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TMCNet:  TICC CAPITAL CORP. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

[November 09, 2012]

TICC CAPITAL CORP. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Edgar Glimpses Via Acquire Media NewsEdge) CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q.

Except where the context requires otherwise, the terms "TICC," "Company," "we," "us" and "our" refer to TICC Capital Corp. together with its subsidiaries, TICC Capital Corp. 2011-1 Holdings LLC ("Holdings") TICC CLO LLC ("2011 Securitization Issuer" or "TICC CLO") and TICC CLO 2012-1 LLC ("2012 Securitization Issuer" or "TICC CLO 2012-1"); "TICC Management" refers to TICC Management, LLC; and "BDC Partners" refers to BDC Partners, LLC.

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

32 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, a registered investment adviser under the Investment Advisers Act of 1940, as amended. 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, are the 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. For more information, see "Risk Factors-Risks Relating to our Business and Structure-There are significant potential conflicts of interest, which could impact our investment returns." On August 10, 2011, the Company completed a $225.0 million debt securitization financing transaction. The Class A Notes offered in the debt securitization were issued by TICC CLO, a subsidiary of Holdings, a direct subsidiary of TICC, and the notes are secured by the assets held by the 2011 Securitization Issuer. The securitization was executed through a private placement of $101.25 million of Aaa/AAA Class A Notes of the 2011 Securitization Issuer. 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.

On August 23, 2012, the Company completed a $160 million debt securitization financing transaction. The secured and subordinated notes offered in the debt securitization were issued by TICC CLO 2012-1 LLC ("2012 Securitization Issuer" or "TICC CLO 2012-1"), a newly formed special purpose vehicle that is a wholly-owned subsidiary of the Company. The secured notes of the 2012 Securitization Issuer have an aggregate face amount of $120 million and were issued in four classes. The class A-1 notes have an initial face amount of $88 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 an initial face amount of $10 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 an initial face amount of $11.5 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 an initial face amount of $10.5 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 subordinated notes, which totaled $40 million, and $3 million of the class D-1 notes issued in this CLO transaction.

For further information on this securitization, see Note 4.

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 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 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.

While the structure of our investments will vary, and while we invest across a wide range of different industries, we have historically overweighted our investments in the debt of technology-related companies. 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 are cash flow positive. Many of these companies will have financial backing provided by private equity or venture capital funds or other financial or strategic sponsors at the time we make an investment. The types of portfolio companies in which we invest, however, will generally be considered below investment grade.

We generally expect to invest between $5 million and $25 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% of the total portfolio. As of September 30, 2012, our debt investments had stated interest rates of between 3.81% and 16.00% (excluding our investment in GenuTec Business Solutions, Inc. which carries a zero interest rate through October 30, 2014) and maturity dates of between 5 and 144 months.

In addition, our total portfolio had a weighted average yield on debt investments of approximately 10.3% including GenuTec Business Solutions, Inc.

33 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 quarter ended September 30, 2012, we recognized approximately $201,000 from PIK interest and dividend income associated with our investments in Pegasus Solutions, Inc., Merrill Communications, LLC., and Shearers Food, Inc., compared to PIK interest of approximately $147,000 for the quarter ended September 30, 2011. 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 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.

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, our loans will be 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 quarter ended September 30, 2012, we closed approximately $128.0 million in portfolio investments, including additional investments of approximately $44.2 million in existing portfolio companies and approximately $83.8 million in new portfolio companies. During the quarter ended September 30, 2012, we recognized a total of $45.3 million from principal repayments on debt investments, and we recognized approximately $9.0 million from the sale of portfolio investments. We realized net gains on investments during the quarter ended September 30, 2012 in the amount of approximately $1.8 million. For the quarter ended September 30, 2012, we had net unrealized appreciation of approximately $21.5 million.

Based upon the fair value determinations made in good faith by the Board of Directors, during the quarter ended September 30, 2012, we had net unrealized appreciation of approximately $21.5 million, comprised of $25.4 million in gross unrealized appreciation, $2.4 million in gross unrealized depreciation and approximately $1.5 million relating to the reversal of prior period net unrealized appreciation as an investment was realized. The most significant changes in net unrealized appreciation and depreciation during the quarter ended September 30, 2012 were as follows (in millions): 34 Unrealized appreciation Portfolio Company (depreciation) Jersey Street 2006-1A CLO LTD. $ 1.5 Canaras CLO Equity - 2007-1A, 1X 1.4 Emporia CLO 2007 3A E 1.2 Stone Tower CLO LTD 2007 7X 1.1 ACA CLO 2007-1a sub 1.1 Muir Grove CLO LTD 2007 1X E 1.0 GSC Partners 2007-8X Sub CDO 0.9 Rampart 2007-1A CLO Equity 0.7 OCT11 2007-1A CLO 0.7 ACA CLO 2006-2, Limited 0.7 Merrill Communications, LLC 0.6 Fusionstorm, Inc. 2 0.6 Prospero CLO II BV 0.6 Band Digital Inc. (0.7 ) American Integration Technologies, LLC (1.4 ) Net all other 11.5 Total $ 21.5 For the quarter ended September 30, 2011, we recorded net realized gains on investments of approximately $0.1 million, which represents the gain realized on the repayment of our investment in Flexera Software.

Based upon the fair value determinations made in good faith by the Board of Directors, during the quarter ended September 30, 2011, we had net unrealized depreciation of approximately $20.1 million, comprised of $0.3million in gross unrealized appreciation, $20.3 million in gross unrealized depreciation and approximately $0.1 million relating to the reversal of prior period net unrealized appreciation as an investment was realized. The most significant changes in net unrealized appreciation and depreciation during the quarter ended September 30, 2011 were as follows (in millions): Unrealized appreciation Portfolio Company (depreciation) Vision Solutions, Inc. $ (0.4 ) CIFC CLO - 2006-1A B2L (0.4 ) Ocean Trails CLO II 2007-2a-d (0.4 ) Hewetts Island CDO 2007 - 1RA E (0.4 ) Nextag, Inc. (0.4 ) Primus 2007 2X Class E CLO (0.4 ) GXS Worldwide Inc. (0.4 ) Canaras CLO Equity - 2007-1A, 1X (0.4 ) Latitude II CLO 2006 2A D (0.4 ) RBS Holding Company (0.4 ) Loomis Sayles CLO 2006-1AE (0.5 ) Pegasus Solutions, Inc. (0.5 ) Hewetts Island CDO III 2005-1A D (0.5 ) Jersey Straits 2006-1A CLO LTD (0.5 ) Avenue CLO V LTD 2007-5A D1 (0.5 ) SourceHov, LLC (0.6 ) Lightpoint CLO 2007-8a (0.6 ) ACA CLO 2006-2, Limited (0.6 ) Latitude III CLO 2007-3A (0.6 ) Landmark V CDO LTD (0.6 ) Emporia CLO 2007 3A E (0.7 ) Harch 2005-2A BB CLO (0.7 ) Integra Telecomm, Inc. (0.9 ) Hewetts Island CDO IV 2006-4 (1.0 ) Prospero CLO II BV (2.0 ) Net all other (5.3 ) Total $ (20.1 ) 35 Current Market and Economic Conditions Current market conditions appear generally stable. During 2011 and through the quarter ended September 30, 2012, we saw much less severe price volatility for corporate loans (compared with the prior three year period), consistent with many other parts of the debt and equity markets. During 2012, the market for new investments has become more competitive and yields have generally decreased. We expect the market for new investments to remain competitive through the remainder of 2012. In view of the above circumstances, we continue to invest in syndicated and larger middle-market loans, and, opportunistically, in certain structured finance investments, including collateralized loan obligation investment vehicles, and continue to be active in those markets.

CRITICAL ACCOUNTING POLICIES The preparation of 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 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 most significant estimates made in the preparation of our consolidated financial statements are the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We believe 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 we make. We are required to specifically fair value each individual investment on a quarterly basis.

