Triangle Mezzanine Fund LLLP

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)


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

For the fiscal year ended December 31, 2007


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

For the transition period from to

Commission file number 001-33130

Triangle Mezzanine Fund LLLP

(Exact name of registrant as specified in its charter)


North Carolina		42-1576337
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3600 Glenwood Avenue, Suite 104 Raleigh, North Carolina (Address and zip code of principal executive offices)		27612 (Zip Code)

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

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

Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class

Partnership interests of Triangle Mezzanine Fund LLLP

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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

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

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


Large Accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o
	(Do not check if a 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 o No þ

The registrant meets the conditions set forth in General Instructions (I)(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced disclosure format. Part II Items 4, 10, 11, 12 and 13 have been omitted in accordance with Instruction I(2)(a) and (c).

All of the registrant’s partnership interests are directly and indirectly owned by Triangle Capital Corporation (File No. 001-33130), which files reports pursuant to the Securities Exchange Act of 1934, as amended.

DOCUMENTS INCORPORATED BY REFERENCE

Certain exhibits previously filed with the Securities and Exchange commission are incorporated by reference into Part IV of this Annual Report.

FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Some of the statements in this Annual Report constitute forward-looking statements because they relate to future events or our future performance or financial condition. Forward-looking statements may include, among other things, statements as to our future operating results, our business prospects and the prospects of our portfolio companies, the impact of the investments that we expect to make, the ability of our portfolio companies to achieve their objectives, our expected financings and investments, the adequacy of our cash resources and working capital, and the timing of cash flows, if any, from the operations of our portfolio companies. Words such as “expect,” “anticipate,” “target,” “goals,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “continue,” “forecast,” “may,” “should,” “potential,” variations of such words, and similar expressions indicate a forward-looking statement, although not all forward-looking statements include these words. Readers are cautioned that the forward-looking statements contained in this Annual Report are only predictions, are not guarantees of future performance, and are subject to risks, events, uncertainties and assumptions that are difficult to predict. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors discussed in Item 1A entitled “Risk Factors” in Part I of this Annual Report and elsewhere in this Annual Report. Other factors that could cause actual results to differ materially include changes in the economy, risks associated with possible disruption in our operations or the economy generally due to terrorism, and future changes in laws or regulations and conditions in our operating areas. These statements are based on our current expectations, estimates, forecasts, information and projections about the industry in which we operate and the beliefs and assumptions of our management as of the date of this Annual Report. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless we are required to do so by law. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

PART I

Item 1. Business.

Formation of Our Company

Triangle Mezzanine Fund LLLP (the “Fund”) is a wholly owned subsidiary of a Maryland corporation, Triangle Capital Corporation (the “Company”). The Company was formed on October 10, 2006 for the purposes of acquiring 100% of the equity interests in the Fund and the Fund’s former general partner, Triangle Mezzanine LLC (“TML”), raising capital in its initial public offering, which was completed in February 2007 (the “Offering”) and thereafter operating as an internally managed business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). Unless otherwise noted, the terms “we,” “us,” “our” and “Triangle” refer to the Fund prior to the Offering and to Triangle Capital Corporation and its subsidiaries, including the Fund, after the Offering. At the time of closing of the Offering, the following formation transactions (“Formation Transactions”) were consummated:

	•		The Company acquired 100% of the limited partnership interests in the Fund, which became the Company’s wholly owned subsidiary, retained its license by the United States Small Business Administration (the “SBA”) to operate as a small business investment company (an “SBIC”), continued to hold its existing investments and to make new investments with the net proceeds of the Offering.

	•		The Company acquired 100% of the equity interests in TML, the general partner of the Fund.

The Offering consisted of the sale of 4,770,000 shares of the Company’s common stock at a price of $15.00 per share, resulting in net proceeds to the Company of approximately $64.7 million after deducting offering costs. As a result of the Offering and the Formation Transactions described above, we and the Company are closed-end, non-diversified investment companies that have elected to be treated as BDCs under the 1940 Act.

The following chart reflects graphically the Company’s organizational structure after the Offering and consummation of the Formation Transactions:


(1)		Based on 6,686,760 shares of common stock outstanding immediately after the Offering and consummation of the Formation Transactions.

Our headquarters are in Raleigh, North Carolina, and our Internet address is www.tcap.com. We are not including the information contained on our website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. Copies of this Annual Report and other reports are also available without charge upon written request to us.

Overview of our Business

We are a specialty finance company that provides customized financing solutions to lower middle market companies located throughout the United States. We define lower middle market companies as those having annual revenues between $10.0 and $100.0 million. Our investment objective is to seek attractive returns by generating current income from our debt investments and capital appreciation from our equity related investments. Our investment philosophy is to partner with business owners, management teams and financial sponsors to provide flexible financing solutions to fund growth, changes of control, or other corporate events. We invest primarily in senior and subordinated debt securities secured by first and second lien security interests in portfolio company assets, coupled with equity interests.

We focus on investments in companies with a history of generating revenues and positive cash flows, an established market position and a proven management team with a strong operating discipline. Our target portfolio company has annual revenues between $20.0 and $75.0 million and annual earnings before interest, taxes, depreciation and amortization (“EBITDA”) between $2.0 and $10.0 million. We believe that these companies have less access to capital and that the market for such capital is underserved relative to larger companies. Companies of this size are generally privately held and are less well known to traditional capital sources such as commercial and investment banks.

Our investments generally range from $5.0 to $15.0 million per portfolio company. In certain situations, we have partnered with other funds to provide larger financing commitments. We are continuing to operate as an SBIC and to utilize the proceeds of the sale of SBA-guaranteed debentures, referred to herein as SBA leverage, to enhance returns. As of December 31, 2007, we had investments in 25 portfolio companies, with an aggregate cost of $105.8 million.

Our Business Strategy

We seek attractive returns by generating current income from our debt investments and capital appreciation from our equity related investments by:

	•		*Focusing on Underserved Markets.* We believe that broad-based consolidation in the financial services industry coupled with operating margin and growth pressures have caused financial institutions to de-emphasize services to lower middle market companies in favor of larger corporate clients and capital market transactions. We believe these dynamics have resulted in the financing market for lower middle market companies to be underserved, providing us with greater investment opportunities.

	•		*Providing Customized Financing Solutions.* We offer a variety of financing structures and have the flexibility to structure our investments to meet the needs of our portfolio companies. Typically we invest in senior and subordinated debt securities, coupled with equity interests. We believe our ability to customize financing arrangements makes us an attractive partner to lower middle market companies.

	•		*Leveraging the Experience of Our Management Team.* Our senior management team has more than 100 years of combined experience advising, investing in, lending to and operating companies across changing market cycles. The members of our management team have diverse investment backgrounds, with prior experience at investment banks, specialty finance companies, commercial banks, and privately and publicly held companies in the capacity of executive officers. We believe this diverse experience provides us with an in depth understanding of the strategic, financial and operational challenges and opportunities of lower middle market companies. We believe this understanding allows us to select and structure better investments and to efficiently monitor and provide managerial assistance to our portfolio companies.

	•		*Applying Rigorous Underwriting Policies and Active Portfolio Management.* Our senior management team has implemented rigorous underwriting policies that are followed in each transaction. These policies include a thorough analysis of each potential portfolio company’s competitive position, financial performance, management team operating discipline, growth potential and industry attractiveness, allowing us to better assess the company’s prospects. After investing in a company, we monitor the investment closely, typically receiving monthly, quarterly and annual financial statements. We analyze and discuss in detail the company’s financial performance with management in addition to attending regular board of directors meetings. We believe that our initial and ongoing portfolio review process allows us to monitor effectively the performance and prospects of our portfolio companies.

	•		*Taking Advantage of Low Cost Debentures Guaranteed by the SBA.* Our license to do business as an SBIC allows us to issue fixed-rate, low interest debentures which are guaranteed by the SBA and sold in the capital markets, potentially allowing us to increase our net interest income beyond the levels achievable by other BDCs utilizing traditional leverage.

	•		*Maintaining Portfolio Diversification.* While we focus our investments in lower middle market companies, we seek to diversify across various industries. We monitor our investment portfolio to ensure we have acceptable diversification, using industry and market metrics as key indicators. By monitoring our investment portfolio for diversification we seek to reduce the effects of economic downturns associated with any particular industry or market sector. However, we may from time to time hold securities of a single portfolio company that comprise more than 5.0% of our total assets and/or more than 10.0% of the outstanding voting securities of the portfolio company. For that reason, we are classified as a non-diversified management investment company under the 1940 Act.

	•		*Utilizing Long-Standing Relationships to Source Deals.* Our senior management team maintains extensive relationships with entrepreneurs, financial sponsors, attorneys, accountants, investment bankers, commercial bankers and other non-bank providers of capital who refer prospective portfolio companies to us. These relationships historically have generated significant investment opportunities. We believe that our network of relationships will continue to produce attractive investment opportunities.

Investments

Debt Investments

We tailor the terms of our debt investments to the facts and circumstances of each transaction and prospective portfolio company, negotiating a structure that seeks to protect our rights and manage our risk while creating incentives for the portfolio company to achieve its business plan. To that end, we typically seek board observation rights with each of our portfolio companies and offer managerial assistance. We also seek to limit the downside risks of our investments by negotiating covenants that are designed to protect our investments while affording our portfolio companies as much flexibility in managing their businesses as possible. Such restrictions may include affirmative and negative covenants, default penalties, lien protection, change of control provisions and put rights. We typically add a prepayment penalty structure to enhance our total return on our investments.

We typically invest in senior secured debt and subordinated notes. Senior subordinated notes are junior to senior secured debt but senior to other series of subordinated notes. Our senior secured debt investments and subordinated note investments generally have terms of three to seven years. Our senior secured debt investments generally provide for variable interest at rates ranging from LIBOR plus 300 basis points to LIBOR plus 400 basis points and our subordinated debt investments generally provide for fixed interest rates between 12.0% and 19.0% per annum. Our subordinated note investments generally are secured by a second priority security interest in the assets of the borrower and generally include an equity component, such as warrants to purchase common stock in the portfolio company. In addition, certain loan investments may have a form of interest that is not paid currently but is accrued and added to the loan balance and paid at the end of the term, referred to as payment in kind, or PIK interest. In our negotiations with potential portfolio companies, we generally seek to minimize PIK interest. At December 31, 2007, the weighted average yield on all of our outstanding debt investments was approximately 13.9%.

Equity Investments

When we provide financing, we may acquire equity interests in the portfolio company. We generally seek to structure our equity investments as non-control investments to provide us with minority rights and event-driven or time-driven puts. We also seek to obtain registration rights in connection with these investments, which may include demand and “piggyback” registration rights, board seats and board observation rights. Our investments have in the past and may in the future contain a synthetic equity position pursuant to a formula typically setting forth royalty rights we may exercise in accordance with such formula.

Investment Criteria

We utilize the following criteria and guidelines in evaluating investment opportunities. However, not all of these criteria and guidelines have been, or will be, met in connection with each of our investments.

	•		*Established Companies With Positive Cash Flow.* We seek to invest in established companies with a history of generating revenues and positive cash flows. We typically focus on companies with a history of profitability and minimum trailing twelve month EBITDA of $2.0 million. We do not invest in start-up companies, distressed situations, “turn-around” situations or companies that we believe have unproven business plans.

	•		*Experienced Management Teams With Meaningful Equity Ownership.* Based on our prior investment experience, we believe that a management team with significant experience with a portfolio company or relevant industry experience and meaningful equity ownership is more committed to a portfolio company. We believe a management team with these attributes is more likely to manage the portfolio company in a manner that enhances the value of our investment.

	•		*Strong Competitive Position.* We seek to invest in companies that have developed strong positions within their respective markets, are well positioned to capitalize on growth opportunities and compete in industries with barriers to entry. We also seek to invest in companies that exhibit a competitive advantage, which may help to protect their market position and profitability.

	•		*Diversified Customer and Supplier Base.* We prefer to invest in companies that have a diversified customer and supplier base. Companies with a diversified customer and supplier base are generally better able to endure economic downturns, industry consolidation and shifting customer preferences.

	•		*Significant Invested Capital.* We believe the existence of significant underlying equity value provides important

support to investments. We will look for portfolio companies that we believe have sufficient imbedded equity or franchise value.

Investment Process

Our investment committee is responsible for all aspects of our investment process. The members of our investment committee are Messrs. Garland S. Tucker III, Brent P.W. Burgess, Steven C. Lilly, Tarlton H. Long, and David F. Parker. Our investment committee meets once a week but also meets on an as needed basis depending on transaction volume. Our investment committee has organized our investment process into five distinct stages:

	•		Origination

	•		Due Diligence and Underwriting

	•		Approval

	•		Documentation and Closing

	•		Portfolio Management and Investment Monitoring

Our investment process is summarized in the following chart:

Origination

The origination process for our investments includes sourcing, screening, preliminary due diligence, transaction structuring, and negotiation. Our origination process ultimately leads to the issuance of a non-binding term sheet. Investment origination is conducted by eight investment professionals who are responsible for sourcing potential investment opportunities. Our investment professionals utilize their extensive relationships with various financial sponsors, entrepreneurs, attorneys, accountants, investment bankers and other non-bank providers of capital to source transactions with prospective portfolio companies.

If a transaction meets our investment criteria, we perform preliminary due diligence, taking into consideration some or all of the following factors:

	•		A comprehensive financial model that we prepare based on quantitative analysis of historical financial performance, financial projections and pro forma financial ratios assuming investment;

	•		Competitive landscape surrounding the potential investment;

	•		Strengths and weaknesses of the potential investment’s business strategy and industry;

	•		Results of a broad qualitative analysis of the company’s products or services, market position, market dynamics and customers and suppliers; and

	•		Potential investment structures, certain financing ratios and investment pricing terms.

If the results of our preliminary due diligence are satisfactory, the origination team prepares a Summary Transaction Memorandum which is presented to our investment committee. If our investment committee recommends moving forward, we issue a non-binding term sheet to the potential portfolio company. Upon execution of a term sheet, we begin our formal due diligence and underwriting process as we move toward investment approval.

Due Diligence and Underwriting

Our due diligence on a prospective investment is completed by a minimum of two investment professionals, which we define as the underwriting team. The members of the underwriting team work together to conduct due diligence and to understand the relationships among the prospective portfolio company’s business plan, operations and financial performance through various methods, including, among others, on-site visits with management, in-depth review of historical and projected financial data, interviews with customers and suppliers, management background checks, third-party accounting reports and review of any material contracts.

In most circumstances, we utilize outside experts to review the legal affairs, accounting systems and results, and, where appropriate, we engage specialists to investigate issues like environmental matters and general industry outlooks. During the underwriting process, significant attention is given to sensitivity analyses and how companies might be expected to perform in a protracted “downside” operating environment. In addition, we analyze key financing ratios and other industry metrics, including total debt to EBITDA, EBITDA to fixed charges, EBITDA to total interest expense, total debt to total capitalization and total senior debt to total capitalization.

Upon completion of a satisfactory due diligence review and as part of our evaluation of a proposed investment, the underwriting team prepares an Investment Memorandum for presentation to our investment committee. The Investment Memorandum includes information about the potential portfolio company such as its history, business strategy, potential strengths and risks involved, analysis of key customers and suppliers, working capital analysis, third party consultant findings, expected returns on investment structure, anticipated sources of repayment and exit strategies, analysis of historical financials, and potential capitalization and ownership.

Approval

The underwriting team for the proposed investment presents the Investment Memorandum to our investment committee for consideration and approval. After reviewing the Investment Memorandum, members of the investment committee may request additional due diligence or modify the proposed financing structure or terms of the proposed investment. Before we proceed with any investment, the investment committee must approve the proposed investment. Upon receipt of transaction approval, the involved investment professionals proceed to document and, upon satisfaction of applicable closing conditions, fund the investment.

Documentation and Closing

The underwriting team is responsible for leading the negotiation of all documentation related to investment closings. We also rely on law firms with whom we have worked on multiple transactions to help us complete the necessary documentation associated with transaction closings. If a transaction changes materially from what was originally approved by the investment committee, the underwriting team requests a formal meeting of the investment committee to communicate the contemplated changes. The investment committee has the right to approve the amended transaction structure, to suggest alternative structures or not to approve the contemplated changes.

Portfolio Management and Investment Monitoring

Our investment professionals generally employ several methods of evaluating and monitoring the performance of our portfolio companies, which, depending on the particular investment, may include the following specific processes, procedures and reports:

	•		Monthly and quarterly review of actual financial performance versus the corresponding period of the prior year and financial projections;

	•		Monthly and quarterly monitoring of all financial and other covenants;

	•		Review of senior lender loan compliance certificates, where applicable;

	•		Quarterly review of operating results, and general business performance, including the preparation of a portfolio monitoring report which is distributed to members of our investment committee;

	•		Periodic face-to-face meetings with management teams and financial sponsors of portfolio companies;

	•		Attendance at portfolio company board meetings through board seats or observation rights; and

	•		Application of our investment rating system to each investment.

In the event that our investment committee determines that an investment is underperforming, or circumstances suggest that the risk associated with a particular investment has significantly increased, we undertake more aggressive monitoring of the affected portfolio company. The frequency of our monitoring of an investment is determined by a number of factors, including, but not limited to, the trends in the financial performance of the portfolio company, the investment structure and the type of collateral securing our investment, if any.

Investment Rating System

We monitor a wide variety of key credit statistics that provide information regarding our portfolio companies to help us assess credit quality and portfolio performance. We generally require our portfolio companies to provide annual audits in addition to monthly and quarterly unaudited financial statements. Using these statements, we calculate and evaluate certain financing ratios. For purposes of analyzing the financial performance of our portfolio companies, we may make certain adjustments to their financial statements to reflect the pro forma results of a company consistent with a change of control transaction, to reflect anticipated cost savings resulting from a merger or restructuring, costs related to new product development, compensation to previous owners, and other acquisition or restructuring related items.

