UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2017

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

For the transition period to

Commission File No. 000-54961

NF INVESTMENT CORP.

(Exact name of Registrant as specified in its charter)

Maryland

61-1696304

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

520 Madison Avenue, 40th Floor, New York, NY 10022

(Address of principal executive office) (Zip Code)

(212) 813-4900

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class	Outstanding at May 10, 2017
Common stock, $0.01 par value		8,156,316

NF INVESTMENT CORP.

INDEX


Part I.	Financial Information

Item 1.	Financial Statements

	Consolidated Statements of Assets and Liabilities as of March 31, 2017 (unaudited) and December 31, 2016	3

	Consolidated Statements of Operations for the three month periods ended March 31, 2017 (unaudited) and March 31, 2016 (unaudited)	4

	Consolidated Statements of Changes in Net Assets for the three month periods ended March 31, 2017 (unaudited) and March 31, 2016 (unaudited)	5

	Consolidated Statements of Cash Flows for the three month periods ended March 31, 2017 (unaudited) and March 31, 2016 (unaudited)	6

	Consolidated Schedules of Investments as of March 31, 2017 (unaudited) and December 31, 2016	7

	Notes to Consolidated Financial Statements (unaudited)	18

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55

Item 4.	Controls and Procedures	56

Part II.	Other Information

Item 1.	Legal Proceedings	57

Item 1A.	Risk Factors	57

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57

Item 3.	Defaults Upon Senior Securities	57

Item 4.	Mine Safety Disclosures	57

Item 5.	Other Information	57

Item 6.	Exhibits	57

	Signatures	58

NF INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(dollar amounts in thousands, except per share data)


	March 31, 2017			December 31, 2016
	(unaudited)
ASSETS
Investments—non-controlled/non-affiliated, at fair value (amortized cost of $270,327 and $291,008 respectively)	$	267,265		$	286,181
Cash and cash equivalents		5,012			7,217
Deferred financing costs		978			1,084
Interest receivable		788			795
Prepaid expenses and other assets		6			12

Total assets	$	274,049		$	295,289

LIABILITIES
Payable for investments purchased	$	642		$	3,456
Secured borrowings (Note 5)		113,084			130,427
Due to Investment Adviser		17			41
Interest and credit facility fees payable (Note 5)		625			616
Management fees payable (Note 4)		351			180
Dividend payable (Note 7)		3,589			4,567
Administrative service fees payable (Note 4)		28			34
Other accrued expenses and liabilities		532			422

Total liabilities		118,868			139,743

Commitments and contingencies (Notes 6 and 9)
NET ASSETS
Common stock, $0.01 par value; 200,000,000 shares authorized; 8,156,316 shares issued and outstanding at March 31, 2017 and December 31, 2016		82			82
Paid-in capital in excess of par value		160,936			160,936
Offering costs		(45	)		(45	)
Accumulated net investment income (loss), net of cumulative dividends of $30,359 and $26,770 at March 31, 2017 and December 31, 2016, respectively		(70	)		(600	)
Accumulated net realized gain (loss)		(2,660	)		—
Accumulated net unrealized appreciation (depreciation)		(3,062	)		(4,827	)

Total net assets	$	155,181		$	155,546

NET ASSETS PER SHARE	$	19.03		$	19.07

The accompanying notes are an integral part of these consolidated financial statements.

NF INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollar amounts in thousands, except per share data)

(unaudited)


	For the three month periods ended
	March 31, 2017			March 31, 2016
Investment income:
Interest income from non-controlled/non-affiliated investments	$	5,631		$	4,519

Total investment income		5,631			4,519

Expenses:
Management fees (Note 4)		171			154
Professional fees		143			163
Administrative service fees (Note 4)		48			45
Interest expense (Note 5)		820			655
Credit facility fees (Note 5)		202			173
Directors’ fees and expenses		17			61
Other general and administrative		111			109

Total expenses		1,512			1,360

Net investment income (loss)		4,119			3,159
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments:
Net realized gain (loss) on investments—non-controlled/non-affiliated		(2,660	)		10
Net change in unrealized appreciation (depreciation) on investments—non-controlled/non-affiliated		1,765			(2,320	)

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments		(895	)		(2,310	)

Net increase (decrease) in net assets resulting from operations	$	3,224		$	849

Basic and diluted earnings per common share (Note 7)	$	0.40		$	0.12

Weighted-average shares of common stock outstanding—Basic and Diluted (Note 7)		8,156,316			6,960,097

Dividends declared per common share (Note 7)	$	0.44		$	0.44

The accompanying notes are an integral part of these consolidated financial statements.

NF INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(dollar amounts in thousands)

(unaudited)


	For the three month periods ended
	March 31, 2017			March 31, 2016
Increase (decrease) in net assets resulting from operations:
Net investment income (loss)	$	4,119		$	3,159
Net realized gain (loss) on investments—non-controlled/non-affiliated		(2,660	)		10
Net change in unrealized appreciation (depreciation) on investments—non-controlled/non-affiliated		1,765			(2,320	)

Net increase (decrease) in net assets resulting from operations		3,224			849

Capital transactions:
Common stock issued		—			8,000
Dividends declared (Note 7)		(3,589	)		(3,203	)

Net increase (decrease) in net assets resulting from capital share transactions		(3,589	)		4,797

Net increase (decrease) in net assets		(365	)		5,646

Net assets at beginning of period		155,546			131,519

Net assets at end of period	$	155,181		$	137,165

The accompanying notes are an integral part of these consolidated financial statements.

NF INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollar amounts in thousands)

(unaudited)


	For the three month periods ended
	March 31, 2017			March 31, 2016
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations	$	3,224		$	849
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Amortization of deferred financing costs		124			96
Net accretion of discount on investments		(648	)		(143	)
Net realized (gain) loss on investments—non-controlled/non-affiliated		2,660			(10	)
Net change in unrealized (appreciation) depreciation on investments—non-controlled/non-affiliated		(1,765	)		2,320
Cost of investments purchased and change in payable for investments purchased		(22,873	)		(8,186	)
Proceeds from sales and repayments of investments and change in receivable for investments sold		38,728			4,181
Changes in operating assets:
Interest receivable		7			56
Prepaid expenses and other assets		6			12
Changes in operating liabilities:
Due to Investment Adviser		(24	)		(22	)
Interest and credit facility fees payable		9			47
Management fees payable		171			3
Administrative service fees payable		(6	)		15
Other accrued expenses and liabilities		110			120

Net cash provided by (used in) operating activities		19,723			(662	)

Cash flows from financing activities:
Proceeds from issuance of common stock		—			8,000
Borrowings on SPV Credit Facility and Credit Facility		13,200			2,500
Repayments of SPV Credit Facility and Credit Facility		(30,543	)		(9,827	)
Debt issuance costs paid		(18	)		(25	)
Dividends paid in cash		(4,567	)		(3,226	)

Net cash provided by (used in) financing activities		(21,928	)		(2,578	)

Net increase (decrease) in cash and cash equivalents		(2,205	)		(3,240	)
Cash and cash equivalents, beginning of period		7,217			7,404

Cash and cash equivalents, end of period	$	5,012		$	4,164

Supplemental disclosures:
Interest paid during the period	$	811		$	593
Dividends declared during the period	$	3,589		$	3,203

The accompanying notes are an integral part of these consolidated financial statements.

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of March 31, 2017

(dollar amounts in thousands)

(unaudited)


Investments— non-controlled/non-affiliated ⁽¹⁾	Industry		Interest Rate ⁽²⁾	Maturity Date		Par/ Principal Amount		Amortized Cost ⁽⁶⁾		Fair Value⁽⁷⁾		Percentage of Net Assets
First Lien Debt (96.83%)
Access CIG, LLC^{(2) (3) (5)}		Business Services	L + 5.00% (1.00% Floor)		10/17/2021	$	6,064	$	6,027	$	6,072		3.91	%
Alpha Packaging Holdings, Inc.^{(2) (3) (4)}		Containers, Packaging & Glass	L + 4.25% (1.00% Floor)		5/12/2020		3,764		3,762		3,764		2.43
Anaren, Inc.^{(2) (3) (4)}		Telecommunications	L + 4.50% (1.00% Floor)		2/18/2021		3,154		3,134		3,155		2.03
APX Group Inc.^{(5) (8)}		Consumer Services	6.38%		12/1/2019		1,458		1,441		1,500		0.97
Aquilex LLC^{(2) (3) (4)}		Environmental Industries	L + 4.00% (1.00% Floor)		12/31/2020		3,208		3,206		3,205		2.07
Audax AAMP Holdings, Inc.^{(2) (3) (4)}		Durable Consumer Goods	L + 6.50% (1.00% Floor)		6/24/2017		2,515		2,511		2,396		1.54
Brooks Equipment Company, LLC^{(2) (3) (4)}		Construction & Building	L + 5.00% (1.00% Floor)		8/29/2020		3,522		3,499		3,514		2.26
Capstone Logistics Acquisition, Inc.^{(2) (3) (4)}		Transportation: Cargo	L + 4.50% (1.00% Floor)		10/7/2021		4,870		4,836		4,861		3.13
Captive Resources Midco, LLC^{(2) (3) (4) (11) (12)}		Banking, Finance, Insurance & Real Estate	L + 5.75% (1.00% Floor)		6/30/2020		4,139		4,090		4,139		2.67
Central Security Group, Inc.^{(2) (3) (4) (12)}		Consumer Services	L + 5.63% (1.00% Floor)		10/6/2020		5,677		5,611		5,660		3.65
CIBT Holdings, Inc.^{(2) (3) (4) (11)}		Transportation: Consumer	L + 5.25% (1.00% Floor)		6/28/2022		4,190		4,157		4,190		2.70
Colony Hardware Corporation^{(2) (3) (4)}		Construction & Building	L + 6.00% (1.00% Floor)		10/23/2021		2,615		2,581		2,615		1.69
Cvent, Inc.^{(2) (3) (4) (12)}		High Tech Industries	L + 5.00% (1.00% Floor)		6/30/2023		4,000		3,965		3,997		2.58
Datapipe, Inc.^{(2) (3) (5) (12)}		Telecommunications	L + 4.75% (1.00% Floor)		3/15/2019		4,863		4,825		4,877		3.14
Dent Wizard International Corporation^{(2) (3) (4) (12)}		Automotive	L + 4.75% (1.00% Floor)		4/7/2020		3,374		3,360		3,370		2.17
DermaRite Industries, LLC^{(2) (3) (5)} ⁽¹¹⁾		Healthcare & Pharmaceuticals	L + 7.00% (1.00% Floor)		3/3/2022		3,344		3,276		3,301		2.13
Dimensional Dental Management, LLC^{(2) (3) (5) (9) (11)}		Healthcare & Pharmaceuticals	L + 7.0% (1.00% Floor)		2/12/2021		2,649		2,596		2,658		1.71
Direct Travel, Inc.^{(2) (3) (5) (11)}		Hotel, Gaming & Leisure	L + 6.50% (1.00% Floor)		12/1/2021		1,420		1,376		1,412		0.91
DTI Holdco, Inc.^{(2) (3) (4)}		High Tech Industries	L + 5.25% (1.00% Floor)		9/30/2023		4,975		4,928		4,910		3.17
EP Minerals, LLC^{(2) (3) (4)}		Metals & Mining	L + 4.50% (1.00% Floor)		8/20/2020		3,413		3,402		3,412		2.20
FCX Holdings Corp.^{(2) (3) (4) (12)}		Capital Equipment	L + 4.50% (1.00% Floor)		8/4/2020		3,669		3,668		3,669		2.36
Genex Holdings, Inc.^{(2) (3) (4) (12)}		Banking, Finance, Insurance & Real Estate	L + 4.25% (1.00% Floor)		5/30/2021		4,994		4,965		4,984		3.21
Green Energy Partners/Stonewall LLC^{(2) (3) (5)}		Energy: Electricity	L + 5.50% (1.00% Floor)		11/13/2021		3,400		3,376		3,402		2.19
Hummel Station LLC.^{(2) (3) (5) (12)}		Energy: Electricity	L + 6.00% (1.00% Floor)		10/27/2022		4,000		3,865		3,865		2.49
Imagine! Print Solutions, LLC^{(2) (3) (4)}		Media: Advertising, Printing & Publishing	L + 6.00% (1.00% Floor)		3/30/2022		2,376		2,345		2,376		1.53
Imperial Bag & Paper Co. LLC^{(2) (3) (5) (12)}		Forest Products & Paper	L + 6.00% (1.00% Floor)		1/7/2022		4,002		3,951		3,997		2.58
Indra Holdings Corp. (Totes Isotoner)^{(2) (3) (5)}		Non-durable Consumer Goods	L + 4.25% (1.00% Floor)		5/1/2021		4,741		4,711		3,088		1.99
Integro Parent Inc.^{(2) (3) (4)}		Banking, Finance, Insurance & Real Estate	L + 5.75% (1.00% Floor)		10/30/2022		4,939		4,822		4,863		3.13
International Medical Group, Inc.^{(2) (3) (5) (9) (12)}		Banking, Finance, Insurance & Real Estate	L + 6.50% (1.00% Floor)		10/30/2020		5,000		4,921		5,062		3.26
Jackson Hewitt Inc.^{(2) (3) (4)}		Retail	L + 7.00% (1.00% Floor)		7/30/2020		1,302		1,283		1,230		0.79
Metrogistics LLC^{(2) (3) (4)}		Transportation: Cargo	L + 6.50% (1.00% Floor)		9/30/2022		1,789		1,764		1,789		1.15

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of March 31, 2017

(dollar amounts in thousands)

(unaudited)


Investments— non-controlled/non-affiliated ⁽¹⁾	Industry		Interest Rate ⁽²⁾	Maturity Date		Par/ Principal Amount		Amortized Cost ⁽⁶⁾			Fair Value⁽⁷⁾			Percentage of Net Assets
First Lien Debt (96.83%) (continued)
Ministry Brands, LLC^{(2) (3) (5) (12)}		High Tech Industries	L + 5.00% (1.00% Floor)		12/2/2022	$	5,988	$	5,935		$	5,960			3.84	%
MTC Intermediate Holdco, Inc.^{(2) (3) (4)}		Banking, Finance, Insurance & Real Estate	L + 5.00% (1.00% Floor)		2/8/2022		4,000		3,964			3,981			2.57
National Technical Systems, Inc.^{(2) (3) (4) (11)}		Aerospace & Defense	L + 6.25% (1.00% Floor)		6/12/2021		5,798		5,738			5,593			3.61
NES Global Talent Finance US LLC (United Kingdom)^{(2) (3) (4) (8)}		Energy: Oil & Gas	L + 5.50% (1.00% Floor)		10/3/2019		3,106		3,075			3,010			1.94
Netsmart Technologies, Inc.^{(2) (3) (5)}		High Tech Industries	L + 4.50% (1.00% Floor)		4/19/2023		4,566		4,525			4,545			2.93
OnCourse Learning Corporation^{(2) (3) (4) (5) (11)}		Consumer Services	L + 6.50% (1.00% Floor)		9/12/2021		2,898		2,858			2,921			1.88
Paradigm Acquisition Corp.^{(2) (3) (5)}		Business Services	L + 5.00% (1.00% Floor)		6/2/2022		4,323		4,272			4,323			2.79
Pasternack Enterprises, Inc. (Infinite RF)^{(2) (3) (4)}		Capital Equipment	L + 5.00% (1.00% Floor)		5/27/2022		3,973		3,947			3,964			2.55
Pelican Products, Inc.^{(2) (3) (4)}		Containers, Packaging & Glass	L + 4.25% (1.00% Floor)		4/11/2020		2,916		2,908			2,909			1.87
Plano Molding Company, LLC^{(2) (3) (5)}		Hotel, Gaming & Leisure	L + 7.50% (1.00% Floor)		5/12/2021		3,527		3,502			3,361			2.17
PPT Management Holdings, LLC^{(2) (3) (5)}		Healthcare & Pharmaceuticals	L + 6.00% (1.00% Floor)		12/16/2022		2,494		2,471			2,495			1.61
Premier Senior Marketing, LLC^{(2) (3) (5) (12)}		Banking, Finance, Insurance & Real Estate	L + 5.00% (1.00% Floor)		7/1/2022		3,731		3,683			3,731			2.40
Product Quest Manufacturing LLC^{(2) (3) (4) (9) (12)}		Containers, Packaging & Glass	L + 5.75% (1.00% Floor)		9/9/2020		5,000		4,926			4,620			2.98
Prowler Acquisition Corp.(Pipeline Supply and Service, LLC)^{(2) (3) (5)}		Wholesale	L + 4.50% (1.00% Floor)		1/28/2020		4,259		4,238			3,469			2.24
PSC Industrial Holdings Corp. ^{(2) (3) (4)}		Environmental Industries	L + 4.75% (1.00% Floor)		12/5/2020		2,933		2,913			2,871			1.85
PT Intermediate Holdings III, LLC (Parts Town)^{(2) (3) (4) (5) (11) (12)}		Wholesale	L + 6.50% (1.00% Floor)		6/23/2022		2,171		2,148			2,160			1.39
Q Holding Company^{(2) (3) (4)}		Automotive	L + 5.00% (1.00% Floor)		12/18/2021		3,482		3,449			3,490			2.25
Reliant Pro Rehab, LLC^{(2) (3) (5) (9)}		Healthcare & Pharmaceuticals	L + 10.00% (1.00% Floor)		12/29/2017		2,475		2,456			2,474			1.59
Restaurant Technologies, Inc.^{(2) (3) (4)}		Retail	L + 4.75% (1.00% Floor)		11/23/2022		3,500		3,469			3,505			2.26
SolAero Technologies Corp.^{(2) (3) (4) (5)}		Telecommunications	L + 5.25% (1.00% Floor)		12/10/2020		6,442		6,400			5,987			3.86
Superior Health Linens, LLC^{(2) (3) (4) (5) (11)}		Business Services	L + 6.50% (1.00% Floor)		9/30/2021		1,980		1,949			1,959			1.26
The SI Organization, Inc.^{(2) (3) (4)}		Aerospace & Defense	L + 4.75% (1.00% Floor)		11/23/2019		5,863		5,832			5,922			3.82
The Topps Company, Inc.^{(2) (3) (4)}		Non-durable Consumer Goods	L + 6.00% (1.25% Floor)		10/2/2020		4,664		4,646			4,663			3.00
Transilwrap Company, Inc.^{(2) (3) (4) (12)}		Chemicals, Plastics & Rubber	L + 4.50% (1.00% Floor)		11/22/2019		1,757		1,750			1,757			1.13
Transilwrap Company, Inc.^{(2) (3) (4) (12)}		Chemicals, Plastics & Rubber	L + 4.00% (1.00% Floor)		11/22/2019		4,816		4,812			4,816			3.10
Tweddle Group, Inc.^{(2) (3) (4)}		Media: Advertising, Printing & Publishing	L + 6.00 (1.00% Floor)		10/24/2022		1,778		1,744			1,785			1.15
TwentyEighty, Inc.—(Revolver) (fka Miller Heiman, Inc.)^{(2)(3)(5) (10) (11)}		Business Services	L + 8.00% (1.00% Floor)		3/31/2020		—		(2	)		(1	)		0.00
TwentyEighty, Inc.— (Term A Loans) ^{(2) (3) (5) (10)}		Business Services	L + 3.50% (1.00% Floor), 4.50% PIK		3/31/2020		983		977			977			0.63
TwentyEighty, Inc.— (Term B Loans) ^{(5) (10)}		Business Services	1.00%, 7.00% PIK		3/31/2020		1,615		1,615			1,297			0.83