In May 2011, the FASB issued ASU 2011-04, " Fair Value Measurement which represents amendments to achieve common fair value measurement and disclosure requirements in US GAAP and IFRS ." The amendments are of two types: (i) those that clarify the FASB's intent about the application of existing fair value measurement and disclosure requirements and (ii) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments that change a particular principle or requirement for measuring fair value or disclosing information about fair value measurements relate to (i) measuring the fair value of the financial instruments that are managed within a portfolio; (ii) application of premium and discount in a fair value measurement; and (iii) additional disclosures about fair value measurements. The update is effective for annual periods beginning after December 15, 2011 and as such we have adopted this ASU beginning with the quarter ended March 31, 2012. We have increased our disclosures related to Level 3 fair value measurement, in addition to other required disclosures. There were no related impacts on our financial position or results of operations.

We adopted ASC 820-10, Fair Value Measurements and Disclosure, which establishes a three-level valuation hierarchy for disclosure of fair value measurements, on January 1, 2008. 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. We have determined that due to the general illiquidity of the market for our investment portfolio, whereby little or no market data exists, almost all of our investments are based upon "Level 3" inputs.

36 Our Board of Directors determines the value of our investment portfolio each quarter. 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. Since March 2004, we have engaged third-party valuation firms to provide assistance in valuing our bilateral investments and, more recently, for certain of our syndicated loans, although our Board of Directors ultimately determines the appropriate valuation of each such investment.

Our process for determining the fair value of a bilateral investment begins with determining the enterprise value of the portfolio company. Enterprise value means the entire value of the company to a potential buyer, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The fair value of our investment is based, in part, on the enterprise value at which the portfolio company could be sold in an orderly disposition over a reasonable period of time between willing parties other than in a forced or liquidation sale. The liquidity event whereby we exit a private investment is generally the sale, the recapitalization or, in some cases, the initial public offering of the portfolio company.

There is no one methodology to determine enterprise value and, in fact, for any one portfolio company, enterprise value is best expressed as a range of fair values, from which we derive a single estimate of enterprise value. To determine the enterprise value of a portfolio company, we analyze the historical and projected financial results, as well as the nature and value of any collateral.

We also use industry valuation benchmarks and public market comparables. We also consider other events, including private mergers and acquisitions, a purchase transaction, public offering or subsequent debt or equity sale or restructuring, and include these events in the enterprise valuation process. We generally require portfolio companies to provide annual audited and quarterly unaudited financial statements, as well as annual projections for the upcoming fiscal year.

Typically, our bilateral debt investments are valued on the basis of a fair value determination arrived at through an analysis of the borrower's financial and operating condition or other factors, as well as consideration of the entity's enterprise value. The types of factors that we may take into account in valuing our investments include: market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, the nature and realizable value of any collateral, the portfolio company's ability to make payments and its earnings and discounted cash flows, among other factors. The fair value of equity interests in portfolio companies is determined based on various factors, including the enterprise value remaining for equity holders after the repayment of the portfolio company's debt and other preference capital, and other pertinent factors such as recent offers to purchase a portfolio company, recent transactions involving the purchase or sale of the portfolio company's equity securities, or other liquidity events. The determined equity values are generally discounted when we have a minority position, restrictions on resale, specific concerns about the receptivity of the capital markets to a specific company at a certain time, or other factors.

We will record unrealized depreciation on bilateral investments when we believe that an investment has become impaired, including where collection of a loan or realization of an equity security is doubtful. To the extent that we believe that it has become probable that a loan is not collectible or probable that an equity investment is not realizable, we will classify that amount as a realized loss. We will record unrealized appreciation if we believe that the underlying portfolio company has appreciated in value and our equity security has also appreciated in value. Changes in fair value, other than such changes that are considered probable of non-collection or non-realization, as described above, are recorded in the statement of operations as net change in unrealized appreciation or depreciation.

37 Under the valuation procedures approved by our Board of Directors, upon the recommendation of the Valuation Committee, a third-party valuation firm will prepare valuations for each of our bilateral investments for which market quotations are not readily available 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 those third-party valuations of our 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. 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. Our Board of Directors retains ultimate authority as to the third-party review cycle as well as the appropriate valuation of each investment.

On April 9, 2009, the FASB issued additional guidelines under ASC 820-10-35, " Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly ," which provides guidance on factors that should be considered in determining when a previously active market becomes inactive and whether a transaction is orderly. 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 for which we obtain indicative bid quotes for purposes of determining the fair value of our syndicated loan investments have shown these 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 may engage third-party valuation firms to provide assistance in valuing certain syndicated investments that we own. In addition, TICC 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.

We have considered the factors described in ASC 820-10 and have determined that we are properly valuing the securities in our portfolio.

We have also acquired a number of debt and equity positions in CLO investment vehicles. These investments are special purpose financing vehicles. In valuing such investments, we consider the operating metrics of the specific investment vehicle, including compliance with collateralization tests, defaulted and restructured securities, and payment defaults, if any. In addition, we consider the indicative prices provided by the broker who arranges transactions in such investment vehicles, as well as any available information on other relevant transactions in the market. 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 our Board of Directors for its determination of fair value of these investments.

The Company's assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820-10-35 at September 30, 2012, were as follows: ($ in millions) Fair Value Measurements at Reporting Date Using Significant Quoted Prices in Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Assets (Level 1) (Level 2) (Level 3) Total Cash equivalents $ 0.0 $ 0.0 $ 0.0 $ 0.0 Senior Secured Notes 0.0 12.7 342.6 355.3 CLO Debt 0.0 0.0 87.7 87.7 CLO Equity 0.0 0.0 82.8 82.8 Subordinated Notes 0.0 0.0 4.9 4.9 Common Stock 0.0 0.0 4.6 4.6 Preferred Shares 0.0 0.0 1.4 1.4 Warrants to purchase equity 0.0 0.0 1.0 1.0 Total $ 0.0 $ 12.7 $ 525.0 $ 537.7 38 A reconciliation of the fair value of investments for three months ended September 30, 2012, utilizing significant unobservable inputs, is as follows: Collateralized Collateralized Loan Loan Warrants to Senior Obligation Obligation Subordinated Common Preferred Purchase Secured Note Debt Equity Note Stock Share Equity Equity ($ in millions) Investments Investments Investments Investments Investments Investments Investments TotalBalance at June 30, 2012 $ 292.1 $ 68.8 $ 58.9 $ 4.4 $ 4.2 $ 1.8 $ 0.3 $ 430.5 Realized Gains included in earnings 1.6 0.0 0.0 0.0 0.0 0.0 0.0 1.6 Unrealized (depreciation) appreciation included in earnings 1.2 10.4 8.9 0.6 0.4 (0.5 ) 0.7 21.7 Accretion of discount 0.5 0.8 0.0 0.0 0.0 0.0 0.0 1.3 Purchases 95.3 7.7 15.0 0.0 0.0 0.0 0.0 118.0 Repayments and Sales (48.2 ) 0.0 0.0 (0.1 ) 0.0 0.0 0.0 (48.3 ) Payment in Kind income 0.1 0.0 0.0 0.0 0.0 0.1 0.0 0.2 Transfers in and/or out of level 3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Balance at September 30, 2012 $ 342.6 $ 87.7 $ 82.8 $ 4.9 $ 4.6 $ 1.4 $ 1.0 $ 525.0 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(1) $ 2.8 $ 10.4 $ 8.9 $ 0.6 $ 0.3 $ (0.4 ) $ 0.6 $ 23.2 (1) Includes rounding adjustments to reconcile period balances.