As part of our valuation procedures we risk rate all of our investments in debt securities. Our investment rating system uses a scale of 0 to 10, with 10 being the lowest probability of default and principal loss. This system is used to estimate the probability of default on our debt securities and the probability of loss if there is a default. The system is also used to assist us in estimating the fair value of equity related securities. These types of systems are referred to as risk rating systems and are used by banks and rating agencies. Our risk rating system covers both qualitative and quantitative aspects of the business and the securities we hold.

In connection with the monitoring of our portfolio companies, each investment we hold is rated based upon the following numeric investment rating system:


Investment
Rating		Description
10		Investment is performing above original expectations and possibly 30.0% or more above original projections provided by the portfolio company. Investment has been positively influenced by an unforeseen external event. Full return of principal and interest is expected. Capital gain is expected.

9		Investment is performing above original expectations and possibly 30.0% or more above original projections provided by the portfolio company. Investment may have been or is soon to be positively influenced by an unforeseen external event. Full return of principal and interest is expected. Capital gain is expected.

8		Investment is performing above original expectations and possibly 21.0% to 30.0% above original projections provided by the portfolio company. Full return of principal and interest is expected. Capital gain is expected.

7		Investment is performing above original expectations and possibly 11.0% to 21.0% above original projections provided by the portfolio company. Full return of principal and interest is expected. Depending on age of transaction, potential for capital gain exists.

6		Investment is performing above original expectations and possibly 5.0% to 11.0% above original projections provided by the portfolio company. Full return of principal and interest is expected. Depending on age of transaction, potential for capital gain exists.

5		Investment is performing in line with expectations. Full return of principal and interest is expected. Depending on age of transaction, potential for nominal capital gain may be expected.

4		Investment is performing below expectations, but no covenant defaults have occurred. Full return of principal and interest is expected. Little to no capital gain is expected.

3		Investment is in default of transaction covenants but interest payments are current. No loss of principal is expected.

2		Investment is in default of transaction covenants and interest payments are not current. A principal loss of between 1.0% and 33.0% is expected.


Investment
Rating		Description
1		Investment is in default of transaction covenants and interest (and possibly principal) payments are not current. A principal loss of between 34.0% and 67.0% is expected.

0		Investment is in default and a principal loss of between 68.0% and 100.0% is expected.

Valuation Process and Determination of Net Asset Value of the Company’s Common Stock

We determine the net asset value per share of the Company’s common stock on a quarterly basis. The net asset value per share is equal to the value of our total assets minus liabilities and any preferred stock outstanding divided by the total number of shares of common stock outstanding.

Securities that are publicly traded, if any, are valued at the closing price of the exchange or securities market on which they are listed on the valuation date. Securities which are not traded on a public exchange or securities market, but for which a limited market exists, such as participations in syndicated loans, are valued at the indicative bid price offered by the syndication agent on the valuation date. As of December 31, 2007, none of the debt securities in our portfolio were publicly traded or had a limited market, and there was a limited market for one of the equity securities that we owned. Debt and equity securities that are not publicly traded, for which a limited market does not exist, or for which we have various degrees of trading restrictions are valued at fair value as determined in good faith by our board of directors.

Duff & Phelps, LLC (“Duff & Phelps”), an independent valuation firm, provides third-party valuation consulting services to us, which consist of certain limited procedures that we identified and requested Duff & Phelps to perform. We generally request Duff & Phelps to perform the procedures on each portfolio company at least once in every calendar year and for new portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, we may determine that it is not cost-effective, and as a result, is not in our shareholders’ best interest, to request Duff & Phelps to perform the procedures on one or more portfolio companies. Such instances include, but are not limited to, situations where the fair value of our investment in the portfolio company is determined to be insignificant relative to our total investment portfolio. For a further discussion of Duff & Phelps’ procedures, see the section entitled “Investment Valuation” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of Part I of this Annual Report.

Determination of the fair value involves subjective judgments and estimates not susceptible to substantiation by auditing procedures. Accordingly, under current auditing standards, the notes to our financial statements will refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements. In addition, the SBA has established certain valuation guidelines for SBICs to follow when valuing portfolio investments.

In making the good faith determination of the value of these securities, we start with the cost basis of the security, which includes the amortized original issue discount, and PIK interest, if any. We prepare the valuations of our investments in portfolio companies using the most recent portfolio company financial statements and forecasts. We also consult with members of the senior management team of each portfolio company to obtain further updates on the portfolio company’s performance, including information such as industry trends, new product development, and other operational issues. Due to the uncertainty inherent in the valuation process, such estimates of fair value may differ significantly from the values that would have been obtained had a ready market for the securities existed, and the differences could be material. Additionally, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.

For debt securities that are not publicly traded or for which there is no market, we begin with our investment rating of the security as described under “Investment Rating System.” Using this investment rating, we seek to determine the value of the security as if we intended to sell the security in a current sale. The factors that may be taken into account in fairly valuing such security include, as relevant, the portfolio company’s ability to make payments, its estimated earnings and projected discounted cash flows, the nature and realizable value of any collateral, the financial environment in which the portfolio company operates, comparisons to securities of similar publicly traded companies, statistical ratios compared to lending standards and to other similar securities and other relevant factors.

For convertible debt, equity, success fees or other equity-like securities that are not publicly traded or for which there is no market, we use the same information we would use for a debt security valuation described above, except risk-rating, as well as valuation methodologies consistent with industry practices used to value the equity securities of private companies. These valuation methodologies consist of discounted cash flow of the expected sale price in the future, valuation of the securities based on recent sales in comparable transactions, and a review of similar companies that are publicly traded and the market multiple of their equity securities.

Due to the inherent uncertainty 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 ready market

existed for such investments, and the differences could be material. For a discussion of the risks inherent in determining the value of securities for which readily available market values do not exist, see “Risk Factors — There may be uncertainty as to the value of our portfolio investments.”

Managerial Assistance

As a BDC, we offer, and must provide upon request, managerial assistance to certain of our portfolio companies. This assistance typically involves, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. Our senior management team provides such services. We believe, based on our management team’s combined experience at investment banks, specialty finance companies, commercial banks, and operating in executive-level capacities in various operating companies, we offer this assistance effectively. We may receive fees for these services.

Competition

We compete for investments with a number of BDCs and investment funds (including private equity funds, mezzanine funds and other SBICs), as well as traditional financial services companies such as commercial banks and other sources of financing. Many of these entities have greater financial and managerial resources than we do. We believe we compete with these entities primarily on the basis of our willingness to make smaller investments, the experience and contacts of our management team, our responsive and efficient investment analysis and decision-making processes, our comprehensive suite of customized financing solutions and the investment terms we offer.

We believe that some of our competitors make senior secured loans, junior secured loans and subordinated debt investments with interest rates that are comparable to or lower than the rates we offer. Therefore, we do not seek to compete primarily on the interest rates we offer to potential portfolio companies.

Our competitors also do not always require equity components in their investments. For additional information concerning the competitive risks we face, see “Risk Factors — We operate in a highly competitive market for investment opportunities.”

Brokerage Allocation and Other Practices

Since we generally acquire and dispose of our investments in privately negotiated transactions, we infrequently use brokers in the normal course of our business. Our management team is primarily responsible for the execution of the publicly traded securities portion of our portfolio transactions and the allocation of brokerage commissions. We do not expect to execute transactions through any particular broker or dealer, but will seek to obtain the best net results for us, taking into account such factors as price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution, and operational facilities of the firm and the firm’s risk and skill in positioning blocks of securities. While we will generally seek reasonably competitive trade execution costs, we will not necessarily pay the lowest spread or commission available. Subject to applicable legal requirements, we may select a broker based partly upon brokerage or research services provided to us. In return for such services, we may pay a higher commission than other brokers would charge if we determine in good faith that such commission is reasonable in relation to the services provided. We did not pay any brokerage commissions during the year ended December 31, 2007.

Employees

At December 31, 2007, we employed eleven individuals, including investment and portfolio management professionals, operations professionals and administrative staff. We expect to expand our management team and administrative staff in the future in proportion to our growth.

Election to be Regulated as a Business Development Company and Regulated Investment Company

In connection with the Offering, both we and the Company filed elections to be regulated as BDCs under the 1940 Act. In addition, the Company intends to elect to be treated as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Our election to be regulated as a BDC and the Company’s election to be treated as a RIC will have a significant impact on our future operations. Some of the most important effects on our future operations of our election to be regulated as a BDC and the Company’s election to be treated as a RIC are outlined below.

	•		We report our investments at market value or fair value with changes in value reported through our statement of operations.

			In accordance with the requirements of Article 6 of Regulation S-X, we report all of our investments, including

debt investments, at market value or, for investments that do not have a readily available market value, at their “fair value” as determined by our board of directors. Changes in these values are reported through our statement of operations under the caption of “net unrealized appreciation (depreciation) of investments.” See “Valuation Process and Determination of Net Asset Value” above.

	•		The Company generally will be required to pay income taxes only on the portion of its taxable income it does not distribute to its stockholders (actually or constructively).

			The Company intends to elect to be treated as a RIC under Subchapter M of the Code. As a RIC, so long as it meets certain minimum distribution, source-of-income and asset diversification requirements, the Company generally is required to pay income taxes only on the portion of its taxable income and gains it does not distribute (actually or constructively) and certain built-in gains. Any capital gains the Company recognized prior to the effective date of its election to be taxed as a RIC will, when distributed to its shareholders, be taxed as ordinary income and not as capital gains, as would have been the case had the Company been taxed as a RIC as of the date of the Offering. However, such distribution may qualify for taxation at reduced rates applicable to qualifying dividend income.

	•		Our ability to use leverage as a means of financing our portfolio of investments will be limited.

			As a BDC, we are required to meet a coverage ratio of total assets to total senior securities of at least 200.0%. For this purpose, senior securities include all borrowings and any preferred stock we may issue in the future. Additionally, our ability to continue to utilize leverage as a means of financing our portfolio of investments will be limited by this asset coverage test.

	•		The Company intends to distribute substantially all of its income to its stockholders.

			As a RIC, the Company intends to distribute to its stockholders substantially all of its income, except for certain net long-term capital gains. The Company may make deemed distributions to its stockholders of any retained net long-term capital gains. If this happens, the Company’s shareholders will be treated as if they received an actual distribution of the capital gains and reinvested the net after-tax proceeds in the Company. The Company’s shareholders also may be eligible to claim a tax credit (or, in certain circumstances, a tax refund) equal to their allocable share of the tax the Company pays on the deemed distribution.

Exemptive Relief

The Company has filed a request with the SEC for exemptive relief to allow the Company to engage in certain transactions with the Fund that otherwise would be permitted if the Company and the Fund were one company. In addition, the Company has requested that the SEC allow them to exclude any indebtedness guaranteed by the SBA and issued by the Fund from the 200.0% asset coverage requirements applicable to the Company. While the SEC has granted exemptive relief in substantially similar circumstances in the past, no assurance can be given that an exemptive order will be granted.

Under current SEC rules and regulations, BDCs may not grant options or restricted stock to directors who are not officers or employees of the BDC. The Company has applied for exemptive relief from the SEC to permit the Company to grant restricted stock to its independent directors as a portion of their compensation for service on our Board of Directors. Similarly, under the 1940 Act, BDCs cannot issue stock for services to their executive officers and employees other than options, warrants and rights to acquire capital stock. As a result, the Company has applied for exemptive relief from the SEC to permit the Company to grant restricted stock in exchange for or in recognition of services by its executive officers and employees. No assurance can be provided that exemptive relief will be received from the SEC in either case.

Regulation of Business Development Companies

The following is a general summary of the material regulatory provisions affecting BDCs generally. It does not purport to be a complete description of all of the laws and regulations affecting BDCs.

Both we and the Company have elected to be regulated as BDCs under the 1940 Act. The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates, principal underwriters and affiliates of those affiliates or underwriters. The 1940 Act requires that a majority of the directors be persons other than “interested persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by a majority of our outstanding voting securities.

The 1940 Act defines “a majority of the outstanding voting securities” as the lesser of (i) 67.0% or more of the voting

securities present at a meeting if the holders of more than 50.0% of our outstanding voting securities are present or represented by proxy, or (ii) 50.0% of our voting securities.

Qualifying Assets

Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70.0% of the company’s total assets. The principal categories of qualifying assets relevant to our business are any of the following:

(1) Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which:

(a) is organized under the laws of, and has its principal place of business in, the United States;

(b) is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and

	(i)		does not have any class of securities that is traded on a national securities exchange;

	(ii)		is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a director of the eligible portfolio company; or

	(iii)		is a small and solvent company having total assets of not more than $4.0 million and capital and surplus of not less than $2.0 million.

(2) Securities of any eligible portfolio company that we control.

(3) Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.

(4) Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60.0% of the outstanding equity of the eligible portfolio company.

(5) Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities.

(6) Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.

In addition, a BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above.

Managerial Assistance to Portfolio Companies

In order to count portfolio securities as qualifying assets for the purpose of the 70.0% test, we must either control the issuer of the securities or must offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance; except that, where we purchase such securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company.

Temporary Investments

Pending investment in other types of “qualifying assets,” as described above, our investments may consist of cash, cash

equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70.0% of our assets are qualifying assets. Typically, we will invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the U.S. Government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price that is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25.0% of the Company’s total assets constitute repurchase agreements from a single counterparty, the Company would not meet the Diversification Tests in order to qualify as a RIC for federal income tax purposes. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. The Company’s management team will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.

Senior Securities

The Company is permitted, under specified conditions, to issue multiple classes of debt and one class of stock senior to its common stock if its asset coverage, as defined in the 1940 Act, is at least equal to 200.0% immediately after each such issuance. In addition, while any senior securities remain outstanding, the Company must make provisions to prohibit any distribution to its stockholders or the repurchase of such securities or shares unless the Company meets the applicable asset coverage ratios at the time of the distribution or repurchase. The Company may also borrow amounts up to 5.0% of the value of its total assets for temporary or emergency purposes without regard to asset coverage. For a discussion of the risks associated with leverage, see “Risk Factors — Risks Relating to Our Business and Structure — Because the Company intends to distribute substantially all of its income to its stockholders upon its election to be treated as a RIC, the Company will continue to need additional capital to finance its growth, and regulations governing its operation as a business development company will affect its ability to, and the way in which it, raises additional capital.”

Code of Ethics

We have adopted the Code of Conduct for Triangle Capital Corporation and Triangle Mezzanine Fund LLLP, a code of ethics pursuant to Rule 17j-1 under the 1940 Act, that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to the code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s requirements. For information on how to obtain a copy of the code of ethics, see “Available Information.“

Proxy Voting Policies and Procedures

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

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

Stockholders may obtain information regarding how we voted proxies with respect to our portfolio securities by making a written request for proxy voting information to: Chief Compliance Officer, 3600 Glenwood Avenue, Suite 104, Raleigh, North Carolina 27612.

Other

We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our board of directors who are not interested persons and, in some cases, prior approval by the SEC.

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

We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any

liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.

We are required to adopt and implement written policies and procedures reasonably designed to prevent violation of the federal securities laws, review these policies and procedures annually for their adequacy and the effectiveness of their implementation, and to designate a chief compliance officer to be responsible for administering the policies and procedures.

Small Business Administration Regulations

The Fund is licensed by the Small Business Administration to operate as a Small Business Investment Company under Section 301(c) of the Small Business Investment Act of 1958. The Fund is a wholly-owned subsidiary of the Company, holds its SBIC license and has elected to be a BDC. The Fund initially obtained its SBIC license on September 11, 2003.

SBICs are designed to stimulate the flow of private equity capital to eligible small businesses. Under SBA regulations, SBICs may make loans to eligible small businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services. The Fund has typically invested in senior and subordinated debt, acquired warrants and/or made equity investments in qualifying small businesses.

Under present SBA regulations, eligible small businesses generally include businesses that (together with their affiliates) have a tangible net worth not exceeding $18.0 million and have average annual net income after Federal income taxes not exceeding $6.0 million (average net income to be computed without benefit of any carryover loss) for the two most recent fiscal years. In addition, an SBIC must devote 20.0% of its investment activity to “smaller” concerns as defined by the SBA. A smaller concern generally includes businesses that have a tangible net worth not exceeding $6.0 million and have average annual net income after Federal income taxes not exceeding $2.0 million (average net income to be computed without benefit of any net carryover loss) for the two most recent fiscal years. SBA regulations also provide alternative size standard criteria to determine eligibility for designation as an eligible small business or smaller concern, which criteria depend on the industry in which the business is engaged and are based on such factors as the number of employees and gross revenue. However, once an SBIC has invested in a company, it may continue to make follow on investments in the company, regardless of the size of the portfolio company at the time of the follow on investment, up to the time of the portfolio company’s initial public offering.

The SBA prohibits an SBIC from providing funds to small businesses for certain purposes, such as relending and investment outside the United States, to businesses engaged in a few prohibited industries, and to certain “passive” (non-operating) companies. In addition, without prior SBA approval, an SBIC may not invest an amount equal to more than 20.0% of the SBIC’s regulatory capital in any one portfolio company.

The SBA places certain limitations on the financing terms of investments by SBICs in portfolio companies (such as limiting the permissible interest rate on debt securities held by an SBIC in a portfolio company). Although prior regulations prohibited an SBIC from controlling a small business concern except in limited circumstances, regulations adopted by the SBA in 2002 now allow an SBIC to exercise control over a small business for a period of seven years from the date on which the SBIC initially acquires its control position. This control period may be extended for an additional period of time with the SBA’s prior written approval.

