Carlyle Secured Lending, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollar amounts in thousands, except per share data, unless otherwise indicated) The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes in Part II, Item 8 of this Form 10-K “Financial Statements and Supplementary Data.” 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 this Form 10-K “Risk Factors.” Our actual results could differ materially from those anticipated by such forward-looking information due to factors discussed under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this Form 10-K. OVERVIEW We are a Maryland corporation formed on February 8, 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, to a lesser extent, capital appreciation primarily through secured debt investments in U.S. middle market companies. Our core investment strategy focuses on lending to U.S. middle market companies supported by financial sponsors, which we define as companies with approximately $25 million to 57 Table of Contents $100 million of EBITDA, which we believe is a useful proxy for cash flow. This core strategy is supplemented with complementary specialty lending and opportunistic investing strategies, which take advantage of the broad capabilities of Carlyle’s Global Credit platform while offering risk diversifying portfolio benefits. We seek to achieve our investment objective primarily through direct originations of Middle Market Senior Loans, with a minority of our assets invested in higher yielding investments (which may include unsecured debt, mezzanine debt and investments in equities). We generally make Middle Market Senior Loans to private U.S. middle market companies that are, in many cases, controlled by private equity firms. Depending on market conditions, we expect that between 70% and 80% of the value of our assets will be invested in Middle Market Senior Loans. 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. On June 19, 2017, we closed our IPO, issuing 9,454,200 shares of our common stock (including shares issued pursuant to the exercise of the underwriters’ over-allotment option on July 5, 2017) at a public offering price of $18.50 per share. Net of underwriting costs, we received cash proceeds of $169,488. Shares of common stock of TCG BDC began trading on the Nasdaq Global Select Market under the symbol “CGBD” on June 14, 2017. On June 9, 2017, we acquired NF Investment Corp. (“NFIC”), a BDC managed by our Investment Advisor (the “NFIC Acquisition”). As a result, we issued 434,233 shares of common stock to the NFIC stockholders and approximately $145,602 in cash, and acquired approximately $153,648 in net assets. 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. Our Investment Adviser’s five-person investment committee is responsible for reviewing and approving our investment opportunities. The members of the investment committee have experience investing through different credit cycles. As of December 31, 2021, our Investment Adviser’s investment team included a team of more than 180 investment professionals across the Carlyle Global Credit segment. Our Investment Adviser’s investment committee comprises five of the most senior credit professionals within the Global Credit segment, with backgrounds and expertise across asset classes and over 26 years of average industry experience and 10 years of average tenure. In addition, our Investment Adviser and its investment team are supported by a team of finance, operations and administrative professionals currently employed by Carlyle Employee Co., a wholly owned subsidiary of Carlyle. In conducting our investment activities, we believe that we benefit from the significant scale, relationships 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. KEY COMPONENTS OF OUR RESULTS OF OPERATIONS 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 dividends on direct equity investments, capital gains on the sales of loans and debt and equity 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. 58 Table of Contents Expenses Our primary operating expenses include the payment of: (i) investment advisory fees, including base management fees and incentive fees, to our Investment Adviser pursuant to 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 the Administration Agreement between us and our Administrator; and (iii) other operating expenses as detailed below: • administration fees payable under our Administration Agreement and Sub-Administration Agreements, including related expenses; • the costs of any 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; • certain costs and expenses relating to distributions paid on our shares; • 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. 59 Table of Contents PORTFOLIO AND INVESTMENT ACTIVITY Below is a summary of certain characteristics of our investment portfolio as of December 31, 2021, 2020 and 2019. As of December 31, 2021 2020 2019 Count of investments 154 160 136 Count of portfolio companies / investment funds 117 117 112 Count of industries 27 27 28 Percentage of total investment fair value: First lien debt 64.4 % 67.0 % 78.3 % Second lien debt 17.9 % 15.6 % 11.0 % Total secured debt 82.3 % 82.6 % 89.3 % Investment Funds 13.7 % 15.5 % 9.6 % Equity investments 4.0 % 1.9 % 1.0 % Percentage of debt investment fair value: Floating rate (1) 98.4 % 99.1 % 99.7 % Fixed interest rate 1.6 % 0.9 % 0.3 % (1) Primarily subject to interest rate floors. 60 Table of Contents Our investment activity for the years ended December 31, 2021, 2020 and 2019 is presented below (information presented herein is at amortized cost unless otherwise indicated): For the years ended December 31, 2021 2020 2019 Investments: Total investments, beginning of year $ 1,922,966 $ 2,201,451 $ 2,043,591 New investments purchased 851,422 705,743 1,000,467 Net accretion of discount on investments 9,383 8,186 12,955 Net realized gain (loss) on investments 19,038 (58,472) (38,376) Investments sold or repaid (845,256) (933,942) (817,186) Total investments, end of year $ 1,957,553 $ 1,922,966 $ 2,201,451 Principal amount of investments funded: First Lien Debt $ 696,018 $ 345,239 $ 726,489 Second Lien Debt 137,465 117,106 144,217 Equity Investments 46,600 12,233 5,436 Investment Funds — 234,122 131,699 Total $ 880,083 $ 708,700 $ 1,007,841 Principal amount of investments sold or repaid: First Lien Debt $ (718,114) $ (773,858) $ (623,853) Second Lien Debt (92,370) (57,207) (88,695) Equity Investments (5,839) (1,282) (3,070) Investment Funds (23,000) (156,500) (145,200) Total $ (839,323) $ (988,847) $ (860,818) Number of new funded investments 48 48 51 Average amount of new funded investments $ 11,278 $ 8,781 $ 19,617 Percentage of new funded debt investments at floating interest rates 98 % 99 % 99 % Percentage of new funded debt investments at fixed interest rates 2 % 1 % 1 % As of December 31, 2021 and 2020, investments consisted of the following: December 31, 2021 December 31, 2020 Amortized Cost Fair Value Amortized Cost Fair Value First Lien Debt $ 1,271,794 $ 1,232,084 $ 1,298,154 $ 1,224,063 Second Lien Debt 341,538 341,776 297,962 284,523 Equity Investments 73,125 77,093 32,754 33,877 Investment Funds 271,096 262,099 294,096 283,286 Total $ 1,957,553 $ 1,913,052 $ 1,922,966 $ 1,825,749 The weighted average yields (1) for our first and second lien debt, based on the amortized cost and fair value as of December 31, 2021 and 2020, were as follows: December 31, 2021 December 31, 2020 Amortized Cost Fair Value Amortized Cost Fair Value First Lien Debt 7.31 % 7.55 % 7.21 % 7.65 % Second Lien Debt 9.04 9.04 9.15 9.59 First and Second Lien Debt Total 7.68 % 7.87 % 7.57 % 8.01 % (1) Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of December 31, 2021 and 2020. 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 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 61 Table of Contents 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 7.57% to 7.68% from December 31, 2020 to December 31, 2021. The increase in weighted average yields was primarily due to new fundings being originated at a higher weighted average yield than the yield of positions that repaid or were sold. The following table summarizes the fair value of our performing and non-accrual/non-performing investments as of December 31, 2021 and 2020: December 31, 2021 December 31, 2020 Fair Value Percentage Fair Value Percentage Performing $ 1,836,501 96.0 % $ 1,767,613 96.8 % Non-accrual (1) 76,551 4.0 58,136 3.2 Total $ 1,913,052 100.0 % $ 1,825,749 100.0 % (1) For information regarding our non-accrual policy, see Note 2 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K. As part of the monitoring process, our Investment Adviser has developed risk assessment policies pursuant to which it regularly assesses the risk profile of each of our debt investments and rates each of them based on categories, which we refer to as “Internal Risk Ratings”. Pursuant to these risk policies, an Internal Risk Rating of 1 – 5, which are defined below, is assigned to each debt investment in our portfolio. Key drivers of internal risk ratings include financial metrics, financial covenants, liquidity and enterprise value coverage. Internal Risk Ratings Definitions Rating Definition 1 Borrower is operating above expectations, and the trends and risk factors are generally favorable. 2 Borrower is operating generally as expected or at an acceptable level of performance. The level of risk to our initial cost bases is similar to the risk to our initial cost basis at the time of origination. This is the initial risk rating assigned to all new borrowers. 3 Borrower is operating below expectations and level of risk to our cost basis has increased since the time of origination. The borrower may be out of compliance with debt covenants. Payments are generally current although there may be higher risk of payment default. 4 Borrower is operating materially below expectations and the loan’s risk has increased materially since origination. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due, but generally not by more than 120 days. It is anticipated that we may not recoup our initial cost basis and may realize a loss of our initial cost basis upon exit. 5 Borrower is operating substantially below expectations and the loan’s risk has increased substantially since origination. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. It is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis upon exit. Our Investment Adviser monitors and, when appropriate, changes the risk ratings assigned to each debt investment in our portfolio. Our Investment Adviser reviews our investment ratings in connection with our quarterly valuation process. The below table summarizes the Internal Risk Ratings assigned as of December 31, 2021 and 2020. 62 Table of Contents December 31, 2021 December 31, 2020 (dollar amounts in millions) Fair Value % of Fair Value Fair Value % of Fair Value Internal Risk Rating 1 $ 3.8 0.2 % $ 19.1 1.3 % Internal Risk Rating 2 1,205.5 76.6 1,047.5 69.4 Internal Risk Rating 3 299.5 19.0 361.1 23.9 Internal Risk Rating 4 27.6 1.8 48.1 3.2 Internal Risk Rating 5 37.5 2.4 32.8 2.2 Total $ 1,573.9 100.0 % $ 1,508.6 100.0 % As of December 31, 2021 and 2020, the weighted average Internal Risk Rating of our debt investment portfolio was 2.3 and 2.4, respectively. As of December 31, 2021 and 2020, two and six of our debt investments with an aggregate fair value of $65.1 million and $80.9 million, respectively, were assigned an Internal Risk Rating of 4-5. As of December 31, 2021 and 2020, five and five first lien debt investments in the portfolio with a fair value of $76.6 million and $58.1 million, respectively, were on non-accrual status, which represented approximately 4.0% and 3.2%, respectively, of total investments at fair value. The remaining first and second lien debt investments were performing and current on their interest payments as of December 31, 2021 and 2020. See the Consolidated Schedules of Investments as of December 31, 2021 and 2020, in our consolidated financial statements in Part II, Item 8 of this Form 10-K “Financial Statements and Supplementary Data” for more information on our investments, including a list of companies and type and amount of investments. CONSOLIDATED RESULTS OF OPERATIONS For the years ended December 31, 2021, 2020 and 2019 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 Investment income for the years ended December 31, 2021, 2020 and 2019, was as follows: For the years ended December 31, 2021 2020 2019 Investment income: First Lien Debt $ 108,345 $ 125,958 $ 168,750 Second Lien Debt 29,189 29,851 24,203 Equity Investments 3,640 1,978 63 Investment Funds 30,064 24,277 27,931 Cash — 54 351 Total investment income $ 171,238 $ 182,118 $ 221,298 The decrease in investment income for the year ended December 31, 2021 from the comparable period in 2020 was primarily driven by a lower average investment balance, partially offset by higher dividend income from the Investment Funds. As of December 31, 2021, the size of our portfolio increased to $1,957,553 from $1,922,966 as of December 31, 2020 at amortized cost. As of December 31, 2021, the weighted average yield of our first and second lien debt increased to 7.68% from 7.57% as of December 31, 2020, on amortized cost, primarily due to new fundings being originated at a higher weighted average yield than the yield of positions that repaid or were sold. The decrease in investment income for the year ended December 31, 2020 from the comparable period in 2019 was primarily driven the impact of average LIBOR, lower average investment balance, and the impact of loans on non-accrual status. The size of our portfolio decreased to $1,922,966 as of December 31, 2020 from $2,201,451 as of December 31, 2019, at amortized cost. As of December 31, 2020, the weighted average yield of our first and second lien debt decreased to 7.57% from 8.22% as of December 31, 2019, on amortized cost, primarily due to the decrease in LIBOR. 