A reconciliation of the fair value of investments for nine months ending September 30, 2012, utilizing significant unobservable inputs, is as follows: Collateralized Collateralized Senior Loan Loan Warrants to Secured Obligation Obligation Subordinated Common Preferred Purchase Note Debt Equity Note Stock Share Equity Equity ($ in millions) Investments Investments Investments Investments Investments Investments Investments TotalBalance at December 31, 2011 $ 279.2 $ 51.0 $ 39.3 $ 4.9 $ 3.1 $ 2.5 $ 0.8 $ 380.8 Realized Gains included in earnings 3.0 0.2 0.0 0.0 0.0 0.0 0.1 3.3 Unrealized (depreciation) appreciation included in earnings (3.4 ) 13.6 11.7 0.5 1.5 (1.4 ) 0.6 23.1 Accretion of discount 2.1 2.1 0.0 0.0 0.0 0.0 0.0 4.2 Purchases 183.5 22.3 31.8 0.0 0.0 0.0 0.0 237.6 Repayments and Sales (125.9 ) (1.5 ) 0.0 (0.5 ) 0.0 0.0 (0.5 ) (128.4 ) Payment in Kind income 4.1 0.0 0.0 0.0 0.0 0.3 0.0 4.4 Transfers in and/or out of level 3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Balance at September 30, 2012 $ 342.6 $ 87.7 $ 82.8 $ 4.9 $ 4.6 $ 1.4 $ 1.0 $ 525.0 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(1) $ (2.4 ) $ 13.8 $ 11.7 $ 0.4 $ 1.4 $ (1.3 ) $ 0.4 $ 24.0 (1) Includes rounding adjustments to reconcile period balances.

39 Our assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820-10-35 at December 31, 2011, were as follows: ($ in millions) Fair Value Measurements at Reporting Date Using Significant Quoted Prices in Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Assets (Level 1) (Level 2) (Level 3) Total Cash equivalents $ 0.0 $ 0.0 $ 0.0 $ 0.0 Senior Secured Notes 0.0 10.7 279.2 289.9 CLO Debt 0.0 0.0 51.0 51.0 CLO Equity 0.0 0.0 39.3 39.3 Subordinated Notes 0.0 0.0 4.9 4.9 Common Stock 0.0 0.0 3.1 3.1 Preferred Shares 0.0 0.0 2.5 2.5Warrants to purchase equity 0.0 0.0 0.8 0.8 Total $ 0.0 $ 10.7 $ 380.8 $ 391.5 A reconciliation of the fair value of investments for the year ended December 31, 2011, utilizing significant unobservable inputs, is as follows: Collateralized Collateralized Senior Loan Loan Preferred Warrants Secured Obligation Obligation Subordinated Common Share to Purchase Note Debt Equity Note Stock Equity Equity ($ in millions) Investments Investments Investments Investments Investments Investments Investments Total Balance at December 31, 2010 $ 173.9 $ 50.4 $ 8.9 $ 6.0 $ 5.8 $ 2.0 $ 0.5 $ 247.5 Realized Losses included in earnings 2.7 0.9 0.0 0.0 0.0 0.0 0.0 3.6 Unrealized (depreciation) appreciation included in earnings (5.7 ) (9.5 ) (1.5 ) (0.4 ) (2.7 ) 0.1 0.3 (19.4 ) Accretion of discount 2.8 2.2 0.0 0.0 0.0 0.0 0.0 5.0 Purchases 230.0 10.6 31.9 0.0 0.0 0.0 0.0 272.5Repayments and Sales (1) (113.8 ) (3.6 ) 0.0 (0.7 ) 0.0 0.4 0.0 (117.7 ) Transfers in and/or out of level 3 (10.7 ) 0.0 0.0 0.0 0.0 0.0 0.0 (10.7 ) Balance at December 31, 2011 $ 279.2 $ 51.0 $ 39.3 $ 4.9 $ 3.1 $ 2.5 $ 0.8 $ 380.8 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 $ (4.1 ) $ (8.8 ) $ (1.3 ) $ (0.3 ) $ (2.7 ) $ 0.1 $ 0.3 $ (16.8 ) (1) Includes PIK income of approximately $1.5 million and rounding adjustments to reconcile period balances.

PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY The total fair value of our investment portfolio was approximately $537.7 million and $391.5 million as of September 30, 2012 and December 31, 2011, respectively. The increase in investments during the nine month period was due primarily to new investments of approximately $247.6 million and net unrealized appreciation of approximately $22.8 million. Funding for these new investments was provided by equity and debt capital raises. These increases were partially offset by debt repayments and sales of securities totaling approximately $136.4 million.

40 In certain instances, we receive payments based on scheduled amortization of the outstanding balances and sales of portfolio investments. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments may fluctuate significantly from period to period. For the quarter ended September 30, 2012, we recognized approximately $9.0 million largely from the sales of our debt investment in CHS Community Health Systems, Inc. ($3.9 million), Airvana Network Solutions, Inc.

($2.7 million) and our partial sale of our investment in Goodman Global, Inc.

($2.0 million), whereas for the year ended December 31, 2011, we recognized proceeds of approximately $11.3 million from the sales of securities. Also, during the quarter ended September 30, 2012, we had repayments and amortization payments of approximately $45.3 million, whereas, for the year ended December 31, 2011, we had repayments and amortization payments of approximately $107.9 million.

As of September 30, 2012, we had investments in debt securities of, or loans to, 78 portfolio companies, with a fair value of approximately $447.9 million, and equity investments in 24 portfolio companies, with a fair value of approximately $89.8 million. As of December 31, 2011, we had investments in debt securities of, or loans to, 69 portfolio companies, with a fair value of approximately $345.8 million, and equity investments in 21 portfolio companies, with a fair value of approximately $45.7 million.

A reconciliation of the investment portfolio for the nine months ended September 30, 2012 and the year ended December 31, 2011 follows: September 30, 2012 December 31, 2011 (dollars in millions) (dollars in millions) Beginning Investment Portfolio $ 391.5 $ 247.5 Portfolio Investments Acquired 247.6 272.5 Debt repayments (115.9 ) (107.9 ) Sales of securities (20.5 ) (11.3 ) Payment in Kind 4.4 1.5 Original Issue Discount 4.3 5.0Net Unrealized Appreciation (Depreciation) 22.8 (19.4 ) Net Realized Gains 3.5 3.6 $ 537.7 $ 391.5 The following table indicates the quarterly portfolio investment activity for the past seven quarters: New Investments Debt Repayments Sales of Securities Quarter ended (dollars in millions) (dollars in millions) (dollars in millions) September 30, 2012 $ 128.0 $ 45.3 $ 9.0 June 30, 2012 62.1 66.2 2.5 March 31, 2012 57.5 4.4 9.0 Total $ 247.6 $ 115.9 $ 20.5 December 31, 2011 $ 60.3 $ 28.5 $ 2.9 September 30, 2011 81.0 9.0 - June 30, 2011 30.6 12.6 - March 31, 2011 100.6 57.8 8.4 Total $ 272.5 $ 107.9 $ 11.3 41 The following table shows the fair value of our portfolio of investments by asset class as of September 30, 2012 and December 31, 2011: September 30, 2012 December 31, 2011 Investments at Percentage of Investments at Percentage of Fair Value Total Portfolio Fair Value Total Portfolio (dollars in millions) (dollars in millions) Senior Secured Notes $ 355.3 66.1 % $ 289.9 74.1 % CLO Debt 87.7 16.3 % 51.0 13.0 % CLO Equity 82.8 15.4 % 39.3 10.0 % Subordinated Notes 4.9 0.9 % 4.9 1.3 % Common Stock 4.6 0.8 % 3.1 0.8 % Preferred Shares 1.4 0.3 % 2.5 0.6 % Warrants 1.0 0.2 % 0.8 0.2 % Total $ 537.7 100.0 % $ 391.5 100.0 % The following table shows our portfolio of investments by industry at fair value, as of September 30, 2012 and December 31, 2011: September 30, 2012 December 31, 2011 Investments Percentage Investments at Percentage at Fair Value of Fair Value Fair Value of Fair Value Structured finance $ 170.5 31.7 % $ 90.3 23.0 % Software 37.7 7.0 % 42.5 10.9 % Enterprise software 37.3 6.9 % 18.9 4.8 % Telecommunication services 34.8 6.5 % 32.6 8.3 % Healthcare 32.1 6.0 % 28.1 7.2 % Retail 31.8 5.9 % 18.8 4.8 % Financial intermediaries 30.4 5.7 % 11.6 3.0 % Business services 27.9 5.2 % 29.4 7.5 % Web hosting 24.7 4.6 % 14.5 3.7 % IT consulting 20.9 3.9 % 9.6 2.5 % Education 13.6 2.5 % 8.7 2.2 % Printing and publishing 12.1 2.3 % 14.7 3.8 % Auto parts manufacturer 11.8 2.2 % 9.4 2.4 % Cable/satellite television 10.7 2.0 % 4.9 1.2 % Computer hardware 9.0 1.7 % 10.1 2.6 % Logistics 7.9 1.5 % 0.0 0.0 % Food products manufacturer 4.5 0.8 % 4.0 1.0 % Gorcery 3.9 0.7 % 0.0 0.0 % Shipping and transportation 3.5 0.6 % 0.0 0.0 % Digital media 2.9 0.5 % 0.0 0.0 % Advertising 2.9 0.5 % 7.6 1.9 % Building and development 2.9 0.5 % 4.8 1.2 % Utlities 2.5 0.5 % 0.0 0.0 % IT value-added reseller 1.4 0.3 % 1.5 0.4 %Semiconductor capital equipment 0.0 0.0 % 22.6 5.8 % Packaging and glass 0.0 0.0 % 4.9 1.3 % Interactive voice messaging services 0.0 0.0% 2.0 0.5 % Total $ 537.7 100.0 % $ 391.5 100.0 % 42 PORTFOLIO GRADING We have adopted a credit grading system to monitor the quality of our debt investment portfolio. As of September 30, 2012 and December 31, 2011, our portfolio had a weighted average grade of 2.2 and 2.2, respectively, based upon the fair value of the debt investments in the portfolio. Equity securitiesare not graded.

