BlackRock TCP Capital Corp. - FORM 10-Q - November 8, 2016

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EX-31.1 - EXHIBIT 31.1 - BlackRock TCP Capital Corp.s001464x1_ex31-1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

☒
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended September 30, 2016
 
☐
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 814-00899

TCP CAPITAL CORP.
(Exact Name of Registrant as Specified in Charter)

Delaware
56-2594706
(State or Other Jurisdiction of Incorporation)
(IRS Employer Identification No.)
 
 
2951 28 th Street, Suite 1000
 
Santa Monica, California
90405
(Address of Principal Executive Offices)
(Zip Code)

Registrant’s telephone number, including area code (310) 566-1000

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

Common Stock, par value $0.001 per share
NASDAQ Global Select Market
(Title of each class)
(Name of each exchange where registered)

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

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

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

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

Large accelerated filer ☒
Accelerated filer     ☐
 
 
Non-accelerated filer   ☐
Smaller Reporting company ☐

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

The number of shares of the Registrant’s common stock, $0.001 par value, outstanding as of November 8, 2016 was 53,041,751.
 

 
TCP CAPITAL CORP.
 
FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
 

 
TABLE OF CONTENTS
 
 
 
 
Part I.
Financial Information
 
 
 
 
Item 1.
Financial Statements
 
 
Consolidated Statements of Assets and Liabilities as of September 30, 2016 (unaudited) and December 31, 2015
2
 
Consolidated Schedule of Investments as of September 30, 2016 (unaudited) and December 31, 2015
3
 
Consolidated Statements of Operations for the three and nine months ended September 30, 2016 (unaudited) and September 30, 2015 (unaudited)
13
 
Consolidated Statements of Changes in Net Assets for the nine months ended September 30, 2016 (unaudited) and year ended December 31, 2015
14
 
Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 (unaudited) and September 30, 2015 (unaudited)
15
 
Notes to Consolidated Financial Statements (unaudited)
16
 
Consolidated Schedule of Changes in Investments in Affiliates for the nine months ended September 30, 2016 (unaudited) and year ended December 31, 2015
43
 
Consolidated Schedule of Restricted Securities of Unaffiliated Issuers as of September 30, 2016 (unaudited) and December 31, 2015
45
 
Consolidating Statements of Assets and Liabilities as of September 30, 2016 (unaudited) and December 31, 2015
47
 
Consolidating Statements of Operations for the nine months ended September 30, 2016 (unaudited) and September 30, 2015 (unaudited)
49
 
 
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
51
 
 
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
65
 
 
 
Item 4.
Controls and Procedures
65
 
 
 
Part II.
Other Information
 
 
 
 
Item 1.
Legal Proceedings
66
 
 
 
Item 1A.
Risk Factors
66
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
66
 
 
 
Item 3.
Defaults upon Senior Securities
66
 
 
 
Item 4.
Mine Safety Disclosures
66
 
 
 
Item 5.
Other Information
66
 
 
 
Item 6.
Exhibits
66
 

1
TCP Capital Corp.
 
Consolidated Statements of Assets and Liabilities
 
   
September 30, 2016
    
December 31, 2015
  
   
(unaudited)
        
Assets
            
Investments, at fair value:
            
Companies less than 5% owned (cost of $1,161,033,998 and $1,123,682,687, respectively)
  
$
1,144,719,963
    
$
1,099,208,475
  
Companies 5% to 25% owned (cost of $72,925,246 and $68,862,518, respectively)
    
68,900,676
      
69,008,931
  
Companies more than 25% owned (cost of $88,662,808 and $39,162,221, respectively)
    
62,809,253
      
14,702,319
  
Total investments (cost of $1,322,622,052 and $1,231,707,426, respectively)
    
1,276,429,892
      
1,182,919,725
  
                 
Cash and cash equivalents
    
140,873,527
      
35,629,435
  
Receivable for investments sold
    
6,306,581
      
-
  
Accrued interest income:
                
Companies less than 5% owned
    
11,067,134
      
8,842,528
  
Companies 5% to 25% owned
    
1,036,764
      
741,306
  
Companies more than 25% owned
    
15,919
      
29,230
  
Deferred debt issuance costs
    
4,216,157
      
5,390,241
  
Unrealized appreciation on swaps
    
-
      
3,229,442
  
Options (cost of $279,327 and $51,750, respectively)
    
460,972
      
-
  
Prepaid expenses and other assets
    
1,421,623
      
2,331,044
  
Total assets
    
1,441,828,569
      
1,239,112,951
  
                 
Liabilities
                
Debt, net of unamortized issuance costs
    
631,701,662
      
498,205,471
  
Payable for investments purchased
    
9,151,343
      
6,425,414
  
Incentive allocation payable
    
5,133,010
      
5,207,606
  
Interest payable
    
4,520,221
      
2,911,257
  
Payable to the Advisor
    
877,866
      
508,334
  
Accrued expenses and other liabilities
    
3,336,925
      
3,877,852
  
Total liabilities
    
654,721,027
      
517,135,934
  
                 
Commitments and contingencies (Note 5)
                
                 
Net assets applicable to common shareholders
  
$
787,107,542
    
$
721,977,017
  
                 
Composition of net assets applicable to common shareholders
                
Common stock, $0.001 par value; 200,000,000 shares authorized, 53,041,751 and 48,834,734 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively
  
$
53,042
    
$
48,834
  
Paid-in capital in excess of par
    
944,993,651
      
878,383,356
  
Accumulated net investment income
    
24,716,951
      
22,261,793
  
Accumulated net realized losses
    
(136,476,545
)
    
(132,483,593
)
Accumulated net unrealized depreciation
    
(46,179,557
)
    
(46,233,373
)
Net assets applicable to common shareholders
  
$
787,107,542
    
$
721,977,017
  
                 
Net assets per share
  
$
14.84
    
$
14.78
  
 
See accompanying notes to the consolidated financial statements.
2
TCP Capital Corp.
 
Consolidated Schedule of Investments (Unaudited)
 
September 30, 2016
 
                                             
Fair
Value
    
% of Total
Cash and
Investments
        
                                                       
Issuer
  
Instrument
  
Ref
  
Floor
    
Spread
    
Total Coupon
  
Maturity
  
Principal
    
Cost
            
Notes
  
                                                           
Debt Investments (A)
                                                      
Activities Related to Real Estate
                                                      
Associations, Inc.
  
First Lien FILO Term Loan
  
LIBOR (Q)
    
1.00
%
    
8.96
%
    
9.96
%
12/23/2019
  
$
12,924,237
    
$
12,795,214
    
$
12,794,994
      
0.90
%
      
                                                                         
Advertising and Public Relations Services
                                                                    
InMobi, Inc. (Singapore)
  
First Lien Delayed Draw Tranche 1 Term Loan
(1.25% Exit Fee)
  
LIBOR (M)
    
0.33
%
    
10.17
%
    
10.98
%
9/1/2018
  
$
15,000,000
      
14,717,540
      
14,735,250
      
1.04
%
  
H/L
 
InMobi, Inc. (Singapore)
  
First Lien Delayed Draw Tranche 1 Term Loan
  
LIBOR (M)
    
0.33
%
    
10.17
%
    
N/A
  
9/1/2018
  
$
–
      
-
      
-
      
-
     H
 
InMobi, Inc. (Singapore)
  
First Lien Delayed Draw Tranche 1 Term Loan
  
LIBOR (M)
    
0.33
%
    
10.17
%
    
N/A
  
9/1/2018
  
$
–
      
-
      
-
      
-
     H
 
                                               
14,717,540
      
14,735,250
      
1.04
%
      
Air Transportation
                                                                    
Mesa Air Group, Inc.
  
Acquisition Loan
  
LIBOR (M)
    
-
      
7.25
%
    
7.81
%
7/15/2022
  
$
14,545,227
      
14,324,197
      
14,836,131
      
1.05
%
      
                                                                         
Apparel Manufacturing
                                                                    
Broder Bros., Co.
  
First Lien Term Loan (First Out)
  
LIBOR (Q)
    
1.25
%
    
5.75
%
    
7.00
%
6/3/2021
  
$
9,760,000
      
9,592,010
      
9,711,200
      
0.69
%
      
Broder Bros., Co.
  
First Lien Term Loan B (Last Out)
  
LIBOR (Q)
    
1.25
%
    
12.25
%
    
13.50
%
6/3/2021
  
$
9,840,000
      
9,675,719
      
9,741,600
      
0.69
%
      
JH Apparel Holdings, LLC
  
First Lien FILO Term Loan
  
LIBOR (M)
    
1.00
%
    
9.60
%
    
10.60
%
4/8/2019
  
$
2,953,456
      
2,940,331
      
2,982,990
      
0.21
%
      
                                               
22,208,060
      
22,435,790
      
1.59
%
      
Building Equipment Contractors
                                                                    
Hylan Datacom & Electrical, LLC
  
First Lien Delayed Draw Term Loan
  
LIBOR (Q)
    
1.00
%
    
7.50
%
    
8.50
%
7/25/2021
  
$
–
      
-
      
-
      
-
        
Hylan Datacom & Electrical, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
7.50
%
    
8.50
%
7/25/2021
  
$
14,386,131
      
14,173,719
      
14,172,065
      
1.00
%
      
                                               
14,173,719
      
14,172,065
      
1.00
%
      
Business Support Services
                                                                    
Enerwise Global Technologies, Inc.
  
Sr Secured Revolving Loan
  
LIBOR (Q)
    
0.23
%
    
8.52
%
    
N/A
  
11/30/2018
  
$
–
      
(22,700
)
    
(24,400
)
    
-
     K
 
Enerwise Global Technologies, Inc.
  
Sr Secured Term Loan (1.0% Exit Fee)
  
LIBOR (Q)
    
0.23
%
    
9.27
%
    
9.92
%
11/30/2019
  
$
23,937,500
      
23,785,168
      
23,791,481
      
1.68
%
   L
 
STG-Fairway Acquisitions, Inc.
(First Advantage)
  
Second Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
9.25
%
    
10.25
%
6/30/2023
  
$
31,000,000
      
30,574,535
      
31,093,000
      
2.19
%
      
                                               
54,337,003
      
54,860,081
      
3.87
%
      
Chemicals
                                                                        
Anuvia Plant Nutrients Holdings, LLC
  
Sr Secured Term Loan (8.0% Exit Fee)
  
LIBOR (Q)
    
-
      
10.63
%
    
12.15
%
2/1/2018
  
$
9,053,891
      
9,480,486
      
9,650,996
      
0.68
%
   L
 
Green Biologics, Inc.
  
Sr Secured Delayed Draw Term Loan
(10.0% Exit Fee)
  
Prime Rate
    
-
      
7.75
%
    
11.25
%
5/1/2018
  
$
15,000,000
      
15,340,950
      
14,694,750
      
1.04
%
   L
 
                                               
24,821,436
      
24,345,746
      
1.72
%
      
Communications Equipment Manufacturing
                                                                    
Globecomm Systems, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.25
%
    
7.63
%
    
8.88
%
12/11/2018
  
$
14,517,321
      
14,372,148
      
14,517,320
      
1.02
%
   B
 
Globecomm Systems, Inc.
  
First Lien Series A Term Loan
  
LIBOR (Q)
    
1.25
%
    
7.63
%
    
N/A
  
12/11/2018
  
$
–
      
-
      
-
      
-
     B  
Triangle Acquisition Co. (Polycom)
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
6.50
%
    
7.50
%
9/29/2023
  
$
5,000,000
      
4,800,000
      
4,825,000
      
0.34
%
      
                                               
19,172,148
      
19,342,320
      
1.36
%
      
                                                                         
Computer Equipment Manufacturing
                                                                    
Silicon Graphics  International Corp.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
9.00
%
    
10.00
%
7/27/2018
  
$
15,846,397
      
15,677,901
      
16,140,347
      
1.14
%
   J
 
                                                                         
Computer Systems Design and Related Services
                                                                
Dealersocket, Inc.
  
Senior Secured 1st Lien Term Loan
  
LIBOR (M)
    
1.00
%
    
10.00
%
    
11.00
%
2/10/2021
  
$
17,500,000
      
16,858,354
      
17,272,500
      
1.22
%
      
MSC Software Corporation
  
Second Lien Term Loan
  
LIBOR (M)
    
1.00
%
    
7.50
%
    
8.50
%
5/29/2021
  
$
6,993,035
      
6,949,718
      
6,853,175
      
0.49
%
      
Marketo, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
9.50
%
    
10.50
%
8/16/2021
  
$
23,295,455
      
22,605,970
      
22,596,591
      
1.59
%
      
Marketo, Inc.
  
Senior Secured Revolver
  
LIBOR (Q)
    
1.00
%
    
9.50
%
    
10.50
%
8/16/2021
  
$
–
      
(49,877
)
    
(51,135
)
    
-
     K
 
OnX Enterprise Solutions, Ltd. (Canada)
  
First Lien Term Loan B
  
LIBOR (Q)
    
-
      
8.00
%
    
8.75
%
9/3/2018
  
$
2,319,933
      
2,319,933
      
2,319,933
      
0.16
%
   H
 
OnX Enterprise Solutions, Ltd. (Canada)
  
First Lien Term Loan
  
LIBOR (Q)
    
-
      
8.00
%
    
8.75
%
9/3/2018
  
$
10,346,667
      
10,287,679
      
10,346,667
      
0.73
%
  
H
 
OnX USA, LLC
  
First Lien Term Loan B
  
LIBOR (Q)
    
-
      
8.00
%
    
8.75
%
9/3/2018
  
$
3,749,867
      
3,749,867
      
3,749,867
      
0.26
%
      
OnX USA, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
-
      
8.00
%
    
8.75
%
9/3/2018
  
$
3,173,333
      
3,160,481
      
3,173,333
      
0.22
%
      
Waterfall International, Inc.
  
First Lien Delayed Draw Term Loan
(3.0% Exit Fee)
  
LIBOR (Q)
    
-
      
11.67
%
    
12.48
%
9/1/2018
  
$
4,800,000
      
4,798,895
      
4,779,360
      
0.34
%
  
L
  
                                               
70,681,020
      
71,040,291
      
5.01
%
      
Data Processing and Hosting Services
                                                                    
Rightside Group, Ltd.
  
Second Lien Term Loan
  
LIBOR (Q)
    
0.50
%
    
8.75
%
    
9.63
%
8/6/2019
  
$
4,562,500
      
3,964,688
      
4,608,125
      
0.33
%
      
United TLD Holdco, Ltd. (Rightside)
(Cayman Islands)
  
Second Lien Term Loan
  
LIBOR (Q)
    
0.50
%
    
8.75
%
    
9.63
%
8/6/2019
  
$
9,125,000
      
7,929,375
      
9,216,250
      
0.65
%
  
H
 
                                               
11,894,063
      
13,824,375
      
0.98
%
      
Electric Power Generation, Transmission and Distribution
                                                                    
Holocene Renewable Energy Fund 3, LLC
(Conergy)
  
First Lien Term Loan
  
Fixed
    
-
      9% Cash
+ 1% PIK		    
10.00
%
9/10/2017
  
$
7,518,173
      
7,480,132
      
7,442,991
      
0.53
%
      
CGY UK Portfolio I Borrower LLC,
(Conergy)
  
Senior Secured 1st Lien Term Loan
  
LIBOR (Q)
    
-
      
9.00
%
    
9.85
%
3/3/2018
  
$
3,951,020
      
3,862,845
      
3,911,510
      
0.28
%
      
                                               
11,342,977
      
11,354,501
      
0.81
%
      
Electronic Component Manufacturing
                                                                    
Redaptive, Inc.
  
First Lien Delayed Draw Term Loan
  
LIBOR (Q)
    
-
      
10.72
%
    
N/A
  
7/1/2018
  
$
–
      
(84,877
)
    
-
      
-
    
K
 
Soraa, Inc.
  
Tranche A Term Loan (3.0% Exit Fee)
  
LIBOR (Q)
    
0.44
%
    
9.33
%
    
10.15
%
3/1/2018
  
$
18,563,581
      
18,170,569
      
18,164,464
      
1.28
%
  
L
 
Soraa, Inc.
  
Tranche B Term Loan
  
LIBOR (Q)
    
0.44
%
    
9.33
%
    
10.15
%
9/1/2017
  
$
1,603,779
      
1,539,706
      
1,548,689
      
0.11
%
      
                                               
19,625,398
      
19,713,153
      
1.39
%
      
Equipment Leasing
                                                                    
36th Street Capital Partners Holdings, LLC
  
Senior Note
  
Fixed
    
-
      
12.00
%
    
12.00
%
11/1/2020
  
$
24,180,718
      
24,180,718
      
24,180,718
      
1.71
%
  
E/F
 
Essex Ocean, LLC (Solexel)
  
Sr Secured Term Loan
  
Fixed
    
-
      
8.00
%
    
8.00
%
8/15/2018
  
$
1,928,731
      
1,928,731
      
1,967,306
      
0.14
%
      
                                               
26,109,449
      
26,148,024
      
1.85
%
      

3
TCP Capital Corp.
 
Consolidated Schedule of Investments (Unaudited) (Continued)
 
September 30, 2016
 
                                             
Fair
Value
    
% of Total
Cash and
Investments
        
                                                       
Issuer
  
Instrument
  
Ref
  
Floor
    
Spread
    
Total Coupon
  
Maturity
  
Principal
    
Cost
            
Notes
  
                                                           
Debt Investments (continued)
                                                      
Facilities Support Services
                                                      
NANA Development Corp.
  
First Lien Term Loan B
  
LIBOR (M)
    
1.25
%
    
6.75
%
    
8.00
%
3/15/2018
  
$
1,055,416
    
$
991,404
    
$
997,368
      
0.07
%
      
                                                                         
Financial Investment Activities
                                                                    
iPayment, Inc.
  
First Lien Term Loan B2
  
LIBOR (Q)
    
1.50
%
    
5.25
%
    
6.75
%
5/8/2017
  
$
12,304,553
      
12,015,428
      
11,689,326
      
0.83
%
      
Magnolia Finance V plc (Cayman Islands)
  
Asset-Backed Credit Linked Notes
  
Fixed
    
-
      
13.13
%
    
13.13
%
8/2/2021
  
$
15,000,000
      
15,000,000
      
14,926,500
      
1.05
%
  
E/H
 
                                               
27,015,428
      
26,615,826
      
1.88
%
      
Gaming
                                                                    
AP Gaming I, LLC
  
First Lien Revolver
  
LIBOR (M)
    
-
      
8.25
%
    
N/A
  
12/20/2018
  
$
–
      
(1,707,675
)
    
(1,125,000
)
    
(0.08
%)
   K
 
                                                                         
Grocery Stores
                                                                    
Bashas, Inc.
  
First Lien FILO Term Loan
  
LIBOR (M)
    
1.50
%
    
8.80
%
    
10.30
%
10/8/2019
  
$
9,362,778
      
9,326,959
      
9,456,406
      
0.67
%
      
                                                                         
Hospitals
                                                                    
KPC Healthcare, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
9.50
%
    
10.50
%
8/28/2020
  
$
15,821,501
      
15,527,235
      
16,194,097
      
1.14
%
      
Pacific Coast Holdings Investment, LLC
  
Senior Secured 1st Lien Delayed
Draw Term Loan
  
LIBOR (M)
    
2.00
%
    
9.70
%
    
11.70
%
10/23/2019
  
$
10,828,233
      
10,762,079
      
10,828,233
      
0.76
%
      
                                               
26,289,314
      
27,022,330
      
1.90
%
      
Insurance Carriers
                                                                    
JSS Holdings, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
6.50
%
    
7.50
%
8/31/2021
  
$
3,800,000
      
3,735,379
      
3,781,000
      
0.27
%
      
US Apple Holdco, LLC (Ventiv Technology)
  
First Lien Term Loan
  
LIBOR (Q)
    
0.50
%
    
13.62
%
    
14.50
%
8/29/2019
  
$
20,015,152
      
19,495,681
      
20,015,152
      
1.41
%
      
                                               
23,231,060
      
23,796,152
      
1.68
%
      
Insurance Related Activities
                                                                    
Acrisure, LLC
  
Second Lien Notes
  
LIBOR (Q)
    
1.00
%
    
9.00
%
    
10.00
%
11/19/2022
  
$
28,999,999
      
28,618,700
      
28,999,999
      
2.05
%
      
Acrisure, LLC
  
Second Lien Incremental Notes
  
LIBOR (Q)
    
1.00
%
    
9.00
%
    
10.00
%
11/19/2022
  
$
6,000,000
      
5,943,055
      
6,000,000
      
0.42
%
      
                                               
34,561,755
      
34,999,999
      
2.47
%
      
Lessors of Nonfinancial Licenses
                                                                    
ABG Intermediate Holdings 2, LLC
  
Second Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
8.50
%
    
9.50
%
5/27/2022
  
$
16,573,588
      
16,430,136
      
16,283,550
      
1.15
%
      
ABG Intermediate Holdings 2, LLC
  
Second Lien Incremental Term Loan
  
LIBOR (Q)
    
1.00
%
    
8.50
%
    
9.50
%
5/27/2022
  
$
3,426,412
      
3,396,188
      
3,366,450
      
0.24
%
      
                                               
19,826,324
      
19,650,000
      
1.39
%
      
Management, Scientific, and Technical Consulting Services
                                                                
Dodge Data & Analytics, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
8.75
%
    
9.75
%
10/31/2019
  
$
24,170,030
      
23,748,562
      
23,573,030
      
1.66
%
      
                                                                         
Medical Equipment and Supplies Manufacturing
                                                                
Bioventus, LLC
  
Second Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
10.00
%
    
11.00
%
4/10/2020
  
$
11,000,000
      
10,844,831
      
11,027,500
      
0.78
%
      
                                                                         
Motion Picture and Video Industries
                                                                    
CORE Entertainment, Inc.
  
First Lien Term Loan
  
Fixed
    
-
      
11.00
%
    
11.00
%
6/21/2017
  
$
9,462,231
      
9,497,311
      
4,315,251
      
0.30
%
  
C
 
CORE Entertainment, Inc.
  
Second Lien Term Loan
  
Fixed
    
-
      
15.50
%
    
15.50
%
6/21/2018
  
$
7,569,785
      
7,700,187
      
297,493
      
0.02
%
  
C
 
                                               
17,197,498
      
4,612,744
      
0.32
%
      
Nondepository Credit Intermediation
                                                                    
Caribbean Financial Group
(Cayman Islands)
  
Sr Secured Notes
  
Fixed
    
-
      
11.50
%
    
11.50
%
11/15/2019
  
$
28,678,000
      
28,560,113
      
29,108,170
      
2.05
%
  
E/G/H
  
Daymark Financial Acceptance, LLC
  
First Lien Delayed Draw Term Loan
  
LIBOR (M)
    
-
      
9.50
%
    
10.02
%
1/12/2020
  
$
17,500,000
      
17,283,898
      
17,263,750
      
1.22
%
      
Greystone Select Holdings, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
8.00
%
    
9.00
%
3/26/2021
  
$
16,102,989
      
15,945,396
      
15,933,907
      
1.13
%
      
Trade Finance Funding I, Ltd.
(Cayman Islands)
  
Secured Class B Notes
  
Fixed
    
-
      
10.75
%
    
10.75
%
11/13/2018
  
$
15,084,000
      
15,084,000
      
14,857,740
      
1.05
%
  
E/H
 
                                               
76,873,407
      
77,163,567
      
5.45
%
      
Other Chemical Product and Preparation Manufacturing
                                                                    
Nanosys, Inc.
  
First Lien Delayed Draw Term Loan
(3.5% Exit Fee)
  
LIBOR (Q)
    
-
      
9.81
%
    
10.69
%
4/1/2019
  
$
7,000,000
      
6,448,006
      
6,740,300
      
0.48
%
  
L
 
                                                                         
Other Information Services
                                                                    
Asset International, Inc.
  
Delayed Draw Term Loan
  
LIBOR (M)
    
1.00
%
    
7.00
%
    
N/A
  
7/31/2020
  
$
–
      
(24,780
)
    
(56,427
)
    
-
    
K
 
Asset International, Inc.
  
Revolver Loan
  
LIBOR (M)
    
1.00
%
    
7.00
%
    
N/A
  
7/31/2020
  
$
–
      
(11,672
)
    
(26,580
)
    
-
    
K
 
Asset International, Inc.
  
First Lien Term Loan
  
LIBOR (M)
    
1.00
%
    
7.00
%
    
8.00
%
7/31/2020
  
$
15,506,085
      
15,293,023
      
15,086,646
      
1.06
%
      
Simmons Research, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
0.50
%
    
10.50
%
    
11.38
%
12/11/2020
  
$
4,936,601
      
4,849,352
      
4,899,576
      
0.35
%
      
SoundCloud Ltd. (United Kingdom)
  
Sr Secured Term Loan (2.0% Exit Fee)
  
LIBOR (M)
    
0.28
%
    
10.72
%
    
11.60
%
10/1/2018
  
$
31,550,000
      
31,562,496
      
32,039,060
      
2.26
%
  
H/L
 
TCH-2 Holdings, LLC (TravelClick)
  
Second Lien Term Loan
  
LIBOR (M)
    
1.00
%
    
7.75
%
    
8.75
%
11/6/2021
  
$
19,988,392
      
19,760,997
      
19,788,509
      
1.40
%
  
G
 
                                               
71,429,416
      
71,730,784
      
5.07
%
      
Other Manufacturing
                                                                    
AGY Holding Corp.
  
Sr Secured Term Loan
  
Fixed
    
-
      
12.00
%
    
12.00
%
9/15/2018
  
$
4,869,577
      
4,869,577
      
4,869,577
      
0.34
%
  
B
 
AGY Holding Corp.
  
Second Lien Notes
  
Fixed
    
-
      
11.00
%
    
11.00
%
11/15/2016
  
$
9,268,000
      
7,586,317
      
9,268,000
      
0.65
%
  
B/E
 
AGY Holding Corp.
  
Delayed Draw Term Loan
  
Fixed
    
-
      
12.00
%
    
12.00
%
9/15/2018
  
$
–
      
-
      
-
      
-
    
B
 
Boomerang Tube, LLC
  
Subordinated Notes
  
LIBOR (M)
    
-
      
17.50
%
    
17.50
%
2/1/2021
  
$
1,030,741
      
1,030,741
      
149,458
      
0.01
%
  
C
 
                                               
13,486,635
      
14,287,035
      
1.00
%
      
Other Publishing
                                                                    
Bisnow, LLC
  
First Lien Revolver
  
LIBOR (Q)
    
-
      
9.00
%
    
N/A
  
4/29/2021
  
$
–
      
(24,000
)
    
(22,200
)
    
-
     K
 
Bisnow, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
-
      
9.00
%
    
9.88
%
4/29/2021
  
$
8,614,356
      
8,453,191
      
8,459,298
      
0.60
%
      
                                               
8,429,191
      
8,437,098
      
0.60
%
      
Other Telecommunications
                                                                    
Securus Technologies, Inc.
  
Second Lien Term Loan
  
LIBOR (Q)
    
1.25
%
    
7.75
%
    
9.00
%
4/30/2021
  
$
10,387,097
      
10,283,226
      
10,043,024
      
0.71
%
      
                                                                         
Pharmaceuticals 
                                                                    
Lantheus Medical Imaging, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
6.00
%
    
7.00
%
6/30/2022
  
$
9,277,833
      
8,785,818
      
9,115,471
      
0.64
%
      
                                                                         
Plastics Manufacturing
                                                                    
Iracore International, Inc.
  
Sr Secured Notes
  
Fixed
    
-
      
9.50
%
    
9.50
%
6/1/2018
  
$
13,600,000
      
13,600,000
      
7,208,000
      
0.51
%
  
E/G
 
 
4
TCP Capital Corp.
 
Consolidated Schedule of Investments (Unaudited) (Continued)
 
September 30, 2016
 
                                             
Fair
Value
    
% of Total
Cash and
Investments
        
                                                       
Issuer
  
Instrument
  
Ref
  
Floor
    
Spread
    
Total Coupon
  
Maturity
  
Principal
    
Cost
            
Notes
  
                                                           
Debt Investments (continued)
                                                      
Radio and Television Broadcasting 
                                                      
Fuse, LLC
  
Sr Secured Notes
  
Fixed
    
-
      
10.38
%
    
10.38
%
7/1/2019
  
$
7,312,000
    
$
7,312,000
    
$
5,027,000
      
0.35
%
  
E/G
 
NEP/NCP Holdco, Inc.
  
Second Lien Term Loan
  
LIBOR (M)
    
1.25
%
    
8.75
%
    
10.00
%
7/22/2020
  
$
15,981,496
      
15,709,496
      
16,101,357
      
1.14
%
      
                                               
23,021,496
      
21,128,357
      
1.49
%
      
                                                                         
Restaurants 
                                                                    
RM OpCo, LLC (Real Mex)
  
Convertible Second Lien Term Loan Tranche B-1
  
Fixed
    
-
      
8.50
%
    
8.50
%
3/30/2018
  
$
1,902,207
      
1,902,207
      
1,902,207
      
0.13
%
  
B
 
RM OpCo, LLC (Real Mex)
  
First Lien Term Loan Tranche A
  
Fixed
    
-
      
7.00
%
    
7.00
%
3/30/2018
  
$
4,864,613
      
4,581,227
      
4,864,613
      
0.34
%
   B
 
RM OpCo, LLC (Real Mex)
  
Second Lien Term Loan Tranche B
  
Fixed
    
-
      
8.50
%
    
8.50
%
3/30/2018
  
$
9,478,043
      
9,478,043
      
3,981,726
      
0.28
%
  
B
 
RM OpCo, LLC (Real Mex)
  
Second Lien Term Loan Tranche B-1
  
Fixed
    
-
      
8.50
%
    
8.50
%
3/30/2018
  
$
2,984,959
      
2,969,537
      
2,984,959
      
0.21
%
   B
 
RM OpCo, LLC (Real Mex)
  
Sr Convertible Second Lien Term Loan B
  
Fixed
    
-
      
8.50
%
    
8.50
%
3/30/2018
  
$
3,422,601
      
3,422,601
      
3,422,601
      
0.24
%
   B
 
                                               
22,353,615
      
17,156,106
      
1.20
%
      
Retail 
                                                                    
Bon-Ton, Inc.
  
First Lien Tranche A-1 Revolver
  
LIBOR (Q)
    
1.00
%
    
9.50
%
    
10.50
%
3/15/2021
  
$
4,432,934
      
4,344,275
      
4,388,604
      
0.31
%
      
Gander Mountain Company
  
Second Lien Term Loan
  
LIBOR (Q)
    
-
      
9.50
%
    
10.33
%
6/15/2018
  
$
11,465,152
      
11,360,266
      
11,350,501
      
0.80
%
      
The Gymboree Corporation
  
First Lien Term Loan
  
LIBOR (Q)
    
-
      
10.25
%
    
11.09
%
9/24/2020
  
$
9,704,432
      
9,519,691
      
9,530,723
      
0.67
%
      
Kenneth Cole Productions, Inc.
  
First Lien FILO Term Loan
  
LIBOR (M)
    
1.00
%
    
8.50
%
    
9.50
%
9/25/2020
  
$
20,672,789
      
20,479,758
      
20,879,517
      
1.47
%
      
                                               
45,703,990
      
46,149,345
      
3.25
%
      
Satellite Telecommunications
                                                                    
Avanti Communications Group, PLC
(United Kingdom)
  
Sr Secured Notes
  
Fixed
    
-
      
10.00
%
    
10.00
%
10/1/2019
  
$
9,393,000
      
9,393,000
      
7,509,506
      
0.53
%
  
E/G/H
  
                                                                         
Scientific Research and Development Services 
                                                                
BPA Laboratories, Inc.
  
