive fee income for managerial assistance it renders to portfolio companies in connection with its investments. For the years ended December 31, 2014, 2013 and 2012, the Company received no fee income for managerial assistance.

NOTE 8. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company enters into a variety of undertakings containing a variety of warranties and indemnifications that may expose the Company to some risk of loss. The risk of future loss arising from such undertakings, while not quantifiable, is expected to be remote.

130

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 8. COMMITMENTS AND CONTINGENCIES  – (continued)

As of December 31, 2014, the Company did not have any commitments to purchase additional debt or equity investments.

The Company is not currently subject to any material legal proceedings. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that these proceedings will have a material effect upon its financial condition or results of operations.

NOTE 9. BORROWINGS

In accordance with the 1940 Act, with certain limited exceptions, the Company is only allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 200% immediately after such borrowing. As of December 31, 2014, the Company’s asset coverage for borrowed amounts was 202%.

The following are the Company’s outstanding principal amounts, carrying values and fair values of the Company’s borrowings as of December 31, 2014 and December 31, 2013. Fair values of our notes payable are based upon the bid price provided by the placement agent at the measurement date, if available:

	As of
	December 31, 2014							December 31, 2013
($ in thousands)	Principal Amount		Carrying Value			Fair Value		Principal Amount		Carrying Value			Fair Value
TICC CLO LLC 2021 Notes(1)	$	—	$	—		$	—	$	101,250	$	100,041	(2)	$	100,617
TICC CLO 2012-1 LLC Class A-1 2023 Notes		176,000		174,271	(2)		176,000		176,000		174,072	(2)		173,061
TICC CLO 2012-1 LLC Class B-1 2023 Notes		20,000		19,524	(2)		20,000		20,000		19,471	(2)		19,950
TICC CLO 2012-1 LLC Class C-1 2023 Notes		23,000		22,194	(2)		23,000		23,000		22,105	(2)		23,058
TICC CLO 2012-1 LLC Class D-1 2023 Notes		21,000		20,087	(2)		21,011		21,000		19,987	(2)		21,000
Sub-total TICC CLO 2012-1, LLC		240,000		236,076			240,011		240,000		235,635			237,069
TICC Funding LLC revolving credit facility(3)		150,000		150,000			150,000		—		—			—
2017 Convertible Notes		115,000		115,000			119,025		115,000		115,000			124,631
	$	505,000	$	501,076		$	509,036	$	456,250	$	450,676		$	462,317

(1) On October 27, 2014, we redeemed all of the $101,250 Class A Notes issued by TICC CLO LLC on August 10, 2011. In connection with the redemption, we wrote-off approximately $1,078 of unaccreted discount. For the year ended December 31, 2014, the total discount charged to “interest expense and other debt financing expenses��� was approximately $1,209.

(2) Represents the aggregate principal amount outstanding less the unaccreted discount. The total unaccreted discount for the 2023 Class A Notes, the 2023 Class B Notes, the 2023 Class C Notes and the 2023 Class D Notes was approximately $1,729, $476, $806 and $913, respectively. As of December 31, 2013,

131

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 9. BORROWINGS  – (continued)

the total unaccreted discount for the 2021 Notes, the 2023 Class A Notes, the 2023 Class B Notes, the 2023 Class C Notes and the 2023 Class D Notes was approximately $1,209, $1,928, $529, $895 and $1,013, respectively.

(3) TICC Funding LLC revolving credit facility fair value represents the par amount of the debt obligation.

The weighted average stated interest rate and weighted average maturity on all our debt outstanding as of December 31, 2014 were 3.54% and 5.6 years, respectively, and as of December 31, 2013 were 3.90% and 7.7 years, respectively.

Debt Securitization

Notes Payable-TICC CLO LLC

On August 10, 2011, TICC completed a $225.0 million debt securitization financing transaction. The Class A Notes and the subordinated notes offered in the debt securitization were issued by TICC CLO, a subsidiary of Holdings, which was in turn a direct subsidiary of TICC. The Class A Notes were secured by the assets held by the 2011 Securitization Issuer. The securitization was executed through a private placement of $101.25 million of secured notes rated AAA/Aaa by Standard & Poor’s Rating Service (“S&P”) and Moody’s Investors Service Inc. (“Moody’s”), respectively, and bearing interest at the three-month LIBOR plus 2.25%. As of October 26, 2014, Holdings retained all of the subordinated notes, which totaled $123.75 million (the “2011 Subordinated Notes”), and retained all the membership interests in the 2011 Securitization Issuer. The notes were sold at a discount to par, and the amount of the discount is being amortized over the term of the notes.

On October 27, 2014, in conjunction with the revolving debt credit facility established under TICC Funding, the Company redeemed all of the $101,250,000 Class A secured notes issued by TICC CLO (see discussion on “Credit Facility,” below). The accrued interest payable at December 31, 2014 was $0 and for the year ended December 31, 2014, the amortization of discount on the issued notes was approximately $1.2 million (including the write-off of previously unaccreted discount of approximately $1.1 million) and the amortization of deferred debt issuance costs was approximately $2.3 million (including the write-off of previously unamortized costs of approximately $2.0 million). As of December 31, 2014, TICC CLO had remaining 2 investments in portfolio companies with a total fair value of approximately $5.6 million.

Effective January 1, 2014 and through January 26, 2014, the interest rate of 2.49% charged under the securitization was based on three-month LIBOR of 0.24%. Effective January 27, 2014 and through April 24, 2014, the interest rate of 2.49% charged under the securitization was based on three-month LIBOR of 0.24%. Effective April 25, 2014 and through July 24, 2014, the interest rate of 2.48% charged under the securitization was based on three-month LIBOR of 0.23%. Effective July 25, 2014 and through October 27, 2014, the interest rate of 2.48% charged under the securitization was based on the three-month LIBOR of 0.23%.