The SBA restricts the ability of an SBIC to lend money to any of its officers, directors and employees or to invest in affiliates thereof. The SBA also prohibits, without prior SBA approval, a “change of control” of an SBIC or transfers that would result in any person (or a group of persons acting in concert) owning 10.0% or more of a class of capital stock of a licensed SBIC. A “change of control” is any event which would result in the transfer of the power, direct or indirect, to direct the management and policies of an SBIC, whether through ownership, contractual arrangements or otherwise.

An SBIC (or group of SBICs under common control) may generally have outstanding debentures guaranteed by the SBA in amounts up to twice the amount of the regulatory capital of the SBIC(s). Debentures guaranteed by the SBA have a maturity of ten years, require semi-annual payments of interest, do not require any principal payments prior to maturity, and, historically, were subject to certain prepayment penalties. Those prepayment penalties no longer apply as of September 2006. As of December 31, 2007, we had issued $37.0 million of SBA-guaranteed debentures, which had an annual weighted average interest rate of 5.83%. As of December 31, 2007, SBA regulations limited the dollar amount of outstanding SBA-guaranteed debentures that may be issued by any one SBIC (or group of SBICs under common control) to $130.6 million (which amount is subject to increase on an annual basis based on cost of living increases). With $63.3 million of regulatory capital as of December 31, 2007, we have the current capacity to issue up to a total of $126.5 million of SBA-guaranteed debentures.

SBICs must invest idle funds that are not being used to make loans in investments permitted under SBA regulations in the following limited types of securities: (i) direct obligations of, or obligations guaranteed as to principal and interest by, the United States government, which mature within 15 months from the date of the investment; (ii) repurchase agreements with

federally insured institutions with a maturity of seven days or less (and the securities underlying the repurchase obligations must be direct obligations of or guaranteed by the federal government); (iii) certificates of deposit with a maturity of one year or less, issued by a federally insured institution; (iv) a deposit account in a federally insured institution that is subject to a withdrawal restriction of one year or less; (v) a checking account in a federally insured institution; or (vi) a reasonable petty cash fund.

SBICs are periodically examined and audited by the SBA’s staff to determine its compliance with SBIC regulations and are periodically required to file certain forms with the SBA.

Neither the SBA nor the U.S. government or any of its agencies or officers has approved any ownership interest to be issued by us or any obligation that we or any of our subsidiaries may incur.

Available Information

A copy of this Annual Report and our other reports is available without charge upon written request to Investor Relations, Triangle Mezzanine Fund LLLP, 3600 Glenwood Avenue, Suite 104, Raleigh, North Carolina 27612. Further, a copy of this Annual Report is obtainable from the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy and information statements and our other filings at www.sec.gov.

We have adopted the Code of Conduct for Triangle Capital Corporation and Triangle Mezzanine Fund LLLP, a code of ethics, which every employee is expected to observe. The Code of Conduct for Triangle Capital Corporation and Triangle Mezzanine Fund LLLP is publicly available on the Company’s website under “Corporate Governance” at the following URL: http://ir.tcap.com/governance.cfm and is included in this Annual Report as Exhibit 14.1 attached hereto. The information found on the Company’s website is not part of this or any other report we file with or furnish to the SEC. We assume no obligation to update or revise any forward looking statements in this Annual Report or in other reports filed with the SEC, whether as a result of new information, future events or otherwise, unless we are required to do so by law.

Item 1A. Risk Factors.

As indicated above in this Annual Report under “Forward-Looking Statements,” those statements in this Annual Report that are not historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investing in our common stock involves a number of significant risks. The risks set out below are not the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us might also impair our operations and performance. If any of the following events occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, our net asset value and the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Relating to Our Business and Structure

Our financial condition and results of operations will depend on our ability to manage and deploy capital effectively.

Our ability to achieve our investment objective will depend on our ability to effectively manage and deploy our capital, which will depend, in turn, on our management team’s ability to identify, evaluate and monitor, and our ability to finance and invest in, companies that meet our investment criteria. We cannot assure you that we will achieve our investment objective.

Accomplishing this result on a cost-effective basis will be largely a function of our management team’s handling of the investment process, its ability to provide competent, attentive and efficient services and our access to investments offering acceptable terms. In addition to monitoring the performance of our existing investments, members of our management team and our investment professionals may also be called upon to provide managerial assistance to our portfolio companies. These demands on their time may distract them or slow the rate of investment.

Even if we are able to grow and build upon our investment operations in a manner commensurate with the increased capital available to us as a result of the Company’s recent Offering, any failure to manage our growth effectively could have a material adverse effect on our business, financial condition, results of operations and prospects. The results of our operations will depend on many factors, including the availability of opportunities for investment, readily accessible short and long-term funding alternatives in the financial markets and economic conditions. Furthermore, if we cannot successfully operate our business or implement our investment policies and strategies as described in this Annual Report, it could negatively impact the Company’s ability to pay dividends and cause you to lose all or part of your investment.

There may be uncertainty as to the value of our portfolio investments.

Under the 1940 Act, we will be required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value as determined by our board of directors. Typically there is not a public market for the securities of the privately held companies in which we have invested and will generally continue to invest. As a result, we will value these securities quarterly at fair value as determined in good faith by our board of directors based on input from management. Our board of directors utilizes Duff & Phelps, LLC (“Duff & Phelps”), an independent valuation firm, to provide third-party valuation consulting services to us, which consist of certain limited procedures that we identify and request Duff & Phelps to perform. For a further discussion of Duff & Phelps’ procedures, see the section entitled “Investment Valuation” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of Part I of this Annual Report.

The determination of fair value and consequently, the amount of unrealized gains and losses in our portfolio, is to a certain degree subjective and dependent on the judgment of our board. Certain factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company’s earnings and its ability to make payments on its indebtedness, the markets in which the portfolio company does business, comparison to comparable publicly-traded companies, discounted cash flow and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Due to this uncertainty, our fair value determination may cause the Company’s net asset value on a given date to materially understate or overstate the value that we may ultimately realize upon one or more of our investments. As a result, investors purchasing the Company’s common stock based on an overstated net asset value would pay a higher price than the value of our investments might warrant. Conversely, investors selling shares of the Company’s common stock during a period in which the net asset value understates the value of our investments will receive a lower price for their shares than the value of our investment portfolio might warrant.

We operate in a highly competitive market for investment opportunities.

We compete for investments with other BDCs and investment funds (including private equity funds and mezzanine funds), as well as traditional financial services companies such as commercial banks and other sources of funding. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we are forced to match our competitors’ pricing, terms and structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant part of our competitive advantage stems from the fact that the lower middle market is underserved by traditional commercial and investment banks, and generally has less access to capital. A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors have greater experience operating under, or are not subject to, the regulatory restrictions that the 1940 Act will impose on us as a BDC.

We are dependent upon our key investment personnel for our future success.

We depend on the members of our senior management team, particularly Garland S. Tucker III, Brent P.W. Burgess and Steven C. Lilly, for the identification, final selection, structuring, closing and monitoring of our investments. These individuals have critical industry experience and relationships that we rely on to implement our business plan. If we lose the services of these individuals, we may not be able to operate our business as we expect, and our ability to compete could be harmed, which could cause our operating results to suffer. We have entered into employment agreements with each of our executive officers.

Additionally, the increase in available capital for investment resulting from the Company’s recent Offering requires that we seek out and retain new investment and administrative personnel. We believe our future success will depend, in part, on our ability to identify, attract and retain sufficient numbers of highly skilled employees. If we do not succeed in identifying, attracting and retaining these personnel, we may not be able to operate our business as we expect.

Our business model depends to a significant extent upon strong referral relationships, and our inability to maintain or develop these relationships, as well as the failure of these relationships to generate investment opportunities, could adversely affect our business.

We expect that members of our management team will maintain their relationships with financial institutions, private equity and other non-bank investors, investment bankers, commercial bankers, attorneys, accountants and consultants, and we

will rely to a significant extent upon these relationships to provide us with potential investment opportunities. If our management team fails to maintain its existing relationships or develop new relationships with other sponsors or sources of investment opportunities, we will not be able to grow our investment portfolio. In addition, individuals with whom members of our management team have relationships are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us.

We have limited operating history as a business development company or as a regulated investment company, which may impair your ability to assess our prospects.

The Fund was formed in 2003 by certain members of our senior management team. Prior to the Offering, however, we have not operated, and our management team has no experience operating, as a BDC under the 1940 Act or as a regulated investment company under Subchapter M of the Code. As a result, we have limited operating results under these regulatory frameworks that can demonstrate to you either their effect on our business or our ability to manage our business under these frameworks. If we fail to operate our business so as to maintain our status as a BDC or a RIC, our operating flexibility will be significantly reduced.

The Fund is licensed by the SBA, and therefore subject to SBA regulations.

The Fund is licensed to act as a small business investment company and is regulated by the SBA. Under current SBA regulations, a licensed SBIC can provide capital to those entities that have a tangible net worth not exceeding $18.0 million and an average annual net income after Federal income taxes not exceeding $6.0 million for the two most recent fiscal years. In addition, a licensed SBIC must devote 20.0% of its investment activity to those entities that have a tangible net worth not exceeding $6.0 million and an average annual net income after Federal income taxes not exceeding $2.0 million for the two most recent fiscal years. The SBA regulations also provide alternative size standard criteria to determine eligibility, which depend on the industry in which the business is engaged and are based on factors such as the number of employees and gross sales. The SBA regulations permit licensed SBICs to make long term loans to small businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services. The SBA also places certain limitations on the financing terms of investments by SBICs in portfolio companies and prohibits SBICs from providing funds for certain purposes or to businesses in a few prohibited industries. Compliance with SBA requirements may cause the Fund, and us, as its parent, to forego attractive investment opportunities that are not permitted under SBA regulations.

Further, the SBA regulations require that a licensed SBIC be periodically examined and audited by the SBA to determine its compliance with the relevant SBA regulations. The SBA prohibits, without prior SBA approval, a “change of control” of an SBIC or transfers that would result in any person (or a group of persons acting in concert) owning 10.0% or more of a class of capital stock of a licensed SBIC. If the Fund fails to comply with applicable SBA regulations, the SBA could, depending on the severity of the violation, limit or prohibit the Fund’s use of debentures, declare outstanding debentures immediately due and payable, and/or limit the Fund from making new investments. Such actions by the SBA would, in turn, negatively affect us because the Fund is our wholly owned subsidiary.

Because we borrow money, the potential for gain or loss on amounts invested in us is magnified and may increase the risk of investing in us.

Borrowings, also known as leverage, magnify the potential for gain or loss on amounts invested and, therefore, increases the risks associated with investing in us. The Fund issues debt securities guaranteed by the SBA and sold in the capital markets. As a result of its guarantee of the debt securities, the SBA has fixed dollar claims on the Fund’s assets that are superior to the claims of our common stockholders. We may also borrow from banks and other lenders in the future. If the value of our assets increases, then leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net income to increase more than it would without the leverage, while any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make common stock dividend payments. Leverage is generally considered a speculative investment technique.

On December 31, 2007, we had $37.0 million of outstanding indebtedness guaranteed by the SBA, which had a weighted average annualized interest cost of 5.83%.

Our ability to achieve our investment objectives may depend in part on our ability to achieve additional leverage on favorable terms by issuing debentures guaranteed by the SBA or by borrowing from banks, or insurance companies, and there can be no assurance that such additional leverage can in fact be achieved.

SBA regulations limit the outstanding dollar amount of SBA-guaranteed debentures that may be issued by an SBIC or group of SBIC’s under common control.

The SBA regulations currently limit the dollar amount of SBA-guaranteed debentures that can be issued by any one SBIC or group of SBICs under common control to $130.6 million (which amount is subject to increase on an annual basis based on cost of living increases). Moreover, an SBIC may not borrow an amount in excess of two times its regulatory capital. As of December 31, 2007, the Fund had issued $37.0 million in debentures guaranteed by the SBA. With $63.3 million of regulatory capital as of December 31, 2007, the Fund has the current capacity to issue up to a total of $126.5 million of SBA-guaranteed debentures. While we cannot presently predict whether or not we will borrow the maximum permitted amount, if we reach the maximum dollar amount of SBA-guaranteed debentures permitted, and thereafter require additional capital, our cost of capital may increase, and there is no assurance that we will be able to obtain additional financing on acceptable terms.

Moreover, the Fund’s current status as an SBIC does not automatically assure that the Fund will continue to receive SBA-guaranteed debenture funding. Receipt of SBA leverage funding is dependent upon the Fund continuing to be in compliance with SBA regulations and policies and there being funding available. The amount of SBA leverage funding available to SBICs is dependent upon annual Congressional authorizations and in the future may be subject to annual Congressional appropriations. There can be no assurance that there will be sufficient debenture funding available at the times desired by the Fund.

The debentures guaranteed by the SBA have a maturity of ten years and require semi-annual payments of interest. The Fund will need to generate sufficient cash flow to make required interest payments on the debentures. If the Fund is unable to meet its financial obligations under the debentures, the SBA, as a creditor, will have a superior claim to the Fund’s assets over our stockholders in the event we liquidate the Fund or the SBA exercises its remedies under such debentures as the result of a default by us.

We may experience fluctuations in our quarterly results.

We could experience fluctuations in our quarterly operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate payable on the debt securities we acquire, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

Our ability to enter into and exit investment transactions with our affiliates will be restricted.

Except in those instances where we have received prior exemptive relief from the SEC, we will be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our independent directors. Any person that owns, directly or indirectly, 5.0% or more of our outstanding voting securities will be our affiliate for purposes of the 1940 Act and we will generally be prohibited from buying or selling any security from or to such affiliate, absent the prior approval of our independent directors. The 1940 Act also prohibits “joint” transactions with an affiliate, which could include investments in the same portfolio company (whether at the same or different times), without prior approval of our independent directors. If a person acquires more than 25.0% of our voting securities, we will be prohibited from buying or selling any security from or to such person, or entering into joint transactions with such person, absent the prior approval of the SEC. These restrictions could limit or prohibit us from making certain attractive investments that we might otherwise make absent such restrictions.

We have filed an application with the SEC requesting exemptive relief from certain provisions of the 1940 Act and the Securities and Exchange Act of 1934.

The 1940 Act prohibits certain transactions between the Company, the Fund and any affiliates without first obtaining an exemptive order from the SEC. We have filed a request with the SEC for exemptive relief to allow us to engage in certain transactions with the Company that otherwise would be permitted if the Company and the Fund were one company. In addition, the Company has requested that the SEC allow it to exclude any indebtedness guaranteed by the SBA and issued by the Fund from the 200.0% asset coverage requirements applicable to the Company. While the SEC has granted exemptive relief in substantially similar circumstances in the past, no assurance can be given that an exemptive order will be granted. Delays and costs involved in obtaining necessary approvals may make certain transactions impracticable or impossible to consummate, and there is no assurance that the application for exemptive relief will be granted by the SEC.

Our board of directors may change our operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.

Our board of directors has the authority to modify or waive our current operating policies and strategies without prior notice and without stockholder approval. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and value of our stock. However, the effects might be adverse, which could negatively impact our ability to pay you dividends and cause you to lose all or part of your investment. Moreover, we will have significant flexibility in investing the net proceeds from the Company’s recent Offering and may use the net proceeds from such Offering in ways with which investors may not agree or for purposes other than those currently contemplated.

The Company may not be able to pay you dividends, and its dividends may not grow over time.

The Company has and intends to continue to pay quarterly dividends to its stockholders out of assets legally available for distribution. We cannot assure you that the Company and the Fund will achieve investment results that will allow us to make a specified level of cash dividends or year-to-year increases in cash dividends. The Company’s ability to pay dividends might be harmed by, among other things, the risk factors described in this Annual Report. In addition, the inability to satisfy the asset coverage test applicable to us as a BDC can limit the Company’s ability to pay dividends. All dividends will be paid at the discretion of the Company’s board of directors and will depend on its earnings, its financial condition, maintenance of its RIC status, compliance with applicable BDC regulations, the Fund’s compliance with applicable SBIC regulations and such other factors as the Company’s board of directors may deem relevant from time to time. We cannot assure you that the Company will pay dividends to its stockholders in the future.

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

For federal income tax purposes, we will include in income certain amounts that we have not yet received in cash, such as original issue discount, which may arise if we receive warrants in connection with the origination of a loan or possibly in other circumstances, or contractual PIK interest, which represents contractual interest added to the loan balance and due at the end of the loan term. Such original issue discounts or increases in loan balances as a result of contractual PIK arrangements will be included in income before we receive any corresponding cash payments. We also may be required to include in income certain other amounts that we will not receive in cash.

Since, in certain cases, the company or the Fund may recognize income before or without receiving cash representing such income, we may have difficulty meeting the annual distribution requirement necessary to obtain and maintain RIC tax treatment under the Code. Accordingly, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or reduce new investment originations for this purpose. If the company is not able to obtain cash from other sources, it may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.

The Fund, as an SBIC, may be unable to make distributions to the Company that may harm its ability to meet registered investment company requirements, which could result in the imposition of an entity-level tax.

In order for the Company to continue to qualify as a RIC, it will be required to distribute on an annual basis substantially all of its taxable income, including income from its subsidiaries, including the Fund. As all of the Company’s investments are initially being made by the Fund, we will be substantially dependent on the Fund for cash distributions to enable the Company to meet the RIC distribution requirements. The Fund may be limited by the Small Business Investment Act of 1958, and SBA regulations governing SBICs, from making certain distributions to the Company that may be necessary to enable the Company to qualify as a RIC. We may have to request a waiver of the SBA’s restrictions for the Fund to make certain distributions to maintain the Company’s status as a RIC. We cannot assure you that the SBA will grant such waiver and if the Fund is unable to obtain a waiver, compliance with the SBA regulations may result in loss of the Company’s RIC status and a consequent imposition of an entity-level tax on us.

