UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, ~~2022~~2023


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

Commission file number: 000-56162

CNL STRATEGIC CAPITAL, LLC

(Exact name of registrant as specified in its charter)

__________________________________________________________________________________________________________________________________


Delaware						32-0503849
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


CNL Center at City Commons
450 South Orange Avenue
Orlando,	Florida	32801
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (407) 650-1000

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

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

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

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

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

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

As of November ~~10, 2022,~~7, 2023, the Company had ~~4,263,201~~4,202,311 Class FA shares, ~~2,070,405~~4,787,793 Class A shares, ~~2,232,690~~2,619,293 Class T shares, ~~1,736,717~~2,539,717 Class D shares, ~~8,042,186~~11,816,006 Class I shares and ~~1,765,257~~1,750,599 Class S shares outstanding.

Table of Contents

INDEX


		PAGE
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited):	2

	Condensed Consolidated Statements of Assets and Liabilities	2

	Condensed Consolidated Statements of Operations	3

	Condensed Consolidated Statements of Changes in Net Assets	45

	Condensed Consolidated Statements of Cash Flows	67

	Condensed Consolidated Schedules of Investments	78

	Notes to Condensed Consolidated Financial Statements	1012

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3134

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5256

Item 4.	Controls and Procedures	5357

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	5458

Item 1A.	Risk Factors	5458

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5558

Item 3.	Defaults Upon Senior Securities	5658

Item 4.	Mine Safety Disclosures	5658

Item 5.	Other Information	5658

Item 6.	Exhibits	5759

Exhibit Index		5759

Signatures		5860

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CNL STRATEGIC CAPITAL, LLC

CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(in thousands, except per share data)

September 30, 2022 (Unaudited) December 31, 2021
Assets
Investments at fair value
Portfolio company investments (amortized cost of $476,901 and $387,754, respectively) $ 572,926 $ 455,997
U.S. treasury bills (amortized cost of $60,067 and $—, respectively) 60,075 —
Total investments at fair value 633,001 455,997
Cash 10,631 58,704
Receivable for shares sold 17,042 —
Prepaid expenses and other assets 591 143
Total assets 661,265 514,844
Liabilities
Due to related parties (Note 5) 11,372 9,922
Payable for shares repurchased 2,127 509
Deferred tax liabilities, net 2,103 1,877
Distributions payable 1,933 1,566
Accounts payable and other accrued expenses 1,062 661
Total liabilities 18,597 14,535
Commitments and contingencies (Note 11)
Members’ Equity (Net Assets)
Preferred shares, $0.001 par value, 50,000 shares authorized and unissued — —
Class FA Common shares, $0.001 par value, 7,400 shares authorized; 4,844 shares issued; 4,263 and 4,559 shares outstanding, respectively 4 5
Class A Common shares, $0.001 par value, 94,660 shares authorized; 2,068 and 1,486 shares issued, respectively; 2,019 and 1,461 shares outstanding, respectively 2 1
Class T Common shares, $0.001 par value, 558,620 shares authorized, respectively; 2,211 and 1,654 shares issued, respectively; 2,115 and 1,609 shares outstanding, respectively 2 2
Class D Common shares, $0.001 par value, 94,660 shares authorized; 1,685 and 1,020 shares issued, respectively; 1,657 and 1,009 shares outstanding, respectively 2 1
Class I Common shares, $0.001 par value, 94,660 shares authorized; 8,097 and 5,519 shares issued, respectively; 7,777 and 5,410 shares outstanding, respectively 8 5
Class S Common shares, $0.001 par value, 100,000 shares authorized; 1,770 shares issued; 1,765 and 1,766 shares outstanding, respectively 2 2
Capital in excess of par value 561,316 442,752
Distributable earnings 81,332 57,541
Total Members’ Equity $ 642,668 $ 500,309
Net assets, Class FA shares $ 145,589 $ 148,717
Net assets, Class A shares 64,443 44,958
Net assets, Class T shares 67,539 49,328
Net assets, Class D shares 52,356 30,607
Net assets, Class I shares 251,558 168,704
Net assets, Class S shares 61,183 57,995
Total Members’ Equity $ 642,668 $ 500,309


	September 30, 2023 (Unaudited)		December 31, 2022
Assets
Investments at fair value
Portfolio company investments (amortized cost of $638,253 and $476,901, respectively)	$	779,025	$	588,837
U.S. Treasury bills (amortized cost of $50,013 and $106,216, respectively)	50,018		106,242
Total investments at fair value	829,043		695,079
Cash and cash equivalents	119,143		36,837




Prepaid expenses and other assets	578		627
Total assets	948,764		732,543
Liabilities

Due to related parties, net (Note 5)	10,845		15,609
Payable for shares repurchased	6,767		2,368
Deferred tax liabilities, net	8,489		4,247


Accounts payable and other accrued expenses	1,383		1,220


Total liabilities	27,484		23,444
Commitments and contingencies (Note 11)
Members’ Equity (Net Assets)
Preferred shares, $0.001 par value, 50,000 shares authorized and unissued	—		—
Class FA Common shares, $0.001 par value, 7,400 shares authorized; 4,844 shares issued; 4,202 and 4,244 shares outstanding, respectively	4		4
Class A Common shares, $0.001 par value, 94,660 shares authorized; 4,594 and 2,245 shares issued, respectively; 4,489 and 2,195 shares outstanding, respectively	4		2
Class T Common shares, $0.001 par value, 558,620 shares authorized; 3,066 and 2,458 shares issued, respectively; 2,594 and 2,343 shares outstanding, respectively	3		2
Class D Common shares, $0.001 par value, 94,660 shares authorized; 2,553 and 1,999 shares issued, respectively; 2,481 and 1,957 shares outstanding, respectively	1		2
Class I Common shares, $0.001 par value, 94,660 shares authorized; 12,216 and 9,131 shares issued, respectively; 11,590 and 8,772 shares outstanding, respectively	12		9
Class S Common shares, $0.001 par value, 100,000 shares authorized; 1,770 shares issued; 1,751 and 1,765 shares outstanding, respectively	2		2
Capital in excess of par value	807,370		615,383
Distributable earnings	113,884		93,695
Total Members’ Equity	$	921,280	$	709,099

Net asset value per share:
Class FA	$	36.03	$	34.90
Class A	$	33.13	$	32.45
Class T	$	33.18	$	32.46
Class D	$	32.86	$	32.11
Class I	$	33.60	$	32.88
Class S	$	36.62	$	35.39

See notes to condensed consolidated financial statements.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Investment Income
Investment income										Investment income
From portfolio company investments:	From portfolio company investments:									From portfolio company investments:
Interest income	Interest income	$	6,895	$	4,483	$	19,189	$	11,917	Interest income	$	9,436	$	6,895	$	24,277	$	19,189
Dividend income	Dividend income	5,167		8,362		14,710		11,141		Dividend income	5,017		5,167		15,624		14,710
From U.S. treasury bills and cash accounts:
Interest income		151		22		164		95
From U.S. Treasury bills and cash accounts										From U.S. Treasury bills and cash accounts
Interest and dividend income										Interest and dividend income	1,468		151		3,844		164
Total investment income	Total investment income	12,213		12,867		34,063		23,153		Total investment income	15,921		12,213		43,745		34,063
Operating Expenses
Operating expenses										Operating expenses
Total return incentive fees	Total return incentive fees	3,090		1,419		7,723		6,289		Total return incentive fees	3,743		3,090		8,710		7,723
Base management fees	Base management fees	2,425		1,287		6,417		3,277		Base management fees	3,505		2,425		9,342		6,417
Organization and offering expenses		756		688		2,002		1,802
Offering expenses										Offering expenses	1,071		756		3,022		2,002
Professional services	Professional services	383		367		1,261		1,140		Professional services	490		383		1,501		1,261
Pursuit costs	Pursuit costs	147		137		486		651		Pursuit costs	682		147		1,228		486
Distribution and shareholder servicing fees	Distribution and shareholder servicing fees	210		104		549		247		Distribution and shareholder servicing fees	310		210		873		549
Custodian and accounting fees	Custodian and accounting fees	66		59		272		174		Custodian and accounting fees	142		66		420		272
Insurance expense	Insurance expense	56		60		172		173		Insurance expense	51		56		157		172
Director fees and expenses	Director fees and expenses	52		50		154		152		Director fees and expenses	50		52		151		154
General and administrative expenses	General and administrative expenses	108		50		208		124		General and administrative expenses	115		108		423		208

Total operating expenses	Total operating expenses	7,293		4,221		19,244		14,029		Total operating expenses	10,159		7,293		25,827		19,244
Expense support		—		4,495		—		—

Reimbursement of expense support	Reimbursement of expense support	183		1,055		2,535		1,055		Reimbursement of expense support	—		183		644		2,535
Net operating expenses	Net operating expenses	7,476		9,771		21,779		15,084		Net operating expenses	10,159		7,476		26,471		21,779
Net investment income before taxes	Net investment income before taxes	4,737		3,096		12,284		8,069		Net investment income before taxes	5,762		4,737		17,274		12,284
Income tax expense	Income tax expense	(128)		(985)		(244)		(1,125)		Income tax expense	—		(128)		—		(244)
Net investment income	Net investment income	4,609		2,111		12,040		6,944		Net investment income	5,762		4,609		17,274		12,040