Senior Secured Notes
  
Fixed
    
-
      
12.25
%
    
12.25
%
4/1/2017
  
$
38,932,000
      
39,001,750
      
39,061,760
      
2.76
%
  
E/G
 
                                                                         
Software Publishing 
                                                                    
Acronis International GmbH
(Switzerland)
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
11.00
%
    
12.00
%
6/9/2017
  
$
28,336,513
      
28,303,218
      
28,121,155
      
1.98
%
   H
 
ArcServe (USA), LLC
  
Second Lien Term Loan
  
LIBOR (Q)
    
0.50
%
    8.5% Cash
+ 1.25% PIK		    
10.60
%
1/31/2020
  
$
30,124,704
      
29,727,413
      
28,312,703
      
2.00
%
      
Aptos Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
6.75
%
    
7.75
%
9/1/2022
  
$
10,000,000
      
9,800,200
      
9,800,000
      
0.69
%
      
Autoalert, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
0.25
%
    4.75% Cash
+ 4% PIK		    
9.63
%
3/31/2019
  
$
35,627,947
      
35,232,825
      
35,531,752
      
2.51
%
      
BlackLine Systems, Inc.
  
First Lien Acquisition Term Loan
  
LIBOR (Q)
    
1.50
%
    3.25% Cash
+ 4.75% PIK		    
9.50
%
9/25/2018
  
$
9,593,227
      
9,500,850
      
9,503,530
      
0.67
%
      
BlackLine Systems, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.50
%
    3.25% Cash
+ 4.75% PIK		    
9.50
%
9/25/2018
  
$
15,347,165
      
14,711,503
      
15,203,669
      
1.07
%
      
BlackLine Systems, Inc.
  
Senior Secured 1st Lien Incremental Term Loan
  
LIBOR (Q)
    
1.50
%
    3.25% Cash
+ 4.75% PIK		    
9.50
%
9/25/2018
  
$
3,868,410
      
3,808,441
      
3,832,240
      
0.27
%
      
BlackLine Systems, Inc.
  
Senior Secured Revolver
  
LIBOR (Q)
    
0.50
%
    
6.00
%
    
6.50
%
9/25/2018
  
$
–
      
-
      
-
      
-
        
Bluehornet Networks, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
-
      
9.50
%
    
10.36
%
12/3/2020
  
$
5,837,798
      
5,732,817
      
5,837,798
      
0.41
%
      
Edmentum, Inc.
  
Jr Revolving Facility
  
Fixed
    
-
      
5.00
%
    
5.00
%
6/9/2020
  
$
-
      
-
      
-
      
-
     B
 
Edmentum Ultimate Holdings, LLC
  
Sr PIK Notes
  
Fixed
    
-
      
8.50
%
    
8.50
%
6/9/2020
  
$
2,784,444
      
2,784,444
      
2,784,444
      
0.20
%
   B
 
Edmentum Ultimate Holdings, LLC
  
Jr PIK Notes
  
Fixed
    
-
      
10.00
%
    
10.00
%
6/9/2020
  
$
12,708,557
      
12,176,942
      
12,225,632
      
0.86
%
   B
 
Fidelis Acquisitionco, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
8.00
%
    
9.00
%
11/4/2019
  
$
42,565,572
      
41,947,258
      
42,246,330
      
2.98
%
      
Fidelis Acquisitionco, LLC
  
Sr Secured Revolver
  
LIBOR (Q)
    
1.00
%
    
8.00
%
    
9.00
%
11/4/2019
  
$
3,182,143
      
3,182,143
      
3,158,277
      
0.22
%
      
Newscycle Solutions, Inc.
  
Second Lien Term Loan
  
LIBOR (Q)
    
-
      
13.00
%
    
13.83
%
9/10/2021
  
$
11,513,362
      
11,181,123
      
11,255,463
      
0.79
%
      
Newscycle Solutions AB
  
Second Lien Term Loan B
  
LIBOR (Q)
    
-
      
13.00
%
    
13.83
%
9/10/2021
  
$
11,513,362
      
11,181,123
      
11,255,463
      
0.79
%
      
Soasta, Inc.
  
Senior Secured 1st Lien Term Loan
(4.0% Exit Fee)
  
LIBOR (Q)
    
-
      
9.56
%
    
10.44
%
4/1/2019
  
$
17,880,435
      
17,699,921
      
17,777,622
      
1.25
%
   L
 
Utilidata, Inc.
  
First Lien Delayed Draw Term Loan
(1.0% Exit Fee)
  
LIBOR (M)
    
0.62
%
    
9.88
%
    
10.69
%
1/1/2019
  
$
3,200,000
      
3,120,904
      
3,040,000
      
0.21
%
   L
 
Virgin Pulse Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
-
      
8.00
%
    
8.88
%
5/21/2020
  
$
7,500,000
      
7,416,185
      
7,500,000
      
0.53
%
      
                                               
247,507,310
      
247,386,078
      
17.43
%
      
                                                                         
Textile Furnishings Mills 
                                                                    
Lexmark Carpet Mills, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
10.00
%
    
11.00
%
12/19/2019
  
$
23,038,235
      
23,038,235
      
22,653,496
      
1.60
%
      
Lexmark Carpet Mills, Inc.
  
First Lien Term Loan B
  
LIBOR (Q)
    
1.00
%
    
10.00
%
    
11.00
%
12/19/2019
  
$
7,902,650
      
7,749,659
      
7,770,676
      
0.55
%
      
                                               
30,787,894
      
30,424,172
      
2.15
%
      
Utility System Construction 
                                                                    
Kawa Solar Holdings Limited
  
Bank Guarantee Credit Facility
  
Fixed
    
-
      8.2% Cash
+ 3.5% PIK		    
11.70
%
7/2/2017
  
$
21,089,833
      
21,089,833
      
20,704,944
      
1.46
%
   F
 
Kawa Solar Holdings Limited
  
Revolving Credit Facility
  
Fixed
    
-
      
8.20
%
    
8.20
%
7/2/2017
  
$
4,000,000
      
4,000,000
      
4,000,000
      
0.28
%
   F
 
                                               
25,089,833
      
24,704,944
      
1.74
%
      
Wholesalers 
                                                                    
NILCO, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
9.50
%
    
10.50
%
9/1/2021
  
$
21,289,225
      
20,655,468
      
20,650,548
      
1.46
%
      
                                                                         
Wired Telecommunications Carriers 
                                                                    
Alpheus Communications, LLC
  
First Lien Delayed Draw FILO Term Loan
  
LIBOR (Q)
    
1.00
%
    
7.42
%
    
8.42
%
5/31/2018
  
$
334,243
      
330,920
      
328,959
      
0.02
%
      
Alpheus Communications, LLC
  
First Lien Delayed Draw FILO Term Loan
  
LIBOR (Q)
    
1.00
%
    
7.42
%
    
8.42
%
5/31/2018
  
$
1,355,968
      
1,345,325
      
1,328,879
      
0.09
%
      
Alpheus Communications, LLC
  
First Lien FILO Term Loan
  
LIBOR (Q)
    
1.00
%
    
7.42
%
    
8.42
%
5/31/2018
  
$
7,304,093
      
7,231,480
      
7,166,776
      
0.51
%
      
Integra Telecom Holdings, Inc.
  
Second Lien Term Loan
  
LIBOR (Q)
    
1.25
%
    
8.50
%
    
9.75
%
2/22/2020
  
$
13,231,193
      
13,072,471
      
12,613,746
      
0.89
%
      
Oxford County Telephone and
Telegraph Company
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
7.13
%
    
8.13
%
8/31/2020
  
$
3,955,000
      
3,906,296
      
3,942,740
      
0.28
%
      
U.S. TelePacific Corp.
  
First Lien Notes
  
LIBOR (Q)
    
1.00
%
    
8.50
%
    
9.50
%
2/24/2021
  
$
10,000,000
      
9,701,998
      
9,719,000
      
0.69
%
      
                                               
35,588,490
      
35,100,100
      
2.48
%
      
Wireless Telecommunications Carriers 
                                                                    
Gogo, LLC
  
Sr Secured Notes
  
Fixed
    
-
      
12.50
%
    
12.50
%
7/1/2022
  
$
10,000,000
      
10,000,000
      
10,816,670
      
0.76
%
   E
 
                                                                         
Total Debt Investments
                                          
1,241,644,130
      
1,221,182,288
      
86.16
%
      

5

TCP Capital Corp.
 
Consolidated Schedule of Investments (Unaudited) (Continued)
 
September 30, 2016
 
                                         
Fair
Value
    
% of Total
Cash and
Investments
        
                                                   
Issuer
  
Instrument
  
Ref
  
Floor
  
Spread
  
Total Coupon
  
Maturity
  
Shares
    
Cost
            
Notes
  
                                                       
Equity Securities 
                                                  
Advertising and Public Relations Services 
                                                  
InMobi, Inc. (Singapore)
  
Warrants to Purchase Stock
                        
562,496
    
$
230,569
    
$
231,973
      
0.02
%
  
C/E/H
  
                                                               
Air Transportation
                                                          
Aircraft Leased to United Airlines, Inc.
                                                              
United N659UA-767, LLC (N659UA)
  
Trust Beneficial Interests
                        
683
      
3,341,416
      
3,288,050
      
0.23
%
  
E/F
 
United N661UA-767, LLC (N661UA)
  
Trust Beneficial Interests
                        
688
      
3,472,159
      
3,324,395
      
0.23
%
  
E/F
 
Epic Aero, Inc. (One Sky)
  
Warrants to Purchase Common Stock
                        
1,843
      
855,313
      
1,707,044
      
0.12
%
  
C/E
 
                                     
7,668,888
      
8,319,489
      
0.58
%
      
Business Support Services 
                                                          
Findly Talent, LLC
  
Membership Units
                        
708,229
      
230,938
      
143,062
      
0.01
%
  
C/E
 
STG-Fairway Holdings, LLC (First Advantage)
  
Class A Units
                        
841,479
      
325,432
      
1,716,028
      
0.12
%
  
C/E
 
                                     
556,370
      
1,859,090
      
0.13
%
      
Chemicals 
                                                          
Green Biologics, Inc.
  
Warrants to Purchase Stock
                        
615,000
      
272,594
      
20,910
      
-
    
C/E
 
                                                               
Communications Equipment Manufacturing 
                                                          
Wasserstein Cosmos Co-Invest, L.P. (Globecomm)
  
Limited Partnership Units
                        
5,000,000
      
5,000,000
      
2,000,000
      
0.14
%
  
B/C/E
  
                                                               
Computer Systems Design and Related Services 
                                                      
Waterfall International, Inc.
  
Series B Preferred Stock
                        
1,428,571
      
1,000,000
      
1,065,143
      
0.07
%
  
C/E
 
Waterfall International, Inc.
  
Warrants to Purchase Stock
                        
920,000
      
89,847
      
84,824
      
0.01
%
  
C/E
 
                                     
1,089,847
      
1,149,967
      
0.08
%
      
Data Processing and Hosting Services  
                                                          
Anacomp, Inc.
  
Class A Common Stock
                        
1,255,527
      
26,711,048
      
1,393,635
      
0.10
%
  
C/E/F
  
Rightside Group, Ltd.
  
Warrants
                        
498,855
      
2,778,622
      
686,883
      
0.05
%
  
C/E
 
                                     
29,489,670
      
2,080,518
      
0.15
%
      
Electrical Equipment Manufacturing  
                                                          
NEXTracker, Inc.
  
Series B Preferred Stock
                        
558,884
      
-
      
3,240,969
      
0.23
%
  
C/E
 
NEXTracker, Inc.
  
Series C Preferred Stock
                        
17,640
      
-
      
102,277
      
0.01
%
  
C/E
 
                                     
-
      
3,343,246
      
0.24
%
      
Electronic Component Manufacturing  
                                                          
Soraa, Inc.
  
Warrants to Purchase Common Stock
                        
3,071,860
      
478,899
      
4,915
      
-
    
C/E
 
                                                               
Equipment Leasing
                                                          
36th Street Capital Partners Holdings, LLC
  
Membership Units
                        
5,744,606
      
5,744,606
      
5,744,606
      
0.41
%
  
C/E/F
  
Essex Ocean II, LLC
  
Membership Units
                        
199,430
      
123,028
      
172,905
      
0.01
%
  
C/E/F
  
                                     
5,867,634
      
5,917,511
      
0.42
%
      
                                                               
Financial Investment Activities
                                                          
GACP I, LP
  
Membership Units
                        
12,162,730
      
12,281,867
      
12,378,269
      
0.87
%
  
C/E/I
  
Marsico Holdings, LLC
  
Common Interest Units
                        
168,698
      
172,694
      
1,687
      
-
    
C/E/I
  
                                     
12,454,561
      
12,379,956
      
0.87
%
      
                                                               
Metal and Mineral Mining 
                                                          
EPMC HoldCo, LLC
  
Membership Units
                        
1,312,720
      
-
      
210,035
      
0.01
%
  
B/E
 
                                                               
Other Chemical Products and Mineral Manufacturing
                                                          
Nanosys, Inc.
  
Warrants to Purchase Common Stock
                        
800,000
      
605,266
      
676,800
      
0.05
%
  
C/E
 
                                                               
Other Information Services 
                                                          
SoundCloud, Ltd. (United Kingdom)
  
Warrants to Purchase Preferred Stock
                        
946,498
      
79,082
      
77,802
      
0.01
%
  
C/E/H
  
                                                               
Other Manufacturing 
                                                          
Boomerang Tube Holdings, Inc.
  
Common Stock
                        
24,288
      
243
      
-
      
-
    
C/E
 
KAGY Holding Company, Inc.
  
Series A Preferred Stock
                        
9,778
      
1,091,200
      
5,189,344
      
0.37
%
  
B/C/E
  
                                     
1,091,443
      
5,189,344
      
0.37
%
      
Radio and Television Broadcasting
                                                          
Fuse Media, LLC
  
Warrants to Purchase Common Stock
                        
233,470
      
300,322
      
-
      
-
    
C/E
 
                                                               
Restaurants 
                                                          
RM Holdco, LLC (Real Mex)
  
Equity Participation
                        
24
      
-
      
-
      
-
    
B/C/E
  
RM Holdco, LLC (Real Mex)
  
Membership Units
                        
13,161,000
      
2,010,777
      
-
      
-
    
B/C/E
  
                                     
2,010,777
      
-
      
-
        
Retail 
                                                          
Shop Holding, LLC (Connexity)
  
Class A Units
                        
507,167
      
480,049
      
5,072
      
-
    
C/E
 

6
TCP Capital Corp.
 
Consolidated Schedule of Investments (Unaudited) (Continued)
 
September 30, 2016
 
                                         
Fair
Value
    
% of Total
Cash and
Investments
        
                                                   
Issuer
  
Instrument
  
Ref
  
Floor
  
Spread
  
Total Coupon
  
Maturity
  
Shares
    
Cost
            
Notes
  
                                                       
Equity Securities (continued) 
                                                  
Software Publishing
                                                  
Blackline Intermediate, Inc.
  
Warrants to Purchase Common Stock
                        
1,232,731
    
$
522,678
    
$
2,830,844
      
0.20
%
  
C/E
 
Edmentum Ultimate Holdings, LLC
  
Class A Common Units
                        
159,515
      
680,226
      
680,218
      
0.05
%
  
B/C/E
  
Soasta, Inc.
  
Warrants to Purchase Series F Preferred Stock
                        
715,217
      
192,651
      
282,511
      
0.02
%
  
C/E
 
Utilidata, Inc.
  
Warrants to Purchase Stock
                        
719,998
      
216,336
      
205,200
      
0.01
%
  
C/E
 
                                     
1,611,891
      
3,998,773
      
0.28
%
      
Utility System Construction 
                                                          
Kawa Solar Holdings Limited
  
Ordinary Shares
                        
2,332,594
      
-
      
-
      
-
    
C/F
 
                                                               
Wired Telecommunications Carriers 
                                                          
Integra Telecom, Inc.
  
Common Stock
                        
1,274,522
      
8,433,884
      
5,269,511
      
0.37
%
  
C/E
 
Integra Telecom, Inc.
  
Warrants
                        
346,939
      
19,920
      
162,645
      
0.01
%
  
C/E
 
V Telecom Investment S.C.A. (Vivacom)
(Luxembourg)
  
Common Shares
                        
1,393
      
3,236,256
      
2,350,047
      
0.17
%
  
C/D/E/H
  
                                     
11,690,060
      
7,782,203
      
0.55
%
      
                                                               
Total Equity Securities 
                                
80,977,922
      
55,247,604
      
3.90
%
      
                                                               
Total Investments 
                              
$
1,322,622,052
    
$
1,276,429,892
                
                                                               
Cash and Cash Equivalents 
                                                          
Cash Denominated in Foreign Currencies
                               
 
            
14,354,800
      
1.01
%
      
Cash Held on Account at Various Institutions
                          
 
                 
46,520,310
      
3.28
%
      
Wells Fargo Government Money Market Fund
                                        
55,000,000
      
3.88
%
      
Bank Tokyo, Commercial Paper, 0.38%, due 10/07/16
                                        
24,998,417
      
1.77
%
      
Cash and Cash Equivalents 
                                      
140,873,527
      
9.94
%
      
                                                               
Total Cash and Investments 
                                      
$
1,417,303,419
      
100.00
%
  
M
 

Notes to Consolidated Schedule of Investments:

(A)  Investments in bank debt generally are bought and sold among institutional investors in transactions not subject to registration under the Securities Act  of 1933. Such transactions are generally subject to contractual restrictions,
      such as approval of the agent or borrower.

(B)  Non-controlled affiliate – as defined under the Investment Company Act of 1940 (ownership of between 5% and 25% of the outstanding voting  securities of this issuer). See Consolidated Schedule of Changes in Investments in Affiliates.

(C)  Non-income producing security.

(D)   Investment denominated in foreign currency.  Amortized cost and fair value converted from foreign currency to US dollars. Foreign currency denominated investments are generally hedged for currency exposure.
       At September 30, 2016, such hedging activities included the derivatives listed at the end of the Consolidated Schedule of Investments. (See Note 2)

(E)    Restricted security. (See Note 2)

(F)    Controlled issuer – as defined under the Investment Company Act of 1940 (ownership of 25% or more of the outstanding voting securities of this issuer). Investment is not more than 50% of the outstanding voting securities of the issuer
       nor deemed to be a significant subsidiary.  See Consolidated Schedule of Changes in Investments in Affiliates.

(G)   Investment has been segregated to collateralize certain unfunded commitments.

(H)     Non-U.S. company or principal place of business outside the U.S. and as a result the investment is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire
       any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

(I)     Deemed an investment company under Section 3(c) of the Investment Company Act and as a result the investment is not a qualifying asset under Section 55(a) of the Investment Company Act.  Under the Investment Company Act, the Company
        may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

(J)   Publicly traded company with a market capitalization greater than $250 million and as a result the investment is not a qualifying asset under Section 55(a)  of the Investment Company Act. Under the Investment Company Act, the Company may
        not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

(K)   Negative balances relate to an unfunded commitment that was acquired and/or valued at a discount.

(L)      In addition to the stated coupon, investment has an exit fee payable upon repayment of the loan in an amount equal to the percentage of the original principal amount shown.

(M)  All cash and investments, except those referenced in Notes G above, are pledged as collateral under certain debt as described in Note 4 to the Consolidated Financial Statements.


LIBOR or EURIBOR resets monthly (M), quarterly (Q), semiannually (S), or annually (A).


Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $379,816,646 and $294,224,143 respectively, for the nine months ended September 30, 2016. Aggregate acquisitions includes investment assets received as payment in kind.  Aggregate dispositions includes principal paydowns on and maturities of debt investments.  The total value of restricted securities and bank debt as of September 30, 2016 was $1,276,033,988 or 90.0% of total cash and investments of the Company.  As of September 30, 2016 approximately 13.7% of the total assets of the Company were not qualifying assets under Section 55(a) of the 1940 Act.

Options and swaps at September 30, 2016 were as follows:

 Investment
  
Notional Amount
    
Fair Value
  
GBP, Put Option, $1.47370, expires 3/3/17
  
£
2,681,021
    
$
460,972
  
 
See accompanying notes to the consolidated financial statements.
7

TCP Capital Corp.
 
Consolidated Schedule of Investments
 
December 31, 2015
 
                                             
Fair
Value
    
% of Total
Cash and
Investments
        
                                                       
Issuer
  
Instrument
  
Ref
  
Floor
    
Spread
    
Total Coupon
  
Maturity
  
Principal
    
Cost
            
Notes
  
                                                           
Debt Investments (A) 
                                                      
                                                           
Accounting, Tax and Payroll Services
                                                  
EGS Holdings, Inc.
(Expert Global Solutions)
  
Holdco PIK Notes
  
LIBOR (A)
    
3.00
%
    
10.00
%
    
13.00
%
10/3/2018
  
$
64,783
    
$
64,783
    
$
64,783
      
0.01
%
      
Expert Global Solutions, LLC
  
Second Lien Term Loan
  
LIBOR (Q)
    
1.50
%
    
11.00
%
    
12.50
%
10/3/2018
  
$
15,249,675
      
15,041,186
      
15,249,675
      
1.25
%
      
                                               
15,105,969
      
15,314,458
      
1.26
%
      
Advertising and Public Relations Services
                                                                    
Doubleplay III Limited (Exterion Media)
(United Kingdom)
  
First Lien Facility A1 Term Loan
  
EURIBOR (Q)
    
1.25
%
    
5.75
%
    
7.00
%
3/18/2018
  
€
12,249,157
      
15,931,220
      
13,171,984
      
1.08
%
  
D/H
 
InMobi, Inc. (Singapore)
  
First Lien Delayed Draw Tranche 1 Term Loan (1.25% Exit Fee)
  
LIBOR (M)
    
0.33
%
    
10.17
%
    
10.50
%
9/1/2018
  
$
13,145,041
      
12,695,719
      
12,776,341
      
1.05
%
  
H/L
 
InMobi, Inc. (Singapore)
  
First Lien Delayed Draw Tranche 1 Term Loan (1.25% Exit Fee)
  
LIBOR (M)
    
0.33
%
    
10.17
%
    
N/A
  
9/1/2018
  
$
-
      
-
      
-
      
-
    
H/L
 
InMobi, Inc. (Singapore)
  
First Lien Delayed Draw Tranche 1 Term Loan (1.25% Exit Fee)
  
LIBOR (M)
    
0.33
%
    
10.17
%
    
N/A
  
9/1/2018
  
$
-
      
-
      
-
      
-
    
H/L
 
                                               
28,626,939
      
25,948,325
      
2.13
%
      
Air Transportation 
                                                                    
Aircraft Leased to Delta Air Lines, Inc.
                                                                        
N913DL
  
Aircraft Secured Mortgage
  
Fixed
    
-
      
8.00
%
    
8.00
%
3/15/2017
  
$
114,196
      
114,196
      
115,617
      
0.01
%
  
F
 
N918DL
  
Aircraft Secured Mortgage
  
Fixed
    
-
      
8.00
%
    
8.00
%
8/15/2018
  
$
233,219
      
233,219
      
237,494
      
0.02
%
   F
 
N954DL
  
Aircraft Secured Mortgage
  
Fixed
    
-
      
8.00
%
    
8.00
%
3/20/2019
  
$
336,554
      
336,554
      
342,734
      
0.03
%
   F
 
N955DL
  
Aircraft Secured Mortgage
  
Fixed
    
-
      
8.00
%
    
8.00
%
6/20/2019
  
$
362,232
      
362,232
      
369,162
      
0.03
%
   F
 
N956DL
  
Aircraft Secured Mortgage
  
Fixed
    
-
      
8.00
%
    
8.00
%
5/20/2019
  
$
358,380
      
358,380
      
365,197
      
0.03
%
   F
 
N957DL
  
Aircraft Secured Mortgage
  
Fixed
    
-
      
8.00
%
    
8.00
%
6/20/2019
  
$
365,401
      
365,401
      
372,392
      
0.03
%
   F
 
N959DL
  
Aircraft Secured Mortgage
  
Fixed
    
-
      
8.00
%
    
8.00
%
7/20/2019
  
$
372,361
      
372,361
      
379,522
      
0.03
%
   F
 
N960DL
  
Aircraft Secured Mortgage
  
Fixed
    
-
      
8.00
%
    
8.00
%
10/20/2019
  
$
396,169
      
396,169
      
403,869
      
0.03
%
   F
 
N961DL
  
Aircraft Secured Mortgage
  
Fixed
    
-
      
8.00
%
    
8.00
%
8/20/2019
  
$
385,667
      
385,667
      
393,115
      
0.03
%
   F
 
N976DL
  
Aircraft Secured Mortgage
  
Fixed
    
-
      
8.00
%
    
8.00
%
2/15/2018
  
$
214,686
      
214,686
      
218,321
      
0.02
%
  
F
 
Aircraft Leased to United Airlines, Inc.
                                                                        
N659UA
  
Aircraft Secured Mortgage
  
Fixed
    
-
      
12.00
%
    
12.00
%
2/28/2016
  
$
313,315
      
313,315
      
318,980
      
0.03
%
   F
 
N661UA
  
Aircraft Secured Mortgage
  
Fixed
    
-
      
12.00
%
    
12.00
%
5/4/2016
  
$
557,684
      
557,684
      
570,303
      
0.05
%
   F
 
Cargojet Airways LTD. (Canada)
  
Aircraft Acquisition Loan A
  
LIBOR (M)
    
-
      
8.50
%
    
8.75
%
1/31/2023
  
$
14,250,773
      
13,982,969
      
14,252,198
      
1.17
%
   H
 
Cargojet Airways LTD. (Canada)
  
Aircraft Acquisition Loan A1
  
LIBOR (M)
    
-
      
8.50
%
    
N/A
  
1/31/2023
  
$
-
      
-
      
-
      
-
     H
 
Mesa Air Group, Inc.
  
Acquisition Delayed Draw Loan
  
LIBOR (M)
    
-
      
7.25
%
    
N/A
  
6/17/2019
  
$
-
      
-
      
278,288
      
0.02
%
      
Mesa Air Group, Inc.
  
Acquisition Loan
  
LIBOR (M)
    
-
      
7.25
%
    
7.62
%
7/15/2022
  
$
15,997,019
      
15,724,234
      
16,324,958
      
1.34
%
      
                                               
33,717,067
      
34,942,150
      
2.87
%
      
Apparel Manufacturing 
                                                                    
Broder Bros., Co.
  
First Lien Term Loan A (First Out)
  
LIBOR (Q)
    
1.25
%
    
5.75
%
    
7.00
%
6/3/2021
  
$
9,940,000
      
9,743,116
      
9,741,200
      
0.80
%
      
Broder Bros., Co.
  
First Lien Term Loan B (Last Out)
  
LIBOR (Q)
    
1.25
%
    
12.25
%
    
13.50
%
6/3/2021
  
$
9,960,000
      
9,762,553
      
9,760,800
      
0.80
%
      
JH Apparel Holdings, LLC
  
First Lien FILO Term Loan
  
LIBOR (M)
    
1.00
%
    
9.60
%
    
10.60
%
4/8/2019
  
$
3,669,926
      
3,645,226
      
3,669,926
      
0.30
%
      
                                               
23,150,895
      
23,171,926
      
1.90
%
      
Business Support Services  
                                                                    
Enerwise Global Technologies, Inc.
  
Sr Secured Revolving Loan
  
LIBOR (Q)
    
0.23
%
    
8.52
%
    
8.75
%
11/30/2017
  
$
-
      
(69,938
)
    
(123,750
)
    
(0.01
%)
  
K
 
Enerwise Global Technologies, Inc.
  
Sr Secured Term Loan (1.0% Exit Fee)
  
LIBOR (Q)
    
0.23
%
    
9.27
%
    
9.50
%
11/30/2019
  
$
17,281,250
      
17,043,402
      
16,996,109
      
1.39
%
   L
 
STG-Fairway Acquisitions, Inc.
(First Advantage)
  
Second Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
9.25
%
    
10.25
%
6/30/2023
  
$
31,000,000
      
30,546,700
      
31,883,500
      
2.62
%
      
                                               
47,520,164
      
48,755,859
      
4.00
%
      
Chemicals 
                                                                    
Anuvia Plant Nutrients
Holdings, LLC
  
Sr Secured Term Loan (8.0 % Exit Fee)
  
LIBOR (M)
    
0.23
%
    
10.27
%
    
10.50
%
2/1/2018
  
$
7,700,000
      
7,993,675
      
8,059,280
      
0.66
%
   L
 
BioAmber, Inc.
  
Sr Secured Term Loan (8.25% Exit Fee)
  
LIBOR (M)
    
0.23
%
    
9.27
%
    
9.50
%
12/1/2017
  
$
10,000,000
      
10,226,245
      
10,509,000
      
0.86
%
   L
 
Green Biologics, Inc.
  
Sr Secured Delayed Draw Term Loan
(10.0% Exit Fee)
  
Prime Rate
    
-
      
7.75
%
    
11.25
%
5/1/2018
  
$
15,000,000
      
14,927,838
      
15,175,500
      
1.25
%
   L
 
                                               
33,147,758
      
33,743,780
      
2.77
%
      
Communications Equipment Manufacturing 
                                                                    
Globecomm Systems, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.25
%
    
7.63
%
    
8.88
%
12/11/2018
  
$
14,629,280
      
14,482,987
      
14,256,233
      
1.17
%
   B
 
                                                                         
Computer Equipment Manufacturing 
                                                                    
Silicon Graphics International Corp.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
9.00
%
    
10.00
%
7/27/2018
  
$
18,432,723
      
18,157,715
      
18,570,968
      
1.52
%
   J
 
                                                                         
Computer Systems Design and Related Services
                                                                    
Autoalert, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
0.25
%
   4.75% Cash
+ 4% PIK		    
9.00
%
3/31/2019
  
$
34,564,922
      
34,069,278
      
34,459,499
      
2.83
%
      
MSC Software Corporation
  
Second Lien Term Loan
  
LIBOR (M)
    
1.00
%
    
7.50
%
    
8.50
%
5/29/2021
  
$
6,993,035
      
6,938,605
      
6,153,871
      
0.51
%
      
OnX Enterprise Solutions, Ltd. (Canada)
  
First Lien Term Loan B
  
LIBOR (Q)
    
-
      
8.00
%
    
8.32
%
9/3/2018
  
$
2,337,733
      
2,337,733
      
2,355,266
      
0.19
%
   H
 
OnX Enterprise Solutions, Ltd. (Canada)
  
First Lien Term Loan
  
LIBOR (Q)
    
-
      
7.00
%
    
7.32
%
9/3/2018
  
$
10,426,667
      
10,343,578
      
10,322,400
      
0.85
%
   H
 
OnX USA, LLC
  
First Lien Term Loan B
  
LIBOR (Q)
    
-
      
8.00
%
    
8.32
%
9/3/2018
  
$
4,675,467
      
4,675,467
      
4,710,533
      
0.39
%
      
OnX USA, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
-
      
7.00
%
    
7.32
%
9/3/2018
  
$
5,213,333
      
5,175,467
      
5,161,200
      
0.42
%
      
Vistronix, LLC
  
First Lien Revolver
  
LIBOR (Q)
    
0.50
%
    
8.50
%
    
9.00
%
12/4/2018
  
$
365,437
      
361,329
      
365,437
      
0.03
%
      
Vistronix, LLC
  
First Lien Term Loan
  
LIBOR (M)
    
0.50
%
    
8.50
%
    
9.00
%
12/4/2018
  
$
6,205,583
      
6,155,701
      
6,050,443
      
0.50
%
      
Waterfall International, Inc.
  
First Lien Delayed Draw Term Loan
  
LIBOR (Q)
    
-
      
11.67
%
    
12.00
%
9/1/2018
  
$
4,800,000
      
4,678,943
      
4,733,280
      
0.39
%
      
                                               
74,736,101
      
74,311,929
      
6.11
%
      
Data Processing and Hosting Services 
                                                                    
Asset International, Inc.
  
Delayed Draw Term Loan
  
LIBOR (M)
    
1.00
%
    
7.00
%
    
8.00
%
7/31/2020
  
$
3,430,383
      
3,396,023
      
3,404,827
      
0.28
%
      
Asset International, Inc.
  
Revolver Loan
  
LIBOR (M)
    
1.00
%
    
7.00
%
    
8.00
%
7/31/2020
  
$
242,376
      
234,663
      
242,376
      
0.02
%
      
Asset International, Inc.
  