Because the Company intends to distribute substantially all of its income to its stockholders upon its election to be treated as a RIC, we will continue to need additional capital to finance our growth, and regulations governing our operation as a business development company will affect our ability to, and the way in which we, raise additional capital.

In order to satisfy the requirements applicable to a RIC and to avoid payment of excise taxes, we intend to distribute to the Company’s stockholders substantially all of the Company’s net ordinary income and net capital gain income except for certain net long-term capital gains recognized after it becomes a RIC, which we may retain, pay applicable income taxes with respect thereto, and elect to treat as deemed distributions to the Company’s stockholders. As a BDC, we generally are required to meet a coverage ratio of total assets to total senior securities, which includes all of our borrowings and any preferred stock we may

issue in the future, of at least 200.0%. This requirement limits the amount that we may borrow. If the value of our assets declines, we may be unable to satisfy this test. If that happens, we may be required to sell a portion of our investments, or the Company may be required to sell additional shares of its common stock and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. The Company has filed a request with the SEC for exemptive relief to allow it to exclude any indebtedness guaranteed by the SBA and issued by the Fund from the 200.0% asset coverage requirements applicable to the Company. While the SEC has granted exemptive relief in substantially similar circumstances in the past, no assurance can be given that an exemptive order will be granted. In addition, issuance of additional securities could dilute the percentage ownership of the Company’s current stockholders in us.

While we expect to be able to borrow and to issue additional debt and equity securities, we cannot assure you that debt and equity financing will be available to us on favorable terms, or at all. In addition, as a BDC, we generally will not be permitted to issue equity securities priced below net asset value without stockholder approval. If additional funds are not available to us, we could be forced to curtail or cease new investment activities, and the Company’s net asset value could decline.

Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.

We and our portfolio companies will be subject to regulation at the local, state and federal level. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of investments we are permitted to make, any of which could harm us and our stockholders, potentially with retroactive effect. In addition, any change to the SBA’s current debenture program could have a significant impact on our ability to obtain low-cost leverage and, therefore, our competitive advantage over other funds.

Additionally, any changes to the laws and regulations governing our operations relating to permitted investments may cause us to alter our investment strategy in order to avail ourselves of new or different opportunities. Such changes could result in material differences to the strategies and plans set forth in this Annual Report and may result in our investment focus shifting from the areas of expertise of our management team to other types of investments in which our management team may have less expertise or little or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment.

Efforts to comply with the Sarbanes-Oxley Act will involve significant expenditures, and non-compliance with the Sarbanes-Oxley Act may adversely affect us.

We are subject to the Sarbanes-Oxley Act of 2002, and the related rules and regulations promulgated by the SEC. Among other requirements, under Section 404 of the Sarbanes-Oxley Act and rules and regulations of the SEC thereunder, our management is required to report on our internal controls over financial reporting. We are required to review on an annual basis our internal controls over financial reporting, and on a quarterly and annual basis to evaluate and disclose significant changes in our internal controls over financial reporting. We have and expect to continue to incur significant expenses related to compliance with the Sarbanes-Oxley Act, which will negatively impact our financial performance and our ability to make distributions. In addition, this process results in a diversion of management’s time and attention. Since we have a limited operating history as a company subject to the Sarbanes-Oxley Act, we cannot assure you that our internal controls over financial reporting will continue to be effective. In the event that we are unable to maintain compliance with the Sarbanes-Oxley Act and related rules, we may be adversely affected.

Risks Related to Our Investments

Our investments in portfolio companies may be risky, and we could lose all or part of our investment.

Investing in lower middle market companies involves a number of significant risks. Among other things, these companies:

	•		may have limited financial resources and may be unable to meet their obligations under their debt instruments that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees from subsidiaries or affiliates of our portfolio companies that we may have obtained in connection with our investment;

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

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

portfolio company and, in turn, on us;

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

	•		generally have less publicly available information about their businesses, operations and financial condition. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and may lose all or part of our investment.

In addition, in the course of providing significant managerial assistance to certain of our portfolio companies, certain of our officers and directors may serve as directors on the boards of such companies. To the extent that litigation arises out of our investments in these companies, our officers and directors may be named as defendants in such litigation, which could result in an expenditure of funds (through our indemnification of such officers and directors) and the diversion of management time and resources.

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

We invest, and will continue to invest in companies whose securities are not publicly traded, and whose securities will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of these investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments. As a result, we do not expect to achieve liquidity in our investments in the near-term. Our investments are usually subject to contractual or legal restrictions on resale or are otherwise illiquid because there is usually no established trading market for such investments. The illiquidity of most of our investments may make it difficult for us to dispose of them at a favorable price, and, as a result, we may suffer losses.

We may not have the funds to make additional investments in our portfolio companies.

We may not have the funds to make additional investments in our portfolio companies. After our initial investment in a portfolio company, we may be called upon from time to time to provide additional funds to such company or have the opportunity to increase our investment through the exercise of a warrant to purchase common stock. There is no assurance that we will make, or will have sufficient funds to make, follow-on investments. Any decisions not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a portfolio company in need of such an investment, may result in a missed opportunity for us to increase our participation in a successful operation or may reduce the expected yield on the investment.

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

We invest primarily in senior subordinated debt as well as equity issued by lower middle market companies. Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.

Even though we may have structured certain of our investments as senior loans, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio company, a bankruptcy court might recharacterize our debt investment and subordinate all or a portion of our claim to that of other creditors. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower. It is possible that we could become subject to a lender’s liability claim, including as a result of actions taken in rendering significant managerial assistance.

Second priority liens on collateral securing loans that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.

Certain loans that we make to portfolio companies will be secured on a second priority basis by the same collateral securing senior secured debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the company under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. Further, there is a risk that such collateral securing our investments may decrease in value over time, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the portfolio company and market conditions. If such proceeds are not sufficient to repay amounts outstanding under the loan obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the company’s remaining assets, if any.

The rights we may have with respect to the collateral securing the loans we make to our portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected.

We generally will not control our portfolio companies.

We do not, and do not expect to, control many of our portfolio companies, even though we may have board representation or board observation rights, and our debt agreements may contain certain restrictive covenants. As a result, we are subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree and the management of such company, as representatives of the holders of their common equity, may take risks or otherwise act in ways that do not serve our interests as debt investors. Due to the lack of liquidity for our investments in non-traded companies, we may not be able to dispose of our interests in our portfolio companies as readily as we would like or at an appropriate valuation. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings.

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

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

Any unrealized losses we experience on our loan portfolio may be an indication of future realized losses, which could reduce our income available for distribution.

As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at the fair value as determined in good faith by our Board of Directors. Decreases in the market values or fair values of our investments will be recorded as unrealized depreciation. Any unrealized losses in our loan portfolio could be an indication of a portfolio company’s inability to meet its repayment obligations to us with respect to the affected loans. This could result in realized losses in the future and ultimately in reductions of our income available for distribution in future periods.

Defaults by our portfolio companies will harm our operating results.

A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we

hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company.

Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.

We are subject to the risk that the investments we make in our portfolio companies may be repaid prior to maturity. When this occurs, we will generally reinvest these proceeds in temporary investments, pending their future investment in new portfolio companies. These temporary investments will typically have substantially lower yields than the debt being prepaid and we could experience significant delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at lower yields than the debt that was repaid. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies elect to prepay amounts owed to us. Additionally, prepayments could negatively impact our return on equity, which could result in a decline in the market price of our common stock.

Changes in interest rates may affect our cost of capital and net investment income.

Most of our debt investments will bear interest at fixed rates and the value of these investments could be negatively affected by increases in market interest rates. In addition, an increase in interest rates would make it more expensive to use debt to finance our investments. As a result, a significant increase in market interest rates could both reduce the value of our portfolio investments and increase our cost of capital, which would reduce our net investment income. Also, an increase in interest rates available to investors could make an investment in our common stock less attractive if we are not able to increase our dividend rate which could reduce the value of our common stock. Conversely, a decrease in interest rates may have an adverse impact on our returns by requiring us to seek lower yields on our debt investments and by increasing the risk that our portfolio companies will prepay our debt investments, resulting in the need to redeploy capital at potentially lower rates.

We may not realize gains from our equity investments.

Certain investments that we have made in the past and may make in the future include warrants or other equity securities. Investments in equity securities involve a number of significant risks, including the risk of further dilution as a result of additional issuances, inability to access additional capital and failure to pay current distributions. Investments in preferred securities involve special risks, such as the risk of deferred distributions, credit risk, illiquidity and limited voting rights. In addition, we may from time to time make non-control, equity co-investments in companies in conjunction with private equity sponsors. Our goal is ultimately to realize gains upon our disposition of such equity interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We often seek puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer. We may be unable to exercise these puts rights for the consideration provided in our investment documents if the issuer is in financial distress.

Terrorist attacks, acts of war or national disasters may affect any market for our common stock, impact the businesses in which we invest and harm our business, operating results and financial condition.

Terrorist acts, acts of war or national disasters may disrupt our operations, as well as the operations of the businesses in which we invest. Such acts have created, and continue to create, economic and political uncertainties and have contributed to global economic instability. Future terrorist activities, military or security operations, or natural disasters could further weaken the domestic/global economies and create additional uncertainties, which may negatively impact the businesses in which we invest directly or indirectly and, in turn, could have a material adverse impact on our business, operating results and financial condition. Losses from terrorist attacks and natural disasters are generally uninsurable.

We could face losses and potential liability if intrusion, viruses or similar disruptions to our technology jeopardize our confidential information or that of users of our technology.

Although we have implemented, and will continue to implement, security measures, our technology platform is and will continue to be vulnerable to intrusion, computer viruses or similar disruptive problems caused by transmission from unauthorized users. The misappropriation of proprietary information could expose us to a risk of loss or litigation.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

Neither the Company nor the Fund owns any real estate or other physical properties materially important to our operation or any of the Company’s other subsidiaries. Currently, we lease approximately 5,850 square feet of office space located at 3600 Glenwood Avenue, Suite 104, Raleigh, North Carolina 27612. We believe that our current facilities are adequate for our business as we intend to conduct it.

Item 3. Legal Proceedings.

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

Item 4. Submission of Matters to a Vote of Security Holders.

The information required by this item is omitted pursuant to General Instruction (I)(2)(c) of Form 10-K.

PART II

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

Partnership Interests and Holders

All of the partnership interests of Triangle Mezzanine Fund LLLP are owned by Triangle Capital Corporation. There is no market for Triangle Mezzanine Fund LLLP’s partnership interests.

Dividend Policy

In the year ended December 31, 2007, Triangle Mezzanine Fund LLLP distributed $4,623,913 in cash to its general and limited partners, $531,566 of which was accrued as a partners distribution payable of as of December 31, 2006. We intend to make periodic distributions to the Company, as our sole stockholder, of profits to the extent permitted by SBA regulations.

Use of Proceeds from Registered Securities

On February 13, 2007, the SEC declared effective the Company’s first registration statement, filed on Form N-2 (File No. 333-138418) under the Securities Act of 1933 in connection with the recent Offering of the Company’s common stock. Morgan Keegan & Company, Inc., BB&T Capital Markets, Avondale Partners, and Sterne, Agee & Leach, Inc. acted as the underwriters for the Offering.

The Company’s common stock began trading on The Nasdaq Global Market under the trading symbol “TCAP” on February 15, 2007. The Company sold 4,770,000 shares of common stock in its initial public offering at $15.00 per share. The Offering terminated after the sale of all of the securities registered on the registration statement and the expiration of the underwriters’ over-allotment option. The aggregate gross proceeds from the shares of common stock sold were $71.6 million. The Company paid the underwriters a commission of $4.9 million and incurred offering expenses of $2.0 million. After deducting the underwriters’ commission and the estimated offering expenses, the Company received net proceeds of approximately $64.7 million.

Subsequent to the Offering, the Company contributed approximately $42.0 million of the net proceeds from the Offering to the Fund and during the period from February 15, 2007 through December 31, 2007, the Fund invested all of these funds in lower middle market companies in accordance with our investment objective and strategies described in this Annual Report. In addition, we have the ability to use SBA-guaranteed leverage to make additional investments, subject to the limitations described elsewhere in this Annual Report.

The Company will retain the balance of the net proceeds from the Offering to pay certain expenses, dividends required in order to maintain its status as a RIC, amounts needed to implement the Company’s dividend reinvestment plan, and for general corporate purposes. The Company has and will continue to invest retained cash in short-term securities consistent with its BDC election and its election to be taxed as a RIC, but could use all or a portion of these funds for portfolio investments in the future.

None of the expenses, or application of the net proceeds, were paid, directly or indirectly, to directors, officers or persons owning 10% or more of the Company’s common stock or to their associates, or to the Company’s affiliates.

Item 6. Selected Financial Data.

The selected historical financial and other data below reflects the operations of the Fund. The selected financial data at and for the fiscal years ended December 31, 2003, 2004, 2005, 2006 and 2007 have been derived from our financial statements that have been audited by Ernst & Young LLP, an independent registered public accounting firm. You should read this selected financial and other data in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto.


	Year Ended December 31,
	2003			2004			2005			2006			2007
	(Dollars in thousands)
Income statement data:
Investment income:
Total interest, fee and dividend income	$	26		$	1,969		$	5,855		$	6,443		$	10,830
Interest income from cash and cash equivalent investments		15			18			108			280			788

Total investment income		41			1,987			5,963			6,723			11,618
Expenses:
Interest expense		—			339			1,543			1,834			2,073
Amortization of deferred financing fees		—			38			90			100			113
Management fees		1,048			1,564			1,574			1,589			3,260
General and administrative expenses		165			83			58			115			17

Total expenses		1,213			2,024			3,265			3,638			5,463

Net investment income (loss)		(1,172	)		(37	)		2,698			3,085			6,155
Net realized gain (loss) on investments — non-control/non-affiliate		—			—			(3,500	)		6,027			(760	)
Net realized gain (loss) on investments — affiliate		—			—			—			—			131
Net realized gain (loss) on investments — control		—			—			—			—			2,503
Net unrealized appreciation (depreciation) of investments		—			(1,225	)		3,975			(415	)		477

Total net gain (loss) on investments		—			(1,225	)		475			5,612			2,351
Net increase (decrease) in net assets resulting from operations	$	(1,172	)	$	(1,262	)	$	3,173		$	8,697		$	8,506


	Year Ended December 31,
	2003			2004			2005			2006			2007
	(Dollars in thousands)
Balance sheet data:
Assets:
Investments at fair value	$	—		$	19,701		$	37,144		$	54,996		$	108,650
Deferred loan origination revenue		(35	)		(537	)		(602	)		(774	)		(1,368	)
Cash and cash equivalents		2,973			2,849			6,067			2,525			3,360
Interest and fees receivable		—			98			50			135			305
Receivable from Triangle Capital Corporation		—			—			—			318			—
Deferred financing fees		—			823			1,085			985			999

Total assets	$	2,938		$	22,934		$	43,744		$	58,185		$	111,946

Liabilities and net assets:
Accounts payable and accrued liabilities	$	10		$	—		$	13		$	92		$	—
Interest payable		—			230			566			606			699
Distribution / dividends payable		—			—			—			532			—
Payable to Triangle Capital Corporation		—			—			—			—			2,668
SBA-guaranteed debentures payable		—			17,700			31,800			31,800			37,010

Total liabilities		10			17,930			32,379			33,030			40,377
Total net assets		2,928			5,004			11,365			25,155			71,569

Total liabilities and net assets	$	2,938		$	22,934		$	43,744		$	58,185		$	111,946

Other data:
Weighted average yield on investments		—			15.5	%		14.2	%		13.3	%		12.8	%
Number of portfolio companies		—			6			12			19			25
Expense ratios (as percentage of average net assets):
Operating expenses		107.4	%		32.2	%		21.3	%		8.3	%		5.5	%
Interest expense and deferred financing fees		—			7.4			21.4			9.5			3.7

Total expenses		107.4	%		39.6	%		42.7	%		17.8	%		9.2	%

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

The information in this section contains forward-looking statements that involve risks and uncertainties. Please see “Risk Factors” and “Special Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. You should read the following discussion in conjunction with the combined financial statements and related notes and other financial information appearing elsewhere in this Annual Report.

Overview of our Business

We are a wholly owned subsidiary of Triangle Capital Corporation. Triangle Capital Corporation is a Maryland corporation incorporated on October 10, 2006, for the purpose of acquiring the Fund and TML, raising capital in its Offering and thereafter operating as an internally managed business development company, or BDC, under the Investment Company Act of 1940. The Fund is licensed as a small business investment company, or SBIC, by the United States Small Business Administration, or SBA, and has also elected to be treated as a BDC. The Fund has invested primarily in debt instruments, equity investments, warrants and other securities of lower middle market privately held companies located in the United States. Upon the consummation of the Offering, the Company and the Fund completed the Formation Transactions described in Item 1 of Part I of this Annual Report, at which time the Fund became Triangle Capital Corporation’s wholly-owned subsidiary, and the former partners of the Fund became Triangle Capital Corporation’s stockholders.

Our business is to provide capital to lower middle market companies in the United States. We define lower middle market companies as those with annual revenues between $10.0 million and $100.0 million. We focus on investments in companies with a history of generating revenues and positive cash flows, an established market position and a proven management team with a strong operating discipline. Our target portfolio company has annual revenues between $20.0 million and $75.0 million and annual earnings before interest, taxes, depreciation and amortization, or EBITDA, between $2.0 million and $10.0 million.