Realized and unrealized gain (loss) on investments										Realized and unrealized gain (loss) on investments
Net realized gain on investments:										Net realized gain on investments:
U.S. Treasury bills										U.S. Treasury bills	—		—		4		—
Total net realized gain on investments										Total net realized gain on investments	—		—		4		—
Net change in unrealized appreciation on investments:	Net change in unrealized appreciation on investments:									Net change in unrealized appreciation on investments:
Portfolio company investments	Portfolio company investments	10,499		2,045		27,783		30,832		Portfolio company investments	14,069		10,499		28,836		27,783
U.S. treasury bills		8		—		8		—
Benefit (provision) for deferred taxes on investments		357		(500)		(226)		(519)
U.S. Treasury bills										U.S. Treasury bills	(15)		8		(22)		8
(Provision) benefit for deferred taxes on investments										(Provision) benefit for deferred taxes on investments	(2,088)		357		(4,242)		(226)
Total net change in unrealized appreciation on investments	Total net change in unrealized appreciation on investments	10,864		1,545		27,565		30,313		Total net change in unrealized appreciation on investments	11,966		10,864		24,572		27,565
Net increase in net assets resulting from operations	Net increase in net assets resulting from operations	$	15,473	$	3,656	$	39,605	$	37,257	Net increase in net assets resulting from operations	$	17,728	$	15,473	$	41,850	$	39,605

Common shares information:
Net investment income per share		$	0.25	$	0.16	$	0.69	$	0.58
Net increase in net assets resulting from operations per share	Net increase in net assets resulting from operations per share	$	0.83	$	0.28	$	2.28	$	3.12	Net increase in net assets resulting from operations per share
Weighted average number of common shares outstanding		18,563		13,206		17,371		11,930
Class FA										Class FA	$	0.83	$	0.92	$	2.07	$	2.47
Class A										Class A	$	0.65	$	0.79	$	1.62	$	2.08
Class T										Class T	$	0.57	$	0.73	$	1.47	$	2.02
Class D										Class D	$	0.63	$	0.78	$	1.59	$	2.08
Class I										Class I	$	0.65	$	0.80	$	1.66	$	2.11
Class S										Class S	$	0.82	$	0.96	$	2.17	$	2.76

See notes to condensed consolidated financial statements.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)


	Quarter Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Weighted average shares
Class FA	4,219	4,277	4,230	4,417
Class A	3,794	1,865	2,972	1,688
Class T	2,712	2,005	2,605	1,803
Class D	2,388	1,452	2,197	1,246
Class I	11,107	7,198	10,124	6,452
Class S	1,763	1,765	1,764	1,766

See notes to condensed consolidated financial statements.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2023

(in thousands)


	Common Shares			Capital in Excess of Par Value		Distributable Earnings		Total Net Assets
	Number of Shares	Par Value
Balance as of June 30, 2023	25,079	$	25	$	740,458	$	104,021	$	844,504
Net investment income	—	—		—		5,762		5,762

Net change in unrealized appreciation on investments	—	—		—		11,966		11,966
Distributions to shareholders	—	—		—		(7,865)		(7,865)
Issuance of common shares through the Public Offerings	2,125	1		70,278		—		70,279
Issuance of common shares through distribution reinvestment plan	103	—		3,401		—		3,401
Repurchase of common shares pursuant to share repurchase program	(200)	—		(6,767)		—		(6,767)
Balance as of September 30, 2023	27,107	$	26	$	807,370	$	113,884	$	921,280


	Common Shares			Capital in Excess of Par Value		Distributable Earnings		Total Net Assets
	Number of Shares	Par Value
Balance as of December 31, 2022	21,276	$	21	$	615,383	$	93,695	$	709,099
Net investment income	—	—		—		17,274		17,274
Net realized gain on investments	—	—		—		4		4
Net change in unrealized appreciation on investments	—	—		—		24,572		24,572
Distributions to shareholders	—	—		—		(21,661)		(21,661)
Issuance of common shares through the Public Offerings	6,024	5		198,601		—		198,606
Issuance of common shares through distribution reinvestment plan	272	—		8,967		—		8,967
Repurchase of common shares pursuant to share repurchase program	(465)	—		(15,581)		—		(15,581)
Balance as of September 30, 2023	27,107	$	26	$	807,370	$	113,884	$	921,280

See notes to condensed consolidated financial statements.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2022

(in thousands)


	Common Shares			Capital in Excess of Par Value		Distributable Earnings		Total Net Assets
	Number of Shares	Par Value
Balance as of June 30, 2022	18,038	$	18	$	511,940	$	71,486	$	583,444
Net investment income	—	—		—		4,609		4,609

Net change in unrealized appreciation on investments	—	—		—		10,864		10,864
Distributions to shareholders	—	—		—		(5,627)		(5,627)
Issuance of common shares through the Public Offerings	1,562	2		49,548		—		49,550
Issuance of common shares through distribution reinvestment plan	62	—		1,955		—		1,955
Repurchase of common shares pursuant to share repurchase program	(66)	—		(2,127)		—		(2,127)
Balance as of September 30, 2022	19,596	$	20	$	561,316	$	81,332	$	642,668

Common Shares Capital in Excess of Par Value Distributable Earnings Total Net Assets
Number of Shares Par Value
Balance as of December 31, 2021 15,814 $ 16 $ 442,752 $ 57,541 $ 500,309
Net investment income — — — 12,040 12,040
Net change in unrealized appreciation on investments — — — 27,565 27,565
Distributions to shareholders — — — (15,814) (15,814)
Issuance of common shares through the Offerings 4,173 4 131,472 — 131,476
Issuance of common shares through distribution reinvestment plan 168 — 5,271 — 5,271
Repurchase of common shares pursuant to share repurchase program (559) — (18,179) — (18,179)
Balance as of September 30, 2022 19,596 $ 20 $ 561,316 $ 81,332 $ 642,668

~~Table of Contents~~

~~CNL STRATEGIC CAPITAL, LLC~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)~~

~~FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2021~~

~~(in thousands)~~

Common Shares Capital in Excess of Par Value Distributable Earnings Total Net Assets
Number of Shares Par Value
Balance as of June 30, 2021 12,731 $ 13 $ 347,317 $ 56,737 $ 404,067
Net investment income — — — 2,111 2,111
Net change in unrealized appreciation on investments — — — 1,545 1,545
Distributions to shareholders — — — (4,037) (4,037)
Issuance of common shares through the Public Offerings 1,451 1 44,823 — 44,824
Issuance of common shares through distribution reinvestment plan 37 — 1,152 — 1,152
Repurchase of common shares pursuant to share repurchase program (22) — (694) — (694)
Balance as of September 30, 2021 14,197 $ 14 $ 392,598 $ 56,356 $ 448,968

Common Shares Capital in Excess of Par Value Distributable Earnings Total Net Assets
Number of Shares Par Value
Balance as of December 31, 2020 10,458 $ 10 $ 278,908 $ 30,044 $ 308,962
Net investment income — — — 6,944 6,944
Net change in unrealized appreciation on investments — — — 30,313 30,313
Distributions to shareholders — — — (10,945) (10,945)
Issuance of common shares through the Offerings 3,737 4 113,675 — 113,679
Issuance of common shares through distribution reinvestment plan 93 — 2,797 — 2,797
Repurchase of common shares pursuant to share repurchase program (91) — (2,782) — (2,782)
Balance as of September 30, 2021 14,197 $ 14 $ 392,598 $ 56,356 $ 448,968

~~See notes to condensed consolidated financial statements.~~

~~Table of Contents~~

~~CNL STRATEGIC CAPITAL, LLC~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)~~

~~(in thousands)~~

Nine Months Ended September 30,
2022 2021
Operating Activities:
Net increase in net assets resulting from operations $ 39,605 $ 37,257
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
Purchases of portfolio company investments (89,383) (73,000)
Proceeds from return of capital on portfolio company investments 237 2,789
Purchases of investments in U.S. Treasury Bills (104,996) —
Proceeds from redemptions/sales of U.S. Treasury Bills 45,063 —
Net change in unrealized appreciation on investments (27,791) (30,832)
Accretion of discounts (134) —
Increase in due to related parties 1,450 6,753
Increase in accounts payable and other accrued expenses 401 412
Increase in deferred tax liability, net 226 519
Increase in prepaid expenses and other assets (296) (74)
Other operating activities 49 97
Net cash used in operating activities (135,569) (56,079)
Financing Activities:
Proceeds from issuance of common shares 114,434 96,933
Payment on repurchases of common shares (16,561) (4,057)
Distributions paid, net of distributions reinvested (10,176) (7,773)
Deferred financing costs (201) (21)
Net cash provided by financing activities 87,496 85,082
Net (decrease) increase in cash (48,073) 29,003
Cash, beginning of period 58,704 82,688
Cash, end of period $ 10,631 $ 111,691
Supplemental disclosure of cash flow information and non-cash financing activities:
Distributions reinvested $ 5,271 $ 2,797
Amounts incurred but not paid (including amounts due to related parties):
Distributions payable $ 1,933 $ 1,392
Offering costs $ 259 $ 256
Payable for shares repurchased $ 2,127 $ 694


	Common Shares			Capital in Excess of Par Value		Distributable Earnings		Total Net Assets
	Number of Shares	Par Value
Balance as of December 31, 2021	15,814	$	16	$	442,752	$	57,541	$	500,309
Net investment income	—	—		—		12,040		12,040

Net change in unrealized appreciation on investments	—	—		—		27,565		27,565
Distributions to shareholders	—	—		—		(15,814)		(15,814)
Issuance of common shares through the Public Offerings	4,173	4		131,472		—		131,476
Issuance of common shares through distribution reinvestment plan	168	—		5,271		—		5,271
Repurchase of common shares pursuant to share repurchase program	(559)	—		(18,179)		—		(18,179)
Balance as of September 30, 2022	19,596	$	20	$	561,316	$	81,332	$	642,668

See notes to condensed consolidated financial statements.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

CONDENSED CONSOLIDATED ~~SCHEDULE~~STATEMENTS OF ~~INVESTMENTS~~CASH FLOWS (UNAUDITED)

~~AS OF SEPTEMBER 30, 2022~~

(in ~~thousands except share data)~~thousands)