First Lien Term Loan
  
LIBOR (M)
    
1.00
%
    
7.00
%
    
8.00
%
7/31/2020
  
$
8,109,426
      
7,979,611
      
8,050,389
      
0.66
%
      
Rightside Group, Ltd.
  
Second Lien Term Loan
  
LIBOR (Q)
    
0.50
%
    
8.75
%
    
9.38
%
8/6/2019
  
$
4,750,000
      
3,991,890
      
4,828,375
      
0.40
%
      
United TLD Holdco, Ltd. (Rightside)
(Cayman Islands)
  
Second Lien Term Loan
  
LIBOR (Q)
    
0.50
%
    
8.75
%
    
9.38
%
8/6/2019
  
$
9,500,000
      
7,983,779
      
9,656,750
      
0.79
%
   H
 
                                               
23,585,966
      
26,182,717
      
2.15
%
      

8
TCP Capital Corp.
 
Consolidated Schedule of Investments (Continued)
 
December 31, 2015
 
                                             
Fair
Value
    
% of Total
Cash and
Investments
        
                                                       
Issuer
  
Instrument
  
Ref
  
Floor
    
Spread
    
Total Coupon
  
Maturity
  
Principal
    
Cost
            
Notes
  
                                                           
Debt Investments (continued) 
                                                      
Electric Power Generation, Transmission and Distribution
                                                      
Holocene Renewable Energy Fund 3, LLC
(Conergy)
  
First Lien Term Loan
  
Fixed
    
-
      9% Cash
+ 1% PIK		    
10.00
%
9/10/2017
  
$
7,461,240
    
$
7,397,199
    
$
7,386,628
      
0.61
%
      
                                                                       
Electrical Equipment Manufacturing 
                                                                  
API Technologies Corp.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.50
%
    
8.50
%
    
10.00
%
2/6/2018
  
$
6,165,986
      
6,130,433
      
6,058,081
      
0.50
%
      
API Technologies Corp.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.50
%
    
8.50
%
    
10.00
%
2/6/2018
  
$
3,991,338
      
3,921,387
      
3,921,490
      
0.32
%
      
                                               
10,051,820
      
9,979,571
      
0.82
%
      
                                                                         
Electronic Component Manufacturing 
                                                                    
Central MN Renewables, LLC
(Green Biologics)
  
Sr Secured Revolver (3.0% Exit Fee)
  
Fixed
    
-
      
8.25
%
    
N/A
  
1/1/2016
  
$
-
      
-
      
-
      
-
     L
 
Redaptive, Inc.
  
First Lien Delayed Draw Term Loan
  
LIBOR (Q)
    
-
      
10.72
%
    
N/A
  
7/1/2018
  
$
-
      
(121,106
)
    
-
      
-
     K
 
Soraa, Inc.
  
Tranche A Term Loan (3.0% Exit Fee)
  
LIBOR (M)
    
0.44
%
    
9.33
%
    
9.77
%
3/1/2018
  
$
22,500,000
      
21,452,673
      
21,411,000
      
1.76
%
   L
 
Soraa, Inc.
  
Tranche B Term Loan
  
LIBOR (M)
    
0.44
%
    
9.33
%
    
9.77
%
9/1/2017
  
$
1,687,500
      
1,571,025
      
1,567,434
      
0.13
%
      
                                               
22,902,592
      
22,978,434
      
1.89
%
      
Equipment Leasing 
                                                                    
36th Street Capital Partners Holdings, LLC
  
Senior Note
  
Fixed
    
-
      
12.00
%
    
12.00
%
11/1/2020
  
$
900,000
      
900,000
      
900,000
      
0.07
%
  
E/F
 
Essex Ocean, LLC
  
Sr Secured Term Loan
  
Fixed
    
-
      
8.00
%
    
8.00
%
3/25/2019
  
$
-
      
-
      
-
      
-
        
Essex Ocean, LLC (Solexel)
  
Sr Secured Term Loan
  
Fixed
    
-
      
8.00
%
    
8.00
%
8/15/2018
  
$
2,631,033
      
2,631,033
      
2,641,294
      
0.22
%
      
                                               
3,531,033
      
3,541,294
      
0.29
%
      
Financial Investment Activities 
                                                                    
Institutional Shareholder Services, Inc.
  
Second Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
7.50
%
    
8.50
%
4/30/2022
  
$
4,471,492
      
4,437,802
      
4,270,275
      
0.35
%
    
iPayment, Inc.
  
First Lien Term Loan B2
  
LIBOR (Q)
    
1.50
%
    
5.25
%
    
6.75
%
5/8/2017
  
$
6,763,751
      
6,425,563
      
6,502,839
      
0.53
%
      
Magnolia Finance V plc (Cayman Islands)
  
Asset-Backed Credit Linked Notes
  
Fixed
    
-
      
13.13
%
    
13.13
%
8/2/2021
  
$
15,000,000
      
15,000,000
      
14,881,500
      
1.22
%
  
E/H
 
                                               
25,863,365
      
25,654,614
      
2.10
%
      
Gaming 
                                                                    
AP Gaming I, LLC
  
First Lien Revolver
  
LIBOR (M)
    
-
      
8.25
%
    
N/A
  
12/20/2018
  
$
-
      
(1,862,302
)
    
(1,250,000
)
    
(0.10
%)
   K
 
                                                                         
Grocery Stores 
                                                                    
Bashas, Inc.
  
First Lien FILO Term Loan
  
LIBOR (M)
    
1.50
%
    
7.00
%
    
8.50
%
10/8/2019
  
$
10,033,866
      
9,995,480
      
10,111,127
      
0.83
%
      
                                                                         
Hospitals 
                                                                    
Evidera, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
9.00
%
    
10.00
%
7/1/2018
  
$
3,907,686
      
3,888,148
      
3,912,571
      
0.32
%
      
KPC Healthcare, Inc.
  
First Lien Term Loan
  
Prime Rate
    
-
      
8.25
%
    
11.75
%
8/28/2020
  
$
17,157,214
      
16,790,143
      
17,043,118
      
1.40
%
      
RegionalCare Hospital Partners, Inc.
  
Second Lien Term Loan
  
LIBOR (M)
    
1.00
%
    
10.25
%
    
11.25
%
10/23/2019
  
$
21,017,525
      
20,777,746
      
20,807,350
      
1.71
%
   G
 
                                               
41,456,037
      
41,763,039
      
3.43
%
      
Insurance Carriers 
                                                                    
Acrisure, LLC
  
Second Lien Incremental Notes
  
LIBOR (Q)
    
1.00
%
    
9.00
%
    
10.00
%
11/19/2022
  
$
7,080,555
      
6,944,926
      
7,063,562
      
0.58
%
      
Acrisure, LLC
  
Second Lien Notes
  
LIBOR (Q)
    
1.00
%
    
9.00
%
    
10.00
%
11/19/2022
  
$
12,720,998
      
12,542,859
      
12,690,468
      
1.04
%
      
Acrisure, LLC
  
Second Lien Incremental Notes
  
LIBOR (Q)
    
1.00
%
    
9.00
%
    
10.00
%
11/19/2022
  
$
3,846,850
      
3,795,306
      
3,837,597
      
0.31
%
      
JSS Holdings, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
6.25
%
    
7.25
%
8/31/2021
  
$
3,950,000
      
3,874,773
      
3,732,750
      
0.31
%
      
US Apple Holdco, LLC (Ventiv Technology)
  
First Lien Term Loan
  
LIBOR (Q)
    
0.50
%
    
11.50
%
    
12.00
%
8/29/2019
  
$
20,000,000
      
19,375,352
      
19,936,000
      
1.64
%
      
                                               
46,533,216
      
47,260,377
      
3.88
%
      
Insurance Related Activities 
                                                                    
Confie Seguros Holding II Co.
  
Second Lien Term Loan
  
LIBOR (M)
    
1.25
%
    
9.00
%
    
10.25
%
5/8/2019
  
$
11,061,809
      
10,950,946
      
10,951,191
      
0.90
%
   G
 
                                                                         
Lessors of Nonfinancial Licenses 
                                                                    
ABG Intermediate Holdings 2, LLC
  
Second Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
8.50
%
    
9.50
%
5/27/2022
  
$
15,990,714
      
15,853,293
      
15,690,888
      
1.29
%
      
ABG Intermediate Holdings 2, LLC
  
Second Lien Incremental Term Loan
  
LIBOR (Q)
    
1.00
%
    
8.50
%
    
9.50
%
5/27/2022
  
$
3,474,715
      
3,440,934
      
3,409,564
      
0.28
%
      
                                               
19,294,227
      
19,100,452
      
1.57
%
      
Management, Scientific, and Technical Consulting Services
                                                                    
Dodge Data & Analytics, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
8.75
%
    
9.75
%
10/31/2019
  
$
24,693,587
      
24,159,891
      
24,267,623
      
1.99
%
      
                                                                         
Medical Equipment and Supplies Manufacturing
                                                                    
Bioventus, LLC
  
Second Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
10.00
%
    
11.00
%
4/10/2020
  
$
11,000,000
      
10,819,241
      
10,835,000
      
0.89
%
      
                                                                         
Motion Picture and Video Industries 
                                                                    
CORE Entertainment, Inc.
  
First Lien Term Loan
  
Fixed
    
-
      
11.00
%
    
11.00
%
6/21/2017
  
$
9,462,231
      
9,425,030
      
4,667,719
      
0.38
%
      
CORE Entertainment, Inc.
  
Second Lien Term Loan
  
Fixed
    
-
      
15.50
%
    
15.50
%
6/21/2018
  
$
7,569,785
      
7,700,187
      
291,058
      
0.02
%
   C
 
                                               
17,125,217
      
4,958,777
      
0.40
%
      
Nondepository Credit Intermediation 
                                                                    
Caribbean Financial Group
(Cayman Islands)
  
Sr Secured Notes
  
Fixed
    
-
      
11.50
%
    
11.50
%
11/15/2019
  
$
26,975,000
      
26,829,614
      
26,705,250
      
2.19
%
  
E/G/H
  
Daymark Financial Acceptance, LLC
  
First Lien Delayed Draw Term Loan
  
LIBOR (Q)
    
-
      
9.50
%
    
9.92
%
1/12/2020
  
$
5,000,000
      
4,621,333
      
4,919,250
      
0.40
%
      
Greystone Select Holdings, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
8.00
%
    
9.00
%
3/26/2021
  
$
16,305,999
      
16,125,251
      
16,133,156
      
1.32
%
      
Trade Finance Funding I, Ltd.
(Cayman Islands)
  
Secured Class B Notes
  
Fixed
    
-
      
10.75
%
    
10.75
%
11/13/2018
  
$
15,084,000
      
15,084,000
      
14,857,740
      
1.22
%
  
E/H
 
                                               
62,660,198
      
62,615,396
      
5.13
%
      
Oil and Gas Extraction 
                                                                    
Jefferson Gulf Coast Energy Partners, LLC
  
First Lien Term Loan B
  
Prime Rate
    
-
      
7.50
%
    
11.00
%
2/27/2018
  
$
14,812,500
      
14,714,767
      
13,479,375
      
1.11
%
      
MD America Energy, LLC
  
Second Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
8.50
%
    
9.50
%
8/4/2019
  
$
8,095,238
      
7,784,717
      
6,773,043
      
0.56
%
      
                                               
22,499,484
      
20,252,418
      
1.67
%
      
Other Information Services 
                                                                    
Simmons Research, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
0.50
%
    
10.50
%
    
11.13
%
12/11/2020
  
$
5,128,936
      
5,026,844
      
5,026,357
      
0.41
%
      
TCH-2 Holdings, LLC (TravelClick)
  
Second Lien Term Loan
  
LIBOR (M)
    
1.00
%
    
7.75
%
    
8.75
%
11/6/2021
  
$
19,988,392
      
19,735,864
      
18,789,089
      
1.54
%
   G
 
                                               
24,762,708
      
23,815,446
      
1.95
%
      
Other Manufacturing 
                                                                    
AGY Holding Corp.
  
Sr Secured Term Loan
  
Fixed
    
-
      
12.00
%
    
12.00
%
9/15/2016
  
$
4,869,577
      
4,869,577
      
4,869,577
      
0.40
%
   B
 
AGY Holding Corp.
  
Second Lien Notes
  
Fixed
    
-
      
11.00
%
    
11.00
%
11/15/2016
  
$
9,268,000
      
7,586,317
      
9,268,000
      
0.76
%
  
B/E
 
Boomerang Tube, LLC
  
Second Lien Term Loan
  
LIBOR (Q)
    
1.50
%
    
9.50
%
    
11.00
%
10/11/2017
  
$
3,825,453
      
4,010,758
      
1,759,709
      
0.14
%
   C
 
Boomerang Tube, LLC
  
Super Priority Debtor-in-Possession
  
Prime Rate
    
-
      
10.00
%
    
13.50
%
11/30/2015
  
$
1,124,444
      
1,124,444
      
1,124,444
      
0.09
%
      
                                               
17,591,096
      
17,021,730
      
1.39
%
      
Other Telecommunications 
                                                                    
Securus Technologies, Inc.
  
Second Lien Term Loan
  
LIBOR (Q)
    
1.25
%
    
7.75
%
    
9.00
%
4/30/2021
  
$
14,000,000
      
13,860,000
      
7,924,000
      
0.65
%
      
 
9
TCP Capital Corp.
 
Consolidated Schedule of Investments (Continued)
 
December 31, 2015
 
 
                                             
Fair
Value
    
% of Total
Cash and
Investments
        
                                                       
Issuer
  
Instrument
  
Ref
  
Floor
    
Spread
    
Total Coupon
  
Maturity
  
Principal
    
Cost
            
Notes
  
                                                           
Debt Investments (continued) 
                                                      
Other Publishing 
                                                      
MediMedia USA, Inc.
  
First Lien Revolver
  
LIBOR (M)
    
-
      
6.75
%
    
7.18
%
5/20/2018
  
$
3,456,500
    
$
2,886,378
    
$
3,003,668
      
0.25
%
      
MediMedia USA, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.25
%
    
6.75
%
    
8.00
%
11/20/2018
  
$
5,681,239
      
5,582,994
      
5,425,584
      
0.45
%
   G
 
                                               
8,469,372
      
8,429,252
      
0.70
%
      
Pharmaceuticals 
                                                                    
Lantheus Medical Imaging, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
6.00
%
    
7.00
%
6/30/2022
  
$
5,970,000
      
5,879,117
      
5,492,400
      
0.45
%
      
                                                                         
Plastics Manufacturing 
                                                                    
Iracore International, Inc.
  
Sr Secured Notes
  
Fixed
    
-
      
9.50
%
    
9.50
%
6/1/2018
  
$
13,600,000
      
13,600,000
      
8,918,010
      
0.73
%
  
E/G
 
                                                                         
Radio and Television Broadcasting 
                                                                    
Fuse, LLC
  
Sr Secured Notes
  
Fixed
    
-
      
10.38
%
    
10.38
%
7/1/2019
  
$
7,312,000
      
7,312,000
      
5,776,480
      
0.47
%
  
E/G
 
NEP/NCP Holdco, Inc.
  
Second Lien Term Loan
  
LIBOR (M)
    
1.25
%
    
8.75
%
    
10.00
%
7/22/2020
  
$
10,000,000
      
10,019,257
      
9,450,000
      
0.78
%
      
The Tennis Channel, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
-
      
8.50
%
    
8.88
%
5/29/2017
  
$
32,520,727
      
32,351,929
      
32,675,201
      
2.68
%
      
                                               
49,683,186
      
47,901,681
      
3.93
%
      
                                                                         
Restaurants  
                                                                    
RM OpCo, LLC (Real Mex)
  
Convertible Second Lien
Term Loan Tranche B-1
  
Fixed
    
-
      
8.50
%
    
8.50
%
3/30/2018
  
$
1,783,036
      
1,779,352
      
1,783,036
      
0.15
%
   B
 
RM OpCo, LLC (Real Mex)
  
First Lien Term Loan Tranche A
  
Fixed
    
-
      
7.00
%
    
7.00
%
3/21/2016
  
$
3,719,155
      
3,717,664
      
3,719,155
      
0.31
%
   B
 
RM OpCo, LLC (Real Mex)
  
Second Lien Term Loan Tranche B
  
Fixed
    
-
      
8.50
%
    
8.50
%
3/30/2018
  
$
8,884,258
      
8,884,258
      
4,490,993
      
0.37
%
   B
 
RM OpCo, LLC (Real Mex)
  
Second Lien Term Loan Tranche B-1
  
Fixed
    
-
      
8.50
%
    
8.50
%
3/30/2018
  
$
2,797,956
      
2,782,534
      
2,797,956
      
0.23
%
   B
 
RM OpCo, LLC (Real Mex)
  
Sr Convertible Second Lien Term Loan B
  
Fixed
    
-
      
8.50
%
    
8.50
%
3/30/2018
  
$
2,188,233
      
2,188,233
      
2,188,233
      
0.18
%
   B
 
                                               
19,352,041
      
14,979,373
      
1.24
%
      
Retail 
                                                                    
Kenneth Cole Productions, Inc.
  
First Lien FILO Term Loan
  
LIBOR (M)
    
1.00
%
    
8.50
%
    
9.50
%
9/25/2020
  
$
13,185,494
      
13,049,991
      
13,317,349
      
1.09
%
      
Connexity, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
10.00
%
    
11.00
%
2/13/2020
  
$
6,354,563
      
6,354,563
      
6,237,956
      
0.51
%
      
                                               
19,404,554
      
19,555,305
      
1.60
%
      
Satellite Telecommunications 
                                                                    
Avanti Communications Group, PLC
(United Kingdom)
  
Sr Secured Notes
  
Fixed
    
-
      
10.00
%
    
10.00
%
10/1/2019
  
$
9,393,000
      
9,393,000
      
7,336,027
      
0.60
%
  
E/G/H
  
                                                                         
Scientific Research and Development Services
                                                                    
BPA Laboratories, Inc.
  
Senior Secured Notes
  
Fixed
    
-
      
12.25
%
    
12.25
%
4/1/2017
  
$
38,932,000
      
39,001,750
      
40,489,280
      
3.32
%
  
E/G
 
                                                                         
Software Publishing 
                                                                    
Acronis International GmbH
(Switzerland)
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
9.50
%
    
10.50
%
2/21/2017
  
$
29,485,290
      
29,375,415
      
28,170,246
      
2.31
%
   H
 
ArcServe (USA), LLC
  
Second Lien Term Loan
  
LIBOR (Q)
    
0.50
%
    
8.50
%
    
9.00
%
1/31/2020
  
$
30,000,000
      
29,529,480
      
28,023,000
      
2.30
%
      
BlackLine Systems, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.50
%
    0.4% Cash
+ 7.6% PIK		    
9.50
%
9/25/2018
  
$
14,619,396
      
13,946,601
      
14,765,590
      
1.21
%
      
Bluehornet Networks, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
-
      
9.50
%
    
10.11
%
12/3/2020
  
$
6,062,304
      
5,881,725
      
5,880,435
      
0.48
%
      
Edmentum, Inc.
  
Jr Revolving Facility
  
Fixed
    
-
      
5.00
%
    
5.00
%
6/9/2020
  
$
-
      
-
      
-
      
-
    
B
 
Edmentum Ultimate Holdings, LLC
  
Sr PIK Notes
  
Fixed
    
-
      
8.50
%
    
8.50
%
6/9/2020
  
$
2,612,408
      
2,612,408
      
2,612,408
      
0.21
%
   B
 
Edmentum Ultimate Holdings, LLC
  
Jr PIK Notes
  
Fixed
    
-
      
10.00
%
    
10.00
%
6/9/2020
  
$
11,791,569
      
11,176,985
      
11,343,490
      
0.93
%
   B
 
Fidelis Acquisitionco, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
8.00
%
    
9.00
%
11/4/2019
  
$
41,924,150
      
41,178,969
      
42,029,025
      
3.45
%
      
Fidelis Acquisitionco, LLC
  
Sr Secured Revolver
  
LIBOR (Q)
    
1.00
%
    
8.00
%
    
9.00
%
11/4/2019
  
$
1,272,857
      
1,272,857
      
1,276,039
      
0.10
%
      
SoundCloud Ltd. (United Kingdom)
  
Sr Secured Term Loan (2.0% Exit Fees)
  
LIBOR (Q)
    
0.28
%
    
10.72
%
    
11.00
%
10/1/2018
  
$
31,550,000
      
31,341,229
      
31,395,405
      
2.58
%
  
H/L
 
Utilidata, Inc.
  
First Lien Delayed Draw Term Loan
(1.0% Exit Fee)
  
LIBOR (Q)
    
0.62
%
    
9.88
%
    
10.50
%
1/1/2019
  
$
3,200,000
      
2,906,672
      
2,903,680
      
0.24
%
   L
 
Virgin Pulse Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
-
      
8.00
%
    
8.63
%
5/21/2020
  
$
7,500,000
      
7,398,976
      
7,471,875
      
0.61
%
      
                                               
176,621,317
      
175,871,193
      
14.42
%
      
Textile Furnishings Mills 
                                                                    
Lexmark Carpet Mills, Inc.
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
10.00
%
    
11.00
%
12/19/2019
  
$
25,000,000
      
25,000,000
      
24,785,000
      
2.03
%
      
Lexmark Carpet Mills, Inc.
  
First Lien Term Loan B
  
LIBOR (Q)
    
1.00
%
    
10.00
%
    
11.00
%
12/19/2019
  
$
8,575,581
      
8,378,569
      
8,501,831
      
0.70
%
      
                                               
33,378,569
      
33,286,831
      
2.73
%
      
Utility System Construction  
                                                                    
Kawa Solar Holdings Limited
  
Revolving Credit Facility
  
Fixed
    
-
      
8.20
%
    
8.20
%
7/2/2017
  
$
25,000,000
      
25,000,000
      
25,000,000
      
2.05
%
      
                                                                         
Wired Telecommunications Carriers 
                                                                    
Alpheus Communications, LLC
  
First Lien Delayed Draw FILO Term Loan
  
LIBOR (Q)
    
1.00
%
    
6.92
%
    
7.92
%
5/31/2018
  
$
1,064,676
      
1,046,166
      
1,058,812
      
0.09
%
      
Alpheus Communications, LLC
  
First Lien FILO Term Loan
  
LIBOR (Q)
    
1.00
%
    
6.92
%
    
7.92
%
5/31/2018
  
$
7,938,819
      
7,859,897
      
7,895,156
      
0.65
%
      
Integra Telecom Holdings, Inc.
  
Second Lien Term Loan
  
LIBOR (Q)
    
1.25
%
    
8.50
%
    
9.75
%
2/22/2020
  
$
13,231,193
      
13,039,047
      
12,883,874
      
1.06
%
      
Oxford County Telephone and
Telegraph Company
  
First Lien Term Loan
  
LIBOR (Q)
    
1.00
%
    
7.13
%
    
8.13
%
8/31/2020
  
$
4,000,000
      
3,943,631
      
3,922,000
      
0.32
%
      
                                               
25,888,741
      
25,759,842
      
2.12
%
      
Wireless Telecommunications Carriers 
                                                                    
Gogo, LLC
  
First Lien Term Loan
  
LIBOR (Q)
    
1.50
%
    
9.75
%
    
11.25
%
3/21/2018
  
$
32,822,506
      
32,877,865
      
33,150,731
      
2.72
%
   G
 
                                                                         
Total Debt Investments 
                                          
1,160,372,521
      
1,130,535,387
      
92.78
%
      
 

10

TCP Capital Corp.
 
Consolidated Schedule of Investments (Continued)
 
December 31, 2015
 
 
                                         
Fair
Value
    
% of Total
Cash and
Investments
        
                                                   
Issuer
  
Instrument
  
Ref
  
Floor
  
Spread
  
Total Coupon
  
Maturity
  
Shares
    
Cost
            
Notes
  
                                                       
Equity Securities 
                                                  
Advertising and Public Relations Services 
                                                  
InMobi, Inc. (Singapore)
  
Warrants to Purchase Stock
                        
17,578
    
$
230,569
    
$
233,543
      
0.02
%
  
C/E/H
  
                                                               
Air Transportation 
                                                          
Aircraft Leased to Delta Air Lines, Inc.
                                                              
N913DL
  
Trust Beneficial Interests
                        
1,316
      
84,164
      
107,501
      
0.01
%
  
E/F
 
N918DL
  
Trust Beneficial Interests
                        
1,053
      
86,044
      
127,662
      
0.01
%
  
E/F
 
N954DL
  
Trust Beneficial Interests
                        
975
      
95,345
      
77,850
      
0.01
%
  
E/F
 
N955DL
  
Trust Beneficial Interests
                        
937
      
92,045
      
108,100
      
0.01
%
  
E/F
 
N956DL
  
Trust Beneficial Interests
                        
946
      
91,995
      
104,478
      
0.01
%
  
E/F
 
N957DL
  
Trust Beneficial Interests
                        
937
      
92,417
      
105,329
      
0.01
%
  
E/F
 
N959DL
  
Trust Beneficial Interests
                        
928
      
92,840
      
106,203
      
0.01
%
  
E/F
 
N960DL
  
Trust Beneficial Interests
                        
902
      
94,503
      
105,937
      
0.01
%
  
E/F
 
N961DL
  
Trust Beneficial Interests
                        
919
      
94,018
      
101,487
      
0.01
%
  
E/F
 
N976DL
  
Trust Beneficial Interests
                        
1,130
      
87,968
      
100,793
      
0.01
%
  
E/F
 
Aircraft Leased to United Airlines, Inc.
                                                              
United N659UA-767, LLC (N659UA)
  
Trust Beneficial Interests
                        
652
      
3,143,045
      
3,368,599
      
0.28
%
  
E/F
 
United N661UA-767, LLC (N661UA)
  
Trust Beneficial Interests
                        
632
      
3,062,496
      
3,294,024
      
0.27
%
  
E/F
 
Epic Aero, Inc. (One Sky)
  
Warrants to Purchase Common Stock
                        
1,843
      
855,313
      
3,173,450
      
0.26
%
  
C/E
 
                                     
7,972,193
      
10,881,413
      
0.91
%
      
Business Support Services 
                                                          
Findly Talent, LLC
  
Membership Units
                        
708,229
      
230,938
      
162,184
      
0.01
%
  
C/E
 
STG-Fairway Holdings, LLC (First Advantage)
  
Class A Units
                        
841,479
      
325,432
      
2,616,916
      
0.21
%
  
C/E
 
                                     
556,370
      
2,779,100
      
0.22
%
      
Chemicals
                                                              
Green Biologics, Inc.
  
Warrants to Purchase Stock
                        
376,147
      
272,594
      
236,634
      
0.02
%
  
C/E
 
                                                               
Communications Equipment Manufacturing 
                                                          
Wasserstein Cosmos Co-Invest, L.P.
(Globecomm)
  
Limited Partnership Units
                        
5,000,000
      
5,000,000
      
4,198,500
      
0.34
%
  
B/C/E
  
                                                               
Computer Systems Design and Related Services 
                                                      
Waterfall International, Inc.
  
Series B Preferred Stock
                        
1,428,571
      
1,000,000
      
999,714
      
0.08
%
  
C/E
 
Waterfall International, Inc.
  
Warrants to Purchase Stock
                        
857,143
      
57,026
      
57,686
      
-
    
C/E
 
                                     
1,057,026
      
1,057,400
      
0.08
%
      
Data Processing and Hosting Services 
                                                          
Anacomp, Inc.
  
Class A Common Stock
                        
1,255,527
      
26,711,048
      
1,581,964
      
0.13
%
  
C/E/F
  
Rightside Group, Ltd.
  
Warrants
                        
498,855
      
2,778,622
      
919,030
      
0.07
%
  
C/E
 
                                     
29,489,670
      
2,500,994
      
0.20
%
      
Electrical Equipment Manufacturing 
                                                          
NEXTracker, Inc.
  
Series B Preferred Stock
                        
558,884
      
-
      
2,929,279
      
0.24
%
  
C/E
 
NEXTracker, Inc.
  
Series C Preferred Stock
                        
17,640
      
-
      
92,460
      
0.01
%
  
C/E
 
                                     
-
      
3,021,739
      
0.25
%
      
Electronic Component Manufacturing 
                                                          
Soraa, Inc.
  
Warrants to Purchase Common Stock
                        
630,000
      
499,189
      
180,432
      
0.01
%
  
C/E
 
                                                               
Equipment Leasing 
                                                          
36th Street Capital Partners Holdings, LLC
  
Membership Units
                        
225,000
      
225,000
      
225,000
      
0.02
%
  
C/E/F
  
Essex Ocean II, LLC
  
Membership Units
                        
199,430
      
199,429
      
200,686
      
0.02
%
  
C/F
 
                                     
424,429
      
425,686
      
0.04
%
      
                                                               
Financial Investment Activities 
                                                          
GACP I, LP
  
Membership Units
                        
8,470,305
      
8,589,442
      
8,589,760
      
0.70
%
  
C/E/I
  
Marsico Holdings, LLC
  
Common Interest Units
                        
168,698
      
172,694
      
5,061
      
-
    
C/E/I
  
                                     
8,762,136
      
8,594,821
      
0.70
%
      
                                                               
Metal and Mineral Mining 
                                                          
EPMC HoldCo, LLC
  
Membership Units
                        
1,312,720
      
-
      
682,614
      
0.06
%
  
B/E
 
                                                               
Other Manufacturing 
                                                          
KAGY Holding Company, Inc.
  
Series A Preferred Stock
                        
9,778
      
1,091,200
      
6,118,515
      
0.50
%
  
B/C/E
  
Precision Holdings, LLC
  
Class C Membership Interest
                        
33
      
-
      
1,431
      
-
    
C/E
 
                                     
1,091,200
      
6,119,946
      
0.50
%
      
Radio and Television Broadcasting 
                                                          
Fuse Media, LLC
  
Warrants to Purchase Common Stock
                        
233,470
      
300,322
      
-
      
-
    
C/E
 
                                                               
Restaurants 
                                                          
RM Holdco, LLC (Real Mex)
  
Equity Participation
                        
24
      
-
      
-
      
-
    
B/C/E
  
RM Holdco, LLC (Real Mex)
  
Membership Units
                        
13,161,000
      
2,010,777
      
-
      
-
    
B/C/E
  
                                     
2,010,777
      
-
      
-
        
Retail 
                                                          
Shop Holding, LLC (Connexity)
  
Class A Units
                        
507,167
      
480,049
      
320,682
      
0.03
%
  
C/E
 
Shop Holding, LLC (Connexity)
  
Warrants to Purchase Class A Units
                        
326,691
      
-
      
8,079
      
-
    
C/E
 
                                     
480,049
      
328,761
      
0.03
%
      

11

TCP Capital Corp.
 
Consolidated Schedule of Investments (Continued)
 
December 31, 2015
 
                                         
Fair
Value
    
% of Total
Cash and
Investments
        
                                                   
Issuer
  
Instrument
  
Ref
  
Floor
  
Spread
  
Total Coupon
  
Maturity
  
Shares
    
Cost
            
Notes
  
                                                       
Equity Securities (continued) 
                                                  
Software Publishing 
                                                  
Blackline Intermediate, Inc.
  
Warrants to Purchase Common Stock
                        
1,232,731
    
$
522,678
    
$
1,290,175
      
0.11
%
  
C/E
 
Edmentum Ultimate Holdings, LLC
  
Class A Common Units
                      
159,515
680,226
680,218
  
0.05
%
B/C/E
SoundCloud, Ltd. (United Kingdom)
  
Warrants to Purchase Preferred Stock
                        
946,498
      
79,082
      
75,247
      
0.01
%
  
C/E/H
  
Utilidata, Inc.
  
Warrants to Purchase Stock
                        
29,593
      
216,336
      
216,337
      
0.02
%
  
C/E
 
                                     
1,498,322
      
2,261,977
      
0.19
%
      
Wired Telecommunications Carriers 
                                                          
Integra Telecom, Inc.
  
Common Stock
                        
1,274,522
      
8,433,884
      
5,269,511
      
0.43
%
  
C/E
 
Integra Telecom, Inc.
  