63 Table of Contents 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 December 31, 2021 and 2020, five and five first lien debt investments in the portfolio were on non-accrual with the fair value of $76,551 and $58,136, which represents approximately 4.0% and 3.2% of total investments at fair value, respectively. The remaining first and second lien debt investments were performing and current on their interest payments as of December 31, 2021 and 2020. Net investment income (loss) for the years ended December 31, 2021, 2020 and 2019 was as follows: For the years ended December 31, 2021 2020 2019 Total investment income $ 171,238 $ 182,118 $ 221,298 Net expenses (including Excise tax expense) (84,387) (93,311) (113,633) Net investment income (loss) $ 86,851 $ 88,807 $ 107,665 Expenses For the years ended December 31, 2021 2020 2019 Base management fees $ 28,343 $ 28,648 $ 31,316 Incentive fees 17,680 18,555 22,872 Professional fees 3,165 3,082 2,745 Administrative service fees 1,338 679 539 Interest expense 28,829 35,820 50,587 Credit facility fees 1,924 3,761 3,079 Directors’ fees and expenses 561 398 353 Other general and administrative 1,765 1,795 1,738 Excise tax expense 782 573 404 Net expenses $ 84,387 $ 93,311 $ 113,633 Interest expense and credit facility fees for the years ended December 31, 2021, 2020 and 2019 were comprised of the following: For the years ended December 31, 2021 2020 2019 Interest expense $ 28,829 $ 35,820 $ 50,587 Facility unused commitment fee 1,161 1,766 1,263 Amortization of deferred financing costs 763 1,886 1,618 Other fees — 109 198 Total interest expense and credit facility fees $ 30,753 $ 39,581 $ 53,666 Cash paid for interest expense $ 29,355 $ 33,149 $ 49,981 Average principal debt outstanding $ 1,021,326 $ 1,111,397 $ 1,125,547 Weighted average interest rate 2.76 % 3.15 % 4.41 % The decrease in interest expense for the year ended December 31, 2021 compared to the comparable period in 2020 was primarily driven by lower weighted average interest rates and lower average debt outstanding. The decrease in interest expense for the year ended December 31, 2020 compared to the comparable period in 2019 was driven by lower LIBOR. 64 Table of Contents Below is a summary of the base management fees and incentive fees incurred during the years ended December 31, 2021, 2020 and 2019: For the years ended December 31, 2021 2020 2019 Base management fees $ 28,343 $ 28,648 $ 31,316 Incentive fees on pre-incentive fee net investment income 17,680 18,555 22,872 Realized capital gains incentive fees — — — Accrued capital gains incentive fees — — — Total capital gains incentive fees — — — Total incentive fees 17,680 18,555 22,872 Total base management fees and incentive fees $ 46,023 $ 47,203 $ 54,188 The decrease in base management fees for the year ended December 31, 2021 from the comparable period in 2020 was driven by lower average fair value of investments during the year. The decrease in incentive fees for the year ended December 31, 2021 from the comparable period in 2020 was driven by lower pre-incentive fee net investment income. The decrease in base management fees for the year ended December 31, 2020 from the comparable period in 2019 was driven by lower average fair value of investments. The decrease in incentive fees for the year ended December 31, 2020 from the comparable period in 2019 was driven by lower pre-incentive fee net investment income. For the years ended December 31, 2021, 2020 and 2019, we recorded no accrued capital gains incentive fees based upon our cumulative net realized and unrealized appreciation (depreciation) as of December 31, 2021, 2020 and 2019, respectively. The accrual for any capital gains incentive fee under accounting principles generally accepted in the United States (“U.S. GAAP”) in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. See Note 4 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for more information on our incentive and base 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 years ended December 31, 2021, 2020 and 2019, we had realized gains on 34, 9, and 15 investments, respectively, totaling approximately $19,381, $1,473, and $14,719, respectively, which was offset by realized losses on 9, 20, and 13 investments, respectively, totaling approximately $343, $59,946, and $53,062, respectively. During the years ended December 31, 2021, 2020 and 2019, we had a change in unrealized appreciation on 110, 78, and 91 investments, respectively, totaling approximately $71,264, $65,851, and $70,167, respectively, which was offset by a change in unrealized depreciation on 76, 97, and 71 investments, respectively, totaling approximately $18,583, $85,507, and $76,220, respectively. During October 2020, Direct Travel, Inc. ("Direct Travel") completed a restructuring whereby the lenders received the majority of the equity in Direct Travel, but maintained the principal balance in the existing debt. As part of the transaction, the lenders also provided a delayed draw term loan facility to support ongoing liquidity of the business. As part of the restructuring, we received an approximate 9% ownership stake in Direct Travel. During October 2020, Central Security Group, Inc. completed a restructuring whereby a portion of the first lien debt held by us was exchanged into common equity. As a result, $8,566 of unrealized depreciation was reversed and we realized a loss of $8,562 during the year ended December 31, 2020. During April 2019, SolAero Technologies Corp. ("SolAero") completed a restructuring whereby a portion of the first lien debt held by us was exchanged into common equity. As a result, $9,460 of unrealized depreciation was reversed and we realized a loss of $9,102 during the year ended December 31, 2019. On December 31, 2019, we wrote off our remaining balance in the Product Quest Manufacturing, LLC ("Product Quest") first lien/last out, given our expectation of zero recovery. 65 Table of Contents As a result, $32,270 of unrealized depreciation was reversed and we realized a loss of $32,270 during the year ended December 31, 2019. Additionally, during October 2019, we exited our equity investment in Twenty-Eighty, Inc. ("Twenty-Eighty"). As a result, $4,391 of unrealized appreciation was reversed and we realized a gain of $7,990 during the year ended December 31, 2019. Net realized gain (loss) and net change in unrealized appreciation (depreciation) for the years ended December 31, 2021, 2020 and 2019 were as follows: For the years ended December 31, 2021 2020 2019 Net realized gain (loss) on investments $ 19,038 $ (58,473) $ (38,376) Net change in unrealized appreciation (depreciation) on investments 52,681 (19,656) (6,053) Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments $ 71,719 $ (78,129) $ (44,429) Net realized gain (loss) and net change in unrealized appreciation (depreciation) by the type of investments for the years ended December 31, 2021, 2020 and 2019 were as follows: For the years ended December 31, 2021 2020 2019 Type Net realized gain (loss) Net change in unrealized appreciation (depreciation) Net realized gain (loss) Net change in unrealized appreciation (depreciation) Net realized gain (loss) Net change in unrealized appreciation (depreciation) First Lien Debt $ 2,413 $ 34,383 $ (58,766) $ (8,557) $ (52,633) $ 4,894 Second Lien Debt (125) 13,677 (228) (13,965) — 1,003 Equity Investments 16,750 2,845 522 1,697 14,257 (7,751) Investment Funds — 1,813 — (3,104) — (4,199) Total $ 19,038 $ 52,718 $ (58,472) $ (23,929) $ (38,376) $ (6,053) Net change in unrealized appreciation in our investments for the year ended December 31, 2021 compared to the comparable period in 2020 was primarily driven by improving credit fundamentals and tightening market yields in 2021. Net change in unrealized depreciation in our investments for the year ended December 31, 2020 compared to the comparable period in 2019 was primarily driven by unrealized depreciation related to investments more heavily impacted by the COVID-19 pandemic, combined with higher market yields. Net change in unrealized appreciation (depreciation) is also driven by changes in other inputs utilized under our valuation methodology, including, but not limited to, enterprise value multiples, borrower leverage multiples and borrower ratings, and the impact of exits. MIDDLE MARKET CREDIT FUND, LLC Overview On February 29, 2016, the Company and Credit Partners entered into an amended and restated limited liability company agreement, which was subsequently amended and restated on June 24, 2016 and February 22, 2021 (as amended, the “Limited Liability Company Agreement”) to co-manage Credit Fund, a Delaware limited liability company that is not consolidated in the Company’s consolidated financial statements. Credit Fund primarily invests in first lien loans of middle market companies. Credit Fund is managed by a six-member board of managers, on which the Company and Credit Partners each have equal representation. Establishing a quorum for Credit Fund’s board of managers requires at least four members to be present at a meeting, including at least two of the Company’s representatives and two of Credit Partners’ representatives. The Company and Credit Partners each have 50% economic ownership of Credit Fund and have commitments to fund, from time to time, capital of up to $250,000 each. Funding of such commitments generally requires the approval of the board of Credit Fund, including the board members appointed by the Company. By virtue of its membership interest, the Company and Credit Partners each indirectly bear an allocable share of all expenses and other obligations of Credit Fund. Together with Credit Partners, the Company co-invests through Credit Fund. Investment opportunities for Credit Fund are sourced primarily by the Company and its affiliates. Portfolio and investment decisions with respect to Credit Fund must be unanimously approved by a quorum of Credit Fund’s investment committee consisting of an equal number of representatives of the Company and Credit Partners. Therefore, although the Company owns more than 25% of the voting securities of Credit Fund, the Company does not believe that it has control over Credit Fund (other than for purposes of the Investment Company 66 Table of Contents Act). Middle Market Credit Fund SPV, LLC (“Credit Fund Sub”), MMCF CLO 2017-1 LLC (the “2017-1 Issuer”), MMCF CLO 2019-2, LLC (the "2019-2 Issuer") and MMCF Warehouse II, LLC (“Credit Fund Warehouse II”), each a Delaware limited liability company, were formed on April 5, 2016 and October 6, 2017, November 26, 2018 and August 16, 2019, respectively. Credit Fund Sub, the 2019-2 Issuer, and Credit Fund Warehouse II are wholly owned subsidiaries of Credit Fund and are consolidated in Credit Fund’s consolidated financial statements commencing from the date of their respective formations. In December 2020, the 2017-1 Notes, as defined below, were redeemed in full and repaid in full. In August 2021, the 2019-2 Notes, as defined below, were redeemed and repaid in full. Credit Fund Sub and Credit Fund Warehouse II primarily invest in first lien loans of middle market companies. Credit Fund and its wholly owned subsidiaries follow the same Internal Risk Rating System as the Company. Refer to “Debt” below for discussions regarding the credit facilities entered into and the notes issued by such wholly-owned subsidiaries. Credit Fund, the Company and Credit Partners entered into an administration agreement with Carlyle Global Credit Administration L.L.C., the administrative agent of Credit Fund (in such capacity, the “Credit Fund Administrative Agent”), pursuant to which the Credit Fund Administrative Agent is delegated certain administrative and non-discretionary functions, is authorized to enter into sub-administration agreements at the expense of Credit Fund with the approval of the board of managers of Credit Fund, and is reimbursed by Credit Fund for its costs and expenses and Credit Fund’s allocable portion of overhead incurred by the Credit Fund Administrative Agent in performing its obligations thereunder. Selected Financial Data Since inception of Credit Fund and through December 31, 2021 and 2020, the Company and Credit Partners each made capital contributions of $1 and $1 in members’ equity, respectively, and $216,000 and $216,000 in subordinated loans, respectively, to Credit Fund. On May 25, 2021, the Company and Credit Partners received an aggregate return of capital on the subordinated loans of $46,000, of which the Company received $23,000. Below is certain summarized consolidated information for Credit Fund as of December 31, 2021 and 2020. As of December 31, 2021 2020 ASSETS Investments, at fair value (amortized cost of $940,092 and $1,080,538, respectively) $ 926,959 $ 1,056,381 Cash and cash equivalents (1) 54,041 119,796 Other assets 7,698 7,553 Total assets $ 988,698 $ 1,183,730 LIABILITIES AND MEMBERS’ EQUITY Secured borrowings $ 600,651 $ 514,261 Notes payable, net of unamortized debt issuance costs of $0 and $1,559, respectively) — 253,933 Other liabilities 19,828 15,543 Subordinated loans and members’ equity (2) 368,219 399,993 Total liabilities and members’ equity $ 988,698 $ 1,183,730 (1) As of December 31, 2021 and 2020, $10,816 and $83,574, respectively, of Credit Fund’s cash and cash equivalents was restricted. (2) As of December 31, 2021 and 2020, the fair value of the Company's ownership interest in the subordinated loans and members' equity was $184,141 and $205,891, respectively. 