Company (1)(2)
Industry Interest
Rate Maturity
Date Principal Amount /
No. Shares Amortized Cost Fair Value
Senior Secured Note – First Lien – 15.8%
ATA Holding Company, LLC Real Estate Services 15.0% 4/1/2027 $ 37,000 $ 37,000 $ 37,000
Auriemma U.S. Roundtables Information Services and Advisory Solutions 8.0% 11/13/2022 2,000 2,000 2,000
Clarion Safety Systems, LLC Visual Safety Solutions 15.0% 12/9/2028 22,500 22,500 22,500
Healthcare Safety Holdings, LLC Healthcare Supplies 15.0% 7/16/2027 24,400 24,400 24,400
Polyform Products, Co. Hobby Goods and Supplies 16.0% 2/7/2026 15,700 15,700 15,700
Total Senior Secured Notes – First Lien 101,600 101,600
Senior Secured Note – Second Lien – 11.7%
Auriemma U.S. Roundtables Information Services and Advisory Solutions 16.0% 8/1/2025 $ 12,114 $ 12,114 $ 12,114
Blue Ridge ESOP Associates Business Services 15.0% 12/28/2028 2,641 2,641 2,641
Douglas Machines Corp. Sanitation Products 16.0% 10/7/2028 15,000 15,000 15,000
Lawn Doctor, Inc. Commercial and Professional Services 16.0% 7/7/2026 15,000 15,000 15,000
Milton Industries Inc. Engineered Products 15.0% 12/19/2027 3,353 3,353 3,353
Resolution Economics, LLC Business Services 15.0% 1/2/2026 2,834 2,834 2,834
Vektek Holdings, LLC Engineered Products 15.0% 11/6/2029 24,400 24,400 24,400
Total Senior Secured Notes – Second Lien 75,342 75,342
Total Senior Secured Notes 176,942 176,942
Equity – 61.6%
ATA Holding Company, LLC(3)
Real Estate Services 37,985 $ 37,125 $ 39,242
Auriemma U.S. Roundtables(3)
Information Services and Advisory Solutions 32,386 32,386 45,089
Blue Ridge ESOP Associates Business Services 11,489 12,793 19,634
Clarion Safety Systems, LLC(3)
Visual Safety Solutions 50,562 50,756 52,519
Douglas Machines Corp.(3)
Sanitation Products 35,500 35,500 35,681
Healthcare Safety Holdings, LLC(3)
Healthcare Supplies 17,320 17,320 31,081
Lawn Doctor, Inc.(3)
Commercial and Professional Services 7,746 27,776 63,049
Milton Industries Inc. Engineered Products 6,647 6,647 13,755
Polyform Products, Co.(3)
Hobby Goods and Supplies 10,820 15,599 25,501
Resolution Economics, LLC Business Services 7,166 7,129 13,505
Vektek Holdings, LLC(3)
Engineered Products 56,928 56,928 56,928
Total Equity 299,959 395,984
Total Portfolio Company Investments – 89.1% $ 476,901 $ 572,926


	Nine Months Ended September 30,
	2023		2022
Operating Activities:
Net increase in net assets resulting from operations	$	41,850	$	39,605
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
Purchases of portfolio company investments	(161,517)		(89,383)
Proceeds from return of capital on portfolio company investments	165		237
Purchases of investments in U.S. Treasury bills	(754,978)		(104,996)
Proceeds from redemptions/sales of U.S. Treasury bills	813,660		45,063
Net realized gain on investments	(4)		—
Net change in unrealized appreciation on investments, excluding deferred taxes	(28,814)		(27,791)
Accretion of discounts	(2,476)		(134)


(Decrease) increase in due to related parties	(4,764)		1,450
Increase in accounts payable and other accrued expenses	163		401
Increase in deferred tax liabilities, net	4,242		226
Increase in prepaid expenses and other assets	(35)		(296)
Other operating activities	209		49
Net cash used in operating activities	(92,299)		(135,569)
Financing Activities:
Proceeds from issuance of common shares	198,606		114,434
Payment on repurchases of common shares	(11,182)		(16,561)
Distributions paid, net of distributions reinvested	(12,694)		(10,176)
Deferred financing costs	(125)		(201)
Net cash provided by financing activities	174,605		87,496
Net increase (decrease) in cash and cash equivalents	82,306		(48,073)
Cash and cash equivalents, beginning of period	36,837		58,704
Cash and cash equivalents, end of period	$	119,143	$	10,631
Supplemental disclosure of cash flow information and non-cash financing activities:
Distributions reinvested	$	8,967	$	5,271
Amounts incurred but not paid (including amounts due to related parties):
Distributions payable	$	—	$	1,933
Offering costs	$	230	$	259
Payable for shares repurchased	$	6,767	$	2,127

See notes to condensed consolidated financial statements.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED)

AS OF SEPTEMBER 30, ~~2022 (continued)~~2023

(in thousands except share data)
Interest
Rate Maturity
Date Principal Amount Amortized Cost Fair Value
Other Investments – 9.4%
U.S. Treasury Bills —% 10/11/2022 $60,107 $ 60,067 $ 60,075
Total Other Investments 60,067 60,075
TOTAL INVESTMENTS – 98.5% $ 536,968 $ 633,001
OTHER ASSETS IN EXCESS OF LIABILITIES – 1.5% 9,667
NET ASSETS – 100.0% $ 642,668


Company (1)(2)	Industry	Interest Rate	Maturity Date	Principal Amount / No. Shares		Amortized Cost		Fair Value
Senior Secured Note – First Lien – 20.1%
ATA Holding Company, LLC	Real Estate Services	15.0%	4/1/2027	$	37,000	$	37,000	$	37,000
Auriemma U.S. Roundtables	Information Services and Advisory Solutions	8.0%	8/1/2024	2,000		2,000		2,000
Clarion Safety Systems, LLC	Visual Safety Solutions	15.0%	12/9/2028	22,500		22,500		22,500
Healthcare Safety Holdings, LLC	Healthcare Supplies	15.0%	7/16/2027	24,400		24,400		24,400
Polyform Products, Co.	Hobby Goods and Supplies	16.0%	2/7/2026	15,700		15,700		15,700
Tacmed Holdings, LLC	Healthcare Supplies	16.0%	3/24/2030	29,000		29,000		29,000
Lawn Doctor, Inc.	Commercial and Professional Services	(4)	2/7/2025	29,490		29,490		29,490
Vektek Holdings, LLC	Engineered Products	(4)	5/6/2029	24,937		24,937		24,937
Total Senior Secured Notes – First Lien						185,027		185,027
Senior Secured Notes – Second Lien – 8.2%
Auriemma U.S. Roundtables	Information Services and Advisory Solutions	16.0%	8/1/2025	$	12,114	$	12,114	$	12,114
Blue Ridge ESOP Associates	Business Services	15.0%	12/28/2028	2,641		2,641		2,641
Douglas Machines Corp.	Sanitation Products	16.0%	10/7/2028	15,000		15,000		15,000
Lawn Doctor, Inc.	Commercial and Professional Services	16.0%	7/7/2026	15,000		15,000		15,000
Milton Industries Inc.	Engineered Products	15.0%	12/19/2027	3,353		3,353		3,353
Resolution Economics, LLC	Business Services	15.0%	1/2/2026	2,834		2,834		2,834
Vektek Holdings, LLC	Engineered Products	15.0%	11/6/2029	24,400		24,400		24,400
Total Senior Secured Notes – Second Lien						75,342		75,342
Total Senior Secured Notes						260,369		260,369
Equity – 56.3%
ATA Holding Company, LLC(3)	Real Estate Services			37,985		$	37,125	$	33,915
Auriemma U.S. Roundtables(3)	Information Services and Advisory Solutions			33,094		33,476		54,472
Blue Ridge ESOP Associates	Business Services			11,489		12,793		21,289
Clarion Safety Systems, LLC(3)	Visual Safety Solutions			50,562		50,756		48,820
Douglas Machines Corp.(3)	Sanitation Products			35,500		35,500		45,144
Healthcare Safety Holdings, LLC(3)	Healthcare Supplies			17,320		17,320		40,258
Lawn Doctor, Inc.(3)	Commercial and Professional Services			7,746		27,611		70,536
Milton Industries Inc.	Engineered Products			6,647		6,647		18,574
Polyform Products, Co.(3)	Hobby Goods and Supplies			10,820		15,599		15,621
Resolution Economics, LLC	Business Services			7,166		7,129		14,744
Tacmed Holdings, LLC(3)	Healthcare Supplies			77,000		77,000		77,000
Vektek Holdings, LLC(3)	Engineered Products			56,928		56,928		78,283
Total Equity						377,884		518,656
Total Portfolio Company Investments – 84.6%						638,253		779,025

See notes to condensed consolidated financial statements.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED)

AS OF SEPTEMBER 30, 2023 (CONTINUED)

(in thousands except share data)


	Interest Rate	Maturity Date	Principal Amount		Amortized Cost		Fair Value
Other Investments – 5.4%
U.S. Treasury bills	Zero Coupon	10/24/23	$	50,180	$	50,013	$	50,018
Total Other Investments					50,013		50,018
TOTAL INVESTMENTS – 90.0%					$	688,266	829,043
OTHER ASSETS IN EXCESS OF LIABILITIES – 10.0%							92,237
NET ASSETS – 100.0%							$	921,280

FOOTNOTES:

(1) Security may be an obligation of one or more entities affiliated with the named company.

(2) Percentages represent fair value as a percentage of net assets for each investment category.

(3) As of September 30, ~~2022,~~2023, the Company owned a controlling interest in this portfolio company.

(4) As of September 30, 2023, the senior debt investments in Lawn Doctor and Vektek accrue interest at a per annum rate of SOFR + 4.60% and SOFR + 4.35%, respectively. SOFR at September 30, 2023 was 5.32%.