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

We generate revenues in the form of interest income, primarily from our investments in debt securities, loan origination and other fees and dividend income. Fees generated in connection with our debt investments are recognized over the life of the loan using the effective interest method or, in some cases, recognized as earned. In addition, we generate revenue in the form of capital gains, if any, on warrants or other equity-related securities that we acquire from our portfolio companies. Our debt investments generally have a term of between three and seven years and typically bear interest at fixed rates between 11.0% and 15.0% per annum. Certain of our debt investments have a form of interest, referred to as payment in kind, or PIK, interest, that is not paid currently but that is accrued and added to the loan balance and paid at the end of the term. In our negotiations with potential portfolio companies, we generally seek to minimize PIK interest. Cash interest on our debt investments is generally payable monthly; however, some of our debt investments pay cash interest on a quarterly basis. As of December 31, 2007 and December 31, 2006, the weighted average yield on all of our outstanding debt investments (including PIK interest) was approximately 13.9% and 14.0%, respectively. The weighted average yield on all of our outstanding investments (including equity and equity-linked investments) was approximately 12.8% and 13.3% as of December 31, 2007 and December 31, 2006, respectively.

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

Portfolio Composition

The total value of our investment portfolio was $108.7 million as of December 31, 2007, as compared to $55.0 million as of December 31, 2006. As of December 31, 2007, we had investments in 25 portfolio companies with an aggregate cost of $105.8 million. As of December 31, 2006, we had investments in 19 portfolio companies with an aggregate cost of $52.7 million. As of December 31, 2007, we had two portfolio investments that individually represented greater than 10% of the total fair value of our investment portfolio. These two investments together represented approximately 22% of the total fair value of our investment portfolio as of December 31, 2007. As of December 31, 2006, none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio.

As of December 31, 2007 and December 31, 2006, our investment portfolio consisted of the following investments:


			Percentage of Total					Percentage of Total
	Cost		Portfolio			Fair Value		Portfolio

December 31, 2007:
Subordinated debt and 2^nd lien notes	$	82,171,781		78	%	$	82,171,781		76	%
Senior debt		14,798,137		14			14,798,137		13
Equity shares		8,353,435		8			9,645,300		9
Equity warrants		514,572		—			1,836,900		2
Royalty rights		—		—			197,900		—

	$	105,837,925		100	%	$	108,650,018		100	%

December 31, 2006:
Subordinated debt and 2^nd lien notes	$	48,788,108		93	%	$	47,323,885		86	%
Equity shares		2,714,833		5			5,633,283		10
Equity warrants		1,158,411		2			1,789,260		3
Royalty rights		—		—			250,000		1

	$	52,661,352		100	%	$	54,996,428		100	%

Investment Activity

During the year ended December 31, 2007, we made nine new investments totaling $62.2 million, one additional debt investment in an existing portfolio company of $1.9 million and one additional equity investment in an existing portfolio company of approximately $0.1 million. In the first quarter of 2007, we sold one investment in a portfolio company for approximately $1.3 million, resulting in a realized loss of approximately $1.4 million. In the third quarter of 2007, we received principal prepayments from two portfolio companies totaling $3.2 million, which resulted in a realized gain of approximately $0.1 million. In the fourth quarter of 2007, we sold equity investments in five portfolio companies for total proceeds of $4.8 million, resulting in net realized gains of approximately $3.3 million and we received a principal prepayment from one of the five portfolio companies of $4.2 million, which resulted in a realized gain of approximately $0.1 million. In addition, we received normal principal repayments and PIK interest payments totaling approximately $1.1 million in the year ended December 31, 2007.

Total portfolio investment activity for the year ended December 31, 2007 was as follows:


	Year Ended
	December 31, 2007

Fair value of portfolio, January 1, 2007	$	54,996,428
New investments		64,159,172
Proceeds from sale of investment		(6,099,424	)
Principal repayments		(8,243,679	)
Payment in kind interest payments received		(240,164	)
Payment in kind interest earned		1,521,114
Accretion/writeoff of loan discounts		205,725
Net realized gain (loss) on investments		1,873,827
Net unrealized gain on investments		477,019


Fair value of portfolio, December 31, 2007	$	108,650,018

Weighted average yield on debt investments as of December 31, 2007		13.9	%

Weighted average yield on total investments as of December 31, 2007		12.8	%

Results of Operations

Comparison of years ended December 31, 2007 and December 31, 2006

Investment Income

For the year ended December 31, 2007, total investment income was $11.6 million, a 72.8% increase from $6.7 million of total investment income for the year ended December 31, 2006. This increase was primarily attributable to a $4.4 million increase in total loan interest, fee, dividend income and PIK interest due to a net increase in our portfolio investments from December 31, 2006 to December 31, 2007. Fee income, consisting primarily of loan prepayment fees, debt amendment fees and certain management and advisory fees was approximately $0.5 million for the year ended December 31, 2007 compared with $0.2 for the year ended December 31, 2006. In addition, interest income from cash and cash equivalent investments increased by $0.5 million due to a significant increase in average cash balances in 2007 over 2006 resulting from the receipt of partner’s capital contributions of $42.0 million in 2007.

Expenses

For the year ended December 31, 2007, expenses increased by 50.2% to $5.5 million from $3.6 million for the year ended December 31, 2006. The increase in expenses was primarily attributable to a $1.7 million increase in management fees and an increase in interest expense of approximately $0.2 million. Management fees are calculated based on a percentage of the management fee base, which is generally the amount of the Fund’s partner’s capital. As such the increase in management fees is primarily attributable to the increase in the management fee base from 2006 to 2007.

Net Investment Income

As a result of the $4.9 million increase in total investment income and the $1.9 million increase in expenses, net investment income for the year ended December 31, 2007 was $6.2 million compared to net investment income of $3.1 million during the year ended December 31, 2006.

Net Increase (Decrease) in Net Assets Resulting From Operations

For the year ended December 31, 2007, net realized loss on non-control/non-affiliate investments was $0.8 million which related to a realized loss on one investment of $1.4 million, offset by a realized gain on a second investment of $0.6 million. In addition, we recognized a realized gain of $0.1 million on an affiliate investment during the year ended December 31, 2007. This realized gain resulted from the writeoff of original issue discount related to the prepayment of the portfolio company’s outstanding subordinated note. In the fourth quarter of 2007, we recognized net gains on the sales of control investments in four portfolio companies totaling $2.5 million. During the year ended December 31, 2007, we recorded net unrealized appreciation of investments in the amount of $0.5 million, comprised partially of net unrealized appreciation/depreciation reclassification adjustments of approximately $1.4 million related to the realized gains and loss noted above. In addition, in the year ended December 31, 2007, we recorded unrealized appreciation on nine other investments totaling $4.4 million and unrealized depreciation on 10 investments totaling $2.5 million.

For the year ended December 31, 2006, net realized gain on non-control/non-affiliate investments was $6.0 million which related to realized gains on two investments. During the year ended December 31, 2006, we recorded net unrealized depreciation of investments in the amount of $0.4 million, consisting of (i) unrealized depreciation on three investments totaling $1.6 million, (ii) an unrealized depreciation reclassification adjustment of approximately $0.7 million related to the realized gains noted above and (iii) unrealized appreciation on ten investments totaling $1.9 million.

As a result of these events, our net increase in net assets from operations during the year ended December 31, 2007 was $8.5 million as compared to $8.7 million for the year ended December 31, 2006.

Comparison of years ended December 31, 2006 and December 31, 2005

Investment Income

For the year ended December 31, 2006, total investment income was $6.7 million, a 12.7%, increase from $6.0 million of total investment income for the year ended December 31, 2005. The increase was primarily attributable to a $0.8 million increase in total loan interest, fee and dividend income due to the addition of 11 new investments totaling $25.0 million which were closed during the year ended December 31, 2006.

Expenses

For the year ended December 31, 2006, expenses increased by 11.4% to $3.6 million from $3.3 million for the year ended December 31, 2005. The increase in expenses was primarily attributable to a $0.3 million increase in interest expense relating to our SBA-guaranteed debentures, of which there were $31.8 million outstanding for the entire year ended December 31, 2006, and which had an average balance outstanding substantially less than that amount during the year ended December 31, 2005. During May 2005, the Fund increased its SBA-guaranteed debentures by $9.5 million to a total of $31.8 million.

Net Investment Income

As a result of the $0.8 million increase in total investment income and the $0.4 million increase in expenses, net investment income for the year ended December 31, 2006, was $3.1 million compared to net investment income of $2.7 million during the year ended December 31, 2005.

Net Increase (Decrease) in Net Assets Resulting From Operations

For the year ended December 31, 2005, net realized loss on investments was $3.5 million which related to a loss on one investment. During the year ended December 31, 2005, we recorded net unrealized appreciation in the amount of $4.0 million, comprised of $2.8 million of unrealized appreciation on two of our portfolio companies and the reclassification of an unrealized loss to a realized loss in the amount of $1.2 million.

As a result of these events, our net increase in net assets from operations during the year ended December 31, 2006 was $8.7 million as compared to $3.2 million for the year ended December 31, 2005.

Liquidity and Capital Resources

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

Cash Flows

For the year ended December 31, 2007, we experienced a net increase in cash and cash equivalents in the amount of $0.8 million. During that period, our operating activities used $41.6 million in cash, and we generated $42.4 million of cash from financing activities, consisting of (i) partner’s capital contributions of $42.0 million and (ii) proceeds from the issuance of SBA guaranteed debentures of $5.2 million, partially offset by distributions to partners of $4.6 million and financing fees paid to the SBA of $0.1 million. At December 31, 2007, we had $3.4 million of cash and cash equivalents on hand.

For the year ended December 31, 2006, we experienced a net decrease in cash and cash equivalents in the amount of $3.5 million. During that period, we used $8.8 million in cash to fund operating activities and we generated $5.3 million of cash from financing activities, consisting of limited partner capital contributions in the amount of $10.6 million offset by a cash distribution to limited partners in the amount of $5.0 million and payments made for public offering costs of $0.3 million. We invested the entire $10.6 million of cash from the limited partner capital contributions in new subordinated debt investments during 2006. As of December 31, 2006, all limited partners in the Fund had fully funded their committed capital. At December 31, 2006, we had $2.5 million of cash on hand.

For the year ended December 31, 2005, we experienced a net increase in cash and cash equivalents in the amount of $3.2 million. During that period, we used $13.7 million in cash to fund operating activities and we generated $16.9 million of cash from financing activities, consisting of borrowings under SBA-guaranteed debentures in the amount of $14.1 million and limited partner capital contributions in the amount of $3.2 million. These amounts were offset by financing fees paid by us in the amount of $0.4 million. We invested the entire $16.9 million of cash from financing activities in ten new investments during 2005.

Financing Transactions

Due to the Fund’s status as a licensed SBIC, the Fund has the ability to issue debentures guaranteed by the SBA at favorable interest rates. Under the Small Business Investment Act and the SBA rules applicable to SBICs, an SBIC (or group of SBICs under common control) can have outstanding at any time debentures guaranteed by the SBA in an amount up to twice the amount of its regulatory capital, which generally is the amount raised from private investors. The maximum statutory limit on the dollar amount of outstanding debentures guaranteed by the SBA issued by a single SBIC as of December 31, 2007 is currently $130.6 million (which amount is subject to increase on an annual basis based on cost of living increases). Debentures guaranteed by the SBA have a maturity of ten years, with interest payable semi-annually. The principal amount of the debentures is not required to be paid before maturity but may be pre-paid at any time. Debentures issued prior to September 2006 were subject to pre-payment penalties during their first five years. Those pre-payment penalties no longer apply to debentures issued after September 1, 2006.

With $63.3 million of regulatory capital as of December 31, 2007, the Fund has the current capacity to issue up to a total of $126.5 million of SBA guaranteed debentures, subject to the payment of a 1% commitment fee to the SBA on the amount of the commitment. As of December 31, 2007, the Fund had paid commitment fees for and had a commitment from the SBA to issue a total of $41.9 million of SBA guaranteed debentures, of which $37.0 million are outstanding as of December 31, 2007. On January 8, 2008, the SBA approved an additional commitment to the Fund in the amount of $55.0 million, bringing the total commitment from the SBA to approximately $96.9 million. In order to access the remaining $29.6 million in borrowing capacity for which the Fund is currently eligible, the Fund would incur non-refundable commitment fees of $296,000. In addition to the one—time 1.0% fee on the total commitment from the SBA, the Company also pays a one—time 2.425% fee on the amount of each debenture issued. These fees are capitalized as deferred financing costs and are amortized over the term of the debt agreements using the effective interest method. The weighted average interest rate for all SBA guaranteed debentures as of December 31, 2007 was 5.826%.

Current Market Conditions

The debt and equity capital markets in the United States have been severely impacted by significant write-offs in the financial services sector relating to subprime mortgages and the re-pricing of credit risk in the broadly syndicated bank loan market, among other things. These events, along with the deterioration of the housing market, have led to worsening general economic conditions which have impacted the broader financial and credit markets and have reduced the availability of debt and equity capital for the market as a whole and financial firms in particular. While we have capacity to issue additional SBA guaranteed debentures as discussed above, we may not be able to access additional equity capital, which could result in the slowing of our origination activity during 2009 and beyond.

In the event that the United States economy enters into a protracted recession, it is possible that the results of some of the middle market companies similar to those in which we invest could experience deterioration, which could ultimately lead to difficulty in meeting debt service requirements and an increase in defaults. While we are not seeing signs of an overall, broad deterioration in our portfolio company results at this time, there can be no assurance that the performance of certain of our portfolio companies will not be negatively impacted by economic conditions which could have a negative impact on our future results.

Critical Accounting Policies and Use of Estimates

The preparation of our financial statements in accordance with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods covered by such financial statements. We have identified investment valuation and revenue recognition as our most critical accounting estimates. On an on-going basis, we evaluate our estimates, including those related to the matters described below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies follows.

Investment Valuation

The most significant estimate inherent in the preparation of our financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We value our investment portfolio each quarter. As discussed below, we have engaged an independent valuation firm to assist us in our valuation process.

Securities that are publicly traded, if any, are valued at the closing price of the exchange or securities market on which they are listed on the valuation date. Securities that are not traded on a public exchange or securities market but for which a

limited market exists are valued at the indicative bid price offered on the valuation date. As of December 31, 2007, none of the debt securities in our portfolio were publicly traded or had a limited market, and there was a limited market for one of the equity securities we owned.

Debt and equity securities that are not publicly traded and for which a market does not exist are valued at fair value as determined in good faith by our board of directors. There is no single standard for determining fair value in good faith, as fair value depends upon the facts and circumstances of each individual case. In general, fair value is the amount that we might reasonably expect to receive upon the current sale of the security. In making the good faith determination of the value of these securities, we start with the cost basis of the security, which includes the amortized original issue discount, and PIK interest, if any. Management evaluates our investments in portfolio companies using the most recent portfolio company financial statements and forecasts. Management also consults with portfolio company senior management to obtain further updates on the portfolio company’s performance, including information such as industry trends, new product development and other operational issues. In addition, when evaluating equity securities of private companies, we consider valuation methodologies consistent with industry practice, including discounted cash flow of the expected sale price in the future, valuation of the securities based on recent sales in comparable transactions, and a review of similar companies that are publicly traded and the market multiple of their equity securities.

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

We seek to determine the value of the security as if we intended to sell the security at the time of the valuation. To estimate the current sale price of the security, we consider some or all of the following factors:

	•		financial standing of the issuer of the security;

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

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

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

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

	•		ability of the issuer to obtain needed financing;

	•		changes in the economy affecting the issuer;

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

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

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

	•		special reports prepared by analysts;

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

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

	•		the current and forecasted earnings of the issuer;

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

	•		other pertinent factors.

Due to the uncertainty inherent in the valuation process, such estimates of fair value may differ significantly from the values that would have been obtained had a ready market for the securities existed, and the differences could be material. Additionally, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.

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

As of September 30, 2006, we asked Duff & Phelps to perform the procedures on investments in 17 portfolio companies comprising 100% of the total investments at fair value as of September 30, 2006. As of December 31, 2006, we asked Duff & Phelps to perform the procedures on investments in six portfolio companies comprising approximately 41% of the total

investments at fair value (exclusive of the fair value of new investments made during the quarter) as of December 31, 2006. For the quarter ended March 31, 2007, we asked Duff & Phelps to perform the procedures on investments in five portfolio companies comprising approximately 26% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of March 31, 2007. For the quarter ended June 30, 2007, we asked Duff & Phelps to perform the procedures on investments in five portfolio companies comprising approximately 28% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of June 30, 2007. For the quarter ended September 30, 2007, we asked Duff & Phelps to perform the procedures on investments in five portfolio companies comprising approximately 29% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of September 30, 2007. For the quarter ended December 31, 2007, we asked Duff & Phelps to perform the procedures on investments in six portfolio companies comprising approximately 24% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of December 31, 2007. Upon completion of the procedures, Duff & Phelps concluded that the fair value, as determined by the Board of Directors, of those investments subjected to the procedures did not appear to be unreasonable. Our Board of Directors is ultimately and solely responsible for determining the fair value of our investments in good faith.

Revenue Recognition

Interest and Dividend Income

Interest income, adjusted for amortization of premium and accretion of original issue discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. We stop accruing interest on investments and write off any previously accrued and uncollected interest when it is determined that interest is no longer considered collectible. Dividend income is recorded on the ex-dividend date.

Fee Income

Loan origination, facility, commitment, consent and other advance fees received by us on loan agreements or other investments are recorded as deferred income and recognized as income over the term of the loan.