67 Table of Contents For the Years Ended December 31, 2021 2020 Total investment income $ 68,397 $ 83,476 Expenses Interest and credit facility expenses 21,763 40,238 Other expenses 1,992 2,034 Total expenses 23,755 42,272 Net investment income (loss) 44,642 41,204 Net realized gain (loss) on investments (1,440) — Net change in unrealized appreciation (depreciation) on investments 11,024 (12,839) Net increase in members’ equity resulting from operations $ 54,226 $ 28,365 Below is a summary of Credit Fund’s portfolio, followed by a listing of the loans in Credit Fund’s portfolio as of December 31, 2021 and 2020: As of December 31, 2021 2020 Senior secured loans (1) $ 942,930 $ 1,084,491 Weighted average yields of senior secured loans based on amortized cost (2) 6.04 % 6.03 % Weighted average yields of senior secured loans based on fair value (2) 6.09 % 6.15 % Number of portfolio companies in Credit Fund 45 54 Average amount per portfolio company (1) $ 20,954 $ 20,083 Number of loans on non-accrual status — — Fair value of loans on non-accrual status $ — $ — Percentage of loans at floating interest rates (3) (4) 100.0 % 97.7 % Percentage of loans at fixed interest rates (4) — % 2.3 % Fair value of loans with PIK provisions $ — $ 24,113 Percentage of portfolio with PIK provisions (4) — % 2.3 % (1) At par/principal amount. (2) Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of December 31, 2021 and 2020. 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 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. (3) Floating rate debt investments are generally subject to interest rate floors. (4) Percentages based on fair value. 68 Table of Contents Consolidated Schedule of Investments as of December 31, 2021 Investments (1) Footnotes Industry Reference Rate & Spread (2) Interest Rate (2) Maturity Date Par/ Principal Amount Amortized Cost (4) Fair Value (5) First Lien Debt (100.0% of fair value) ACR Group Borrower, LLC ^+ (2)(3)(6) Aerospace & Defense L + 4.25% 5.50% 3/31/2028 $ 34,477 $ 33,913 $ 34,477 Acrisure, LLC +# (2)(3) Banking, Finance, Insurance & Real Estate L + 3.50% 3.78% 2/13/2027 25,376 25,353 25,203 Acrisure, LLC + (2)(3) Banking, Finance, Insurance & Real Estate L + 4.25% 4.75% 2/13/2027 6,700 6,650 6,687 Analogic Corporation ^+ (2)(3)(6) Capital Equipment L + 5.25% 6.25% 6/22/2024 19,796 19,781 19,587 Anchor Packaging, Inc. +# (2)(3) Containers, Packaging & Glass L + 4.00% 4.10% 7/18/2026 24,472 24,385 24,215 API Technologies Corp. +# (2)(3) Aerospace & Defense L + 4.25% 4.35% 5/9/2026 14,625 14,575 14,251 Aptean, Inc. +# (2)(3) Software L + 4.25% 4.35% 4/23/2026 12,157 12,113 12,087 Avalign Technologies, Inc. +# (2)(3) Healthcare & Pharmaceuticals L + 4.50% 4.63% 12/22/2025 14,443 14,354 14,320 Avenu Holdings, LLC + (2)(3) Sovereign & Public Finance L + 5.25% 6.25% 9/28/2024 23,350 23,350 23,350 BMS Holdings III Corp. + (2)(3) Construction & Building L + 5.50% 6.50% 9/30/2026 11,244 11,143 11,071 Chartis Holding, LLC + (2)(3)(6) Business Services L + 5.50% 6.50% 5/1/2025 6,964 6,964 6,964 Chemical Computing Group ULC (Canada) ^+ (2)(3)(6) Software L + 4.50% 5.50% 8/30/2024 13,912 13,480 13,845 Chudy Group, LLC ^+ (2)(3)(6) Healthcare & Pharmaceuticals L + 5.75% 6.75% 6/30/2027 33,021 32,465 33,657 Diligent Corporation ^+ (2)(3)(6) Telecommunications L + 6.25% 7.25% 8/4/2025 9,049 8,816 9,228 Divisions Holding Corporation +# (2)(3) Business Services L + 4.75% 5.50% 5/27/2028 24,938 24,706 24,953 DTI Holdco, Inc. + (2)(3) High Tech Industries L + 4.75% 5.75% 9/30/2023 18,495 18,442 18,237 Eliassen Group, LLC + (2)(3) Business Services L + 4.50% 4.60% 11/5/2024 15,159 15,103 15,152 EPS Nass Parent, Inc. ^+ (2)(3)(6) Utilities: Electric L + 5.75% 6.75% 4/19/2028 32,846 32,169 32,507 EvolveIP, LLC ^+ (2)(3)(6) Telecommunications L + 5.50% 6.50% 6/7/2025 40,196 40,126 39,973 Exactech, Inc. +# (2)(3) Healthcare & Pharmaceuticals L + 3.75% 4.75% 2/14/2025 21,307 21,221 21,073 Excel Fitness Holdings, Inc. +# (2)(3) Hotel, Gaming & Leisure L + 5.25% 6.25% 10/7/2025 24,500 24,336 24,500 Frontline Technologies Holdings, LLC + (2)(3) Software L + 5.25% 6.25% 9/18/2023 14,736 14,269 14,736 GSM Acquisition Corp. ^+ (2)(3)(6) Hotel, Gaming & Leisure L + 5.00% 6.00% 11/16/2026 25,623 25,331 25,396 Heartland Home Services, Inc + (2)(3)(6) Consumer Services L + 6.00% 7.00% 12/15/2026 17,664 17,664 17,735 HMT Holding Inc. ^+ (2)(3)(6) Energy: Oil & Gas L + 5.75% 6.75% 11/17/2023 32,484 32,245 31,086 Integrity Marketing Acquisition, LLC ^+ (2)(3)(6) Banking, Finance, Insurance & Real Estate L + 5.50% 6.25% 8/27/2025 32,853 32,309 32,403 Jensen Hughes, Inc. + (2)(3)(6) Utilities: Electric L + 4.50% 5.50% 3/22/2024 34,392 34,347 33,395 K2 Insurance Services, LLC + (2)(3)(6) Banking, Finance, Insurance & Real Estate L + 5.00% 6.00% 7/1/2026 12,929 12,929 12,906 KAMC Holdings, Inc. +# (2)(3) Energy: Electricity L + 4.00% 4.18% 8/14/2026 13,685 13,638 11,450 KBP Investments, LLC + (2)(3)(6) Beverage, Food & Tobacco L + 5.00% 5.75% 5/25/2027 36,973 36,599 36,570 Odyssey Logistics & Technology Corp. +# (2)(3) Transportation: Cargo L + 4.00% 5.00% 10/12/2024 9,605 9,580 9,509 Output Services Group ^+ (2)(3) Media: Advertising, Printing & Publishing L + 4.50% 5.50% 3/27/2024 19,222 19,194 16,467 Premise Health Holding Corp. +# (2)(3) Healthcare & Pharmaceuticals L + 3.50% 3.72% 7/10/2025 13,445 13,409 13,419 69 Table of Contents Consolidated Schedule of Investments as of December 31, 2021 Investments (1) Footnotes Industry Reference Rate & Spread (2) Interest Rate (2) Maturity Date Par/ Principal Amount Amortized Cost (4) Fair Value (5) Q Holding Company +# (2)(3) Automotive L + 5.00% 6.00% 12/31/2023 $ 21,515 $ 21,421 $ 21,098 QW Holding Corporation ^+ (2)(3)(6) Environmental Industries L + 6.25% 7.25% 8/31/2024 14,116 13,887 13,645 Radiology Partners, Inc. +# (2)(3) Healthcare & Pharmaceuticals L + 4.25% 4.36% 7/9/2025 27,686 27,603 27,245 RevSpring Inc. +# (2)(3) Media: Advertising, Printing & Publishing L + 4.25% 4.47% 10/11/2025 29,149 29,001 29,067 Striper Buyer, LLC + (2)(3) Containers, Packaging & Glass L + 5.50% 6.25% 12/30/2026 14,850 14,720 14,850 Turbo Buyer, Inc. + (2)(3)(6) Automotive L + 6.00% 7.00% 12/2/2025 13,960 13,960 13,661 U.S. TelePacific Holdings Corp. + (2)(3) Telecommunications L + 5.50% 6.50% 5/2/2023 6,660 6,643 4,995 USALCO, LLC + (2)(3) Chemicals, Plastics & Rubber L + 6.00% 7.00% 10/19/2027 14,995 14,704 14,704 VRC Companies, LLC ^+ (2)(3)(6) Business Services L + 5.50% 6.25% 6/29/2027 26,520 26,103 26,162 Welocalize, Inc. + (2)(3)(6) Business Services L + 4.75% 5.75% 12/23/2024 34,201 33,868 33,444 WRE Holding Corp. ^+ (2)(3)(6) Environmental Industries SOFR + 5.50% 6.50% 1/3/2025 8,740 8,724 8,584 Yellowstone Buyer Acquisition, LLC + (2)(3) Consumer Goods: Durable L + 5.75% 6.75% 9/13/2027 39,900 39,135 39,095 First Lien Debt Total $ 934,728 $ 926,959 Equity Investments (0.00% of fair value) DBI Holding, LLC ^ Transportation: Cargo 2,961 $ — $ — DBI Holding, LLC ^ Transportation: Cargo 13,996 5,364 — Equity Investments Total $ 5,364 $ — Total Investments $ 940,092 $ 926,959 ^ Denotes that all or a portion of the assets are owned by Credit Fund. Credit Fund has entered into a revolving credit facility (the "Credit Fund Facility"). Accordingly, such assets are not available to creditors of Credit Fund Sub or Credit Fund Warehouse II. + Denotes that all or a portion of the assets are owned by Credit Fund Sub. Credit Fund Sub has entered into a revolving credit facility (the “Credit Fund Sub Facility”). The lenders of the Credit Fund Sub Facility have a first lien security interest in substantially all of the assets of Credit Fund Sub. Accordingly, such assets are not available to creditors of Credit Fund or Credit Fund Warehouse II. # Denotes that all or a portion of the assets are owned by the Credit Fund Warehouse II. Credit Fund Warehouse II has entered into a revolving credit facility (the "Credit Fund Warehouse II"). The lenders of the Credit Fund Warehouse II Facility have a first lien security interest in substantially all of the assets of the Credit Fund Warehouse II. Accordingly, such assets are not available to creditors of Credit Fund or Credit Fund Sub. (1) Unless otherwise indicated, issuers of investments held by Credit Fund are domiciled in the United States. As of December 31, 2021, the geographical composition of investments as a percentage of fair value was 1.5% in Canada and 98.5% in the United States. Certain portfolio company investments are subject to contractual restrictions on sales. (2) Variable rate loans to the portfolio companies bear interest at a rate that is 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, Credit Fund has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2021. As of December 31, 2021, the reference rates for Credit Fund's variable rate loans were the 30-day LIBOR at 0.10%, the 90-day LIBOR at 0.22% and the 180-day LIBOR at 0.33%. (3) Loan includes interest rate floor feature, which is generally 1.00%. (4) 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. (5) Fair value is determined in good faith by or under the direction of the board of managers of Credit Fund, pursuant to Credit Fund’s valuation policy, with the fair value of all investments determined using significant unobservable inputs, which is substantially similar to the valuation policy of the Company provided in Note 3, Fair Value Measurements, to the consolidated financial statements in Part II, Item 8 of this Form 10-K. 70 Table of Contents (6) As of December 31, 2021, Credit Fund and Credit Fund Sub had the following unfunded commitments to fund delayed draw and revolving senior secured loans: First Lien Debt – unfunded delayed draw and revolving term loans commitments Type Unused Fee Par/ Principal Amount Fair Value ACR Group Borrower, LLC Revolver 0.38 % $ 7,350 $ — Analogic Corporation Revolver 0.50 847 (9) Chartis Holding, LLC Revolver 0.50 2,183 — Chemical Computing Group ULC (Canada) Revolver 0.50 873 (4) Chudy Group, LLC Delayed Draw 1.00 5,517 88 Chudy Group, LLC Revolver 0.50 1,379 22 Diligent Corporation Delayed Draw 1.00 1,653 26 Diligent Corporation Revolver 0.50 703 11 EPS Nass Parent, Inc. Delayed Draw 1.00 3,136 (29) EPS Nass Parent, Inc. Revolver 0.50 941 (9) EvolveIP, LLC Revolver 0.50 3,360 (17) GSM Acquisition Corp. Delayed Draw 1.00 4,313 (33) Heartland Home Services, Inc Revolver 0.50 746 3 HMT Holding Inc. Revolver 0.50 6,173 (223) Integrity Marketing Acquisition, LLC Delayed Draw — 7,000 (71) Integrity Marketing Acquisition, LLC Delayed Draw 1.00 4,453 (45) Jensen Hughes, Inc. Revolver 0.50 2,000 (55) K2 Insurance Services, LLC Revolver 0.50 1,170 (2) KBP Investments, LLC Delayed Draw 1.00 503 (5) KBP Investments, LLC Delayed Draw 1.00 2,415 (24) QW Holding Corporation Delayed Draw 1.00 9,338 (162) QW Holding Corporation Revolver 0.50 3,794 (66) Turbo Buyer, Inc. Revolver 0.50 933 (19) VRC Companies, LLC Delayed Draw 0.75 2,521 (30) VRC Companies, LLC Revolver 0.50 833 (10) Welocalize, Inc. Revolver 0.50 3,375 (64) Welocalize, Inc. Revolver 0.50 2,250 (43) WRE Holding Corp. Revolver 0.50 624 (10) Total unfunded commitments $ 80,383 $ (780) 71 Table of Contents Consolidated Schedule of Investments as of December 31, 2020 Investments (1) Footnotes Industry Reference Rate & Spread (2) Interest Rate (2) Maturity Date Par/ Principal Amount Amortized Cost (4) Fair Value (5) First Lien Debt (97.5% of fair value) Acrisure, LLC \# (2)(3) Banking, Finance, Insurance & Real Estate L + 3.50% 3.65% 2/15/2027 $ 25,634 $ 25,606 $ 25,104 Alku, LLC +# (2)(3) Business Services L + 5.50% 5.75% 7/29/2026 23,666 23,466 23,512 Alpha Packaging Holdings, Inc. +\ (2)(3) Containers, Packaging & Glass L + 6.00% 7.00% 11/12/2021 16,378 16,378 16,378 AmeriLife Holdings LLC # (2)(3) Banking, Finance, Insurance & Real Estate L + 4.00% 4.15% 3/18/2027 