See notes to condensed consolidated financial statements.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS

AS OF DECEMBER 31, ~~2021~~2022

(in thousands except share data)


Company (1)(2)	Company (1)(2)	Industry	Interest Rate	Maturity Date	Principal Amount / No. Shares	Amortized Cost		Fair Value		Company (1)(2)	Industry	Interest Rate	Maturity Date	Principal Amount / No. Shares	Amortized Cost		Fair Value
Senior Secured Note – First Lien – 23.3%
Senior Secured Note – First Lien – 14.3%										Senior Secured Note – First Lien – 14.3%
ATA Holding Company, LLC	ATA Holding Company, LLC	Real Estate Services	15.0%	4/1/2027	37,000	$	37,000	$	37,000	ATA Holding Company, LLC	Real Estate Services	15.0%	4/1/2027	37,000	$	37,000	$	37,000
Auriemma U.S. Roundtables	Auriemma U.S. Roundtables	Information Services and Advisory Solutions	8.0%	11/13/2022	2,000	2,000		2,000		Auriemma U.S. Roundtables	Information Services and Advisory Solutions	8.0%	8/1/2024	2,000	2,000		2,000
Clarion Safety Systems, LLC	Clarion Safety Systems, LLC	Visual Safety Solutions	15.0%	12/9/2028	22,500	22,500		22,500		Clarion Safety Systems, LLC	Visual Safety Solutions	15.0%	12/9/2028	22,500	22,500		22,500
Douglas Machines Corp.		Sanitation Products	16.0%	10/7/2028	15,000	15,000		15,000
Healthcare Safety Holdings, LLC	Healthcare Safety Holdings, LLC	Healthcare Supplies	15.0%	7/16/2027	24,400	24,400		24,400		Healthcare Safety Holdings, LLC	Healthcare Supplies	15.0%	7/16/2027	24,400	24,400		24,400
Polyform Products, Co.	Polyform Products, Co.	Hobby Goods and Supplies	16.0%	8/7/2023	15,700	15,700		15,700		Polyform Products, Co.	Hobby Goods and Supplies	16.0%	2/7/2026	15,700	15,700		15,700
Total Senior Secured Notes – First Lien	Total Senior Secured Notes – First Lien					116,600		116,600		Total Senior Secured Notes – First Lien					101,600		101,600
Senior Secured Note – Second Lien – 7.2%
Senior Secured Note – Second Lien – 10.6%										Senior Secured Note – Second Lien – 10.6%
Auriemma U.S. Roundtables	Auriemma U.S. Roundtables	Information Services and Advisory Solutions	16.0%	8/1/2025	12,114	$	12,114	$	12,114	Auriemma U.S. Roundtables	Information Services and Advisory Solutions	16.0%	8/1/2025	12,114	$	12,114	$	12,114
Blue Ridge ESOP Associates	Blue Ridge ESOP Associates	Business Services	15.0%	12/28/2028	2,641	2,641		2,641		Blue Ridge ESOP Associates	Business Services	15.0%	12/28/2028	2,641	2,641		2,641
Douglas Machines Corp.										Douglas Machines Corp.	Sanitation Products	16.0%	10/7/2028	15,000	15,000		15,000
Lawn Doctor, Inc.	Lawn Doctor, Inc.	Commercial and Professional Services	16.0%	7/7/2026	15,000	15,000		15,000		Lawn Doctor, Inc.	Commercial and Professional Services	16.0%	7/7/2026	15,000	15,000		15,000
Milton Industries, Inc.		Engineered Products	15.0%	12/19/2027	3,353	3,353		3,353
Milton Industries Inc.										Milton Industries Inc.	Engineered Products	15.0%	12/19/2027	3,353	3,353		3,353
Resolution Economics, LLC	Resolution Economics, LLC	Business Services	15.0%	1/2/2026	2,834	2,834		2,834		Resolution Economics, LLC	Business Services	15.0%	1/2/2026	2,834	2,834		2,834
Vektek Holdings, LLC										Vektek Holdings, LLC	Engineered Products	15.0%	11/6/2029	24,400	24,400		24,400
Total Senior Secured Notes – Second Lien	Total Senior Secured Notes – Second Lien					35,942		35,942		Total Senior Secured Notes – Second Lien					75,342		75,342
Total Senior Secured Notes	Total Senior Secured Notes					152,542		152,542		Total Senior Secured Notes					176,942		176,942
Equity – 60.7%
Equity – 58.1%										Equity – 58.1%
ATA Holding Company, LLC(3)	ATA Holding Company, LLC(3)	Real Estate Services			36,980	$	36,000	$	41,612	ATA Holding Company, LLC(3)	Real Estate Services			37,985	$	37,125	$	38,406
Auriemma U.S. Roundtables(3)	Auriemma U.S. Roundtables(3)	Information Services and Advisory Solutions			32,386	32,386		40,902		Auriemma U.S. Roundtables(3)	Information Services and Advisory Solutions			32,386	32,386		46,187
Blue Ridge ESOP Associates	Blue Ridge ESOP Associates	Business Services			9,859	9,859		12,731		Blue Ridge ESOP Associates	Business Services			11,489	12,793		20,334
Clarion Safety Systems, LLC(3)	Clarion Safety Systems, LLC(3)	Visual Safety Solutions			46,759	46,759		46,760		Clarion Safety Systems, LLC(3)	Visual Safety Solutions			50,562	50,756		51,609
Douglas Machines Corp.(3)	Douglas Machines Corp.(3)	Sanitation Products			35,500	35,500		35,500		Douglas Machines Corp.(3)	Sanitation Products			35,500	35,500		37,338
Healthcare Safety Holdings, LLC(3)	Healthcare Safety Holdings, LLC(3)	Healthcare Supplies			17,320	17,320		24,117		Healthcare Safety Holdings, LLC(3)	Healthcare Supplies			17,320	17,320		33,865
Lawn Doctor, Inc.(3)	Lawn Doctor, Inc.(3)	Commercial and Professional Services			7,746	28,013		56,806		Lawn Doctor, Inc.(3)	Commercial and Professional Services			7,746	27,776		66,028
Milton Industries, Inc.	Milton Industries, Inc.	Engineered Products			6,647	6,647		9,286		Milton Industries, Inc.	Engineered Products			6,647	6,647		15,203
Polyform Products, Co.(3)	Polyform Products, Co.(3)	Hobby Goods and Supplies			10,820	15,599		24,116		Polyform Products, Co.(3)	Hobby Goods and Supplies			10,820	15,599		25,105
Resolution Economics, LLC	Resolution Economics, LLC	Business Services			7,166	7,129		11,625		Resolution Economics, LLC	Business Services			7,166	7,129		13,793
Vektek Holdings, LLC (3)										Vektek Holdings, LLC (3)	Engineered Products			56,928	56,928		64,027
Total Equity	Total Equity					235,212		303,455		Total Equity					299,959		411,895
TOTAL INVESTMENTS – 91.2%						$	387,754	$	455,997
OTHER ASSETS IN EXCESS OF LIABILITIES – 8.8%								44,312
NET ASSETS – 100.0%								$	500,309
Total Portfolio Company Investments – 83.0%										Total Portfolio Company Investments – 83.0%					476,901		588,837

See notes to condensed consolidated financial statements.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS

AS OF DECEMBER 31, 2022 (CONTINUED)

(in thousands except share data)


	Interest Rate	Maturity Date	Principal Amount		Amortized Cost		Fair Value
Other Investments – 15.0%
U.S. Treasury bills	Zero Coupon	1/3/2023	$	88,235	$	88,210	$	88,235
U.S. Treasury bills	Zero Coupon	1/24/2023	18,047		18,006		18,007
Total Other Investments					106,216		106,242
TOTAL INVESTMENTS – 98.0%					$	583,117	695,079
OTHER ASSETS IN EXCESS OF LIABILITIES – 2.0%							14,020
NET ASSETS – 100.0%							$	709,099

FOOTNOTES:

(1) Security may be an obligation of one or more entities affiliated with the named company.

(2) Percentages represent fair value as a percentage of net assets for each investment category.

(3) As of December 31, ~~2021,~~2022, the Company owned a controlling interest in this portfolio company.

See notes to condensed consolidated financial statements.

911

~~Table of Contents~~

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2022~~2023

1. Principal Business and Organization

CNL Strategic Capital, LLC (the “Company”) is a limited liability company that primarily seeks to acquire and grow durable, middle-market U.S. businesses. The Company is externally managed by CNL Strategic Capital Management, LLC (the “Manager”) and sub-managed by Levine Leichtman Strategic Capital, LLC (the “Sub-Manager”). The Manager is responsible for the overall management of the Company’s activities and the Sub-Manager is responsible for the day-to-day management of the Company’s assets. ~~Each of the~~The Manager and the Sub-Manager are each registered as an investment adviser under the Investment Advisers Act of 1940, as amended. The Company conducts and intends to continue its operations so that the Company and each of its subsidiaries do not fall within, or are excluded from, the definition of an “investment company” under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

The Company intends to target businesses that are highly cash flow generative, with annual revenues primarily between $15 million and $250 million and whose management teams seek an ownership stake in the company. The Company’s business strategy is to acquire controlling equity interests in combination with debt positions and in doing so, provide long-term capital appreciation and current income while protecting invested capital. The Company seeks to structure its investments with limited, if any, third-party senior leverage.

The Company intends for a significant majority of its total assets to be comprised of long-term controlling equity interests and debt positions in the businesses it acquires. In addition and to a lesser extent, the Company may acquire other debt and minority equity positions, which may include acquiring debt in the secondary market and minority equity interests in combination with other funds managed by the Sub-Manager from co-investments with other partnerships managed by the Sub-Manager or their affiliates. The Company expects that these positions will comprise a minority of its total assets.