Payment in Kind Interest (PIK)

We currently hold, and we expect to hold in the future, some loans in our portfolio that contain a PIK interest provision. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan, rather than being paid to us in cash, and recorded as interest income. To maintain the Company’s status as a RIC, this non-cash source of income must be paid out to the Company’s stockholders in the form of dividends, even though it has not yet collected the cash. We will stop accruing PIK interest and write off any accrued and uncollected interest when it is determined that PIK interest is no longer collectible.

Recently Issued Accounting Standards

In February 2006, the FASB issued FASB Statement No. 155, Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140. This Statement was effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The adoption of this statement did not have a material impact on our financial position, results of operations or cash flows.

In July 2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. The adoption of this statement did not have a material impact on our financial position, results of operations or cash flows.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently evaluating the impact on our financial statements of the adoption of SFAS 157.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115 (“SFAS 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of SFAS 159 is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. Under SFAS 159, unrealized gains and losses on items for which the fair value option has been elected are reported in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently evaluating the impact on our financial statements of the adoption of SFAS 159.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements.

Quantitative and Qualitative Disclosure About Market Risk

Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio.

Our investment income is affected by fluctuations in various interest rates, including LIBOR and prime rates. As of December 31, 2007, approximately 80.7% of our investment portfolio bore interest at fixed rates. All of our SBA leverage is currently at fixed rates.

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

Related Party Transactions

During 2007, we sold equity investments in four of our portfolio companies to Triangle Capital Corporation for a total price of approximately $3.9 million and recognized realized gains totaling approximately $2.5 million. The sales prices for these investments were determined using the fair value as determined by our Board of Directors as of September 30, 2007.

Effective concurrently with the closing of the Offering, TML, the general partner of the Fund, merged into a wholly owned subsidiary of Triangle Capital Corporation. A substantial majority of the ownership interests of TML were owned by Messrs. Tucker, Burgess, Lilly, Long and Parker. As a result of such merger, Messrs. Tucker, Burgess, Lilly, Long and Parker collectively received shares of Triangle Capital Corporation’s common stock valued at approximately $6.7 million.

Prior to the closing of the Offering, certain members of our management (Garland S. Tucker, III, Tarlton H. Long and David F. Parker) collectively owned approximately 67% of Triangle Capital Partners, LLC, an entity which provided management and advisory services to the Fund pursuant to a management services agreement dated as of February 3, 2003. Under the terms of this management services agreement, Triangle Capital Partners, LLC received $0.2 million in management fees from the Fund in the year ended December 31, 2007 and $1.6 million in management fees from the Fund during each of the years ended December 31, 2006 and 2005. This agreement terminated upon the closing of the Offering.

Contractual Obligations

As of December 31, 2007, our future fixed commitments for cash payments are as follows (in thousands):



					2009 to		2011 to		2013 and
	Total		2008		2010		2012		Thereafter

SBA guaranteed debentures payable	$	37,010,000	$	—	$	—	$	—	$	37,010,000
Interest due on SBA guaranteed debentures payable		16,919,314		2,140,599		4,314,379		4,320,289		6,144,047
Unused commitments to extend credit(1)		2,139,200		2,139,200		—		—		—

Total	$	56,068,514	$	4,279,799	$	4,314,379	$	4,320,289	$	43,154,047


(1)		We have a commitment to extend credit, in the form of loans, to one of our portfolio companies which is undrawn as of December 31, 2007. Since this commitment may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements, however we have chosen to present the amount of this unused commitment as an obligation in this table.

Recent Developments

SBA Guaranteed Debentures Payable

On February 28, 2008, we borrowed an additional $5.2 million under the SBA debenture commitment.

New Portfolio Company Investments

On March 6, 2008, we invested $4.3 million and $0.5 million in subordinated debt and in equity of AssetPoint, LLC (“AssetPoint”), a provider of integrated enterprise asset management and computerized maintenance management software and services based in Greenville, South Carolina. Under the terms of the investment, AssetPoint will pay interest on the subordinated debt at a fixed rate of 15.0% per annum.

On March 7, 2008, we invested $1.0 million and $3.0 million in senior debt and subordinated debt, respectively, of Electronic Systems Protection, Inc. (“ESP”), a manufacturer of power protection technology for the office technology industry based in Zebulon, North Carolina. Under the terms of the investment, ESP will pay interest on the senior debt at a floating rate of LIBOR plus 375 basis points per annum and will pay interest on the subordinated debt at a fixed rate of 14.0% per annum.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

See the section entitled “Quantitative and Qualitative Disclosure About Market Risk” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of Part I of this Annual Report and incorporated by reference herein.

Item 8. Financial Statements and Supplementary Data.

See our Financial Statements included herein and listed in Item 15(a) of this Annual Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A(T). Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

Management’s Annual Report on Internal Control over Financial Reporting

Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles (“GAAP”). Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Management (with the participation of our Chief Executive Officer and Chief Financial Officer) conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2007.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the fourth quarter of 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this Item is omitted pursuant to General Instruction (I)(2)(c) of Form 10-K.

Item 11. Executive Compensation.

The information required by this Item is omitted pursuant to General Instruction (I)(2)(c) of Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item is omitted pursuant to General Instruction (I)(2)(c) of Form 10-K.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item is omitted pursuant to General Instruction (I)(2)(c) of Form 10-K.

Item 14. Principal Accountant Fees and Services

For the fiscal year ended December 31, 2007, the Fund incurred no accounting fees as all such fees were paid by Triangle Capital Corporation. For the fiscal year ended December 31, 2006, all accounting fees billed by Ernst & Young LLP were paid by Triangle Capital Corporation.

The following is a summary of fees billed by Dixon Hughes PLLC to Triangle Mezzanine Fund LLLP for audit and other professional services rendered in connection with the fiscal year ended December 31, 2006:


	Year Ended
	December 31, 2006

Audit Fees	$	—


Audit-Related Fees		—

Tax Fees (1)		8,500


All Other Fees		—


Total All Fees	$	8,500


(1)		Tax compliance fees billed in relation to preparation and review of income tax returns.

Applicable SEC rules require that the Company’s audit committee pre-approve audit, audit-related and permissible non-audit services provided by its independent registered public accounting firm. On March 21, 2007, the audit committee began pre-approving all services by Ernst & Young LLP and has pre-approved any and all new services since that time. The Company’s independent public accounting firm will submit an engagement letter for all of its services to the chairman of the audit committee, who thereafter has full authority to negotiate the terms of the engagement with the accounting firm. Once all material terms have been agreed upon, the accounting firm engagement will be approved by the Company’s entire audit committee in either a regular or special meeting.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this Report:

	(1)		Financial Statements

			Triangle Mezzanine Fund LLLP Financial Statements:


		Page

Report of Independent Registered Public Accounting Firm		F-1
Balance Sheets as of December 31, 2007 and 2006		F-2
Statements of Operations for each of the three years in the period ended December 31, 2007		F-3
Statements of Changes in Partners’ Capital for each of the three years in the period ended December 31, 2007		F-4
Statements of Cash Flows for each of the three years in the period ended December 31, 2007		F-5
Schedule of Investments as of December 31, 2007		F-6
Schedule of Investments as of December 31, 2006		F-9
Notes to Financial Statements		F-12

	(2)		Financial Statement Schedules

			None.

			Schedules that are not listed herein have been omitted because they are not applicable or the information required to be set forth therein is included in the Financial Statements or notes thereto.

	(3)		List of Exhibits

			The exhibits required by Item 601 of Regulation S-K, except as otherwise noted, have been filed with previous reports by the registrant and are herein incorporated by reference.


Number		Exhibit
2.1		Agreement and Plan of Merger, dated as of November 2, 2006, by and among Triangle Capital Corporation, New Triangle GP, LLC, and Triangle Mezzanine LLC (Filed as Exhibit (k)(7) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on November 3, 2006 and incorporated herein by reference).

2.2		Agreement and Plan of Merger, dated as of November 2, 2006, by and among Triangle Capital Corporation, TCC Merger Sub, LLC and Triangle Mezzanine Fund LLLP (Filed as Exhibit (k)(8) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on November 3, 2006 and incorporated herein by reference).

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

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

10.1		Custodian Agreement with U.S. Bank National Association (Filed as Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K (File No. 001-33130) for the year ended December 31, 2006 filed with the Securities and Exchange Commission on March 29, 2007 and incorporated herein by reference).

10.2		Amendment to Custody Agreement between the Registrant and U.S. Bank National Association dated February 19, 2008.

14.1		Code of Conduct (Filed as Exhibit 14.1 to the Registrant’s Annual Report on Form 10-K (File No. 001-33130) for the year ended December 31, 2006 filed with the Securities and Exchange Commission on March 29, 2007 and incorporated herein by reference).

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

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

32.1		Chief Executive Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 12, 2008


TRIANGLE MEZZANINE FUND LLLP By: New Triangle GP, LLC, Its General Partner By: Triangle Capital Corporation, Its Manager
By:	/s/ Garland S. Tucker, III
	Name:	Garland S. Tucker, III
	Title:	President, Chief Executive Officer and Chairman of the Board of Directors

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature	Title	Date

/s/ Garland S. Tucker, III Garland S. Tucker, III	President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer)	March 12, 2008

/s/ Steven C. Lilly Steven C. Lilly	Chief Financial Officer, Treasurer, Secretary and Director (Principal Financial Officer)	March 12, 2008

/s/ C. Robert Knox, Jr. C. Robert Knox, Jr.	Controller (Principal Accounting Officer)	March 12, 2008

/s/ Brent P. W. Burgess Brent P. W. Burgess	Chief Investment Officer and Director	March 12, 2008

/s/ W. McComb Dunwoody W. McComb Dunwoody	Director	March 12, 2008

/s/ Thomas M. Garrott, III Thomas M. Garrott, III	Director	March 12, 2008

/s/ Benjamin S. Goldstein Benjamin S. Goldstein	Director	March 12, 2008

/s/ Simon B. Rich, Jr. Simon B. Rich, Jr.	Director	March 12, 2008

/s/ Sherwood H. Smith, Jr. Sherwood H. Smith, Jr.	Director	March 12, 2008

Report of Independent Registered Public Accounting Firm

To the Board of Directors

Triangle Mezzanine Fund LLLP

We have audited the accompanying balance sheets of Triangle Mezzanine Fund LLLP (the Fund), including the schedules of investments, as of December 31, 2007 and 2006, and the related statements of operations, changes in net assets, and cash flows for each of the three years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2007 and 2006 by correspondence with the portfolio companies. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Triangle Mezzanine Fund LLLP at December 31, 2007 and 2006, the results of its operations, changes in net assets, and its cash flows for each of the three years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.



	/s/ Ernst & Young LLP

Raleigh, North Carolina
March 11, 2008

F-1

Triangle Mezzanine Fund LLLP
Balance Sheets


	December 31,
	2007			2006


Assets
Investments at fair value:
Non—Control / Non—Affiliate investments (cost of $66,819,386 and $40,592,972 at December 31, 2007 and 2006, respectively)	$	69,078,281		$	42,370,348
Affiliate investments (cost of $23,754,295 and $9,453,445 at December 31, 2007 and 2006, respectively)		24,307,493			10,011,145
Control investments (cost of $15,264,244 and $2,614,935 at December 31, 2007 and 2006, respectively)		15,264,244			2,614,935

Total investments at fair value		108,650,018			54,996,428
Deferred loan origination revenue		(1,368,603	)		(774,216	)
Cash and cash equivalents		3,360,184			2,525,105
Interest and fees receivable		305,159			134,819
Receivable from Triangle Capital Corporation		—			317,805
Deferred financing fees		999,159			985,477

Total assets	$	111,945,917		$	58,185,418


Liabilities and Net Assets
Accounts payable and accrued liabilities	$	—		$	92,142
Interest payable		698,735			606,296
Partners distribution payable		—			531,566
Payable to Triangle Capital Corporation		2,668,523			—
SBA guaranteed debentures payable		37,010,000			31,800,000

Total liabilities		40,377,258			33,030,004

Net assets:
Partners’ capital		63,250,100			21,250,100
Accumulated undistributed investment income		3,632,637			1,570,238
Accumulated realized losses on investments		1,873,827			—
Net unrealized appreciation of investments		2,812,095			2,335,076

Total net assets		71,568,659			25,155,414

Total liabilities and net assets	$	111,945,917		$	58,185,418

See accompanying notes.

F-2

Triangle Mezzanine Fund LLLP
Statements of Operations


	Year Ended December 31,
	2007			2006			2005


Investment income:
Loan interest, fee and dividend income:
Non—Control / Non—Affiliate investments	$	6,258,670		$	4,488,831		$	4,125,584
Affiliate investments		1,808,664			638,318			459,810
Control investments		1,241,876			293,532			39,850

Total loan interest, fee and dividend income		9,309,210			5,420,681			4,625,244

Paid—in—kind interest income:
Non—Control / Non—Affiliate investments		871,184			815,408			962,121
Affiliate investments		225,622			40,208			243,663
Control investments		424,308			166,690			23,642

Total paid—in—kind interest income		1,521,114			1,022,306			1,229,426

Interest income from cash and cash equivalent investments		787,309			279,817			108,493

Total investment income		11,617,633			6,722,804			5,963,163


Expenses:
Interest expense		2,073,311			1,833,458			1,543,378
Amortization of deferred financing fees		112,660			99,920			89,970
Management fees		3,259,838			1,589,070			1,573,602
General and administrative expenses		17,078			114,937			57,991

Total expenses		5,462,887			3,637,385			3,264,941

Net investment income		6,154,746			3,085,419			2,698,222

Net realized gain (loss) on investments — Non Control / Non—Affiliate		(759,634	)		6,026,948			(3,500,000	)
Net realized gain on investment — Affiliate		131,014			—			—
Net realized gain on investment — Control		2,502,447			—			—
Net unrealized appreciation (depreciation) of investments		477,019			(414,924	)		3,975,000

Total net gain on investments		2,350,846			5,612,024			475,000
Net increase in net assets resulting from operations	$	8,505,592		$	8,697,443		$	3,173,222


Allocation of net increase (decrease) in net assets resulting from operations to:
General partner		N/A		$	1,739,489		$	634,644

Limited partners		N/A		$	6,957,954		$	2,538,578

See accompanying notes.

F-3

Triangle Mezzanine Fund LLLP
Statements of Changes in Net Assets


									Accumulated			Net
			Capital			Accumulated			Realized			Unrealized
			Contribution			Undistributed			Gains			Appreciation			Total
	Partners’		Commitment			Investment			(Losses) on			(Depreciation) of			Net
	Capital		Receivable			Income			Investments			Investments			Assets


Balance, January 1, 2005	$	21,250,100	$	(13,812,500	)	$	(1,208,775	)	$	—		$	(1,225,000	)	$	5,003,825
Partners’ capital contributions		—		3,187,500			—			—			—			3,187,500
Net investment income		—		—			2,698,222			—			—			2,698,222
Realized loss on investments		—		—			—			(3,500,000	)		—			(3,500,000	)
Net unrealized gains on investments		—		—			—			—			3,975,000			3,975,000


Balance, December 31, 2005	$	21,250,100	$	(10,625,000	)	$	1,489,447		$	(3,500,000	)	$	2,750,000		$	11,364,547
Partners’ capital contributions		—		10,625,000			—			—			—			10,625,000
Net investment income		—		—			3,085,419			—			—			3,085,419
Realized gains on investments		—		—			—			6,026,948			—			6,026,948
Net unrealized losses on investments		—		—			—			—			(414,924	)		(414,924	)
Distributions to partners		—		—			(3,004,628	)		(2,526,948	)		—			(5,531,576	)


Balance, December 31, 2006	$	21,250,100	$	—		$	1,570,238		$	—		$	2,335,076		$	25,155,414
Partner’s capital contribution		42,000,000		—			—			—			—			42,000,000
Net investment income		—		—			6,154,746			—			—			6,154,746
Net realized gains on investments		—		—			—			1,873,827			(1,381,141	)		492,686
Net unrealized gains on investments		—		—			—			—			1,858,160			1,858,160
Distributions to partners		—		—			(4,092,347	)		—			—			(4,092,347	)

Balance, December 31, 2007	$	63,250,100	$	—		$	3,632,637		$	1,873,827		$	2,812,095		$	71,568,659

See accompanying notes.

F-4

Triangle Mezzanine Fund LLLP
Statements of Cash Flows


	Year Ended December 31,
	2007			2006			2005


Cash flows from operating activities:
Net increase in net assets resulting from operations	$	8,505,592		$	8,697,443		$	3,173,222
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
Purchases of portfolio investments		(64,159,172	)		(21,458,478	)		(29,125,000	)
Repayments received/sales of portfolio investments		14,343,103			9,965,445			12,202,510
Loan origination and other fees received		1,272,002			607,794			1,083,600
Net realized (gain) loss on investments		(1,873,827	)		(6,026,948	)		3,500,000
Net unrealized (appreciation) depreciation on investments		(477,019	)		414,924			(3,975,000	)
Paid—in—kind interest accrued, net of payments received		(1,280,950	)		(578,724	)		47,748
Amortization of deferred financing fees		112,660			99,920			89,970
Recognition of loan origination and other fees		(677,615	)		(435,492	)		(1,018,965	)
Accretion of loan discounts		(205,725	)		(169,036	)		(93,272	)
Changes in operating assets and liabilities:
Interest and fees receivable		(170,340	)		(85,236	)		48,859
Accounts payable and accrued liabilities		(92,142	)		78,916			13,226
Interest payable		92,439			40,228			335,696
Payable to / receivable from Triangle Capital Corporation		2,986,328			—			—

Net cash used in operating activities		(41,624,666	)		(8,849,244	)		(13,717,406	)

Cash flows from financing activities:
Borrowings under SBA guaranteed debentures payable		5,210,000			—			14,100,000
Financing fees paid		(126,342	)		—			(352,500	)
Payments made for public offering costs (receivable from Triangle Capital Corporation)		—			(317,805	)		—
Partners’ capital contributions		42,000,000			10,625,000			3,187,500
Distribution to partners		(4,623,913	)		(5,000,010	)		—

Net cash provided by financing activities		42,459,745			5,307,185			16,935,000

Net increase (decrease) in cash and cash equivalents		835,079			(3,542,059	)		3,217,594
Cash and cash equivalents, beginning of year		2,525,105			6,067,164			2,849,570

Cash and cash equivalents, end of year	$	3,360,184		$	2,525,105		$	6,067,164


Supplemental Disclosure of cash flow information:
Cash paid for interest	$	1,980,872		$	1,793,230		$	1,208,000

Summary of non-cash financing transactions:
Accrued distribution to partners	$	—		$	531,566		$	—

See accompanying notes.