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of March 31, 2017

(dollar amounts in thousands)

(unaudited)


Investments— non-controlled/non-affiliated ⁽¹⁾	Industry		Interest Rate ⁽²⁾		Maturity Date		Par/ Principal Amount		Amortized Cost ⁽⁶⁾		Fair Value⁽⁷⁾		Percentage of Net Assets
First Lien Debt (96.83%) (continued)
TwentyEighty, Inc.— (Term C Loans) ^{(5) (10)}		Business Services		0.25%, 8.50% PIK		3/31/2020	$	1,541	$	1,541	$	772		0.50	%
U.S. Acute Care Solutions, LLC^{(2) (3) (4)}		Healthcare & Pharmaceuticals		L + 5.00% (1.00% Floor)		5/15/2021		5,940		5,902		5,927		3.82
U.S. Anesthesia Partners, Inc.^{(2) (3) (4) (12)}		Healthcare & Pharmaceuticals		L + 5.00% (1.00% Floor)		12/31/2019		2,587		2,564		2,591		1.67
Vantage Specialty Chemicals, Inc.^{(2) (3) (4) (12)}		Chemicals, Plastics & Rubber		L + 4.50% (1.00% Floor)		2/5/2021		4,466		4,437		4,444		2.86
Vetcor Professional Practices, LLC^{(2) (3) (4) (5) (11)}		Consumer Services		L + 6.00% (1.00% Floor)		4/20/2021		5,426		5,339		5,473		3.54
Violin Finco S.A.R.L. (Alexander Mann Solutions) (United Kingdom)^{(2) (3) (4) (8)}		Business Services		L + 4.75% (1.00% Floor)		12/20/2019		2,810		2,795		2,810		1.81
Vistage Worldwide Inc.^{(2) (3) (4) (12)} Business Services				L + 5.50% (1.00% Floor)		8/19/2021		4,793		4,756		4,827		3.11
VRC Companies, LLC^{(2) (3) (11) (13)}		Business Services		L + 6.50% (1.00% Floor)		3/31/2023		2,848		2,769		2,793		1.80
W/S Packaging Group, Inc.^{(2) (3) (4)}		Containers, Packaging & Glass		L + 5.00% (1.00% Floor)		8/9/2019		4,036		4,028		3,874		2.50
Watchfire Enterprises, Inc.^{(2) (3) (4)}		Media: Advertising, Printing & Publishing		L + 4.00% (1.00% Floor)		10/2/2020		3,342		3,335		3,342		2.15
Winchester Electronics Corporation^{(2) (3) (5) (11)}		Capital Equipment		L + 6.50% (1.00% Floor)		6/30/2022		4,550		4,486		4,625		2.98
WIRB—Copernicus Group, Inc.^{(2) (3) (4)}		Healthcare & Pharmaceuticals		L + 5.00% (1.00% Floor)		8/12/2022		2,635		2,617		2,627		1.69
Zest Holdings, LLC^{(2) (3) (4)}		Durable Consumer Goods		L + 4.75% (1.00% Floor)		8/16/2020		4,822		4,818		4,818		3.10

*First Lien Debt Total*									$	261,841	$	258,800		166.77	%

Second Lien Debt (3.17%)
AmeriLife Group, LLC^{(2) (3) (5) (12)}		Banking, Finance, Insurance & Real Estate		L + 8.75% (1.00% Floor)		1/10/2023	$	2,000	$	1,967	$	1,932		1.25	%
Argon Medical Devices, Inc.^{(2) (3) (4)}		Healthcare & Pharmaceuticals		L + 9.50% (1.00% Floor)		6/23/2022		1,000		974		1,018		0.66
Berlin Packaging L.L.C.^{(2) (3) (5)}		Containers, Packaging & Glass		L + 6.75% (1.00% Floor)		10/1/2022		573		570		577		0.37
Charter NEX US Holdings, Inc.^{(2) (3) (5)}		Chemicals, Plastics & Rubber		L + 8.25% (1.00% Floor)		2/5/2023		1,479		1,461		1,479		0.95
Genex Holdings, Inc.^{(2) (3) (4) (12)}		Banking, Finance, Insurance & Real Estate		L + 7.75% (1.00% Floor)		5/30/2022		1,000		990		1,000		0.64
Jazz Acquisition, Inc. (Wencor)^{(2) (3) (5)}		Aerospace & Defense		L + 6.75% (1.00% Floor)		6/19/2022		800		797		705		0.46
MRI Software, LLC ^{(2) (3) (4)}		Software		L + 8.00% (1.00% Floor)		6/23/2022		1,250		1,235		1,256		0.81
Vantage Specialty Chemicals, Inc.^{(2) (3) (4) (12)}		Chemicals, Plastics & Rubber		L + 8.75% (1.00% Floor)		2/5/2022		500		492		498		0.32

*Second Lien Debt Total*									$	8,486	$	8,465		5.46	%

Total Investments—non-controlled/non-affiliated⁽¹⁴⁾									$	270,327	$	267,265		172.23	%

(1)

Unless otherwise indicated, issuers of debt investments held by NF Investment Corp. (together with its consolidated subsidiaries, “we,” “us,” “our,” “NFIC” or the “Company”) are domiciled in the United States. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of March 31, 2017, the Company does not “control” any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of March 31, 2017, the Company is not an “affiliated person” of any of these portfolio companies.

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of March 31, 2017

(dollar amounts in thousands)

(unaudited)

(2)

Variable rate loans to the portfolio companies bear interest at a rate that may be determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has provided the interest rate in effect as of March 31, 2017. As of March 31, 2017, all of our LIBOR loans were indexed to the 90-day LIBOR rate at 1.15%, except for those loans as indicated in Notes 12 and 13 below.

(3)	Loan includes interest rate floor feature.

(4)

Denotes that all or a portion of the assets are owned by the Company’s wholly owned subsidiary, NFIC SPV LLC (the “SPV”). The SPV has entered into a senior secured revolving credit facility (as amended, the “SPV Credit Facility”). The lenders of the SPV Credit Facility have a first lien security interest in substantially all of the assets of the SPV (see Note 5, Borrowings). Accordingly, such assets are not available to creditors of the Company.

(5)

Denotes that all or a portion of the assets are owned by the Company. The Company has entered into a senior secured revolving credit facility (as amended, the “Credit Facility” and, together with the SPV Credit Facility, the “Facilities”). The lender of the Credit Facility has a first lien security interest in substantially all of the portfolio investments held by the Company (see Note 5, Borrowings). Accordingly, such assets are not available to creditors of the SPV.

(6)	Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.

(7)	Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements), pursuant to the Company’s valuation policy.

(8)

The Company has determined the indicated investments are non-qualifying assets under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

(9)

In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company is entitled to receive additional interest as a result of an agreement among lenders as follows: Dimensional Dental Management, LLC (4.70%), International Medical Group, Inc. (4.79%), Product Quest Manufacturing LLC (3.66%) and Reliant Pro Rehab, LLC (nil). Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments.

(10)	Loan was on non-accrual status as of March 31, 2017.

(11)	As of March 31, 2017, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans:


Investments—non controlled/non-affiliated	Type		Unused Fee			Par/Principal Amount		Fair Value
First Lien Debt—unfunded delayed draw and revolving term loans commitments
Captive Resources Midco, LLC		Revolver		0.50	%	$	268	$	—
Captive Resources Midco, LLC		Delayed Draw		1.25	%		446		—
CIBT Holdings, Inc.		Delayed Draw		1.00	%		779		—
DermaRite Industries, LLC		Revolver		0.50	%		655		(7	)
Dimensional Dental Management, LLC		Delayed Draw		1.00	%		201		1
Direct Travel, Inc.		Delayed Draw		1.00	%		1,073		(4	)
National Technical Systems, Inc.		Delayed Draw		1.00	%		1,031		(28	)
National Technical Systems, Inc.		Revolver		0.50	%		469		(17	)
OnCourse Learning Corporation		Revolver		0.50	%		95		1
PT Intermediate Holdings III, LLC (Parts Town)		Revolver		0.50	%		159		(1	)
Superior Health Linens, LLC		Revolver		0.50	%		269		(2	)
TwentyEighty, Inc. (fka Miller Heiman, Inc.)		Revolver		0.50	%		155		(1	)
Vetcor Professional Practices, LLC		Delayed Draw		1.00	%		835		6
VRC Companies, LLC		Delayed Draw		1.00	%		501		(8	)
VRC Companies, LLC		Revolver		0.50	%		201		(3	)
Winchester Electronics Corporation		Delayed Draw		1.00	%		417		6

Total unfunded commitments						$	7,554	$	(57	)

(12)	As of March 31, 2017, this LIBOR loan was indexed to the 30-day LIBOR rate at 0.98%.

(13)	As of March 31, 2017, this LIBOR loan was indexed to the 180-day LIBOR rate at 1.42%.

(14) Effective January 31, 2017, TwentyEighty, Inc. (fka Miller Heiman, Inc.) completed a restructuring whereby the first lien debt held by the Company was converted into new term loans and equity. As a result, in addition to the term loans included above, the Company also received 17,850 shares of equity in TwentyEighty Investors LLC on the effective date at no cost, which were fair valued at $0 as of March 31, 2017.

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of March 31, 2017

(dollar amounts in thousands)

(unaudited)

As of March 31, 2017, investments—non-controlled/non-affiliated, at fair value consisted of the following:


Type	Amortized Cost		Fair Value		% of Fair Value
First Lien Debt	$	261,841	$	258,800		96.83	%
Second Lien Debt		8,486		8,465		3.17

Total	$	270,327	$	267,265		100.00	%


Type	Amortized Cost		Fair Value		% of Fair Value
Floating Rate	$	265,730	$	263,696		98.66	%
Fixed Rate		4,597		3,569		1.34

Total	$	270,327	$	267,265		100.00	%

The industry composition of investments—non-controlled/non-affiliated at fair value as of March 31, 2017 was as follows:


Industry	Amortized Cost		Fair Value		% of Fair Value
Aerospace & Defense	$	12,367	$	12,220		4.57	%
Automotive		6,809		6,860		2.57
Banking, Finance, Insurance & Real Estate		29,402		29,692		11.11
Business Services		26,699		25,829		9.66
Capital Equipment		12,101		12,258		4.58
Chemicals, Plastics & Rubber		12,952		12,994		4.86
Construction & Building		6,080		6,129		2.29
Consumer Services		15,249		15,554		5.82
Containers, Packaging & Glass		16,194		15,744		5.89
Durable Consumer Goods		7,329		7,214		2.70
Energy: Electricity		7,241		7,267		2.72
Energy: Oil & Gas		3,075		3,010		1.13
Environmental Industries		6,119		6,076		2.27
Forest Products & Paper		3,951		3,997		1.50
Healthcare & Pharmaceuticals		22,856		23,091		8.64
High Tech Industries		19,353		19,412		7.26
Hotel, Gaming & Leisure		4,878		4,773		1.79
Media: Advertising, Printing & Publishing		7,424		7,503		2.81
Metals & Mining		3,402		3,412		1.28
Non-durable Consumer Goods		9,357		7,751		2.90
Retail		4,752		4,735		1.77
Software		1,235		1,256		0.47
Telecommunications		14,359		14,019		5.24
Transportation: Cargo		6,600		6,650		2.49
Transportation: Consumer		4,157		4,190		1.57
Wholesale		6,386		5,629		2.11

Total	$	270,327	$	267,265		100.00	%

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of March 31, 2017

(dollar amounts in thousands)

(unaudited)

The geographical composition of investments—non-controlled/non-affiliated at fair value as of March 31, 2017 was as follows:


Geography	Amortized Cost		Fair Value		% of Fair Value
United Kingdom	$	5,870	$	5,820		2.18	%
United States		264,457		261,445		97.82

Total	$	270,327	$	267,265		100.00	%

The accompanying notes are an integral part of these consolidated financial statements.

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of December 31, 2016

(dollar amounts in thousands)


Investments— non-controlled/non-affiliated ⁽¹⁾	Industry	Interest Rate⁽²⁾		Maturity Date		Par/ Principal Amount		Amortized Cost ⁽⁶⁾		Fair Value⁽⁷⁾		Percentage of Net Assets
First Lien Debt (96.36%)
Access CIG, LLC^{(2) (3) (5)}	Business Services		L + 5.00% (1.00% Floor)		10/17/2021	$	6,079	$	6,041	$	6,079		3.91	%
AF Borrower LLC (Accuvant)^{(2) (3) (4)}	High Tech Industries		L + 5.25% (1.00% Floor)		1/28/2022		4,028		3,981		4,028		2.59
Alpha Packaging Holdings, Inc. ^{(2) (3) (4)}	Containers, Packaging & Glass		L + 4.25% (1.00% Floor)		5/12/2020		3,774		3,771		3,774		2.43
Anaren, Inc.^{(2) (3) (4)}	Telecommunications		L + 4.50% (1.00% Floor)		2/18/2021		3,170		3,150		3,170		2.04
APX Group Inc.^{(5) (8)}	Consumer Services		6.38%		12/1/2019		2,500		2,450		2,572		1.65
Aquilex LLC^{(2) (3) (4)}	Environmental Industries		L + 4.00% (1.00% Floor)		12/31/2020		3,212		3,209		3,207		2.06
Audax AAMP Holdings, Inc.^{(2) (3) (4)}	Durable Consumer Goods		L + 6.00% (1.00% Floor)		6/24/2017		2,552		2,546		2,533		1.63
Brooks Equipment Company, LLC^{(2) (3) (4)}	Construction & Building		L + 5.00% (1.00% Floor)		8/29/2020		1,674		1,664		1,671		1.07
Capstone Logistics Acquisition, Inc.^{(2) (3) (4)}	Transportation: Cargo		L + 4.50% (1.00% Floor)		10/7/2021		4,870		4,834		4,803		3.09
Captive Resources Midco, LLC^{(2) (3) (4) (11)}	Banking, Finance, Insurance & Real Estate		L + 5.75% (1.00% Floor)		6/30/2020		4,150		4,097		4,144		2.66
Central Security Group, Inc.^{(2) (3) (4) (12)}	Consumer Services		L + 5.63% (1.00% Floor)		10/6/2020		5,692		5,622		5,672		3.65
CIBT Holdings, Inc.^{(2) (3) (4) (11)}	Transportation: Consumer		L + 5.25% (1.00% Floor)		6/28/2022		4,211		4,177		4,211		2.71
Colony Hardware Corporation^{(2) (3) (4)}	Construction & Building		L + 6.00% (1.00% Floor)		10/23/2021		2,621		2,586		2,621		1.69
Cvent, Inc.^{(2) (3) (4)}	High Tech Industries		L + 5.00% (1.00% Floor)		6/30/2023		4,000		3,960		3,996		2.57
Datapipe, Inc.^{(2) (3) (5) (12)}	Telecommunications		L + 4.75% (1.00% Floor)		3/15/2019		4,875		4,833		4,882		3.14
Dent Wizard International Corporation^{(2) (3) (4) (12)}	Automotive		L + 4.75% (1.00% Floor)		4/7/2020		3,374		3,359		3,374		2.17
Dimensional Dental Management, LLC^{(2) (3) (5) (9) (11)}	Healthcare & Pharmaceuticals		L + 7.00% (1.00% Floor)		2/12/2021		2,500		2,445		2,474		1.59
Direct Travel, Inc.^{(2) (3) (5) (11)}	Hotel, Gaming & Leisure		L + 6.50% (1.00% Floor)		12/1/2021		1,427		1,380		1,413		0.91
DTI Holdco, Inc.^{(2) (3) (4) (12)}	High Tech Industries		L + 5.25% (1.00% Floor)		9/30/2023		4,988		4,939		4,913		3.16
Emerging Markets Communications, LLC^{(2) (3) (4) (8)}	Telecommunications		L + 5.75% (1.00% Floor)		7/1/2021		1,970		1,811		1,970		1.27
EP Minerals, LLC^{(2) (3) (4)}	Metals & Mining		L + 4.50% (1.00% Floor)		8/20/2020		3,421		3,410		3,419		2.20
FCX Holdings Corp.^{(2) (3) (4) (12)}	Capital Equipment		L + 4.50% (1.00% Floor)		8/4/2020		3,672		3,670		3,672		2.36
Generation Brands Holdings, Inc.^{(2) (3) (5)}	Durable Consumer Goods		L + 5.00% (1.00% Floor)		6/10/2022		4,975		4,929		5,025		3.23
Genex Holdings, Inc.^{(2) (3) (4) (12)}	Banking, Finance, Insurance & Real Estate		L + 4.25% (1.00% Floor)		5/30/2021		5,007		4,977		5,002		3.22
Green Energy Partners/Stonewall LLC^{(2) (3) (5)}	Energy: Electricity		L + 5.50% (1.00% Floor)		11/13/2021		3,400		3,374		3,400		2.19
Hummel Station LLC.^{(2) (3) (5) (12)}	Energy: Electricity		L + 6.00% (1.00% Floor)		10/27/2022		4,000		3,860		3,840		2.47
Imagine! Print Solutions, LLC^{(2) (3) (4)}	Media: Advertising, Printing & Publishing		L + 6.00% (1.00% Floor)		3/30/2022		2,382		2,350		2,400		1.54
Imperial Bag & Paper Co. LLC^{(2) (3) (5) (12)}	Forest Products & Paper		L + 6.00% (1.00% Floor)		1/7/2022		4,012		3,958		3,987		2.56
Indra Holdings Corp. (Totes Isotoner)^{(2) (3) (5)}	Non-durable Consumer Goods		L + 4.25% (1.00% Floor)		5/1/2021		4,741		4,710		3,518		2.26
Integro Parent Inc.^{(2) (3) (4) (12)}	Banking, Finance, Insurance & Real Estate		L + 5.75% (1.00% Floor)		10/30/2022		4,951		4,830		4,853		3.12
International Medical Group, Inc.^{(2) (3) (5) (9)}	Banking, Finance, Insurance & Real Estate		L + 6.50% (1.00% Floor)		10/30/2020		5,000		4,917		5,040		3.24