The following table sets forth the components of interest expense, effective annualized average interest rates and cash paid for interest for the years ended December 31, 2014, 2013 and 2012, respectively:

TICC CLO LLC	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
Stated interest expense	$	2,089,028		$	2,592,158		$	2,783,113
Amortization of deferred issuance costs		2,290,010			302,517			303,345
Note discount expense		1,208,774			158,599			171,802
Total interest expense	$	5,587,812		$	3,053,274		$	3,258,260
Effective annualized average interest rate		6.72	%		3.02	%		3.21	%
Cash paid for interest	$	2,564,925		$	2,606,865		$	3,368,622

132

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 9. BORROWINGS  – (continued)

Notes Payable — TICC CLO 2012-1 LLC

On August 23, 2012, the Company completed a $160 million debt securitization financing transaction, consisting of $120 million in secured notes and $40 million of the 2012 Subordinated Notes. On February 25, 2013 and May 28, 2013, TICC CLO 2012-1 issued additional secured notes totaling an aggregate of $120 million and 2012 Subordinated Notes totaling an aggregate of $40 million, which 2012 Subordinated Notes were purchased by us, under the “accordion” feature of the debt securitization which allowed, under certain circumstances and subject to the satisfaction of certain conditions, for an increase in the amount of secured and subordinated notes. It is not necessary that the Company own all or any of the notes permitted by this feature, which may affect the accounting treatment of the debt securitization financing transaction. As of December 31, 2014 the secured notes of the 2012 Securitization Issuer have an aggregate face amount of $240 million and were issued in four classes. The class A-1 notes have a current face amount of $176 million, are rated AAA(sf)/Aaa(sf) by Standard & Poor’s Ratings Services (S&P) and Moody’s Investors Service, Inc. (Moody’s), respectively, and bear interest at three-month LIBOR plus 1.75%. The class B-1 notes have a current face amount of $20 million, are rated AA(sf)/Aa2(sf) by S&P and Moody’s, respectively, and bear interest at three-month LIBOR plus 3.50%. The class C-1 notes have a current face amount of $23 million, are rated A(sf)/A2(sf) by S&P and Moody’s, respectively, and bear interest at three-month LIBOR plus 4.75%. The class D-1 notes have a current face amount of $21 million, are rated BBB(sf)/Baa2(sf) by S&P and Moody’s, respectively, and bear interest at three-month LIBOR plus 5.75%. TICC presently owns all of the 2012 Subordinated Notes, which totaled $80 million as of December 31, 2014.

During a period of up to four years from the closing date, all principal collections received on the underlying collateral may be used by the 2012 Securitization Issuer to purchase new collateral under our direction in our capacity as collateral manager of the 2012 Securitization Issuer and in accordance with our investment strategy, allowing us to maintain the initial leverage in the securitization for such four-year period. All note classes are scheduled to mature on August 25, 2023.

The proceeds of the private placement of the Classes A, B, C, D and 2012 Subordinated Notes of the 2012 Securitization Issuer, net of discount and debt issuance costs, were used for investment purposes. As part of the securitization, we entered into a master loan sale agreement with TICC CLO 2012-1 pursuant to which we agreed to sell or contribute certain senior secured and second lien loans (or participation interests therein) to TICC CLO 2012-1, and to purchase or otherwise acquire the 2012 Subordinated Notes. The Classes A, B, C, D and 2012 Subordinated Notes of the 2012 Securitization Issuer are the secured obligations of TICC CLO 2012-1, and an indenture governing the notes of the 2012 Securitization Issuer includes customary covenants and events of default.

As of December 31, 2014, there were 43 investments in portfolio companies with a total fair value of approximately $311.4 million, collateralizing the secured notes of the 2012 Securitization Issuer. The pool of loans in the securitization must meet certain requirements, including asset mix and concentration, collateral coverage, term, agency rating, minimum coupon, minimum spread and sector diversity requirements.

133

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 9. BORROWINGS  – (continued)

Deferred debt issuance costs consist of fees and expenses incurred in connection with debt offerings. As of December 31, 2014, TICC had a deferred debt issuance balance of approximately $3.0 million associated with this securitization. Aggregate net discount on the notes of the 2012 Securitization Issuer at the time of issuance totaled approximately $4.9 million. These amounts are being amortized and included in interest expense in the consolidated statements of operations over the term of the debt securitization. The following table sets forth the components of interest expense, effective annualized average interest rates and cash paid for interest of the Class A-1, B-1, C-1 and D-1 for the years ended December 31, 2014, 2013 and 2012, respectively:

TICC CLO 2012-1 LLC	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
Stated interest expense	$	6,731,838		$	5,957,008		$	1,352,438
Amortization of deferred issuance costs		343,822			315,259			85,833
Note discount expense		440,659			437,171			139,386
Total interest expense	$	7,516,319		$	6,709,438		$	1,577,657
Effective annualized average interest rate		3.13	%		3.29	%		3.75	%
Cash paid for interest	$	6,733,010		$	6,693,325		$	—

Effective January 1, 2014 and through February 24, 2014, the interest charged under the securitization was based on three-month LIBOR, which was 0.238%. Effective February 25, 2014 and through May 26, 2014, the interest charged under the securitization was based on three month LIBOR, which was approximately 0.235%. Effective May 27, 2014 and through August 24, 2014, the interest charged under the securitization was based on three-month LIBOR, which was approximately 0.227%. Effective August 25, 2014 and through November 24, 2014, the interest charged under the securitization was based on the three-month LIBOR which was approximately 0.235%. Effective November 25, 2014 and through as of December 31, 2014, the interest charged under the securitization was based on three-month LIBOR, which was approximately 0.233%.

The classes, interest rates, spread over LIBOR, cash paid for interest, stated interest expense and note discount expense of each of the Class A-1, B-1, C-1 and D-1 for the year ended December 31, 2014 is as follows:

TICC CLO 2012-1 LLC	Stated Interest Rate			LIBOR Spread (basis points)		Year Ended December 31, 2014
						Cash Paid for Interest		Stated Interest Expense		Note Discount Expense
Class A-1 Notes		1.98285	%		175	$	3,539,726	$	3,538,866	$	198,104
Class B-1 Notes		3.73285	%		350		757,103		757,005		53,669
Class C-1 Notes		4.98285	%		475		1,162,161		1,162,049		89,214
Class D-1 Notes		5.98285	%		575		1,274,020		1,273,918		99,672
Total						$	6,733,010	$	6,731,838	$	440,659

134

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 9. BORROWINGS  – (continued)

The classes, interest rates, spread over LIBOR, cash paid for interest, stated interest expense and note discount expense of each of the Class A-1, B-1, C-1 and D-1 for the year ended December 31, 2013 is as follows:

TICC CLO 2012-1 LLC	Stated Interest Rate			LIBOR Spread (basis points)		Year Ended December 31, 2013
						Cash Paid for Interest		Stated Interest Expense		Note Discount Expense
Class A-1 Notes		1.98760	%		175	$	3,594,875	$	3,164,054	$	193,812
Class B-1 Notes		3.73760	%		350		741,981		665,315		52,857
Class C-1 Notes		4.98760	%		475		1,127,202		1,016,276		90,094
Class D-1 Notes		5.98760	%		575		1,229,267		1,111,363		100,408
Total						$	6,693,325	$	5,957,008	$	437,171

The classes, interest rates, spread over LIBOR, cash paid for interest, stated interest expense and note discount expense of each of the Class A-1, B-1, C-1 and D-1 for the year ended December 31, 2012 is as follows:

TICC CLO 2012-1 LLC	Stated Interest Rate			LIBOR Spread (basis points)		Year Ended December 31, 2012
						Cash Paid for Interest		Stated Interest Expense		Note Discount Expense
Class A-1 Notes		2.46815	%		175	$	—	$	790,356	$	61,215
Class B-1 Notes		4.21815	%		350		—		153,494		17,692
Class C-1 Notes		5.46815	%		475		—		228,827		31,868
Class D-1 Notes		6.46815	%		575		—		179,761		28,611
Total						$	—	$	1,352,438	$	139,386

The amounts, ratings and interest rates (expressed as a spread to LIBOR) of the Class A-1, B-1, C-1, D-1 and 2012 Subordinated Notes as of December 31, 2014 are as follows:

Description

Class A-1 Notes

Class B-1 Notes

Class C-1 Notes

Class D-1 Notes

Subordinated Notes

Type

Senior Secured Floating Rate

Senior Secured Floating Rate

Secured Deferrable Floating Rate

Secured Deferrable Floating Rate

Subordinated

Amount Outstanding

$

176,000,000

$

20,000,000

$

23,000,000

$

21,000,000

$

80,000,000

Moody’s Rating

“Aaa”

“Aa2”

“A2”

“Baa2”

N/A

Standard & Poor’s Rating

“AAA”

“AA”

“A”

“BBB”

N/A

Interest Rate

LIBOR + 1.75

%

LIBOR + 3.50

%

LIBOR + 4.75

%

LIBOR + 5.75

%

N/A

Stated Maturity

August 25, 2023

August 25, 2023

August 25, 2023

August 25, 2023

August 25, 2023

Junior Classes

B-1, C-1, D-1 and Subordinated

C-1, D-1 and Subordinated

D-1 and Subordinated

Subordinated

None

135

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 9. BORROWINGS  – (continued)

The amounts, ratings and interest rates (expressed as a spread to LIBOR) of the Class A-1, B-1, C-1, D-1 and 2012 Subordinated Notes as of December 31, 2013 are as follows:

Description

Class A-1 Notes

Class B-1 Notes

Class C-1 Notes

Class D-1 Notes

Subordinated Notes

Type

Senior Secured Floating Rate

Senior Secured Floating Rate

Secured Deferrable Floating Rate

Secured Deferrable Floating Rate

Subordinated

Amount Outstanding

$

176,000,000

$

20,000,000

$

23,000,000

$

21,000,000

$

80,000,000

Moody’s Rating

“Aaa”

“Aa2”

“A2”

“Baa2”

N/A

Standard & Poor’s Rating

“AAA”

“AA”

“A”

“BBB”

N/A

Interest Rate

LIBOR + 1.75

%

LIBOR + 3.50

%

LIBOR + 4.75

%

LIBOR + 5.75

%

N/A

Stated Maturity

August 25, 2023

August 25, 2023

August 25, 2023

August 25, 2023

August 25, 2023

Junior Classes

B-1, C-1, D-1 and Subordinated

C-1, D-1 and Subordinated

D-1 and Subordinated

Subordinated

None

The amounts, ratings and interest rates (expressed as a spread to LIBOR) of the Class A-1, B-1, C-1, D-1 and 2012 Subordinated Notes as of December 31, 2012 are as follows:

Description

Class A-1 Notes

Class B-1 Notes

Class C-1 Notes

Class D-1 Notes

Subordinated Notes

Type

Senior Secured Floating Rate

Senior Secured Floating Rate

Secured Deferrable Floating Rate

Secured Deferrable Floating Rate

Subordinated

Amount Outstanding

$

88,000,000

$

10,000,000

$

11,500,000

$

10,500,000

$

40,000,000

Moody’s Rating

“Aaa”

“Aa2”

“A2”

“Baa2”

N/A

Standard & Poor’s Rating

“AAA”

“AA”

“A”

“BBB”

N/A

Interest Rate

LIBOR + 1.75

%

LIBOR + 3.50

%

LIBOR + 4.75

%

LIBOR + 5.75

%

N/A

Stated Maturity

August 25, 2023

August 25, 2023

August 25, 2023

August 25, 2023

August 25, 2023

Junior Classes

B-1, C-1, D-1 and Subordinated

C-1, D-1 and Subordinated

D-1 and Subordinated

Subordinated

None

TICC serves as collateral manager to the 2012 Securitization Issuer under a collateral management agreement. TICC is entitled to a deferred fee for its services as collateral manager. The deferred fee is eliminated in consolidation.

Convertible Notes

On September 26, 2012, the Company issued $105.0 million aggregate principal amount of the Convertible Notes and an additional $10.0 million aggregate principal amount of the Convertible Notes was issued on October 22, 2012 pursuant to the exercise of the initial purchasers’ option to purchase additional Convertible Notes. The Convertible Notes bear interest at a rate of 7.50% per year, payable semi-annually in arrears on May 1 and November 1 of each year, commencing on May 1, 2013. The Convertible Notes are convertible into shares of TICC’s common stock based on an initial conversion rate of 87.2448 shares of its common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $11.46 per share of common stock. The conversion price for the Convertible Notes will be reduced for quarterly cash dividends paid to common shares to the extent that the quarterly dividend exceeds $0.29 cents per share, subject to adjustment. The Convertible Notes mature on November 1, 2017, unless previously converted in accordance with their terms. TICC does not have the right to redeem the Convertible Notes prior to maturity. Deferred debt issuance costs represent fees and other direct incremental costs incurred in connection with the Convertible Notes. As of December 31, 2014, the Company had a deferred debt issuance balance of approximately $1.8 million. This amount is being amortized and is included in interest expense in the consolidated statements of operations over the term of the Convertible Notes.