The Company commenced its initial public offering of up to $1.1 billion of its limited liability company interests (“shares”) on March 7, 2018 (the “Initial Public Offering”), which included up to $100.0 million of shares being offered through its distribution reinvestment plan, pursuant to a registration statement on Form S-1, as amended (the “Initial Registration Statement”). On November 1, 2021, the Company commenced a follow-on public offering of up to $1.1 billion of shares (the “Follow-On Public Offering” and together with the Initial Public Offering, the “Public Offerings”), which included up to $100.0 million of shares being offered through its distribution reinvestment plan, pursuant to a registration statement on Form S-1 (the “Registration Statement”) filed with the Securities and Exchange Commission (the “SEC”). Upon commencement of the Follow-On Public Offering, the Initial Registration Statement was deemed terminated.

Through the Follow-On Public Offering, the Company is offering, in any combination, four classes of shares: Class A shares, Class T shares, Class D shares and Class I shares (collectively, the “Non-founder shares”). There are differing selling fees and commissions and dealer manager fees for each share class. The Company also pays distribution and shareholder servicing fees, subject to certain limits, on the Class T and Class D shares sold in the Follow-On Public Offering (excluding sales pursuant to its ~~distributions investment~~distribution reinvestment plan). See Note 7. “Capital Transactions” and Note 13. “Subsequent Events” for additional information related to the Public Offerings.

2. Significant Accounting Policies

Basis of Presentation

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as contained in the Financial Accounting Standards Board Accounting Standards Codification (the “Codification” or “ASC”), which requires the use of estimates, assumptions and the exercise of subjective judgment as to future uncertainties. In the opinion of management, the condensed consolidated financial statements reflect all adjustments that are of a normal recurring nature and necessary for the fair presentation of financial results as of and for the periods presented.

Although the Company is organized and intends to conduct its business in a manner so that it is not required to register as an investment company under the Investment Company Act, its financial statements are prepared using the specialized accounting principles of ASC Topic 946, “Financial Services—Investment Companies” (“ASC Topic 946”) to utilize investment company accounting. The Company obtains funds through the issuance of equity interests to multiple unrelated investors, and provides such investors with investment management services. Further, the Company’s business strategy is to acquire interests in middle-market U.S. businesses to provide current income and long term capital appreciation, while protecting invested capital.

1012

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CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2022~~2023

Overall, the Company believes that the use of investment company accounting on a fair value basis is consistent with the management of its assets on a fair value basis, and makes the Company’s financial statements more useful to investors and other financial statement users in facilitating the evaluation of an investment in the Company as compared to other investment products in the marketplace.

Principles of Consolidation

Under ASC Topic 946 the Company is precluded from consolidating any entity other than an investment company or an operating company which provides substantially all of its services to benefit the Company. In accordance therewith, the Company has consolidated the results of its wholly owned subsidiaries which provide services to the Company in its condensed consolidated financial statements. However, the Company has not consolidated the results of its subsidiaries in which the Company holds debt and equity investments. All intercompany account balances and transactions have been eliminated in consolidation.

~~Risks~~Cash and ~~Uncertainties~~

The Company's portfolio companies and the success of its investment activities are affected by global and national economic, political and market conditions generally and also by the local economic conditions where the portfolio companies are located and operate. Certain external events such as public health crises, including the novel coronavirus (“COVID-19”) and its variants, natural disasters and geopolitical events, including the ongoing conflict between Russia, Belarus and Ukraine have recently led to increased financial and credit market volatility and disruptions, leading to record inflationary pressure, rising interest rates, supply chain issues, labor shortages and recessionary concerns. Although more normalized activities have resumed and there has been improvement due to global and domestic vaccination efforts, at this time the Company cannot predict the full extent of the impacts of the COVID-19 pandemic on the Company and the economy as a whole. Additionally, in response to recent inflationary pressure, the U.S. Federal Reserve and other global central banks have raised interest rates in 2022 and have indicated likely further interest rate increases. The full impact of such external events on the financial and credit markets and consequently on the Company’s financial conditions and results of operations is uncertain and cannot be fully predicted. The Company will continue to monitor these events and will adjust its operations as necessary.

Cash Equivalents

Cash ~~consists~~and cash equivalents consist of demand deposits and money market funds at commercial banks. Demand deposits are carried at cost plus accrued interest, which approximates fair value. The Company deposits its cash with highly-rated banking corporations and, at times, cash deposits may exceed the insured limits under applicable law.

As of September 30, 2023, the Company held cash equivalents in the form of money market fund shares held in Fidelity Government Money Market with a fair value of approximately $22.1 million, which represents 2.40% of total net assets. The Company did not hold cash equivalents as of December 31, 2022. Cash equivalents in the form of money market fund shares are valued at their reported net asset value on the measurement date, and are categorized within Level 1 of the fair value hierarchy under ASC Topic 820, as inputs in the valuation are observable.

Use of Estimates

Management makes estimates and assumptions related to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare the financial statements in conformity with ~~generally accepted accounting principles.~~GAAP. The uncertainty of future events may materially impact the accuracy of the estimates and assumptions used in the financial statements and related footnotes and actual results could differ from those estimates.

Valuation of Investments

ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC Topic 820”) clarifies that ~~the~~ fair value is the price in an orderly transaction between market participants to sell an asset or transfer a liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. The transaction to sell the asset or transfer the liability is a hypothetical transaction at the measurement date, considered from the perspective of a market participant that holds the asset or owes the liability. ASC Topic 820 provides a consistent definition of fair value which focuses on exit price and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs.

In addition, ASC Topic 820 provides a framework for measuring fair value and establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels of valuation hierarchy established by ASC Topic 820 are defined as follows:

~~Table of Contents~~

~~CNL STRATEGIC CAPITAL, LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2022~~

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets. An active market is defined as a market in which transactions for the asset or liability occur with sufficient pricing information on an ongoing basis. Publicly listed equity and debt securities and listed derivatives that are traded on major securities exchanges and publicly traded equity options are generally valued using Level 1 inputs. If a price for an asset cannot be determined based upon this established process, it shall then be valued as a Level 2 or Level 3 asset.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2023

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include the following: (i) quoted prices for similar assets in active markets; (ii) quoted prices for identical or similar assets in markets that are not active; (iii) inputs that are derived principally from or corroborated by observable market data by correlation or other means; and (iv) inputs other than quoted prices that are observable for the assets. Fixed income and derivative assets, where there is an observable secondary trading market and through which pricing inputs are available through pricing services or broker quotes, are generally valued using Level 2 inputs. If a price for an asset cannot be determined based upon this established process, it shall then be valued as a Level 3 asset.

Level 3 – Unobservable inputs for the asset or liability being valued. Unobservable inputs will be used to measure fair value to the extent that observable inputs are not available and such inputs will be based on the best information available in the circumstances, which under certain circumstances might include the Manager’s or the Sub-Manager’s own data. Level 3 inputs may include, but are not limited to, capitalization and discount rates and earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples. The information may also include pricing information or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. Certain assets may be valued based upon estimated value of underlying collateral and include adjustments deemed necessary for estimates of costs to obtain control and liquidate available collateral. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence. Debt and equity investments in private companies or assets valued using the market or income approach are generally valued using Level 3 inputs.

In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls will be determined based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each asset. U.S. Treasury securities are classified as Level 1 assets and are recorded at fair value based on the average of the bid and ask quotes for identical instruments.

The Company’s board of directors is responsible for determining in good faith the fair value of the Company’s Level 3 investments in accordance with the Company’s valuation policy and procedures approved by the board of directors, based on, among other factors, the input of the Manager, the Sub-Manager, its audit committee, and the independent third-party valuation firm. The determination of the fair value of the Company’s Level 3 assets requires judgment, ~~especially with respect to~~which include assets for which market prices are not available. For most of the Company’s assets, market prices will not be available. Due to the inherent uncertainty of determining the fair value of assets that do not have a readily available market value, the fair value of the assets may differ significantly from the values that would have been used had a readily available market value existed for such assets, and the differences could be material. Because the calculation of the Company’s net asset value is based, in part, on the fair value of its assets, the Company’s calculation of net asset value is subjective and could be adversely affected if the determinations regarding the fair value of its assets were materially higher than the values that the Company ultimately realizes upon the disposal of such assets. Furthermore, through the valuation process, the Company’s board of directors may determine that the fair value of the Company’s Level 3 assets differs materially from the values that were provided by the independent valuation firm.

The Company may also look to private merger and acquisition statistics, public trading multiples adjusted for illiquidity and other factors, valuations implied by third-party investments in the businesses or industry practices in determining fair value. The Company may also consider the size and scope of a business and its specific strengths and weaknesses, as well as any other factors it deems relevant in assessing the value.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation on Investments

The Company will measure realized gains or losses as the difference between the net proceeds from the sale, repayment, or disposal of an asset and the amortized cost basis of the asset, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation on investments will reflect the change in asset values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

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CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2022~~2023

Income Recognition

Interest Income – Interest income from loans and debt securities is recorded on an accrual basis to the extent that the Company expects to collect such amounts. The Company does not accrue as a receivable interest on loans and debt securities for accounting purposes if it has reason to doubt its ability to collect such interest. The Company places loans on non-accrual status when principal and interest are past due 90 days or more or when there is a reasonable doubt that the Company will collect principal or interest. Accrued interest is generally reversed when a loan is placed on non-accrual. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are generally restored to accrual status when past due principal and interest amounts are paid and, in management’s judgment, are likely to remain current. Since inception, the Company has not experienced any past due payments on any of its loan investments.