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of December 31, 2016

(dollar amounts in thousands)


Investments— non-controlled/non-affiliated ⁽¹⁾	Industry	Interest Rate⁽²⁾		Maturity Date		Par/ Principal Amount		Amortized Cost ⁽⁶⁾		Fair Value⁽⁷⁾		Percentage of Net Assets
First Lien Debt (96.36%) (continued)
Jackson Hewitt Inc.^{(2) (3) (4)}	Retail		L + 7.00% (1.00% Floor)		7/30/2020	$	1,302	$	1,282	$	1,237		0.80	%
Metrogistics LLC^{(2) (3) (4)}	Transportation: Cargo		L + 6.50% (1.00% Floor)		9/30/2022		1,800		1,775		1,787		1.15
Ministry Brands, LLC^{(2) (3) (5) (11)}	High Tech Industries		L + 5.00% (1.00% Floor)		12/2/2022		4,708		4,655		4,702		3.02
MSX International, Inc.^{(2) (3) (4)}	Automotive		L + 5.00% (1.00% Floor)		8/21/2020		1,962		1,950		1,962		1.26
National Technical Systems, Inc.^{(2) (3) (4) (11)}	Aerospace & Defense		L + 6.25% (1.00% Floor)		6/12/2021		5,798		5,736		5,522		3.55
NES Global Talent Finance US LLC (United Kingdom)^{(2) (3) (4) (8)}	Energy: Oil & Gas		L + 5.50% (1.00% Floor)		10/3/2019		3,150		3,116		3,055		1.96
Netsmart Technologies, Inc.^{(2) (3) (5)}	High Tech Industries		L + 4.50% (1.00% Floor)		4/19/2023		4,577		4,535		4,538		2.92
OnCourse Learning Corporation^{(2) (3) (4) (5) (11) (12)}	Consumer Services		L + 6.50% (1.00% Floor)		9/12/2021		2,905		2,864		2,913		1.87
Paradigm Acquisition Corp.^{(2) (3) (5)}	Business Services		L + 5.00% (1.00% Floor)		6/2/2022		4,334		4,281		4,330		2.78
Pasternack Enterprises, Inc. (Infinite RF)^{(2) (3) (4)}	Capital Equipment		L + 5.00% (1.00% Floor)		5/27/2022		2,985		2,961		2,985		1.92
Pelican Products, Inc.^{(2) (3) (4)}	Containers, Packaging & Glass		L + 4.25% (1.00% Floor)		4/11/2020		2,924		2,915		2,905		1.87
Plano Molding Company, LLC^{(2) (3) (5)}	Hotel, Gaming & Leisure		L + 6.50% (1.00% Floor)		5/12/2021		3,536		3,510		3,369		2.17
PPT Management Holdings, LLC^{(2) (3) (5)}	Healthcare & Pharmaceuticals		L + 6.00% (1.00% Floor)		12/16/2022		2,500		2,476		2,492		1.60
Premier Senior Marketing, LLC^{(2) (3) (5) (12)}	Banking, Finance, Insurance & Real Estate		L + 5.00% (1.00% Floor)		7/1/2022		3,741		3,690		3,741		2.41
Product Quest Manufacturing LLC^{(2) (3) (4) (9)}	Containers, Packaging & Glass		L + 5.75% (1.00% Floor)		9/9/2020		5,000		4,923		4,614		2.97
Prowler Acquisition Corp. (Pipeline Supply and Service, LLC)^{(2) (3) (5)}	Wholesale		L + 4.50% (1.00% Floor)		1/28/2020		4,270		4,248		3,204		2.06
PSC Industrial Holdings Corp. ^{(2) (3) (4)}	Environmental Industries		L + 4.75% (1.00% Floor)		12/5/2020		2,940		2,920		2,822		1.81
PSI Services LLC^{(2) (3) (4) (9) (12)}	Business Services		L + 6.75% (1.00% Floor)		2/27/2021		5,681		5,558		6,042		3.88
PT Intermediate Holdings III, LLC (Parts Town)^{(2) (3) (4) (5) (11)}	Wholesale		L + 6.50% (1.00% Floor)		6/23/2022		1,935		1,913		1,952		1.25
Q Holding Company^{(2) (3) (4)}	Automotive		L + 5.00% (1.00% Floor)		12/18/2021		3,491		3,457		3,485		2.24
Reliant Pro Rehab, LLC^{(2) (3) (5) (9)}	Healthcare & Pharmaceuticals		L + 10.00% (1.00% Floor)		12/29/2017		2,481		2,447		2,481		1.60
Restaurant Technologies, Inc.^{(2) (3) (4)}	Retail		L + 4.75% (1.00% Floor)		11/23/2022		3,500		3,468		3,492		2.24
SolAero Technologies Corp.^{(2) (3) (4) (5)}	Telecommunications		L + 5.25% (1.00% Floor)		12/10/2020		6,527		6,482		6,270		4.03
Superior Health Linens, LLC^{(2) (3) (4) (5) (11)}	Business Services		L + 6.50% (1.00% Floor)		9/30/2021		1,980		1,947		1,966		1.26
Teaching Strategies, LLC^{(2) (3) (4)}	Media: Advertising, Printing & Publishing		L + 5.50% (0.50% Floor)		10/1/2019		4,454		4,442		4,454		2.86
The SI Organization, Inc.^{(2) (3) (4)}	Aerospace & Defense		L + 4.75% (1.00% Floor)		11/23/2019		5,879		5,845		5,949		3.82
The Topps Company, Inc.^{(2) (3) (4)}	Non-durable Consumer Goods		L + 6.00% (1.25% Floor)		10/2/2020		4,677		4,656		4,699		3.02
Transilwrap Company, Inc.^{(2) (3) (4) (12)}	Chemicals, Plastics & Rubber		L + 4.50% (1.00% Floor)		11/22/2019		1,762		1,754		1,761		1.13
Transilwrap Company, Inc.^{(2) (3) (4) (12)}	Chemicals, Plastics & Rubber		L + 3.75% (1.00% Floor)		11/22/2019		4,829		4,824		4,829		3.10
Tweddle Group, Inc.^{(2) (3) (4)}	Media: Advertising, Printing & Publishing		L + 6.00% (1.00% Floor)		10/24/2022		1,800		1,765		1,790		1.15
TwentyEighty, Inc. (fka Miller Heiman, Inc.)^{(2) (3) (5) (10)}	Business Services		L + 6.00% (1.00% Floor)		9/30/2019		6,433		6,383		2,621		1.69
U.S. Acute Care Solutions, LLC^{(2) (3) (4)}	Healthcare & Pharmaceuticals		L + 5.00% (1.00% Floor)		5/15/2021		5,955		5,915		5,941		3.82
U.S. Anesthesia Partners, Inc.^{(2) (3) (4)}	Healthcare & Pharmaceuticals		L + 5.00% (1.00% Floor)		12/31/2019		2,594		2,569		2,590		1.67
U.S. Farathane, LLC^{(2) (3) (4)}	Automotive		L + 4.75% (1.00% Floor)		12/23/2021		4,950		4,904		4,950		3.18

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of December 31, 2016

(dollar amounts in thousands)


Investments— non-controlled/non-affiliated ⁽¹⁾	Industry	Interest Rate⁽²⁾		Maturity Date		Par/ Principal Amount		Amortized Cost ⁽⁶⁾		Fair Value⁽⁷⁾		Percentage of Net Assets
First Lien Debt (96.36%) (continued)
Vantage Specialty Chemicals, Inc.^{(2) (3) (4) (12)}	Chemicals, Plastics & Rubber		L + 4.50% (1.00% Floor)		2/5/2021	$	4,477	$	4,447	$	4,476		2.88	%
Vetcor Professional Practices, LLC^{(2) (3) (4) (5) (11)}	Consumer Services		L + 6.25% (1.00% Floor)		4/20/2021		4,763		4,691		4,791		3.08
Violin Finco S.A.R.L. (Alexander Mann Solutions) (United Kingdom)^{(2) (3) (4) (8)}	Business Services		L + 4.75% (1.00% Floor)		12/20/2019		2,818		2,803		2,816		1.81
Vistage Worldwide Inc.^{(2) (3) (4) (12)}	Business Services		L + 5.50% (1.00% Floor)		8/19/2021		4,793		4,754		4,781		3.08
Vitera Healthcare Solutions, LLC^{(2) (3) (5)}	Healthcare & Pharmaceuticals		L + 5.00% (1.00% Floor)		11/4/2020		3,186		3,167		3,177		2.04
W/S Packaging Group, Inc.^{(2) (3) (4)}	Containers, Packaging & Glass		L + 5.00% (1.00% Floor)		8/9/2019		4,058		4,049		3,831		2.46
Watchfire Enterprises, Inc.^{(2) (3) (4)}	Media: Advertising, Printing & Publishing		L + 4.00% (1.00% Floor)		10/2/2020		3,342		3,334		3,342		2.15
Winchester Electronics Corporation^{(2) (3) (5) (11)}	Capital Equipment		L + 6.50% (1.00% Floor)		6/30/2022		4,562		4,493		4,577		2.94
WIRB—Copernicus Group, Inc.^{(2) (3) (4)}	Healthcare & Pharmaceuticals		L + 5.00% (1.00% Floor)		8/12/2022		1,995		1,979		2,013		1.29
Zest Holdings, LLC^{(2) (3) (4)}	Durable Consumer Goods		L + 4.75% (1.00% Floor)		8/16/2020		4,822		4,818		4,849		3.12

*First Lien Debt Total*								$	280,541	$	275,766		177.29	%

Second Lien Debt (3.64%)
AF Borrower LLC (Accuvant) ^{(2) (3) (5)}	High Tech Industries		L + 9.00% (1.00% Floor)		1/30/2023	$	2,000	$	1,983	$	2,000		1.29	%
AmeriLife Group, LLC^{(2) (3) (5)}	Banking, Finance, Insurance & Real Estate		L + 8.75% (1.00% Floor)		1/10/2023		2,000		1,966		1,921		1.23
Argon Medical Devices, Inc.^{(2) (3) (4)}	Healthcare & Pharmaceuticals		L + 9.50% (1.00% Floor)		6/23/2022		1,000		974		1,010		0.65
Berlin Packaging L.L.C.^{(2) (3) (5)}	Containers, Packaging & Glass		L + 6.75% (1.00% Floor)		10/1/2022		573		570		578		0.37
Charter NEX US Holdings, Inc.^{(2) (3) (5)}	Chemicals, Plastics & Rubber		L + 8.25% (1.00% Floor)		2/5/2023		1,479		1,461		1,494		0.96
Genex Holdings, Inc.^{(2) (3) (4) (12)}	Banking, Finance, Insurance & Real Estate		L + 7.75% (1.00% Floor)		5/30/2022		1,000		990		998		0.64
Jazz Acquisition, Inc. (Wencor)^{(2) (3) (5)}	Aerospace & Defense		L + 6.75% (1.00% Floor)		6/19/2022		800		797		665		0.43
MRI Software, LLC ^{(2) (3) (4)}	Software		L + 8.00% (1.00% Floor)		6/23/2022		1,250		1,235		1,252		0.80
Vantage Specialty Chemicals, Inc.^{(2) (3) (4) (12)}	Chemicals, Plastics & Rubber		L + 8.75% (1.00% Floor)		2/5/2022		500		491		497		0.32

*Second Lien Debt Total*								$	10,467	$	10,415		6.69	%

Total Investments—non-controlled/non-affiliated								$	291,008	$	286,181		183.98	%

(1)

Unless otherwise indicated, issuers of debt investments held by NFIC are domiciled in the United States. Under the Investment Company Act, the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of December 31, 2016, the Company does not “control” any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of December 31, 2016, the Company is not an “affiliated person” of any of these portfolio companies.

(2)

Variable rate loans to the portfolio companies bear interest at a rate that may be determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has provided the interest rate in effect as of December 31, 2016. As of December 31, 2016, all our LIBOR loans were indexed to the 90-day LIBOR rate at 1.00%, except for those loans as indicated in Note 12 below.

(3)	Loan includes interest rate floor feature.

(4)

Denotes that all or a portion of the assets are owned by the SPV. The SPV has entered into the SPV Credit Facility. The lenders of the SPV Credit Facility have a first lien security interest in substantially all of the assets of the SPV (see Note 5, Borrowings). Accordingly, such assets are not available to creditors of the Company.

(5)

Denotes that all or a portion of the assets are owned by the Company. The Company has entered into the Credit Facility. The lender of the Credit Facility has a first lien security interest in substantially all of the portfolio investments held by the Company (see Note 5, Borrowings). Accordingly, such assets are not available to creditors of the SPV.

(6)	Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of December 31, 2016

(dollar amounts in thousands)

(7)	Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements), pursuant to the Company’s valuation policy.

(8)

(9)

In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company is entitled to receive additional interest as a result of an agreement among lenders as follows: Dimensional Dental Management, LLC (4.54%), International Medical Group, Inc. (4.64%), Product Quest Manufacturing LLC (3.54%), PSI Services LLC (4.40%) and Reliant Pro Rehab, LLC (nil). Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments.

(10)	Loan was on non-accrual status as of December 31, 2016.

(11)	As of December 31, 2016, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans:


Investments—non controlled/non-affiliated	Type	Unused Fee			Par/Principal Amount		Fair Value
First Lien Debt—unfunded delayed draw and revolving term loans commitments
Captive Resources Midco, LLC	Revolver		0.50	%	$	268	$	—
Captive Resources Midco, LLC	Delayed Draw		1.25	%		446		(1	)
CIBT Holdings, Inc.	Delayed Draw		1.00	%		778		—
Dimensional Dental Management, LLC	Delayed Draw		1.00	%		350		(6	)
Direct Travel, Inc.	Delayed Draw		1.00	%		1,073		(3	)
Ministry Brands, LLC	Delayed Draw		1.00	%		1,292		(1	)
National Technical Systems, Inc.	Revolver		0.50	%		469		(23	)
National Technical Systems, Inc.	Delayed Draw		1.00	%		1,031		(38	)
OnCourse Learning Corporation	Revolver		0.50	%		95		—
PT Intermediate Holdings III, LLC (Parts Town)	Revolver		0.50	%		225		2
Superior Health Linens, LLC	Revolver		0.50	%		282		(2	)
Vetcor Professional Practices, LLC	Delayed Draw		1.00	%		582		3
Winchester Electronics Corporation	Delayed Draw		1.00	%		417		1

Total unfunded commitments					$	7,308	$	(68	)

(12)	As of December 31, 2016, this LIBOR loan was indexed to the 30-day LIBOR rate at 0.77%.