136

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 9. BORROWINGS  – (continued)

The following table sets forth the components of interest expense, effective annualized average interest rates and cash paid for interest of the Convertible Notes for the years ended December 31, 2014, 2013 and 2012, respectively:

Convertible Notes	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
Stated interest expense	$	8,625,000		$	8,577,083		$	2,269,791
Amortization of deferred issuance costs		619,025			620,882			157,006
Total interest expense	$	9,244,025		$	9,197,965		$	2,426,797
Effective annualized average interest rate		8.04	%		8.00	%		8.13	%
Cash paid for interest	$	8,625,000		$	9,463,542		$	—

In certain circumstances, the Convertible Notes will be convertible into shares of TICC’s common stock at its initial conversion rate (listed below) subject to customary anti-dilution adjustments and the requirements of its indenture, at any time on or prior to the close of business on the business day immediately preceding the maturity date. The Company will in certain circumstances increase the conversion rate by a number of additional shares.

	Convertible Notes
Conversion premium		10.00	%
Closing stock price	$	10.42
Closing stock price date		September 20, 2012
Initial conversion price	$	11.46
Initial conversion rate (shares per one thousand dollar principal amount)		87.2448
Maturity date		November 1, 2017

As of December 31, 2014, the principal amount of the Convertible Notes exceeded the value of the underlying shares multiplied by the per share closing price of the Company’s common stock.

The Convertible Notes are TICC’s general, unsecured obligations and rank equal in right of payment with all of TICC’s existing and future senior, unsecured indebtedness and senior in right of payment to any of its subordinated indebtedness. As a result, the Convertible Notes will be effectively subordinated to TICC’s existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to any existing and future liabilities and other indebtedness of its subsidiaries.

Credit Facility

On October 27, 2014, TICC Funding, LLC (“TICC Funding”), a special purpose vehicle and wholly-owned subsidiary of the Company, entered into a revolving credit facility (the “Facility”) with Citibank, N.A. Subject to certain exceptions, pricing under the Facility is based on the London interbank offered rate (“LIBOR”) for an interest period equal to three months plus a spread of 1.50% per annum. Pursuant to the terms of the credit agreement governing the Facility, TICC Funding has borrowed, on a revolving basis, the maximum aggregate principal amount of $150,000,000. The revolving basis period will end on October 27, 2016 (“Reinvestment Period”), subject to certain exceptions. Post Reinvestment Period, the Facility has a mandatory amortization schedule such that twenty-five percent (25.0%) and fifty percent (50.0%) of the principal amount outstanding as of October 27, 2016 will be due and payable, on January 18, 2017 and April 18, 2017, respectively, and the remaining principal amount outstanding and accrued and unpaid interest thereunder will be due and payable, on October 27, 2017. The Company used part of the proceeds from the Facility to redeem all of the $101.25 million of Class A secured notes issued by TICC CLO on August 10, 2011. The secured notes previously issued under TICC CLO LLC were based on LIBOR for an interest period of three months plus a spread of 2.25% per annum. In connection with the redemption of the

137

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 9. BORROWINGS  – (continued)

secured notes issued by TICC CLO, the Company wrote-off approximately $3.1 million of previously unaccreted discount and unamortized costs.

The Facility is secured by a pool of loans initially consisting of loans sold by TICC CLO to TICC Funding, loans sold to and contributed by the Company to TICC Funding, and loans purchased by TICC Funding from unaffiliated third parties. The Company may sell and contribute additional loans to TICC Funding from time to time. The Company will act as the collateral manager of the loans owned by TICC Funding, and has retained a residual interest through its ownership of TICC Funding.

As of December 31, 2014, there were 46 investments in portfolio companies with a total fair value of approximately $295.6 million, collateralizing the Facility. The pool of loans in TICC Funding must meet certain requirements, including asset mix and concentration, collateral coverage, term, agency rating, minimum coupon, minimum spread and sector diversity requirements.

The aggregate accrued interest payable on the 2017 Revolving Credit Facility at December 31, 2014 was approximately $477,000. Deferred debt issuance costs represent fees and other direct incremental costs incurred in connection with the credit facility. As of December 31, 2014, TICC had a deferred debt balance of approximately $0.9 million. This amount is being amortized and included in interest expense in the consolidated statements of operation over the term of the credit facility.

Additionally, for the year ended December 31, 2014, the amortization of deferred debt issuance costs was approximately $83,000.

The following table sets forth the components of interest expense, effective annualized average interest rates and cash paid for interest of the Facility for the year ended December 31, 2014:

Credit Facility	Year Ended December 31, 2014
Stated interest expense	$	476,740
Amortization of deferred issuance costs		83,046
Total interest expense	$	559,786
Effective annualized average interest rate		2.04	%
Cash paid for interest	$	—

Each of TICC CLO LLC, TICC CLO 2012-1 and TICC Funding, are consolidated subsidiaries of TICC. The Company consolidated the results of its wholly-owned subsidiaries in its consolidated financial statements as the subsidiaries are operated solely for investment activities of the Company, and the Company has substantial equity at risk. The creditors of TICC CLO 2012-1 and TICC Funding have received security interests in the assets owned by TICC CLO 2012-1 and TICC Funding, respectively, and such assets are not intended to be available to the creditors of TICC (or any other affiliate of TICC).

NOTE 10. SUBSEQUENT EVENTS

From January 2, 2015 through January 20, 2015, an additional 315,783 shares of TICC’s common stock settled through its share repurchase program, for an aggregate cost of approximately $2.4 million at a weighted average price per share of common stock of approximately $7.56.

On February 19, 2015, the Company’s Board of Directors declared a cash dividend of $0.27 per share payable on March 31, 2015 to holders of record on March 17, 2015.

The Company’s management evaluated subsequent events through the date of issuance of these Consolidated Financial Statements and noted no other events that necessitate adjustments to or disclosure in the financial statements.