9,951 9,929 9,802 Analogic Corporation ^+ (2)(3)(6) Capital Equipment L + 5.25% 6.25% 6/22/2024 18,857 18,837 18,857 Anchor Packaging, Inc. +# (2)(3) Containers, Packaging & Glass L + 4.00% 4.15% 7/18/2026 24,723 24,617 24,656 API Technologies Corp. +\ (2)(3) Aerospace & Defense L + 4.25% 4.49% 5/9/2026 14,775 14,713 13,999 Aptean, Inc. +\ (2)(3) Software L + 4.25% 4.40% 4/23/2026 12,281 12,227 12,077 AQA Acquisition Holding, Inc. +\ (2)(3)(6) High Tech Industries L + 4.25% 5.25% 5/24/2023 18,759 18,752 18,757 Astra Acquisition Corp. +# (2)(3) Software L + 5.50% 6.50% 3/1/2027 28,783 28,392 28,783 Avalign Technologies, Inc. +\ (2)(3) Healthcare & Pharmaceuticals L + 4.50% 4.73% 12/22/2025 14,592 14,481 14,334 Big Ass Fans, LLC +\# (2)(3) Capital Equipment L + 3.75% 4.75% 5/21/2024 13,766 13,714 13,766 BK Medical Holding Company, Inc. ^+ (2)(3)(6) Healthcare & Pharmaceuticals L + 5.25% 6.25% 6/22/2024 24,165 23,951 22,363 Chemical Computing Group ULC (Canada) ^+ (2)(3)(6) Software L + 5.00% 6.00% 8/30/2023 14,055 13,378 14,055 Clarity Telecom LLC. + (2)(3) Media: Broadcasting & Subscription L + 4.25% 4.40% 8/30/2026 14,813 14,773 14,813 Clearent Newco, LLC ^ (2)(3)(6) High Tech Industries L + 6.50% 7.50% 3/20/2025 4,079 4,079 3,907 Clearent Newco, LLC ^+\ (2)(3) High Tech Industries L + 5.50% 7.50% 3/20/2025 29,486 29,236 28,722 DecoPac, Inc. ^+\ (2)(3)(6) Non-durable Consumer Goods L + 4.25% 5.25% 9/29/2024 12,336 12,253 12,318 Diligent Corporation ^+ (2)(3)(6) Telecommunications L + 6.25% 7.25% 8/4/2025 8,683 8,411 8,819 DTI Holdco, Inc. ^+\ (2)(3) High Tech Industries L + 4.75% 5.75% 9/30/2023 18,690 18,642 16,655 Eliassen Group, LLC +\ (2)(3) Business Services L + 4.25% 4.40% 11/5/2024 7,543 7,516 7,483 EvolveIP, LLC ^+ (2)(3)(6) Telecommunications L + 5.75% 6.75% 6/7/2023 19,800 19,759 19,775 Exactech, Inc. +\# (2)(3) Healthcare & Pharmaceuticals L + 3.75% 4.75% 2/14/2025 21,528 21,416 20,422 Excel Fitness Holdings, Inc. +# (2)(3) Hotel, Gaming & Leisure L + 5.25% 6.25% 10/7/2025 24,750 24,546 22,780 Frontline Technologies Holdings, LLC + (2)(3) Software L + 5.75% 6.75% 9/18/2023 14,886 14,198 14,589 Golden West Packaging Group LLC +\ (2)(3) Containers, Packaging & Glass L + 5.25% 6.25% 6/20/2023 29,012 28,896 28,974 HMT Holding Inc. +\ (2)(3)(6) Energy: Oil & Gas L + 5.00% 6.00% 11/17/2023 32,821 32,458 30,984 Integrity Marketing Acquisition, LLC ^+ (2)(3)(6) Banking, Finance, Insurance & Real Estate L + 6.25% 7.25% 8/27/2025 7,836 7,701 7,956 Jensen Hughes, Inc. +\ (2)(3)(6) Utilities: Electric L + 4.50% 5.50% 3/22/2024 34,584 34,489 33,424 KAMC Holdings, Inc. +# (2)(3) Energy: Electricity L + 4.00% 4.23% 8/14/2026 13,825 13,768 12,531 KBP Investments, LLC ^+ (2)(3)(6) Beverage, Food & Tobacco L + 5.00% 6.00% 5/15/2023 9,292 9,059 9,350 Marco Technologies, LLC ^+\ (2)(3)(6) Media: Advertising, Printing & Publishing L + 4.00% 5.00% 10/30/2023 7,332 7,293 7,332 Mold-Rite Plastics, LLC +\ (2)(3) Chemicals, Plastics & Rubber L + 4.25% 5.25% 12/14/2021 14,520 14,501 14,520 72 Table of Contents Newport Group Holdings II, Inc. +\# (2)(3) Banking, Finance, Insurance & Real Estate L + 3.50% 3.75% 9/13/2025 23,475 23,285 23,405 Odyssey Logistics & Technology Corp. +\# (2)(3) Transportation: Cargo L + 4.00% 5.00% 10/12/2024 $ 38,897 $ 38,773 $ 37,766 Output Services Group ^+\ (2)(3) Media: Advertising, Printing & Publishing L + 4.50% 5.50% 3/27/2024 19,421 19,382 14,178 Pasternack Enterprises, Inc. +\ (2)(3) Capital Equipment L + 4.00% 5.00% 7/2/2025 22,524 22,513 22,218 Pharmalogic Holdings Corp. +\ (2)(3) Healthcare & Pharmaceuticals L + 4.00% 5.00% 6/11/2023 11,205 11,189 11,158 Premise Health Holding Corp. +\# (2)(3) Healthcare & Pharmaceuticals L + 3.50% 3.75% 7/10/2025 13,584 13,538 13,503 Propel Insurance Agency, LLC ^+\ (2)(3)(6) Banking, Finance, Insurance & Real Estate L + 5.00% 6.00% 6/1/2024 38,134 37,662 37,716 Q Holding Company +\# (2)(3) Automotive L + 5.00% 6.00% 12/31/2023 21,735 21,604 20,229 QW Holding Corporation + (2)(3)(6) Environmental Industries L + 6.25% 7.25% 8/31/2022 11,566 11,465 10,727 Radiology Partners, Inc. +\# (2)(3) Healthcare & Pharmaceuticals L + 4.25% 4.81% 7/9/2025 27,686 27,581 27,193 RevSpring Inc. +\# (2)(3) Media: Advertising, Printing & Publishing L + 4.25% 4.40% 10/11/2025 29,449 29,265 29,199 Situs Group Holdings Corporation +\ (2)(3) Banking, Finance, Insurance & Real Estate L + 4.75% 5.75% 6/28/2025 14,781 14,689 14,636 T2 Systems, Inc. ^+ (2)(3)(6) Transportation: Consumer L + 6.75% 7.75% 9/28/2022 29,119 28,743 29,118 The Original Cakerie, Ltd. (Canada) +\ (2)(3)(6) Beverage, Food & Tobacco L + 4.50% 5.50% 7/20/2022 6,295 6,281 6,289 The Original Cakerie, Ltd. (Canada) + (2)(3) Beverage, Food & Tobacco L + 5.00% 6.00% 7/20/2022 8,837 8,815 8,829 Thoughtworks, Inc. \# (2)(3) Business Services L + 3.75% 4.75% 10/11/2024 11,704 11,683 11,704 U.S. Acute Care Solutions, LLC +\ (2)(3) Healthcare & Pharmaceuticals L + 6.00% 7.00% 5/15/2021 31,211 31,184 29,104 U.S. TelePacific Holdings Corp. +\ (2)(3) Telecommunications L + 5.50% 6.50% 5/2/2023 26,660 26,585 23,984 VRC Companies, LLC + (2)(3)(6) Business Services L + 6.50% 7.50% 3/31/2023 30,582 29,464 30,582 Water Holdings Acquisition LLC ^+ (2)(3)(6) Utilities: Water L + 5.25% 6.25% 12/18/2026 26,316 25,520 25,516 Welocalize, Inc. + (2)(3)(6) Business Services L + 4.50% 5.50% 12/23/2023 22,629 22,414 22,584 WRE Holding Corp. ^+ (2)(3)(6) Environmental Industries L + 5.25% 6.25% 1/3/2023 8,367 8,336 8,252 First Lien Debt Total $ 1,051,406 $ 1,029,687 Second Lien Debt (2.3% of fair value) DBI Holding, LLC ^ (2) Transportation: Cargo 9.00% PIK 9.00% 2/1/2026 $ 24,113 $ 23,768 $ 24,113 Second Lien Debt Total $ 23,768 $ 24,113 Equity Investments (0.2% of fair value) DBI Holding, LLC ^ Transportation: Cargo 2,961 $ — $ — DBI Holding, LLC ^ Transportation: Cargo 13,996 5,364 2,581 Equity Investments Total $ 5,364 $ 2,581 Total Investments $ 1,080,538 $ 1,056,381 ^ Denotes that all or a portion of the assets are owned by Credit Fund. Credit Fund has entered into a revolving credit facility (the "Credit Fund Facility"). Accordingly, such assets are not available to creditors of Credit Fund Sub, the 2019-2 Issuer or Credit Fund Warehouse II. + Denotes that all or a portion of the assets are owned by Credit Fund Sub. Credit Fund Sub has entered into a revolving credit facility (the “Credit Fund Sub Facility”). The lenders of the Credit Fund Sub Facility have a first lien security interest in substantially all of the assets of Credit Fund Sub. Accordingly, such assets are not available to creditors of Credit Fund, the 2019-2 Issuer or Credit Fund Warehouse II. \ Denotes that all or a portion of the assets are owned by the 2019-2 Issuer and secure the notes issued in connection with a $399,900 term debt securitization completed by Credit Fund on May 21, 2019 (the “2019-2 Debt Securitization”). Accordingly, such assets are not available to creditors of Credit Fund, Credit Fund Sub, or Credit Fund Warehouse II. # Denotes that all or a portion of the assets are owned by the Credit Fund Warehouse II. Credit Fund Warehouse II has entered into a revolving credit facility (the "Credit Fund Warehouse II"). The lenders of the Credit Fund Warehouse II Facility have a first lien security interest in substantially all of the assets of the Credit Fund Warehouse II. Accordingly, such assets are not available to creditors of Credit Fund, Credit Fund Sub, or 2019-2 Issuer. 73 Table of Contents (1) Unless otherwise indicated, issuers of investments held by Credit Fund are domiciled in the United States. As of December 31, 2020, the geographical composition of investments as a percentage of fair value was 2.8% in Canada and 97.2% in the United States. Certain portfolio company investments are subject to contractual restrictions on sales. (2) Variable rate loans to the portfolio companies bear interest at a rate that is 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, Credit Fund has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2020. As of December 31, 2020, the reference rates for Credit Fund's variable rate loans were the 30-day LIBOR at 0.15%, the 90-day LIBOR at 0.25% and the 180-day LIBOR at 0.26%. (3) Loan includes interest rate floor feature, which is generally 1.00%. (4) 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. (5) Fair value is determined in good faith by or under the direction of the board of managers of Credit Fund, pursuant to Credit Fund’s valuation policy, with the fair value of all investments determined using significant unobservable inputs, which is substantially similar to the valuation policy of the Company provided in Note 3, Fair Value Measurements, to the consolidated financial statements in Part II, Item 8 of this Form 10-K. (6) As of December 31, 2020, Credit Fund and Credit Fund Sub had the following unfunded commitments to fund delayed draw and revolving senior secured loans: First Lien Debt – unfunded delayed draw and revolving term loans commitments Type Unused Fee Par/ Principal Amount Fair Value Analogic Corporation Revolver 0.50 % $ 1,975 $ — AQA Acquisition Holding, Inc. Revolver 0.50 2,459 — BK Medical Holding Company, Inc. Revolver 0.50 2,609 (176) Chemical Computing Group ULC (Canada) Revolver 0.50 873 — Clearent Newco, LLC Delayed Draw 1.00 2,549 (66) DecoPac, Inc. Revolver 0.50 2,143 (3) Diligent Corporation Delayed Draw 1.00 2,109 25 Diligent Corporation Revolver 0.50 703 8 EvolveIP, LLC Delayed Draw 1.00 1,904 (2) EvolveIP, LLC Revolver 0.50 1,680 (2) HMT Holding Inc. Revolver 0.50 6,173 (291) Integrity Marketing Acquistion, LLC Delayed Draw 1.00 4,144 41 Jensen Hughes, Inc. Delayed Draw 1.00 1,127 (35) Jensen Hughes, Inc. Revolver 0.50 1,364 (43) KBP Investments, LLC Delayed Draw 1.00 503 1 KBP Investments, LLC Delayed Draw 1.00 10,190 30 Marco Technologies, LLC Delayed Draw 1.00 7,500 — Propel Insurance Agency, LLC Revolver 0.50 1,905 (19) Propel Insurance Agency, LLC Delayed Draw 1.00 1,733 (17) QW Holding Corporation Revolver 0.50 5,498 (268) QW Holding Corporation Delayed Draw 1.00 161 (8) T2 Systems, Inc. Revolver 0.50 1,955 — The Original Cakerie, Ltd. (Canada) Revolver 0.50 1,665 (1) VRC Companies, LLC Revolver 0.50 858 — Water Holdings Acquisition LLC Delayed Draw 1.00 8,421 (168) Water Holdings Acquisition LLC Revolver 0.50 5,263 (105) Welocalize, Inc. Revolver 0.50 2,250 (4) WRE Holding Corp. Revolver 0.50 852 (10) WRE Holding Corp. Delayed Draw 1.00 563 (7) Total unfunded commitments $ 81,129 $ (1,120) Debt The Credit Fund, Credit Fund Sub and Credit Fund Warehouse II are party to separate credit facilities as described below. As of December 31, 2021 and 2020, Credit Fund, Credit Fund Sub, and Credit Fund Warehouse II were in compliance with all covenants and other requirements of their respective credit facility agreements. Below is a summary of the borrowings and repayments under the credit facilities for the respective periods. 74 Table of Contents Credit Fund Facility Credit Fund Sub Facility Credit Fund Warehouse II Facility Outstanding balance as of December 31, 2019 $ 93,000 $ 343,506 $ 97,571 Borrowings 63,500 269,313 54,373 Repayments (156,500) (191,960) (58,542) Outstanding balance as of December 31, 2020 — 420,859 93,402 Borrowings — 444,000 52,250 Repayments — (350,238) (59,622) Outstanding balance as of December 31, 2021 $ — $ 514,621 $ 86,030 Credit Fund Facility. On June 24, 2016, Credit Fund entered into the Credit Fund Facility with the Company, which was subsequently amended on June 5, 2017, October 2, 2017, November 3, 2017, June 22, 2018, June 29, 2018, February 21, 2019, March 20, 2020 and February 22, 2021, pursuant to which Credit Fund may from time to time request mezzanine loans from the Company. The maximum principal amount of the Credit Fund Facility is $175,000. The maturity date of the Credit Fund Facility is May 21, 2022. Amounts borrowed under the Credit Fund Facility bear interest at a rate of LIBOR plus 9.00%. Credit Fund Sub Facility. On June 24, 2016, Credit Fund Sub closed on the Credit Fund Sub Facility with lenders, which was subsequently amended on May 31, 2017, October 27, 2017, August 24, 2018, December 12, 2019, March 11, 2020 and May 3, 2021. The Credit Fund Sub Facility provides for secured borrowings during the applicable revolving period up to an amount equal to $640,000. The facility is secured by a first lien security interest in substantially all of the portfolio investments held by Credit Fund Sub. The maturity date of the Credit Fund Sub Facility is May 22, 2024. Amounts borrowed under the Credit Fund Sub Facility bear interest at a rate of LIBOR plus 2.25%. Credit Fund Warehouse II Facility . On August 16, 2019, Credit Fund Warehouse II closed on a revolving credit facility (the "Credit Fund Warehouse II Facility") with lenders. The Credit Fund Warehouse II Facility provides for secured borrowings during the applicable revolving period up to an amount equal to $150,000. The Credit Fund Warehouse II Facility is secured by a first lien security interest in substantially all of the portfolio investments held by the Credit Fund Warehouse II Facility. The maturity date of the Credit Fund Warehouse II Facility is August 16, 2022. Amounts borrowed under the Credit Fund Warehouse II Facility bear interest at a rate of LIBOR plus 1.50%. Amounts borrowed under the Credit Fund Warehouse II Facility during the first 12 months bore interest at a rate of LIBOR plus 1.05%, and amounts borrowed in the second 12 months bore interest at LIBOR plus 1.15%. 