At September 30, 2012, and December 31, 2011, our debt investment portfolio was graded as follows: 43 September 30, 2012 Percentage of Portfolio at Percentage of Grade Summary Description Principal Value Total Portfolio Fair Value 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 principal and interest is expected 397.0 82.7 % 374.4 83.6 % 3 Closer monitoring is required. Full repayment of principal and interest is expected 73.0 15.2 % 69.4 15.5 % 4 A reduction of interest income has occurred or is expected to occur. No loss of principal is expected - 0.0 % - 0.0 % 5 A loss of some portion of principal is expected 10.2 2.1 % 4.1 0.9 % $ 480.2 100.0 % $ 447.9 100.0 % December 31, 2011 Percentage of Portfolio at Percentage of Grade Summary Description Principal Value Total Portfolio Fair Value 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 $ 13.2 3.4 % $ 13.1 3.8 % 2 Full repayment of principal and interest is expected 301.9 78.3 % 267.1 77.2 % 3 Closer monitoring is required. Full repayment of principal and interest is expected 67.2 17.4 % 63.6 18.4 % 4 A reduction of interest income has occurred or is expected to occur. No loss of principal is expected - 0.0 % - 0.0 % 5 A loss of some portion of principal is expected 3.5 0.9 % 2.0 0.6 % $ 385.8 100.0 % $ 345.8 100.0 % 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 grades 3, 4 or 5 may fluctuate from period to period.

Further discussion regarding the other investments which experienced significant unrealized depreciation is presented in "Results of Operations." 44 RESULTS OF OPERATIONS Set forth below is a comparison of our results of operations for the three months ended September 30, 2012 to the three months ended September 30, 2011.

Investment Income As of September 30, 2012, our debt investments had stated interest rates of between 3.81% and 16.00% (excluding our investment in GenuTec Business Solutions, Inc. which carries a zero interest rate through October 30, 2014) and maturity dates of between 5 and 144 months. In addition, our total portfolio had a weighted average yield on debt investments of approximately 10.3% including GenuTec Business Solutions, Inc., compared with 11.4% as of September 30, 2011.

Investment income for the three months ended September 30, 2012 was approximately $15.6 million compared to approximately $11.1 million for the three months ended September 30, 2011. This increase was due in part to an increase in the amount of 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 September 30, 2012 and September 30, 2011 was approximately $474.9 million and $356.0 million, respectively. For the quarter ended September 30, 2012, investment income consisted of approximately $7.7 million in cash interest from portfolio investments, approximately $1.4 million in amortization of original issue and market discount, approximately $31,000 of discount income derived from unscheduled principal cash remittances at par on discounted debt securities, approximately $6.0 million in distributions from the equity interest in securitized vehicle investments and an equity investment, as well as approximately $0.2 million in PIK interest income.

For the quarter ended September 30, 2012, fee income of approximately $279,000 was recorded, compared to fee income of approximately $61,000 for the quarter ended September 30, 2011. 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 quarter ended September 30, 2012 were $11.0 million, which includes the increase of the accrued capital gains incentive fee of approximately $4.6 million.

Expenses before incentive fees, for the quarter ended September 30, 2012, were approximately $5.3 million. This amount consisted 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 $2.1 million from the quarter ended September 30, 2011, attributable primarily to higher investment advisory fees (consisting of the base management fee), interest expense associated with the senior notes issued under our debt securitization transactions and convertible notes issued in September 2012, as well as increased professional fees associated with our audit and legal expenses. Expenses before incentive fees for the quarter ended September 30, 2011 were approximately $3.2 million.

The investment advisory fee for the third quarter of 2012 was approximately $2.8 million, representing the base fee as provided for in the Investment Advisory Agreement. The investment advisory fee in the comparable period in 2011 was approximately $1.9 million. The increase of approximately $854,000 is due to an increase in average gross assets. At each of September 30, 2012 and December 31, 2011, respectively, approximately $2.8 million and $1.9 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 third quarter of 2012 was approximately $1.4 million, which was directly related to our debt securitization financing transactions as well as our convertible note transaction. Interest expense for the third quarter of 2011 was approximately $434,000.

TICC CLO LLC In August 2011, senior notes in the amount of $101,250,000 were issued by a newly formed special purpose vehicle in which a wholly-owned subsidiary of TICC owns all of the equity. Under this structure, the notes bear interest, after the effective date, at three-month London Inter Bank Offered Rate ("LIBOR") plus 2.25% (prior to the effective date, the Class A Notes bear interest at five-month LIBOR plus 2.25%). The accrued interest payable on these notes during the third quarter of 2012 was approximately $517,000. Additionally, for the quarter ended September 30, 2012, the amortization of discount on the issued notes was approximately $40,000 and the amortization of deferred debt issuance costs was approximately $76,000. At December 31, 2011, interest expense of approximately $1.1 million remained payable.

45 TICC CLO 2012-1 LLC On August 23, 2012, the Company completed a $160 million debt securitization financing transaction. The secured and subordinated notes offered in the debt securitization were issued by TICC CLO 2012-1 LLC ("2012 Securitization Issuer" or "TICC CLO 2012-1"), a newly formed special purpose vehicle that is a wholly-owned subsidiary of the Company. The secured notes of the 2012 Securitization Issuer have an aggregate face amount of $120 million and were issued in four classes. The class A-1 notes have an initial face amount of $88 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 an initial face amount of $10 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 an initial face amount of $11.5 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 an initial face amount of $10.5 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 subordinated notes, which totaled $40 million, and $3 million of the class D-1 notes issued in this CLO transaction.

For further information on this securitization, see Note 4.

The aggregate accrued interest payable on the notes of the 2012 Securitization Issuer during the third quarter of 2012 was approximately $402,000.

Additionally, for the quarter ended September 30, 2012, the aggregate amortization of discount on the issued notes of the 2012 Securitization Issuer was approximately $41,000 and the amortization of deferred debt issuance costs was approximately $25,000.

2017 Convertible Notes On September 26, 2012, we issued $105,000,000 aggregate principal amount of the Convertible Notes. The Convertible Notes mature on November 1, 2017. 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 accrued interest payable on the Convertible Notes during the third quarter of 2012 was approximately $109,000. Additionally, for the quarter ended September 30, 2012, the amortization of deferred issuance costs was approximately $6,000.