138

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 11. FINANCIAL HIGHLIGHTS

	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Per Share Data
Net asset value at beginning of period	$	9.85		$	9.90		$	9.30		$	9.85		$	8.36
Net investment income(1)		1.11			1.09			0.98			0.92			0.89
Net realized and unrealized (losses) gains(2)		(1.14	)		0.06			0.82			(0.47	)		1.19
Total from net investment operations		(0.03	)		1.15			1.80			0.45			2.08
Distributions from net investment income		(1.00	)		(1.16	)		(1.12	)		(0.99	)		(0.81	)
Distributions based on weighted average share impact		(0.03	)		(0.04	)		(0.04	)		—			—
Tax return of capital distributions		(0.16	)		—			—			—			—
Total distributions(3)		(1.19	)		(1.20	)		(1.16	)		(0.99	)		(0.81	)
Effect of shares issued, net of offering expenses		—			—			(0.04	)		(0.01	)		0.22
Effect of shares repurchased, gross		0.01			—			—			—			—
Net asset value at end of period	$	8.64		$	9.85		$	9.90		$	9.30		$	9.85
Per share market value at beginning of period	$	10.34		$	10.12		$	8.65		$	11.21		$	6.05
Per share market value at end of period	$	7.53		$	10.34		$	10.12		$	8.65		$	11.21
Total return(4)		(17.22	)%		14.68	%		30.49	%		(14.19	)%		102.39	%
Shares outstanding at end of period		60,303,769			53,400,745			41,371,286			32,818,428			31,886,367

139

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 11. FINANCIAL HIGHLIGHTS  – (continued)

	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Ratios/Supplemental Data
Net assets at end of period (000’s)		520,813			526,242			409,603			305,102			314,118
Average net assets (000’s)		560,169			506,093			363,584			318,305			243,723
Ratio of expenses to average net assets:
Expenses before incentive fees		8.95	%		8.68	%		6.33	%		3.72	%		3.22	%
Net investment income incentive fees		1.00	%		1.30	%		1.50	%		0.70	%		0.58	%
Capital gains incentive fees		(0.69	)%		(0.24	)%		1.52	%		0.35	%		—
Total ratio of expenses to average net assets		9.26	%		9.74	%		9.35	%		4.77	%		3.80	%
Ratio of expenses, excluding interest expense, to average net assets		5.17	%		6.00	%		7.35	%		4.38	%		3.80	%
Ratio of net investment income to average net assets		11.69	%		11.02	%		10.23	%		9.42	%		9.95	%

(1) Represents per share net investment income for the period, based upon average shares outstanding.

(2) Net realized and unrealized gains and losses include rounding adjustments to reconcile change in net asset value per share.

(3) Management monitors available taxable earnings, including net investment income and realized capital gains, to determine if a tax return of capital may occur for the year. To the extent the Company’s taxable earnings fall below the total amount of the Company’s distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to the Company’s stockholders.

(4) Total return equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value per share, assuming dividend reinvestment prices obtained under the Company’s dividend reinvestment plan, excluding any discounts.

NOTE 12. DIVIDENDS

The following table represents the cash distributions, including dividends, dividends reinvested and returns of capital, if any, declared per share:

Date Declared	Record Date		Payment Date		Amount
Fiscal 2015
February 19, 2015		March 17, 2015		March 31, 2015	$	0.27
Fiscal 2014
October 30, 2014		December 17, 2014		December 31, 2014	$	0.29
July 31, 2014		September 16, 2014		September 30, 2014		0.29
May 1, 2014		June 16, 2014		June 30, 2014		0.29
March 5, 2014		March 25, 2014		March 31, 2014		0.29

140

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 12. DIVIDENDS  – (continued)

Date Declared	Record Date		Payment Date		Amount
Total (2014)					$	1.16
Fiscal 2013
October 29, 2013		December 17, 2013		December 31, 2013	$	0.29
July 30, 2013		September 16, 2013		September 30, 2013		0.29
April 30, 2013		June 14, 2013		June 28, 2013		0.29
February 28, 2013		March 22, 2013		March 29, 2013		0.29
Total (2013)					$	1.16

The tax character of distributions declared and paid in 2014 represented $60,189,322 from ordinary income, and $9,697,552 from tax return of capital. Generally accepted accounting principles require adjustments to certain components of net assets to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net asset value per share. For 2014, the permanent differences between financial and tax reporting were due to gains from unscheduled prepayments, prepayment penalty fees, and capital gains incentive fees, resulting in a decrease of distributions in excess of investment income of $4,335,415, a decrease of accumulated net realized losses on investments of $1,719,411, and a decrease of capital in excess of par value of $6,054,826.

The tax character of distributions declared and paid in 2013 represented $61,353,645 from ordinary income, and $0 from tax return of capital. Generally accepted accounting principles require adjustments to certain components of net assets to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net asset value per share. For 2013, the permanent differences between financial and tax reporting were due to gains from unscheduled prepayments, prepayment penalty fees, and capital gains incentive fees, resulting in a decrease of distributions in excess of investment income of $7,869,753, a decrease of accumulated net realized losses on investments of $2,071,674, and a decrease of capital in excess of par value of $9,941,427.

We have adopted an “opt out” dividend reinvestment plan for our common shareholders. As a result, if we make a cash distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash distributions. During 2014, 2013 and 2012, the Company issued approximately 307,624, 337,286, and 215,358 shares, respectively, of common stock to shareholders in connection with the dividend reinvestment plan.

On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the Company will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term losses rather than being considered all short-term as under previous law.

The Company has available $43,805,188 of capital losses which can be used to offset future capital gains. Of these losses, $25,681,808 will expire in 2018, if not utilized, the amount not subject to expiration under The Act is $18,123,380. Under the current law, capital losses related to securities realized after October 31 and prior to the Company’s fiscal year end may be deferred as occurring the first day of the following year. For the fiscal year ended December 31, 2014, the Company has deferred such losses in the amount of $4,399,416.

141

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 12. DIVIDENDS  – (continued)

As of December 31, 2014, the estimated components of accumulated earnings on a tax basis were as follow:

Distributable ordinary income	$	0
Distributable long-term capital gains (capital loss carry forward)		(43,805,188	)
Unrealized depreciation on investments		(54,604,191	)
Other timing differences		(4,399,416	)

The amounts will be finalized before filing the federal income tax return.