Warrants
                        
346,939
      
19,919
      
221,174
      
0.02
%
  
C/E
 
V Telecom Investment S.C.A. (Vivacom)
(Luxembourg)
  
Common Shares
                        
1,393
      
3,236,256
      
3,390,093
      
0.28
%
  
C/D/E/H
  
                                     
11,690,059
      
8,880,778
      
0.73
%
      
                                                               
Total Equity Securities 
                                
71,334,905
      
52,384,338
      
4.30
%
      
                                                               
Total Investments 
                              
$
1,231,707,426
    
$
1,182,919,725
                
                                                               
Cash and Cash Equivalents 
                                                          
Cash Denominated in Foreign Currencies
                                           
130,081
      
0.01
%
      
Cash Held on Account at Various Institutions
                                           
35,499,354
      
2.91
%
      
Cash and Cash Equivalents 
                                      
35,629,435
      
2.92
%
      
                                                               
Total Cash and Investments 
                                      
$
1,218,549,160
      
100.00
%
   M
 

Notes to Consolidated Schedule of Investments:

(A)  Investments in bank debt generally are bought and sold among institutional investors in transactions not subject to registration under the Securities Act  of 1933. Such transactions are generally subject to contractual restrictions,
      such as approval of the agent or borrower.

(B)  Non-controlled affiliate – as defined under the Investment Company Act of 1940 (ownership of between 5% and 25% of the outstanding voting  securities of this issuer). See Consolidated Schedule of Changes in Investments in Affiliates.

(C)  Non-income producing security.

(D)  Investment denominated in foreign currency.  Amortized cost and fair value converted from foreign currency to US dollars. Foreign currency denominated investments are generally hedged for currency exposure.
     At December 31, 2015, such hedging activities included the derivatives listed at the end of the Consolidated Schedule of Investments. (See Note 2)

(E)  Restricted security. (See Note 2)

(F)  Controlled issuer – as defined under the Investment Company Act of 1940 (ownership of 25% or more of the outstanding voting securities of this issuer). Investment is not more than 50% of the outstanding voting securities of the issuer
     nor deemed to be a significant subsidiary.  See Consolidated Schedule of Changes in Investments in Affiliates.

(G)  Investment has been segregated to collateralize certain unfunded commitments.

(H)    Non-U.S. company or principal place of business outside the U.S. and as a result the investment is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire
      any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

(I)    Deemed an investment company under Section 3(c) of the Investment Company Act and as a result the investment is not a qualifying asset under Section 55(a) of the Investment Company Act.  Under the Investment Company Act, the Company
       may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

(J)  Publicly traded company with a market capitalization greater than $250 million and as a result the investment is not a qualifying asset under Section 55(a)  of the Investment Company Act. Under the Investment Company Act, the Company may
        not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

(K)  Negative balances relate to an unfunded commitment that was acquired and/or valued at a discount.

(L) In addition to the stated coupon, investment has an exit fee payable upon repayment of the loan in an amount equal to the percentage of the original principal amount shown.

(M)  All cash and investments, except those referenced in Notes G above, are pledged as collateral under certain debt as described in Note 4 to the Consolidated Financial Statements.


LIBOR or EURIBOR resets monthly (M), quarterly (Q), semiannually (S), or annually (A).


Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $500,928,009 and $456,059,137 respectively, for the twelve months ended December 31, 2015. Aggregate acquisitions includes investment assets received as payment in kind.  Aggregate dispositions includes principal paydowns on and maturities of debt investments.  The total value of restricted securities and bank debt as of December 31, 2015 was $1,182,719,039, or 97.1% of total cash and investments of the Company.  As of December 31, 2015, approximately 18.0% of the total assets of the Company were not qualifying assets under Section 55(a) of the 1940 Act.

Options and swaps at December 31, 2015 were as follows:

 Investment
  
Notional Amount
    
Fair Value
  
             
Interest Rate Cap with Deutsche Bank AG, 4%, expires 5/15/2016
  
$
25,000,000
    
$
-
  
Euro/US Dollar Cross-Currency Basis Swap with Wells Fargo Bank, N.A., Pay Euros/Receive USD, Expires 3/31/2017
  
$
16,401,467
    
$
3,229,442
  
 
See accompanying notes to the consolidated financial statements.
12

TCP Capital Corp.
 
Consolidated Statements of Operations (Unaudited)
 
   
Three Months Ended September 30,
    
Nine Months Ended September 30,
  
   
2016
    
2015
    
2016
    
2015
  
                         
Investment income
                        
Interest income:
                        
Companies less than 5% owned
  
$
35,115,862
    
$
32,171,144
    
$
99,016,633
    
$
98,581,508
  
Companies 5% to 25% owned
    
1,848,171
      
1,516,596
      
4,982,075
      
3,828,262
  
Companies more than 25% owned
    
1,313,034
      
125,074
      
1,915,981
      
444,168
  
Lease income:
                                
Companies more than 25% owned
    
71,013
      
354,958
      
1,496,869
      
978,000
  
Other income:
                                
Companies less than 5% owned
    
120,910
      
1,331,277
      
1,241,885
      
3,420,283
  
Total investment income
    
38,468,990
      
35,499,049
      
108,653,443
      
107,252,221
  
                                 
Operating expenses
                                
Interest and other debt expenses
    
6,198,850
      
4,610,726
      
17,577,859
      
13,031,365
  
Management and advisory fees
    
4,816,043
      
4,703,999
      
13,976,545
      
13,681,411
  
Legal fees, professional fees and due diligence expenses
    
550,563
      
425,796
      
1,784,174
      
1,994,571
  
Administrative expenses
    
429,867
      
394,920
      
1,267,815
      
1,177,357
  
Director fees
    
97,877
      
67,625
      
295,486
      
233,465
  
Insurance expense
    
78,794
      
99,876
      
280,575
      
272,677
  
Custody fees
    
75,995
      
74,891
      
231,846
      
214,141
  
Other operating expenses
    
555,944
      
866,249
      
1,569,986
      
2,182,452
  
Total operating expenses
    
12,803,933
      
11,244,082
      
36,984,286
      
32,787,439
  
                                 
Net investment income
    
25,665,057
      
24,254,967
      
71,669,157
      
74,464,782
  
                                 
Net realized and unrealized gain (loss) on investments and foreign currency
                                
Net realized gain (loss):
                                
Investments in companies less than 5% owned
    
(763,617
)
    
5,735,352
      
(4,490,140
)
    
(3,714,114
)
Investments in companies 5% to 25% owned
    
102,392
      
395
      
417,446
      
1,185
  
Investments in companies more than 25% owned
    
-
      
-
      
79,742
      
19,167
  
Net realized gain (loss)
    
(661,225
)
    
5,735,747
      
(3,992,952
)
    
(3,693,762
)
                                 
Change in net unrealized appreciation/depreciation
    
869,981
      
(7,621,948
)
    
53,816
      
28,123
  
Net realized and unrealized gain (loss)
    
208,756
      
(1,886,201
)
    
(3,939,136
)
    
(3,665,639
)
                                 
Net increase in net assets from operations
    
25,873,813
      
22,368,766
      
67,730,021
      
70,799,143
  
                                 
Gain on repurchase of Series A preferred interests
    
-
      
-
      
-
      
1,675,000
  
Dividends on Series A preferred equity facility
    
-
      
(460,836
)
    
-
      
(1,251,930
)
Net change in accumulated dividends on Series A preferred equity facility
      -      
398,541
      
-
      
497,790
  
Distributions of incentive allocation to the General Partner from: Net investment income
    
(5,133,010
)
    
(4,838,534
)
    
(14,333,831
)
    
(14,742,130
)
                                 
Net increase in net assets applicable to common shareholders resulting from operations
  
$
20,740,803
    
$
17,467,937
    
$
53,396,190
    
$
56,977,873
  
                                 
Basic and diluted earnings per common share
  
$
0.39
    
$
0.36
    
$
1.06
    
$
1.17
  
                                 
Basic and diluted weighted average common shares outstanding
    
52,736,835
      
48,957,567
      
50,245,035
      
48,858,263
  
 
See accompanying notes to the consolidated financial statements.
13

TCP Capital Corp.
 
Consolidated Statements of Changes in Net Assets (Unaudited)
 
    
Common Stock
    
Paid in Capital
    
Accumulated
Net Investment
    
Accumulated
Net Realized
    
Accumulated
Net Unrealized
    
Total Net
  
    
Shares
    
Par Amount
    
in Excess of Par
    
Income
    
Losses
    
Depreciation
    
Assets
  
Balance at December 31, 2014
    
48,710,627
    
$
48,710
    
$
877,103,880
    
$
21,884,381
    
$
(126,408,033
)
  
$
(41,499,910
)
  
$
731,129,028
  
                                                         
Issuance of common stock from at the market offerings, net
    
248,614
      
249
      
3,945,817
      
-
      
-
      
-
      
3,946,066
  
Issuance of common stock from dividend reinvestment plan
    
555
      
-
      
8,116
      
-
      
-
      
-
      
8,116
  
Repurchase of common stock
    
(125,062
)
    
(125
)
    
(1,797,751
)
                            
(1,797,876
)
Gain on repurchase of Series A preferred interests
    
-
      
-
      
-
      
-
      
1,675,000
      
-
      
1,675,000
  
Net investment income
    
-
      
-
      
-
      
100,502,812
      
-
      
-
      
100,502,812
  
Net realized and unrealized loss
    
-
      
-
      
-
      
-
      
(17,671,648
)
    
(4,733,463
)
    
(22,405,111
)
Dividends on Series A preferred equity facility
    
-
      
-
      
-
      
(754,140
)
    
-
      
-
      
(754,140
)
General Partner incentive allocation
    
-
      
-
      
-
      
(19,949,734
)
    
-
      
-
      
(19,949,734
)
Regular dividends paid to common shareholders
    
-
      
-
      
-
      
(70,377,144
)
    
-
      
-
      
(70,377,144
)
Tax reclassification of stockholders’ equity in accordance with generally accepted accounting principles
    
-
      
-
      
(876,706
)
    
(9,044,382
)
    
9,921,088
      
-
      
-
  
Balance at December 31, 2015
    
48,834,734
    
$
48,834
    
$
878,383,356
    
$
22,261,793
    
$
(132,483,593
)
  
$
(46,233,373
)
  
$
721,977,017
  
                                                         
Issuance of common stock in public offering, net
    
2,336,552
      
2,337
      
34,956,233
      
-
      
-
      
-
      
34,958,570
  
Issuance of common stock from conversion of convertible debt
    
2,011,900
      
2,012
      
30,216,726
      
-
      
-
      
-
      
30,218,738
  
Issuance of common stock from dividend reinvestment plan
    
461
      
-
      
7,147
      
-
      
-
      
-
      
7,147
  
Issuance of convertible debt
    
-
      
-
      
3,309,596
      
-
      
-
      
-
      
3,309,596
  
Repurchase of common stock
    
(141,896
)
    
(141
)
    
(1,879,407
)
    
-
      
-
      
-
      
(1,879,548
)
Net investment income
    
-
      
-
      
-
      
71,669,157
      
-
      
-
      
71,669,157
  
Net realized and unrealized loss
    
-
      
-
      
-
      
-
      
(3,992,952
)
    
53,816
      
(3,939,136
)
General Partner incentive allocation
    
-
      
-
      
-
      
(14,333,831
)
    
-
      
-
      
(14,333,831
)
Regular dividends paid to common shareholders
    
-
      
-
      
-
      
(54,880,168
)
    
-
      
-
      
(54,880,168
)
Balance at September 30, 2016
    
53,041,751
    
$
53,042
    
$
944,993,651
    
$
24,716,951
    
$
(136,476,545
)
  
$
(46,179,557
)
  
$
787,107,542
  

See accompanying notes to the consolidated financial statements.
14

TCP Capital Corp.
 
Consolidated Statements of Cash Flows (Unaudited)

   
Nine Months Ended September 30,
  
   
2016
    
2015
  
             
Operating activities
            
Net increase in net assets applicable to common shareholders resulting from operations
  
$
53,396,190
    
$
56,977,873
  
Adjustments to reconcile net increase in net assets applicable to common
                
shareholders resulting from operations to net cash used in
                
operating activities:
                
Net realized loss
    
3,992,952
      
3,693,762
  
Change in net unrealized appreciation/depreciation of investments
    
121,178
      
(374,026
)
Gain on repurchase of Series A preferred interests
    
-
      
(1,675,000
)
Dividends paid on Series A preferred equity facility
    
-
      
1,251,930
  
Net change in accumulated dividends on Series A preferred equity facility
    
-
      
(497,790
)
Net amortization of investment discounts and premiums
    
(9,263,325
)
    
(9,252,856
)
Amortization of original issue discount on convertible debt
    
361,750
      
308,402
  
Interest and dividend income paid in kind
    
(5,209,391
)
    
(4,854,335
)
Amortization of deferred debt issuance costs
    
1,947,472
      
1,623,333
  
Accrued interest on convertible debt at conversion
    
218,738
      
-
  
Changes in assets and liabilities:
                
Purchases of investment securities
    
(374,607,255
)
    
(418,493,733
)
Proceeds from sales, maturities and pay downs of investments
    
294,224,143
      
305,505,796
  
Increase in accrued interest income - companies less than 5% owned
    
(2,224,606
)
    
(4,039,131
)
Increase in accrued interest income - companies 5% to 25% owned
    
(295,458
)
    
(496,698
)
Decrease in accrued interest income - companies more than 25% owned
    
13,311
      
10,957
  
Decrease (increase) in receivable for investments sold
    
(6,306,581
)
    
8,991,647
  
Decrease in prepaid expenses and other assets
    
909,421
      
795,661
  
Increase in payable for investments purchased
    
2,725,929
      
5,798,002
  
Increase (decrease) in incentive allocation payable
    
(74,596
)
    
535,494
  
Increase in interest payable
    
1,608,964
      
2,069,047
  
Increase in payable to the Advisor
    
369,532
      
271,345
  
Decrease in accrued expenses and other liabilities
    
(540,927
)
    
(584,783
)
Net cash used in operating activities
    
(38,632,559
)
    
(52,435,104
)
                 
Financing activities
                
Borrowings
    
503,700,000
      
415,300,000
  
Repayments of debt
    
(503,500,000
)
    
(169,000,000
)
Payments of debt issuance costs
    
(4,529,350
)
    
(3,766,618
)
Repurchase of Series A preferred interests
    
-
      
(132,325,000
)
Dividends paid on Series A preferred equity facility
    
-
      
(1,251,930
)
Regular dividends paid to common shareholders
    
(54,880,168
)
    
(52,786,506
)
Repurchase of common shares
    
(1,879,548
)
    
(372,843
)
Proceeds from issuance of convertible debt
    
170,000,000
      
-
  
Proceeds from shares issued in connection with dividend reinvestment plan
    
7,147
      
6,012
  
Proceeds from common shares sold, net of underwriting and offering costs
    
34,958,570
      
3,946,066
  
Net cash provided by financing activities
    
143,876,651
      
59,749,181
  
                 
Net increase in cash and cash equivalents
    
105,244,092
      
7,314,077
  
Cash and cash equivalents at beginning of period
    
35,629,435
      
27,268,792
  
Cash and cash equivalents at end of period
  
$
140,873,527
    
$
34,582,869
  
                 
Supplemental cash flow information
                
Interest payments
  
$
12,768,481
    
$
8,110,934
  
Excise tax payments
  
$
877,879
    
$
877,879
  
                 
Non-cash transactions
                
Conversion of convertible debt
  
$
30,218,738
    
$
-
  
See accompanying notes to the consolidated financial statements.
15
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited)

September 30, 2016

1. Organization and Nature of Operations
 
TCP Capital Corp. (the “Company”) is a Delaware corporation formed on April 2, 2012 as an externally managed, closed-end, non-diversified management investment company. The Company elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company’s investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. The Company invests primarily in the debt of middle-market companies as well as small businesses, including senior secured loans, junior loans, mezzanine debt and bonds. Such investments may include an equity component, and, to a lesser extent, the Company may make equity investments directly. The Company was formed through the conversion on April 2, 2012 of the Company’s predecessor, Special Value Continuation Fund, LLC, from a limited liability company to a corporation in a non-taxable transaction, leaving the Company as the surviving entity. On April 3, 2012, the Company completed its initial public offering.

Investment operations are conducted in Special Value Continuation Partners, LP, a Delaware limited partnership (the “Operating Company”), of which the Company owns 100% of the common limited partner interests, or in one of the Operating Company’s wholly owned subsidiaries, TCPC Funding I, LLC, a Delaware limited liability company (“TCPC Funding”) and TCPC SBIC, LP, a Delaware limited partnership (the “SBIC”). The Operating Company has also elected to be treated as a BDC under the 1940 Act. The SBIC was organized in June 2013, and, on April 22, 2014, received a license from the United States Small Business Administration (the “SBA”) to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958. These consolidated financial statements include the accounts of the Company, the Operating Company, TCPC Funding and the SBIC. All significant intercompany transactions and balances have been eliminated in the consolidation.
 
The Company has elected to be treated as a regulated investment company (“RIC”) for U.S. federal income tax purposes. As a RIC, the Company will not be taxed on its income to the extent that it distributes such income each year and satisfies other applicable income tax requirements. The Operating Company, TCPC Funding, and the SBIC have elected to be treated as partnerships for U.S. federal income tax purposes.
 
The general partner of the Operating Company is SVOF/MM, LLC, which also serves as the administrator of both the Company and the Operating Company (the “Administrator” or the “General Partner”). The managing member of the General Partner is Tennenbaum Capital Partners, LLC (the “Advisor”), which serves as the investment manager to the Company, the Operating Company, TCPC Funding, and the SBIC. Most of the equity interests in the General Partner are owned directly or indirectly by the Advisor and its employees.
 
Company management consists of the Advisor and the Company’s board of directors. Operating Company management consists of the General Partner and the Operating Company’s board of directors. The Advisor and the General Partner direct and execute the day-to-day operations of the Company and the Operating Company, respectively, subject to oversight from the respective board of directors, which sets the broad policies of the respective entity and performs certain functions required by the 1940 Act in the case of the Operating Company. The board of directors of the Operating Company has delegated investment management of the Operating Company’s assets to the Advisor. Each board of directors consists of six persons, four of whom are independent.
16
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016

2. Summary of Significant Accounting Policies
 
Basis of Presentation
 
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The Company is an investment company following accounting and reporting guidance in Accounting Standards Codification (“ASC”) Topic 946, Financial Services – Investment Companies. The Company has consolidated the results of its wholly owned subsidiaries in its consolidated financial statements in accordance with ASC Topic 946. The following is a summary of the significant accounting policies of the Company and the Operating Company.
 
Reclassifications
 
Certain prior period amounts in the Consolidated Statements of Assets and Liabilities relating to deferred debt issuance costs were reclassified to debt to conform to the current period presentation resulting from the adoption of two Accounting Standards Updates (see “Recent Accounting Pronouncements”).  Certain prior period amounts in the Consolidated Statements of Operations relating to interest expense, amortization of deferred debt issuance costs and commitment fees have been reclassified into “interest and other debt expenses” to conform to the current period presentation.
 
Use of Estimates
 
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well the reported amounts of revenues and expenses during the reporting periods presented. Although management believes these estimates and assumptions to be reasonable, actual results could differ from those estimates and such differences could be material.
 
Investment Valuation
 
The Company’s investments are generally held by the Operating Company, either directly or through either TCPC Funding or the SBIC. Management values investments at fair value in accordance with GAAP, based upon the principles and methods of valuation set forth in policies adopted by the board of directors. Fair value is generally defined as the amount for which an investment would be sold in an orderly transaction between market participants at the measurement date.
 
All investments are valued at least quarterly based on quotations or other affirmative pricing from independent third-party sources, with the exception of investments priced directly by the Advisor which in the aggregate comprise less than 5% of the capitalization of the Operating Company. Investments listed on a recognized exchange or market quotation system, whether U.S. or foreign, are valued using the closing price on the date of valuation.

17
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
2. Summary of Significant Accounting Policies (continued)

Investments not listed on a recognized exchange or market quotation system, but for which reliable market quotations are readily available are valued using prices provided by a nationally recognized pricing service or by using quotations from broker-dealers.

Investments for which market quotations are either not readily available or are determined to be unreliable are priced at fair value using affirmative valuations performed by independent valuation services approved by the board of directors or, for investments aggregating less than 5% of the total capitalization of the Operating Company, using valuations determined directly by the Advisor. Such valuations are determined under a documented valuation policy that has been reviewed and approved by the board of directors.
 
Pursuant to this policy, the Advisor provides recent portfolio company financial statements and other reporting materials to independent valuation firms as applicable, which firms evaluate such materials along with relevant observable market data to conduct independent appraisals each quarter, and their preliminary valuation conclusions are documented and discussed with senior management of the Advisor. The audit committee of the board of directors discusses the valuations, and the board of directors approves the fair value of the investments in good faith based on the input of the Advisor, the respective independent valuation firms as applicable, and the audit committee of the board of directors.
 
Generally, to increase objectivity in valuing the investments, the Advisor will utilize external measures of value, such as public markets or third-party transactions, whenever possible. The Advisor’s valuation is not based on long-term work-out value, immediate liquidation value, nor incremental value for potential changes that may take place in the future. The values assigned to investments are based on available information and do not necessarily represent amounts that might ultimately be realized, as these amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated. The foregoing policies apply to all investments, including any in companies and groups of affiliated companies aggregating more than 5% of the Company’s assets.
 
Fair valuations of investments in each asset class are determined using one or more methodologies including the market approach, income approach, or, in the case of recent investments, the cost approach, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. Such information may include observed multiples of earnings and/or revenues at which transactions in securities of comparable companies occur, with appropriate adjustments for differences in company size, operations or other factors affecting comparability.
 
The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present value amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. The discount rates used for such analyses reflect market yields for comparable investments, considering such factors as relative credit quality, capital structure, and other factors.
 
In following these approaches, the types of factors that may be taken into account also include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparables, comparable costs of capital, the principal market in which the investment trades and enterprise values, among other factors.
 
18
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
2. Summary of Significant Accounting Policies (continued)
 
Investments may be categorized based on the types of inputs used in valuing such investments. The level in the GAAP valuation hierarchy in which an investment falls is based on the lowest level input that is significant to the valuation of the investment in its entirety. Transfers between levels are recognized as of the beginning of the reporting period.
 
At September 30, 2016, the Company’s investments were categorized as follows:
 
Level
  
Basis for Determining Fair Value
  
Bank Debt
    
Other
Corporate Debt
    
Equity
Securities
  
1
  
Quoted prices in active markets for identical assets
  
$
-
    
$
-
    
$
-
  
2
  
Other direct and indirect observable market inputs *
    
25,216,828
      
91,523,106
      
-
  
3
  
Independent third-party valuation sources that employ significant unobservable inputs
    
1,033,851,938
      
70,440,958
      
53,494,113
  
3
  
Advisor valuations with significant unobservable inputs
    
149,458
      
-
      
1,753,491
  
Total
  
 
  
$
1,059,218,224
    
$
161,964,064
    
$
55,247,604
  
 
*
For example, quoted prices in inactive markets or quotes for comparable investments

Unobservable inputs used in the fair value measurement of Level 3 investments as of September 30, 2016 included the following:

Asset Type
  
Fair Value
  
Valuation Technique
  
Unobservable Input
  
Range (Weighted Avg.)
  
Bank Debt
  
$
801,891,666
  
Income approach
  
Discount rate
    
7.5% – 19.3% (12.0%)
 
 
    
131,813,913
  
Market quotations
  
Indicative bid/ask quotes
    
1 – 5(2)
 
 
    
48,698,938
  
Market comparable companies
  
Revenue multiples
    
0.4x – 4.0x(2.4x)
 
 
    
51,596,879
  
Market comparable companies
  
EBITDA multiples
    
5.0x – 11.5x(6.9x)
 
Other Corporate Debt
    
61,172,958
  
Market quotations
  
Indicative bid/ask quotes
    
1 – 2(1)
 
 
    
9,268,000
  
Market comparable companies
  
EBITDA multiples
    
7.8x(7.8x)
 
Equity
    
6,785,350
  
Income approach
  
Discount rate
    
5.3% – 26.2% (5.8%)
 
 
    
27,675,630
  
Market quotations
  
Indicative bid/ask quotes
    
1(1)
 
 
    
4,564,588
  
Market comparable companies
  
Revenue multiples
    
0.4x – 7.8x(5.3x)
 
 
    
16,222,036
  
Market comparable companies
  
EBITDA multiples
    
6.4x – 11.5x(7.6x)
 
 
  
$
1,159,689,958
  
 
  
 
        
 
19

TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
2. Summary of Significant Accounting Policies (continued)
 
Generally, a change in an unobservable input may result in a change to the value of an investment as follows:

Input
 
  
Impact to Value if
Input Increases
 
  
Impact to Value if
Input Decreases
Discount rate
 
  
Decrease
 
  
Increase
Revenue multiples
 
  
Increase
 
  
Decrease
EBITDA multiples
 
  
Increase
 
  
Decrease
 
Changes in investments categorized as Level 3 during the three months ended September 30, 2016 were as follows:
 
 
  
Independent Third-Party Valuation
  
 
  
Bank Debt
    
Other
Corporate Debt
    
Equity
Securities
  
Beginning balance
  
$
986,374,365
    
$
108,247,783
    
$
53,064,896
  
Net realized and unrealized gains (losses)
    
185,985
      
1,148,520
      
(1,782,745
)
Acquisitions *
    
143,164,985
      
7,310,415
      
5,540,103
  
Dispositions
    
(102,376,236
)
    
-
      
(3,007,459
)
Transfers out of Level 3 †
    
-
      
(46,265,760
)
    
-
  
Transfers into Level 3 ‡
    
6,502,839
      
-
      
-
  
Reclassifications within Level 3 §
    
-
      
-
      
(320,682
)
Ending balance
  
$
1,033,851,938
    
$
70,440,958
    
$
53,494,113
  
 
                        
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)
  
$
2,587,265
    
$
1,148,520
    
$
(1,782,745
)

*
Includes payments received in kind and accretion of original issue and market discounts
†
Comprised of two investments that transferred to Level 2 due to increased observable market activity
‡
Comprised of one investment that transferred from Level 2 due to reduced trading volumes
§
Comprised of one investment that reclassified to Advisor Valuation

 
  
Advisor Valuation
  
 
  
Bank Debt
    
Other
Corporate Debt
     Equity
Securities
  
Beginning balance
  
$
146,365
    
$
-
    
$
1,855,336
  
Net realized and unrealized gains (losses)
    
3,093
      
-
      
(319,764
)
Dispositions
    
-
      
-
      
(102,763
)
Reclassifications within Level 3 *
    
-
      
-
      
320,682
  
Ending balance
  
$
149,458
    
$
-
    
$
1,753,491
  
 
                        
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)
  
$
3,093
    
$
-
       (420,896
)
                         

*
Comprised of one investment that reclassified from Independent Third-Party Valuation


20
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
2. Summary of Significant Accounting Policies (continued)

There were no transfers between Level 1 and 2 during the three months ended September 30, 2016.

Changes in investments categorized as Level 3 during the nine months ended September 30, 2016 were as follows:

 
  
Independent Third-Party Valuation
  
 
  
Bank Debt
    
Other
Corporate Debt
    
Equity
Securities
  
Beginning balance
  
$
907,967,337
    
$
89,314,530
    
$
49,956,123
  
Net realized and unrealized gains (losses)
    
4,677,005
      
(1,665,010
)
    
(5,662,544
)
Acquisitions *
    
324,878,794
      
23,280,718
      
19,764,729
  
Dispositions
    
(249,281,514
)
    
-
      
(10,238,452
)
Transfers out of Level 3 †
    
(5,492,400
)
    
(46,265,760
)
    
-
  
Transfers into Level 3 ‡
    
51,102,716
      
5,776,480
      
-
  
Reclassifications within Level 3 §
    
-
      
-
      
(325,743
)
Ending balance
  
$
1,033,851,938
    
$
70,440,958
    
$
53,494,113
  
 
                        
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)
  
$
7,944,054
    
$
(1,665,010
)
  
$
(5,637,217
)

*
Includes payments received in kind and accretion of original issue and market discounts
†
Comprised of three investments that transferred to Level 2 due to increased observable market activity
‡
Comprised of six investments that transferred from Level 2 due to reduced trading volumes
§
Comprised of two investments that reclassified to Advisor Valuation

 
  
Advisor Valuation
  
 
  
Bank Debt
    
Other
Corporate Debt
    
Equity
Securities
  
Beginning balance
  
$
1,124,504
    
$
-
    
$
2,428,217
  
Net realized and unrealized gains (losses)
    
(923,349
)
    
-
      
(582,896
)
Acquisitions *
    
1,050,297
      
-
      
243
  
Dispositions
    
(1,101,994
)
    
-
      
(417,816
)
Reclassifications within Level 3 †
    
-
      
-
      
325,743
  
Ending balance
  
$
149,458
    
$
-
    
$
1,753,491
  
 
                        
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)
  
$
(881,282
)
  
$
-
    
$
(999,280
)
 
*
Includes payments received in kind and accretion of original issue and market discounts
†
Comprised of two investments that reclassified from Independent Third-Party Valuation

There were no transfers between Level 1 and 2 during the nine months ended September 30, 2016.


21
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
2. Summary of Significant Accounting Policies (continued)

At December 31, 2015, the Company’s investments were categorized as follows:

Level
  
Basis for Determining Fair Value
  
Bank Debt
    
Other
Corporate Debt
    
Equity
Securities
  
1
  
Quoted prices in active markets for identical assets
  
$
-
    
$
-
    
$
-
  
2
  
Other direct and indirect observable market inputs *
    
92,311,257
      
39,817,757
      
-
  
3
  
Independent third-party valuation sources that employ significant unobservable inputs
    
907,967,337
      
89,314,530
      
49,956,123
  
3
  
Advisor valuations with significant unobservable inputs
    
1,124,504
      
-
      
2,428,217
  
Total
  
 
  
$
1,001,403,098
    
$
129,132,287
    
$
52,384,340
  
 
*
For example, quoted prices in inactive markets or quotes for comparable investments
 
Unobservable inputs used in the fair value measurement of Level 3 investments as of December 31, 2015 included the following:
 
Asset Type
  
Fair Value
  
Valuation Technique
  
Unobservable Input
  
Range (Weighted Avg.)
  
Bank Debt
  
$
715,701,737
  
Income approach
  
Discount rate
    
4.2% – 18.9% (11.8%)
 
 
    
140,033,088
  
Market quotations
  
Indicative bid/ask quotes
    
1 – 5(1)
 
 
    
36,550,712
  
Market comparable companies
  
Revenue multiples
    
0.3x – 4.5x(2.2x)
 
 
    
16,806,304
  
Market comparable companies
  
EBITDA multiples
    
3.3x – 11.5x(7.8x)
 
Other Corporate Debt
    
80,046,530
  
Market quotations
  
Indicative bid/ask quotes
    
1(1)
 
 
    
9,268,000
  
Market comparable companies
  
EBITDA multiples
    
7.3x(7.3x)
 
Equity
    
7,908,649
  
Income approach
  
Discount rate
    
5.9% – 26.2% (8.0%)
 
 
    
15,827,563
  
Market quotations
  
Indicative bid/ask quotes
    
1 – 2(1)
 
 
    
3,212,249
  
Market comparable companies
  
Revenue multiples
    
0.3x – 6.0x(3.2x)
 
 
    
25,435,879
  
Market comparable companies
  
EBITDA multiples
    
4.4x – 11.5x(6.8x)
 
 
  
$
1,050,790,711
  
 
  
 
        

22
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016

2. Summary of Significant Accounting Policies (continued)

Changes in investments categorized as Level 3 during the three months ended September 30, 2015 were as follows:

 
  
Independent Third-Party Valuation
  
 
  
Bank Debt
    
Other
Corporate Debt
    
Equity
Securities
  
Beginning balance
  
$
908,884,909
    
$
96,136,194
    
$
38,634,245
  
Net realized and unrealized gains (losses)
    
(3,214,866
)
    
(1,285,320
)
    
6,167,397
  
Acquisitions *
    
111,630,494
      
-
      
2,750,607
  
Dispositions
    
(30,596,992
)
    
-
      
(8,497,163
)
Reclassifications within Level 3 †
    
(289,132
)‡
    
-
      
-
  
Ending balance
  
$
986,414,413
    
$
94,850,874
    
$
39,055,086
  
 
                        
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)
  
$
(1,862,003
)
  
$
(1,285,320
)
  
$
4,284,045
  
 
*
Includes payments received in kind and accretion of original issue and market discounts
†
Comprised of one investment that reclassified from Advisor Valuation
‡
Negative balance relates to an unfunded commitment that was acquired and valued at a discount


 
  
Advisor Valuation
  
 
  
Bank Debt
    
Other
Corporate Debt
    
Equity
Securities
  
Beginning balance
  
$
(383,918
)‡
  
$
-
    
$
2,455,417
  
Net realized and unrealized gains (losses)
    
149,870
      
-
      
(26,540
)
Acquisitions *
    
1,076,312
      
-
      
-
  
Dispositions
    
(6,893
)
    
-
      
(1,217
)
Reclassifications within Level 3 †
    
289,132
 
    
-
      
-
  
Ending balance
  
$
1,124,503
    
$
-
    
$
2,427,660
  
 
                        
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)
  
$
149,870
    
$
-
    
$
201,750
  
 
*
Includes payments received in kind and accretion of original issue and market discounts
†
Comprised of one investment that reclassified to Independent Third-Party Valuation
‡
Negative balance relates to an unfunded commitment that was acquired and valued at a discount

There were no transfers between Level 1 and 2 during the three months ended September 30, 2015.