The table below summarizes the components of interest expense for the three months ended September 30, 2012 and 2011: Three Months Ended September 30, 2012 Three Months Ended September 30, 2011 Stated Note Amortization of Stated Note Amortization of Interest Discount Deferred Debt Interest Discount Deferred Debt (dollars in thousands) Expense Expense Issuance Costs Total Expense Expense Issuance Costs Total TICC CLO LLC Class A Notes $ 699.9 $ 39.9 $ 76.3 $ 816.1 $ 383.3 $ 8.7 $ 42.3 $ 434.3 TICC CLO 2012-1 LLC Class A-1 Notes 235.3 17.9 - 253.2 - - - - TICC CLO 2012-1 LLC Class B-1 Notes 45.7 5.1 - 50.8 - - - - TICC CLO 2012-1 LLC Class C-1 Notes 68.1 9.3 - 77.4 - - - - TICC CLO 2012-1 LLC Class D-1 Notes 52.6 8.3 - 60.9 - - - - TICC CLO 2012-1 amortization of deferred debt - - 25.1 25.1 - - - - 2017 Convertible Notes 109.4 - 6.1 115.5 - - - - Total $ 1,211.0 $ 80.5 $ 107.5 $ 1,399.0 $ 383.3 $ 8.7 $ 42.3 $ 434.3 Professional fees, consisting of legal, valuation, audit and tax fees, were approximately $421,000 for the quarter ended September 30, 2012, compared to approximately $386,000 for the quarter ended September 30, 2011. This was the result of an increase in audit fees which was partially offset by lower legal and valuation costs.

Compensation expenses were approximately $289,000 for the quarter ended September 30, 2012, compared to approximately $218,000 for the quarter ended September 30, 2011, reflecting the allocation of compensation expenses for the services of our chief financial officer, chief compliance officer, controller and senior accountants, and other administrative support personnel. At September 30, 2012 and December 31, 2011, respectively, approximately $450,000 and $605,000 of compensation expenses remained payable.

General and administrative expenses, consisting primarily of directors' fees, insurance, listing fees, transfer agent and custodian fees, office supplies, facilities costs and other expenses, were approximately $424,000 for the three months ended September 30, 2012 compared to approximately $186,000 for the same period in 2011. The increase was due largely to charges for excise tax and costs incurred directly by TICC CLO. 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 third quarter of 2012 was approximately $1.0 million compared to $456,000 in the third quarter of 2011.

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). For the quarter ended September 30, 2012, the investment adviser permanently waived $5,000 of the net investment income incentive fee.

46 The capital gains incentive fee expense for the third quarter ended September 30, 2012 was approximately $4.6 million. 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 period end and the termination of the Investment Advisory Agreement on such date. The $4.6 million capital gains incentive fee accrual as of September 30, 2012 relates entirely to this hypothetical liquidation calculation. For the quarter ended September 30, 2011, a reversal of approximately $4.2 million was recorded.

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, as of the termination date). 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, 2011, such an accrual was not required under the terms of the Investment Advisory Agreement.

Realized and Unrealized Gains/Losses on Investments For the quarter ended September 30, 2012, we recorded net realized gains on investments of approximately $1.8 million, which primarily represents the gain on the repayments of several of our investment including American Integration Technologies, LLC ($1.4 million.) Based upon the fair value determinations made in good faith by the Board of Directors, during the quarter ended September 30, 2012, we had net unrealized appreciation of approximately $21.5 million, comprised of $25.4 million in gross unrealized appreciation, $2.4 million in gross unrealized depreciation and approximately $1.5 million relating to the reversal of prior period net unrealized appreciation as an investment was realized. The most significant changes in net unrealized appreciation and depreciation during the quarter ended September 30, 2012 were as follows (in millions): Unrealized appreciation Portfolio Company (depreciation) Jersey Street 2006-1A CLO LTD. $ 1.5 Canaras CLO Equity - 2007-1A, 1X 1.4 Emporia CLO 2007 3A E 1.2 Stone Tower CLO LTD 2007 7X 1.1 ACA CLO 2007-1a sub 1.1 Muir Grove CLO LTD 2007 1X E 1.0 GSC Partners 2007-8X Sub CDO 0.9 Rampart 2007-1A CLO Equity 0.7 OCT11 2007-1A CLO 0.7 ACA CLO 2006-2, Limited 0.7 Merrill Communications, LLC 0.6 Fusionstorm, Inc. 2 0.6 Prospero CLO II BV 0.6 Band Digital Inc. (0.7 ) American Integration Technologies, LLC (1.4 ) Net all other 11.5 Total $ 21.5 47 For the quarter ended September 30, 2011, we recorded net realized gains on investments of approximately $83,000.

Based upon the fair value determinations made in good faith by the Board of Directors, during the quarter ended September 30, 2011, we had net unrealized depreciation of approximately $20.1 million, comprised of $284,000 in gross unrealized appreciation, $20.3 million in gross unrealized depreciation and approximately $0.1 million relating to the reversal of prior period net unrealized appreciation as an investment was realized. The most significant changes in net unrealized appreciation and depreciation during the quarter ended September 30, 2011 were as follows (in millions): Unrealized appreciation Portfolio Company (depreciation) Vision Solutions, Inc. $ (0.4 ) CIFC CLO - 2006-1A B2L (0.4 ) Ocean Trails CLO II 2007-2a-d (0.4 ) Hewetts Island CDO 2007 - 1RA E (0.4 ) Nextag, Inc. (0.4 ) Primus 2007 2X Class E CLO (0.4 ) GXS Worldwide Inc. (0.4 ) Canaras CLO Equity - 2007-1A, 1X (0.4 ) Latitude II CLO 2006 2A D (0.4 ) RBS Holding Company (0.4 ) Loomis Sayles CLO 2006-1AE (0.5 ) Pegasus Solutions, Inc. (0.5 ) Hewetts Island CDO III 2005-1A D (0.5 ) Jersey Straits 2006-1A CLO LTD (0.5 ) Avenue CLO V LTD 2007-5A D1 (0.5 ) SourceHov, LLC (0.6 ) Lightpoint CLO 2007-8a (0.6 ) ACA CLO 2006-2, Limited (0.6 ) Latitude III CLO 2007-3A (0.6 ) Landmark V CDO LTD (0.6 ) Emporia CLO 2007 3A E (0.7 ) Harch 2005-2A BB CLO (0.7 ) Integra Telecomm, Inc. (0.9 ) Hewetts Island CDO IV 2006-4 (1.0 ) Prospero CLO II BV (2.0 ) Net all other (5.3 ) Total $ (20.1 ) Please see "-Portfolio Grading" for more information.

Net Increase in Net Assets Resulting from Net Investment Income Net investment income for the quarter ended September 30, 2012 and 2011 was $4.6 million and $11.6 million, respectively. This decrease was due to a greater hypothetical capital gains incentive fee, increased management fees (which is comprised of the base management fee and the net investment income incentive fee) as well as increased interest expense. These were partially offset by an increase in the amount of performing assets in the portfolio and distributions from the CLO equity investments in our portfolio.

Excluding the impact of the capital gains incentive fee of approximately $4.6 million, net investment income for the quarter ended September 30, 2012 was approximately $9.3 million compared to approximately $7.5 million for the same period in 2011.

Based on weighted-average shares outstanding of 39,383,076 (basic) and 39,880,940 (diluted), the net increase in net assets resulting from net investment income per common share for the quarter ended September 30, 2012 was approximately $0.12 (basic and diluted), compared to approximately $0.36 per share (basic and diluted) for the same period in 2011.

48 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 $0.24, (basic) and $0.23 (diluted), compared to $0.23 per share (basic and diluted), for the same period in 2011.

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

Net Increase in Net Assets Resulting from Operations We had a net increase in net assets resulting from operations of approximately $27.9 million for the quarter ended September 30, 2012, compared to a net decrease of approximately $8.4 million for the comparable period in 2011. This increase was attributable to greater unrealized appreciation and realized gains as well as an increase in the amount of performing assets in the portfolio and distributions from the CLO equity investments in our portfolio. This increase was partially offset by greater hypothetical capital gains incentive fee, increased management fees as well as higher interest expense.