2017-1 Notes On December 19, 2017, Credit Fund completed the 2017-1 Debt Securitization. The notes offered in the 2017-1 Debt Securitization (the “2017-1 Notes”) were issued by the 2017-1 Issuer, a wholly owned and consolidated subsidiary of Credit Fund, and are secured by a diversified portfolio of the 2017-1 Issuer consisting primarily of first and second lien senior secured loans. The 2017-1 Debt Securitization was executed through a private placement of the 2017-1 Notes, consisting of: • $231,700 of Aaa/AAA Class A-1 Notes, which bore interest at the three-month LIBOR plus 1.17%; • $48,300 of Aa2/AA Class A-2 Notes, which bore interest at the three-month LIBOR plus 1.50%; • $15,000 of A2/A Class B-1 Notes, which bore interest at the three-month LIBOR plus 2.25%; • $9,000 of A2/A Class B-2 Notes which bore interest at 4.30%; • $22,900 of Baa2/BBB Class C Notes which bore interest at the three-month LIBOR plus 3.20%; and • $25,100 of Ba2/BB Class D Notes which bore interest at the three-month LIBOR plus 6.38%. The 2017-1 Notes were scheduled to mature on January 15, 2028. Credit Fund received 100% of the preferred interests issued by the 2017-1 Issuer (the “2017-1 Issuer Preferred Interests”) on the closing date of the 2017-1 Debt Securitization in exchange for Credit Fund’s contribution to the 2017-1 Issuer of the initial closing date loan portfolio. The 2017-1 Issuer Preferred Interests did not bear interest and had a nominal value of $47,900 at closing. The 2017-1 Notes were fully redeemed during the year ended December 31, 2020. As of the redemption date, the 2017-1 Issuer was in compliance with all covenants and other requirements of the indenture. 75 Table of Contents 2019-2 Notes On May 21, 2019, Credit Fund completed the 2019-2 Debt Securitization. The notes offered in the 2019-2 Debt Securitization (the “2019-2 Notes”) were issued by the 2019-2 Issuer, a wholly owned and consolidated subsidiary of Credit Fund, and are secured by a diversified portfolio of the 2019-2 Issuer consisting primarily of first and second lien senior secured loans. The 2019-2 Debt Securitization was executed through a private placement of the 2019-2 Notes, consisting of: • $233,000 of Aaa/AAA Class A-1 Notes, which bore interest at the three-month LIBOR plus 1.50%; • $48,000 of Aa2/AA Class A-2 Notes, which bore interest at the three-month LIBOR plus 2.40%; • $23,000 of A2/A Class B Notes, which bore interest at the three-month LIBOR plus 3.45%; • $27,000 of Baa2/BBB- Class C Notes which bore interest at the three-month LIBOR plus 4.55%; and • $21,000 of Ba2/BB- Class D Notes which bore interest at the three-month LIBOR plus 8.03%. The 2019-2 Notes were scheduled to mature on April 15, 2029. Credit Fund received 100% of the preferred interests issued by the 2019-2 Issuer (the “2019-2 Issuer Preferred Interests”) on the closing date of the 2019-2 Debt Securitization in exchange for Credit Fund’s contribution to the 2019-2 Issuer of the initial closing date loan portfolio. The 2019-2 Issuer Preferred Interests did not bear interest and had a nominal value of $48,300 at closing. The 2019-2 Notes were fully redeemed during the year ended December 31, 2021. As of the redemption date and December 31, 2020, the 2019-2 Issuer was in compliance with all covenants and other requirements of the indenture. MIDDLE MARKET CREDIT FUND II, LLC Overview On November 3, 2020, the Company and CCLF entered into a limited liability company agreement to co-manage Credit Fund II, a Delaware limited liability company that is not consolidated in the Company's consolidated financial statements. Credit Fund II primarily invests in senior secured loans of middle market companies. Credit Fund II is managed by a four-member board, on which the Company and CCLF have equal representation. Establishing a quorum for Credit Fund II's board requires at least one of the Company's representatives and one of CCLF's representatives. The Company and CCLF have 84.13% and 15.87% economic ownership of Credit Fund II, respectively. By virtue of its membership interest, each of the Company and CCLF indirectly bears an allocable share of all expenses and other obligations of Credit Fund II. Credit Fund II's initial portfolio consists of 45 senior secured loans of middle market companies with an aggregate principal balance of approximately $250 million. Credit Fund II's initial portfolio was funded on November 3, 2020 with existing senior secured debt investments contributed by the Company and as part of the transaction, the Company determined that the contribution met the requirements under ASC 860, Transfers and Servicing . Credit Fund II is expected to make only limited new investments in senior secured loans of middle market companies. Portfolio and investment decisions with respect to Credit Fund II must be unanimously approved by a quorum of Credit Fund II’s board members consisting of at least one of the Company's representatives and one of CCLF's representatives. Therefore, although the Company owns more than 25% of the voting securities of Credit Fund II, the Company does not believe that it has control over Credit Fund (other than for purposes of the Investment Company Act). Middle Market Credit Fund II SPV, LLC (“Credit Fund II Sub”), a Delaware limited liability company, was formed on September 4, 2020. Credit Fund II Sub is a wholly owned subsidiary of Credit Fund II and is consolidated in Credit Fund II’s consolidated financial statements commencing from the date of its formation. Credit Fund II Sub primarily holds investments in first lien loans of middle market companies, which are pledged as security for the Credit Fund II Senior Notes (see below). Credit Fund II, the Company and CCLF entered into an administration agreement with Carlyle Global Credit Administration L.L.C., the administrative agent of Credit Fund II (in such capacity, the “Credit Fund II Administrative Agent”), pursuant to which the Credit Fund II Administrative Agent is delegated certain administrative and non-discretionary functions, is authorized to enter into sub-administration agreements at the expense of Credit Fund II with the approval of the board of managers of Credit Fund II, and is reimbursed by Credit Fund II for its costs and expenses and Credit Fund II’s allocable portion of overhead incurred by the Credit Fund II Administrative Agent in performing its obligations thereunder. Credit Fund II Senior Notes On November 3, 2020 and as amended on December 29, 2021, Credit Fund II Sub closed on the Credit Fund II Senior Notes (the “Credit Fund II Senior Notes”) with lenders. The Credit Fund II Senior Notes provides for secured borrowings 76 Table of Contents totaling $157,500 with two tranches, A-1 and A-2 outstanding. The facility is secured by a first lien security interest in substantially all of the portfolio investments held by Credit Fund II Sub. The maturity date of the Credit Fund II Senior Notes Sub Facility is November 3, 2030. Amounts issued for the Class A-1 notes totaled $147,500 and bear interest at a rate of LIBOR plus 2.70%, and amounts issued for the Class A-2 notes totaled $10,000 and bear interest at LIBOR plus 3.20%. The A-1 Notes were rated AAA, and the A-2 Notes were rated AA by DBRS Morningstar. The terms of the Credit Fund II Senior Notes provide that as loans pay down, up to $50,000 is available from principal proceeds for reinvestment, and then the investment principal proceeds are used to directly pay down the principal balance on the Credit Fund II Senior Notes. As of December 31, 2021 and 2020, Credit Fund II Sub was in compliance with all covenants and other requirements of its respective credit agreements. Selected Financial Data Since inception of Credit Fund II and through December 31, 2021, the Company and CCLF each made capital contributions of $78,096 and $12,709 in members’ equity, respectively, to Credit Fund II. Below is certain summarized consolidated information for Credit Fund II as of December 31, 2021 and 2020. As of December 31, 2021 2020 ASSETS Investments, at fair value (amortized cost of $238,615 and $245,312, respectively) $ 239,289 $ 246,421 Cash and cash equivalents (1) 10,092 1,385 Other assets 5,606 3,436 Total assets $ 254,987 $ 251,242 LIABILITIES AND MEMBERS’ EQUITY Liabilities Notes payable, net of unamortized debt issuance costs of $802 and $875, respectively $ 156,698 $ 156,625 Other liabilities 5,557 2,675 Total members' equity (2) 92,732 91,942 Total liabilities and members’ equity $ 254,987 $ 251,242 (1) As of December 31, 2021 and 2020, all of Credit Fund II’s cash and cash equivalents was restricted. (2) As of December 31, 2021 and 2020, the fair value of Company's ownership interest in the members' equity was $77,958 and $77,395, respectively. For the Year Ended December 31, 2021 2020 Total investment income $ 18,822 $ 3,005 Expenses Interest and credit facility expenses 4,695 766 Other expenses 897 498 Total expenses 5,592 1,264 Net investment income (loss) 13,230 1,741 Net change in unrealized appreciation (depreciation) on investments (440) 1,114 Net increase (decrease) resulting from operations $ 12,790 $ 2,855 77 Table of Contents Below is a summary of Credit Fund II’s portfolio, followed by a listing of the loans in Credit Fund II’s portfolio as of December 31, 2021 and 2020: As of December 31, 2021 2020 Senior secured loans (1) $ 240,878 $ 248,172 Weighted average yields of senior secured loans based on amortized cost (2) 7.26 % 7.32 % Weighted average yields of senior secured loans based on fair value (2) 7.24 % 7.29 % Number of portfolio companies in Credit Fund II 36 44 Average amount per portfolio company (1) $ 6,691 $ 5,640 Percentage of portfolio at floating interest rates (3) (4) 97.7 % 99.1 % Percentage of portfolio at fixed interest rates (4) 2.3 % 0.9 % Fair value of loans with PIK provisions $ 17,453 $ 8,856 Percentage of portfolio with PIK provisions (4) 7.3 % 3.6 % (1) At par/principal amount. (2) Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of December 31, 2021 and 2020. 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 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. (3) Floating rate debt investments are generally subject to interest rate floors. (4) Percentages based on fair value. 78 Table of Contents Consolidated Schedule of Investments as of December 31, 2021 Investments (1) Footnotes Industry Reference Rate & Spread (2) Interest Rate (2) Maturity Date Par/ Principal Amount Amortized Cost (4) Fair Value (5) First Lien Debt (87.0%) of fair value) Airnov, Inc. ^ (2)(3) Containers, Packaging & Glass L + 5.00% 6.00% 12/19/2025 $ 9,946 $ 9,930 $ 9,946 American Physician Partners, LLC ^ (2)(3) Healthcare & Pharmaceuticals L + 6.75%, 1.50% PIK 9.25% 2/21/2022 8,415 8,415 8,415 Appriss Health, LLC ^ (2)(3) Healthcare & Pharmaceuticals L + 7.25% 8.25% 5/6/2027 1,197 1,178 1,198 Apptio, Inc. ^ (2)(3) Software L + 7.25% 8.25% 1/10/2025 5,357 5,295 5,357 Aurora Lux FinCo S.