23

TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
2. Summary of Significant Accounting Policies (continued)

Changes in investments categorized as Level 3 during the nine months ended September 30, 2015 were as follows:

 
  
Independent Third-Party Valuation
  
 
  
Bank Debt
    
Other
Corporate Debt
    
Equity
Securities
  
Beginning balance
  
$
840,538,179
    
$
56,621,975
    
$
30,618,142
  
Net realized and unrealized gains (losses)
    
(14,665,802
)
    
897,833
      
13,506,731
  
Acquisitions *
    
406,576,197
      
300,149
      
5,266,261
  
Dispositions
    
(223,620,986
)
    
(2,516,390
)
    
(10,336,048
)
Transfers out of Level 3 †
    
(36,143,175
)
    
(16,311,095
)
    
-
  
Transfers into Level 3 ‡
    
13,730,000
      
51,247,224
      
-
  
Reclassifications within Level 3 §
    
-
      
4,611,178
      
-
  
Ending balance
  
$
986,414,413
    
$
94,850,874
    
$
39,055,086
  
 
                        
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)
  
$
(11,815,486
)
  
$
841,634
    
$
7,600,170
  
 
*
Includes payments received in kind and accretion of original issue and market discounts
†
Comprised of five investments that transferred to Level 2 due to increased observable market activity
‡
Comprised of three investments that transferred from Level 2 due to reduced trading volumes
§
Comprised of one investment that reclassified from Advisor Valuation
 
 
 
  
Advisor Valuation
  
 
  
Bank Debt
    
Other
Corporate Debt
    
Equity
Securities
  
Beginning balance
  
$
-
    
$
4,611,178
    
$
2,324,629
  
Net realized and unrealized gains (losses)
    
134,445
      
-
      
104,248
  
Acquisitions *
    
1,725,243
      
-
      
-
  
Dispositions
    
(735,185
)
    
-
      
(1,217
)
Reclassifications within Level 3 †
    
-
      
(4,611,178
)
    
-
  
Ending balance
  
$
1,124,503
    
$
-
    
$
2,427,660
  
 
                        
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)
  
$
134,445
    
$
-
    
$
332,538
  
 
*
Includes payments received in kind and accretion of original issue and market discounts
†
Comprised of one investment that reclassified to Independent Third-Party Valuation

There were no transfers between Level 1 and 2 during the nine months ended September 30, 2015.

24

TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
2. Summary of Significant Accounting Policies (continued)

Investment Transactions
 
Investment transactions are recorded on the trade date, except for private transactions that have conditions to closing, which are recorded on the closing date. The cost of investments purchased is based upon the purchase price plus those professional fees which are specifically identifiable to the investment transaction. Realized gains and losses on investments are recorded based on the specific identification method, which typically allocates the highest cost inventory to the basis of investments sold.
 
Cash and Cash Equivalents
 
Cash consists of amounts held in accounts with brokerage firms and the custodian bank. Cash equivalents consist of highly liquid investments with an original maturity of generally three months or less. Cash equivalents are carried at amortized cost which approximates fair value. Cash equivalents are classified as Level 1 in the GAAP valuation hierarchy.
 
Restricted Investments
 
The Company may invest without limitation in instruments that are subject to legal or contractual restrictions on resale. These instruments generally may be resold to institutional investors in transactions exempt from registration or to the public if the securities are registered. Disposal of these investments may involve time-consuming negotiations and additional expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted investments is included at the end of the Consolidated Schedule of Investments. Restricted investments, including any restricted investments in affiliates, are valued in accordance with the investment valuation policies discussed above.
 
Foreign Investments
 
The Company may invest in instruments traded in foreign countries and denominated in foreign currencies. Foreign currency denominated investments comprised approximately 0.2% and 1.4% of total investments at September 30, 2016 and December 31, 2015, respectively. Such positions were converted at the respective closing foreign exchange rates in effect at September 30, 2016 and December 31, 2015 and reported in U.S. dollars. Purchases and sales of investments and income and expense items denominated in foreign currencies, when they occur, are translated into U.S. dollars based on the foreign exchange rates in effect on the respective dates of such transactions. The portion of gains and losses on foreign investments resulting from fluctuations in foreign currencies is included in net realized and unrealized gain or loss from investments.
 
Investments in foreign companies and securities of foreign governments may involve special risks and considerations not typically associated with investing in U.S. companies and securities of the U.S. government. These risks include, among other things, revaluation of currencies, less reliable information about issuers, different transaction clearance and settlement practices, and potential future adverse political and economic developments. Moreover, investments in foreign companies and securities of foreign governments and their markets may be less liquid and their prices more volatile than those of comparable U.S. companies and the U.S. government.
25
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
2. Summary of Significant Accounting Policies (continued)
 
Derivatives
 
In order to mitigate certain currency exchange and interest rate risks, the Operating Company has entered into certain swap and option transactions. All derivatives are reported at their gross amounts as either assets or liabilities in the Consolidated Statements of Assets and Liabilities. The transactions entered into are accounted for using the mark-to-market method with the resulting change in fair value recognized in earnings for the current period. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in interest rates and the value of foreign currencies relative to the U.S. dollar. The Company was required under the terms of its swap agreement to pledge assets as collateral to secure its obligation. As of September 30, 2016, $0.5 million of cash was held as collateral and was included in cash and cash equivalents in the Consolidated Statements of Assets and Liabilities.
 
During the nine months ended September 30, 2016, the Company entered into a GBP put option with a notional amount of £2.7 million. During the nine months ended September 30, 2016, the Company’s interest rate cap with a notional amount of $25.0 million expired and the Company exited its cross currency basis swap with a notional amount of $16.4 million. The put option is reported in the Consolidated Statements of Assets and Liabilities as options.  Gains and losses from derivatives during the nine months ended September 30, 2016 were included in net realized and unrealized gain (loss) on investments in the Consolidated Statements of Operations as follows: 

Instrument
  
Realized
Gains
(Losses)
    
Unrealized
Gains
(Losses)
  
Put option
  
$
-
    
$
460,972
  
Cross currency basis swap
    
2,746,072
      
(3,229,442
)
Interest rate cap
    
(51,750
)
    
51,750
  
 
The Company did not enter into any new derivative transactions during the nine months ended September 30, 2015. At September 30, 2015, the Company held an interest rate cap with a notional amount of $25.0 million and a cross currency basis swap with a notional amount of $16.4 million. The interest rate cap and the cross currency basis swap are reported in the Consolidated Statements of Assets and Liabilities as options and unrealized appreciation on swaps, respectively. Gains and losses from derivatives during the nine months ended September 30, 2015 were included in net realized and unrealized gain (loss) on investments in the Consolidated Statements of Operations as follows:
26

TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
2. Summary of Significant Accounting Policies (continued)

Instrument
  
Realized
Gains
(Losses)
    
Unrealized
Gains
(Losses)
  
Cross currency basis swap
  
$
-
    
$
1,151,138
  
Interest rate cap
    
-
      
(497
)

Valuations of derivatives held at September 30, 2016 and 2015 were determined using observable market inputs other than quoted prices in active markets for identical assets and, accordingly, are classified as Level 2 in the GAAP valuation hierarchy.
 
Deferred Debt Issuance Costs
 
Costs of approximately $4.1 million were incurred in September 2016 in connection with placing the Company’s unsecured convertible notes (see Note 4). Costs of approximately $1.8 million were incurred during 2015 in connection with the extension of the Operating Company’s credit facility (see Note 4). Costs of approximately $1.9 million were incurred during 2015 in connection with placing and extending TCPC Funding’s revolving credit facility (see Note 4). Costs of approximately $0.5 million and $0.4 million were incurred during the nine months ended September 30, 2016 and year ended December 31, 2015, respectively, in connection with placing the SBA Debentures (see Note 4). These costs were deferred and are being amortized on a straight-line basis over the estimated life of the respective instruments. The impact of utilizing the straight-line amortization method versus the effective-interest method is not material to the operations of the Company.
 
Revenue Recognition
 
Interest and dividend income, including income paid in kind, is recorded on an accrual basis. Origination, structuring, closing, commitment and other upfront fees, including original issue discounts, earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment, as are end-of-term or exit fees receivable upon repayment of a debt investment. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, are recognized as earned. Prepayment fees and similar income due upon the early repayment of a loan or debt security are recognized when earned and are included in interest income.
 
Certain debt investments are purchased at a discount to par as a result of the underlying credit risks and financial results of the issuer, as well as general market factors that influence the financial markets as a whole. Discounts on the acquisition of corporate bonds are generally amortized using the effective-interest or constant-yield method assuming there are no questions as to collectability. When principal payments on a loan are received in an amount in excess of the loan’s amortized cost, the excess principal payments are recorded as interest income.
 
27

TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
2. Summary of Significant Accounting Policies (continued)

Income Taxes
 
The Company intends to comply with the applicable provisions of the Internal Revenue Code of 1986, as amended, pertaining to regulated investment companies and to make distributions of taxable income sufficient to relieve it from substantially all federal income taxes. Accordingly, no provision for income taxes is required in the consolidated financial statements. The income or loss of the Operating Company, TCPC Funding and the SBIC is reported in the respective partners’ income tax returns. In accordance with ASC Topic 740 – Income Taxes, the Company recognizes in its consolidated financial statements the effect of a tax position when it is determined that such position is more likely than not, based on the technical merits, to be sustained upon examination. As of September 30, 2016, all tax years of the Company, the Operating Company, TCPC Funding and the SBIC since January 1, 2012 remain subject to examination by federal tax authorities. No such examinations are currently pending.
 
Cost and unrealized appreciation and depreciation of the Operating Company’s investments (including derivatives) for U.S. federal income tax purposes at September 30, 2016 and December 31, 2015 were as follows:

 
  
September 30, 2016
    
December 31, 2015
  
Unrealized appreciation
  
$
27,311,608
    
$
30,920,149
  
Unrealized depreciation
    
(73,322,123
)
    
(79,759,600
)
Net unrealized depreciation
  
$
(46,010,515
)
  
$
(48,839,451
)
 
                
Cost
  
$
1,322,901,379
    
$
1,231,759,176
  

Recent Accounting Pronouncements
 
During the first quarter of 2016, the Company adopted Financial Accounting Standards Board (the “FASB”) Accounting Standards Update (“ASU”) 2015-02, Amendments to the Consolidation Analysis. In particular, the new pronouncement changed the manner in which a reporting entity evaluates whether 1) an entity is a variable interest entity (“VIE”), 2) fees paid to decision makers or service providers are variable interests in a VIE, and 3) variable interests in a VIE held by related parties require the reporting entity to consolidate the VIE. The pronouncement also introduced a separate consolidation analysis specific to limited partnerships and similar entities. ASU 2015-02 also eliminated the VIE consolidation model based on majority exposure to variability that applied to certain investment companies and similar entities. The adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.
 
The Company also adopted ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs as well as ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements – Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015.  Together, these ASUs required, in most cases, that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount.  Debt issuance costs incurred in connection with line-of-credit arrangements, however, may continue to be presented as an asset in the balance sheet. The adoption of these ASUs resulted in the reclassification of certain debt issuance costs related to the Term Loan, convertible notes and SBA Debentures (as defined in Note 4) from deferred debt issuance costs to debt in the Consolidated Statements of Assets and Liabilities. As of September 30, 2016 and December 31, 2015, $8.0 million and $4.2 million in debt issuance costs, respectively, were included in debt in the Consolidated Statements of Assets and Liabilities.
28
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
2. Summary of Significant Accounting Policies (continued)
 
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition. Under this new pronouncement, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 applies to all entities and, for public entities, is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early application is permitted, but no earlier than annual periods beginning after December 15, 2016 and interim periods within that reporting period. The Company does not expect adoption of this pronouncement to have a material impact on its consolidated financial statements.
 
On January 5, 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The more significant changes to the current GAAP model resulting from ASU 2016-01 include 1) elimination of the requirement to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost, 2) requiring public entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes and 3) requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements. ASU 2016-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early application is permitted. The Company does not expect adoption of this pronouncement to have a material impact on its consolidated financial statements.
 
3. Management Fees, Incentive Compensation and Other Expenses
 
The Company’s management fee is calculated at an annual rate of 1.5% of total assets (excluding cash and cash equivalents) on a consolidated basis as of the beginning of each quarter and is payable to the Advisor quarterly in arrears.
 
Incentive compensation is only paid to the extent the total performance of the Company exceeds a cumulative 8% annual return since January 1, 2013 (the “Total Return Hurdle”). Beginning January 1, 2013, the incentive compensation equals 20% of net investment income (reduced by preferred dividends) and 20% of net realized gains (reduced by any net unrealized losses), subject to the Total Return Hurdle. The incentive compensation is payable quarterly in arrears as an allocation and distribution to the General Partner and is calculated as the difference between cumulative incentive compensation earned since January 1, 2013 and cumulative incentive compensation paid since January 1, 2013. A reserve for incentive compensation is accrued based on the amount of additional incentive compensation that would have been distributable to the General Partner assuming a hypothetical liquidation of the Company at net asset value on the balance sheet date. The General Partner’s equity interest in the Operating Company is comprised entirely of such reserve amount, if any. As of September 30, 2016 and December 31, 2015, no such reserve was accrued.
29
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
3. Management Fees, Incentive Compensation and Other Expenses (continued)
 
The Company bears all expenses incurred in connection with its business, including fees and expenses of outside contracted services, such as custodian, administrative, legal, audit and tax preparation fees, costs of valuing investments, insurance costs, brokers’ and finders’ fees relating to investments, and any other transaction costs associated with the purchase and sale of investments.
 
4. Leverage
 
Leverage is comprised of convertible senior unsecured notes due December 2019 issued by the Company (the “2019 Convertible Notes”), convertible senior unsecured notes due March 2022 issued by the Company (the “2022 Convertible Notes”), amounts outstanding under a term loan issued by the Operating Company (the “Term Loan”), amounts outstanding under a senior secured revolving credit facility issued by the Operating Company (the “SVCP Revolver” and together with the Term Loan, the “SVCP Facility”), amounts outstanding under a senior secured revolving credit facility issued by TCPC Funding (the “TCPC Funding Facility”), debentures guaranteed by the SBA (the “SBA Debentures”), and, prior to the repurchase and retirement of remaining interests on September 3, 2015, amounts outstanding under a preferred equity facility issued by the Operating Company (the “Preferred Interests”). From April 18, 2016 through its conversion to common equity on June 7, 2016, leverage also included a privately placed convertible senior unsecured note due April 2021 issued by the Company (the “CNO Note”).

Total leverage outstanding and available at September 30, 2016 was as follows: 

 
  
Maturity
    
Rate
    
Carrying
Value*
    
Available
    
Total
Capacity
  
SVCP Facility
                              
SVCP Revolver
  
2018
      
L+2.50
%†
  
$
-
    
$
116,000,000
    
$
116,000,000
  
Term Loan
  
2018
      
L+2.50
%†
    
100,500,000
      
-
      
100,500,000
  
2019 Convertible Notes ($108 million par)
  
2019
      
5.25
 %    
106,436,711
      
-
      
106,436,711
  
2022 Convertible Notes ($140 million par)
  
2022
      
4.625
%
    
136,725,763
      
-
      
136,725,763
  
TCPC Funding Facility
  
2020
      
L+2.50
%‡
    
235,000,000
      
115,000,000
      
350,000,000
  
SBA Debentures
   2024-2026      
2.58
%§
    
61,000,000
      
14,000,000
      
75,000,000
** 
Total leverage
                    
639,662,474
    
$
245,000,000
    
$
884,662,474
  
Unamortized issuance costs
                    
(7,960,812
)
                
Debt, net of unamortized issuance costs
                  
$
631,701,662
                  
 
*
Except for the convertible notes, all carrying values are the same as the principal amounts outstanding.
†
Based on either LIBOR or the lender’s cost of funds, subject to certain limitations
‡
Or L+2.25% subject to certain funding requirements
§
Weighted-average interest rate, excluding fees of 0.36%
**
Total capacity increased to $150.0 million on October 13, 2016.
 
30
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
4. Leverage (continued)

Total leverage outstanding and available at December 31, 2015 was as follows:
 
 
  
Maturity
    
Rate
    
Carrying
Value*
    
Available
    
Total
Capacity
 
SVCP Facility
                              
SVCP Revolver
  
2018
      
L+1.75
%†
  
$
24,000,000
    
$
92,000,000
    
$
116,000,000
  
Term Loan
  
2018
      
L+1.75
%†
    
100,500,000
      
-
      
100,500,000
  
2019 Convertible Notes ($108 million par)
  
2019
      
5.25
%
    
106,110,321
      
-
      
106,110,321
  
TCPC Funding Facility
  
2020
      
L+2.50
%‡
    
229,000,000
      
121,000,000
      
350,000,000
  
SBA Debentures
   2024-2025      
2.81
 %§    
42,800,000
      
32,200,000
      
75,000,000
** 
Total leverage
                    
502,410,321
    
$
245,200,000
    
$
747,610,321
  
Unamortized issuance costs
                    
(4,204,850
)
                
Debt, net of unamortized issuance costs
                  
$
498,205,471
                  
 
*
Except for the convertible notes, all carrying values are the same as the principal amounts outstanding.
†
Based on either LIBOR or the lender’s cost of funds, subject to certain limitations
‡
Or L+2.25% subject to certain funding requirements
§
Weighted-average interest rate on pooled loans of $38.8 million, excluding fees of 0.36%. As of December 31, 2015, the remaining $4.0 million of the outstanding amount was not yet pooled, and bore interest at a temporary rate of 0.90% plus fees of 0.36% through March 22, 2016, the date of the next SBA pooling.
**
Anticipated total capacity of $150.0 million, subject to approval by the SBA following complete funding of the Operating Company’s initial $75.0 million commitment.

The combined weighted-average interest rates on total leverage outstanding at September 30, 2016 and December 31, 2015 were 3.80% and 3.20%, respectively.
 
Total expenses related to debt include:
 
 
  
Nine Months Ended September 30,
  
 
  
2016
    
2015
  
Interest expense
  
$
14,739,195
    
$
10,488,383
  
Amortization of deferred debt issuance costs
    
1,947,472
      
1,623,333
  
Commitment fees
    
891,192
      
919,649
  
Total
  
$
17,577,859
    
$
13,031,365
  
 
Amounts outstanding under the SVCP Facility, the TCPC Funding Facility, the convertible notes and the SBA Debentures are carried at amortized cost in the Consolidated Statements of Assets and Liabilities. As of September 30, 2016, the estimated fair values of the SVCP Facility, the TCPC Funding Facility and the SBA Debentures approximated their carrying values, and the 2019 Convertible Notes and the 2022 Convertible Notes had estimated fair values of $115.2 million and $141.6 million, respectively. The estimated fair values of the SVCP Facility, the TCPC Funding Facility, the convertible notes and the SBA Debentures are determined by discounting projected remaining payments using market interest rates for borrowings of the Company and entities with similar credit risks at the measurement date. At September 30, 2016, the fair values of the SVCP Facility, the TCPC Funding Facility, the convertible notes and the SBA Debentures as prepared for disclosure purposes were deemed to be Level 3 in the GAAP valuation hierarchy.
31
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
4. Leverage (continued)

Convertible Notes
 
On June 11, 2014, the Company issued $108.0 million of convertible senior unsecured notes that mature on December 15, 2019, unless previously converted or repurchased in accordance with their terms. The 2019 Convertible Notes are general unsecured obligations of the Company, and rank structurally junior to the SVCP Facility and the TCPC Funding Facility. The Company does not have the right to redeem the 2019 Convertible Notes prior to maturity. The 2019 Convertible Notes bear interest at an annual rate of 5.25%, payable semi-annually. In certain circumstances, the 2019 Convertible Notes will be convertible into cash, shares of the Company’s common stock or a combination of cash and shares of common stock (such combination to be at the Company’s election), at an initial conversion rate of 50.9100 shares of common stock per one thousand dollar principal amount, which is equivalent to an initial conversion price of approximately $19.64 per share of common stock, subject to customary anti-dilutional adjustments. The initial conversion price was approximately 12.5% above the $17.46 per share closing price of the Company’s common stock on June 11, 2014. At September 30, 2016, the principal amount of the 2019 Convertible Notes exceeded the value of the conversion rate multiplied by the per share closing price of the Company’s common stock. Therefore, no additional shares have been added to the calculation of diluted earnings per common share and weighted average common shares outstanding.
 
Prior to the close of business on the business day immediately preceding June 15, 2019, holders may convert their 2019 Convertible Notes only under certain circumstances set forth in the indenture governing the terms of the 2019 Convertible Notes. On or after June 15, 2019 until the close of business on the scheduled trading day immediately preceding December 15, 2019, holders may convert their 2019 Convertible Notes at any time. Upon conversion, the Company will pay or deliver, as the case may be, at its election, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, subject to the requirements of the indenture.

On August 30, 2016, the Company issued $140.0 million of convertible senior unsecured notes that mature on March 1, 2022, unless previously converted or repurchased in accordance with their terms. The 2022 Convertible Notes are general unsecured obligations of the Company, and rank structurally junior to the SVCP Facility and the TCPC Funding Facility. The Company does not have the right to redeem the 2022 Convertible Notes prior to maturity. The 2022 Convertible Notes bear interest at an annual rate of 4.625%, payable semi-annually. In certain circumstances, the 2022 Convertible Notes will be convertible into cash, shares of the Company’s common stock or a combination of cash and shares of common stock (such combination to be at the Company’s election), at an initial conversion rate of 54.5019 shares of common stock per one thousand dollar principal amount of the 2022 Convertible Notes, which is equivalent to an initial conversion price of approximately $18.35 per share of common stock, subject to customary anti-dilutional adjustments. The initial conversion price was approximately 10.0% above the $16.68 per share closing price of the Company’s common stock on August 30, 2016. At September 30, 2016, the principal amount of the 2022 Convertible Notes exceeded the value of the conversion rate multiplied by the per share closing price of the Company’s common stock. Therefore, no additional shares have been added to the calculation of diluted earnings per common share and weighted average common shares outstanding.
 
Prior to the close of business on the business day immediately preceding September 1, 2021, holders may convert their 2022 Convertible Notes only under certain circumstances set forth in the indenture governing the terms of the 2022 Convertible Notes. On or after September 1, 2021 until the close of business on the scheduled trading day immediately preceding March 1, 2022, holders may convert their 2022 Convertible Notes at any time. Upon conversion, the Company will pay or deliver, as the case may be, at its election, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, subject to the requirements of the indenture.
  
The 2019 Convertible Notes and 2022 Convertible Notes are accounted for in accordance with ASC Topic 470-20 – Debt with Conversion and Other Options. Upon conversion of any of the 2019 Convertible Notes or the 2022 Convertible Notes, the Company intends to pay the outstanding principal amount in cash and, to the extent that the conversion value exceeds the principal amount, has the option to pay the excess amount in cash or shares of the Company’s common stock (or a combination of cash and shares), subject to the requirements of the respective indenture. The Company has determined that the embedded conversion options in the 2019 Convertible Notes and 2022 Convertible Notes are not required to be separately accounted for as derivatives under GAAP. At the time of issuance the estimated values of the debt and equity components of the 2019 Convertible Notes were approximately 97.7% and 2.3%, respectively. At the time of issuance the estimated values of the debt and equity components of the 2022 Convertible Notes were approximately 97.6% and 2.4%, respectively.
 
The original issue discounts equal to the equity components of the 2019 Convertible Notes and 2022 Convertible Notes were recorded in “paid-in capital in excess of par” in the accompanying Consolidated Statements of Assets and Liabilities. As a result, the Company records interest expense comprised of both stated interest and amortization of the original issue discounts. At the time of issuance, the equity components of the 2019 Convertible Notes and the 2022 Convertible Notes were $2.5 million and $3.3 million, respectively. As of September 30, 2016 and December 31, 2015, the components of the carrying value of the 2019 Convertible Notes and 2022 Convertible Notes were as follows:
     
 
September 30, 2016
  
December 31, 2015
  
 
2019 Convertible Notes
  
2022 Convertible Notes
  
2019 Convertible Notes
  
2022 Convertible Notes
  
Principal amount of debt
  
$
108,000,000
    
$
140,000,000
    
$
108,000,000
      
N/A
  
Original issue discount, net of accretion
    
(1,563,289
)
    
(3,274,237
)
    
(1,889,679
)
    
N/A
  
Carrying value of debt
  
$
106,436,711
    
$
136,725,763
    
$
106,110,321
      
N/A
  
 
32
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
4. Leverage (continued)
 
For the nine months ended September 30, 2016 and 2015, the components of interest expense for the convertible notes were as follows: 

 
Nine Months Ended September 30,
  
 
2016
  
2015
  
 
2019 Convertible Notes
  
2022 Convertible Notes
  
2019 Convertible Notes
  
2022 Convertible Notes
  
Stated interest expense
  
$
4,252,500
    
$
431,667
    
$
4,252,500
      
N/A
  
Amortization of original issue discount
    
326,391
      
35,359
      
308,402
      
N/A
  
Total interest expense
  
$
4,578,891
    
$
467,026
    
$
4,560,902
      
N/A
  


The estimated effective interest rate of the debt component of the 2019 Convertible Notes, equal to the stated interest of 5.25% plus the accretion of the original issue discount, was approximately 5.75% for the nine months ended September 30, 2016. The estimated effective interest rate of the debt component of the 2022 Convertible Notes, equal to the stated interest of 4.625% plus the accretion of the original issue discount, was approximately 5.125 % for the nine months ended September 30, 2016.
 
SVCP Facility
 
The SVCP Facility consists of a $100.5 million fully-drawn senior secured term loan and a senior secured revolving credit facility which provides for amounts to be drawn up to $116.0 million, subject to certain collateral and other restrictions. The SVCP Facility matures on July 31, 2018. Most of the cash and investments held directly by the Operating Company, as well as the net assets of TCPC Funding and the SBIC, are included in the collateral for the facility.
 
Advances under the SVCP Facility through July 31, 2014 bore interest at an annual rate equal to 0.44% plus either LIBOR or the lender’s cost of funds (subject to a cap of LIBOR plus 20 basis points). Advances under the SVCP Facility for periods from July 31, 2014 through September 3, 2015 bore interest at an annual rate equal to 2.50% plus either LIBOR or the lender’s cost of funds (subject to a cap of LIBOR plus 20 basis points). Advances under the SVCP Facility from September 3, 2015 through July 31, 2016 bore interest at an annual rate equal to 1.75% plus either LIBOR or the lender’s cost of funds (subject to a cap of LIBOR plus 20 basis points). Advances under the SVCP Facility from July 31, 2016 through the maturity date of the facility bear interest at an annual rate of 2.50% plus either LIBOR or the lender’s cost of funds (subject to a cap of LIBOR plus 20 basis points). In addition to amounts due on outstanding debt, the SVCP Revolver accrues commitment fees of 0.20% per annum on the unused portion of the facility, or 0.25% per annum when less than $46.4 million in borrowings are outstanding. The facility may be terminated, and any outstanding amounts thereunder may become due and payable, should the Operating Company fail to satisfy certain financial or other covenants. As of September 30, 2016, the Operating Company was in full compliance with such covenants.
 
33

TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
4. Leverage (continued)

SBA Debentures
 
As of September 30, 2016 the SBIC was able to issue up to $75.0 million in SBA Debentures, subject to funded regulatory capital and other customary regulatory requirements. On October 13, 2016, the SBIC received an additional $75.0 million commitment from the SBA for a total of commitment of $150.0 million. As of September 30, 2016, the Operating Company had committed $75.0 million of regulatory capital to the SBIC, all of which had been funded. SBA Debentures are non-recourse and may be prepaid at any time without penalty. Once drawn, the SBIC debentures bear an interim interest rate of LIBOR plus 30 basis points. The rate then becomes fixed at the time of SBA pooling, which occurs twice each year, and is set to the then-current 10-year treasury rate plus a spread and an annual SBA charge.
 
SBA Debentures outstanding as of September 30, 2016 were as follows:

Issuance Date
  
 Maturity
  
Debenture
Amount
    
Fixed
Interest Rate
    
SBA
Annual Charge
  
September 24, 2014
  
September 1, 2024
  
$
18,500,000
      
3.02
%
    
0.36
%
March 25, 2015
  
March 1, 2025
    
9,500,000
      
2.52
%
    
0.36
%
September 23, 2015
  
September 1, 2025
    
10,800,000
      
2.83
%
    
0.36
%
March 23, 2016
  
March 1, 2026
    
4,000,000
      
2.51
%
    
0.36
%
September 21, 2016
  
September 1, 2026
    
18,200,000
      
2.05
%
    
0.36
%
 
  
  
  
$
61,000,000
      
2.58
%*
        
* Weighted-average interest rate
 
TCPC Funding Facility
 
The TCPC Funding Facility is a senior secured revolving credit facility which provides for amounts to be drawn up to $350.0 million, subject to certain collateral and other restrictions. The facility matures on March 6, 2020, subject to extension by the lender at the request of TCPC Funding. The facility contains an accordion feature which allows for expansion of the facility to up to $400.0 million subject to consent from the lender and other customary conditions. The cash and investments of TCPC Funding are included in the collateral for the facility.
 
Borrowings under the TCPC Funding Facility bear interest at a rate of LIBOR plus either 2.25% or 2.50% per annum, subject to certain funding requirements, plus an administrative fee of 0.25% per annum. In addition to amounts due on outstanding debt, the facility accrues commitment fees of 0.50% per annum on the unused portion of the facility, or 0.75% per annum when the unused portion is greater than 33% of the total facility, plus an administrative fee of 0.25% per annum. The facility may be terminated, and any outstanding amounts thereunder may become due and payable, should TCPC Funding fail to satisfy certain financial or other covenants. As of September 30, 2016, TCPC Funding was in full compliance with such covenants.
34

TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
4. Leverage (continued)

Preferred Interests
 
During 2015, the Operating Company fully repurchased and retired all outstanding Preferred Interests. On June 30, 2015, the Operating Company repurchased and retired 1,675 of the previously outstanding 6,700 Preferred Interests at a price of $31.8 million. On September 3, 2015, the Operating Company repurchased and retired the remaining 5,025 Preferred Interests outstanding at a price of $100.5 million.

When issued, the Preferred Interests were comprised of 6,700 Series A preferred limited partner interests with a liquidation preference of $20,000 per interest. The Preferred Interests accrued dividends at an annual rate equal to 0.85% plus either LIBOR or the interest holder’s cost of funds (subject to a cap of LIBOR plus 20 basis points).