Based on weighted-average shares outstanding of 39,383,076 (basic) and 39,880,940 (diluted), the net increase in net assets resulting from operations per common share for the quarter ended September 30, 2012 was approximately $0.71 (basic) and approximately $0.70 (diluted), compared to a net increase in net assets resulting from operations of approximately $0.36 per share (basic and diluted) for the same period in 2011.

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 $0.83 for basic and $0.82 for diluted, compared to a decrease of $0.39 per share for the same period in 2011.

Set forth below is a comparison of our results of operations for the nine months ended September 30, 2012 to the nine months ended September 30, 2011.

Investment Income As of September 30, 2012, our debt investments had stated interest rates of between 3.81% and 16.00% (excluding our investment in GenuTec Business Solutions, Inc. which carries a zero interest rate through October 30, 2014) and maturity dates of between 5 and 144 months. In addition, our total portfolio had a weighted average yield on debt investments of approximately 10.3% including GenuTec Business Solutions, Inc., compared with 11.4% as of September 30, 2011.

Investment income for the nine months ended September 30, 2012 was approximately $50.8 million compared to approximately $32.0 million for the nine months ended September 30, 2011. 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 as well as a one-time fee of approximately $3.4 million associated with our investment in American Integration Technologies, LLC. The total principal value of income producing debt investments as of September 30, 2012 and September 30, 2011 was approximately $474.9 million and $356.0 million, respectively. For the nine months ended September 30, 2012, investment income consisted of approximately $22.5 million in cash interest from portfolio investments, approximately $4.3 million in amortization of original issue and market discount, approximately $0.5 million of discount income derived from unscheduled principal cash remittances at par on discounted debt securities, approximately $18.0 million in distributions from the equity interest in securitized vehicle investments and an equity investment, as well as approximately $1.0 million in PIK interest income.

For the nine months ended September 30, 2012, fee income of approximately $4.5 million was recorded, compared to fee income of approximately $507,000 for the nine months ended September 30, 2011. Fee income consists of non-recurring fees in connection with our investments in portfolio companies, including commitment fees, origination fees and amendment fees. During the nine months ended September 30, 2012, we recorded approximately $3.4 million of PIK fee income in association with our investment in AIT.

Operating Expenses Total expenses for the nine months ended September 30, 2012 were $23.0 million, which includes the accrued capital gains incentive fee of approximately $4.6 million.

Expenses before incentive fees, for the nine months ended September 30, 2012, were approximately $14.1 million. This amount consisted 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 $6.1 million from the nine months ended September 30, 2011, attributable primarily to higher interest expense associated with the senior notes issued under our collateralized loan obligation transaction, higher investment advisory fees (consisting of the base management fee) as well as increased professional fees associated with our legal and audit expenses. Expenses before incentive fees for the nine months ended September 30, 2011 were approximately $8.0 million.

49 The investment advisory fee for the nine months of 2012 was approximately $7.4 million, representing the base fee as provided for in the Investment Advisory Agreement. The investment advisory fee in the comparable period in 2011 was approximately $5.2 million. The increase of approximately $2.2 million is due to an increase in average gross assets. At each of September 30, 2012 and December 31, 2011, respectively, approximately $2.8 million and $1.9 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 nine months ended of 2012 was approximately $3.1 million, which was directly related to our debt securitization financing transaction compared with interest expense of approximately $434,000 for the nine months ending September 30, 2011.

TICC CLO LLC In August 2011, senior notes in the amount of $101,250,000 were issued by a newly formed special purpose vehicle in which a whole-owned subsidiary of TICC owns all of the equity. Under this structure, the notes bear interest, after the effective date, at three-month London Inter Bank Offered Rate ("LIBOR") plus 2.25% (prior to the effective date, the Class A Notes bear interest at five-month LIBOR plus 2.25%). The accrued interest payable on these notes during the third quarter of 2012 was approximately $517,000. Additionally, for the nine months ended September 30, 2012, the amortization of discount on the issued notes was approximately $132,000 and the amortization of deferred debt issuance costs was approximately $227,000. At December 31, 2011, interest expense of approximately $1.1 million remained payable.

TICC CLO 2012-1 LLC On August 23, 2012, the Company completed a $160 million debt securitization financing transaction. The secured and subordinated notes offered in the debt securitization were issued by TICC CLO 2012-1 LLC ("2012 Securitization Issuer" or "TICC CLO 2012-1"), a newly formed special purpose vehicle that is a wholly-owned subsidiary of the Company. The secured notes of the 2012 Securitization Issuer have an aggregate face amount of $120 million and were issued in four classes. The class A-1 notes have an initial face amount of $88 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 an initial face amount of $10 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 an initial face amount of $11.5 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 an initial face amount of $10.5 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 subordinated notes, which totaled $40 million, and $3 million of the class D-1 notes issued in this CLO transaction.

For further information on this securitization, see Note 4.

The aggregate accrued interest payable on the notes of the 2012 Securitization Issuer during the third quarter of 2012 was approximately $402,000.

Additionally, for the nine months ended September 30, 2012, the aggregate amortization of discount on the issued notes of the 2012 Securitization Issuer was approximately $41,000 and the amortization of deferred debt issuance costs was approximately $25,000.

2017 Convertible Notes On September 26, 2012, we issued $105.0 million aggregate principal amount of the Convertible Notes. The Convertible Notes mature on November 1, 2017. 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 accrued interest payable on the Convertible Notes during the third quarter of 2012 was approximately $109,000. Additionally, for the nine months ended September 30, 2012, the amortization of deferred issuance costs was approximately $6,000.

The table below summarizes the components of interest expense for the nine months ended September 30, 2012 and 2011: Nine Months Ended September 30, 2012 Nine Months Ended September 30, 2011 Amortization of Amortization Stated Note Deferred Debt Stated of Deferred Interest Discount Issuance Interest Note Debt Issuance (dollars in thousands) Expense Expense Costs Total Expense Discount Expense Costs Total TICC CLO LLC Class A Notes $ 2,110.2 $ 131.9 $ 227.1 $ 2,469.2 $ 383.3 $ 8.7 $ 42.3 $ 434.3 TICC CLO 2012-1 LLC Class A-1 Notes 235.3 17.9 - 253.2 - - - - TICC CLO 2012-1 LLC Class B-1 Notes 45.7 5.1 - 50.8 - - - - TICC CLO 2012-1 LLC Class C-1 Notes 68.1 9.3 - 77.4 - - - - TICC CLO 2012-1 LLC Class D-1 Notes 52.6 8.3 - 60.9 - - - - TICC CLO 2012-1 amortization of deferred debt - - 25.1 25.1 - - - - 2017 Convertible Notes 109.4 - 6.1 115.5 - - - - Total $ 2,621.3 $ 172.5 $ 258.3 $ 3,052.1 $ 383.3 $ 8.7 $ 42.3 $ 434.3 50 Professional fees, consisting of legal, valuation, audit and tax fees, were approximately $1.6 million for the nine months ended September 30, 2012, compared to approximately $847,000 for the nine months ended September 30, 2011.

This was the result of an increase in audit fees and legal services which were approximately $977,000 and $545,000, respectively.

Compensation expenses were approximately $839,000 for the nine months ended September 30, 2012, compared to approximately $713,000 for the nine months ended September 30, 2011, reflecting the allocation of compensation expenses for the services of our chief financial officer, chief compliance officer, controller and senior accountants, and other administrative support personnel. At September 30, 2012 and December 31, 2011, respectively, approximately $450,000 and $605,000 of compensation expenses remained payable.

General and administrative expenses, consisting primarily of directors' fees, insurance, listing fees, transfer agent and custodian fees, office supplies, facilities costs and other expenses, were approximately $1.2 million for the nine months ended September 30, 2012 compared to approximately $761,000 for the same period in 2011. 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 nine months of 2012 was approximately $4.4 million compared to $1.4 million for the nine months ended September 30, 2011. 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). For the nine months ending September 30, 2012, the investment adviser permanently waived $5,000 of this incentive fee.

The capital gains incentive fee expense for the nine months ended September 30, 2012 was approximately $4.6 million. 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 period end and the termination of the Investment Advisory Agreement on such date. The $4.6 million capital gains incentive fee accrual as of September 30, 2012 relates entirely to this hypothetical liquidation calculation. For the nine months ended September 30, 2011, an expense of approximately $873,000 was recorded.