Á.R.L. (Luxembourg) ^ (2)(3) Software L + 6.00% 7.00% 12/24/2026 4,355 4,273 3,924 Avenu Holdings, LLC ^ (2)(3) Sovereign & Public Finance L + 5.25% 6.25% 9/28/2024 987 980 987 BMS Holdings III Corp. ^ (2)(3) Construction & Building L + 5.50% 6.50% 9/30/2026 3,275 3,216 3,224 Captive Resources Midco, LLC ^ (2)(3) Banking, Finance, Insurance & Real Estate L + 5.50% 6.25% 5/31/2027 8,193 8,108 8,147 Chartis Holding, LLC ^ (2)(3) Business Services L + 5.50% 6.50% 5/1/2025 9,924 9,907 9,924 Comar Holding Company, LLC ^ (2)(3) Containers, Packaging & Glass L + 5.75% 6.75% 6/18/2024 8,710 8,632 8,536 Cority Software Inc. (Canada) ^ (2)(3) Software L + 5.00% 6.00% 7/2/2026 8,712 8,591 8,707 Dwyer Instruments, Inc ^ (2)(3) Capital Equipment L + 5.50% 6.25% 7/21/2027 10,000 9,939 9,974 Ethos Veterinary Health LLC ^ (2)(3) Consumer Services L + 4.75% 4.85% 5/15/2026 8,134 8,080 8,134 EvolveIP, LLC ^ (2)(3) Telecommunications L + 5.50% 6.50% 6/7/2025 8,710 8,701 8,666 Harbour Benefit Holdings, Inc. ^ (2)(3) Business Services L + 5.25% 6.25% 12/13/2024 4,717 4,707 4,669 K2 Insurance Services, LLC ^ (2)(3) Banking, Finance, Insurance & Real Estate L + 5.00% 6.00% 7/1/2026 9,012 8,914 8,998 Kaseya, Inc. ^ (2)(3) High Tech Industries L + 5.50%, 1.00% PIK 7.50% 5/3/2025 9,092 8,987 9,038 Material Holdings, LLC ^ (2)(3) Business Services L + 5.75% 6.50% 8/19/2027 7,980 7,896 7,891 Maverick Acquisition, Inc. ^ (2)(3) Aerospace & Defense L + 6.00% 7.00% 6/1/2027 7,980 7,814 7,808 National Technical Systems, Inc. ^ (2)(3) Aerospace & Defense L + 5.50% 6.50% 6/12/2023 8,733 8,720 8,733 NMI AcquisitionCo, Inc. ^ (2)(3) High Tech Industries L + 5.75% 6.50% 9/6/2025 8,708 8,680 8,601 Redwood Services Group, LLC ^ (2)(3) High Tech Industries L + 6.00% 7.00% 6/6/2024 8,736 8,724 8,737 Riveron Acquisition Holdings, Inc. ^ (2)(3) Banking, Finance, Insurance & Real Estate L + 5.75% 6.75% 5/22/2025 8,173 8,074 8,173 RSC Acquisition, Inc. ^ (2)(3) Banking, Finance, Insurance & Real Estate L + 5.50% 6.25% 11/1/2026 8,401 8,277 8,434 Superior Health Linens, LLC ^ (2)(3) Business Services L + 6.50% 7.50% 3/31/2022 6,875 6,875 6,875 TCFI Aevex LLC ^ (2)(3) Aerospace & Defense L + 6.00% 7.00% 3/18/2026 1,701 1,676 1,458 Turbo Buyer, Inc. ^ (2)(3) Automotive L + 6.00% 7.00% 12/2/2025 8,091 7,950 7,929 US INFRA SVCS Buyer, LLC ^ (2)(3) Environmental Industries L + 6.50% 7.50% 4/13/2026 3,267 3,217 3,189 USLS Acquisition, Inc. ^ (2)(3) Business Services L + 5.50% 6.50% 11/30/2024 6,234 6,223 6,165 Westfall Technik, Inc. ^ (2)(3) Chemicals, Plastics & Rubber L + 5.75% 6.75% 9/13/2024 6,418 6,337 6,359 First Lien Debt Total $ 208,316 $ 208,196 Second Lien Debt (13.0%) of fair value AI Convoy S.A.R.L (United Kingdom) ^ (2)(3) Aerospace & Defense L + 8.25% 9.25% 1/17/2028 5,514 5,413 5,720 AP Plastics Acquisition Holdings, LLC ^ (2)(3) Chemicals, Plastics & Rubber L + 7.50% 8.25% 8/10/2029 4,500 4,410 4,526 79 Table of Contents Consolidated Schedule of Investments as of December 31, 2021 Investments (1) Footnotes Industry Reference Rate & Spread (2) Interest Rate (2) Maturity Date Par/ Principal Amount Amortized Cost (4) Fair Value (5) AQA Acquisition Holdings, Inc. ^ (2)(3) High Tech Industries L + 7.50% 8.00% 3/3/2029 $ 5,000 $ 4,881 $ 5,004 Quartz Holding Company ^ (2)(3) Software L + 8.00% 8.10% 4/2/2027 4,852 4,781 4,852 Tank Holding Corp. ^ (2)(3) Capital Equipment L + 8.25% 8.35% 3/26/2027 5,514 5,446 5,569 World 50, Inc. ^ (6) Business Services 11.50% 11.50% 1/9/2027 5,465 5,368 5,422 Second Lien Debt Total $ 30,299 $ 31,093 Total Investments $ 238,615 $ 239,289 ^ Denotes that all or a portion of the assets are owned by Credit Fund II Sub. Credit Fund II Sub has entered into the Credit Fund II Sub Notes. The lenders of the Credit Fund II Sub Notes have a first lien security interest in substantially all of the assets of Credit Fund II Sub. Accordingly, such assets are not available to creditors of Credit Fund II. (1) Unless otherwise indicated, issuers of investments held by Credit Fund are domiciled in the United States. As of December 31, 2021, the geographical composition of investments as a percentage of fair value was 3.6% in Canada, 1.6% in Luxembourg, 2.4% in the United Kingdom and 92.4% in the United States. Certain portfolio company investments are subject to contractual restrictions on sales. (2) Variable rate loans to the portfolio companies bear interest at a rate that is 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, Credit Fund II has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2021. As of December 31, 2021, the reference rates for Credit Fund II's variable rate loans were the 30-day LIBOR at 0.10%, the 90-day LIBOR at 0.22% and the 180-day LIBOR at 0.33%. (3) Loan includes interest rate floor feature, which is generally 1.00%. (4) 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. (5) Fair value is determined in good faith by or under the direction of the board of managers of Credit Fund II, pursuant to Credit Fund II’s valuation policy, with the fair value of all investments determined using significant unobservable inputs, which is substantially similar to the valuation policy of the Company provided in Note 3, Fair Value Measurements, to the consolidated financial statements included in Part II, Item 8 of the Form 10-K. (6) Represents a corporate mezzanine loan, which is subordinated to senior secured term loans of the portfolio company . 80 Table of Contents Consolidated Schedule of Investments as of December 31, 2020 Investments (1) Footnotes Industry Reference Rate & Spread (2) Interest Rate (2) Maturity Date Par/ Principal Amount Amortized Cost (4) Fair Value (5) First Lien Debt (90.1%) of fair value) Airnov, Inc. ^ (2)(3) Containers, Packaging & Glass L + 5.25% 6.25% 12/19/2025 $ 1,500 $ 1,481 $ 1,501 Alpine SG, LLC ^ (2)(3) High Tech Industries L + 5.75% 6.75% 11/16/2022 4,411 4,390 4,378 American Physician Partners, LLC ^ (2)(3) Healthcare & Pharmaceuticals L + 6.75% 7.75% 12/21/2021 8,725 8,679 8,265 AMS Group HoldCo, LLC ^ (2)(3) Transportation: Cargo L + 6.50% 7.50% 9/29/2023 8,182 8,096 8,079 Apptio, Inc. ^ (2)(3) Software L + 7.25% 8.25% 1/10/2025 5,357 5,278 5,437 Aurora Lux FinCo S.Á.R.L. (Luxembourg) ^ (2)(3) Software L + 5.75% 6.75% 12/24/2026 4,400 4,303 4,018 Avenu Holdings, LLC ^ (2)(3) Sovereign & Public Finance L + 5.25% 6.25% 9/28/2024 997 987 997 BMS Holdings III Corp. ^ (2)(3) Construction & Building L + 5.25% 6.25% 9/30/2026 3,308 3,239 3,270 Captive Resources Midco, LLC ^ (2)(3) Banking, Finance, Insurance & Real Estate L + 5.75% 6.75% 5/31/2025 8,406 8,297 8,463 Chartis Holding, LLC ^ (2)(3) Business Services L + 5.50% 6.50% 5/1/2025 1,496 1,474 1,497 Comar Holding Company, LLC ^ (2)(3) Containers, Packaging & Glass L + 5.50% 6.50% 6/18/2024 8,799 8,692 8,832 Cority Software Inc. (Canada) ^ (2)(3) Software L + 5.25% 6.25% 7/2/2026 8,800 8,655 8,862 Ensono, LP ^ (2)(3) Telecommunications L + 5.25% 5.40% 6/27/2025 6,292 6,246 6,245 Ethos Veterinary Health LLC ^ (2)(3) Consumer Services L + 4.75% 4.90% 5/15/2026 8,182 8,117 8,070 EvolveIP, LLC ^ (2)(3) Telecommunications L + 5.75% 6.75% 6/7/2023 8,799 8,784 8,790 Innovative Business Services, LLC ^ (2)(3) High Tech Industries L + 5.50% 6.50% 4/5/2023 2,200 2,162 2,159 K2 Insurance Services, LLC ^ (2)(3) Banking, Finance, Insurance & Real Estate L + 5.00% 6.00% 7/1/2024 6,927 6,827 6,928 Kaseya, Inc. ^ (2)(3) High Tech Industries L + 4.00%, 3.00% PIK 8.00% 5/2/2025 8,822 8,688 8,856 Mailgun Technologies, Inc. ^ (2)(3) High Tech Industries L + 5.00% 6.00% 3/26/2025 8,478 8,347 8,330 National Technical Systems, Inc. ^ (2)(3) Aerospace & Defense L + 5.50% 6.50% 6/12/2023 8,800 8,778 8,733 NMI AcquisitionCo, Inc. ^ (2)(3) High Tech Industries L + 5.00% 6.00% 9/6/2022 8,799 8,732 8,711 Paramit Corporation ^ (2)(3) Capital Equipment L + 4.50% 5.50% 5/3/2025 1,000 992 980 PPC Flexible Packaging, LLC ^ (2)(3) Containers, Packaging & Glass L + 6.00% 7.00% 11/23/2024 4,400 4,358 4,386 Redwood Services Group, LLC ^ (2)(3) High Tech Industries L + 6.00% 7.00% 6/6/2023 3,300 3,279 3,291 Reladyne, Inc. ^ (2)(3) Wholesale L + 5.00% 6.00% 7/22/2022 6,484 6,431 6,514 Riveron Acquisition Holdings, Inc. ^ (2)(3) Banking, Finance, Insurance & Real Estate L + 5.75% 6.75% 5/22/2025 8,257 8,131 8,312 RSC Acquisition, Inc. ^ (2)(3) Banking, Finance, Insurance & Real Estate L + 5.50% 6.50% 11/1/2026 8,487 8,341 8,572 Smile Doctors, LLC ^ (2)(3) Healthcare & Pharmaceuticals L + 6.00% 7.00% 10/6/2022 6,509 6,507 6,379 Sovos Brands Intermediate, Inc. ^ (2)(3) Beverage, Food & Tobacco L + 4.75% 4.96% 11/20/2025 2,200 2,182 2,181 Superior Health Linens, LLC ^ (2)(3) Business Services L + 6.50% 7.50% 9/30/2021 7,199 7,178 7,162 T2 Systems, Inc. ^ (2)(3) Transportation: Consumer L + 6.75% 7.75% 9/28/2022 8,799 8,713 8,799 TCFI Aevex LLC ^ (2)(3) Aerospace & Defense L + 6.00% 7.00% 3/18/2026 1,718 1,688 1,712 TSB Purchaser, Inc. ^ (2)(3) Media: Advertising, Printing & Publishing L + 6.00% 7.00% 5/14/2024 8,799 8,663 8,729 Turbo Buyer, Inc. ^ (2)(3) Automotive L + 5.25% 6.25% 12/2/2025 8,174 8,001 8,249 81 Table of Contents Consolidated Schedule of Investments as of December 31, 2020 Investments (1) Footnotes Industry Reference Rate & Spread (2) Interest Rate (2) Maturity Date Par/ Principal Amount Amortized Cost (4) Fair Value (5) US INFRA SVCS Buyer, LLC ^ (2)(3) Environmental Industries L + 6.00% 7.00% 4/13/2026 $ 3,300 $ 3,240 $ 3,292 VRC Companies, LLC ^ (2)(3) Business Services L + 6.50% 7.50% 3/31/2023 4,311 4,271 4,311 Zemax Software Holdings, LLC ^ (2)(3) Software L + 5.75% 6.75% 6/25/2024 4,400 4,363 4,294 Zenith Merger Sub, Inc. ^ (2)(3) Business Services L + 5.25% 6.25% 12/13/2023 4,399 4,370 4,367 First Lien Debt Total $ 220,960 $ 221,951 Second Lien Debt (9.9%) of fair value AI Convoy S.A.R.L (United Kingdom) ^ (2)(3) Aerospace & Defense L + 8.25% 9.25% 1/17/2028 $ 5,514 $ 5,401 $ 5,676 AQA Acquisition Holding, Inc. ^ (2)(3) High Tech Industries L + 8.00% 9.00% 5/24/2024 1,000 993 1,000 Quartz Holding Company ^ (2)(3) Software L + 8.00% 8.15% 4/2/2027 4,852 4,771 4,815 Tank Holding Corp. ^ (2)(3) Capital Equipment L + 8.25% 8.40% 3/26/2027 5,514 5,436 5,394 Ultimate Baked Goods MIDCO, LLC ^ (2)(3) Beverage, Food & Tobacco L + 8.00% 9.00% 8/9/2026 5,514 5,428 5,257 World 50, Inc. (6) Business Services 11.50% 11.50% 1/9/2027 2,365 2,323 2,328 Second Lien Debt Total $ 24,352 $ 24,470 Total Investments $ 245,312 $ 246,421 ^ Denotes that all or a portion of the assets are owned by Credit Fund II Sub. Credit Fund II Sub has entered into the Credit Fund II Sub Notes. The lenders of the Credit Fund II Sub Notes have a first lien security interest in substantially all of the assets of Credit Fund II Sub. Accordingly, such assets are not available to creditors of Credit Fund II. (1) Unless otherwise indicated, issuers of investments held by Credit Fund are domiciled in the United States. As of December 31, 2020, the geographical composition of investments as a percentage of fair value was 3.6% in Canada, 1.6% in Luxembourg, 2.3% in the United Kingdom and 92.5% in the United States. Certain portfolio company investments are subject to contractual restrictions on sales. (2) Variable rate loans to the portfolio companies bear interest at a rate that is 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, Credit Fund II has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2020. As of December 31, 2020, the reference rates for Credit Fund II's variable rate loans were the 30-day LIBOR at 0.15%, the 90-day LIBOR at 0.25% and the 180-day LIBOR at 0.26%. (3) Loan includes interest rate floor feature, which is generally 1.00%. (4) 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. (5) Fair value is determined in good faith by or under the direction of the board of managers of Credit Fund II, pursuant to Credit Fund II’s valuation policy, with the fair value of all investments determined using significant unobservable inputs, which is substantially similar to the valuation policy of the Company provided in Note 3, Fair Value Measurements, to the consolidated financial statements included in Part II, Item 8 of this form 10-K. (6) Represents a corporate mezzanine loan, which is subordinated to senior secured term loans of the portfolio company . 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 Credit Facility, as defined below, the issuance of debt, and through securitization of a portion of our existing investments. 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. We believe our current cash position, available capacity on our revolving credit facilities – which is well in excess of our unfunded commitments – and net cash provided by operating activities will provide us with sufficient resources to meet our obligations and continue to support our investment objectives, including reserving for the capital needs which may arise at our portfolio companies. On March 21, 2014, the Company closed on a senior secured revolving credit facility (“the Credit Facility”), which was subsequently amended on January 8, 2015, May 25, 2016, March 22, 2017, September 25, 2018, June 14, 2019 and October 28, 2020. The maximum principal amount of the Credit Facility is $688,000, 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, subject to certain conditions, to $900,000 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 $50,000 limit for swingline loans and a 82 Table of Contents $20,000 limit for letters of credit. 