CNO Note

On April 18, 2016, the Company issued $30.0 million in aggregate principal amount of a 5.25% convertible senior unsecured note due 2021 pursuant to a purchase agreement, dated as of April 18, 2016, between the Company and CNO Financial Investments Corp., a minority interest owner of the Advisor. The CNO Note had a maturity of April 30, 2021 unless previously converted.  The CNO Note was convertible at the option of the holder at any time prior to the close of business on the business day immediately preceding April 30, 2021, in integral multiples of $1,000,000 principal amount. However, the CNO Note was automatically convertible in its entirety, without any further action by the holder, on the date on which the closing price of the common stock of the Company was at or above the Company’s most recent publicly reported net asset value per share of common stock for at least ten trading days (whether or not consecutive) in a 20 consecutive trading day period. The conversion price was the greater of (a) the closing price of the Company’s common shares on the conversion date and (b) the then-current net asset value of the Company. On June 7, 2016, the Company issued 2,011,900 shares of its common stock pursuant to the full conversion, at the holder’s option, of the $30.0 million in aggregate principal amount (plus accrued interest) of the CNO Note. The CNO Note was converted at a price of $15.02 per share of Common Stock. There was no gain or loss associated with the conversion of the CNO Note. No placement agent or underwriting fees were incurred in connection with the issuance or the conversion of the CNO Note.
 
5. Commitments, Contingencies, Concentration of Credit Risk and Off-Balance Sheet Risk
 
The Operating Company, TCPC Funding and the SBIC conduct business with brokers and dealers that are primarily headquartered in New York and Los Angeles and are members of the major securities exchanges. Banking activities are conducted with a firm headquartered in the San Francisco area.
35
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016

5. Commitments, Contingencies, Concentration of Credit Risk and Off-Balance Sheet Risk (continued)
 
In the normal course of business, investment activities involve executions, settlement and financing of various transactions resulting in receivables from, and payables to, brokers, dealers and the custodian. These activities may expose the Company to risk in the event that such parties are unable to fulfill contractual obligations. Management does not anticipate any material losses from counterparties with whom it conducts business. Consistent with standard business practice, the Company, the Operating Company, TCPC Funding and the SBIC enter into contracts that contain a variety of indemnifications, and are engaged from time to time in various legal actions. The maximum exposure under these arrangements and activities is unknown. However, management expects the risk of material loss to be remote.

The Consolidated Schedules of Investments include certain revolving loan facilities and other commitments with unfunded balances at September 30, 2016 and December 31, 2015 as follow:

 
  
      
  
Unfunded Balances
  
Issuer
  
Maturity
  
September 30, 2016
    
December 31, 2015
  
AGY Holding Corp.
  
9/15/2018
  
$ 
1,049,146
    
$
N/A
  
AP Gaming I, LLC
  
12/20/2018
  
 
12,500,000
    
 
12,500,000
  
Acrisure, LLC
  
11/19/2022
    
N/A
      
1,351,596
  
Alpheus Communications, LLC
  
5/31/2018
    
357,419
      
1,072,256
  
Anuvia Plant Nutrients Holdings, LLC (VitAG)
  
2/1/2018
    
N/A
      
4,300,000
  
Asset International, Inc.
  
7/31/2020
    
3,068,650
      
565,544
  
Bisnow, LLC
  
4/29/2021
    
1,200,000
      
N/A
  
BlackLine Systems, Inc.
  
9/25/2018
    
3,740,693
      
N/A
  
Cargojet Airways, LTD.
  
1/31/2023
    
N/A
      
14,457,306
  
Central MN Renewables, LLC
  
1/16/2016
    
N/A
      
2,100,000
  
Daymark Financial Acceptance, LLC
  
1/12/2020
    
N/A
      
20,000,000
  
Edmentum, Inc.
  
6/9/2020
    
3,368,586
      
3,368,586
  
Enerwise Global Technologies, Inc.
  
11/30/2017
    
4,000,000
      
7,500,000
  
Essex Ocean, LLC
  
3/25/2019
    
N/A
      
22,008,557
  
Fidelis Acquisitionco, LLC
  
11/4/2019
    
N/A
      
1,909,286
  
Globecomm Systems, Inc.
  
12/11/2018
    
800,000
      
N/A
  
Hylan Datacom & Electrical, LLC
  
7/25/2016
    
4,991,956
      
N/A
  
InMobi, Inc.
  
9/1/2018
    
7,500,000
      
9,354,959
  
Marketo, Inc.
  
8/16/2016
    
1,704,545
      
N/A
  
MediMedia USA, Inc.
  
5/20/2018
    
N/A
      
4,293,500
  
Mesa Air Group, Inc.
  
7/15/2022
    
N/A
      
13,575,000
  
Nanosys, Inc.
  
4/1/19
    
3,000,000
      
N/A
  
Redaptive, Inc.
  
7/1/2018
    
15,000,000
      
15,000,000
  
RM OpCo, LLC (Real Mex)
  
3/30/2018
    
N/A
      
440,774
  
Utilidata, Inc.
  
1/1/2019
    
N/A
      
4,800,000
  
Vistronix, LLC
  
12/4/2018
    
N/A
      
205,558
  
Waterfall International, Inc.
  
9/1/2018
    
N/A
      
3,200,000
  
Total Unfunded Balances
  
 
  
$
62,280,995
    
$
142,002,922
  

36

TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
6. Related Party Transactions

The Company, the Operating Company, TCPC Funding, the SBIC, the Advisor, the General Partner and their members and affiliates may be considered related parties. From time to time, the Operating Company advances payments to third parties on behalf of the Company which are reimbursable through deductions from distributions to the Company. At September 30, 2016 and December 31, 2015, no such amounts were outstanding. From time to time, the Advisor advances payments to third parties on behalf of the Company and the Operating Company and receives reimbursement from the Company and the Operating Company. At September 30, 2016 and December 31, 2015, amounts reimbursable to the Advisor totaled $0.9 million and $0.5 million, respectively, as reflected in the Consolidated Statements of Assets and Liabilities.
 
Pursuant to administration agreements between the Administrator and each of the Company and the Operating Company (the “Administration Agreements”), the Administrator may be reimbursed for costs and expenses incurred by the Administrator for office space rental, office equipment and utilities allocable to the Company or the Operating Company, as well as costs and expenses incurred by the Administrator or its affiliates relating to any administrative, operating, or other non-investment advisory services provided by the Administrator or its affiliates to the Company or the Operating Company. For the nine months ended September 30, 2016 and 2015, expenses allocated pursuant to the Administration Agreements totaled $1.2 million and $1.1 million, respectively.

On November 25, 2014, the Company and the Operating Company obtained an exemptive order (the “Exemptive Order”) from the Securities and Exchange Commission permitting the Company and Operating Company to purchase certain investments from affiliated investment companies at fair value. The Exemptive Order exempts the Company and the Operating Company from provisions of Sections 17(a) and 57(a) of the 1940 Act which would otherwise restrict such transfers. All such purchases are subject to the conditions set forth in the Exemptive Order, which among others include certain procedures to verify that each purchase is done at the current fair value of the respective investment. During the nine months ended September 30, 2016 and 2015, the Company purchased approximately $0.0 million and $94.5 million, respectively, of investments from affiliates (as defined in the 1940 Act), which were classified as Level 2 in the GAAP valuation hierarchy at the time of the transfer. The selling party has no continuing involvement in the transferred assets. All of the transfers were consummated in accordance with the provisions of the Exemptive Order and were accounted for as a purchase in accordance with ASC 860, Transfers and Servicing.

37
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
7. Stockholders’ Equity and Dividends

The following table summarizes the total shares issued and proceeds received in public offerings of the Company’s common stock net of underwriting discounts and offering costs as well as shares issued in connection with the Company’s dividend reinvestment plan for the nine months ended September 30, 2016.
 
 
  
Shares Issued
    
Price Per Share
    
Net Proceeds
  
Shares issued from dividend reinvestment plan
    
461
    
$
15.50
*
  
$
7,147
  
Shares issued from conversion of convertible debt †
    
2,011,900
      
15.02
      
-
  
July 13, 2016 registered direct public offering
    
2,336,552
      
15.09
      
34,958,570
  
 
*
Weighted-average price per share
†
Shares issued in connection with the full conversion of the CNO Note

The following table summarizes the total shares issued and proceeds received in public offerings of the Company’s common stock net of underwriting discounts and offering costs as well as shares issued in connection with the Company’s dividend reinvestment plan for the year ended December 31, 2015:

 
  
Shares Issued
    
Price Per Share
    
Net Proceeds
  
At-the-market offerings
    
248,614
    
$
15.87
*
  
$
3,946,066
  
Shares issued from dividend reinvestment plan
    
555
      
14.62
*
    
8,116
  

*
Weighted-average price per share
 
The Company’s dividends are recorded on the ex-dividend date. The following table summarizes the Company’s dividends declared and paid for the nine months ended September 30, 2016:
 
Date Declared
  
Record Date
  
Payment Date
  
Type
  
Amount Per Share
    
Total Amount
  
February 24, 2016
  
March 17, 2016
  
March 31, 2016
  
Regular
  
$
0.36
    
$
17,530,963
  
May 10, 2016
  
June 16, 2016
  
June 30, 2016
  
Regular
    
0.36
      
18,254,229
  
August 9, 2016
  
September 16, 2016
  
September 30, 2016
  
Regular
    
0.36
      
19,094,976
  
 
  
 
  
 
  
       
  
$
1.08
    
$
54,880,168
  
 
The following table summarizes the Company’s dividends declared and paid for the nine months ended September 30, 2015:
 
Date Declared
  
Record Date
  
Payment Date
  
Type
  
Amount Per Share
    
Total Amount
  
March 10, 2015
  
March 19, 2015
  
March 31, 2015
  
Regular
  
$
0.36
    
$
17,535,826
  
May 7, 2015
  
June 16, 2015
  
June 30, 2015
  
Regular
    
0.36
      
17,625,370
  
August 6, 2015
  
September 16, 2015
  
September 30, 2015
  
Regular
    
0.36
      
17,625,310
  
 
  
 
  
 
  
       
  
$
1.08
    
$
52,786,506
  

38
TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
7. Stockholders’ Equity and Dividends (continued)
 
On February 24, 2015, the Company’s board of directors approved a stock repurchase plan (the “Company Repurchase Plan”) to acquire up to $50.0 million in the aggregate of the Company’s common stock at prices at certain thresholds below the Company’s net asset value per share, in accordance with the guidelines specified in Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934. The Company Repurchase Plan is designed to allow the Company to repurchase its common stock at times when it otherwise might be prevented from doing so under insider trading laws. The Company Repurchase Plan requires an agent selected by the Company to repurchase shares of common stock on the Company’s behalf if and when the market price per share is at certain thresholds below the most recently reported net asset value per share. Under the plan, the agent will increase the volume of purchases made if the price of the Company’s common stock declines, subject to volume restrictions. The timing and amount of any stock repurchased depends on the terms and conditions of the Company Repurchase Plan, the market price of the common stock and trading volumes, and no assurance can be given that any particular amount of common stock will be repurchased. The Company Repurchase Plan was re-approved on August 3, 2016, to be in effect through the earlier of two trading days after the Company’s third quarter 2016 earnings release unless further extended or terminated by the Company’s board of directors, or such time as the approved $50.0 million repurchase amount has been fully utilized, subject to certain conditions. On November 2, 2016, the Company’s board of directors re-approved the Company Repurchase Plan, to be in effect through the earlier of two trading days after the Company’s fourth quarter 2016 earnings release or such time as the approved $50.0 million repurchase amount has been fully utilized, subject to certain conditions.

The following table summarizes the total shares repurchased and amounts paid by the Company under the Company Repurchase Plan, including broker fees, for the nine months ended September 30, 2016.
 
 
  
Shares
Repurchased
  
Price Per Share
 
  
Total Cost
Company Repurchase Plan
  
141,896
  
$
13.25
*
  
$
1,879,548
 
*
Weighted-average price per share

8. Earnings Per Share

In accordance with ASC 260, Earnings per Share, basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding during the period.  Other potentially dilutive common shares, if any, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. The following information sets forth the computation of the net increase in net assets per share resulting from operations for the nine months ended September 30, 2016 and 2015:

 
Nine Months Ended September 30,
  
 
2016
  
2015
  
Net increase in net assets applicable to common shareholders resulting from operations
  
$
53,396,190
    
$
56,977,873
  
Weighted average shares outstanding
    
50,245,035
      
48,858,263
  
Earnings per share
  
$
1.06
    
$
1.17
  

39

TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
9. Subsequent Events

On October 13, 2016, the SBIC received an additional $75.0 million commitment from the SBA, increasing its total commitment to $150.0 million.

On November 2, 2016, the Company’s board of directors re-approved the Company Repurchase Plan, to be in effect through the earlier of two trading days after the Company’s fourth quarter 2016 earnings release or such time as the approved $50.0 million repurchase amount has been fully utilized, subject to certain conditions.

On November 8, 2016, the Company’s board of directors declared a fourth quarter regular dividend of $0.36 per share payable on December 30, 2016 to stockholders of record as of the close of business on December 16, 2016.

40

TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
10. Financial Highlights
 
 
  
Nine Months Ended September 30,
 
 
  
2016
    
2015
  
 
            
Per Common Share
            
Per share NAV at beginning of period
  
$
14.78
    
$
15.01
  
 
                
Investment operations:
                
Net investment income
    
1.43
      
1.52
  
Net realized and unrealized losses
    
(0.08
)
    
(0.07
)
Dividends on Series A preferred equity facility
    
-
      
(0.01
)
Incentive allocation reserve and distributions
    
(0.29
)
    
(0.30
)
Total from investment operations
    
1.06
      
1.14
  
 
                
Issuance of common stock
    
0.02
      
-
  
Issuance of convertible debt
    
0.06
      
-
  
Repurchase of Series A preferred interests
    
-
      
0.03
  
Distributions to common shareholders from:
                
Net investment income
    
(1.08
)
    
(1.08
)
Per share NAV at end of period
  
$
14.84
    
$
15.10
  
 
                
 
                
Per share market price at end of period
  
$
16.38
    
$
13.56
  
 
                
Total return based on market value (1), (2)
    
25.3
%
    
(12.8
%)
Total return based on net asset value (1), (3)
    
7.7
%
    
7.8
%
 
                
Shares outstanding at end of period
    
53,041,751
      
48,934,498
  

41

TCP Capital Corp.

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2016
10. Financial Highlights (continued)

 
  
Nine Months Ended September 30,
 
 
  
2016
    
2015
  
 
            
Ratios to average common equity: (4), (5)
            
Net investment income (6)
    
10.2
%
    
11.5
%
Expenses
    
6.6
%
    
5.9
%
Expenses and incentive allocation (7)
    
8.5
%
    
7.9
%
 
                
Ending common shareholder equity
  
$
787,107,542
    
$
738,899,630
  
Portfolio turnover rate
    
23.8
%
    
25.3
%
Weighted-average leverage outstanding (8)
  
$
528,593,078
    
$
505,921,876
  
Weighted-average interest rate on leverage (9)
    
3.7
%
    
3.0
%
Weighted-average number of common shares
    
50,245,035
      
48,858,263
  
Average leverage per share (8)
  
$
10.52
    
$
10.35
  
 
(1)
Not annualized.
(2)
Total return based on market value equals the change in ending market value per share during the period plus declared dividends per share during the period, divided by the market value per share at the beginning of the period.
(3)
Total return based on net asset value equals the change in net asset value per share during the period plus declared dividends per share during the period, divided by the net asset value per share at the beginning of the period.
(4)
Annualized, except for incentive allocation.
(5)
These ratios include interest expense but do not reflect the effect of dividends on the preferred equity facility.
(6)
Net of incentive allocation.
(7)
Includes incentive allocation payable to the General Partner and all Company expenses.
(8)
Includes both debt and preferred leverage.
(9)
Includes dividends on the preferred leverage facility.
42

TCP Capital Corp.

Consolidated Schedule of Changes in Investments in Affiliates (1)  (Unaudited)

Nine Months Ended September 30, 2016
 
Security
  
Dividends or
Interest (2)
    
Fair Value at
December 31, 2015
    
Acquisitions (3)
    
Dispositions (4)
    
Fair Value at
 September 30, 2016
  
                               
36th Street Capital Partners Holdings, LLC, Membership Units
  
$
-
    
$
225,000
    
$
5,582,051
    
$
(62,445
)
  
$
5,744,606
  
36th Street Capital Partners Holdings, LLC, Subordinated Promissory Note, 12%, due 11/1/20
    
1,194,755
      
900,000
      
23,280,718
      
-
      
24,180,718
  
AGY Holding Corp., Senior Secured 2nd Lien Notes, 11%, due 11/15/16
    
764,610
      
9,268,000
      
-
      
-
      
9,268,000
  
AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16
    
444,756
      
4,869,577
      
-
      
-
      
4,869,577
  
Anacomp, Inc., Class A Common Stock
    
-
      
1,581,964
      
-
      
(188,329
)
    
1,393,635
  
Edmentum Ultimate Holdings, LLC, Junior PIK Notes, 10%, due 6/9/20
    
1,019,534
      
11,343,490
      
999,957
      
(117,815
)
    
12,225,632
  
Edmentum Ultimate Holdings, LLC, Senior PIK Notes, 8.5%, due 6/9/20
    
175,251
      
2,612,408
      
172,036
      
-
      
2,784,444
  
Edmentum, Inc., Junior Revolving Facility, 5%, due 6/9/20
    
51,210
      
-
      
2,762,241
      
(2,762,241
)
    
-
  
Edmentum Ultimate Holdings, LLC, Class A Common Units
    
-
      
680,218
      
-
      
-
      
680,218
  
EPMC HoldCo, LLC, Membership Units
    
-
      
682,614
      
102,392
      
(574,971
)
    
210,035
  
Essex Ocean II, LLC, Membership Units
    
-
      
200,686
      
59,668
      
(87,449
)
    
172,905
  
Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625%, 1.25% LIBOR Floor, due 12/11/18
    
986,959
      
14,256,233
      
561,807
      
(300,720
)
    
14,517,320
  
KAGY Holding Company, Inc., Series A Preferred Stock
    
-
      
6,118,515
      
45,967
      
(975,138
)
    
5,189,344
  
Kawa Solar Holdings Limited, Bank Guarantee Credit Facility, 8.2% Cash + 3.5% PIK, due 7/2/17
    
631,560
      
25,000,000
      
89,833
      
(4,384,889
)
    
20,704,944
  
Kawa Solar Holdings Limited, Revolving Credit Facility, 8.2%, due 7/2/17
    
1,004
      
-
      
4,000,000
      
-
      
4,000,000
  
Kawa Solar Holdings Limited, Ordinary Shares
    
-
      
-
      
-
      
-
      
-
  
N659UA Aircraft Secured Mortgage, 12%, due 2/28/16
    
4,554
      
318,980
      
-
      
(318,980
)
    
-
  
N661UA Aircraft Secured Mortgage, 12%, due 5/4/16
    
11,822
      
570,303
      
-
      
(570,303
)
    
-
  
N913DL Aircraft Secured Mortgage, 8%, due 3/15/17
    
2,322
      
115,617
      
-
      
(115,617
)
    
-
  
N918DL Aircraft Secured Mortgage, 8%, due 8/15/18
    
5,109
      
237,494
      
-
      
(237,494
)
    
-
  
N954DL Aircraft Secured Mortgage, 8%, due 3/20/19
    
7,829
      
342,734
      
-
      
(342,734
)
    
-
  
N955DL Aircraft Secured Mortgage, 8%, due 6/20/19
    
8,463
      
369,162
      
-
      
(369,162
)
    
-
  
N956DL Aircraft Secured Mortgage, 8%, due 5/20/19
    
8,365
      
365,197
      
-
      
(365,197
)
    
-
  
N957DL Aircraft Secured Mortgage, 8%, due 6/20/19
    
8,537
      
372,392
      
-
      
(372,392
)
    
-
  
N959DL Aircraft Secured Mortgage, 8%, due 7/20/19
    
8,708
      
379,522
      
-
      
(379,522
)
    
-
  
N960DL Aircraft Secured Mortgage, 8%, due 10/20/19
    
9,289
      
403,869
      
-
      
(403,869
)
    
-
  
N961DL Aircraft Secured Mortgage, 8%, due 8/20/19
    
9,028
      
393,115
      
-
      
(393,115
)
    
-
  
N976DL Aircraft Secured Mortgage, 8%, due 2/15/18
    
4,636
      
218,321
      
-
      
(218,321
)
    
-
  
N913DL Equipment Trust Beneficial Interests
    
494,813
      
107,501
      
375
      
(107,876
)
    
-
  
N918DL Equipment Trust Beneficial Interests
    
8,483
      
127,662
      
89,515
      
(217,177
)
    
-
  
N954DL Equipment Trust Beneficial Interests
    
8,743
      
77,850
      
17,496
      
(95,346
)
    
-
  
N955DL Equipment Trust Beneficial Interests
    
8,278
      
108,100
      
2,433
      
(110,533
)
    
-
  
N956DL Equipment Trust Beneficial Interests
    
8,362
      
104,478
      
2,571
      
(107,049
)
    
-
  
N957DL Equipment Trust Beneficial Interests
    
8,249
      
105,329
      
2,637
      
(107,966
)
    
-
  
N959DL Equipment Trust Beneficial Interests
    
8,139
      
106,203
      
2,702
      
(108,905
)
    
-
  
N960DL Equipment Trust Beneficial Interests
    
7,785
      
105,937
      
3,088
      
(109,025
)
    
-
  
N961DL Equipment Trust Beneficial Interests
    
7,976
      
101,487
      
3,159
      
(104,646
)
    
-
  
N976DL Equipment Trust Beneficial Interests
    
8,635
      
100,793
      
755
      
(101,548
)
    
-
  
RM Holdco, LLC, Equity Participation
    
-
      
-
      
-
      
-
      
-
  
RM Holdco, LLC, Membership Units
    
220,401
      
-
      
-
      
-
      
-
  
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 7%, due 3/21/16
    
241,801
      
3,719,155
      
1,145,458
      
-
      
4,864,613
  
RM OpCo, LLC, Senior Secured 2nd Lien Term Loan Tranche B, 8.5%, due 3/30/18
    
595,894
      
4,490,993
      
925,943
      
(1,435,210
)
    
3,981,726
  
RM OpCo, LLC, Senior Secured 2nd Lien Term Loan Tranche B-1, 8.5%, due 3/30/18
    
187,667
      
2,797,956
      
187,003
      
-
      
2,984,959
  
RM OpCo, LLC, Convertible 2nd Lien Term Loan Tranche B-1, 8.5%, due 3/30/18
    
123,278
      
1,783,036
      
122,855
      
(3,684
)
    
1,902,207
  
RM OpCo, LLC, Senior Convertible 2nd Lien Term Loan B, 8.5%, due 3/30/18
    
170,715
      
2,188,233
      
1,234,368
      
-
      
3,422,601
  
United N659UA-767, LLC (N659UA)
    
416,216
      
3,368,599
      
448,126
      
(528,675
)
    
3,288,050
  
United N661UA-767, LLC (N661UA)
    
511,189
      
3,294,024
      
635,980
      
(605,609
)
    
3,324,395
  
Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units
    
-
      
4,198,500
      
-
      
(2,198,500
)
    
2,000,000
  
                                         

Notes to Consolidated Schedule of Changes in Investments in Affiliates:

(1) The issuers of the securities listed on this schedule are considered affiliates under the Investment Company Act of 1940 due to the ownership by the Company of 5% or more of the issuers’
   voting securities.
(2) Also includes fee and lease income as applicable.
(3) Acquisitions include new purchases, PIK income, amortization of original issue and market discounts and net unrealized appreciation.
(4) Dispositions include decreases in the cost basis from sales, paydowns, mortgage amortizations, aircraft depreciation and net unrealized depreciation.

43

TCP Capital Corp.

Consolidated Schedule of Changes in Investments in Affiliates (1)

Year Ended December 31, 2015 
 
Security
  
Dividends or
Interest (2)
    
Fair Value at
 December 31, 2014
    
Acquisitions (3)
    
Dispositions (4)
    
Fair Value at
 December 31, 2015
  
 
                              
36th Street Capital Partners Holdings, LLC, Membership Units
  
$
15,600
    
$
-
    
$
225,000
    
$
-
    
$
225,000
  
36th Street Capital Partners Holdings, LLC, Subordinated Promissory Note, 12%, due 11/1/20
    
-
      
-
      
900,000
      
-
      
900,000
  
AGY Holding Corp., Senior Secured 2nd Lien Notes, 11%, due 11/15/16
    
1,019,480
      
9,017,764
      
250,236
      
-
      
9,268,000
  
AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16
    
592,466
      
4,869,577
      
-
      
-
      
4,869,577
  
Anacomp, Inc., Class A Common Stock
    
-
      
916,535
      
665,429
      
-
      
1,581,964
  
Edmentum Ultimate Holdings, LLC, Junior PIK Notes, 10%, due 6/9/20
    
715,131
      
-
      
12,054,264
      
(710,774
)
    
11,343,490
  
Edmentum Ultimate Holdings, LLC, Senior PIK Notes, 8.5%, due 6/9/20
    
124,828
      
-
      
2,612,408
      
-
      
2,612,408
  
Edmentum, Inc., Junior Revolving Facility, 5%, due 6/9/20
    
22,329
      
-
      
2,105,366
      
(2,105,366
)
    
-
  
Edmentum Ultimate Holdings, LLC, Class A Common Units
    
-
      
-
      
680,218
      
-
      
680,218
  
EPMC HoldCo, LLC, Membership Units
    
-
      
682,614
      
-
      
-
      
682,614
  
Essex Ocean II, LLC, Membership Units
    
-
      
-
      
200,686
      
-
      
200,686
  
Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625%, 1.25% LIBOR Floor, due 12/11/18
    
1,330,125
      
14,656,950
      
121,560
      
(522,277
)
    
14,256,233
  
KAGY Holding Company, Inc., Series A Preferred Stock
    
-
      
121,975
      
5,996,540
      
-
      
6,118,515
  
N659UA Aircraft Secured Mortgage, 12%, due 2/28/16
    
120,307
      
1,659,003
      
-
      
(1,340,023
)
    
318,980
  
N661UA Aircraft Secured Mortgage, 12%, due 5/4/16
    
137,289
      
1,899,950
      
-
      
(1,329,647
)
    
570,303
  
N913DL Aircraft Secured Mortgage, 8%, due 3/15/17
    
12,800
      
209,168
      
-
      
(93,551
)
    
115,617
  
N918DL Aircraft Secured Mortgage, 8%, due 8/15/18
    
21,901
      
320,440
      
-
      
(82,946
)
    
237,494
  
N954DL Aircraft Secured Mortgage, 8%, due 3/20/19
    
30,753
      
437,679
      
315
      
(95,260
)
    
342,734
  
N955DL Aircraft Secured Mortgage, 8%, due 6/20/19
    
32,662
      
460,258
      
539
      
(91,635
)
    
369,162
  
N956DL Aircraft Secured Mortgage, 8%, due 5/20/19
    
32,415
      
457,902
      
479
      
(93,184
)
    
365,197
  
N957DL Aircraft Secured Mortgage, 8%, due 6/20/19
    
32,947
      
464,283
      
544
      
(92,435
)
    
372,392
  
N959DL Aircraft Secured Mortgage, 8%, due 7/20/19
    
33,476
      
470,601
      
612
      
(91,691
)
    
379,522
  
N960DL Aircraft Secured Mortgage, 8%, due 10/20/19
    
35,326
      
493,258
      
831
      
(90,220
)
    
403,869
  
N961DL Aircraft Secured Mortgage, 8%, due 8/20/19
    
34,574
      
484,908
      
694
      
(92,487
)
    
393,115
  
N976DL Aircraft Secured Mortgage, 8%, due 2/15/18
    
20,940
      
314,588
      
-
      
(96,267
)
    
218,321
  
N913DL Equipment Trust Beneficial Interests
    
25,444
      
117,497
      
90,909
      
(100,905
)
    
107,501
  
N918DL Equipment Trust Beneficial Interests
    
21,074
      
135,890
      
81,670
      
(89,898
)
    
127,662
  
N954DL Equipment Trust Beneficial Interests
    
21,205
      
72,604
      
112,997
      
(107,751
)
    
77,850
  
N955DL Equipment Trust Beneficial Interests
    
20,000
      
111,010
      
103,527
      
(106,437
)
    
108,100
  
N956DL Equipment Trust Beneficial Interests
    
20,172
      
106,800
      
105,581
      
(107,903
)
    
104,478
  
N957DL Equipment Trust Beneficial Interests
    
19,872
      
107,682
      
105,105
      
(107,458
)
    
105,329
  
N959DL Equipment Trust Beneficial Interests
    
19,577
      
108,579
      
104,638
      
(107,014
)
    
106,203
  
N960DL Equipment Trust Beneficial Interests
    
18,590
      
107,865
      
104,750
      
(106,678
)
    
105,937
  
N961DL Equipment Trust Beneficial Interests
    
19,044
      
102,826
      
107,207
      
(108,546
)
    
101,487
  
N976DL Equipment Trust Beneficial Interests
    
20,825
      
102,006
      
101,347
      
(102,560
)
    
100,793
  
RM Holdco, LLC, Equity Participation
    
-
      
792
      
-
      
(792
)
    
-
  
RM Holdco, LLC, Membership Units
    
-
      
-
      
-
      
-
      
-
  
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 7%, due 3/21/16
    
272,075
      
3,900,025
      
18,674
      
(199,544
)
    
3,719,155
  
RM OpCo, LLC, Senior Secured 2nd Lien Term Loan Tranche B, 8.5%, due 3/30/18
    
736,422
      
6,457,325
      
731,070
      
(2,697,402
)
    
4,490,993
  
RM OpCo, LLC, Senior Secured 2nd Lien Term Loan Tranche B-1, 8.5%, due 3/30/18
    
238,052
      
2,567,717
      
239,889
      
(9,650
)
    
2,797,956
  
RM OpCo, LLC, Convertible 2nd Lien Term Loan Tranche B-1, 8.5%, due 3/30/18
    
165,715
      
1,636,314
      
164,641
      
(17,919
)
    
1,783,036
  
RM OpCo, LLC, Senior Convertible 2nd Lien Term Loan B, 8.5%, due 3/30/18
    
120,207
      
631,164
      
1,557,069
      
-
      
2,188,233
  
United N659UA-767, LLC (N659UA)
    
581,125
      
3,177,822
      
1,268,821
      
(1,078,044
)
    
3,368,599
  
United N661UA-767, LLC (N661UA)
    
569,770
      
3,078,923
      
1,230,498
      
(1,015,397
)
    
3,294,024
  
Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units
    
-
      
4,175,000
      
1,050,000
      
(1,026,500
)
    
4,198,500
  
 
                                        
 Notes to Consolidated Schedule of Changes in Investments in Affiliates:

(1)
The issuers of the securities listed on this schedule are considered affiliates under the Investment Company Act of 1940 due to the ownership by the Company of 5% or more of the issuers’ voting securities.
(2)
Also includes fee and lease income as applicable.
(3)
Acquisitions include new purchases, PIK income, accretion of original issue and market discounts and net unrealized appreciation.
(4)
Dispositions include decreases in the cost basis from sales, paydowns, mortgage amortizations, aircraft depreciation and net unrealized depreciation.
 