As of December 31, 2016, investments—non-controlled/non-affiliated, at fair value consisted of the following:


Type—% of Fair Value	Amortized Cost		Fair Value		% of Fair Value
First Lien Debt	$	280,541	$	275,766		96.36	%
Second Lien Debt		10,467		10,415		3.64

Total	$	291,008	$	286,181		100.00	%


Type	Amortized Cost		Fair Value		% of Fair Value
Floating Rate	$	288,558	$	283,609		99.10	%
Fixed Rate		2,450		2,572		0.90

Total	$	291,008	$	286,181		100.00	%

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

As of December 31, 2016

(dollar amounts in thousands)

The industry composition of investments—non-controlled/non-affiliated at fair value as of December 31, 2016 was as follows:


Industry	Amortized Cost		Fair Value		% of Fair Value
Aerospace & Defense	$	12,378	$	12,136		4.24	%
Automotive		13,670		13,771		4.81
Banking, Finance, Insurance & Real Estate		25,467		25,699		8.98
Business Services		31,767		28,635		10.00
Capital Equipment		11,124		11,234		3.93
Chemicals, Plastics & Rubber		12,977		13,057		4.57
Construction & Building		4,250		4,292		1.50
Consumer Services		15,627		15,948		5.57
Containers, Packaging & Glass		16,228		15,702		5.49
Durable Consumer Goods		12,293		12,407		4.34
Energy: Electricity		7,234		7,240		2.53
Energy: Oil & Gas		3,116		3,055		1.07
Environmental Industries		6,129		6,029		2.11
Forest Products & Paper		3,958		3,987		1.39
Healthcare & Pharmaceuticals		21,972		22,178		7.75
High Tech Industries		24,053		24,177		8.45
Hotel, Gaming & Leisure		4,890		4,782		1.67
Media: Advertising, Printing & Publishing		11,891		11,986		4.19
Metals & Mining		3,410		3,419		1.19
Non-durable Consumer Goods		9,366		8,217		2.87
Retail		4,750		4,729		1.65
Software		1,235		1,252		0.44
Telecommunications		16,276		16,292		5.69
Transportation: Cargo		6,609		6,590		2.30
Transportation: Consumer		4,177		4,211		1.47
Wholesale		6,161		5,156		1.80

Total	$	291,008	$	286,181		100.00	%

The geographical composition of investments—non-controlled/non-affiliated at fair value as of December 31, 2016 was as follows:


Geography	Amortized Cost		Fair Value		% of Fair Value
United Kingdom	$	5,919	$	5,871		2.05	%
United States		285,089		280,310		97.95	%

Total	$	291,008	$	286,181		100.00	%

The accompanying notes are an integral part of these consolidated financial statements.

NF INVESTMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

As of March 31, 2017

(dollar amounts in thousands, except per share data)

1. ORGANIZATION

NF Investment Corp. (together with its consolidated subsidiaries, “we,” “us,” “our,” “NFIC” or the “Company”) is a Maryland corporation formed on November 1, 2012, and structured as an externally managed, non-diversified closed-end investment company. The Company is managed by its investment adviser, Carlyle GMS Investment Management L.L.C. (“CGMSIM” or “Investment Adviser”), a wholly owned subsidiary of The Carlyle Group L.P. The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”). In addition, the Company has elected to be treated, and intends to continue to comply with the requirements to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the “Code”).

The Company’s investment objective is to generate current income and capital appreciation primarily through debt investments in U.S. middle market companies, which the Company defines as companies with approximately $10 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”), which the Company believes is a useful proxy for cash flow. The Company seeks to achieve its investment objective primarily through direct originations of secured debt, including first lien senior secured loans (which may include stand-alone first lien loans, first lien/last out loans and “unitranche” loans) and second lien senior secured loans (collectively, “Middle Market Senior Loans”), subject to, in the case of second lien senior secured loans, a limit of 10% of the Company’s total assets. In addition, the Company may invest up to 10% of its total assets in high yield securities whose risk profile, as determined at the sole discretion of the Investment Adviser, is similar to or better than the risk profile of Middle Market Senior Loans. The Middle Market Senior Loans are generally made to private U.S. middle market companies that are, in many cases, controlled by private equity firms. The Company expects that the composition of its portfolio will change over time given the Investment Adviser’s view on, among other things, the economic and credit environment (including with respect to interest rates) in which the Company is operating.

On August 6, 2013, the Company completed its initial closing of capital commitments (the “Initial Closing”) and subsequently commenced substantial investment operations.

NFIC is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. NFIC expects to remain an emerging growth company because it does not intend to pursue an initial public offering.

The Company is externally managed by the Investment Adviser, an investment adviser registered under the Investment Advisers Act of 1940, as amended. Carlyle GMS Finance Administration L.L.C. (the “Administrator”) provides the administrative services necessary for the Company to operate. Both the Investment Adviser and the Administrator are wholly owned subsidiaries of Carlyle Investment Management L.L.C., a subsidiary of The Carlyle Group L.P. “Carlyle” refers to The Carlyle Group L.P. and its affiliates and its consolidated subsidiaries (other than portfolio companies of its affiliated funds), a global alternative asset manager publicly traded on NASDAQ Global Select Market under the symbol “CG”. Refer to the sec.gov website for further information on Carlyle.

NFIC SPV LLC (the “SPV”) is a Delaware limited liability company that was formed on June 18, 2013. The SPV invests in first and second lien senior secured loans. The SPV is a wholly-owned subsidiary of the Company and is consolidated in these consolidated financial statements commencing from the date of its formation.

Upon the earlier of August 6, 2018 and the completion of an initial public offering by TCG BDC, Inc. (f/k/a “Carlyle GMS Finance, Inc.”) (“TCG BDC”) (a BDC managed by the Investment Adviser) that results in an unaffiliated public float of at least 15% of its aggregate capital commitments (a “Qualified IPO”), the Board of Directors (subject to any necessary stockholder approvals and applicable requirements of the Investment Company Act) will use its best efforts to wind down and/or liquidate and dissolve the Company. These efforts may include cash tender offers from time to time as proceeds become available. Refer to sec.gov website for further information on TCG BDC.

As a BDC, the Company is required to comply with certain regulatory requirements. As part of these requirements, the Company must not acquire any assets other than “qualifying assets” specified in the Investment Company Act unless, at the time the acquisition is made, at least 70% of its total assets are qualifying assets (with certain limited exceptions).

To qualify as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements and timely distribute to its stockholders generally at least 90% of its investment company taxable income, as defined by the Code, for each year. Pursuant to this election, the Company generally does not have to pay corporate level taxes on any income that it distributes to stockholders, provided that the Company satisfies those requirements.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“US GAAP”). The Company is an investment company for the purposes of accounting and financial reporting in accordance with Accounting Standards Update (“ASU”) 2013-08, Financial Services—Investment Companies (“ASU 2013-08”): Amendments to the Scope, Measurement and Disclosure Requirements. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the SPV. All significant intercompany balances and transactions have been eliminated. US GAAP for an investment company requires investments to be recorded at fair value. The carrying value for all other assets and liabilities approximates their fair value.

The interim financial statements have been prepared in accordance with US GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X. Accordingly, certain disclosures accompanying the annual consolidated financial statements prepared in accordance with US GAAP are omitted. In the opinion of management, all adjustments considered necessary for the fair presentation of consolidated financial statements for the interim period presented have been included. These adjustments are of a normal, recurring nature. This Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2016. The results of operations for the three month period ended March 31, 2017 are not necessarily indicative of the operating results to be expected for the full year.

Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on management fees involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements. Actual results could differ from these estimates and such differences could be material.

Investments

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the accompanying Consolidated Statements of Operations reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. See Note 3 for further information about fair value measurements.

Cash and cash equivalents

Cash and cash equivalents consist of demand deposits and highly liquid investments (e.g., money market funds, U.S. treasury notes) with original maturities of three months or less. Cash equivalents are carried at amortized cost, which approximates fair value. The Company’s cash and cash equivalents are held with two large financial institutions and cash held in such financial institutions may, at times, exceed the Federal Deposit Insurance Corporation insured limit.

Revenue Recognition

Interest from Investments and Realized Gain/Loss on Investments

Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. At time of exit, the realized gain or loss on an investment is the difference between the amortized cost at time of exit and the cash received at exit using the specific identification method.

The Company may have loans in its portfolio that contain payment-in-kind (“PIK”) provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. As of March 31, 2017, the fair value of the loan in the portfolio with PIK provisions was $3,046, which represents approximately 1.1% of total investments at fair value. For the three month period ended March 31, 2017, there was no PIK interest accrued. As of December 31, 2016, no loans in the portfolio contained PIK provisions.

Other Income

Other income may include income such as consent, waiver, amendment, syndication and prepayment fees associated with the Company’s investment activities as well as any fees for managerial assistance services rendered by the Company to the portfolio companies. Such fees will be recognized as income when earned or the services are rendered. The Company may receive fees for guaranteeing the outstanding debt of a portfolio company. Such fees will be amortized into other income over the life of the guarantee. The unamortized amount, if any, is included in other assets in the accompanying Consolidated Statements of Assets and Liabilities.

Non-Accrual Income

paid current and, in management’s judgment, are likely to remain current. Management may not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. As of March 31, 2017, the fair value of the loan in the portfolio on non-accrual status was $3,045, which represents approximately 1.1% of total investments at fair value. The remaining first and second lien debt investments were performing and current on their interest payments as of March 31, 2017. All first and second lien debt investments were performing and current on their interest payments as of March 31, 2016.

SPV Credit Facility and Credit Facility Related Costs, Expenses and Deferred Financing Costs (See Note 5, Borrowings)

Interest expense and unused commitment fees on the SPV Credit Facility and Credit Facility are recorded on an accrual basis. Unused commitment fees are included in credit facility fees in the accompanying Consolidated Statements of Operations.

The SPV Credit Facility and Credit Facility are recorded at carrying value, which approximates fair value.

Deferred financing costs include capitalized expenses related to the closing or amendments of the SPV Credit Facility and Credit Facility. Amortization of deferred financing costs for each credit facility is computed on the straight-line basis over the respective term of each credit facility, except for a portion that was accelerated in connection with the amendment of the SPV Credit Facility as described in Note 5. The unamortized balance of such costs is included in deferred financing costs in the accompanying Consolidated Statements of Assets and Liabilities. The amortization of such costs is included in credit facility fees in the accompanying Consolidated Statements of Operations.

Organization and Offering Costs

The Company agreed to reimburse the Investment Adviser for initial organization and offering costs incurred on behalf of the Company up to $750. As of March 31, 2017 and December 31, 2016, $663 of organization and offering costs had been incurred by the Company since inception. The $663 of incurred organization and offering costs are allocated to all stockholders based on their respective capital commitment and are re-allocated amongst all stockholders at the time of each capital drawdown subsequent to the Initial Closing. The Company’s organization costs incurred are expensed and the offering costs are charged against equity when incurred.

Income Taxes

For federal income tax purposes, the Company has elected to be treated as a RIC under the Code, and intends to make the required distributions to its stockholders as specified therein. In order to qualify as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute.

The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

In addition, based on the excise distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income

(both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding year. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed. The Company intends to make sufficient distributions each taxable year to satisfy the excise distribution requirements.

The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely than not” to be sustained by the applicable tax authority. All penalties and interest associated with income taxes, if any, are included in income tax expense.

The SPV is a disregarded entity for tax purposes and is consolidated with the tax return of the Company.

Capital Calls and Dividends and Distributions to Common Stockholders

The Company records the shares issued in connection with capital calls as of the effective date of the capital call. To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its common stockholders. Dividends and distributions to common stockholders are recorded on the record date and paid in cash. The amount to be distributed is determined by the Board of Directors each quarter and is generally based upon the taxable earnings estimated by management and available cash. Net realized capital gains, if any, are generally distributed at least annually, although the Company may decide to retain such capital gains for investment.

Functional Currency

The functional currency of the Company is the U.S. Dollar and all transactions were in U.S. Dollars.

3. FAIR VALUE MEASUREMENTS

The Company applies fair value accounting in accordance with the terms of Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. The Company values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e., “consensus pricing”). When doing so, the Company determines whether the quote obtained is sufficient according to US GAAP to determine the fair value of the security. The Company may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.

Securities/instruments that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or the Company’s Board of Directors, does not represent fair value shall each be valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment and include comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses. The process generally used to determine the applicable value is as follows: (i) the value of each portfolio company or investment is initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments, a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs is used to determine a preliminary value, which is also

reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of members of senior management; (iii) the Board of Directors engages a third-party valuation firm to provide positive assurance on portions of the Middle Market Senior Loans portfolio each quarter (such that each non-traded investment is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of management’s preliminary valuation and conclusion on fair value; (iv) the Audit Committee of the Board of Directors (the “Audit Committee”) reviews the assessments of the Investment Adviser and the third-party valuation firm and provides the Board of Directors with any recommendations with respect to changes to the fair value of each investment in the portfolio; and (v) the Board of Directors discusses the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.

All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:

•

the nature and realizable value of any collateral;

•

call features, put features and other relevant terms of debt;

•

the portfolio company’s leverage and ability to make payments;

•

the portfolio company’s public or private credit rating;

•

the portfolio company’s actual and expected earnings and discounted cash flow;

•

prevailing interest rates and spreads for similar securities and expected volatility in future interest rates;

•

the markets in which the portfolio company does business and recent economic and/or market events; and

•

comparisons to comparable transactions and publicly traded securities.

Investment performance data utilized are the most recently available financial statements and compliance certificate received from the portfolio companies as of the measurement date which in many cases may reflect a lag in information.

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 the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the consolidated financial statements as of March 31, 2017 and December 31, 2016.

US GAAP establishes a hierarchical disclosure framework which ranks the level of observability of market price inputs used in measuring investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

Investments measured and reported at fair value are classified and disclosed based on the observability of inputs used in determination of fair values, as follows:

•

Level 1—inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date. The types of financial instruments in Level 1 generally include unrestricted securities, including equities and derivatives, listed in active markets. The Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

•

Level 2—inputs to the valuation methodology are either directly or indirectly observable as of the reporting date and are those other than quoted prices in active markets. The type of financial instruments in this category generally includes less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

•

Level 3—inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are in this category generally include investments in privately-held entities, collateralized loan obligations (“CLOs”), and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Investment Adviser’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur. For the three month periods ended March 31, 2017 and 2016, there were no transfers between levels.

The following tables summarize the Company’s investments measured at fair value on a recurring basis by the above fair value hierarchy levels as of March 31, 2017 and December 31, 2016:


	March 31, 2017
	Level I		Level II		Level III		Total
Assets
First Lien Debt		—	$	1,500	$	257,300	$	258,800
Second Lien Debt		—		—		8,465		8,465

Total		—	$	1,500	$	265,765	$	267,265


	December 31, 2016
	Level I		Level II		Level III		Total
Assets
First Lien Debt		—	$	2,572	$	273,194	$	275,766
Second Lien Debt		—		—		10,415		10,415

Total		—	$	2,572	$	283,609	$	286,181

The changes in the Company’s investments at fair value for which the Company has used Level 3 inputs to determine fair value and net change in unrealized appreciation (depreciation) included in earnings for Level 3 investments still held are as follows:


	Financial Assets For the three month period ended March 31, 2017
	First Lien Debt			Second Lien Debt			Total
Balance, beginning of period	$	273,194		$	10,415		$	283,609
Purchases		20,059			—			20,059
Sales		—			—			—
Paydowns		(35,685	)		(2,001	)		(37,686	)
Realized gains (losses)		(2,660	)		—			(2,660	)
Accretion of discount		595			20			615
Net change in unrealized appreciation (depreciation)		1,797			31			1,828

Balance, end of period	$	257,300		$	8,465		$	265,765

Net change in unrealized appreciation (depreciation) included in earnings related to investments still held as of March 31, 2017 included in net change in unrealized appreciation (depreciation) on investments non-controlled/non-affiliated on the Consolidated Statements of Operations	$	(1,099	)	$	65		$	(1,034	)


	Financial Assets For the three month period ended March 31, 2016
	First Lien Debt			Second Lien Debt			Total
Balance, beginning of period	$	218,977		$	22,912		$	241,889
Purchases		10,540			—			10,540
Sales		(3,185	)		—			(3,185	)
Paydowns		(996	)		—			(996	)
Realized gains (losses)		10			—			10
Accretion of discount		133			6			139
Net change in unrealized appreciation (depreciation)		(1,974	)		(456	)		(2,430	)

Balance, end of period	$	223,505		$	22,462		$	245,967

Net change in unrealized appreciation (depreciation) included in earnings related to investments still held as of March 31, 2016 included in net change in unrealized appreciation (depreciation) on investments non-controlled/non-affiliated on the Consolidated Statements of Operations	$	(2,021	)	$	(456	)	$	(2,477	)

The Company generally uses the following framework when determining the fair value of investments that are categorized as Level 3:

Investments in debt securities are initially evaluated to determine whether the enterprise value of the portfolio company is greater than the applicable debt. The enterprise value of the portfolio company is estimated using a market approach and an income approach. The market approach utilizes market value (EBITDA) multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The Company carefully considers numerous factors when selecting the appropriate companies whose multiples are used to value its portfolio companies. These factors include, but are not limited to, the type of organization, similarity to the business being valued, relevant risk factors, as well as size, profitability and growth expectations. The income approach typically uses a discounted cash flow analysis of the portfolio company.

Investments in debt securities that do not have sufficient coverage through the enterprise value analysis are valued based on an expected probability of default and discount recovery analysis.