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, 2011, such an accrual was not required under the terms of the Investment Advisory Agreement.

Realized and Unrealized Gains/Losses on Investments For the nine months ended September 30, 2012, we recorded net realized gains on investments of approximately $3.6 million, which represents the gains on the sale and repayments of several of our investments, principally in American Integration Technologies, LLC ($1.4 million), GRD Holding III ($370,000), Liberty CDO LTD 2005-1AC ($216,000), Power Tools, Inc. ($204,000), Attachmate Corporation ($135,000), Syniverse Holdings, Inc. ($137,000), Sonic Wall, Inc.

($140,000) and Shield Finance Co. ($115,000).

Based upon the fair value determinations made in good faith by the Board of Directors, during the nine months ended September 30, 2012, we had net unrealized appreciation of approximately $22.8 million, comprised of $44.1 million in gross unrealized appreciation, $19.2 million in gross unrealized depreciation and approximately $2.1 million relating to the reversal of prior period net unrealized appreciation as an investment was realized. The most significant changes in net unrealized appreciation and depreciation during the nine months ended September 30, 2012 were as follows (in millions): 51 Unrealized appreciation Portfolio Company (depreciation) Jersey Street 2006-1A CLO LTD. $ 1.7 Canaras CLO Equity - 2007-1A, 1X 1.6 Harbourview - 2006A CLO Equity 1.5 GSC Partners 2007-8X Sub CDO 1.4 Emporia CLO 2007 3A E 1.4 Prospero CLO II BV 1.3 Integra Telecom Holdings, Inc. 1.2 Hewetts Island CDO IV 2006-4 E 1.2 Muir Grove CLO LTD 2007 1X E 1.0 Algorithmic Implementations, Inc. 1.0 SourceHOV, LLC 1.0 Power Tools, Inc. 0.9 GALE 2007-4A CLO 0.8 Stone Tower CLO LTD 2007 7X 0.8 Rampart 2007-1A CLO Equity 0.8 Lightpoint CLO 2007-8A 0.8 ACA CLO 2007-1a sub 0.8 Harch 2005-2A BB CLO 0.8 ACA CLO 2006-2, Limited 0.8 RBS Holding Company (0.9 ) Stratus Technologies, Inc. (1.0 ) American Integration Technologies, LLC (1.5 ) Merrill Communications, LLC (1.5 ) GenuTec Business Solutions, Inc. (2.0 ) Pegasus Solutions, Inc. (2.5 ) Net all other 11.4 Total $ 22.8 For the nine months ended September 30, 2011, we recorded net realized gains on investments of approximately $2.7 million, which largely represents relatively small gains on several different investments including the realized gains on the repayment of our investment in Prodigy Health Group ($0.7 million) and the sale of our investment in Del Mar CLO I Ltd. 2006-1 ($0.4 million).

Based upon the fair value determinations made in good faith by the Board of Directors, during the nine months ended September 30, 2011, we had net unrealized losses of approximately $17.1 million, comprised of $18.2 million in gross unrealized appreciation, $32.9 million in gross unrealized depreciation and approximately $2.4 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 nine months ended September 30, 2011 were as follows (in millions): YTD Unrealized appreciation Portfolio Company (depreciation) American Integration Technologies, LLC 1.7 ACA CLO 2006-2, Limited 1.1 Pegasus Solutions, Inc. common stock 1.0 Fusionstorm, Inc. 0.5 Sargas CLO 2006 -1A 0.5 Pegasus Solutions, Inc. preferred equity 0.4 Vision Solutions, Inc. (0.4 ) CIFC CLO - 2006-1A B2L (0.4 ) Hewetts Island CDO 2007 - 1RA E (0.4 ) Nextag, Inc. (0.4 ) 52 YTD Unrealized appreciation Portfolio Company (depreciation) Harbourview - 2006A CLO Equity (0.4 ) Primus 2007 2X Class E CLO (0.4 ) GXS Worldwide Inc. (0.4 ) Canaras CLO Equity - 2007-1A, 1X (0.4 ) Del Mar CLO I Ltd. 2006-1 (0.4 ) RBS Holding Company (0.4 ) Loomis Sayles CLO 2006-1AE (0.5 ) Pegasus Solutions, Inc. (0.5 ) Jersey Straits 2006-1A CLO LTD (0.5 ) SourceHov, LLC (0.6 ) Emporia CLO 2007 3A E (0.7 ) Ocean Trails CLO II 2007-2a-d (0.7 ) Prodigy Health Group (0.8 ) Lightpoint CLO 2007-8a (0.9 ) Hewetts Island CDO III 2005-1A D (1.0 ) Prospero CLO II BV (1.3 ) Hewetts Island CDO IV 2006-4 (1.6 ) Integra Telecomm, Inc. (1.9 ) Net all other (7.3 ) Total $ (17.1 ) Please see "-Portfolio Grading" for more information.

Net Increase in Net Assets Resulting from Net Investment Income Net investment income for the nine months ended September 30, 2012 and 2011 was approximately $27.8 million and $21.7 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 the non-recurrence of a one-time fee of approximately $3.4 million associated with our investment in American Integration Technologies, LLC.

Excluding the impact of the capital gains incentive fee of approximately $4.6 million, net investment income for the nine months ended September 30, 2012 was approximately $32.4 million compared to approximately $22.6 million for thesame period in 2011.

Based on weighted-average shares outstanding of 36,859,005 (basic) and 37,026,172 (diluted), the net increase in net assets resulting from net investment income per common share for the nine months ended September 30, 2012 was approximately $0.75 (basic and diluted), compared to approximately $0.67 per share (basic and diluted) for the same period in 2011. 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 $0.88 (basic) and approximately $0.87 (diluted), compared to $0.70 per share (basic and diluted) for the same period in 2011.

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

Net Increase in Net Assets Resulting from Operations We had a net increase in net assets resulting from operations of approximately $54.2 million for the nine months ended September 30, 2012, compared to a net increase of approximately $7.3 million for the comparable period in 2011. This increase was attributable to greater net investment income and was partially offset set by the expense accrual for the capital gains incentive fee of approximately $4.6 million as of September 30, 2012.

Based on weighted-average shares outstanding of 36,859,005 (basic) and 37,026,172 (diluted), the net increase in net assets resulting from operations per common share for the nine months ended September 30, 2012 was approximately $1.47 (basic) and approximately $1.47 (diluted), compared to a net increase in net assets resulting from operations of approximately $0.23 per share (basic and diluted) for the same period in 2011.

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 $1.59 (basic) and approximately $1.59 (diluted), compared to an increase of $0.25 per share (basic and diluted) for the same period in 2011.

53 Please see "-Portfolio Grading" above for more information.

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

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. The Company's 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 is based on a hypothetical event that did not occur, 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 is not a currently tax deductible expense and as the RIC requirements are to distribute taxable earnings, the core net investment income provides an indication of taxable income for the yearto date.