F-5

TRIANGLE MEZZANINE FUND LLLP
Schedule of Investments
December 31, 2007


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

Non—Control / Non—Affiliate Investments:

Ambient Air Corporation (8%)*	Specialty Trade Contractors	Subordinated Note (12%, Due 03/11)	$	3,144,654	$	3,042,889	$	3,042,889
		Subordinated Note (14%, Due 03/11)		1,872,075		1,872,075		1,872,075
		Common Stock Warrants (455 shares)				142,361		929,700

				5,016,729		5,057,325		5,844,664

APO Newco, LLC (6%)*	Commercial and Consumer Marketing Products	Subordinated Note (14%, Due 03/13)		4,315,262		4,292,325		4,292,325
		Unit purchase warrant (87,302 Class C units)				25,200		199,000

				4,315,262		4,317,525		4,491,325

Art Headquarters, LLC (3%)*	Retail, Wholesale and Distribution	Subordinated Note (14%, Due 01/10)		2,441,824		2,422,091		2,422,091
		Membership unit warrants (15% of units (150 units))				40,800		9,800

				2,441,824		2,462,891		2,431,891

Assurance Operations Corporation (5%)*	Auto Components /Metal Fabrication	Subordinated Note (17%, Due 03/12)		3,828,527		3,828,527		3,828,527
		Common Stock (200 shares)				200,000	—

				3,828,527		4,028,527		3,828,527

Bruce Plastics, Inc. (2%)*	Plastic Component Manufacturing	Subordinated Note (14%, Due 10/11)		1,500,000		1,412,046		1,412,046
		Common Stock Warrants (12% of common stock)				108,534	—

				1,500,000		1,520,580		1,412,046

CV Holdings, LLC (7%)*	Specialty Healthcare Products Manufacturer	Subordinated Note (16%, Due 03/10)		4,976,360		4,976,360		4,976,360
		Royalty rights				—		197,900

				4,976,360		4,976,360		5,174,260

Cyrus Networks, LLC (7%)*	Data Center Services Provider	Senior Note (9%, Due 07/13)		4,382,257		4,382,257		4,382,257
		2^nd Lien Note (12%, Due 01/14)		907,663		907,663		907,663
		Revolving Line of Credit (9%)		70,880		70,880		70,880

				5,360,800		5,360,800		5,360,800

DataPath, Inc. (1%)*	Satellite Communication Manufacturer	Common Stock (210,263 shares)				101,500		576,400

						101,500		576,400

Eastern Shore Ambulance, Inc. (1%)*	Specialty Health Care Services	Subordinated Note (13%, Due 03/11)		1,000,000		958,715		958,715
		Common Stock Warrants (6% of common stock)				55,268		7,400
		Common Stock (30 shares)				30,000		1,900

				1,000,000		1,043,983		968,015

F-6


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

Energy Hardware Holdings, LLC (5%)*	Machined Parts Distribution	Subordinated Note (14.5%, Due 10/12)	$	3,265,142	$	3,265,142	$	3,265,142
		Junior Subordinated Note (8%, Due 10/12)		207,667		207,667		207,667

				3,472,809		3,472,809		3,472,809

FCL Graphics, Inc. (10%)*	Commercial Printing Services	Senior Note (9%, Due 10/12)		1,920,000		1,920,000		1,920,000
		Senior Note (13%, Due 10/13)		2,000,000		2,000,000		2,000,000
		2^nd Lien Note (18%, Due 4/14)		3,145,481		3,145,481		3,145,481

				7,065,481		7,065,481		7,065,481

Fire Sprinkler Systems, Inc. (4%)*	Specialty Trade Contractors	Subordinated Notes (13%—17.5%, Due 04/11)		2,517,986		2,517,986		2,517,986
		Common Stock (250 shares)				250,000		41,700

				2,517,986		2,767,986		2,559,686

Flint Acquisition Corporation (7%)*	Specialty Chemical Manufacturer	Subordinated Note (12.5%, Due 09/09)		3,750,000		3,750,000		3,750,000
		Preferred Stock (9,875 shares)				308,333		1,074,100

				3,750,000		4,058,333		4,824,100

Garden Fresh Restaurant Corp. (5%)*	Restaurant	2^nd Lien Note (13%, Due 12/11)		3,000,000		3,000,000		3,000,000
		Membership Units (5,000 units)				500,000		446,600

				3,000,000		3,500,000		3,446,600

Gerli & Company (4%)*	Specialty Woven Fabrics Manufacturer	Subordinated Note (14%, Due 08/11)		3,114,063		3,057,349		3,057,349
		Common Stock Warrants (56,559 shares)				83,414		84,500

				3,114,063		3,140,763		3,141,849

Library Systems & Services, LLC (4%)*	Municipal Business Services	Subordinated Note (12%, Due 03/11)		2,000,000		1,960,528		1,960,528
		Common Stock Warrants (112 shares)				58,995		594,300

				2,000,000		2,019,523		2,554,828

Syrgis Holdings, Inc. (8%)*	Specialty Chemical Manufacturer	Senior Note (9%, Due 08/12-02/14)		4,932,500		4,932,500		4,932,500
		Common Units (2,114 units)				1,000,000		1,000,000

				4,932,500		5,932,500		5,932,500

Twin-Star International, Inc. (8%)*	Consumer Home Furnishings Manufacturer	Subordinated Note (13%, Due 04/14)		4,500,000		4,500,000		4,500,000
		Senior Note (8%, Due 04/13)		1,492,500		1,492,500		1,492,500

				5,992,500		5,992,500		5,992,500


Subtotal Non—Control / Non—Affiliate Investments				64,284,841		66,819,386		69,078,281

F-7


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

Affiliate Investments:

Axxiom Manufacturing, Inc. (4%)*	Industrial Equipment Manufacturer	Subordinated Note (14%, Due 01/11)	$	2,081,321	$	2,081,321	$	2,081,321
		Common Stock (34,100 shares)				200,000		543,600
		Common Stock Warrant (1,000 shares)				—		12,200

				2,081,321		2,281,321		2,637,121

Brantley Transportation, LLC (4) (5%)*	Oil and Gas Services	Subordinated Note — Brantley Transportation (14%, Due 12/12)		3,800,000		3,770,482		3,770,482

				3,800,000		3,770,482		3,770,482

Dyson Corporation (15%)*	Custom Forging and Fastener Supplies	Subordinated Note (15%, Due 12/13)		10,009,167		10,009,167		10,009,167
		Class A Units (1,000,000 units)				1,000,000		1,000,000

				10,009,167		11,009,167		11,009,167

Equisales, LLC (9%)*	Energy Products and Services	Subordinated Note (15%, Due 04/12)		6,129,723		6,129,723		6,129,723

				6,129,723		6,129,723		6,129,723

Genapure Corporation (“Genapure”) and Genpref, LLC (“Genpref”) (4) (1%)*	Lab Testing Services	Genapure Common Stock (4,286 shares)				500,000		675,122
		Genpref Preferred Stock (455 shares)				63,602		85,878

						563,602		761,000


Subtotal Affiliate Investments				22,020,211		23,754,295		24,307,493

Control Investments:

ARC Industries, LLC (3%)*	Remediation Services	Subordinated Note (19%, Due 11/10)		2,403,521		2,403,521		2,403,521

				2,403,521		2,403,521		2,403,521
Fischbein, LLC (18%)*	Packaging and Materials Handling Equipment Manufacturer	Subordinated Note (16.5%, Due 05/13)		8,660,723		8,660,723		8,660,723
		Membership Units (4,200,000 units)				4,200,000		4,200,000

				8,660,723		12,860,723		12,860,723


Subtotal Control Investments				11,064,244		15,264,244		15,264,244


Total Investments, December 31, 2007 (152%)*			$	97,369,296	$	105,837,925	$	108,650,018


*		Value as a percent of net assets

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

(2)		Interest rates on subordinated debt include cash interest rate and paid-in-kind interest rate.

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

(4)		Genpref is the sole owner of Genapure’s preferred stock and its sole business purpose is its ownership of Genapure’s preferred stock.

See accompanying notes.

F-8

TRIANGLE MEZZANINE FUND LLLP
Schedule of Investments
December 31, 2006


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

Non—Control / Non—Affiliate Investments:

AirServ Corporation (18%)*	Airline Services	Subordinated Note (12%, Due 06/09)	$	4,226,813	$	4,010,000	$	4,010,000
		Common Stock Warrants (1,238,843 shares)				414,285		551,385

				4,226,813		4,424,285		4,561,385

Ambient Air Corporation (16%)*	Specialty Trade Contractors	Subordinated Notes (12%—13%, Due 03/09—3/11)		4,000,000		3,874,015		3,874,015
		Common Stock Warrants (455 shares)				142,361		142,361

				4,000,000		4,016,376		4,016,376

Art Headquarters, LLC (11%)*	Retail, Wholesale and Distribution	Subordinated Note (14%, Due 01/10)		2,680,155		2,652,414		2,652,414
		Membership unit warrants (15% of units (150 units))				40,800		40,800

				2,680,155		2,693,214		2,693,214

Assurance Operations Corporation (15%)*	Auto Components /Metal Fabrication	Subordinated Note (17%, Due 03/12)		3,640,439		3,640,439		3,640,439
		Common Stock (200 shares)				200,000		200,000

				3,640,439		3,840,439		3,840,439

Bruce Plastics, Inc. (6%)*	Plastic Component Manufacturing	Subordinated Note (14%, Due 10/11		1,500,000		1,395,305		1,395,305
		Common Stock Warrants (12% of common stock)				108,534		108,534

				1,500,000		1,503,839		1,503,839

CV Holdings, LLC (20%)*	Specialty Healthcare Products Manufacturer	Subordinated Note (16%, Due 03/10)		4,683,376		4,683,376		4,683,376
		Royalty rights				—		250,000

				4,683,376		4,683,376		4,933,376

DataPath, Inc. (8%)*	Satellite Communication Manufacturer	Common Stock (210,263 shares)				101,500		2,070,000

						101,500		2,070,000

Eastern Shore Ambulance, Inc. (4%)*	Specialty Health Care Services	Subordinated Note (13%, Due 03/11)		1,000,000		949,099		949,099
		Common Stock Warrants (6% of common stock)				55,268		94,267
		Common Stock (30 shares)				30,000		51,100

				1,000,000		1,034,367		1,094,466

Fire Sprinkler Systems, Inc. (12%)*	Specialty Trade Contractors	Subordinated Notes (13%—17.5%, Due 04/11)		2,713,460		2,713,460		2,713,460
		Common Stock (250 shares)				250,000		250,000

				2,713,460		2,963,460		2,963,460

F-9


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

Flint Acquisition Corporation (18%)*	Specialty Chemical Manufacturer	Subordinated Note (12.5%, Due 09/09)	$	3,750,000	$	3,750,000	$	3,750,000
		Preferred Stock (9,875 shares)				308,333		829,633

				3,750,000		4,058,333		4,579,633

Garden Fresh Restaurant Corp. (15%)*	Restaurant	Subordinated Note (12.8%, Due 12/11)		3,000,000		3,000,000		3,000,000
		Membership Units (5,000 units)				500,000		673,700

				3,000,000		3,500,000		3,673,700

Gerli & Company (12%)*	Specialty Woven Fabrics Manufacturer	Subordinated Note (14%, Due 08/11)		3,052,167		2,981,184		2,981,184
		Common Stock Warrants (56,559 shares)				83,414		83,414

				3,052,167		3,064,598		3,064,598

Library Systems & Services, LLC (9%)*	Municipal Business Services	Subordinated Note (12%, Due 03/11)		2,000,000		1,950,190		1,950,190
		Common Stock Warrants (112 shares)				58,995		189,895

				2,000,000		2,009,185		2,140,085

Numo Manufacturing, Inc. (5%)*	Consumer Products Manufacturer	Subordinated Note (13%, Due 12/10)		2,700,000		2,700,000		1,235,777
		Common Stock Warrants (238 shares)				—	—

				2,700,000		2,700,000		1,235,777


Subtotal Non–Control / Non–Affiliate Investments				38,946,410		40,592,972		42,370,348

Affiliate Investments:

Axxiom Manufacturing, Inc. (4) (10%)*	Industrial Equipment Manufacturer	Subordinated Note (14%, Due 01/11)		2,039,575		2,039,575		2,039,575
		Common Stock (34,100 shares)				200,000		541,700

				2,039,575		2,239,575		2,581,275

Brantley Transportation, LLC (“Brantley Transportation”) and Pine Street Holdings, LLC (“Pine Street”) (5) (16%)*	Oil and Gas Services	Subordinated Note — Brantley Transportation (14%, Due 12/12)		3,800,633		3,767,033		3,767,033
		Common Unit Warrants — Brantley Transportation (4,560 common units)				33,600		33,600
		Preferred Units — Pine Street (200 units)				200,000		200,000
		Common Unit Warrants — Pine Street (2,220 units)				—	—

				3,800,633		4,000,633		4,000,633

Genapure Corporation (2%)*	Lab Testing Services	Common Stock (4,286 shares)				500,000		500,000

						500,000		500,000

F-10


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

Porter’s Group, LLC (12%)*	Metal Fabrication	Subordinated Note (12%, Due 06/10)	$	2,410,000	$	2,242,083	$	2,242,083
		Membership Units (980 units)				250,000		142,150
		Membership Warrants (3,750 Units)				221,154		545,004

				2,410,000		2,713,237		2,929,237


Subtotal Affiliate Investments				8,250,208		9,453,445		10,011,145

Control Investments:

ARC Industries, LLC (10%)*	Remediation Services	Subordinated Note (19%, Due 11/10)		2,439,935		2,439,935		2,439,935
		Membership Units (3,000 units)				175,000		175,000

				2,439,935		2,614,935		2,614,935


Subtotal Control Investments				2,439,935		2,614,935		2,614,935


Total Investments, December 31, 2006 (219%)*			$	49,636,553	$	52,661,352	$	54,996,428


*		Value as a percent of net assets

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

(2)		Interest rates on Subordinated debt include cash interest rate and paid-in-kind interest rate.

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

(4)		Does not include a warrant to purchase 1,000 shares of Axxiom Manufacturing, Inc.’s common stock which was held by the Fund upon completion of the formation transactions described in Note 1.

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

See accompanying notes.

F-11

Triangle Mezzanine Fund LLLP
Notes to Financial Statements

1. Organization, Basis of Presentation and Summary of Significant Accounting Policies

Organization

Triangle Mezzanine Fund LLLP (the “Fund”) is a specialty finance limited liability limited partnership formed to make investments primarily in middle market companies located throughout the United States. The Fund’s term is ten years from the date of formation (August 14, 2002) unless terminated earlier or extended in accordance with provisions of the limited partnership agreement.

On September 11, 2003, the Fund was licensed to operate as a Small Business Investment Company (“SBIC”) under the authority of the United States Small Business Administration (“SBA”). As a SBIC, the Fund is subject to a variety of regulations concerning, among other things, the size and nature of the companies in which it may invest and the structure of those investments.

On October 10, 2006, Triangle Capital Corporation (the “Company”), was formed for the purposes of acquiring the Fund, raising capital in an initial public offering, (the “Offering”) and thereafter operating as an internally managed Business Development Company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”).

On February 21, 2007, concurrent with the closing of the Offering, the following formation transactions were consummated (the “Formation Transactions”):

	•		The Company acquired 100% of the limited partnership interests in the Fund, which became the Company’s wholly owned subsidiary, retained its license by the SBA to operate as an SBIC and continues to hold its existing investments and make new investments with the proceeds of the Offering; and

	•		The Company acquired 100% of the equity interests in Triangle Mezzanine LLC, the former general partner of the Fund (“TML”), and the management agreement between the Fund and Triangle Capital Partners, LLC was terminated.

The Fund currently operates as a closed—end, non—diversified investment company and has elected to be treated as a BDC under the 1940 Act. The Company is internally managed by its executive officers (previously employed by the Fund’s external manager) under the supervision of its board of directors. For all periods subsequent to the consummation of the Offering and the Formation Transactions, the Company does not pay management or advisory fees, but instead incurs the operating costs associated with employing executive management and investment and portfolio management professionals.

As a result of completion of the Offering and formation transactions, the Fund became a 100% wholly owned subsidiary of the Company. The general partner of the Fund is New Triangle GP, LLC, which is wholly owned by the Company, and holds 0.1% of the Fund and the limited partner of the Fund is the Company, which holds 99.9% of the Fund.

Basis of Presentation

The financial statements of the Fund include the accounts of the Fund. The Fund does not consolidate portfolio company investments. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Valuation of Investments

The Fund invests primarily in debt and equity of privately held companies for which market prices are not available. Therefore, the Fund values all of its investments at fair value, as determined in good faith by the Board of Directors. Due to the inherent uncertainty in the valuation process, the Board of Directors’ estimate of fair value may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material. In addition, changes in the market

F-12

environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.