Investments in debt securities with sufficient coverage through the enterprise value analysis are generally valued using a discounted cash flow analysis of the underlying security. Projected cash flows in the discounted cash flow typically represent the relevant security’s contractual interest, fees and principal payments plus the assumption of full principal recovery at the security’s expected maturity date. The discount rate to be used is determined using an average of two market-based methodologies. Investments in debt securities may also be valued using consensus pricing.

The following tables summarize the quantitative information related to the significant unobservable inputs for Level 3 instruments which are carried at fair value as of March 31, 2017 and December 31, 2016:


	Fair Value as of March 31, 2017		Valuation Techniques	Significant Unobservable Inputs	Range
	Fair Value as of March 31, 2017		Valuation Techniques	Significant Unobservable Inputs	Low			High			Weighted Average
Investments in First Lien Debt	$	228,533	Discounted Cash Flow	Discount Rate		4.13	%		16.25	%		6.98	%
		27,995	Consensus Pricing	Indicative Quotes		65.13			101.00			95.43
		772	Income Approach	Discount Rate		19.53			19.53			19.53
			Market Approach	Comparable Multiple		4.06x			4.51x			4.28x

Total First Lien Debt	$	257,300

Investments in Second Lien Debt	$	7,888	Discounted Cash Flow	Discount Rate		8.52	%		11.01	%		9.64	%
		577	Consensus Pricing	Indicative Quotes		100.75			100.75			100.75

Total Second Lien Debt	$	8,465

Total Debt	$	265,765

Total Level 3 Investments	$	265,765


	Fair Value as of December 31, 2016		Valuation Techniques	Significant Unobservable Inputs	Range
	Fair Value as of December 31, 2016		Valuation Techniques	Significant Unobservable Inputs	Low			High			Weighted Average
Investments in First Lien Debt	$	233,006	Discounted Cash Flow	Discount Rate		4.50	%		16.33	%		6.96	%
		40,188	Consensus Pricing	Indicative Quotes		40.75			106.36			96.10

Total First Lien Debt	$	273,194

Investments in Second Lien Debt	$	7,172	Discounted Cash Flow	Discount Rate		8.56	%		11.05	%		9.60	%
		3,243	Consensus Pricing	Indicative Quotes		83.17			100.88			96.70

Total Second Lien Debt	$	10,415

Total Debt	$	283,609

Total Level 3 Investments	$	283,609

The significant unobservable inputs used in the fair value measurement of the Company’s investments in first and second lien debt securities are discount rates and indicative quotes. Significant increases in discount rates would result in a significantly lower fair value measurement. Significant decreases in indicative quotes in isolation may result in a significantly lower fair value measurement.

Financial instruments disclosed but not carried at fair value

The following table presents the carrying value and fair value of the Company’s secured borrowings disclosed but not carried at fair value as of March 31, 2017 and December 31, 2016:


	March 31, 2017				December 31, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
Secured borrowings	$	113,084	$	113,084	$	130,427	$	130,427

Total	$	113,084	$	113,084	$	130,427	$	130,427

The carrying values of the secured borrowings approximate their respective fair values and are categorized as Level 3 within the hierarchy. Secured borrowings are valued generally using discounted cash flow analysis. The significant unobservable inputs used in the fair value measurement of the Company’s secured borrowings are discount rates. Significant increases in discount rates would result in a significantly lower fair value measurement.

The carrying value of other financial assets and liabilities approximates their fair value based on the short term nature of these items.

4. RELATED PARTY TRANSACTIONS

Investment Advisory Agreement

On July 10, 2013, the Company’s Board of Directors, including a majority of the directors who are not “interested persons” as defined in Section 2(a)(19) of the Investment Company Act (the “Independent Directors”), approved an investment advisory agreement (the “Investment Advisory Agreement”) between the Company and the Investment Adviser in accordance with, and on the basis of an evaluation satisfactory to such directors as required by, Section 15(c) of the Investment Company Act. The initial term of the Investment Advisory Agreement is two years from July 10, 2013 and, unless terminated earlier, the Investment Advisory Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by the vote of the Board of Directors and by the vote of a majority of the Independent Directors. On March 20, 2017, the Company’s Board of Directors, including a majority of the Independent Directors, approved the continuance of the Investment Advisory Agreement for a one year period. The Investment Advisory Agreement will automatically terminate in the event of an assignment and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party. Subject to the overall supervision of the Board of Directors, the Investment Adviser provides investment advisory services to the Company. For providing these services, the Investment Adviser receives management fees from the Company.

The management fee is calculated and payable quarterly in arrears at an annual rate of 0.25% of the average value of the gross assets of the Company at the end of the two most recently completed fiscal quarters, excluding any cash and cash equivalents and including assets acquired through the incurrence of debt from use of the SPV Credit Facility and Credit Facility (see Note 5, Borrowings). For purposes of this calculation, cash and cash equivalents include any temporary investments in cash-equivalents, U.S. government securities and other high quality investment grade debt investments that mature in 12 months or less from the date of investment. The management fee for any partial quarter is prorated.

For the three month periods ended March 31, 2017 and 2016, management fees were $171 and $154, respectively, which were included in management fees in the accompanying Consolidated Statements of Operations.

As of March 31, 2017 and December 31, 2016, $351 and $180, respectively, was included in management fees payable in the accompanying Consolidated Statements of Assets and Liabilities.

On July 10, 2013, the Investment Adviser entered into a personnel agreement with The Carlyle Group Employee Co., L.L.C. (“Carlyle Employee Co.”), an affiliate of the Investment Adviser, pursuant to which Carlyle Employee Co. provides the Investment Adviser with access to investment professionals.

Administration Agreement

On July 10, 2013, the Company’s Board of Directors approved an administration agreement (the “Administration Agreement”) between the Company and the Administrator. Pursuant to the Administration Agreement, the Administrator provides services and receives reimbursements equal to an amount that reimburses the Administrator for its costs and expenses and the Company’s allocable portion of overhead incurred by the Administrator in performing its obligations under the Administration Agreement, including the Company’s allocable portion of the compensation paid to or compensatory distributions received by the Company’s officers (including the Chief Compliance Officer and Chief Financial Officer) and respective staff who provide services to the Company, operations staff who provide services to the Company, and any internal audit staff, to the extent internal audit performs a role in the Company’s Sarbanes-Oxley Act internal control assessment. Reimbursement under the Administration Agreement occurs quarterly in arrears.

The initial term of the Administration Agreement is two years from July 10, 2013 and, unless terminated earlier, the Administration Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board of Directors or by a majority vote of the outstanding voting securities of the Company and (ii) the vote of a majority of the Company’s Independent Directors. On March 20, 2017, the Company’s Board of Directors, including a majority of the Independent Directors, approved the continuance of the Administration Agreement for a one year period. The Administration Agreement may not be assigned by a party without the consent of the other party and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party.

For the three month periods ended March 31, 2017 and 2016, the Company incurred $48 and $45, respectively, in fees under the Administrative Agreement, which were included in administrative service fees in the accompanying Consolidated Statements of Operations. As of March 31, 2017 and December 31, 2016, $28 and $34, respectively, was unpaid and included in administrative service fees payable in the accompanying Consolidated Statements of Assets and Liabilities.

Sub-Administration Agreements

On July 10, 2013, the Administrator entered into sub-administration agreements with Carlyle Employee Co. and CELF Advisers LLP (“CELF”) (the “Carlyle Sub-Administration Agreements”). Pursuant to the Carlyle Sub-Administration Agreements, Carlyle Employee Co. and CELF provide the Administrator with access to personnel.

On July 10, 2013, the Administrator entered into a sub-administration agreement with State Street Bank and Trust Company (“State Street” and, such agreement, the “State Street Sub-Administration Agreement” and, together with the Carlyle Sub-Administration Agreements, the “Sub-Administration Agreements”). On March 11, 2015, the Company’s Board of Directors, including a majority of the Independent Directors, approved an amendment to the State Street Sub-Administration Agreement. The initial term of the State Street Sub-Administration Agreement ends on April 1, 2017 and, unless terminated earlier, the State Street Sub-Administration Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board of Directors or by the vote of a majority of the outstanding voting securities of the Company and (ii) the vote of a majority of the Company’s Independent Directors. The State Street Sub-Administration Agreement may be terminated upon at least 60 days’ written notice and without penalty by the vote of a majority of the outstanding securities of the Company, or by the vote of the Board of Directors or by either party to the State Street Sub-Administration Agreement.

For the three month periods ended March 31, 2017 and 2016, fees incurred in connection with the State Street Sub-Administration Agreement, which amounted to $60 and $60, respectively, were included in other general and administrative in the accompanying Consolidated Statements of Operations. As of March 31, 2017 and December 31, 2016, $60 and $60, respectively, was unpaid and included in other accrued expenses and liabilities in the accompanying Consolidated Statements of Assets and Liabilities.

Placement Fees

On July 10, 2013, the Company entered into a placement fee arrangement with TCG Securities, L.L.C. (“TCG”), a licensed broker-dealer and an affiliate of the Investment Adviser, which may require stockholders to pay a placement fee to TCG for TCG’s services.

For the three month periods ended March 31, 2017 and 2016, TCG did not earn or receive any placement fees from the Company’s stockholders in connection with the issuance or sale of the Company’s common stock.

Board of Directors

The Company’s Board of Directors currently consists of five members, three of whom are Independent Directors. The Board of Directors has established an Audit Committee consisting of its Independent Directors and a Pricing Committee of the Board of Directors (the “Pricing Committee”), and may establish additional committees in the future. For the three month periods ended March 31, 2017 and 2016, the Company incurred $17 and $61, respectively, in fees and expenses associated with its Independent Directors and the Audit Committee. As of March 31, 2017 and December 31, 2016, $0 was unpaid and included in other accrued expenses and liabilities in the accompanying Consolidated Statements of Assets and Liabilities. As of March 31, 2017 and December 31, 2016, current directors had no capital commitments to the Company.

5. BORROWINGS

In accordance with the Investment Company Act, the Company is only allowed to borrow amounts such that its asset coverage, as defined in the Investment Company Act, is at least 200% after such borrowing. As of March 31, 2017 and December 31, 2016, asset coverage was 237.23% and 219.26%, respectively. During the three month periods ended March 31, 2017 and 2016, there were secured borrowings of $13,200 and $2,500, respectively, under the SPV Credit Facility and Credit Facility and repayments of $30,543 and $9,827, respectively, under the SPV Credit Facility and Credit Facility. As of March 31, 2017 and December 31, 2016, there was $113,084 and $130,427, respectively, in secured borrowings outstanding.

SPV Credit Facility

The SPV closed on September 12, 2013 on the SPV Credit Facility, which was subsequently amended on July 25, 2014 and further amended on November 13, 2015 (the “Second Amendment”). Advances under the SPV Credit Facility first became available once the SPV held at least $10,500 of minimum equity in its assets. The SPV Credit Facility provides for secured borrowings during the applicable revolving period up to an amount equal to the lesser of $120,000 (the borrowing base as calculated pursuant to the terms of the SPV Credit Facility) and the amount of net cash proceeds and unpledged capital commitments the Company has received, with an accordion feature that can, subject to certain conditions, increase the aggregate maximum credit commitment up to an amount not to exceed $262,500, subject to restrictions imposed on borrowings under the Investment Company Act and certain restrictions and conditions set forth in the SPV Credit Facility, including adequate collateral to support such borrowings. The SPV Credit Facility has a revolving period through the earlier of May 2, 2018 and the completion of a Qualified IPO by TCG BDC (with two one-year extension options, subject to the SPV’s and the lenders’ consent) and a maturity date of the earlier of May 2, 2021 or the completion of a Qualified IPO by TCG BDC (extendable in connection with an extension of the revolving period). Base rate borrowings under the SPV Credit Facility bear interest initially at the applicable commercial

paper rate (if the lender is a conduit lender) or LIBOR (or, if applicable, a rate based on the prime rate or federal funds rate) plus 1.65% per year during the revolving period, with pre-determined future interest rate increases of 1.25%-2.15% over the three years following the end of the revolving period. The SPV is also required to pay an undrawn commitment fee of between 0.25% and 1.00% per year depending on the usage of the SPV Credit Facility. Payments under the SPV Credit Facility are made quarterly. The lenders have a first lien security interest on substantially all of the assets of the SPV.

As part of the SPV Credit Facility, the SPV is subject to limitations as to how borrowed funds may be used and the types of loans that are eligible to be acquired by the SPV including, but not limited to, restrictions on sector and geographic concentrations, loan size, payment frequency, tenor and minimum investment ratings (or estimated ratings). In addition, borrowed funds are intended to be used primarily to purchase first lien loan assets, and the SPV is limited in its ability to purchase certain other assets (including, but not limited to, second lien loans, covenant-lite loans, revolving and delayed draw loans and discount loans) and other assets are not permitted to be purchased (including, but not limited to paid-in-kind loans). The SPV Credit Facility has certain requirements relating to interest coverage, collateral quality and portfolio performance, including limitations on delinquencies and charge offs, certain violations of which could result in the immediate acceleration of the amounts due under the SPV Credit Facility. The SPV Credit Facility is also subject to a borrowing base that applies different advance rates to assets held by the SPV based generally on the fair market value of such assets. Under certain circumstances as set forth in the SPV Credit Facility, the Company could be obliged to repurchase loans from the SPV.

As of March 31, 2017 and December 31, 2016, the SPV was in compliance with all covenants and other requirements of the SPV Credit Facility.

Credit Facility

The Company closed on March 27, 2014 on the Credit Facility, which was subsequently amended on August 22, 2014, December 12, 2014 and further amended on August 31, 2016. The maximum principal amount of the Credit Facility is $50,000, subject to availability under the Credit Facility, which is based on certain advance rates multiplied by the value of the Company’s portfolio investments net of certain other indebtedness that the Company may incur in accordance with the terms of the Credit Facility. Proceeds of the Credit Facility may be used for general corporate purposes, including the funding of portfolio investments. Maximum capacity under the Credit Facility may be increased to $125,000 through the exercise by the Company of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing. The Credit Facility includes a $10,000 limit for swingline loans and a $5,000 limit for letters of credit. The Company may borrow amounts in U.S. dollars, subject to the satisfaction of certain conditions, including certain collateral quality tests. The availability period under the Credit Facility will terminate on May 2, 2018 or earlier under certain conditions specified in the Credit Facility (the “Commitment Termination Date”) and the Credit Facility will mature on March 27, 2020 (the “Maturity Date”). During the period from the Commitment Termination Date to the Maturity Date, the Company will be obligated to make mandatory prepayments under the Credit Facility out of the proceeds of certain asset sales, other recovery events and equity and debt issuances. Amounts drawn under the Credit Facility, including amounts drawn in respect of letters of credit, will bear interest at either (a) LIBOR plus an applicable spread of (i) prior to the Commitment Termination Date, 2.25% and (ii) following the Commitment Termination Date, 2.50%, or (b) an “alternative base rate” (which is the highest of a prime rate, the federal funds effective rate plus 0.50%, or one month LIBOR plus 1.00%) plus an applicable spread of (i) prior to the Commitment Termination Date, 1.00% and (ii) following the Commitment Termination Date, 1.50%. The Company may elect either the LIBOR or the “alternative base rate” at the time of drawdown, and loans may be converted from one rate to another at any time, subject to certain conditions. The Company also pays a fee of 0.50% on undrawn amounts under the Credit Facility and, in respect of each undrawn letter of credit, a fee and interest rate equal to the then-applicable margin under the Credit Facility while the letter of credit is outstanding.

Subject to certain exceptions, the Credit Facility is secured by a first lien security interest in substantially all of the portfolio investments held by the Company and the Company’s unfunded investor equity capital commitments (provided that the amount of unfunded capital commitments ultimately available to the lenders is limited to $34,000). The pledge of unfunded investor equity capital commitments was subject to release upon the earlier of (a) the date eligible investments held by the Company are equal to or greater than $62,500 and the Credit Facility’s borrowing base equity test is satisfied and (b) the date the borrower has received equity capital contributions in an amount equal to $34,000. Such eligible investments and shareholder equity thresholds have been satisfied as of March 31, 2017 and December 31, 2016. The Credit Facility includes customary covenants, including certain financial covenants related to asset coverage, shareholders’ equity, liquidity and interest coverage, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for senior secured revolving credit facilities of this nature.

As of March 31, 2017 and December 31, 2016, the Company was in compliance with all covenants and other requirements of the Credit Facility.

Summary of Facilities

The Facilities consisted of the following as of March 31, 2017 and December 31, 2016:


	March 31, 2017
	Total Facility		Borrowings Outstanding		Unused Portion ⁽¹⁾		Amount Available⁽²⁾
SPV Credit Facility	$	120,000	$	83,084	$	36,916	$	5,183
Credit Facility		50,000		30,000		20,000		16,841

Total	$	170,000	$	113,084	$	56,916	$	22,024


	December 31, 2016
	Total Facility		Borrowings Outstanding		Unused Portion ⁽¹⁾		Amount Available⁽²⁾
SPV Credit Facility	$	120,000	$	90,427	$	29,573	$	7,004
Credit Facility		50,000		40,000		10,000		10,000

Total	$	170,000	$	130,427	$	39,573	$	17,004

(1)	The unused portion is the amount upon which commitment fees are based.

(2)	Available for borrowing based on the computation of collateral to support the borrowings and subject to compliance with applicable covenants and financial ratios.

As of March 31, 2017 and December 31, 2016, $561 and $552, respectively, of interest expense, $19 and $19, respectively, of unused commitment fees and $45 and $45, respectively, of other fees were included in interest and credit facility fees payable. For the three month periods ended March 31, 2017 and 2016, the weighted average interest rate was 2.68% and 2.21%, respectively, and average principal debt outstanding was $122,534 and $116,959, respectively. As of March 31, 2017 and December 31, 2016, the weighted average interest rate was 2.78% and 2.62%, respectively, based on floating LIBOR rates.