44
TCP Capital Corp.

Consolidated Schedule of Restricted Securities of Unaffiliated Issuers (Unaudited)

September 30, 2016

Investment
 
  
Acquisition Date
 
 
  
  
Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19
 
  
9/26/13
BlackLine Intermediate, Inc., Warrants to Purchase Common Stock
 
  
9/25/13
Boomerang Tube Holdings, Inc., Common Stock
 
  
2/2/16
BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17 (144A)
 
  
3/5/12
Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19
 
  
10/19/12
Epic Aero, Inc. (One Sky), Warrants to Purchase Common Stock
 
  
12/4/13
Findly Talent, LLC, Membership Units
 
  
1/1/14
Fuse Media, LLC, Warrants to Purchase Common Stock
 
  
8/3/12
Fuse, LLC, Senior Secured Notes, 10.375%, due 7/1/19
 
  
6/18/14
GACP I, LP, Membership Units
 
  
10/1/15
Gogo Intermediate Holdings, LLC, Senior Secured Notes, 12.5%, due 7/1/22
 
  
6/9/16
Green Biologics, Inc., Warrants to Purchase Stock
 
  
12/22/14
InMobi, Inc., Warrants to Purchase Stock
 
  
9/18/15
Integra Telecom, Inc., Common Stock
 
  
11/19/09
Integra Telecom, Inc., Warrants
 
  
11/19/09
Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18
 
  
5/8/13
Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21
 
  
8/1/13
Marsico Holdings, LLC, Common Interest Units
 
  
9/10/12
Nanosys, Inc., Warrants to Purchase Common Stock
 
  
3/29/16
NEXTracker, Inc., Series B Preferred Stock
 
  
12/17/14
NEXTracker, Inc., Series C Preferred Stock
 
  
6/12/15
Rightside Group, Ltd., Warrants
 
  
8/6/14
Shop Holding, LLC (Connexity), Class A Units
 
  
6/2/11
Soasta, Inc., Warrants to Purchase Series F Preferred Stock
 
  
3/4/16
Soraa, Inc., Warrants to Purchase Common Stock
 
  
8/29/14
SoundCloud, Ltd., Warrants to Purchase Preferred Stock
 
  
4/30/15
STG-Fairway Holdings, LLC (First Advantage), Class A Units
 
  
12/30/10
Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18
 
  
11/13/13
Utilidata, Inc., Warrants to Purchase Stock
 
  
12/22/15
V Telecom Investment S.C.A. (Vivacom), Common Shares
 
  
11/9/12
Waterfall International, Inc., Series B Preferred Stock
 
  
9/16/2015
Waterfall International, Inc., Warrants to Purchase Stock
 
  
9/16/2015

45
 
TCP Capital Corp.

Consolidated Schedule of Restricted Securities of Unaffiliated Issuers

December 31, 2015

Investment
 
  
Acquisition Date
 
 
  
 
Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19
 
  
9/26/13
BlackLine Intermediate, Inc., Warrants to Purchase Common Stock
 
  
9/25/13
BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17 (144A)
 
  
3/5/12
Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19
 
  
10/19/12
Findly Talent, LLC, Membership Units
 
  
1/1/14
Flight Options Holdings I, Inc. (One Sky), Warrants to Purchase Common Stock
 
  
12/4/13
Fuse Media, LLC, Warrants to Purchase Common Stock
 
  
8/3/12
Fuse, LLC, Senior Secured Notes, 10.375%, due 7/1/19
 
  
6/18/14
GACP I, LP, Membership Units
 
  
10/1/15
Green Biologics, Inc., Warrants to Purchase Stock
 
  
12/22/14
InMobi, Inc., Warrants to Purchase Stock
 
  
9/18/15
Integra Telecom, Inc., Common Stock
 
  
11/19/09
Integra Telecom, Inc., Warrants
 
  
11/19/09
Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18
 
  
5/8/13
Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21
 
  
8/1/13
Marsico Holdings, LLC, Common Interest Units
 
  
9/10/12
NEXTracker, Inc., Series B Preferred Stock
 
  
12/17/14
NEXTracker, Inc., Series C Preferred Stock
 
  
6/12/15
Precision Holdings, LLC, Class C Membership Interests
 
  
Var. 2010 & 2011
Rightside Group, Ltd., Warrants
 
  
8/6/14
Shop Holding, LLC (Connexity), Class A Units
 
  
6/2/11
Shop Holding, LLC (Connexity), Warrants to Purchase Class A Units
 
  
6/2/11
Soraa, Inc., Warrants to Purchase Common Stock
 
  
8/29/14
SoundCloud, Ltd., Warrants to Purchase Preferred Stock
 
  
4/30/15
STG-Fairway Holdings, LLC (First Advantage), Class A Units
 
  
12/30/10
Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18
 
  
11/13/13
Utilidata, Inc., Warrants to Purchase Stock
 
  
12/22/15
V Telecom Investment S.C.A. (Vivacom), Common Shares
 
  
11/9/12
Waterfall International, Inc., Series B Preferred Stock
 
  
9/16/2015
Waterfall International, Inc., Warrants to Purchase Stock
 
  
9/16/2015
 
46

TCP Capital Corp.

Consolidating Statement of Assets and Liabilities (Unaudited)

September 30, 2016
 
         
Special Value
              
   
TCP
    
Continuation
          
TCP
  
   
Capital Corp.
    
Partners, LP
          
Capital Corp.
  
   
Standalone
    
Consolidated
    
Eliminations
    
Consolidated
  
Assets
                        
Investments, at fair value:
                        
Companies less than 5% owned
  
$
-
    
$
1,144,719,963
    
$
-
    
$
1,144,719,963
  
Companies 5% to 25% owned
    
-
      
68,900,676
      
-
      
68,900,676
  
Companies more than 25% owned
    
-
      
62,809,253
      
-
      
62,809,253
  
Investment in subsidiary
    
1,026,886,283
      
-
      
(1,026,886,283
)
    
-
  
Total investments
    
1,026,886,283
      
1,276,429,892
      
(1,026,886,283
)
    
1,276,429,892
  
                                 
Cash and cash equivalents
    
-
      
140,873,527
      
-
      
140,873,527
  
Receivable for investments sold
    
-
      
6,306,581
      
-
      
6,306,581
  
Accrued interest income
    
-
      
12,119,817
      
-
      
12,119,817
  
Deferred debt issuance costs
    
-
      
4,216,157
      
-
      
4,216,157
  
Options
    
-
      
460,972
      
-
      
460,972
  
Prepaid expenses and other assets
    
661,170
      
760,453
      
-
      
1,421,623
  
Total assets
    
1,027,547,453
      
1,441,167,399
      
(1,026,886,283
)
    
1,441,828,569
  
                                 
Liabilities
                                
Debt, net of unamortized issuance costs
    
237,256,886
      
394,444,776
      
-
      
631,701,662
  
Payable for investment securities purchased
    
-
      
9,151,343
      
-
      
9,151,343
  
Incentive allocation payable
    
-
      
5,133,010
      
-
      
5,133,010
  
Interest payable
    
2,097,083
      
2,423,138
      
-
      
4,520,221
  
Payable to the Advisor
    
411,988
      
465,878
      
-
      
877,866
  
Accrued expenses and other liabilities
    
673,954
      
2,662,971
      
-
      
3,336,925
  
Total liabilities
    
240,439,911
      
414,281,116
      
-
      
654,721,027
  
                                 
Net assets
  
$
787,107,542
    
$
1,026,886,283
    
$
(1,026,886,283
)
  
$
787,107,542
  
                                 
Composition of net assets
                                
Common stock
  
$
53,042
    
$
-
    
$
-
    
$
53,042
  
Additional paid-in capital
    
944,993,651
      
1,180,024,317
      
(1,180,024,317
)
    
944,993,651
  
Accumulated deficit
    
(157,939,151
)
    
(153,138,034
)
    
153,138,034
      
(157,939,151
)
Net assets
  
$
787,107,542
    
$
1,026,886,283
    
$
(1,026,886,283
)
  
$
787,107,542
  


47

TCP Capital Corp.

Consolidating Statement of Assets and Liabilities

December 31, 2015

 
  
TCP
Capital Corp.
Standalone
    
Special Value
Continuation
Partners, LP
Consolidated
    
Eliminations
    
TCP
Capital Corp.
Consolidated
  
Assets
                        
Investments, at fair value:
                        
Companies less than 5% owned
  
$
-
    
$
1,099,208,475
    
$
-
    
$
1,099,208,475
  
Companies 5% to 25% owned
    
-
      
69,008,931
      
-
      
69,008,931
  
Companies more than 25% owned
    
-
      
14,702,319
      
-
      
14,702,319
  
Investment in subsidiary
    
827,455,601
      
-
      
(827,455,601
)
    
-
  
Total investments
    
827,455,601
      
1,182,919,725
      
(827,455,601
)
    
1,182,919,725
  
Cash and cash equivalents
    
-
      
35,629,435
      
-
      
35,629,435
  
Deferred debt issuance costs
    
-
      
5,390,241
      
-
      
5,390,241
  
Accrued interest income
    
-
      
9,613,064
      
-
      
9,613,064
  
Unrealized appreciation on swaps
    
-
      
3,229,442
      
-
      
3,229,442
  
Prepaid expenses and other assets
    
283,913
      
2,047,131
      
-
      
2,331,044
  
Total assets
    
827,739,514
      
1,238,829,038
      
(827,455,601
)
    
1,239,112,951
  
 
                                
Liabilities
                                
Debt
    
103,738,064
      
394,467,407
      
-
      
498,205,471
  
Payable for investment securities purchased
    
-
      
6,425,414
      
-
      
6,425,414
  
Incentive allocation payable
    
-
      
5,207,606
      
-
      
5,207,606
  
Interest payable
    
247,916
      
2,663,341
      
-
      
2,911,257
  
Payable to the Advisor
    
247,574
      
260,760
      
-
      
508,334
  
Accrued expenses and other liabilities
    
1,528,943
      
2,348,909
      
-
      
3,877,852
  
Total liabilities
    
105,762,497
      
411,373,437
      
-
      
517,135,934
  
 
                                
Net assets
  
$
721,977,017
    
$
827,455,601
    
$
(827,455,601
)
  
$
721,977,017
  
 
                                
Composition of net assets
                                
Common stock
  
$
48,834
    
$
-
    
$
-
    
$
48,834
  
Additional paid-in capital
    
878,383,356
      
981,033,295
      
(981,033,295
)
    
878,383,356
  
Accumulated deficit
    
(156,455,173
)
    
(153,577,694
)
    
153,577,694
      
(156,455,173
)
Net assets
  
$
721,977,017
    
$
827,455,601
    
$
(827,455,601
)
  
$
721,977,017
  
 
48

TCP Capital Corp.

Consolidating Statement of Operations (Unaudited)

Nine Months Ended September 30, 2016
  
         
Special Value
              
   
TCP
    
Continuation
          
TCP
  
   
Capital Corp.
    
Partners, LP
          
Capital Corp.
  
   
Standalone
    
Consolidated
    
Eliminations
    
Consolidated
  
Investment income
                        
Interest income:
                        
Companies less than 5% owned
  
$
-
    
$
99,016,633
    
$
-
    
$
99,016,633
  
Companies 5% to 25% owned
    
-
      
4,982,075
      
-
      
4,982,075
  
Companies more than 25% owned
    
-
      
1,915,981
      
-
      
1,915,981
  
Lease income:
                                
Companies more than 25% owned
    
-
      
1,496,869
      
-
      
1,496,869
  
Other income:
                                
Companies less than 5% owned
    
-
      
1,241,885
      
-
      
1,241,885
  
Total investment income
    
-
      
108,653,443
      
-
      
108,653,443
  
                                 
Operating expenses
                                
Interest and other debt expenses
    
5,819,334
      
11,758,525
      
-
      
17,577,859
  
Management and advisory fees
    
-
      
13,976,545
      
-
      
13,976,545
  
Legal fees, professional fees and due diligence expenses
    
973,172
      
811,002
      
-
      
1,784,174
  
Administration expenses
    
-
      
1,267,815
      
-
      
1,267,815
  
Director fees
    
97,295
      
198,191
      
-
      
295,486
  
Insurance expense
    
90,345
      
190,230
      
-
      
280,575
  
Custody fees
    
2,625
      
229,221
      
-
      
231,846
  
Other operating expenses
    
708,438
      
861,548
      
-
      
1,569,986
  
Total expenses
    
7,691,209
      
29,293,077
      
-
      
36,984,286
  
                                 
Net investment income (loss)
    
(7,691,209
)
    
79,360,366
      
-
      
71,669,157
  
                                 
Net realized and unrealized gain (loss) on investments and foreign currency
                                
Net realized gain (loss):
                                
Investments in companies less than 5% owned
    
-
      
(4,490,140
)
    
-
      
(4,490,140
)
Investments in companies 5% to 25% owned
    
-
      
417,446
      
-
      
417,446
  
Investments in companies more than 5% owned
    
-
      
79,742
      
-
      
79,742
  
Net realized loss
    
-
      
(3,992,952
)
    
-
      
(3,992,952
)
Change in net unrealized appreciation/depreciation
    
-
      
53,816
      
-
      
53,816
  
Net realized and unrealized loss
    
-
      
(3,939,136
)
    
-
      
(3,939,136
)
                                 
Net increase (decrease) in net assets from operations
    
(7,691,209
)
    
75,421,230
      
-
      
67,730,021
  
                                 
Interest in earnings of subsidiary
    
61,087,399
      
-
      
(61,087,399
)
    
-
  
Distributions of incentive allocation to the General Partner from net investment income    
-
      
-
      
(14,333,831
)
    
(14,333,831
)
Net increase in net assets applicable to common equityholders resulting from operations
  
$
53,396,190
    
$
75,421,230
    
$
(75,421,230
)
  
$
53,396,190
  

49
TCP Capital Corp.

Consolidating Statement of Operations (Unaudited)

Nine Months Ended September 30, 2015 
 
   
TCP
Capital Corp.
Standalone
    
Special Value
Continuation
Partners, LP
Consolidated
    
Eliminations
    
TCP
Capital Corp.
Consolidated
  
Investment income
                        
Interest income:
                        
Companies less than 5% owned
  
$
-
    
$
98,581,508
    
$
-
    
$
98,581,508
  
Companies 5% to 25% owned
    
-
      
3,828,262
      
-
      
3,828,262
  
Companies more than 25% owned
    
-
      
444,168
      
-
      
444,168
  
Lease income:
                                
Companies more than 25% owned
    
-
      
978,000
      
-
      
978,000
  
Other income:
                                
Companies less than 5% owned
    
153,217
      
3,267,066
      
-
      
3,420,283
  
Total investment income
    
153,217
      
107,099,004
      
-
      
107,252,221
  
                                 
Operating expenses
                                
Management and advisory fees
    
-
      
13,681,411
      
-
      
13,681,411
  
Interest expense
    
4,560,902
      
5,927,481
      
-
      
10,488,383
  
Legal fees, professional fees and due diligence expenses
    
1,287,695
      
706,876
      
-
      
1,994,571
  
Amortization of deferred debt issuance costs
    
513,581
      
1,109,752
      
-
      
1,623,333
  
Administration expenses
    
-
      
1,177,357
      
-
      
1,177,357
  
Commitment fees
    
-
      
919,649
      
-
      
919,649
  
Insurance expense
    
90,505
      
182,172
      
-
      
272,677
  
Director fees
    
76,622
      
156,843
      
-
      
233,465
  
Custody fees
    
2,625
      
211,516
      
-
      
214,141
  
Other operating expenses
    
921,473
      
1,260,979
      
-
      
2,182,452
  
Total expenses
    
7,453,403
      
25,334,036
      
-
      
32,787,439
  
                                 
Net investment income (loss)
    
(7,300,186
)
    
81,764,968
      
-
      
74,464,782
  
                                 
Net realized and unrealized gain (loss) on investments and foreign currency
                                
Net realized gain (loss):
                                
Investments in companies less than 5% owned
    
-
      
(3,714,114
)
    
-
      
(3,714,114
)
Investments in companies 5% to 25% owned
    
-
      
1,185
      
-
      
1,185
  
Investments in companies more than 5% owned
    
-
      
19,167
      
-
      
19,167
  
Net realized loss
    
-
      
(3,693,762
)
    
-
      
(3,693,762
)
Change in net unrealized appreciation/depreciation
    
-
      
28,123
      
-
      
28,123
  
Net realized and unrealized loss
    
-
      
(3,665,639
)
    
-
      
(3,665,639
)
                                 
Net increase (decrease) in net asets from operations 
    
(7,300,186
)
    
78,099,329
      
-
      
70,799,143
  
                                 
Interest in earnings of subsidiary
    
64,278,059
      
-
      
(64,278,059
)
    
-
  
Gain on repurchase of Series A preferred interests
    
-
      
1,675,000
      
-
      
1,675,000
  
Dividends paid on Series A preferred equity facility
    
-
      
(1,251,930
)
    
-
      
(1,251,930
)
Net change in accumulated dividends on Series A preferred equity facility
    
-
      
497,790
      
-
      
497,790
  
Distributions of incentive allocation to the General Partner from net investment income
    
-
      
-
      
(14,742,130
)
    
(14,742,130
)
Net increase in net assets applicable to equity holders resulting from operations
  
$
56,977,873
    
$
79,020,189
    
$
(79,020,189
)
  
$
56,977,873
  

50

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

The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q. Some of the statements in this report (including in the following discussion) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or the future performance or financial condition of TCP Capital Corp. (the “Holding Company”). For simplicity, this report uses the terms “Company,” “we,” “us” and “our” to include the Holding Company and, where appropriate in the context, Special Value Continuation Partners, LP (the “Operating Company”), on a consolidated basis. The forward-looking statements contained in this report involve a number of risks and uncertainties, including statements concerning:

•
our, or our portfolio companies’, future business, operations, operating results or prospects;
 
•
the return or impact of current and future investments;
 
•
the impact of a protracted decline in the liquidity of credit markets on our business;
 
•
the impact of fluctuations in interest rates on our business;
 
•
the impact of changes in laws or regulations governing our operations or the operations of our portfolio companies;
 
•
our contractual arrangements and relationships with third parties;
 
•
the general economy and its impact on the industries in which we invest;
 
•
the financial condition of and ability of our current and prospective portfolio companies to achieve their objectives;
 
•
our expected financings and investments;
 
•
the adequacy of our financing resources and working capital;
 
•
the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments;
 
•
the timing of cash flows, if any, from the operations of our portfolio companies;
 
•
the timing, form and amount of any dividend distributions; and
 
•
our ability to maintain our qualification as a regulated investment company and as a business development company.

We use words such as “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “could,” “may,” “plan” and similar words to identify forward-looking statements. The forward looking statements contained in this annual report involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth as “Risk Factors” in this report.

We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the SEC, including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K.
51
Overview

The Holding Company is a Delaware corporation formed on April 2, 2012 and is an externally managed, closed-end, non-diversified management investment company. The Holding Company was formed through the conversion of a pre-existing closed-end investment company.  The Holding Company elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Our investment objective is to seek to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. We invest primarily in the debt of middle-market companies as well as small businesses, including senior secured loans, junior loans, mezzanine debt and bonds. Such investments may include an equity component, and, to a lesser extent, we may make equity investments directly. Investment operations are conducted either in Special Value Continuation Partners, LP, a Delaware Limited Partnership (the “Operating Company”), of which the Holding Company owns 100% of the common limited partner interests, or in one of the Operating Company’s wholly-owned subsidiaries, TCPC Funding I, LLC (“TCPC Funding”) and TCPC SBIC, LP (the “SBIC”). The Operating Company has also elected to be treated as a BDC under the 1940 Act. The General Partner of the Operating Company is SVOF/MM, LLC (“SVOF/MM”), which also serves as the administrator (the “Administrator”) of the Holding Company and the Operating Company. The managing member of SVOF/MM is Tennenbaum Capital Partners, LLC (the “Advisor”), which serves as the investment manager to the Holding Company, the Operating Company, TCPC Funding, and the SBIC. Most of the equity interests in the General Partner are owned directly or indirectly by the Advisor and its employees.  The SBIC was organized as a Delaware limited partnership in June 2013. On April 22, 2014, the SBIC received a license from the United States Small Business Administration (the “SBA”) to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958.
 
The Holding Company has elected to be treated as a regulated investment company (“RIC”) for U.S. federal income tax purposes. As a RIC, the Holding Company will not be taxed on its income to the extent that it distributes such income each year and satisfies other applicable income tax requirements. The Operating Company, TCPC Funding, and the SBIC have elected to be treated as partnerships for U.S. federal income tax purposes.

Our leverage program is comprised of $116.0 million in available debt under a senior secured revolving credit facility issued by the Operating Company (the “SVCP Revolver”), a $100.5 million term loan issued by the Operating Company (the “Term Loan” and together with the SVCP Revolver, the “SVCP Facility”), $350.0 million in available debt under a senior secured revolving credit facility issued by TCPC Funding (the “TCPC Funding Facility”), $108.0 million in convertible senior unsecured notes issued by the Holding Company maturing in 2019 (the “2019 Convertible Notes”), $140.0 million in convertible senior unsecured notes issued by the Holding Company maturing in 2022 (the “2022 Convertible Notes”) and $75.0 million in committed leverage from the SBA (the “SBA Program” and, together with the SVCP Facility, the TCPC Funding Facility and the convertible notes the “Leverage Program”). Prior to the repurchase and retirement of the remaining preferred interests on September 3, 2015, the Leverage Program also included amounts outstanding under a preferred equity facility issued by the Operating Company (the “Preferred Interests”).

To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements and timely distribute to our stockholders generally at least 90% of our investment company taxable income, as defined by the Internal Revenue Code of 1986, as amended, for each year. Pursuant to this election, we generally will not have to pay corporate level taxes on any income that we distribute to our stockholders provided that we satisfy those requirements.

Investments

Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity, the general economic environment and the competitive environment for the types of investments we make.

As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities and indebtedness of private U.S. companies, public U.S. operating companies whose securities are not listed on a national securities exchange or registered under the Securities Exchange Act of 1934, as amended, public domestic operating companies having a market capitalization of less than $250.0 million, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. We are also permitted to make certain follow-on investments in companies that were eligible portfolio companies at the time of initial investment but that no longer meet the definition. As of September 30, 2016, 86.3% of our total assets were invested in qualifying assets.

Revenues

We generate revenues primarily in the form of interest on the debt we hold. We also generate revenue from dividends on our equity interests, capital gains on the disposition of investments, and certain lease, fee, and other income. Our investments in fixed income instruments generally have an expected maturity of three to five years, although we have no lower or upper constraint on maturity. Interest on our debt investments is generally payable quarterly or semi-annually. Payments of principal of our debt investments may be amortized over the stated term of the investment, deferred for several years or due entirely at maturity. In some cases, our debt investments and preferred stock investments may defer payments of cash interest or dividends or PIK. Any outstanding principal amount of our debt investments and any accrued but unpaid interest will generally become due at the maturity date. In addition, we may generate revenue in the form of prepayment fees, commitment, origination, structuring or due diligence fees, end-of-term or exit fees, fees for providing significant managerial assistance, consulting fees and other investment related income.
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Expenses

Our primary operating expenses include the payment of a base management fee and, depending on our operating results, incentive compensation, expenses reimbursable under the management agreement, administration fees and the allocable portion of overhead under the administration agreement. The base management fee and incentive compensation remunerates the Advisor for work in identifying, evaluating, negotiating, closing and monitoring our investments. Our administration agreement with SVOF/MM, LLC (the “Administrator”) provides that the Administrator may be reimbursed for costs and expenses incurred by the Administrator for office space rental, office equipment and utilities allocable to us under the administration agreement, as well as any costs and expenses incurred by the Administrator or its affiliates relating to any non-investment advisory, administrative or operating services provided by the Administrator or its affiliates to us. We also bear all other costs and expenses of our operations and transactions (and the Holding Company’s common stockholders indirectly bear all of the costs and expenses of the Holding Company, the Operating Company, TCPC Funding and the SBIC), which may include those relating to:

•
our organization;
 
•
calculating our net asset value (including the cost and expenses of any independent valuation firms);
 
•
interest payable on debt, if any, incurred to finance our investments;
 
•
costs of future offerings of our common stock and other securities, if any;
 
•
the base management fee and any incentive compensation;
 
•
dividends and distributions on our preferred shares, if any, and common shares;
 
•
administration fees payable under the administration agreement;
 
•
fees payable to third parties relating to, or associated with, making investments;
 
•
transfer agent and custodial fees;
 
•
registration fees;
 
•
listing fees;
 
•
taxes;
 
•
director fees and expenses;
 
•
costs of preparing and filing reports or other documents with the SEC;
 
•
costs of any reports, proxy statements or other notices to our stockholders, including printing costs;
 
•
our fidelity bond;
 
•
directors and officers/errors and omissions liability insurance, and any other insurance premiums;
 
•
indemnification payments;
 
•
direct costs and expenses of administration, including audit and legal costs; and
 
•
all other expenses reasonably incurred by us and the Administrator in connection with administering our business, such as the allocable portion of overhead under the administration agreement, including rent and other allocable portions of the cost of certain of our officers and their respective staffs.
 
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The investment management agreement provides that the base management fee be calculated at an annual rate of 1.5% of our total assets (excluding cash and cash equivalents) payable quarterly in arrears. For purposes of calculating the base management fee, “total assets” is determined without deduction for any borrowings or other liabilities. The base management fee is calculated based on the value of our total assets (excluding cash and cash equivalents) at the end of the most recently completed calendar quarter.

Additionally, the investment management agreement and the Amended and Restated Limited Partnership Agreement provide that the Advisor or its affiliates may be entitled to incentive compensation under certain circumstances. According to the terms of such agreements, no incentive compensation was incurred prior to January 1, 2013. Beginning January 1, 2013, the incentive compensation equals the sum of (1) 20% of all ordinary income since January 1, 2013 and (2) 20% of all net realized capital gains (net of any net unrealized capital depreciation) since January 1, 2013, with each component being subject to a total return requirement of 8% of contributed common equity annually. The incentive compensation is payable to the General Partner by the Operating Company pursuant to the Amended and Restated Limited Partnership Agreement. If the Operating Company is terminated or for any other reason incentive compensation is not paid by the Operating Company, it would be paid pursuant to the investment management agreement between us and the Advisor. The determination of incentive compensation is subject to limitations under the 1940 Act and the Advisers Act.

Critical accounting policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. Management considers the following critical accounting policies important to understanding the financial statements. In addition to the discussion below, our critical accounting policies are further described in the notes to our financial statements.

Valuation of portfolio investments

We value our portfolio investments at fair value based upon the principles and methods of valuation set forth in policies adopted by our board of directors. Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Market participants are buyers and sellers in the principal (or most advantageous) market for the asset that (i) are independent of us, (ii) are knowledgeable, having a reasonable understanding about the asset based on all available information (including information that might be obtained through due diligence efforts that are usual and customary), (iii) are able to transact for the asset, and (iv) are willing to transact for the asset or liability (that is, they are motivated but not forced or otherwise compelled to do so).

Investments for which market quotations are readily available are valued at such market quotations unless the quotations are deemed not to represent fair value. We generally obtain market quotations from recognized exchanges, market quotation systems, independent pricing services or one or more broker-dealers or market makers. However, short term debt investments with remaining maturities within 90 days are generally valued at amortized cost, which approximates fair value. Debt and equity securities for which market quotations are not readily available, which is the case for many of our investments, or for which market quotations are deemed not to represent fair value, are valued at fair value using a consistently applied valuation process in accordance with our documented valuation policy that has been reviewed and approved by our board of directors, who also approve in good faith the valuation of such securities as of the end of each quarter. Due to the inherent uncertainty and subjectivity of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments and may differ materially from the values that we may ultimately realize. In addition, changes in the market environment and other events may have differing impacts on the market quotations used to value some of our investments than on the fair values of our investments for which market quotations are not readily available. Market quotations may be deemed not to represent fair value in certain circumstances where we believe that facts and circumstances applicable to an issuer, a seller or purchaser, or the market for a particular security cause current market quotations to not reflect the fair value of the security. Examples of these events could include cases where a security trades infrequently causing a quoted purchase or sale price to become stale, where there is a “forced” sale by a distressed seller, where market quotations vary substantially among market makers, or where there is a wide bid-ask spread or significant increase in the bid-ask spread.

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The valuation process approved by our board of directors with respect to investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value is as follows:

•
The investment professionals of the Advisor provide recent portfolio company financial statements and other reporting materials to independent valuation firms approved by our board of directors.
 
•
Such firms evaluate this information along with relevant observable market data to conduct independent appraisals each quarter, and their preliminary valuation conclusions are documented and discussed with senior management of the Advisor.
 
•
The fair value of smaller investments comprising in the aggregate less than 5% of our total capitalization may be determined by the Advisor in good faith in accordance with our valuation policy without the employment of an independent valuation firm.
 
•
The audit committee of the board of directors discusses the valuations, and the board of directors approves the fair value of the investments in our portfolio in good faith based on the input of the Advisor, the respective independent valuation firms (to the extent applicable) and the audit committee of the board of directors.

Those investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in determining the fair value of our investments include, as relevant and among other factors: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparables, our principal market (as the reporting entity) and enterprise values.

When valuing all of our investments, we strive to maximize the use of observable inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances.

Our investments may be categorized based on the types of inputs used in their valuation. The level in the GAAP valuation hierarchy in which an investment falls is based on the lowest level input that is significant to the valuation of the investment in its entirety. Investments are classified by GAAP into the three broad levels as follows:

Level 1 — Investments valued using unadjusted quoted prices in active markets for identical assets.

Level 2 — Investments valued using other unadjusted observable market inputs, e.g. quoted prices in markets that are not active or quotes for comparable instruments.

Level 3 — Investments that are valued using quotes and other observable market data to the extent available, but which also take into consideration one or more unobservable inputs that are significant to the valuation taken as a whole.

As of September 30, 2016, none of our investments were categorized as Level 1, 9.1% were categorized as Level 2, 90.7% were Level 3 investments valued based on valuations by independent third party sources, and 0.2% were Level 3 investments valued based on valuations by the Advisor.

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on the financial statements.

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Revenue recognition

Interest and dividend income, including income paid in kind, is recorded on an accrual basis. Origination, structuring, closing, commitment and other upfront fees, including original issue discounts, earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment, as are end-of-term or exit fees receivable upon repayment of a debt investment. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, are recognized as earned. Prepayment fees and similar income due upon the early repayment of a loan or debt security are recognized when earned and are included in interest income.

Certain of our debt investments are purchased at a discount to par as a result of the underlying credit risks and financial results of the issuer, as well as general market factors that influence the financial markets as a whole. Discounts on the acquisition of corporate bonds are generally amortized using the effective-interest or constant-yield method assuming there are no questions as to collectability. When principal payments on a loan are received in an amount in excess of the loan’s amortized cost, the excess principal payments are recorded as interest income.

Net realized gains or losses and net change in unrealized appreciation or depreciation

We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Realized gains and losses are computed using the specific identification method. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
 
Portfolio and investment activity

During the three months ended September 30, 2016, we invested approximately $146.6 million, comprised of new investments in 8 new and 5 existing portfolio companies, as well as draws made on existing commitments and PIK received on prior investments. Of these investments, 96.2% were in senior secured debt comprised of senior loans ($133.4 million, or 91.0% of total acquisitions) and senior secured notes ($7.7 million, or 5.2% of total acquisitions). The remaining $5.5 million (3.8% of total acquisitions) were additional equity interests in two portfolios of debt and lease assets. Additionally, we received approximately $108.2 million in proceeds from sales or repayments of investments during the three months ended September 30, 2016. 

During the three months ended September 30, 2015, we invested approximately $120.6 million, comprised of new investments in 7 new and 4 existing portfolio companies, as well as draws made on existing commitments and PIK received on prior investments. Of these investments, 98.7% were in senior secured debt, comprised of senior loans ($116.6 million, or 96.7% of total acquisitions) and senior secured notes ($2.5 million, or 2.0% of total acquisitions). The remaining $1.5 million (1.3% of total acquisitions) were equity investments. Additionally, we received approximately $65.3 million in proceeds from sales or repayments of investments during the three months ended September 30, 2015.

During the nine months ended September 30, 2016, we invested approximately $379.8 million, comprised of new investments in 17 new and 11 existing portfolio companies, as well as draws made on existing commitments and PIK received on prior investments. Of these investments, 95.1% were in senior secured debt comprised of senior loans ($313.7 million, or 82.6% of total acquisitions) and senior secured notes ($47.3 million, or 12.5% of total acquisitions). The remaining $18.7 million (4.9% of total acquisitions) were comprised of $17.8 million in equity interests in two portfolios of debt and lease assets, as well as $0.9 million in two warrant positions received in connection with debt investments. Additionally, we received approximately $294.2 million in proceeds from sales or repayments of investments during the nine months ended September 30, 2016. 