As of December 31, 2013, the estimated components of accumulated earnings on a tax basis were as follow:

Distributable ordinary income	$	0
Distributable long-term capital gains (capital loss carry forward)		(26,647,308	)
Unrealized depreciation on investments		(7,315,479	)

NOTE 13. SHARE REPURCHASE PROGRAM

On December 18, 2014, our board of directors authorized a repurchase program to be in place until the earlier of June 30, 2015 or until $50 million of our outstanding shares of common stock have been repurchased. Under the repurchase program, we may, but we are not obligated to, repurchase our outstanding common stock in the open market from time to time provided that we comply with the prohibitions under our Insider Trading Policies and Procedures and the guidelines specified in Rule 10b-18 of the Securities Exchange Act of 1934, as amended, including certain price, market volume and timing constraints. In addition, any repurchases will be conducted in accordance with the 1940 Act. During the year ended December 31, 2014, we repurchased 154,600 shares at the weighted average price of approximately $7.58 per share, inclusive of commissions. This represents a discount of approximately 12.3% of the net asset value per share at December 31, 2014. The total dollar amount of shares repurchased in this period is approximately $1.2 million, leaving a maximum of approximately $48.8 million available for future program purchases.

As of December 31, 2014, we had commitments to repurchase 143,283 shares of our common stock. Those commitments represent unsettled trades as of December 31, 2014.

NOTE 14. SELECTED QUARTERLY DATA (UNAUDITED)

	Year Ended December 31, 2014
	Quarter Ended December 31,			Quarter Ended September 30,			Quarter Ended June 30,		Quarter Ended March 31,
Total Investment Income	$	28,557,431		$	30,175,723		$	29,934,738	$	28,656,848
Net Investment Income		12,762,549			17,520,528			17,416,580		17,758,187
Net (Decrease) Increase in Net Assets resulting from Operations		(28,482,389	)		(1,261,925	)		13,135,784		13,260,130
Net Increase in Net Assets resulting from Net Investment Income, per common share, basic(1)	$	0.21		$	0.29		$	0.29	$	0.33
Net Increase in Net Assets resulting from Net Investment Income, per common share, diluted	$	0.21		$	0.28		$	0.27	$	0.30
Net (Decrease) Increase in Net Assets resulting from Operations, per common share, basic(1)	$	(0.47	)	$	(0.02	)	$	0.22	$	0.24

142

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 14. SELECTED QUARTERLY DATA (UNAUDITED)  – (continued)

	Year Ended December 31, 2014
	Quarter Ended December 31,			Quarter Ended September 30,			Quarter Ended June 30,		Quarter Ended March 31,
Net (Decrease) Increase in Net Assets resulting from Operations, per common share, diluted(1)(2)	$	(0.47	)	$	(0.02	)	$	0.21	$	0.23

(1) Aggregate of quarterly earnings per share differs from calculation of annual earnings per share for the year ended December 31, 2014 due to rounding.

(2) Due to the anti-dilutive effect on the computation of diluted earnings per share for the year ended December 31, 2014, the adjustments for the interest on convertible senior notes, base management fees, deferred issuance costs and incentive fee as well as weighted average common shares outstanding adjustments for the dilutive effect of convertible were excluded from the quarters ended September 30, 2014 and December 31, 2014.

	Year Ended December 31, 2013
	Quarter Ended December 31,		Quarter Ended September 30,		Quarter Ended June 30,		Quarter Ended March 31,
Total Investment Income	$	30,488,163	$	27,448,377	$	25,424,144	$	21,731,459
Net Investment Income		16,946,803		12,238,709		15,955,918		10,651,203
Net Increase in Net Assets resulting from Operations		13,056,915		23,588,777		1,456,996		20,842,046
Net Increase in Net Assets resulting from Net Investment Income, per common share, basic (1)	$	0.32	$	0.23	$	0.30	$	0.23
Net Increase in Net Assets resulting from Net Investment Income, per common share, diluted (1)	$	0.30	$	0.22	$	0.28	$	0.22
Net Increase in Net Assets resulting from Operations, per common share, basic (1)	$	0.24	$	0.45	$	0.03	$	0.46
Net Increase in Net Assets resulting from Operations, per common share, diluted(1)	$	0.24	$	0.41	$	0.05	$	0.41

(1) Aggregate of quarterly earnings per share differs from calculation of annual earnings per share for the year ending December 31, 2013 due to rounding.

NOTE 15. RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued ASU 2014-09,Revenue from Contracts with Customers (Topic 606). The update supersedes the revenue recognition requirements in ASC 605,Revenue Recognition. Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. The adoption of the amended guidance in the standard is not expected to have a significant effect on the Company’s consolidated results of operations and financial condition.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15,Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The update is intended to define management’s responsibility to evaluate whether there is a substantial doubt about an organization’s ability to continue as a going concern and to

143

TICC CAPITAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 15. RECENT ACCOUNTING PRONOUNCEMENTS  – (continued)

provide related footnote disclosure. Amendments in this update become effective in the annual period ending after December 15, 2016, with early application permitted. The Company will evaluate the application of this pronouncement and will adopt the standard for the quarter ending March 31, 2016.

In February 2015, the FASB issued Accounting Standards Update 2015-02,Consolidation (Topic 810): Amendments to the Consolidation Analysis.The new guidance applies to entities in all industries and provides a new scope exception to registered money market funds and similar unregistered money market funds. It makes targeted amendments to the current consolidation guidance and ends the deferral granted to investment companies from applying the VIE guidance. The ASU will be effective for periods beginning after December 15, 2015, for public companies. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the application of this pronouncement.

NOTE 16. RISKS AND UNCERTAINTIES

The U.S. capital markets have recently experienced periods of extreme volatility and disruption. Disruptions in the capital markets tend to increase the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. The Company believes these conditions may reoccur in the future. A prolonged period of market illiquidity may have an adverse effect on the Company’s business, financial condition and results of operations. Adverse economic conditions could also increase the Company’s funding costs, limit the Company’s access to the capital markets or result in a decision by lenders not to extend credit to the Company. These events could limit the Company’s investment originations, limit the Company’s ability to grow and negatively impact the Company’s operating results.