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. The Credit Facility includes customary covenants, including certain financial covenants related to asset coverage, shareholders’ equity and liquidity, 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 will remain in compliance, there are no assurances that we will continue to comply with the covenants in the Credit Facility. Failure to comply with these covenants could result in a default under the Credit Facility that, if we 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 thereby have a material adverse impact on our business, financial condition and results of operations. For more information on the Credit Facility, see Note 7 to the consolidated financial statements in Part II, Item 8 of this Form 10-K. On December 30, 2019, the Company closed a private offering of $115.0 million in aggregate principal amount of 4.750% Senior Unsecured Notes due December 31, 2024 (the “2019 Notes”). Interest is payable quarterly, beginning March 31, 2020. On December 11, 2020, the Company issued an additional $75.0 million aggregate principal amount of senior unsecured notes due December 31, 2024 (the "2020 Notes", together with the 2019 Notes, the “Senior Notes”). The 2020 Notes bear interest at an interest rate of 4.500%. The interest rates of the Senior Notes are subject to increase (up to an additional 1.00% over the stated rate of such notes) in the event that, subject to certain exceptions, the Senior Notes cease to have an investment grade rating. The Senior Notes are general unsecured obligations of the Company that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company. On June 26, 2015, we completed the 2015-1 Debt Securitization. The 2015-1 Notes were issued by Carlyle Direct Lending CLO 2015-1R LLC (formerly known as Carlyle GMS Finance MM CLO 2015-1 LLC) (the “2015-1 Issuer”), a wholly owned and consolidated subsidiary of us. On August 30, 2018, the 2015-1 Issuer refinanced the 2015-1 Debt Securitization (the “2015-1 Debt Securitization Refinancing”) by redeeming in full the 2015-1 Notes and issuing new notes (the “2015-1R Notes”). The 2015-1R Notes are secured by a diversified portfolio of the 2015-1 Issuer consisting primarily of first and second lien senior secured loans. On the closing date of the 2015-1 Debt Securitization Refinancing, the 2015-1 Issuer, among other things: (a) refinanced the issued Class A-1A Notes by redeeming in full the Class A-1A Notes and issuing new AAA Class A-1-1-R Notes in an aggregate principal amount of $234,800 which bear interest at the three-month LIBOR plus 1.55%; (b) refinanced the issued Class A-1B Notes by redeeming in full the Class A-1B Notes and issuing new AAA Class A-1-2-R Notes in an aggregate principal amount of $50,000 which bear interest at the three-month LIBOR plus 1.48% for the first 24 months and the three-month LIBOR plus 1.78% thereafter; (c) refinanced the issued Class A-1C Notes by redeeming in full the Class A-1C Notes and issuing new AAA Class A-1-3-R Notes in an aggregate principal amount of $25,000 which bear interest at 4.56%; (d) refinanced the issued Class A-2 Notes by redeeming in full the Class A-2 Notes and issuing new Class A-2-R Notes in an aggregate principal amount of $66,000 which bear interest at the three-month LIBOR plus 2.20%; (e) issued new single-A Class B Notes and BBB- Class C Notes in aggregate principal amounts of $46,400 and $27,000, respectively, which bear interest at the three-month LIBOR plus 3.15% and the three-month LIBOR plus 4.00%, respectively; (f) reduced the 2015-1 Issuer Preferred Interests by approximately $21,375 from a nominal value of $125,900 to approximately $104,525 at close; and (g) extended the reinvestment period end date and maturity date applicable to the 2015-1 Issuer to October 15, 2023 and October 15, 2031, respectively. In connection with the contribution, we have made customary representations, warranties and covenants to the 2015-1 Issuer. The Class A-1-1-R, Class A-1-2-R, Class A-1-3-R, Class A-2-R, Class B and Class C Notes are included in the consolidated financial statements included in Part II, Item 8 of this Form 10-K. The 2015-1 Issuer Preferred Interests were eliminated in consolidation. 83 Table of Contents For more information on the Senior Notes and the 2015-1R Notes, see Note 8 to the consolidated financial statements in Part II, Item 8 of this Form 10-K. As of December 31, 2021 and 2020, we had $93,074 and $68,419, respectively, in cash, cash equivalents and restricted cash. The Credit Facility consisted of the following as of December 31, 2021 and 2020: December 31, 2021 Total Facility Borrowings Outstanding Unused Portion (1) Amounts Available (2) Credit Facility $ 688,000 $ 407,655 $ 280,345 $ 280,706 Total $ 688,000 $ 407,655 $ 280,345 $ 280,706 December 31, 2020 Total Facility Borrowings Outstanding Unused Portion (1) Amounts Available (2) Credit Facility $ 688,000 $ 347,949 $ 340,051 $ 207,365 Total $ 688,000 $ 347,949 $ 340,051 $ 207,365 (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. The following were the carrying values (before debt issuance costs) and fair values for the Senior Notes disclosed but not carried at fair value as of December 31, 2021 and 2020: December 31, 2021 December 31, 2020 Carrying Value Fair Value Carrying Value Fair Value 2019 Notes $ 115,000 $ 117,300 $ 115,000 $ 116,250 2020 Notes 75,000 75,530 75,000 75,000 Total $ 190,000 $ 192,830 $ 190,000 $ 191,250 The following were the carrying values (before debt issuance costs) and fair values of the Company's 2015-1R Notes disclosed but not carried at fair value as of December 31, 2021 and 2020: December 31, 2021 December 31, 2020 2015-1R Notes Carrying Value Fair Value Carrying Value Fair Value Aaa/AAA Class A-1-1-R Notes $ 234,800 $ 234,941 $ 234,800 $ 230,996 Aaa/AAA Class A-1-2-R Notes 50,000 50,075 50,000 49,645 Aaa/AAA Class A-1-3-R Notes 25,000 24,680 25,000 25,017 AA Class A-2-R Notes 66,000 66,003 66,000 64,895 A Class B Notes 46,400 46,430 46,400 45,291 BBB- Class C Notes 27,000 26,714 27,000 24,592 Total $ 449,200 $ 448,843 $ 449,200 $ 440,436 As of December 31, 2021 and 2020, we had a combined $1,046,855 and $987,149, respectively, of outstanding consolidated indebtedness under the Credit Facility, the 2015-1R Notes and the Senior Notes. Our annualized interest cost as of December 31, 2021 and 2020, was 2.75% and 2.89%, excluding fees (such as fees on undrawn amounts and amortization of upfront fees). For the years ended December 31, 2021, 2020 and 2019, we incurred $28,829, $35,820 and $50,587, respectively, of interest expense and $1,161, $1,766 and $1,263, respectively, of unused commitment fees. Equity Activity Common stock issued and outstanding as of December 31, 2021 and 2020 was 53,142,454 and 55,320,309, respectively. 84 Table of Contents The following table summarizes activity in the number of shares of our common stock outstanding during the years ended December 31, 2021, 2020 and 2019: For the years ended December 31, 2021 2020 2019 Common stock outstanding, beginning of year 55,320,309 57,763,811 62,230,251 Repurchase of common stock (2,177,855) (2,443,502) (4,466,440) Common stock outstanding, end of year 53,142,454 55,320,309 57,763,811 On May 5, 2020, we issued and sold 2,000,000 shares of Preferred Stock to an affiliate of Carlyle in a private placement at a price of $25 per share. Shares of Preferred Stock issued and outstanding as of both December 31, 2021 and 2020 were 2,000,000. 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 December 31, 2021 and 2020, in Part II, Item 8 of this Form 10-K, 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 December 31, 2021 2020 Unfunded delayed draw commitments $ 112,985 $ 73,292 Unfunded revolving term loan commitments 67,513 76,216 Total unfunded commitments $ 180,498 $ 149,508 Pursuant to an undertaking by us in connection with the 2015-1 Debt Securitization, we agreed to hold on an ongoing basis the 2015-1 Issuer Preferred Interests with an aggregate dollar purchase price at least equal to 5% of the aggregate outstanding amount of all collateral obligations by the 2015-1 Issuer for so long as any securities of the 2015-1 Issuer remains outstanding. As of December 31, 2021 and 2020, we were in compliance with this undertaking. DIVIDENDS AND DISTRIBUTIONS Prior to July 5, 2017, we had an “opt in” dividend reinvestment plan in respect of our common stock. Effective on July 5, 2017, we converted our “opt in” dividend reinvestment plan to an “opt out” dividend reinvestment plan that provides for reinvestment of our dividends and other distributions on behalf of our common stockholders, other than those common stockholders who have “opted out” of the plan. As a result of adopting the plan, if our Board of Directors authorizes, and we declare, a cash dividend or distribution on our common stock, our common stockholders who have not elected to “opt out” of our dividend reinvestment plan will have their cash dividends or distributions automatically reinvested in additional shares of our common stock, rather than receiving cash. Each registered common stockholder may elect to have such common stockholder’s dividends and distributions distributed in cash rather than participate in the plan. For any registered common stockholder that does not so elect, distributions on such common stockholder’s shares will be reinvested by State Street Bank and Trust Company, our plan administrator, in additional shares of common stock. The number of shares to be issued to the common stockholder will be determined based on the total dollar amount of the cash distribution payable, net of applicable withholding taxes. We intend to use primarily newly issued shares of common stock to implement the plan so long as the market value per share is equal to or greater than the net asset value per share on the relevant valuation date. If the market value per share is less than the net asset value per share on the relevant valuation date, the plan administrator would implement the plan through the purchase of common stock on behalf of participants in the open market, unless we instruct the plan administrator otherwise. 85 Table of Contents The following table summarizes the Company’s dividends declared per share of common stock during the three most recent fiscal years: Date Declared Record Date Payment Date Per Share Amount 2019 February 22, 2019 March 29, 2019 April 17, 2019 $ 0.37 May 6, 2019 June 28, 2019 July 17, 2019 0.37 June 17, 2019 June 28, 2019 July 17, 2019 0.08 (1) August 5, 2019 September 30, 2019 October 17, 2019 0.37 November 4, 2019 December 31, 2019 January 17, 2020 0.37 December 12, 2019 December 31, 2019 January 17, 2020 0.18 (1) Total $ 1.74 2020 February 24, 2020 March 31, 2020 April 17, 2020 0.37 May 4, 2020 June 30, 2020 July 17, 2020 0.37 August 3, 2020 September 30, 2020 October 16, 2020 0.32 (2) August 3, 2020 September 30, 2020 October 16, 2020 0.05 (1) November 2, 2020 December 31, 2020 January 15, 2021 0.32 November 2, 2020 December 31, 2020 January 15, 2021 0.04 (1) Total $ 1.47 2021 February 22, 2021 March 31, 2021 April 16, 2021 $ 0.32 February 22, 2021 March 31, 2021 April 16, 2021 0.05 (1) May 3, 2021 June 30, 2021 July 15, 2021 0.32 May 3, 2021 June 30, 2021 July 15, 2021 0.04 (1) August 2, 2021 September 30, 2021 October 15, 2021 0.32 August 2, 2021 September 30, 2021 October 15, 2021 0.06 (1) November 1, 2021 December 31, 2021 January 14, 2022 0.32 November 1, 2021 December 31, 2021 January 14, 2022 0.07 (1) Total $ 1.50 (1) Represents a special/supplemental dividend. (2) The Company updated its dividend policy such that the base dividend is $0.32 per share of common stock, effective with the third quarter 2020 dividend. Our Preferred Stock has a liquidation preference equal to $25 per share (the “Liquidation Preference) plus any accumulated but unpaid dividends up to but excluding the date of distribution. Dividends on our Preferred Stock are payable on a quarterly basis in an initial amount equal to 7.00% per annum of the Liquidation Preference per share, payable in cash, or at our option, 9.00% per annum of the Liquidation Preference payable in additional shares of Preferred Stock. 86 Table of Contents The following table summarizes the Company’s dividends declared per share of Preferred Stock during the prior year and current fiscal year to date. Unless otherwise noted, dividends declared were paid in cash. Date Declared Record Date Payment Date Per Share Amount 2020 June 30, 2020 June 30, 2020 September 30, 2020 $ 0.277 September 30, 2020 September 30, 2020 September 30, 2020 0.423 December 31, 2020 December 31, 2020 December 31, 2020 0.438 Total $ 1.138 2021 March 31, 2021 March 31, 2021 March 31, 2021 $ 0.438 June 30, 2021 June 30, 2021 June 30, 2021 0.438 September 30, 2021 September 30, 2021 September 30, 2021 0.438 December 29, 2021 December 31, 2021 December 31, 2021 0.438 Total $ 1.752 ASSET COVERAGE In accordance with the Investment Company Act, a BDC is only allowed to borrow amounts such that its “asset coverage,” as defined in the Investment Company Act, satisfies the minimum asset coverage ratio specified in the Investment Company Act after such borrowing. “Asset coverage” generally refers to a company’s total assets, less all liabilities and indebtedness not represented by “senior securities,” as defined in the Investment Company Act, divided by total senior securities representing indebtedness and, if applicable, preferred stock. “Senior securities” for this purpose includes borrowings from banks or other lenders, debt securities and preferred stock. Prior to March 23, 2018, BDCs were required to maintain a minimum asset coverage ratio of 200%. On March 23, 2018, an amendment to Section 61(a) of the Investment Company Act was signed into law to permit BDCs to reduce the minimum asset coverage ratio from 200% to 150%, so long as certain approval and disclosure requirements are satisfied. Under the 200% minimum asset coverage ratio, BDCs are permitted to borrow up to one dollar for investment purposes for every one dollar of investor equity, and under the 150% minimum asset coverage ratio, BDCs are permitted to borrow up to two dollars for investment purposes for every one dollar of investor equity. In other words, Section 61(a) of the 1940 Act, as amended, permits BDCs to potentially increase their debt-to-equity ratio from a maximum of 1 to 1 to a maximum of 2 to 1. On April 9, 2018 and June 6, 2018, the Board of Directors, including a “required majority” (as such term is defined in Section 57(o) of the Investment Company Act), and the stockholders of the Company, respectively, approved the application to the Company of the 150% minimum asset coverage ratio set forth in Section 61(a)(2) of the 1940 Act. As a result, the minimum asset coverage ratio applicable to the Company was reduced from 200% to 150%, effective as of June 7, 2018. On April 8, 2020, the SEC issued an order (Release No. 33837) providing temporary, conditional exemptive relief from certain Investment Company Act provisions for BDCs, including relief permitting BDCs to issue additional senior securities to meet liquidity needs subject to compliance with a reduced asset coverage ratio. The relief is subject to investor protection conditions, including specific requirements for obtaining an independent evaluation of the terms of the senior securities, limits on new investments and approval by a majority of a BDC’s independent board members as well as public disclosure in the case of the issuance of senior securities pursuant to the reduced asset coverage ratio. These exemptions are in effect through the earlier of December 31, 2020 or the date by which a BDC ceases to rely on the order. The Company did not utilize this relief. As of December 31, 2021 and 2020, the Company had total senior securities of $1,096,855 and $1,037,149, respectively, consisting of secured borrowings under the Credit Facility, the Senior Notes, the 2015-1R Notes and the Preferred Stock, and had asset coverage ratios of 181.94% and 182.09%, respectively. For a discussion of the principal risk factors associated with these senior securities, see Part I, Item 1A of this Form 10‑K. For purposes of the asset coverage ratio, the Preferred Stock is classified as a senior security. 