For the three month periods ended March 31, 2017 and 2016, the components of interest expense and credit facility fees were as follows:


	For the three month periods ended
	March 31, 2017		March 31, 2016
Interest expense	$	820	$	655
Facility unused commitment fee		59		62
Amortization of deferred financing costs		124		94
Other fees		19		17

Total interest expense and credit facility fees	$	1,022	$	828

Cash paid for interest expense	$	811	$	593

6. COMMITMENTS AND CONTINGENCIES

A summary of significant contractual payment obligations was as follows as of March 31, 2017 and December 31, 2016:


	Secured Borrowings
Payment Due by Period	March 31, 2017		December 31, 2016
Less than 1 Year	$	—	$	—
1-3 Years		30,000		—
3-5 Years		83,084		130,427
More than 5 Years		—		—

Total	$	113,084	$	130,427

In the ordinary course of its business, the Company enters into contracts or agreements that contain indemnification or warranties. Future events could occur that lead to the execution of these provisions against the Company. The Company believes that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in the consolidated financial statements as of March 31, 2017 and December 31, 2016 for any such exposure.

As of March 31, 2017 and December 31, 2016, the Company had $190,077 in total capital commitments from stockholders, of which $28,541 was unfunded. As of March 31, 2017 and December 31, 2016, current directors had no capital commitments to the Company.

Upon the earlier of August 6, 2018 and the completion of a Qualified IPO by TCG BDC, investors will be released from any further obligation under their capital commitments to purchase additional shares of common stock, subject to certain exceptions contained in their investment subscription agreements.

The Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of the indicated dates:


	Principal Amount as of
	March 31, 2017		December 31, 2016
Unfunded delayed draw commitments	$	5,283	$	5,969
Unfunded revolving term loan commitments		2,271		1,339

Total unfunded commitments	$	7,554	$	7,308

7. NET ASSETS

The Company has the authority to issue 200,000,000 shares of common stock, $0.01 per share par value.

The following table summarizes capital activity during the three month period ended March 31, 2017:


	Common Stock				Capital in Excess of Par Value		Offering Costs			Accumulated Net Investment Income (Loss)			Accumulated Net Realized Gain (Loss) on Investments			Accumulated Net Unrealized Appreciation (Depreciation) on Investments			Total Net Assets
	Common Stock
	Shares		Amount
Balance, beginning of period		8,156,316	$	82	$	160,936	$	(45	)	$	(600	)	$	—		$	(4,827	)	$	155,546
Common stock issued		—		—		—		—			—			—			—			—
Net investment income (loss)		—		—		—		—			4,119			—			—			4,119
Net realized gain (loss) on investments—non-controlled/non-affiliated		—		—		—		—			—			(2,660	)		—			(2,660	)
Net change in unrealized appreciation (depreciation) on investments—non-controlled/non-affiliated		—		—		—		—			—			—			1,765			1,765
Dividends declared		—		—		—		—			(3,589	)		—			—			(3,589	)
Tax reclassification of stockholders’ equity in accordance with US GAAP		—		—		—		—			—			—			—			—

Balance, end of period		8,156,316	$	82	$	160,936	$	(45	)	$	(70	)	$	(2,660	)	$	(3,062	)	$	155,181

During the three month period ended March 31, 2016, the Company issued 415,364 shares for $8,000. The following table summarizes capital activity during the three month period ended March 31, 2016:


	Common Stock				Capital in Excess of Par Value		Offering Costs			Accumulated Net Investment Income (Loss)			Accumulated Net Realized Gain (Loss) on Investments		Accumulated Net Unrealized Appreciation (Depreciation) on Investments			Total Net Assets
	Shares		Amount		Capital in Excess of Par Value		Offering Costs			Accumulated Net Investment Income (Loss)			Accumulated Net Realized Gain (Loss) on Investments					Total Net Assets
Balance, beginning of period		6,864,244	$	69	$	135,956	$	(45	)	$	(638	)	$	53	$	(3,876	)	$	131,519
Common stock issued		415,364		4		7,996		—			—			—		—			8,000
Net investment income (loss)		—		—		—		—			3,159			—		—			3,159
Net realized gain (loss) on investments—non-controlled/non-affiliated		—		—		—		—			—			10		—			10
Net change in unrealized appreciation (depreciation) on investments—non-controlled/non-affiliated		—		—		—		—			—			—		(2,320	)		(2,320	)
Dividends declared		—		—		—		—			(3,203	)		—		—			(3,203	)

Balance, end of period		7,279,608	$	73	$	143,952	$	(45	)	$	(682	)	$	63	$	(6,196	)	$	137,165

During the three month period ended March 31, 2017, the Company did not issue any shares.

The following table summarizes total shares issued and proceeds received related to capital subscriptions for the Company’s common stock during the three month period ended March 31, 2016:


	Shares Issued		Proceeds Received
March 11, 2016		415,364	$	8,000

Total		415,364	$	8,000

Subscribed but unissued shares are presented in equity with a deduction of subscriptions receivable until cash is received for a subscription. There were no subscribed but unissued shares as of March 31, 2017 and December 31, 2016.

Subscription transactions during the three month period ended March 31, 2016 were executed at an offering price at a premium to net asset value due to the requirement to use prior quarter net asset value as offering price unless it would result in the Company selling shares of its common stock at a price below the current net asset value and also in order to effect a reallocation of organizational costs to subsequent investors. Such subscription transactions increased net asset value by $0.01 per share, for the three month period ended March 31, 2016.

As of March 31, 2017 and December 31, 2016, four stockholders represented 97.3% of total net assets.

The Company computes earnings per common share in accordance with ASC 260, Earnings Per Share. Basic earnings per common share were calculated by dividing net increase (decrease) in net assets resulting from operations attributable to the Company by the weighted-average number of common shares outstanding for the period.

Basic and diluted earnings per common share were as follows:


	For the three month periods ended
	March 31, 2017		March 31, 2016
Net increase (decrease) in net assets resulting from operations	$	3,224	$	849
Weighted-average common shares outstanding		8,156,316		6,960,097

Basic and diluted earnings per common share	$	0.40	$	0.12

The following table summarizes the Company’s dividends declared and payable since inception through the quarter ended March 31, 2017:


Date Declared	Record Date	Payment Date	Per Share Amount		Total Amount
March 13, 2014	March 31, 2014	April 14, 2014	$	0.04	$	128
June 26, 2014	June 30, 2014	July 14, 2014	$	0.12	$	383
September 12, 2014	September 18, 2014	October 9, 2014	$	0.24	$	825
December 19, 2014	December 29, 2014	January 26, 2015	$	0.27	$	1,247
March 11, 2015	March 13, 2015	April 17, 2015	$	0.30	$	1,645
June 24, 2015	June 30, 2015	July 22, 2015	$	0.35	$	2,191
September 24, 2015	September 24, 2015	October 22, 2015	$	0.40	$	2,563
December 29, 2015	December 29, 2015	January 22, 2016	$	0.47	$	3,226
March 10, 2016	March 14, 2016	April 22, 2016	$	0.44	$	3,203
June 8, 2016	June 8, 2016	July 22, 2016	$	0.44	$	3,203
September 28, 2016	September 28, 2016	October 24, 2016	$	0.44	$	3,589
December 29, 2016	December 29, 2016	January 24, 2017	$	0.56	$	4,567
March 20, 2017	March 20, 2017	April 24, 2017	$	0.44	$	3,589

8. CONSOLIDATED FINANCIAL HIGHLIGHTS

The following is a schedule of consolidated financial highlights for the three month periods ended March 31, 2017 and 2016:


	For the three month periods ended
	March 31, 2017			March 31, 2016
Per Share Data:
Net asset value per share, beginning of period	$	19.07		$	19.16
Net investment income (loss) ⁽¹⁾		0.51			0.45
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments		(0.11	)		(0.34	)

Net increase (decrease) in net assets resulting from operations		0.40			0.11

Dividends declared⁽²⁾		(0.44	)		(0.44	)
Effect of subscription offering price⁽³⁾		0.00			0.01

Net asset value per share, end of period	$	19.03		$	18.84

Number of shares outstanding, end of period		8,156,316			7,279,608
Total return⁽⁴⁾		2.10	%		0.63	%
Net assets, end of period	$	155,181		$	137,165
Ratio to average net assets ⁽⁵⁾:
Operating expenses		0.96	%		1.02	%
Net investment income (loss)		2.62	%		2.38	%
Interest expense and credit facility fees		0.65	%		0.62	%
Ratios/Supplemental Data:
Asset coverage, end of period		237.23	%		223.72	%
Portfolio turnover		7.32	%		1.70	%
Total committed capital, end of period	$	190,077		$	190,077
Ratio of total contributed capital to total committed capital, end of period		84.98	%		76.04	%
Weighted-average shares outstanding		8,156,316			6,960,097

(1)	Net investment income (loss) per share was calculated as net investment income (loss) for the period divided by the weighted average number of shares outstanding for the period.

(2)	Dividends declared per share was calculated as the sum of dividends declared during the period divided by the number of shares outstanding at each respective quarter-end date (refer to Note 7).

(3)	Increase is due to offering price of subscriptions during the period (refer to Note 7).

(4)

Total return (not annualized) is based on the change in net asset value per share during the period plus the declared dividends, divided by the beginning net asset value for the period. Total return for the three month periods ended March 31, 2017 and 2016 is inclusive of $0.00 and $0.01, respectively, per share increase in net asset value for the periods related to the offering price of subscriptions. Excluding the effects of the higher offering price of subscriptions, total return (not annualized) would have been 2.10% and 0.57%, respectively (refer to Note 7).

(5)	These ratios to average net assets have not been annualized.

9. LITIGATION

The Company may become party to certain lawsuits in the ordinary course of business. The Company does not believe that the outcome of current matters, if any, will materially impact the Company or its consolidated financial statements. As of March 31, 2017 and December 31, 2016, the Company was not subject to any material legal proceedings, nor, to the Company’s knowledge, is any material legal proceeding threatened against the Company.

In addition, portfolio investments of the Company could be the subject of litigation or regulatory investigations in the ordinary course of business. The Company does not believe that the outcome of any current contingent liabilities of its portfolio investments, if any, will materially affect the Company or these consolidated financial statements.

10. TAX

The Company has not recorded a liability for any uncertain tax positions pursuant to the provisions of ASC 740, Income Taxes, as of March 31, 2017 and December 31, 2016.

In the normal course of business, the Company is subject to examination by federal and certain state, local and foreign tax authorities. As of March 31, 2017 and December 31, 2016, the Company had filed tax returns and therefore is subject to examination.

The Company’s taxable income for each period is an estimate and will not be finally determined until the Company files its tax return for each year. Therefore, the final taxable income, and the taxable income earned in each period and carried forward for distribution in the following period, may be different than this estimate. The estimated tax character of dividends declared for the three month periods ended March 31, 2017 and 2016 was as follows:


	For the three month periods ended
	March 31, 2017		March 31, 2016
Ordinary income	$	3,589	$	3,203
Long term capital gains	$	—	$	—
Tax return of capital	$	—	$	—

11. SUBSEQUENT EVENTS

Subsequent events have been evaluated through the date the consolidated financial statements were issued. There have been no subsequent events that require recognition or disclosure through the date the consolidated financial statements were issued, except as disclosed below.

Subsequent to March 31, 2017, the Company borrowed $1,750 under the SPV Credit Facility to fund investment acquisitions. The Company also voluntarily repaid $9,773 under the SPV Credit Facility.

On May 3, 2017, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with TCG BDC, a Maryland corporation and an externally managed, non-diversified closed-end investment company that has elected to be regulated as a BDC under the Investment Company Act. Both the Company and TCG BDC are managed by the Investment Adviser. Pursuant to the Merger Agreement, the Company will merge with and into TCG BDC (the “Merger”) with TCG BDC as the surviving entity. The completion of the Merger is subject to the approval of a majority of the outstanding shares of the Company’s common stock and other customary closing conditions. While there can be no assurances as to the exact timing, or that the Merger will be completed at all, the Company expects to complete the Merger in June 2017. If the proposed Merger is consummated, the Company will cease to exist as a separate corporation, and each share of common stock of the Company will be converted into the right to receive a mixture of cash and shares of common stock of TCG BDC, par value $0.01 per share (the “Acquisition Shares” and together with such cash, the “Merger Consideration”), in accordance with the elections of the stockholders of the Company (under which at least 5% of the Merger Consideration received by each stockholder of the Company must be in the form of Acquisition Shares).

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

(dollar amounts in thousands, except per share data, unless otherwise indicated)

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

We have included or incorporated by reference in this Form 10-Q, and from time to time our management may make, “forward-looking statements”. These forward-looking statements are not historical facts, but instead relate to future events or the future performance or financial condition of NF Investment Corp. (together with its consolidated subsidiaries, “we,” “us,” “our,” “NFIC” or the “Company”). These statements are based on current expectations, estimates and projections about us, our current or prospective portfolio investments, our industry, our beliefs, and our assumptions. The forward-looking statements contained in this Form 10-Q and the documents incorporated by reference herein involve a number of risks and uncertainties, including statements concerning:

•

our, or our portfolio companies’, future business, operations, operating results or prospects;

•

the return or impact of current and future investments;

•

the impact of any protracted decline in the liquidity of credit markets on our business;

•

the impact of fluctuations in interest rates on our business;

•

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

•

our future operating results;

•

the impact of changes in laws, policies or regulations (including the interpretation thereof) affecting our operations or the operations of our portfolio companies;

•

the valuation of our investments in portfolio companies, particularly those having no liquid trading market;

•

our ability to recover unrealized losses;

•

market conditions and our ability to access alternative debt markets and additional debt and equity capital;

•

our contractual arrangements and relationships with third parties;

•

the general economy and its impact on the industries in which we invest;

•

the financial condition of and ability of our current and prospective portfolio companies to achieve their objectives;

•

competition with other entities and our affiliates for investment opportunities;

•

the speculative and illiquid nature of our investments;

•

the use of borrowed money to finance a portion of our investments;

•

our expected financings and investments;

•

the adequacy of our cash resources and working capital;

•

the costs associated with being a public entity;

•

the loss of key personnel;

•

the timing, form and amount of any dividend distributions;

•

the timing of cash flows, if any, from the operations of our portfolio companies;

•

the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments;

•

the ability of The Carlyle Group Employee Co., L.L.C. and CELF Advisors LLP to attract and retain highly talented professionals that can provide services to our investment adviser and administrator;

•

our ability to maintain our status as a business development company; and

•

our intent to satisfy the requirements of a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended.

We use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may,” “plans,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “targets,” “projects,” “outlook,” “potential,” “predicts” and variations of these words and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Our actual results and condition could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2016 and Part II, Item 1A of and elsewhere in this Form 10-Q.

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

OVERVIEW

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part I, Item 1 of this Form 10-Q “Financial Statements.” This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to those described in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2016 and Part II, Item 1A of this Form 10-Q “Risk Factors.” Our actual results could differ materially from those anticipated by such forward-looking statements due to factors discussed under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this Form 10-Q.

We are a Maryland corporation formed on November 1, 2012, and structured as an externally managed, non-diversified closed-end investment company. We have elected to be regulated as a BDC under the Investment Company Act. We have elected to be treated, and intend to continue to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code.

Our investment objective is to generate current income and capital appreciation primarily through debt investments in U.S. middle market companies, which we define as companies with approximately $10 million to $100 million of EBITDA. We seek to achieve our investment objective primarily through direct originations of Middle Market Senior Loans, subject to, in the case of second lien senior secured loans, a limit of 10% of our total assets. In addition, we may invest up to 10% of our total assets in high yield securities whose risk profile, as determined at the sole discretion of our Investment Adviser, is similar to or better than the risk profile of Middle Market Senior Loans. The Middle Market Senior Loans are generally made to private U.S. middle market companies that are, in many cases, controlled by private equity firms. We expect that the composition of our portfolio will change over time given our Investment Adviser’s view on, among other things, the economic and credit environment (including with respect to interest rates) in which we are operating.

We are externally managed by our Investment Adviser, an investment adviser registered under the Advisers Act. Our Administrator provides the administrative services necessary for us to operate. Both our Investment Adviser and our Administrator are wholly-owned subsidiaries of Carlyle Investment Management L.L.C., a subsidiary of Carlyle.

In conducting our investment activities, we believe that we benefit from the significant scale and resources of Carlyle, including our Investment Adviser and its affiliates. We have operated our business as a BDC since we began our investment activities in May 2013.

After the earlier of August 6, 2018 or the completion of a Qualified IPO by TCG BDC, our Board of Directors (subject to any necessary stockholder approvals and applicable requirements of the Investment Company Act) will use its best efforts to wind down and/or liquidate and dissolve us. These efforts may include cash tender offers from time to time as proceeds become available. Refer to sec.gov website for further information on TCG BDC.

Investments

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

Revenue

We generate revenue primarily in the form of interest income on debt investments we hold. In addition, we generate income from capital gains on the sales of loans and debt securities and various loan origination and other fees. Our debt investments generally have a stated term of five to eight years and generally bear interest at a floating rate usually determined on the basis of a benchmark such as LIBOR. Interest on these debt investments is generally paid quarterly. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments fluctuates significantly from period to period. Our portfolio activity also reflects the proceeds of sales of securities. We may also generate revenue in the form of commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees.