Original issue discounts (“OID”) on U.S. Treasury securities are reflected in the initial cost basis and the Company accretes such amounts as interest income over the term of the respective security using the effective interest method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts.

Dividend Income – Dividend income is recorded on the record date for privately issued securities, but excludes any portion of distributions that are treated as a return of capital. Each distribution received from an equity investment is evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company will not record distributions from equity investments as dividend income unless there are sufficient current or accumulated earnings prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.

Paid in Capital

The Company records the proceeds from the sale of its common shares on a net basis to (i) capital ~~stock~~shares at par value and (ii) paid in capital in excess of par value, excluding upfront selling commissions and dealer manager fees.

Share Repurchases

Under the Company’s share repurchase program (the “Share Repurchase Program”), ~~a shareholder’s~~ shares are ~~deemed to have been~~ redeemed as of the repurchase date, which will generally be the last business day of the month of a calendar quarter. Shares redeemed are retired and not available for reissue. See Note 7. “Capital Transactions” for additional information.

~~Organization and~~ Offering Expenses

~~Organization expenses are expensed on the Company’s condensed consolidated statements of operations as incurred.~~ Offering expenses, which consist of amounts incurred for items such as legal, accounting, regulatory and printing work incurred related to the Public Offerings, are capitalized on the Company’s condensed consolidated statements of assets and liabilities as deferred offering expenses and expensed to the Company’s condensed consolidated statements of operations over the lesser of the offering period or 12 months; however, the end of the deferral period will not exceed 12 months from the date the offering expense is incurred by the Manager and the Sub-Manager.

Distribution and Shareholder Servicing Fees

The Company pays distribution and shareholder servicing fees with respect to its Class T and Class D shares, as described further below in Note 5. “Related Party Transactions.” The Company records the distribution and shareholder servicing fees, which accrue daily, in the Company’s condensed consolidated statements of operations as they are incurred.

Deferred Financing Costs

Financing costs, including upfront fees, commitment fees and legal fees related to borrowings (as further described in Note 8. “Borrowings”) are deferred and amortized over the life of the related financing instrument using the effective yield method. The amortization of deferred financing costs is included in general and administrative expense in the Company’s condensed consolidated statements of operations.

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CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2022~~2023

Allocation of Profit and Loss

Class-specific expenses, including base management fees, total return incentive fees, ~~organization and~~ offering expenses, expense support (reimbursement), distribution and shareholder servicing fees ~~expense support (reimbursement)~~ and certain transfer agent fees, are allocated to each share class of common shares in accordance with how such expenses are attributable to the particular share classes, as determined by the Company’s board of directors, the Company’s governing agreements and, in certain cases, expenses which are specifically identifiable to a share class.

The following table reflects class-specific expenses by share class during the quarter and nine months ended September 30, 2023 and 2022 (in thousands):


	Quarter Ended September 30, 2023
	Class FA Shares		Class A Shares		Class T Shares		Class D Shares		Class I Shares		Class S Shares
Base management fees	$	267	$	587	$	414	$	366	$	1,743	$	128
Total return incentive fees	390		614		389		373		1,816		161
Offering expenses	—		463		73		87		448		—
Expense support (reimbursement)	—		—		—		—		—		—
Other class-specific expenses (1)	53		139		300		161		294		36


	Nine Months Ended September 30, 2023
	Class FA Shares		Class A Shares		Class T Shares		Class D Shares		Class I Shares		Class S Shares
Base management fees	$	792	$	1,338	$	1,174	$	990	$	4,670	$	378
Total return incentive fees	961		1,232		961		884		4,247		425
Offering expenses	—		1,008		293		253		1,468		—
Expense support (reimbursement)	610		—		—		—		34		—
Other class-specific expenses (1)	32		85		666		297		176		22


	Quarter Ended September 30, 2022
	Class FA Shares		Class A Shares		Class T Shares		Class D Shares		Class I Shares		Class S Shares
Base management fees	$	289	$	287	$	319	$	228	$	1,165	$	137
Total return incentive fees	449		374		367		282		1,428		190
Offering expenses	—		116		94		134		412		—
Expense support (reimbursement)	(152)		—		—		—		(31)		—
Other class-specific expenses (1)	7		14		162		59		19		12


	Nine Months Ended September 30, 2022
	Class FA Shares		Class A Shares		Class T Shares		Class D Shares		Class I Shares		Class S Shares
Base management fees	$	874	$	747	$	826	$	564	$	3,011	$	395
Total return incentive fees	1,217		896		934		679		3,455		542
Offering expenses	—		255		261		300		1,186		—
Expense support (reimbursement)	(1,445)		(278)		—		—		(812)		—
Other class-specific expenses (1)	27		59		438		157		81		50

(1) Other class-specific expenses consist of distribution and shareholder servicing fees and certain transfer agent fees.

Income and expenses which are not class-specific are allocated monthly pro rata among the share classes based on shares outstanding as of the end of the month.

~~Earnings~~Net Investment Income per Share and Net ~~Investment Income~~Increase in Net Assets Resulting from Operations per Share

~~Earnings~~Net investment income per share and net ~~investment income~~increase in net assets resulting from operations per share are calculated for each share class of common shares based upon the weighted average number of common shares outstanding during the reporting period.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2023

Distributions

The Company’s board of directors has declared and intends to continue to declare distributions based on monthly record ~~dates and such~~dates. The Company’s distributions are ~~expected to be~~ paid ~~on a monthly basis one~~in the same month ~~in arrears.~~as the declared record date. Distributions are made on all classes of the Company’s shares at the same time.

The Company has adopted a distribution reinvestment plan that provides for reinvestment of distributions on behalf of shareholders. Non-founder shareholders participating in the distribution reinvestment plan will have their cash distribution automatically reinvested in additional shares having the same class designation as the class of shares to which such distributions are attributable at a price per share equivalent to the then current public offering price, net of up-front selling commissions and dealer manager fees. Cash distributions paid on Class FA shares participating in the distribution reinvestment plan are reinvested in additional Class A shares. Class S shares do not participate in the distribution reinvestment plan.

Reclassifications

Certain reclassifications have been made to the condensed consolidated statement of operations and condensed consolidated statement of cash flows for the nine months ended September 30, ~~2021~~2022 to conform with the current year presentation. There was no impact on the Company’s consolidated net income, net change in net assets resulting from operations, net cash used in operations or net cash provided by financing activities as a result of the reclassifications.

Income Taxes

Under GAAP, the Company is subject to the provisions of ASC 740, “Income Taxes.” The Company follows the authoritative guidance on accounting for uncertainty in income taxes and concluded it has no material uncertain tax positions to be recognized at this time. If applicable, the Company will recognize interest and penalties related to unrecognized tax benefits as income tax expense in the Company’s condensed consolidated statements of operations.

The Company has operated and expects to continue to operate so that it will qualify to be treated for U.S. federal income tax purposes as a partnership, and not as an association or a publicly traded partnership taxable as a corporation. Generally, the Company will not be taxable as a corporation if 90% or more of its gross income for each taxable year consists of “qualifying income” (generally, interest (other than interest generated from a financial business), dividends, real property rents, gain from the sale of assets that produce qualifying income and certain other items) and the Company is not required to register under the Investment Company Act (the “qualifying income exception”). As a partnership, the individual shareholders are responsible for their proportionate share of the Company’s taxable income.

The Company holds certain equity investments in taxable subsidiaries (the “Taxable Subsidiaries”). The Taxable Subsidiaries permit the Company to hold equity investments in portfolio companies which are “pass through” entities for tax purposes. The Taxable Subsidiaries are not consolidated with the Company for income tax purposes and may generate income tax expense, benefit, and the related tax assets and liabilities, as a result of the Taxable Subsidiaries’ ownership of certain portfolio investments. The income tax expense, or benefit, ~~if any,~~ and related tax assets and liabilities are reflected in the Company’s condensed consolidated financial statements. See Note 9. “Income Taxes” for additional information.

During the quarter and nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, the Company did not incur any material interest or penalties. Tax years ending December 31, ~~2021, 2020~~2019 and ~~2019~~forward remain subject to examination by ~~major tax jurisdictions.~~

~~Table of Contents~~

~~CNL STRATEGIC CAPITAL, LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2022~~

taxing authorities.

3. Investments

The Company made an additional equity investment in ATA of approximately $1.1 million in February 2022, an additional equity investment of approximately $4.0 million in Clarion in June 2022 and an additional equity investment in Blue Ridge of approximately $2.9 million in August 2022.

In ~~May 2022,~~March 2023, the Company, through a wholly-owned subsidiary, acquired an ~~approximate 84%~~approximately 95% equity ownership interest in ~~Vektek~~Tacmed Holdings, LLC (“~~Vektek”~~TacMed”) for consideration of approximately ~~$56.9~~$77.0 million, subject to certain post-closing adjustments (the “Acquisition”). Additionally, on the closing date of the Acquisition, the Company, through a wholly-owned subsidiary, made a debt investment of approximately ~~$24.4~~$29.0 million in the form of a senior secured note issued by ~~Vektek.~~TacMed.

~~In August 2022,~~On June 30, 2023, the Company ~~began investing~~made additional senior debt investments in ~~short-term U.S. Treasury Bills. As~~Lawn Doctor, Inc. (“Lawn Doctor”) of ~~September 30, 2022, the U.S. Treasury Bills held by the Company were scheduled to mature within 30 days.~~

~~The Company’s investment portfolio is summarized as follows as~~approximately $29.5 million and Vektek Holdings, LLC (“Vektek”) of ~~September 30, 2022 and December 31, 2021 (in thousands):~~

As of September 30, 2022
Asset Category Cost Fair Value Fair Value
Percentage of
Investment
Portfolio Fair Value
Percentage of
Net Assets
Senior secured debt
First lien $ 101,600 $ 101,600 16.1 % 15.8 %
Second lien 75,342 75,342 11.9 11.7
Total senior secured debt 176,942 176,942 28.0 27.5
Equity 299,959 395,984 62.6 61.6
U.S. Treasury Bills 60,067 60,075 9.4 9.4
Total investments $ 536,968 $ 633,001 100.0 % 98.5 %
approximately $25.0 million.