87 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and judgments are based on historical information, information currently available to us and on various other assumptions management believes to be reasonable under the circumstances. Actual results could vary from those estimates and we may change our estimates and assumptions in future evaluations. Changes in these estimates and assumptions may have a material effect on our results of operations and financial condition. We believe the critical accounting policies discussed below affect our more significant judgments and estimates used in the preparation of our consolidated financial statements and should be read in conjunction with our consolidated financial statements and related notes in Part II, Item 8, as well as with our “ Risk Factors ” in Part I, Item 1A of this Form 10-K. 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 U.S. 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 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 and equity investments portfolio each quarter (such that each non-traded investment other than Credit Fund and Credit Fund II 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. 88 Table of Contents 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 December 31, 2021 and 2020. U.S. 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. For further information on the fair value hierarchies, our framework for determining fair value, and the composition of our portfolio, see Note 3 to the consolidated financial statements in Part II, Item 8 of this Form 10-K for further information on fair value measurements. 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 II, Item 8 of this Form 10-K 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 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 determine not to place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. 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) 89 Table of Contents 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 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 and the 2015-1 Issuer are disregarded entities for tax purposes and are consolidated with the tax return of the Company. RELATED PARTY TRANSACTIONS Investment Advisory Agreement On April 3, 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 “Original 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 Original Investment Advisory Agreement was amended on September 15, 2017 (as amended, the “First Amended and Restated Investment Advisory Agreement”) after the approval of the Company’s Board of Directors, including a majority of the Independent Directors, at an in-person meeting of the Board of Directors held on May 30, 2017 and the approval of the Company’s stockholders at a special meeting of stockholders held on September 15, 2017 and August 6, 2018 (as amended, the “Investment Advisory Agreement”). Unless terminated earlier, the Investment Advisory Agreement renews 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 May 26, 2021, the Company's Board of Directors, including a majority of the Independent Directors, approved the continuance of the Company's Investment Advisory Agreement with the Adviser for an additional one-year term. Pursuant to relief granted by the SEC in light of the COVID-19 pandemic (the "Order") and a determination by the Board of Directors that reliance on the order was appropriate due to circumstances related to the current or potential side-effects of COVID-19, the May 26, 2021 meeting was held by video- and telephone-conference. 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 fees from the Company consisting of two components—a base management fee and an incentive fee. The base management fee has been calculated and payable quarterly in arrears at an annual rate of 1.50% of the average value of the gross assets at the end of the two most recently completed fiscal quarters; provided, however, effective July 1, 2018, the base management fee has been calculated at an annual rate of 1.00% of the average value of the gross assets as of the end of the two most recently completed calendar quarters that exceeds the product of (A) 200% and (B) the average value of the Company’s net asset value at the end of the two most recently completed calendar quarters. The base management fee will be appropriately adjusted for any share issuances or repurchases during such fiscal quarter and the base management fees for any partial month or quarter will be pro-rated. The Company’s gross assets exclude any cash and cash equivalents and include assets acquired through the incurrence of debt (see Note 7, Borrowings, and Note 8, Notes Payable, to the consolidated financial statements in Part II, Item 8 of this Form 10-K). 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 incentive fee has two parts. The first part is calculated and payable quarterly in arrears based on the pre-incentive fee net investment income for the immediately preceding calendar quarter. The second part is determined and payable in arrears based on capital gains as of the end of each calendar year. Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the operating expenses accrued for the quarter (including the base management fee, expenses payable under the administration 90 Table of Contents agreement, and any interest expense or fees on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature, accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to a “hurdle rate” of 1.50% per quarter (6% annualized) or a “catch-up rate” of 1.82% per quarter (7.28% annualized), as applicable. Pursuant to the Investment Advisory Agreement, the Company pays its Investment Adviser an incentive fee with respect to its pre-incentive fee net investment income in each calendar quarter as follows: • no incentive fee based on pre-incentive fee net investment income in any calendar quarter in which its pre-incentive fee net investment income does not exceed the hurdle rate of 1.50%; • 100% of pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 1.82% in any calendar quarter (7.28% annualized). The Company refers to this portion of the pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 1.82%) as the “catch-up.” The “catch-up” is meant to provide the Investment Adviser with approximately 17.5% of the Company’s pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income exceeds 1.82% in any calendar quarter; and • 17.5% of the amount of pre-incentive fee net investment income, if any, that exceeds 1.82% in any calendar quarter (7.28% annualized) will be payable to the Investment Adviser. This reflects that once the hurdle rate is reached and the catch-up is achieved, 17.5% of all pre-incentive fee investment income thereafter is allocated to the Investment Adviser. The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 17.5% of realized capital gains, if any, on a cumulative basis from inception through the date of determination, computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation, less the aggregate amount of any previously paid capital gain incentive fees, provided that, the incentive fee determined at the end of the first calendar year of operations may be calculated for a period of shorter than twelve calendar months to take into account any realized capital gains computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation. Administration Agreement On April 3, 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. Unless terminated earlier, the Administration Agreement renews 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 May 26, 2021, 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. 91 Table of Contents Sub-Administration Agreements On April 3, 2013, the Administrator entered into a sub-administration agreement with Carlyle Employee Co. (the “Carlyle Sub-Administration Agreement”). Pursuant to the Carlyle Sub-Administration Agreement, Carlyle Employee Co. provides the Administrator with access to personnel. On April 3, 2013, the Administrator entered into a sub-administration agreement with State Street Bank and Trust Company (“State Street”), which was amended on March 11, 2015 (as amended, the “State Street Sub-Administration Agreement” and, together with the Carlyle Sub-Administration Agreement, the “Sub-Administration Agreements”). Unless terminated earlier, the State Street Sub-Administration Agreement renews 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. On May 26, 2021, the Company’s Board of Directors, including a majority of the Independent Directors, approved the continuance of the State Street Sub-Administration Agreement for a one year period. 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. License Agreement The Company has entered into a royalty free license agreement with Carlyle Investment Management L.L.C. (“CIM”), which wholly owns our Adviser and is a wholly owned subsidiary of Carlyle, pursuant to which CIM has granted the Company a non-exclusive, revocable and non-transferable license to use the name and mark “Carlyle.” Board of Directors The Company’s Board of Directors currently consists of seven members, five of whom are Independent Directors. The Board of Directors has established an Audit Committee, a Nominating and Governance Committee of the Board of Directors and a Compensation Committee, and may establish additional committees in the future. Transactions with Investment Funds During the years ended December 31, 2021, 2020 and 2019, the Company sold 8, 4 and 2 investments, respectively, to Credit Fund for proceeds of $118,204, $62,754 and $34,728, respectively, and realized gains (losses) of $1,075, $(2,289) and $208, respectively. See Note 5, Middle Market Credit Fund, LLC, to the consolidated financial statements in Part II, Item 8 of this Form 10-K. During the year ended December 31, 2021, the Company sold 17 investments to Credit Fund II for proceeds of $84,554 and realized gains (losses) of $468. The Company did not sell any investments to Credit Fund II during the years ended December 31, 2020 and 2019. On November 3, 2020, pursuant to a contribution agreement by and between the Company and Credit Fund II, the Company contributed 45 senior secured debt investments with an aggregate principal balance of approximately $250 million to Credit Fund II in exchange for approximately 84.13% of Credit Fund II’s membership interests and gross cash proceeds of approximately $170 million. There were no subsequent transfers through December 31, 2020. See Note 6, Middle Market Credit Fund II, LLC, to the consolidated financial statements in Part II, Item 8 of this Form 10-K for further information about Credit Fund II. Transactions with Carlyle On May 5, 2020, the Company issued and sold 2,000,000 shares of the Preferred Stock to an affiliate of Carlyle in a private placement at a price of $25 per share. See Note 10, Net Assets, to the consolidated financial statements in Part II, Item 8 of this Form 10-K for further information about the Preferred Stock. In December 2020, the Company paid an affiliate of Carlyle a fee of $562 for underwriting services rendered in connection with the issuance of the 2020 Notes in the amount of 0.75% of the aggregate principal amount of the 2020 Notes. See Note 8, Notes Payable, to the consolidated financial statements in Part II, Item 8 of this Form 10-K for further information about the 2020 Notes. 92 Table of Contents