Expenses

Our primary operating expenses include the payment of: (i) management fees to our Investment Adviser pursuant to an investment advisory agreement (the “Investment Advisory Agreement”) between us and our Investment Adviser; (ii) costs and other expenses and our allocable portion of overhead incurred by our Administrator in performing its administrative obligations under an administration agreement (the “Administration Agreement”) between us and our Administrator; and (iii) other operating expenses as detailed below:

•

the costs associated with the Private Offering;

•

the costs of any other offerings of our common stock and other securities, if any;

•

calculating individual asset values and our net asset value (including the cost and expenses of any independent valuation firms);

•

expenses, including travel expenses, incurred by our Investment Adviser, or members of our Investment Adviser team managing our investments, or payable to third parties, performing due diligence on prospective portfolio companies and, if necessary, expenses of enforcing our rights;

•

management fees payable under our Investment Advisory Agreement;

•

certain costs and expenses relating to distributions paid on our shares;

•

administration fees payable under our Administration Agreement and sub-administration agreements, including related expenses;

•

debt service and other costs of borrowings or other financing arrangements;

•

the allocated costs incurred by our Investment Adviser in providing managerial assistance to those portfolio companies that request it;

•

amounts payable to third parties relating to, or associated with, making or holding investments;

•

the costs associated with subscriptions to data service, research-related subscriptions and expenses and quotation equipment and services used in making or holding investments;

•

transfer agent and custodial fees;

•

costs of hedging;

•

commissions and other compensation payable to brokers or dealers;

•

federal and state registration fees;

•

any U.S. federal, state and local taxes, including any excise taxes;

•

independent director fees and expenses;

•

costs of preparing financial statements and maintaining books and records, costs of preparing tax returns, costs of Sarbanes-Oxley Act compliance and attestation and costs of filing reports or other documents with the SEC (or other regulatory bodies), and other reporting and compliance costs, including registration and listing fees, and the compensation of professionals responsible for the preparation or review of the foregoing;

•

the costs of any reports, proxy statements or other notices to our stockholders (including printing and mailing costs), the costs of any stockholders’ meetings and the compensation of investor relations personnel responsible for the preparation of the foregoing and related matters;

•

the costs of specialty and custom software for monitoring risk, compliance and overall portfolio, including any development costs incurred prior to the filing of our election to be regulated as a BDC;

•

our fidelity bond;

•

directors and officers/errors and omissions liability insurance, and any other insurance premiums;

•

indemnification payments;

•

direct fees and expenses associated with independent audits, agency, consulting and legal costs; and

•

all other expenses incurred by us or our Administrator in connection with administering our business, including our allocable share of certain officers and their staff compensation.

We expect our general and administrative expenses to be relatively stable or to decline as a percentage of total assets during periods of asset growth and to increase during periods of asset declines.

PORTFOLIO AND INVESTMENT ACTIVITY

As of March 31, 2017, the fair value of our investments was approximately $267,265 comprised of 79 investments in 75 portfolio companies across 26 industries with 57 unique sponsors. As of December 31, 2016, the fair value of our investments was approximately $286,181 comprised of 85 investments in 80 portfolio companies across 26 industries and 57 unique sponsors.

Based on fair value as of March 31, 2017, our portfolio consisted of approximately 100% in secured debt (96.8% in first lien debt (including 5.5% in first lien/last out loans) and 3.2% in second lien debt). Based on fair value as of March 31, 2017, approximately 1% of our debt portfolio was invested in debt bearing a fixed interest rate and approximately 99% of our debt portfolio was invested in debt bearing a floating interest rate with an interest rate floor.

Based on fair value as of December 31, 2016, our portfolio consisted of approximately 100% in secured debt (96.4% in first lien debt (including 7.2% in first lien/last out loans) and 3.6% in second lien debt). Based on fair value as of December 31, 2016, approximately 1% of our debt portfolio was invested in debt bearing a fixed interest rate and approximately 99% of our debt portfolio was invested in debt bearing a floating interest rate with an interest rate floor.

Our investment activity for the three month periods ended March 31, 2017 and 2016 is presented below (information presented herein is at amortized cost unless otherwise indicated):


	For the three month periods ended
	March 31, 2017			March 31, 2016
Investments—non-controlled/non-affiliated:
Total investments—non-controlled/non-affiliated, beginning of period	$	291,008		$	248,159
New investments purchased		20,059			10,540
Net accretion of discount on investments		648			143
Net realized gain (loss) on investments		(2,660	)		10
Investments sold or repaid		(38,728	)		(4,181	)

Total Investments—non-controlled/non-affiliated, end of period	$	270,327		$	254,671

Principal amount of investments funded:
First Lien Debt	$	20,291		$	10,760
Second Lien Debt		—			—
Equity Investments		18			—

Total	$	20,309		$	10,760

Principal amount of investments sold or repaid:
First Lien Debt	$	(39,435	)	$	(4,181	)
Second Lien Debt		(2,000	)		—

Total	$	(41,435	)	$	(4,181	)

Number of new funded investments		13			8
Average amount of new funded investments	$	1,562		$	1,318
Percentage of new funded debt investments at floating interest rates		84	%		100	%
Percentage of new funded debt investments at fixed interest rates		16	%		0	%

As of March 31, 2017 and December 31, 2016, investments—non-controlled/non-affiliated consisted of the following:


	March 31, 2017				December 31, 2016
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
First Lien Debt	$	261,841	$	258,800	$	280,541	$	275,766
Second Lien Debt		8,486		8,465		10,467		10,415

Total	$	270,327	$	267,265	$	291,008	$	286,181

The weighted average yields ⁽¹⁾ for our first and second lien debt, based on the amortized cost and fair value as of March 31, 2017 and December 31, 2016, were as follows:


	March 31, 2017						December 31, 2016
	Amortized Cost			Fair Value			Amortized Cost			Fair Value
First Lien Debt (excluding First Lien/Last Out)		6.49	%		6.57	%		6.31	%		6.43	%
First Lien/Last Out Unitranche		12.30	%		12.37	%		12.40	%		12.18	%

First Lien Debt Total		6.82	%		6.90	%		6.75	%		6.87	%
Second Lien Debt		9.67	%		9.70	%		9.73	%		9.77	%

First and Second Lien Debt Total		6.91	%		6.99	%		6.86	%		6.97	%

(1)

Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of March 31, 2017 and December 31, 2016. Weighted average yield on debt and income producing securities at fair value is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of original issue discount (“OID”) and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at fair value included in such securities. Weighted average yield on debt and income producing securities at amortized cost is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at amortized cost included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented above.

Total weighted average yields (which includes the effect of accretion of discount and amortization of premiums) of our first and second lien debt investments as measured on an amortized cost basis, increased from 6.86% to 6.91% from December 31, 2016 to March 31, 2017. The increase in weighted average yields was mainly due to the increase in 90-day LIBOR from 1.00% to 1.15% and from originations of new investments with weighted average yields of 7.59%, countered by sales/repayments of existing investments with weighted average yields of 7.77%.

The following table summarizes the fair value of our performing and non-performing investments as of March 31, 2017 and December 31, 2016:


	March 31, 2017					December 31, 2016
	Fair Value		Percentage			Fair Value		Percentage
Performing	$	264,220		98.86	%	$	283,560		99.08	%
Non-accrual⁽¹⁾		3,045		1.14			2,621		0.92

Total	$	267,265		100.00	%	$	286,181		100.00	%

(1)

Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest has been paid current and, in management’s judgment, likely to remain current. Management may not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. See Note 2 to the consolidated financial statements included in Part I, Item 1 of this Form 10-Q for more information on the accounting policies.

See the Consolidated Schedules of Investments as of March 31, 2017 and December 31, 2016 in our consolidated financial statements in Part I, Item 1 of this Form 10-Q for more information on these investments, including a list of companies and type and amount of investments.

As part of the monitoring process, our Investment Adviser has developed risk policies pursuant to which it regularly assesses the risk profile of each of our debt investments and rates each of them based on the following categories, which we refer to as “Internal Risk Ratings”:

Internal Risk Ratings Definitions


Rating		Definition
1		Performing—Low Risk: Borrower is operating more than 10% ahead of the base case.

2		Performing—Stable Risk: Borrower is operating within 10% of the base case (above or below). This is the initial rating assigned to all new borrowers.

3		Performing—Management Notice: Borrower is operating more than 10% below the base case. A financial covenant default may have occurred, but there is a low risk of payment default.

4		Watch List: Borrower is operating more than 20% below the base case and there is a high risk of covenant default, or it may have already occurred. Payments are current although subject to greater uncertainty, and there is moderate to high risk of payment default.

5		Watch List—Possible Loss: Borrower is operating more than 30% below the base case. At the current level of operations and financial condition, the borrower does not have the ability to service and ultimately repay or refinance all outstanding debt on current terms. Payment default is very likely or may have occurred. Loss of principal is possible.

6		Watch List—Probable Loss: Borrower is operating more than 40% below the base case, and at the current level of operations and financial condition, the borrower does not have the ability to service and ultimately repay or refinance all outstanding debt on current terms. Payment default is very likely or may have already occurred. Additionally, the prospects for improvement in the borrower’s situation are sufficiently negative that impairment of some or all principal is probable.

Our Investment Adviser’s risk rating model is based on evaluating portfolio company performance in comparison to the base case when considering certain credit metrics including, but not limited to, adjusted EBITDA and net senior leverage as well as specific events including, but not limited to, default and impairment.

Our Investment Adviser monitors and, when appropriate, changes the investment ratings assigned to each debt investment in our portfolio. In connection with our quarterly valuation process, our Investment Adviser reviews our investment ratings on a regular basis. The following table summarizes the Internal Risk Ratings as of March 31, 2017 and December 31, 2016:


	March 31, 2017					December 31, 2016
	Fair Value		% of Fair Value			Fair Value		% of Fair Value
(dollar amounts in millions)
Internal Risk Rating 1	$	2.8		1.06	%	$	11.9		4.15	%
Internal Risk Rating 2		206.8		77.80			223.0		77.92
Internal Risk Rating 3		30.5		11.47			23.2		8.11
Internal Risk Rating 4		21.8		8.20			22.0		7.69
Internal Risk Rating 5		3.9		1.47			3.5		1.22
Internal Risk Rating 6		—		—			2.6		0.91

Total	$	265.8		100.00	%	$	286.2		100.00	%

As of March 31, 2017 and December 31, 2016, the weighted average Internal Risk Rating of our debt investment portfolio was 2.3 and 2.3 respectively. As of March 31, 2017, 8 of our debt investments, with an

aggregate fair value of $25.7 million, were assigned an Internal Risk Rating of 4-6. As of December 31, 2016, 8 of our debt investments, with an aggregate fair value of $28.1 million, were assigned an Internal Risk Rating of 4-6. As of March 31, 2017 and December 31, 2016, one first lien debt investment in the portfolio with a fair value of $3.0 million and $2.6 million, respectively, was on non-accrual status, which represented approximately 1.14% and 0.92%, respectively, of total first and second lien investments at fair value. The remaining first and second lien debt investments were performing and current on their interest payments as of March 31, 2017 and December 31, 2016. During the period ended March 31, 2017, one investment with fair value of $2.4 million was downgraded to Internal Risk Rating of 4 while one investment with fair value of $3.9 million was upgraded from Internal Risk Rating of 4 to 3 due to changes in financial condition and performance of the respective portfolio companies. Effective January 31, 2017, TwentyEighty, Inc. (fka Miller Heiman, Inc.) completed a restructuring whereby the first lien debt held by us, which carried an Internal Risk Rating of 6 as of December 31, 2016, was converted into new term loans and equity. As of March 31, 2017, the fair value of such new term loans with an Internal Risk Rating of 3 was $0.9 million, an Internal Risk Rating of 4 was $1.3 million, and an Internal Risk Rating of 5 was $0.8 million.

CONSOLIDATED RESULTS OF OPERATIONS

For the three month periods ended March 31, 2017 and 2016

The net increase or decrease in net assets from operations may vary substantially from period to period as a result of various factors, including the recognition of realized gains and losses and net change in unrealized appreciation and depreciation. As a result, quarterly comparisons may not be meaningful.

Investment Income

Interest income for the three month periods ended March 31, 2017 and 2016 were as follows:


	For the three month periods ended
	March 31, 2017		March 31, 2016
Interest income from non-controlled/non-affiliated investments:
First Lien Debt	$	5,396	$	3,953
Second Lien Debt		235		566

Total investment income	$	5,631	$	4,519

The increase in interest income for the three month period ended March 31, 2017 from the comparable period in 2016 was primarily driven by our deployment of capital and increasing invested balance. The size of our portfolio increased to $270,327 as of March 31, 2017 from $254,671 as of March 31, 2016, at amortized cost, and total principal amount of investments outstanding increased to $272,880 as of March 31, 2017 from $257,707 as of March 31, 2016. As of March 31, 2017, the weighted average yield of our first and second lien debt decreased to 6.91% from 7.06% as of March 31, 2016, on amortized cost.

Interest income on our first and second lien debt investments is dependent on the composition and credit quality of the portfolio. Generally, we expect the portfolio to generate predictable quarterly interest income based on the terms stated in each loan’s credit agreement. As of March 31, 2017, one first lien debt investment in the portfolio was non-performing. The fair value of the loan in the portfolio on non-accrual status was $3,045, which represents approximately 1.1% of total investments at fair value. The remaining first and second lien debt investments were performing and current on their interest payments as of March 31, 2017. All first and second lien debt investments were performing and current on their interest payments as of March 31, 2016.

Net investment income for the three month periods ended March 31, 2017 and 2016 was as follows:


	For the three month periods ended
	March 31, 2017			March 31, 2016
Total investment income from non-controlled/non-affiliated investments	$	5,631		$	4,519
Total expenses		(1,512	)		(1,360	)

Net investment income	$	4,119		$	3,159

Expenses


	For the three month periods ended
	March 31, 2017		March 31, 2016
Management fees	$	171	$	154
Professional fees		143		163
Administrative service fees		48		45
Interest expense		820		655
Credit facility fees		202		173
Directors’ fees and expenses		17		61
Other general and administrative		111		109

Total expenses	$	1,512	$	1,360

Interest expense and credit facility fees for the three month periods ended March 31, 2017 and 2016 were comprised of the following:


	For the three month periods ended
	March 31, 2017		March 31, 2016
Interest expense	$	820	$	655
Facility unused commitment fee		59		62
Amortization of deferred financing costs		124		94
Other fees		19		17

Total interest expense and credit facility fees	$	1,022	$	828

Cash paid for interest expense	$	811	$	593

The increase in interest expense for the three month period ended March 31, 2017 compared to the comparable period in 2016 was driven by increased drawings under the Facilities related to increased deployment of capital for investments. For the three month periods ended March 31, 2017 and 2016, the weighted average interest rate under the Facilities increased to 2.68% from 2.21%, respectively, and average principal debt outstanding was $122,534 and $116,959, respectively.

The increase in management fees for the three month period ended March 31, 2017 from the comparable period in 2016 was driven by our deployment of capital and our increasing invested balance. See Note 4 to the consolidated financial statements included in Part I, Item 1 of this Form 10-Q for more information on the management fees.

Professional fees include legal, rating agencies, audit, tax, valuation, technology and other professional fees incurred related to the management of us. Administrative service fees represent fees paid to the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our executive officers and their respective staff. Other general and administrative expenses include insurance, filing, research, subscriptions and other costs.

Net Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) on Investments

During the three months ended March 31, 2017, the Company had a realized loss on 1 investment totaling approximately $2,660. During the three months ended March 31, 2016, the Company had a realized gain on 2 investments totaling approximately $10. During the three months ended March 31 2017 and 2016, the Company had a change in unrealized appreciation on 43 and 33 investments, respectively, totaling approximately $4,920, $1,277, respectively, which was offset by a change in unrealized depreciation on 41 and 41 investments, respectively, totaling approximately $3,155 and $3,597, respectively. In particular, effective January 31, 2017, TwentyEighty, Inc. (fka Miller Heiman, Inc.) completed a restructuring whereby the first lien debt held by us was converted into new term loans and equity. As a result, $3,762 of unrealized depreciation was reversed and we realized a loss of $2,660 during the period.

Net realized gain (loss) and net change in unrealized appreciation (depreciation) for the three months ended March 31, 2017 and 2016, were as follows:


	For the three month periods ended
	March 31, 2017			March 31, 2016
Net realized gain (loss) on investments—non-controlled/non-affiliated	$	(2,660	)	$	10
Net change in unrealized appreciation (depreciation) on investments—non-controlled/non-affiliated		1,765			(2,320	)

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments	$	(895	)	$	(2,310	)

Net realized gain (loss) and net change in unrealized appreciation (depreciation) by the type of investments for the three month periods ended March 31, 2017 and 2016 were as follows:


	For the three month periods ended
	March 31, 2017					March 31, 2016
Type	Net realized gain (loss)			Net change in unrealized appreciation (depreciation)		Net realized gain (loss)		Net change in unrealized appreciation (depreciation)
First Lien Debt	$	(2,660	)	$	1,734	$	10	$	(1,864	)
Second Lien Debt		—			31		—		(456	)

Total	$	(2,660	)	$	1,765	$	10	$	(2,320	)

Net change in unrealized depreciation in our debt investments for the three months ended March 31, 2017 compared to the comparable period in 2016 was primarily due to negative credit related adjustments, such as a non-accrual portfolio company investment, that caused a reduction in fair value and was moderated by a tightening spread environment during the period.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We generate cash from the net proceeds of offerings of our common stock and through cash flows from operations, including investment sales and repayments as well as income earned on investments and cash equivalents. We may also fund a portion of our investments through borrowings under the Facilities.