The following tables provide a reconciliation of net investment income to core net investment income (for the three and nine months ended September 30, 2012 and 2011, respectively): Three Months Ended Nine Months Ended September 30, 2012 September 30, 2012 Per Share Per Share Amount Amounts Amount Amounts Net investment income $ 4,607,574 $ 0.117 $ 27,799,570 $ 0.754Capital gains incentive fee 4,649,814 0.118 4,559,957 0.124 Core net investment income $ 9,257,388 $ 0.235 $ 32,359,527 $ 0.878 Three Months Ended Nine Months Ended September 30, 2011 September 30, 2011 Per Share Per Share Amount Amounts Amount Amounts Net investment income $ 11,615,785 $ 0.36 $ 21,687,245 $ 0.67 Capital gains incentive fee (4,153,198 ) (0.13 ) 873,288 0.03 Core net investment income $ 7,462,587 $ 0.23 $ 22,560,533 $ 0.70 The following tables provide a reconciliation of net increase in net assets resulting from operations to core net increase in net assets resulting from operations (for the three and nine months ended September 30, 2012 and 2011, respectively): Three Months Ended Nine Months Ended September 30, 2012 September 30, 2012 Per Share Per Share Amount Amounts Amount Amounts Net increase in net assets resulting from operations $ 27,856,644 $ 0.707 $ 54,199,886 $ 1.470 Capital gains incentive fee 4,649,814 $ 0.118 4,559,957 0.124 Core net increase in net assets resulting from operations $ 32,506,458 $ 0.825 $ 58,759,843 $ 1.594 Three Months Ended Nine Months Ended September 30, 2011 September 30, 2011 Per Share Per Share Amount Amounts Amount Amounts Net (decrease) increase in net assets resulting from operations $ (8,415,279 ) $ (0.26 ) $ 7,349,009 $ 0.22 Capital gains incentive fee (4,153,198 ) (0.13 ) 873,288 0.03 Core net (decrease) increase in net assets resulting from operations $ (12,568,477 ) $ (0.39 ) $ 8,222,297 $ 0.25 54 In addition, the following ratio is presented to supplement the financial highlights included in Note 10 to the financial statements: 2012 2011 Three Months Nine Months Three Months Nine Months Ended Ended Ended Ended September 30, 2012 September 30, 2012 September 30, 2011 September 30, 2011 Ratio of core net investment income to average net assets, for the three and nine month periods ended September 30, 2012 and 2011, respectively 9.88 % 12.35 % 9.13 % 9.36 % 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 three and nine month periods ended September 30, 2012 and 2011, respectively.

2012 2011 Three Months Nine Months Three Months Nine Months Ended Ended Ended Ended September 30, 2012 September 30, 2012 September 30, 2011 September 30, 2011 Ratio of net investment income to average net assets 4.92 % 10.61 % 14.21 % 9.00 % Ratio of capital gain incentive fee to average net assets 4.96 % 1.74 % (5.08 )% 0.36 % Ratio of core net investment income to average net assets 9.88 % 12.35 % 9.13 % 9.36 % 55 LIQUIDITY AND CAPITAL RESOURCES During the nine months ended September 30, 2012, we issued approximately 8.3 million shares in two equity offerings, raising approximately $78.4 millionin net proceeds.

During the nine months ended September 30, 2012, cash and cash equivalents increased from approximately $4.5 million at the beginning of the period to approximately $122.9 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 $67.7 million, largely reflecting purchases of new investments of approximately $226.4 million partially offset by proceeds from principal repayments and sales of investments of approximately $135.9 million. Net cash used by investing activities reflects the change in restricted cash in the debt securitization entity. During the period, net cash provided by financing activities was approximately $259.6 million reflecting primarily the net proceeds of approximately $109.9 million borrowed under our debt securitization financing transaction completed in August 2012, $102.1 million borrowed under our issuance of the Convertible Notes and $78.4 million resulting from two equity offerings, partially offset by the distribution of dividends.

Contractual Obligations We have certain obligations with respect to the investment advisory and administration services we receive. See "-Overview". We incurred approximately $7.4 million for investment advisory services, excluding pre-incentive net investment income incentive fees and approximately $1.2 million for administrative services for the nine months ended September 30, 2012.

TICC CLO is obligated to repay the notes issued in connection with the debt securitization financing that we completed in August 2011. The notes of the 2011 Securitization Issuer mature in 2021, in the total amount of $101,250,000. There are no amortization payments due on the notes of the 2011 Securitization Issuer prior to maturity. See "Borrowings" below.

TICC CLO 2012-1 is obligated to repay the notes issued in connection with the debt securitization financing that we completed in August 2012. The notes of the 2012 Securitization Issuer mature in 2023, in the total amount of $120,000,000.

There are no amortization payments due on the notes of the 2012 Securitization Issuer prior to maturity. See "Borrowings" below.

TICC is obligated to repay the Convertible Notes, which mature in 2017, in the total amount of $105,000,000, unless previously converted in accordance with their terms.

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

Borrowings On August 10, 2011, the Company completed a $225.0 million debt securitization financing transaction. The Class A Notes offered in the securitization were issued by TICC CLO, and are secured by the assets held by the trustee on behalf of the 2011 Securitization Issuer. The notes are an obligation of TICC CLO. The securitization was executed through a private placement of $101.25 million of Aaa/AAA Class A Notes which bear interest, after the effective date, at three-month LIBOR plus 2.25% (prior to the effective date, the Class A Notes bear interest at five-month LIBOR plus 2.25%). The notes were sold at a discount to par, and the amount of the discount is being amortized over the term of the notes. The Class A Notes are included in the September 30, 2012 consolidated statements of assets and liabilities. For the nine months period ended September 30, 2012, the Class A note holders were paid interest on the Class A notes of approximately $2.7 million. Holdings retained all of the 2011 Subordinated Notes totaling $123.75 million and all of the membership interests in the 2011 Securitization Issuer. The 2011 Subordinated Notes do not bear interest, but are entitled to the residual economic interest in the 2011 Securitization Issuer.

On August 23, 2012, the Company completed a $160 million debt securitization financing transaction. The secured and subordinated notes offered in the debt securitization were issued by TICC CLO 2012-1 LLC ("2012 Securitization Issuer" or "TICC CLO 2012-1"), a newly formed special purpose vehicle that is a wholly-owned subsidiary of the Company. The secured notes of the 2012 Securitization Issuer have an aggregate face amount of $120 million and were issued in four classes. The class A-1 notes have an initial face amount of $88 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 an initial face amount of $10 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 an initial face amount of $11.5 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 an initial face amount of $10.5 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 subordinated notes, which totaled $40 million, and $3 million of the class D-1 notes issued in this CLO transaction.

The TICC CLO 2012-1 debt securitization financing transaction has an "accordion" feature which allows, under certain circumstances and subject to the satisfaction of certain conditions, for an increase in the amount of secured and subordinated notes issued by the special purpose vehicle. If the same classes of secured notes are to be issued, the increase must be pro rata to the existing secured and subordinated notes, and is limited to a total increase of $160 million in total size. Alternatively, the special purpose vehicle may issue a class of secured notes that is pari passu to the class D-1 notes or junior to all secured classes, without a cap on the amount of the 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.

56 On September 26, 2012, the Company issued $105,000,000 aggregate principal amount of the 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 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 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.

Distributions In order to qualify as a regulated investment company 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 short-term capital gains to our stockholders on an annual basis.

57 The following table reflects the cash distributions, including dividends 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 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 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 (1) 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, 2001 June 30, 2010 0.20 March 4, 2010 March 24, 2010 March 31, 2010 0.15 Total (2010) 0.81 (1) 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 (1) 58 Date Declared Record Date Payment Date Amount 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 (2) 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 (3) 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 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 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 (4) Total Distributions: $ 8.84 (5) (1) Distributions for the fiscal years ended December 31, 2011, 2010 and 2009 were funded from undistributed net investment income.

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

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

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

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

59 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. Charles M.

Royce, as the non-managing member, holds a minority, non-controlling interest in TICC Management. 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, the investment adviser to Greenwich Loan Income Fund Limited (f/k/a T2 Income Fund Limited) ("GLIF"), a Guernsey fund established and operated for the purpose of investing in bilateral transactions and syndicated loans across a variety of industries globally. BDC Partners is the managing member of T2 Advisers, LLC. In addition, Mr. Conroy serves as the Chief Financial Officer of GLIF and 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 leveraged corporate loans, and its investment adviser, Oxford Lane Management, LLC ("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 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.

• BDC Partners is the managing member of Oxford Gate Capital, LLC, a private fund in which Messrs. Cohen, Rosenthal and Conroy, along with certain investment and administrative personnel of TICC Management, are invested.

BDC Partners has adopted a written policy with respect to the allocation of investment opportunities among TICC, Oxford Lane Capital Corp., GLIF and Oxford Gate Capital, LLC 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).

RECENT DEVELOPMENTS On November 1, 2012, the Board of Directors declared a distribution of $0.29 per share for the fourth quarter, payable on December 31, 2012 to shareholders of record as of December 17, 2012.

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