As of December 31, 2021
Asset Category Cost Fair Value Fair Value
Percentage of
Investment
Portfolio Fair Value
Percentage of
Net Assets
Senior secured debt
First lien $ 116,600 $ 116,600 25.6 % 23.3 %
Second lien 35,942 35,942 7.9 7.2
Total senior secured debt 152,542 152,542 33.5 30.5
Equity 235,212 303,455 66.5 60.7
Total investments $ 387,754 $ 455,997 100.0 % 91.2 %

~~Collectively,~~In August 2023, the ~~Company’s debt investments accrue interest at a weighted average per annum rate~~Company made an additional equity investment in Auriemma U.S. Roundtables of 15.2% and have weighted average remaining years to maturity of 4.9 years as of September 30, 2022. The note purchase agreements contain customary covenants and events of default. As of September 30, 2022, all of the Company’s portfolio companies were in compliance with their respective debt covenants.

~~As of September 30, 2022 and December 31, 2021, none of the Company’s debt investments were on non-accrual status.~~approximately $1.1 million.

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CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2023

The Company’s investment portfolio is summarized as follows as of September 30, 2023 and December 31, 2022 (in thousands):


	As of September 30, 2023
Asset Category	Cost		Fair Value		Fair Value Percentage of Investment Portfolio		Fair Value Percentage of Net Assets
Senior secured debt
First lien	$	185,027	$	185,027	22.3	%	20.1	%
Second lien	75,342		75,342		9.1		8.2
Total senior secured debt	260,369		260,369		31.4		28.3
Equity	377,884		518,656		62.6		56.3
U.S. Treasury bills	50,013		50,018		6.0		5.4
Total investments	$	688,266	$	829,043	100.0	%	90.0	%


	As of December 31, 2022
Asset Category	Cost		Fair Value		Fair Value Percentage of Investment Portfolio		Fair Value Percentage of Net Assets
Senior secured debt
First lien	$	101,600	$	101,600	14.6	%	14.3	%
Second lien	75,342		75,342		10.8		10.6
Total senior secured debt	176,942		176,942		25.4		24.9
Equity	299,959		411,895		59.3		58.1
U.S. Treasury bills	106,216		106,242		15.3		15.0
Total investments	$	583,117	$	695,079	100.0	%	98.0	%

Collectively, the Company’s debt investments accrue interest at a weighted average per annum rate of 14.2% and have weighted average remaining years to maturity of 4.1 years as of September 30, 2023. The note purchase agreements contain customary covenants and events of default. As of September 30, 2023, all of the Company’s portfolio companies were in compliance with their respective debt covenants. As of September 30, 2023 and December 31, 2022, none of the Company’s debt investments were on non-accrual status.

The industry dispersion of the Company’s portfolio company investments, based on fair value, as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows:


Industry	Industry	September 30, 2022		December 31, 2021		Industry	September 30, 2023		December 31, 2022
Healthcare Supplies						Healthcare Supplies	21.9	%	9.9	%
Engineered Products	Engineered Products	17.3	%	2.8	%	Engineered Products	19.2		18.2
Commercial and Professional Services	Commercial and Professional Services	13.6		15.8		Commercial and Professional Services	14.8		13.8
Real Estate Services	Real Estate Services	13.3		17.2		Real Estate Services	9.1		12.8
Visual Safety Solutions	Visual Safety Solutions	13.1		15.2		Visual Safety Solutions	9.2		12.6
Information Services and Advisory Solutions	Information Services and Advisory Solutions	10.3		12.1		Information Services and Advisory Solutions	8.8		10.2
Healthcare Supplies		9.7		10.6
Sanitation Products	Sanitation Products	8.8		11.1		Sanitation Products	7.7		8.9
Hobby Goods and Supplies	Hobby Goods and Supplies	7.2		8.7		Hobby Goods and Supplies	4.0		6.9
Business Services	Business Services	6.7		6.5		Business Services	5.3		6.7
Total	Total	100.0	%	100.0	%	Total	100.0	%	100.0	%

All investment positions held at September 30, ~~2022~~2023 and December 31, ~~2021~~2022 were denominated in U.S. dollars and located in the United States based on their country of domicile.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2023

Summarized Portfolio Company Financial Information

The Company had ~~one~~two significant portfolio ~~company~~companies in which it owned a controlling equity interest during the quarter and nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022. The following tables present unaudited summarized operating data for the quarter and nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, and summarized balance sheet data as of September 30, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022 for ~~this~~these portfolio ~~company~~companies (in thousands):

~~Lawn Doctor, Inc.~~Polyform


	Quarter Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues	$	4,236	$	4,769	$	12,355	$	18,234
Expenses	(4,546)		(4,753)		(13,220)		(16,349)
(Loss) income before taxes	(310)		16		(865)		1,885
Income tax benefit (expense)	88		(5)		246		(539)
Net (loss) income	$	(222)	$	11	$	(619)	$	1,346

Quarter Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Revenues $ 8,414 $ 7,927 $ 29,960 $ 27,716
Expenses (7,252) (7,318) (26,524) (24,774)
Income before taxes 1,162 609 3,436 2,942
Income tax expense (287) (16) (842) (628)
Consolidated net income 875 593 2,594 2,314
Net (income) loss attributable to non-controlling interests (15) 3 18 91
Net income $ 860 $ 596 $ 2,612 $ 2,405


		As of September 30, 2022			As of December 31, 2021				As of September 30, 2023			As of December 31, 2022
Current assets	Current assets	$	12,145		$	13,926		Current assets	$	8,560		$	9,532
Non-current assets	Non-current assets	89,293			92,309			Non-current assets	25,871			27,263
Current liabilities	Current liabilities	6,925			7,961			Current liabilities	1,084			1,463
Non-current liabilities	Non-current liabilities	62,777			63,576			Non-current liabilities	21,382			21,484
Non-controlling interests		(518)			(500)

Stockholders’ equity	Stockholders’ equity	32,254			35,198			Stockholders’ equity	11,965			13,848
Ownership percentage(1)	Ownership percentage(1)	61		%	61		%	Ownership percentage(1)	87		%	87		%

FOOTNOTE:

(1)Represents the Company’s undiluted ownership percentage as of the end of the period presented, rounded to the nearest percent.

Vektek

The Company acquired its investments in Vektek in May 2022.


	Quarter Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues	$	9,898	$	10,067	$	29,684	$	15,482
Expenses	(9,405)		(8,536)		(28,453)		(15,088)
Income before taxes	493		1,531		1,231		394
Income tax expense	(4)		(57)		(18)		(65)
Net income	$	489	$	1,474	$	1,213	$	329


	As of September 30, 2023			As of December 31, 2022
Current assets	$	14,695		$	14,832
Non-current assets	100,097			101,917
Current liabilities	2,082			2,536
Non-current liabilities	49,688			48,654
Stockholders’ equity	63,022			65,559
Ownership percentage(1)	84		%	84		%

FOOTNOTE:

(1)Represents the Company’s undiluted ownership percentage as of the end of the period presented, rounded to the nearest percent.

~~Table of Contents~~

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2022~~2023

4. Fair Value of Financial Instruments

The Company’s investments were categorized in the fair value hierarchy described in Note 2. “Significant Accounting Policies,” as follows as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		As of September 30, 2022								As of December 31, 2021									As of September 30, 2023								As of December 31, 2022
Description	Description	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Description	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Senior Debt	Senior Debt	$	—	$	—	$	176,942	$	176,942	$	—	$	—	$	152,542	$	152,542	Senior Debt	$	—	$	—	$	260,369	$	260,369	$	—	$	—	$	176,942	$	176,942
Equity	Equity	—		—		395,984		395,984		—		—		303,455		303,455		Equity	—		—		518,656		518,656		—		—		411,895		411,895
U.S. Treasury Bills		60,075		—		—		60,075		—		—		—		—
U.S. Treasury bills																		U.S. Treasury bills	50,018		—		—		50,018		106,242		—		—		106,242
Total Investments	Total Investments	$	60,075	$	—	$	572,926	$	633,001	$	—	$	—	$	455,997	$	455,997	Total Investments	$	50,018	$	—	$	779,025	$	829,043	$	106,242	$	—	$	588,837	$	695,079

The ranges of unobservable inputs used in the fair value measurement of the Company’s Level 3 investments as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows (in thousands):

September 30, 2023

Asset Group

Fair Value

Valuation Techniques

Unobservable Inputs

Range

(Weighted Average)(1)

Impact to Valuation from an Increase in

Input(2)

Senior Debt

260,369

Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

11.0% – 14.5% (12.7%)

6.9x – 14.7x (11.3x)

6.3x – 16.0x (11.7x)

Decrease
Increase
Increase

Equity

518,656

Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

11.0% – 14.5% (12.7%)

6.9x – 14.7x (11.3x)

6.3x – 16.0x (11.7x)

Decrease
Increase
Increase

Total

779,025

December 31, 2022

Asset Group

Fair Value

Valuation Techniques

Unobservable Inputs

Range

(Weighted Average)(1)

Impact to Valuation from an Increase in

Input(2)

Senior Debt

176,942

Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

~~10.0%~~9.8% – ~~14.0% (11.8%~~13.8% (11.6%)

~~6.6x – 13.6x (9.7x)~~

6.5x – ~~12.5x~~13.2x (9.8x)

6.5x – 13.0x (10.8x)

Decrease
Increase
Increase

Equity

~~395,984~~411,895

Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

~~10.0%~~9.8% – ~~14.0% (11.8%~~13.8% (11.6%)