Many of the companies in which the Company has made or will make investments may be susceptible to adverse economic conditions, which may affect the ability of a company to repay TICC’s loans or engage in a liquidity event such as a sale, recapitalization, or initial public offering. Therefore, the Company’s nonperforming assets may increase, and the value of the Company’s portfolio may decrease during this period. Adverse economic conditions also may decrease the value of any collateral securing some of the Company’s loans and the value of its equity investments. Adverse economic conditions could lead to financial losses in the Company’s portfolio and a decrease in its revenues, net income, and the value of the Company’s assets.

A portfolio company’s failure to satisfy financial or operating covenants imposed by the Company or other lenders could lead to defaults and, potentially, termination of the portfolio company’s loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize the portfolio company’s ability to meet its obligations under the debt securities that the Company holds. The Company may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, if a portfolio company goes bankrupt, even though the Company may have structured its investment as senior debt or secured debt, depending on the facts and circumstances, including the extent to which the Company actually provided significant “managerial assistance,” if any, to that portfolio company, a bankruptcy court might re-characterize the Company’s debt holding and subordinate all or a portion of the Company’s claim to that of other creditors. These events could harm the Company’s financial condition and operating results.

As a business development company, the Company is required to carry its investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by or under the direction of its Board of Directors. Decreases in the market values or fair values of the Company’s investments are recorded as unrealized depreciation. Depending on market conditions, the Company could incur substantial losses in future periods, which could have a material adverse impact on its business, financial condition and results of operations.

144

Item 9. Changes in and Disagreements with Independent Registered Public Accounting Firm on Accounting and Financial Disclosure

There were no changes in or disagreements on accounting or financial disclosure with PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, during the fiscal year ended December 31, 2014.

Item 9A. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

As of December 31, 2014 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the 1934 Act). Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

(b) Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934 and for the assessment of the effectiveness of internal control over financial reporting. Management’s Report on Internal Control Over Financial Reporting, which appears on page 95 of this Form 10-K, is incorporated by reference herein.

(c) Attestation Report of the Registered Public Accounting Firm

PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting, which appears on page 96 of this Form 10-K.

(d) Changes in Internal Control Over Financial Reporting

Management did not identify any change in the Company’s internal control over financial reporting that occurred during the fourth quarter of 2014 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information.

Not applicable.

145

PART III

We will file a definitive Proxy Statement for our 2015 Annual Meeting of Stockholders with the SEC, pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year. Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K. Only those sections of our definitive Proxy Statement that specifically address the items set forth herein are incorporated by reference.

Item 10. Directors, Executive Officers and Corporate Governance

The information required by Item 10 is hereby incorporated by reference from the Company’s definitive Proxy Statement relating to the Company’s 2015 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company’s fiscal year.

Item 11. Executive Compensation

The information required by Item 11 is hereby incorporated by reference from the Company’s definitive Proxy Statement relating to the Company’s 2015 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company’s fiscal year.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 12 is hereby incorporated by reference from the Company’s definitive Proxy Statement relating to the Company’s 2015 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company’s fiscal year.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by Item 13 is hereby incorporated by reference from the Company’s definitive Proxy Statement relating to the Company’s 2015 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company’s fiscal year.

Item 14. Principal Accountant Fees and Services

The information required by Item 14 is hereby incorporated by reference from the Company’s definitive Proxy Statement relating to the Company’s 2015 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company’s fiscal year.

146

PART IV

Item 15. Exhibits, Financial Statement Schedules

a. Documents Filed as Part of this Report

The following consolidated financial statements are set forth in Item 8:

	Page
Management’s Report on Internal Control Over Financial Reporting		95
Report of Independent Registered Public Accounting Firm		96
Consolidated Statements of Assets and Liabilities as of December 31, 2014 and December 31, 2013		97
Consolidated Schedule of Investments as of December 31, 2014		98
Consolidated Schedule of Investments as of December 31, 2013		106
Consolidated Statements of Operations for the years ended December 31, 2014, December 31, 2013 and December 31, 2012		111
Consolidated Statements of Changes in Net Assets for the years ended December 31, 2014, December 31, 2013 and December 31, 2012		113
Consolidated Statements of Cash Flows for the years ended December 31, 2014, December 31, 2013 and December 31, 2012		114
Notes to Consolidated Financial Statements		116

147

b. Exhibits

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:

3.1	Articles of Incorporation (Incorporated by reference to the Registrant’s Registration Statement on Form N-2 (File No. 333-109055), filed on September 23, 2003).
3.2	Articles of Amendment (Incorporated by reference to Current Report on Form 8-K (File No. 814-00638) filed December 3, 2007).
3.3	Amended and Restated Bylaws (Incorporated by reference to Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement on Form N-2 (File No. 333-109055), filed on November 19, 2003).
4.1	Form of Share Certificate (Incorporated by reference to the Registrant’s Registration Statement on Form N-2 (File No. 333-109055), filed on September 23, 2003).
10.1	Investment Advisory Agreement between Registrant and TICC Management, LLC (Incorporated by reference to Exhibit 10.1 to the Registrant’s report on Form 8-K filed on July 1, 2011).
10.2	Custodian Agreement between Registrant and State Street Bank and Trust Company (Incorporated by reference to Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement on Form N-2 (File No. 333-109055), filed on November 19, 2003).
10.3	Amended and Restated Administration Agreement between Registrant and BDC Partners, LLC (Incorporated by reference to the Registrant’s quarterly report on Form 10-Q filed on May 10, 2012).
10.4	Second Amended and Restated Dividend Reinvestment Plan*
10.5	Indenture, dated September 26, 2012, relating to the 7.50% Senior Convertible Notes due 2017, by and between the Registrant and the Bank of New York Mellon, as trustee (Incorporated by reference to Exhibit 4.1 to the Registrant’s report on Form 8-K filed on September 27, 2012).
10.6	Purchase Agreement, dated August 13, 2012, by and among TICC Capital Corp., TICC CLO 2012-1 LLC and Guggenheim Securities, LLC (Incorporated by reference to the Registrant’s report on Form 8-K filed on August 23, 2012).
10.7	Master Loan Sale Agreement, dated August 23, 2012, by and among TICC Capital Corp. and TICC CLO 2012-1 LLC (Incorporated by reference to the Registrant’s report on Form 8-K filed on August 23, 2012).
10.8	Indenture, dated August 23, 2012, by and between TICC CLO 2012-1 LLC and The Bank of New York Mellon Trust Company, National Association (Incorporated by reference to the Registrant’s report on Form 8-K filed on August 23, 2012).
10.9	Collateral Management Agreement, dated August 23, 2012, by and between TICC CLO 2012-1 LLC and TICC Capital Corp. (Incorporated by reference to the Registrant’s report on Form 8-K filed on August 23, 2012).
10.10	Collateral Administration Agreement, dated August 23, 2012, by and among TICC CLO 2012-1 LLC, TICC Capital Corp. and The Bank of New York Mellon Trust Company, National Association (Incorporated by reference to the Registrant’s report on Form 8-K filed on August 23, 2012).
10.11	Upsize Purchase Agreement, dated January 24, 2013, by and among TICC Capital Corp., TICC CLO 2012-1 LLC and Guggenheim Securities, LLC (Incorporated by reference to the Registrant’s report on Form 8-K filed on February 26, 2013).
10.12	Subordinated Note Purchase Agreement, dated February 25, 2013, by and among TICC Capital Corp. and TICC CLO 2012-1 LLC (Incorporated by reference to the Registrant’s report on Form 8-K filed on February 26, 2013).
10.13	Form of Credit and Security Agreement, dated as of October 27, 2014, among TICC Funding, LLC, the lenders from time to time party thereto, Citibank, N.A., The Bank of New York Mellon Trust Company, National Association, and TICC Capital Corp. (Incorporated by reference to the Registrant’s report on Form 8-K filed on October 28, 2014).
10.14	Form of Sale, Contribution and Master Participation Agreement, dated as of October 27, 2014, by and among TICC Capital Corp. and TICC Funding, LLC (Incorporated by reference to the Registrant’s report on Form 8-K filed on October 28, 2014).