Debt and equity securities that are not publicly traded and for which a limited market does not exist are valued at fair value as determined in good faith by the Board of Directors. There is no single standard for determining fair value in good faith, as fair value depends upon circumstances of each individual case. In general, fair value is the amount that the Fund might reasonably expect to receive upon the current sale of the security. In making the good faith determination of the value of these securities, the Fund starts with the cost basis of the security, which includes the amortized original issue discount, and payment—in—kind (PIK) interest, if any. Management evaluates the investments in portfolio companies using the most recent portfolio company financial statements and forecasts. Management also consults with the portfolio company’s senior management to obtain further updates on the portfolio company’s performance, including information such as industry trends, new product development and other operational issues. In addition, when evaluating equity securities of private companies, the Fund considers valuation methodologies consistent with industry practice, including (i) valuation using a valuation model based on original transaction multiples and the portfolio company’s recent financial performance, (ii) valuation of the securities based on recent sales in comparable transactions, and (iii) a review of similar companies that are publicly traded and the market multiple of their equity securities. The Fund also uses a risk rating system to estimate the probability of default on the debt securities and the probability of loss if there is a default. The risk rating system covers both qualitative and quantitative aspects of the business and the securities held.

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

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

As of September 30, 2006, the Fund asked Duff & Phelps to perform the procedures on investments in 17 portfolio companies comprising 100% of the total investments at fair value as of September 30, 2006. As of December 31, 2006, the Fund asked Duff & Phelps to perform the procedures on investments in six portfolio companies comprising approximately 41% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of December 31, 2006. For the quarter ended March 31, 2007, the Fund asked Duff & Phelps to perform the procedures on investments in five portfolio companies comprising approximately 26% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of March 31, 2007. For the quarter ended June 30, 2007, the Fund asked Duff & Phelps to perform the procedures on investments in five portfolio companies comprising approximately 28% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of June 30, 2007. For the quarter ended September 30, 2007, the Fund asked Duff & Phelps to perform the procedures on investments in five portfolio companies comprising approximately 29% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of September 30, 2007. For the quarter ended December 31, 2007, the Fund asked Duff & Phelps to perform the procedures on investments in six portfolio companies comprising approximately 24% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of December 31, 2007. Upon completion of the procedures, Duff & Phelps concluded that the fair value, as determined by the Board of Directors, of those investments subjected to the procedures did not appear to be unreasonable. The Board of Directors of the Company is ultimately and solely responsible for determining the fair value of the Fund’s investments in good faith.

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

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

Investment Classification

In accordance with the provisions of the 1940 Act, the Fund classifies investments by level of control. As defined in the 1940 Act, “Control Investments” are investments in those companies that the Fund is deemed to “Control.” “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Fund, as defined in the 1940 Act, other than Control

F-13

Investments. “Non—Control/Non—Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments. Generally, under the 1940 Act, the Fund is deemed to control a company in which it has invested if the Fund owns more than 25.0% of the voting securities of such company or has greater than 50.0% representation on its board. The Fund is deemed to be an affiliate of a company in which the Fund has invested if it owns between 5.0% and 25.0% of the voting securities of such company.

Cash and Cash Equivalents

The Fund considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash and cash equivalents.

Deferred Financing Fees

Costs incurred to obtain long—term debt are capitalized and are amortized over the term of the debt agreements using the effective interest method.

Investment Income

Interest income, adjusted for amortization of premium and accretion of original issue discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. The Fund will stop accruing interest on investments and write off any previously accrued and uncollected interest when it is determined that interest is no longer collectible. Dividend income is recorded on the ex—dividend date.

Fee Income

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

Payment in Kind Interest

The Fund holds loans in its portfolio that contain a payment—in—kind (“PIK”) interest provision. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan and is recorded as interest income. Thus, the actual collection of this interest generally occurs at the time of loan principal repayment. The Fund will generally cease accruing PIK interest if there is insufficient value to support the accrual or if the investee is not expected to be able to pay all principal and interest due.

Management Fee

Prior to the consummation of the Formation Transactions, the Fund was managed by Triangle Capital Partners, LLC, a related party that is majority-owned by the Company’s Chief Executive Officer and two of the Company’s managing directors. Triangle Capital Partners, LLC was entitled to a quarterly management fee, which was payable at an annual rate of 2.5% of total aggregate subscriptions of all institutional partners and capital available from the SBA. Payments of the management fee were made quarterly in advance. Certain direct expenses such as legal, audit, tax and limited partner expense were the responsibility of the Fund. The management fee for the period from January 1, 2007 to February 21, 2007 (the date of the Formation Transactions) was $232,423 and for the years ended December 31, 2006 and 2005 were $1,589,070 and $1,573,602, respectively. In conjunction with the consummation of the Formation Transactions in February 2007, the management agreement between the Fund and Triangle Capital Partners, LLC was terminated, and the Fund entered into a new management agreement with the Company. Under this new agreement, the Company is entitled to a quarterly management fee, which is payable at an annual rate ranging from 2.0% to 2.5% of the sum of i) the Fund’s unreduced regulatory capital and ii) the Fund’s assumed SBA leverage. The management fee expense payable to the Company for the period from February 22, 2007 to December 31, 2007 was $3,027,415.

Income Taxes

No provision for income taxes is included in the financial statements because all income, deductions, gains, losses, and credits are reported in the tax returns of the partners.

Segments

The Fund lends to and invests in customers in various industries. The Fund separately evaluates the performance of each of its lending and investment relationships. However, because each of these loan and investment relationships has similar business and

F-14

economic characteristics, they have been aggregated into a single lending and investment segment. All applicable segment disclosures are included in or can be derived from the Fund’s financial statements.

Concentration of Credit Risk

The Fund’s investees are generally lower middle—market companies in a variety of industries. At December 31, 2007, the Fund had two investments that were individually greater than or equal to 10% of the total fair value of its investment portfolio. These two investments represented approximately 22% of the total fair value of the Fund’s investment portfolio. There were no individual investments greater than 10% of the total fair value of the Fund’s portfolio at December 31, 2006. Income, consisting of interest, dividends, fees, other investment income, and realization of gains or losses on equity interests, can fluctuate dramatically upon repayment of an investment or sale of an equity interest and in any given year can be highly concentrated among several investees.

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

Allocations and Distributions of the Fund

Prior to the Offering, cumulative net increase in net assets resulting from operations were allocated to the former General Partner and limited partners in the following order: first to the extent of the former limited partner’s preferred return, second to the former General Partner until its allocation equaled 20.0% of the former limited partner’s preferred return divided by 80.0%, and third 80.0% to the former limited partners and 20.0% to the former General Partner of any remaining amounts. The former limited partner’s preferred return was an amount equal to 7.0%, compounded annually, of the partner’s net capital contribution. Cumulative net losses were allocated to the former partners in proportion to their capital contributions.

In addition, prior to the Offering, distributions were generally allocated to the former partners in the following order: first to the extent of the income taxes imposed on the former partner with respect to income allocated to the former partner, second to each former limited partner to the extent of the former limited partner’s preferred return, third to each former partner to the extent of contributed capital, fourth to the former General Partner until its allocation equaled 20.0% of the cumulative distributions, and fifth 80.0% to the former limited partners and 20.0% to the former General Partner. Distributions were at the discretion of the former General Partner. During 2006, the Fund distributed $5,000,010 in cash to the former limited partners of the Fund and recorded a partners distribution payable of $531,566 to the former General Partner, which was distributed in the first quarter of 2007. In addition, in the second quarter of 2007, the Fund distributed $220,047 in cash to the former General Partner and former limited partners of the Fund.

In conjunction with the completion of the Offering in February 2007, as more fully described above, the Fund’s Limited Partnership Agreement was amended. As a result, subsequent to the Offering, allocations of profits and losses and distributions of the Fund, generally, are allocated to the partners in proportion to their respective partnership percentages.

Recently Issued Accounting Standards

In February 2006, the FASB issued FASB Statement No. 155, Accounting for Certain Hybrid Financial Instruments an amendment of FASB Statements No. 133 and 140. This Statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The adoption of this statement did not have a material impact on the Fund’s financial position, results of operations of cash flows.

In July 2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. The adoption of this statement did not have a material impact on the Fund’s financial position, results of operations or cash flows.

F-15

November 15, 2007, and interim periods within those fiscal years. The Fund is currently evaluating the impact on its financial statements of adopting SFAS 157.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115 (“SFAS 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of SFAS 159 is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. Under SFAS 159, unrealized gains and losses on items for which the fair value option has been elected are reported in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Fund is currently evaluating the impact on its financial statements of adopting SFAS 159.

2. Investments

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


			Percentage of					Percentage of
	Cost		Total Portfolio			Fair Value		Total Portfolio

December 31, 2007:
Subordinated debt and 2^nd lien notes	$	82,171,781		78	%	$	82,171,781		76	%
Senior debt		14,798,137		14			14,798,137		13
Equity shares		8,353,435		8			9,645,300		9
Equity warrants		514,572		—			1,836,900		2
Royalty rights		—		—			197,900		—

	$	105,837,925		100	%	$	108,650,018		100	%


December 31, 2006:
Subordinated debt and 2^nd lien notes	$	48,788,108		93	%	$	47,323,885		86	%
Equity shares		2,714,833		5			5,633,283		10
Equity warrants		1,158,411		2			1,789,260		3
Royalty rights		—		—			250,000		1

	$	52,661,352		100	%	$	54,996,428		100	%

During the year ended December 31, 2007, the Fund made nine new investments totaling $62.2 million, one additional debt investment in an existing portfolio company of $1.9 million and one additional equity investment in an existing portfolio company of approximately $0.1 million. During the year ended December 31, 2006, the Fund made nine new investments totaling $21.5 million.

3. Long—Term Debt

The Fund has the following debentures outstanding guaranteed by the SBA:


		Prioritized			December 31,		December 31,
Issuance Date	Maturity Date	Return Rate			2007		2006


September 22, 2004	September 1, 2014		5.539	%	$	8,700,000	$	8,700,000
March 23, 2005	March 1, 2015		5.893	%		13,600,000		13,600,000
September 28, 2005	September 1, 2015		5.796	%		9,500,000		9,500,000
February 1, 2007	March 1, 2017		6.231	%		4,000,000	—
December 20, 2007	March 1, 2018		6.031	%		1,210,000	—

					$	37,010,000	$	31,800,000

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

Under the Small Business Investment Act and current SBA policy applicable to SBICs, an SBIC (or group of SBICs under common control) can have outstanding at any time SBA guaranteed debentures up to twice the amount of its regulatory capital. As of

F-16

December 31, 2007, the maximum statutory limit on the dollar amount of outstanding SBA guaranteed debentures issued by a single SBIC is $130.6 million (which amount is subject to increase on an annual basis based on cost of living increases). With $63.3 million of regulatory capital as of December 31, 2007, the Fund has the current capacity to issue up to a total of $126.5 million of SBA guaranteed debentures, subject to the payment of a 1% commitment fee to the SBA on the amount of the commitment. As of December 31, 2007, the Fund had paid commitment fees for and had a commitment from the SBA to issue a total of $41.9 million of SBA guaranteed debentures, of which $37.0 million are outstanding as of December 31, 2007. On January 8, 2008, the SBA approved an additional commitment to the Fund in the amount of $55.0 million, bringing the total commitment from the SBA to approximately $96.9 million. In order to access the remaining $29.6 million in borrowing capacity for which the Fund is currently eligible, the Fund would incur non-refundable commitment fees of $296,000. In addition to the one—time 1.0% fee on the total commitment from the SBA, the Fund also pays a one—time 2.425% fee on the amount of each debenture issued. These fees are capitalized as deferred financing costs and are amortized over the term of the debt agreements using the effective interest method. The weighted average interest rates for all SBA guaranteed debentures as of December 31, 2007 and December 31, 2006 were 5.826% and 5.767%, respectively.

4. Commitments and Contingencies

In the normal course of business, the Fund is party to financial instruments with off-balance sheet risk, consisting primarily of unused commitments to extend credit, in the form of loans, to the Fund’s portfolio companies. The balance of unused commitments to extend credit as of December 31, 2007 was approximately $2.1 million. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.

5. Financial Highlights


	Year Ended December 31,
	2007			2006			2005			2004			2003


Net assets at end of period	$	71,568,659		$	25,155,414		$	11,364,547		$	5,003,825		$	2,928,045
Average net assets	$	59,121,328		$	20,447,456		$	7,654,010		$	5,104,796		$	1,129,026
Ratio of operating expenses (including interest expense) to average net assets		9	%		18	%		43	%		40	%		107	%
Ratio of net investment income to average net assets		10	%		15	%		35	%		(1	%)		(104	%)
Ratio of total capital called to total capital commitments		N/A			100	%		50	%		35	%		20	%
Portfolio turnover ratio		18	%		7	%		39	%		0	%		0	%
Total return(1)		(11	%)		18	%		4	%		(29	%)		57	%


(1)		The total return for the year ended December 31, 2007 equals the change in the ending market value of the Company’s common stock from the Offering price of $15.00 per share plus dividends declared per share during the period, divided by the Offering price. Total return is not annualized.

6. Selected Quarterly Financial Data (Unaudited)

The following tables set forth certain quarterly financial information for each of the eight quarters in the two years ended December 31, 2007. Results for any quarter are not necessarily indicative of results for the full year or for any future quarter.


	Quarter Ended
	March 31,		June 30,		September 30,		December 31,
	2007		2007		2007		2007

Total investment income	$	1,859,169	$	3,008,163	$	3,320,562	$	3,429,739
Net investment income		920,203		1,511,857		1,807,528		1,915,158
Net increase in net assets resulting from operations		1,181,308		2,097,943		3,182,208		2,044,133


	Quarter Ended
	March 31,		June 30,		September 30,		December 31,
	2006		2006		2006		2006

Total investment income	$	1,401,965	$	1,898,543	$	1,713,483	$	1,708,813
Net investment income		505,638		994,711		830,057		755,013
Net increase in net assets resulting from operations		505,638		4,190,320		1,058,757		2,942,728

F-17

EXHIBIT INDEX


Exhibit
Number		Exhibit

2.1		Agreement and Plan of Merger, dated as of November 2, 2006, by and among Triangle Capital Corporation, New Triangle GP, LLC, and Triangle Mezzanine LLC (Filed as Exhibit (k)(7) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on November 3, 2006 and incorporated herein by reference).

2.2		Agreement and Plan of Merger, dated as of November 2, 2006, by and among Triangle Capital Corporation, TCC Merger Sub, LLC and Triangle Mezzanine Fund LLLP (Filed as Exhibit (k)(8) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on November 3, 2006 and incorporated herein by reference).

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

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

10.1		Custodian Agreement with U.S. Bank National Association (Filed as Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K (File No. 001-33130) for the year ended December 31, 2006 filed with the Securities and Exchange Commission on March 29, 2007 and incorporated herein by reference).

10.2		Amendment to Custody Agreement between the Registrant and U.S. Bank National Association dated February 19, 2008.

14.1		Code of Conduct (Filed as Exhibit 14.1 to the Registrant’s Annual Report on Form 10-K (File No. 001-33130) for the year ended December 31, 2006 filed with the Securities and Exchange Commission on March 29, 2007 and incorporated herein by reference).

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

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

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

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


		Page
	PART I

Item 1.	Business	2
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	23
Item 2.	Properties	24
Item 3.	Legal Proceedings	24
Item 4.	Submission of Matters to a Vote of Security Holders	24

	PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6.	Selected Financial Data	25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	35
Item 8.	Financial Statements and Supplementary Data	35
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	35
Item 9A(T).	Controls and Procedures	36
Item 9B.	Other Information	36

	PART III

Item 10.	Directors, Executive Officers and Corporate Governance	37
Item 11.	Executive Compensation	37
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	37
Item 13.	Certain Relationships and Related Transactions, and Director Independence	37
Item 14.	Principal Accountant Fees and Services	37

	PART IV

Item 15.	Exhibits and Financial Statement Schedules	38
Signatures		40
Exhibits
Exhibit 10.2
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2


Number		Exhibit
		Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

	i.		Customer shall certify or cause to be certified to Custodian in writing the names and specimen signatures of all persons authorized to give instructions, notices, or other communications on behalf of Customer.

	ii.		Customer may give instruction, notices or other communication called for by this the Custody Agreement or this Amendment to Custodian in writing, or by telecopy, telex, telegram, electronic mail or other type of electronic communication acceptable to Custodian (“Instructions”). Unless otherwise expressly provided, all Instructions shall continue in full force and effect until canceled or superseded. Customer may give and Custodian may accept oral instructions on an exception basis; provided, however, that Customer shall

	iii.		Custodian may, without liability, rely upon and act in accordance with any Instruction that Custodian using ordinary care believes in good faith has been given by Customer.

	iv.		Custodian may at any time request Instructions from Customer and may await such Instructions without incurring liability. Custodian has no obligation to act in the absence of such requested Instructions, but may, however, without liability take such action as it deems appropriate to carry out the purposes of the Custody Agreement and this Amendment.


TRIANGLE MEZZANINE FUND LLLP
By:	New Triangle GP, LLC
	Its: General Partner

By:	Triangle Capital Corporation
	Its: Manager

By:	/s/ Garland S. Tucker, III
	Name:	Garland S. Tucker, III
	Its: President and CEO


U.S. BANK NATIONAL ASSOCIATION
By:	/s/ Patricia Bonnemere
	Name:	Patricia Bonnemere
	Its: Vice President

	1.		I have reviewed this annual report on Form 10-K of Triangle Mezzanine Fund LLLP;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



/s/ GARLAND S. TUCKER III
Garland S. Tucker III
Chief Executive Officer