The SPV closed on September 12, 2013 on the SPV Credit Facility, which was subsequently amended on July 25, 2014 and November 13, 2015. The SPV Credit Facility provides for secured borrowings during the applicable revolving period up to an amount equal to the lesser of $120,000 (the borrowing base as calculated pursuant to the terms of the SPV Credit Facility) and the amount of net cash proceeds and unpledged capital

commitments the Company has received, with an accordion feature that can, subject to certain conditions, increase the aggregate maximum credit commitment up to an amount not to exceed $262,500, subject to restrictions imposed on borrowings under the Investment Company Act and certain restrictions and conditions set forth in the SPV Credit Facility, including adequate collateral to support such borrowings. The SPV Credit Facility imposes financial and operating covenants on us and the SPV that restrict our and its business activities. Continued compliance with these covenants will depend on many factors, some of which are beyond our control.

We closed on March 27, 2014 on the Credit Facility, which was subsequently amended on August 22, 2014, December 12, 2014 and August 31, 2016. The maximum principal amount of the Credit Facility is $50,000, subject to availability under the Credit Facility, which is based on certain advance rates multiplied by the value of the Company’s portfolio investments (subject to certain concentration limitations) net of certain other indebtedness that the Company may incur in accordance with the terms of the Credit Facility. Proceeds of the Credit Facility may be used for general corporate purposes, including the funding of portfolio investments. Maximum capacity under the Credit Facility may be increased to $125,000 through the exercise by the Company of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing. The Credit Facility includes a $10,000 limit for swingline loans and a $5,000 limit for letters of credit. Subject to certain exceptions, the Credit Facility is secured by a first-priority security interest in substantially all of the portfolio investments held by the Company and the Company’s unfunded investor equity capital commitments (provided that the amount of unfunded capital commitments ultimately available to the lenders is limited to $34,000). The pledge of unfunded investor equity capital commitments was subject to release upon the earlier of (a) the date eligible investments held by the Company are equal to or greater than $62,500 and the Credit Facility’s borrowing base equity test is satisfied and (b) the date the borrower has received equity capital contributions in an amount equal to $34,000. Such eligible investments and shareholder equity thresholds had been satisfied as of March 31, 2017 and December 31, 2016. The Credit Facility includes customary covenants, including certain financial covenants related to asset coverage, shareholders’ equity, liquidity and interest coverage, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for senior secured revolving credit facilities of this nature.

Although we believe that we and the SPV will remain in compliance, there are no assurances that we or the SPV will continue to comply with the covenants in the Credit Facility and the SPV Credit Facility, as applicable. Failure to comply with these covenants could result in a default under the Credit Facility and/or the SPV Credit Facility that, if we or the SPV were unable to obtain a waiver from the applicable lenders, could result in the immediate acceleration of the amounts due under the Credit Facility and/or the SPV Credit Facility, and thereby have a material adverse impact on our business, financial condition and results of operations.

For more information on the SPV Credit Facility and the Credit Facility, see Note 5 to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.

The primary use of existing funds and any funds raised in the future is expected to be for investments in portfolio companies, repayment of indebtedness, cash distributions to our stockholders and for other general corporate purposes.

As of March 31, 2017 and December 31, 2016, the Company had $5,012 and $7,217, respectively, in cash and cash equivalents. The Facilities consisted of the following as of March 31, 2017 and December 31, 2016:


	March 31, 2017
	Total Facility		Borrowings Outstanding		Unused Portion ⁽¹⁾		Amount Available ⁽²⁾
SPV Credit Facility	$	120,000	$	83,084	$	36,916	$	5,183
Credit Facility		50,000		30,000		20,000		16,841

Total	$	170,000	$	113,084	$	56,916	$	22,024


	December 31, 2016
	Total Facility		Borrowings Outstanding		Unused Portion ⁽¹⁾		Amount Available ⁽²⁾
SPV Credit Facility	$	120,000	$	90,427	$	29,573	$	7,004
Credit Facility		50,000		40,000		10,000		10,000

Total	$	170,000	$	130,427	$	39,573	$	17,004

(1)	The unused portion is the amount upon which commitment fees are based.

(2)	Available for borrowing based on the computation of collateral to support the borrowings and subject to compliance with applicable covenants and financial ratios.

Equity Activity

There were no commitments made to us during the three month periods ended March 31, 2017 and 2016. As of March 31, 2017 and December 31, 2016, the Company had $190,077 in total capital commitments from stockholders, of which $28,541 was unfunded and subject to call by the Company. As of March 31, 2017 and December 31, 2016, current directors had no capital commitments to us.

Shares issued as of March 31, 2017 and December 31, 2016 were 8,156,316.

The following table summarizes activity in the number of shares of our common stock outstanding during the three month periods ended March 31, 2017 and 2016:


	For the three month periods ended
	March 31, 2017		March 31, 2016
Shares outstanding, beginning of period		8,156,316		6,864,244
Common stock issued		—		415,364

Shares outstanding, end of period		8,156,316		7,279,608

Upon the earlier of August 6, 2018 or the completion of a Qualified IPO by TCG BDC, investors will be released from any further obligation under their capital commitments to purchase additional shares of common stock, subject to certain exceptions contained in their subscription agreements.

Contractual Obligations

A summary of our significant contractual payment obligations was as follows as of March 31, 2017 and December 31, 2016:


	SPV Credit Facility and Credit Facility
Payment Due by Period	March 31, 2017		December 31, 2016
Less than 1 Year	$	—	$	—
1-3 Years		30,000		—
3-5 Years		83,084		130,427
More than 5 Years		—		—

Total	$	113,084	$	130,427

For more information on the SPV Credit Facility and the Credit Facility, see Note 5 to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.

As of March 31, 2017 and December 31, 2016, $83,084 and $90,427, respectively, of secured borrowings were outstanding under the SPV Credit Facility and $30,000 and $40,000, respectively, were outstanding under the Credit Facility. For the three month periods ended March 31, 2017 and 2016, we incurred $59 and $62, respectively, of unused commitment fees and $820 and $655, respectively, of interest expense.

OFF BALANCE SHEET ARRANGEMENTS

In the ordinary course of our business, we enter into contracts or agreements that contain indemnifications or warranties. Future events could occur which may give rise to liabilities arising from these provisions against us. We believe that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in these consolidated financial statements as of March 31, 2017 and December 31, 2016 in Part I, Item 1 of this Form 10-Q, for any such exposure.

We have in the past and may in the future become obligated to fund commitments such as revolving credit facilities, bridge financing commitments, or delayed draw commitments.

We had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of the indicated dates:


	Principal Amount as of
	March 31, 2017		December 31, 2016
Unfunded delayed draw commitments	$	5,283	$	5,969
Unfunded revolving term loan commitments		2,271		1,339

Total unfunded commitments	$	7,554	$	7,308

DIVIDENDS AND DISTRIBUTIONS TO COMMON STOCKHOLDERS

Dividends and distributions, if any, are paid in cash to common stockholders. The following table summarizes our dividends declared and payable since inception through March 31, 2017:


Date Declared	Record Date	Payment Date	Per Share Amount		Total Amount		Annualized Dividend Yield⁽¹⁾
March 13, 2014	March 31, 2014	April 14, 2014	$	0.04	$	128		1.12	%
June 26, 2014	June 30, 2014	July 14, 2014	$	0.12	$	383		2.46	%
September 12, 2014	September 18, 2014	October 9, 2014	$	0.24	$	825		5.14	%
December 19, 2014	December 29, 2014	January 26, 2015	$	0.27	$	1,247		6.19	%
March 11, 2015	March 13, 2015	April 17, 2015	$	0.30	$	1,645		6.84	%
June 24, 2015	June 30, 2015	July 22, 2015	$	0.35	$	2,191		7.69	%
September 24, 2015	September 24, 2015	October 22, 2015	$	0.40	$	2,563		8.17	%
December 29, 2015	December 29, 2015	January 22, 2016	$	0.47	$	3,226		9.67	%
March 10, 2016	March 14, 2016	April 22, 2016	$	0.44	$	3,203		9.66	%
June 8, 2016	June 8, 2016	July 22, 2016	$	0.44	$	3,203		9.34	%
September 28, 2016	September 28, 2016	October 24, 2016	$	0.44	$	3,589		9.44	%
December 29, 2016	December 29, 2016	January 24, 2017	$	0.56	$	4,567		11.50	%
March 20, 2017	March 20, 2017	April 24, 2017	$	0.44	$	3,589		9.36	%

(1)	Annualized dividend yield is calculated by dividing the declared dividend by the weighted average of the net asset value at the beginning of the quarter and the capital called during the quarter and annualizing over 4 quarterly periods.

CRITICAL ACCOUNTING POLICIES

The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ. Our critical accounting policies, including those relating to the valuation of our investment portfolio, are described below. The critical accounting policies should be read in connection with our consolidated financial statements in Part I, Item 1 of this Form 10-Q and in Part II, Item 8 of the Company’s annual report on Form 10-K for the year ended December 31, 2016.

Fair Value Measurements

The Company applies fair value accounting in accordance with the terms of Financial Accounting Standards Board ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. The Company values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e., “consensus pricing”). When doing so, the Company determines whether the quote obtained is sufficient according to US GAAP to determine the fair value of the security. The Company may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.

techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment and include comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses. The process generally used to determine the applicable value is as follows: (i) the value of each portfolio company or investment is initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments, a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs is used to determine a preliminary value, which is also reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of members of senior management; (iii) the Board of Directors engages a third-party valuation firm to provide positive assurance on portions of the Middle Market Senior Loans portfolio each quarter (such that each non-traded investment is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of management’s preliminary valuation and conclusion on fair value; (iv) the Audit Committee of the Board of Directors (the “Audit Committee”) reviews the assessments of the Investment Adviser and the third-party valuation firm and provides the Board of Directors with any recommendations with respect to changes to the fair value of each investment in the portfolio; and (v) the Board of Directors discusses the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.

All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:

•

the nature and realizable value of any collateral;

•

call features, put features and other relevant terms of debt;

•

the portfolio company’s leverage and ability to make payments;

•

the portfolio company’s public or private credit rating;

•

the portfolio company’s actual and expected earnings and discounted cash flow;

•

prevailing interest rates and spreads for similar securities and expected volatility in future interest rates;

•

the markets in which the portfolio company does business and recent economic and/or market events; and

•

comparisons to comparable transactions and publicly traded securities.

factors, including the type of investment and the characteristics specific to the investment and state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

Investments measured and reported at fair value are classified and disclosed based on the observability of inputs used in determination of fair values, as follows:

•

Level 1—inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date. The types of financial instruments included in Level 1 generally include unrestricted securities, including equities and derivatives, listed in active markets. The Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

•

Level 3—inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are in this category generally include investments in privately-held entities, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur.

The Company generally uses the following framework when determining the fair value of investments that are categorized as Level 3:

Investments in debt securities that do not have sufficient coverage through the enterprise value analysis are valued based on an expected probability of default and discount recovery analysis.

cash flow typically represent the relevant investment’s contractual interest, fees and principal payments plus the assumption of full principal recovery at the investment’s expected maturity date. The discount rate to be used is determined using an average of two market-based methodologies. Investments in debt securities may also be valued using consensus pricing.

The carrying value of the secured borrowings approximates its fair value and is categorized as Level 3 within the hierarchy. Secured borrowings are valued generally using discounted cash flow analysis. The significant unobservable inputs used in the fair value measurement of the Company’s secured borrowings are discount rates. Significant increases in discount rates would result in a significantly lower fair value measurement.

The carrying value of other financial assets and liabilities approximates their fair value based on the short term nature of these items.

See Note 3 to the consolidated financial statements in Part I, Item 1 of this Form 10-Q for further information on fair value measurements.

Use of Estimates

The preparation of consolidated financial statements in Part I, Item 1 of this Form 10-Q in conformity with US GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on management fees involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements in Part I, Item 1 of this Form 10-Q. Actual results could differ from these estimates and such differences could be material.

Investments

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the Consolidated Statements of Operations in Part I, Item 1 of this Form 10-Q reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

Revenue Recognition

Interest from Investments and Realized Gain/Loss on Investments

Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on debt securities purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of

investments represents the original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. At time of exit, the realized gain or loss on an investment is the difference between the amortized cost at time of exit and the cash received at exit using the specific identification method.

Other Income

Other income may include income such as consent, waiver, amendment, syndication and prepayment fees associated with the Company’s investment activities as well as any fees for managerial assistance services rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. The Company may receive fees for guaranteeing the outstanding debt of a portfolio company. Such fees are amortized into other income over the life of the guarantee. The unamortized amount, if any, is included in other assets in the Consolidated Statements of Assets and Liabilities included in Part I, Item 1 of this Form 10-Q.

Non-Accrual Income

Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid current and, in management’s judgment, are likely to remain current. Management may not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. As of March 31, 2017, the fair value of the loan in the portfolio on non-accrual status was $3,045, which represents approximately 1.1% of total investments at fair value. The remaining first and second lien debt investments were performing and current on their interest payments as of March 31, 2017. All first and second lien debt investments were performing and current on their interest payments as of March 31, 2016.

Income Taxes

income realized, but not distributed, in the preceding year. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed. The Company intends to make sufficient distributions each taxable year to satisfy the excise distribution requirements.

The SPV is a disregarded entity for tax purposes and is consolidated with the tax return of the Company.

Capital Calls and Dividends and Distributions to Common Stockholders

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are subject to financial market risks, including changes in the valuations of our investment portfolio and interest rates.

Valuation Risk

Our investments may not have a readily available market price, and we value these investments at fair value as determined in good faith by our Board of Directors in accordance with our valuation policy. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. 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 fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and it is possible that the difference could be material.

Interest Rate Risk

As of March 31, 2017, on a fair value basis, approximately 1% of our debt investments bear interest at a fixed rate and approximately 99% of our debt investments bear interest at a floating rate, which primarily are subject to interest rate floors. Interest rates on the investments held within our portfolio of investments are typically based on floating LIBOR, with many of these investments also having a LIBOR floor. Additionally, our Facilities are also subject to floating interest rates and are currently paid based on floating LIBOR rates.

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. There can be no assurance that a significant change in market interest rates will not have a material adverse effect on our income in the future.

The following table estimates the potential changes in net cash flow generated from interest income, should interest rates increase or decrease by 100, 200 or 300 basis points. Interest income is calculated as revenue from

interest generated from our settled portfolio of investments held as of March 31, 2017 and December 31, 2016. These hypothetical calculations are based on a model of the settled investments in our portfolio, held as of March 31, 2017 and December 31, 2016, and are only adjusted for assumed changes in the underlying base interest rates and the impact of that change on interest income. Interest expense is calculated based on outstanding secured borrowings as of March 31, 2017 and December 31, 2016, and based on the terms of our Facilities. Interest expense on our Facilities is calculated using the interest rate as of March 31, 2017 and December 31, 2016, adjusted for the hypothetical changes in rates, as shown below. We intend to continue to finance a portion of our investments with borrowings and the interest rates paid on our borrowings may impact significantly our net interest income.

We regularly measure exposure to interest rate risk. We assess interest rate risk and manage interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on that review, we determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates.

Based on our Consolidated Statements of Assets and Liabilities as of March 31, 2017 and December 31, 2016, the following table shows the annual impact on net investment income of base rate changes in interest rates for our settled investments (considering interest rate floors for variable rate instruments) and outstanding secured borrowings assuming no changes in our investment and borrowing structure:


	As of March 31, 2017								As of December 31, 2016
Basis Point Change	Interest Income			Interest Expense			Net Investment Income		Interest Income			Interest Expense			Net Investment Income
Up 300 basis points	$	8,256		$	(3,393	)	$	4,863	$	8,623		$	(3,913	)	$	4,710
Up 200 basis points	$	5,590		$	(2,262	)	$	3,328	$	5,743		$	(2,609	)	$	3,134
Up 100 basis points	$	2,923		$	(1,131	)	$	1,792	$	2,862		$	(1,304	)	$	1,558
Down 100 basis points	$	(276	)	$	1,111		$	835	$	(22	)	$	1,006		$	984
Down 200 basis points	$	(276	)	$	1,111		$	835	$	(22	)	$	1,006		$	984
Down 300 basis points	$	(276	)	$	1,111		$	835	$	(22	)	$	1,006		$	984

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer and Treasurer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 of the Exchange Act). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer and Treasurer have concluded that our current disclosure controls and procedures are effective in timely alerting them of material information relating to the Company that is required to be disclosed by us in the reports we file or submit under the Exchange Act.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting during the three month period ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

The Company may become party to certain lawsuits in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. The Company is not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against the Company. See also Note 9 to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors.

There have been no material changes to the risk factors previously disclosed in our annual report on Form 10-K for the year ended December 31, 2016. For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 21, 2017, which is accessible on the SEC’s website at sec.gov.

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

Except as previously reported by the Company on its current reports on Form 8-K, the Company did not sell any equity securities during the period covered in this report that were not registered under the Securities Act.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.



31.1		Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.*

31.2		Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*

32.1		Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2		Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

*	Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	NF INVESTMENT CORP.

Dated: May 10, 2017	By	/s/ Venugopal Rathi
		Venugopal Rathi
		Chief Financial Officer

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NF Investment Corp. 10-Q