148

10.15 Form of Collateral Administration Agreement, dated as of October 27, 2014, by and among TICC Funding, LLC, TICC Capital Corp. and The Bank of New York Mellon Trust Company, National Association (Incorporated by reference to the Registrant’s report on Form 8-K filed on October 28, 2014).11 Computation of Per Share Earnings (included in the notes to the audited consolidated financial statements contained in this report).14.1 Code of Ethics (Incorporated by reference to Exhibit 4.1 to the Registrant’s report on Form 8-K filed on May 30, 2012).21.1 Subsidiaries of Registrant and jurisdiction of incorporation/organization:   TICC CLO LLC – Delaware
TICC CLO 2012-1 LLC — Delaware   TICC Funding, LLC – Delaware31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*32.1 Certification of Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*32.2 Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*

* Filed herewith.

149

c. Financial statement schedule

SCHEDULE 12-14

TICC CAPITAL CORP.
  
INVESTMENTS IN AND ADVANCES TO AFFILIATES
(AMOUNTS IN THOUSANDS)

Name of Issuer	Title of Issue or Nature of Indebtedness		Amount of Income or Dividends Credited to Income(2)		Value as of December 31, 2013		Gross Additions(3)		Gross Reductions(4)			Change in Unrealized (Loss)/Gain			Value as of December 31, 2014
CONTROL INVESTMENT:
Algorithmic Implementations, Inc. (d/b/a “Ai Squared”)		Senior Secured Notes	$	1,384.4	$	13,900.0	$	—	$	(100.0	)	$	—		$	13,800.0
		Common Stock(1)		—		2,150.0		—		—			(990.0	)		1,160.0
Total Control Investment				1,384.4		16,050.0		—		(100.0	)		(990.0	)		14,960.0
AFFILIATED INVESTMENT:
Nextag, Inc.(5)		Senior Secured Notes		—		5,506.7		—		(9,417.4	)		3,910.7			—
				—		5,506.7		—		(9,417.4	)		3,910.7			—
Nextag, Inc.		Senior Secured Notes		116.7		—		2,264.7		—			(679.4	)		1,585.3
		Common Stock(1)		—		—		2,004.0		—			(2,004.0	)		—
				116.7		—		4,268.7		—			(2,683.4	)		1,585.3
Total Affiliated Investment				116.7		5,506.7		4,268.7		(9,417.4	)		1,227.3			1,585.3
TOTAL CONTROL AND AFFILIATED INVESTMENTS			$	1,501.1	$	21,556.7	$	4,268.7	$	(9,517.4	)	$	237.3		$	16,545.3

(1) Common stock is non-income producing.

(2) Represents the total amount of interest or dividends credited to income for the portion of the year an investment was a control or affiliate investment, as appropriate.

(3) Gross additions include increases in investments resulting from new portfolio investments, paid-in-kind interest or dividends, the amortization of discounts and fees.

(4) Gross reductions include decreases in investments resulting from principal collections related to investment repayments or sales, the amortization of premiums and acquisition costs. Gross reductions also include approximately $4.7 million in realized losses in connection with the restructuring of our investment held in Nextag, Inc.

(5) Represents previously held investment in Nextag, Inc. which was restructured on June 4, 2014. Our investment held in Nextag at December 31, 2013 was not deemed an affiliate and the restructuring on June 4, 2014 resulted in the status update. On October 15, 2014, TICC received $0.6 million associated with a tax refund which Nextag, Inc. received in conjunction with its 2013 loss carryback tax filing. TICC’s pro rata share of the refund was recorded as a realized gain.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	TICC CAPITAL CORP.
Date: March 3, 2015	/s/Jonathan H. Cohen Jonathan H. Cohen Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.

Date: March 3, 2015	/s/Charles M. Royce Charles M. Royce Chairman of the Board of Directors
Date: March 3, 2015	/s/Jonathan H. Cohen Jonathan H. Cohen Chief Executive Officer and Director (Principal Executive Officer)
Date: March 3, 2015	/s/Patrick F. Conroy Patrick F. Conroy Chief Financial Officer, Chief Compliance Officer and Secretary (Principal Accounting and Financial Officer)
Date: March 3, 2015	/s/Steven P. Novak Steven P. Novak Director
Date: March 3, 2015	/s/G. Peter O’Brien G. Peter O’Brien Director
Date: March 3, 2015	/s/Tonia L. Pankopf Tonia L. Pankopf Director

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