During the nine months ended September 30, 2015 we invested approximately $423.3 million, comprised of new investments in 16 new and 22 existing portfolio companies, as well as draws made on existing commitments and PIK received on prior investments. Of these investments, 99.5% were in senior secured debt, comprised of senior loans ($379.2 million, or 89.6% of total acquisitions) and senior secured notes ($41.9 million, or 9.9% of total acquisitions). The remaining $2.3 million (0.5% of total acquisitions) were equity investments. Additionally, we received approximately $305.5 million in proceeds from sales or repayments of investments during the nine months ended September 30, 2015.

At September 30, 2016, our investment portfolio of $1,276.4 million (at fair value) consisted of 88 portfolio companies and was invested 95.7% in debt investments, substantially all of which was in senior secured debt. In aggregate, our investment portfolio was invested 78.3% in senior secured loans, 17.4% in senior secured notes and 4.3% in equity investments. Our average portfolio company investment at fair value was approximately $14.5 million. Our largest portfolio company investment by value was approximately $45.4 million and our five largest portfolio company investments by value comprised approximately 14.7% of our portfolio at September 30, 2016.

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At December 31, 2015, our investment portfolio of $1,182.9 million (at fair value) consisted of 88 portfolio companies and was invested 95.5% in debt investments, of which 99.9% was in senior secured debt and 0.1% in unsecured and subordinated debt. In aggregate, our investment portfolio was invested 81.5% in senior secured loans, 14.0% in senior secured notes, 0.1% in unsecured and subordinated debt, and 4.4% in equity investments. Our average portfolio company investment at fair value was approximately $13.4 million. Our largest portfolio company investment by value was approximately $43.3 million and our five largest portfolio company investments by value comprised approximately 15.7% of our portfolio at December 31, 2015.

The industry composition of our portfolio at fair value at September 30, 2016 was as follows:

Industry
 
Percent of Total
Investments
 
Software Publishing
 
 
19.7
%
Nondepository Credit Intermediation
 
 
6.0
%
Computer Systems Design and Related Services
    
5.7
%
Other Information Services
 
 
5.6
%
Business Support Services
    
4.4
%
Retail
 
 
3.6
%
Wired Telecommunications Carriers
 
 
3.4
%
Scientific Research and Development Services
 
 
3.1
%
Financial Investment Activities
 
 
3.1
%
Insurance Related Activities
 
 
2.7
%
Equipment Leasing
 
 
2.5
%
Textile Furnishings Mills
 
 
2.4
%
Hospitals     2.1
%
Utility System Construction
 
 
1.9
%
Chemicals
 
 
1.9
%
Insurance Carriers
 
 
1.9
%
Management, Scientific, and Technical Consulting Services
 
 
1.8
%
Air Transportation
 
 
1.8
%
Apparel Manufacturing
 
 
1.8
%
Communications Equipment Manufacturing
 
 
1.7
%
Radio and Television Broadcasting
 
 
1.7
%
Wholesalers
 
 
1.6
%
Electronic Component Manufacturing
 
 
1.5
%
Lessors of Nonfinancial Licenses
 
 
1.5
%
Other Manufacturing
 
 
1.5
%
Restaurants
 
 
1.3
%
Computer Equipment Manufacturing
 
 
1.3
%
Data Processing and Hosting Services
 
 
1.2
%
Advertising and Public Relations Services
 
 
1.2
%
Building Equipment Contractors
    
1.1
%
Activities Related to Real Estate
 
 
1.0
%
Other
    
8.0
%
Total
 
 
100.0
%
 
The weighted average effective yield of the debt securities in our portfolio was 11.19% at September 30, 2016 and 10.95% at December 31, 2015. At September 30, 2016, 80.5% of our debt investments bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate, and 19.5% bore interest at fixed rates. The percentage of our floating rate debt investments that bore interest based on an interest rate floor was 78.6% at September 30, 2016. At December 31, 2015, 80.4% of our debt investments bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate, and 19.6% bore interest at fixed rates. The percentage of our floating rate debt investments that bore interest based on an interest rate floor was 77.9% at December 31, 2015.

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Results of operations

Investment income

Investment income totaled $38.5 million and $35.5 million, respectively, for the three months ended September 30, 2016 and 2015, of which $38.3 million and $33.8 million were attributable to interest and fees on our debt investments, $0.1 million and $0.4 million to lease income, and $0.1 million and $1.3 million to other income, respectively. Included in interest and fees on our debt investments were $3.0 million and $1.0 million of non-recurring income related to prepayments for the three months ended September 30, 2016 and 2015, respectively.  The increase in investment income in the three months ended September 30, 2016 compared to the three months ended September 30, 2015 reflects an increase in interest income due to the higher non-recurring income related to a higher level of prepayments in the three months ended September 30, 2016 compared to the three months ended September 30, 2015, partially offset by decreases in other income and lease income.

Investment income totaled $108.7 million and $107.3 million, respectively, for the nine months ended September 30, 2016 and 2015, of which $105.9 million and $102.9 million were attributable to interest and fees on our debt investments, $1.5 million and $1.0 million to lease income and $1.3 million and $3.4 million to other income, respectively. Included in interest and fees on our debt investments were $5.9 million and $6.0 million of non-recurring income related to prepayments for the nine months ended September 30, 2016 and 2015, respectively.  The increase in investment income in the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015 reflects an increase in interest income due to the larger portfolio size and an increase in lease income in the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015, partially offset by a decrease in other income.

Expenses

Total operating expenses for the three months ended September 30, 2016 and 2015 were $12.8 million and $11.2 million respectively, comprised of $6.2 million and $4.6 million in interest expense and related fees, $4.8 million and $4.7 million in base management fees, $0.6 million and $0.4 million in legal and other professional fees, $0.4 million and $0.4 million in administrative expenses, and $0.8 million and $1.1 million in other expenses, respectively. The increase in expenses in the three months ended September 30, 2016 compared to the three months ended September 30, 2015 primarily reflects the increase in interest expense and other costs related to the increase in available and outstanding debt, including the conversion of the Preferred Interests to term debt, as well as the higher average interest rate following the issuance of the 2022 Convertible Notes and the increase in LIBOR rates.

Total operating expenses for the nine months ended September 30, 2016 and 2015 were $37.0 million and $32.8 million, respectively, comprised of $17.6 million and $13.0 million in interest expense and related fees, $14.0 million and $13.7 million in base management fees, $1.8 million and $2.0 million in legal and professional fees, $1.2 million and $1.2 million in administrative expenses, and $2.4 million and $2.9 million in other expenses, respectively. The increase in expenses in the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015 primarily reflects the increase in interest expense and other costs related to the increase in available and outstanding debt, including the conversion of the Preferred Interests to term debt, as well as the higher average interest rate following the issuance of the 2022 Convertible Notes and the increase in LIBOR rates.

Net investment income

Net investment income was $25.7 million and $24.3 million, respectively, for the three months ended September 30, 2016 and 2015. The increase in net investment income in the three months ended September 30, 2016 compared to the three months ended September 30, 2015 primarily reflects the increase in investment income, partially offset by the increase in expenses in the three months ended September 30, 2016.

Net investment income was $71.7 million and $74.5 million, respectively, for the nine months ended September 30, 2016 and 2015. The decrease in net investment income in the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015 primarily reflects the increase in expenses, partially offset by the increase in investment income in the nine months ended September 30, 2016.

Net realized and unrealized gain or loss

Net realized gains (losses) for the three months ended September 30, 2016 and 2015 were $(0.7) million and $5.7 million, respectively. The net realized gain during the three months ended September 30, 2015 was primarily comprised of a $5.9 million gain on the disposition of most of our investment in NEXTracker, Inc.
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For the three months ended September 30, 2016 and 2015, the change in net unrealized appreciation/depreciation was an increase of $0.9 million and a decrease of $7.6 million, respectively. The change in net unrealized appreciation/depreciation for the three months ended September 30, 2016 was comprised primarily of mark-to-market adjustments resulting from narrower market yield spreads during the quarter. The change in net unrealized appreciation/depreciation for the three months ended September 30, 2015 was primarily comprised of a $4.0 million unrealized gain on our investment in KAGY Holding Company, Inc., a $3.6 million reversal of prior period unrealized appreciation on our investment in NEXTracker, Inc., $2.4 million in unrealized depreciation on our loan to CORE Entertainment, Inc., and other mark-to-market adjustments primarily due to increases in market yield spreads.

Net realized losses for the nine months ended September 30, 2016 and 2015 were $4.0 million and $3.7 million, respectively. The net realized loss during the nine months ended September 30, 2016 was due primarily to the taxable reorganization of our investment in Boomerang Tube, LLC. The net realized loss during the nine months ended September 30, 2015 was due primarily to the restructure of our loan to Edmentum, in which we received debt and equity in a delevered company, partially offset by the $5.9 million gain on the partial disposition of our NEXTracker investment.

For the nine months ended September 30, 2016 and 2015, the change in net unrealized appreciation/depreciation was an increase of $0.1 million and $0.0 million, respectively.

Income tax expense, including excise tax

The Holding Company has elected to be treated as a RIC under Subchapter M of the Internal Revenue Code (“the Code”) and operates in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, the Holding Company must, among other things, timely distribute to its stockholders generally at least 90% of its investment company taxable income, as defined by the Code, for each year. The Company has made and intends to continue to make the requisite distributions to its stockholders which will generally relieve the Company from U.S. federal income taxes.

Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year dividend distributions from such current year taxable income into the next tax year and pay a 4% excise tax on such income. Any excise tax expense is recorded at year end as such amounts are known. There was no U.S. federal excise tax recorded during the three and nine months ended September 30, 2016 and 2015.

Gain on repurchase of Series A preferred interests
 
Gains on the repurchase of Series A preferred interests for the nine months ended September 30, 2016 and 2015 were $0.0 million and $1.7 million, respectively. The gain on repurchase of Series A preferred interests during the nine months ended September 30, 2015 was due to the repurchase of 1,675 Preferred Interests on June 30, 2015 at a price of $31.8 million.

Dividends to preferred equity holders

Dividends on the Preferred Interests for the three months ended September 30, 2016 and 2015 were $0.0 million and $0.1 million, respectively. Dividends on the Preferred Interests for the nine months ended September 30, 2016 and 2015 were $0.0 million and $0.8 million, respectively.  The decrease in dividends on Preferred Interests during the three and nine months ended September 30, 2016 compared to the three and nine months ended September 30, 2015 was due to the repurchase and retirement of all remaining Preferred Interests during 2015.

Incentive compensation

Incentive compensation distributable to the General Partner for the three months ended September 30, 2016 and 2015 was $5.1 million and $4.8 million, respectively. Incentive compensation distributable to the General Partner for the nine months ended September 30, 2016 and 2015 was $14.3 million and $14.7 million, respectively. Incentive compensation for the three and nine months ended September 30, 2016 and 2015 was distributable due to our performance exceeding the total return threshold and was calculated by multiplying net investment income, less preferred dividends (if any), by 20%.

Net increase in net assets applicable to common shareholders resulting from operations

The net increase in net assets applicable to common shareholders resulting from operations was $20.7 million and $17.5 million for the three months ended September 30, 2016 and 2015, respectively. The higher net increase in net assets applicable to common shareholders resulting from operations during the three months ended September 30, 2016 is primarily due to the higher net investment income during the three months ended September 30, 2016 compared to the three months September 30, 2015 and the net realized and unrealized gains during the three months ended September 30, 2016 compared to the net realized and unrealized losses during the three months ended September 30, 2015.  The net increase in net assets applicable to common shareholders resulting from operations was $53.4 million and $57.0 million for the nine months ended September 30, 2016 and 2015, respectively. The lower net increase in net assets applicable to common shareholders resulting from operations during the nine months ended September 30, 2016 is primarily due to the lower net investment income in the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015.

59
Liquidity and capital resources

Since our inception, our liquidity and capital resources have been generated primarily through the initial private placement of common shares of SVCF (the predecessor entity) which were subsequently converted to common stock of the Holding Company, the net proceeds from the initial and secondary public offerings of our common stock, amounts outstanding under our Leverage Program, and cash flows from operations, including investments sales and repayments and income earned from investments and cash equivalents. The primary uses of cash have been investments in portfolio companies, cash distributions to our equity holders, payments to service our Leverage Program and other general corporate purposes.

The following table summarizes the total shares issued and proceeds received in offerings of the Company’s common stock net of underwriting discounts and offering costs as well as shares issued in connection with the Company’s dividend reinvestment plan for the nine months ended September 30, 2016.
 
 
  
Shares Issued
    
Price Per Share
    
Net Proceeds
  
Shares issued from dividend reinvestment plan
    
461
    
$
15.50
*
  
$
7,147
  
Shares issued from conversion of convertible debt †
    
2,011,900
      
15.02
      
-
  
July 13, 2016 registered direct public offering
    
2,336,552
      
15.09
      
34,958,570
  
 
*
Weighted-average price per share.
†
On April 18, 2016, the Company issued $30.0 million in aggregate principal amount of a 5.25% convertible senior unsecured note due 2021 to CNO Financial Investments Corp. (the “CNO Note”).  On June 7, 2016, the Company issued 2,011,900 shares of its common stock pursuant to the full conversion, at the holder’s option, of the $30.0 million in aggregate principal amount (plus accrued interest) of the CNO Note. The CNO Note was converted at a price of $15.02 per share of common stock. No placement agent or underwriting fees were incurred in connection with the issuance or the conversion of the CNO Note.

The following table summarizes the total shares issued and proceeds received in offerings of the Company’s common stock net of underwriting discounts and offering costs as well as shares issued in connection with the Company’s dividend reinvestment plan for the year ended December 31, 2015.

 
  
Shares Issued
    
Price Per Share
    
Net Proceeds
  
At-the-market offerings
    
248,614
    
$
15.87
*
  
$
3,946,066
  
Shares issued from dividend reinvestment plan
    
555
      
14.62
*
    
8,116
  
 
*
Weighted-average price per share.

On October 3, 2014, we entered into an at-the-market equity offering program (the “ATM Program”) with Raymond James & Associates Inc. through which we may offer and sell, by means of at-the-market offerings from time to time, shares of our common stock having an aggregate offering price of up to $100,000,000.
 
60
On February 24, 2015, the Company’s board of directors approved a stock repurchase plan (the “Company Repurchase Plan”) to acquire up to $50.0 million in the aggregate of the Company’s common stock at prices at certain thresholds below the Company’s net asset value per share, in accordance with the guidelines specified in Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934. The Company Repurchase Plan is designed to allow the Company to repurchase its common stock at times when it otherwise might be prevented from doing so under insider trading laws. The Company Repurchase Plan requires an agent selected by the Company to repurchase shares of common stock on the Company’s behalf if and when the market price per share is at certain thresholds below the most recently reported net asset value per share. Under the plan, the agent will increase the volume of purchases made if the price of the Company’s common stock declines, subject to volume restrictions. The timing and amount of any stock repurchased depends on the terms and conditions of the Company Repurchase Plan, the market price of the common stock and trading volumes, and no assurance can be given that any particular amount of common stock will be repurchased. The Company Repurchase Plan was re-approved on November 2, 2016, to be in effect through the earlier of two trading days after our fourth quarter 2016 earnings release, unless further extended or terminated by our board of directors, or such time as the approved $50.0 million repurchase amount has been fully utilized, subject to certain conditions. The following table summarizes the total shares repurchased and amounts paid by the Company under the Company Repurchase Plan, including broker fees, for the nine months ended September 30, 2016:
 
 
  
Shares
Repurchased
  
Price Per Share
 
  
Total Cost
Company Repurchase Plan
  
141,896
  
$
13.25
*
  
$
1,879,548
 
*
Weighted-average price per share

Total leverage outstanding and available under the combined Leverage Program at September 30, 2016 were as follows:
 
 
  
Maturity
    
Rate
    
Carrying
Value*
    
Available
    
Total
Capacity
  
SVCP Facility
                              
SVCP Revolver
  
2018
      
L+1.75
%†
  
$
-
    
$
116,000,000
    
$
116,000,000
  
Term Loan
  
2018
      
L+1.75
%†
    
100,500,000
      
-
      
100,500,000
  
2019 Convertible Notes ($108 million par)
  
2019
      
5.25
%
    
106,436,711
      
-
      
106,436,711
  
2022 Convertible Notes ($140 million par)
  
2022
      
4.625
%
    
136,725,763
      
-
      
136,725,763
  
TCPC Funding Facility
  
2020
      
L+2.50
%‡
    
235,000,000
      
115,000,000
      
350,000,000
  
SBA Debentures
  
2024-2026
      
2.58
%§
    
61,000,000
      
14,000,000
      
75,000,000
** 
Total leverage
                    
639,662,474
    
$
245,000,000
    
$
884,662,474
  
Unamortized issuance costs
                    
(7,960,812
)
                
Debt, net of unamortized issuance costs
                  
$
631,701,662
                  
 
*
Except for the convertible notes, all carrying values are the same as the principal amounts outstanding.
†
Based on either LIBOR or the lender’s cost of funds, subject to certain limitations
‡
Or L+2.25% subject to certain funding requirements
§
Weighted-average interest rate, excluding fees of 0.36%
**
Total capacity increased to $150.0 million on October 13, 2016.
 
On July 13, 2015, we obtained exemptive relief from the SEC to permit us to exclude the debt of our SBA Debentures from our 200% asset coverage test under the 1940 Act. The exemptive relief provides us with increased flexibility under the 200% asset coverage test by permitting the SBIC to borrow up to $150.0 million more than it would otherwise be able to absent the receipt of this exemptive relief.  At September 30, 2016 the SBIC had a $75.0 million commitment from the SBA, which increased to $150.0 million on October 13, 2016.

Net cash used in operating activities during the nine months ended September 30, 2016 was $38.6 million. Our primary use of cash in operating activities during this period consisted of the settlement of acquisitions of investments (net of dispositions) of $80.4 million, partially offset by net investment income less incentive allocation (net of non-cash income and expenses) of approximately $41.8 million.

Net cash provided by financing activities was $143.9 million during the nine months ended September 30, 2016, consisting primarily of $140.0 million from the issuance of the 2022 Convertible Notes, $35.0 million of net proceeds from the registered direct public offering of our common stock on July 13, 2016, $30.0 million from proceeds from the issuance of the CNO Note (which was subsequently converted to common equity), and $0.2 million of net borrowings reduced by the $54.9 million in regular dividends on common equity, payment of $4.5 million in debt issuance costs, and $1.9 million in common shares repurchases.

61
At September 30, 2016, we had $140.9 million in cash and cash equivalents.

The SVCP Facility and the TCPC Funding Facility are secured by substantially all of the assets in our portfolio, including cash and cash equivalents, and are subject to compliance with customary affirmative and negative covenants, including the maintenance of a minimum shareholders’ equity, the maintenance of a ratio of not less than 200% of total assets (less total liabilities other than indebtedness) to total indebtedness, and restrictions on certain payments and issuance of debt. Unfavorable economic conditions may result in a decrease in the value of our investments, which would affect both the asset coverage ratios and the value of the collateral securing the SVCP Facility and the TCPC Funding Facility, and may therefore impact our ability to borrow under the SVCP Facility and the TCPC Funding Facility. In addition to regulatory restrictions that restrict our ability to raise capital, the Leverage Program contains various covenants which, if not complied with, could accelerate repayment of debt, thereby materially and adversely affecting our liquidity, financial condition and results of operations. At September 30, 2016, we were in compliance with all financial and operational covenants required by the Leverage Program.

Unfavorable economic conditions, while potentially creating attractive opportunities for us, may decrease liquidity and raise the cost of capital generally, which could limit our ability to renew, extend or replace the Leverage Program on terms as favorable as are currently included therein. If we are unable to renew, extend or replace the Leverage Program upon the various dates of maturity, we expect to have sufficient funds to repay the outstanding balances in full from our net investment income and sales of, and repayments of principal from, our portfolio company investments, as well as from anticipated debt and equity capital raises, among other sources. Unfavorable economic conditions may limit our ability to raise capital or the ability of the companies in which we invest to repay our loans or engage in a liquidity event, such as a sale, recapitalization or initial public offering. The SVCP Facility, the 2019 Convertible Notes, the 2022 Convertible Notes and the TCPC Funding Facility mature in July 2018, December 2019, March 2022 and March 2020, respectively. Any inability to renew, extend or replace the Leverage Program could adversely impact our liquidity and ability to find new investments or maintain distributions to our stockholders.

Challenges in the market are intensified for us by certain regulatory limitations under the Code and the 1940 Act. To maintain our qualification as a RIC, we must satisfy, among other requirements, an annual distribution requirement to pay out at least 90% of our ordinary income and short-term capital gains to our stockholders. Because we are required to distribute our income in this manner, and because the illiquidity of many of our investments may make it difficult for us to finance new investments through the sale of current investments, our ability to make new investments is highly dependent upon external financing. While we anticipate being able to continue to satisfy all covenants and repay the outstanding balances under the Leverage Program when due, there can be no assurance that we will be able to do so, which could lead to an event of default.

Contractual obligations

In addition to obligations under our Leverage Program, we have entered into several contracts under which we have future commitments. Pursuant to an investment management agreement, the Advisor manages our day-to-day operations and provides investment advisory services to us. Payments under the investment management agreement are equal to a percentage of the value of our gross assets (excluding cash and cash equivalents) and an incentive compensation, plus reimbursement of certain expenses incurred by the Advisor. Under our administration agreement, the Administrator provides us with administrative services, facilities and personnel. Payments under the administration agreement are equal to an allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations to us, and may include rent and our allocable portion of the cost of certain of our officers and their respective staffs. We are responsible for reimbursing the Advisor for due diligence and negotiation expenses, fees and expenses of custodians, administrators, transfer and distribution agents, counsel and directors, insurance, filings and registrations, proxy expenses, expenses of communications to investors, compliance expenses, interest, taxes, portfolio transaction expenses, costs of responding to regulatory inquiries and reporting to regulatory authorities, costs and expenses of preparing and maintaining our books and records, indemnification, litigation and other extraordinary expenses and such other expenses as are approved by the directors as being reasonably related to our organization, offering, capitalization, operation or administration and any portfolio investments, as applicable. The Advisor is not responsible for any of the foregoing expenses and such services are not investment advisory services under the 1940 Act. Either party may terminate each of the investment management agreement and administration agreement without penalty upon not less than 60 days’ written notice to the other.

Distributions

Our quarterly dividends and distributions to common stockholders are recorded on the ex-dividend date. Distributions are declared considering our estimate of annual taxable income available for distribution to stockholders and the amount of taxable income carried over from the prior year for distribution in the current year. We do not have a policy to pay distributions at a specific level and expect to continue to distribute substantially all of our taxable income. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.

62

The following tables summarize dividends declared for the nine months ended September 30, 2016 and 2015:
 
Date Declared
  
Record Date
  
Payment Date
  
Type
  
Amount Per Share
    
Total Amount
  
February 24, 2016
  
March 17, 2016
  
March 31, 2016
  
Regular
  
$
0.36
    
$
17,530,963
  
May 10, 2016
  
June 16, 2016
  
June 30, 2016
  
Regular
    
0.36
      
18,254,229
  
August 9, 2016
  
September 16, 2016
  
September 30, 2016
  
Regular
    
0.36
      
19,094,976
  
 
  
 
  
 
  
       
  
$
1.08
    
$
54,880,168
  
 
 
Date Declared
  
Record Date
  
Payment Date
  
Type
  
Amount Per Share
    
Total Amount
  
March 10, 2015
  
March 19, 2015
  
March 31, 2015
  
Regular
  
$
0.36
    
$
17,535,826
  
May 7, 2015
  
June 16, 2015
  
June 30, 2015
  
Regular
    
0.36
      
17,625,370
  
August 6, 2015
  
September 16, 2015
  
September 30, 2015
  
Regular
    
0.36
      
17,625,310
  
   
 
  
 
  
       
  
$
1.08
    
$
52,786,506
  

The following table summarizes the total shares issued in connection with our dividend reinvestment plan for the nine months ended September 30, 2016 and 2015:
 
 
  
2016
    
2015
  
Shares Issued
    
311
      
253
  
Average Price Per Share
  
$
15.08
    
$
15.64
  
Proceeds
  
$
4,691
    
$
3,962
  
 
We have elected to be taxed as a RIC under Subchapter M of the Code. In order to maintain favorable RIC tax treatment, we must distribute annually to our stockholders at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In order to avoid certain excise taxes imposed on RICs, we must distribute during each calendar year an amount at least equal to the sum of:

•
98% of our ordinary income (not taking into account any capital gains or losses) for the calendar year;
 
•
98.2% of the amount by which our capital gains exceed our capital losses (adjusted for certain ordinary losses) for the one-year period generally ending on October 31 of the calendar year; and
 
•
certain undistributed amounts from previous years on which we paid no U.S. federal income tax.

We may, at our discretion, carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. If we choose to do so, all other things being equal, this would increase expenses and reduce the amounts available to be distributed to our stockholders. We will accrue excise tax on estimated taxable income as required. In addition, although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment.

We have adopted an “opt in” dividend reinvestment plan for our common stockholders. As a result, if we declare a dividend or other distribution payable in cash, each stockholder that has not “opted in” to our dividend reinvestment plan will receive such dividends in cash, rather than having their dividends automatically reinvested in additional shares of our common stock.

We may not be able to achieve operating results that will allow us to make dividends and distributions at a specific level or to increase the amount of these dividends and distributions from time to time. Also, we may be limited in our ability to make dividends and distributions due to the asset coverage test applicable to us as a BDC under the 1940 Act and due to provisions in our existing and future credit facilities. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of favorable RIC tax treatment. In addition, in accordance with U.S. generally accepted accounting principles and tax regulations, we include in income certain amounts that we have not yet received in cash, such as PIK interest, which represents contractual interest added to the loan balance that becomes due at the end of the loan term, or the accrual of original issue or market discount. Since we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement to distribute at least 90% of our investment company taxable income to obtain tax benefits as a RIC and may be subject to an excise tax.

63
In order to satisfy the annual distribution requirement applicable to RICs, we have the ability to declare a large portion of a dividend in shares of our common stock instead of in cash. As long as a portion of such dividend is paid in cash and certain requirements are met, the entire distribution would be treated as a dividend for U.S. federal income tax purposes.

Related Parties

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

•
Each of the Holding Company, the Operating Company, TCPC Funding, and the SBIC has entered into an investment management agreement with the Advisor.
 
•
The Administrator provides us with administrative services necessary to conduct our day-to-day operations. For providing these services, facilities and personnel, the Administrator may be reimbursed by us for expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our officers and the Administrator’s administrative staff and providing, at our request and on our behalf, significant managerial assistance to our portfolio companies to which we are required to provide such assistance.
 
•
We have entered into a royalty-free license agreement with the Advisor, pursuant to which the Advisor has agreed to grant us a non-exclusive, royalty-free license to use the name “TCP.”

•
Pursuant to its limited partnership agreement, the general partner of the Operating Company is SVOF/MM, LLC. SVOF/MM, LLC is an affiliate of the Advisor and the general partner or managing member of certain other funds managed by the Advisor.
 
The Advisor and its affiliates, employees and associates currently do and in the future may manage other funds and accounts. The Advisor and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds or accounts. Accordingly, conflicts may arise regarding the allocation of investments or opportunities among us and those accounts. In general, the Advisor will allocate investment opportunities pro rata among us and the other funds and accounts (assuming the investment satisfies the objectives of each) based on the amount of committed capital each then has available. The allocation of certain investment opportunities in private placements is subject to independent director approval pursuant to the terms of the co-investment exemptive order applicable to us. In certain cases, investment opportunities may be made other than on a pro rata basis. For example, we may desire to retain an asset at the same time that one or more other funds or accounts desire to sell it or we may not have additional capital to invest at a time the other funds or accounts do. If the Advisor is unable to manage our investments effectively, we may be unable to achieve our investment objective. In addition, the Advisor may face conflicts in allocating investment opportunities between us and certain other entities that could impact our investment returns. While our ability to enter into transactions with our affiliates is restricted under the 1940 Act, we have received an exemptive order from the SEC permitting certain affiliated investments subject to certain conditions. As a result, we may face conflict of interests and investments made pursuant to the exemptive order conditions which could in certain circumstances affect adversely the price paid or received by us or the availability or size of the position purchased or sold by us.

Recent Developments

From October 1, 2016 through November 4, 2016, the Operating Company has invested approximately $82.9 million primarily in five senior secured loans, as well as equity interests in a portfolio of debt assets with a combined effective yield of approximately 10.0%.
 
On October 13, 2016, the SBIC received an additional $75.0 million commitment from the SBA, increasing its total commitment to $150.0 million.

On November 2, 2016, our board of directors re-approved the Company Repurchase Plan, to be in effect through the earlier of two trading days after our fourth quarter 2016 earnings release or such time as the approved $50.0 million repurchase amount has been fully utilized, subject to certain conditions.
 
On November 8, 2016, our board of directors declared a fourth quarter regular dividend of $0.36 per share payable on December 30, 2016 to stockholders of record as of the close of business on December 16, 2016.
64

Item 3:     Quantitative and qualitative disclosure about market risk

We are subject to financial market risks, including changes in interest rates. At September 30, 2016, 80.5% of our debt investments bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate. The interest rates on such investments generally reset by reference to the current market index after one to six months. At September 30, 2016, the percentage of our floating rate debt investments that bore interest based on an interest rate floor was 78.6%. Floating rate investments subject to a floor generally reset by reference to the current market index after one to six months only if the index exceeds the floor.

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. We assess our portfolio companies periodically to determine whether such companies will be able to continue making interest payments in the event that interest rates increase. There can be no assurances that the portfolio companies will be able to meet their contractual obligations at any or all levels of increases in interest rates.

Based on our September 30, 2016 balance sheet, the following table shows the annual impact on net income (excluding the related incentive compensation impact) of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure:

Basis Point Change
  
Interest income
    
Interest Expense
    
Net Income
  
Up 300 basis points
  
$
29,376,868
    
$
(11,895,000
)
  
$
17,481,868
  
Up 200 basis points
    
19,306,154
      
(7,930,000
)
    
11,376,154
  
Up 100 basis points
    
9,251,715
      
(3,965,000
)
    
5,286,715
  
Down 100 basis points
    
(2,671,690
)
    
3,369,060
      
697,370
  
Down 200 basis points
    
(2,671,690
)
    
3,369,060
      
697,370
  
Down 300 basis points
    
(2,671,690
)
    
3,369,060
      
697,370
  

Item 4.     Controls and Procedures

As of the period covered by this report, we, including our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on our evaluation, our management, including the chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were effective in timely alerting management, including the chief executive officer and chief financial officer, of material information about us required to be included in our periodic SEC filings. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, are based upon certain assumptions about the likelihood of future events and can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. There has not been any change in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
 
65

PART II - Other Information

Item 1.     Legal Proceedings

Although we may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise, as of September 30, 2016, we are currently not a party to any pending material legal proceedings.

Item 1A.  Risk Factors

There have been no material changes from the risk factors previously disclosed in our most recent annual report on Form 10-K, as filed with the Securities and Exchange Commission on February 29, 2016.

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

None.

Item 3.     Defaults Upon Senior Securities.

None.

Item 4:     Mine Safety Disclosures.

None.

Item 5:     Other Information.

None.

Item 6:     Exhibits

Number
 
Description
3.1
 
Articles of Incorporation of the Registrant (1)
3.2
 
Bylaws of the Registrant (2)
31.1
 
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934*
31.2
 
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934*
32.1
 
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U. S. C. 1350)*

* Filed herewith.

(1)
Incorporated by reference to Exhibit (a)(2) to the Registrant’s Registration Statement under the Securities Act of 1933 (File No. 333-172669), on Form N-2, filed on May 13, 2011
(2)
Incorporated by reference to Exhibit (b)(2) to the Registrant’s Registration Statement under the Securities Act of 1933 (File No. 333-172669), on Form N-2, filed on May 13, 2011
 
66

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

TCP CAPITAL CORP.

Date: November 8, 2016
 
 
 
 
By:
/s/ Howard M. Levkowitz
 
 
Name:
Howard M. Levkowitz
 
 
Title:
Chief Executive Officer
 

Date: November 8, 2016
 
 
 
 
By:
/s/ Paul L. Davis
 
 
Name:
Paul L. Davis
 
 
Title:
Chief Financial Officer
 

67

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