~~6.6x – 13.6x (9.7x)~~

6.5x – ~~12.5x~~13.2x (9.8x)

6.5x – 13.0x (10.8x)

Decrease
Increase
Increase

Total

~~572,926~~

~~December 31, 2021~~

~~Asset Group~~

~~Fair Value~~

~~Valuation Techniques~~

~~Unobservable Inputs~~

~~Range~~

~~(Weighted Average)(1)~~

~~Impact to Valuation from an Increase in~~

~~Input(2)~~

~~Senior Debt~~

~~130,042~~

Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

~~8.5% – 13.0% (11.4%)~~

~~4.1x – 15.2x (8.9x)~~

~~6.0x – 12.5x (9.6x)~~

Decrease
Increase
Increase

~~22,500~~

~~Transaction Precedent~~

~~Transaction Price~~

~~N/A~~

~~Equity~~

~~256,695~~

Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

~~8.5% – 13.0% (11.4%)~~

~~4.1x – 15.2x (8.9x)~~

~~6.0x – 12.5x (9.6x)~~

Decrease
Increase
Increase

~~46,760~~

~~Transaction Precedent~~

~~Transaction Price~~

~~N/A~~

~~Total~~

~~455,997~~588,837

FOOTNOTES:

(1) Discount rates are relative to the enterprise value of the portfolio companies and are not the market yields on the associated debt investments. Unobservable inputs were weighted by the relative fair value of the investments.

(2) This column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the input would have the opposite effect. Significant changes in these inputs in isolation could result in significantly higher or lower fair value measurements.

The preceding tables include the significant unobservable inputs as they relate to the Company’s determination of fair values for its investments categorized within Level 3 as of September 30, ~~2022~~2023 and December 31, ~~2021.~~2022. In addition to the techniques and inputs noted in the tables above, according to the Company’s valuation policy, the Company may also use other valuation techniques and methodologies when determining the fair value estimates for the Company’s investments. Any significant increases or decreases in the unobservable inputs would result in significant increases or decreases in the fair value of the Company’s investments.

1720

~~Table of Contents~~

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2022~~2023

Investments that do not have a readily available market value are valued utilizing a market approach, an income approach (i.e. discounted cash flow approach), a transaction approach, or a combination of such approaches, as appropriate. The market approach uses prices, including third party indicative broker quotes, and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The transaction approach uses pricing indications derived from recent precedent merger and acquisition transactions involving comparable target companies. The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) that are discounted based on a required or expected discount rate to derive a present value amount range. The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors the Company may take into account to determine the fair value of its investments include, as relevant: available current market data, including an assessment of the credit quality of the security’s issuer, relevant and applicable market trading and transaction comparables, applicable market yields and multiples, illiquidity discounts, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, data derived from merger and acquisition activities for comparable companies, and enterprise values, among other factors.

The following tables provide a reconciliation of investments for which Level 3 inputs were used in determining fair value for the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Nine Months Ended September 30, 2022							Nine Months Ended September 30, 2023
		Senior Debt		Equity		Total			Senior Debt		Equity		Total
Fair value balance as of January 1, 2022		$	152,542	$	303,455	$	455,997
Fair value balance as of January 1, 2023								Fair value balance as of January 1, 2023	$	176,942	$	411,895	$	588,837
Additions	Additions	24,400		64,983		89,383		Additions	83,490		78,090		161,580
Principal repayment								Principal repayment	(63)		—		(63)
Return of capital(1)	Return of capital(1)	—		(237)		(237)		Return of capital(1)	—		(165)		(165)
Net change in unrealized appreciation(2)	Net change in unrealized appreciation(2)	—		27,783		27,783		Net change in unrealized appreciation(2)	—		28,836		28,836
Fair value balance as of September 30, 2022		$	176,942	$	395,984	$	572,926
Change in net unrealized appreciation on investments held as of September 30, 2022(2)		$	—	$	27,783	$	27,783
Fair value balance as of September 30, 2023								Fair value balance as of September 30, 2023	$	260,369	$	518,656	$	779,025
Change in net unrealized appreciation on investments held as of September 30, 2023(2)								Change in net unrealized appreciation on investments held as of September 30, 2023(2)	$	—	$	28,836	$	28,836


		Nine Months Ended September 30, 2021							Nine Months Ended September 30, 2022
		Senior Debt		Equity		Total			Senior Debt		Equity		Total
Fair value balance as of January 1, 2021		$	78,042	$	153,155	$	231,197
Fair value balance as of January 1, 2022								Fair value balance as of January 1, 2022	$	152,542	$	303,455	$	455,997
Additions	Additions	37,000		36,000		73,000		Additions	24,400		64,983		89,383
Return of capital(1)	Return of capital(1)	—		(2,789)		(2,789)		Return of capital(1)	—		(237)		(237)
Net change in unrealized appreciation(2)	Net change in unrealized appreciation(2)	—		30,832		30,832		Net change in unrealized appreciation(2)	—		27,783		27,783
Fair value balance as of September 30, 2021		$	115,042	$	217,198	$	332,240
Change in net unrealized appreciation on investments held as of September 30, 2021(2)		$	—	$	30,832	$	30,832
Fair value balance as of September 30, 2022								Fair value balance as of September 30, 2022	$	176,942	$	395,984	$	572,926
Change in net unrealized appreciation on investments held as of September 30, 2022(2)								Change in net unrealized appreciation on investments held as of September 30, 2022(2)	$	—	$	27,783	$	27,783

FOOTNOTES:

(1) Represents portion of distributions received which were accounted for as a return of capital. See Note 2. “Significant Accounting Policies” for information on the accounting treatment of distributions from portfolio companies.

(2) Included in net change in unrealized appreciation on investments in the condensed consolidated statements of operations.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2023

5. Related Party Transactions

The Manager and Sub-Manager, along with certain affiliates of the Manager or Sub-Manager, receive fees and compensation in connection with the Public Offerings, as well as the acquisition, management and sale of the assets of the Company, as follows:

Managing Dealer

Commissions — The Company pays CNL Securities Corp. (the “Managing Dealer”), an affiliate of the Manager, a selling commission up to 6.00% of the sale price for each Class A share and 3.00% of the sale price for each Class T share sold in the Follow-On Public Offering (excluding sales pursuant to the Company’s distribution reinvestment plan). The Managing Dealer may reallow all or a portion of the selling commissions to participating broker-dealers.

~~Table of Contents~~

~~CNL STRATEGIC CAPITAL, LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2022~~

Dealer Manager Fee — The Company pays the Managing Dealer a dealer manager fee of up to 2.50% of the price of each Class A share and 1.75% of the price of each Class T share sold in the Follow-On Public Offering (excluding sales pursuant to the Company’s distribution reinvestment plan). The Managing Dealer may reallow all or a portion of such dealer manager fees to participating broker-dealers.

Distribution and Shareholder Servicing Fee — The Company pays the Managing Dealer a distribution and shareholder servicing fee, subject to certain limits, with respect to its Class T and Class D shares sold in the Public Offerings (excluding Class T shares and Class D shares sold through the distribution reinvestment plan and those received as share distributions) in an annual amount equal to 1.00% and 0.50%, respectively, of its current net asset value per share, as disclosed in its periodic or current reports, payable on a monthly basis. The distribution and shareholder servicing fee accrues daily and is paid monthly in arrears. The Managing Dealer may reallow all or a portion of the distribution and shareholder servicing fee to the broker-dealer who sold the Class T or Class D shares or, if applicable, to a servicing broker-dealer of the Class T or Class D shares or a fund supermarket platform featuring Class D shares, so long as the broker-dealer or financial intermediary has entered into a contractual agreement with the Managing Dealer that provides for such reallowance. The distribution and shareholder servicing fee is an ongoing fee, subject to certain limits, that is allocated among all Class T and Class D shares, respectively, and is not paid at the time of purchase.

Manager and/or Sub-Manager

~~Organization and~~ Offering Costs — The Company reimburses the Manager and the Sub-Manager, along with their respective affiliates, for the ~~organization and~~ offering costs (other than selling commissions and dealer manager fees) they have incurred on the Company’s behalf only to the extent that such expenses do not exceed 1.5% of the cumulative gross proceeds from the Public Offerings. The Company incurred an obligation to reimburse the Manager and Sub-Manager for ~~organization and~~ offering costs based on actual amounts raised through the Public Offerings of approximately $1.1 million and $0.8 million ~~and $0.7 million~~ during ~~each of~~ the quarters ended September 30, 2023 and 2022, ~~and 2021,~~respectively, and approximately ~~$2.0~~$3.0 million and ~~$1.7~~$2.0 million during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. As of September 30, ~~2022,~~2023, the Manager and the Sub-Manager had incurred approximately ~~$2.9~~$0.2 million of ~~organization and~~ offering costs on behalf of the Company in connection with the Public Offerings in excess of the reimbursement limitation. These costs will be recognized by the Company in future periods as the Company receives future offering proceeds from the Follow-On Public Offering to the extent such costs are within the 1.5% limitation.

Base Management Fee to Manager and Sub-Manager — The Company pays each of the Manager and the Sub-Manager 50% of the total base management fee for their services under the Management Agreement and the Sub-Management Agreement, subject to any reduction or deferral of any such fees pursuant to the terms of the Expense Support and Conditional Reimbursement Agreement described below. The Company incurred base management fees of approximately ~~$2.4~~$3.5 million and ~~$1.3~~$2.4 million during the quarters ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and approximately ~~$6.4~~$9.3 million and ~~$3.3~~$6.4 million during the nine months ended September 30, 2023 and 2022, ~~and 2021,~~ respectively.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2023

The base management fee is calculated for each share class at an annual rate of (i) for the Non-founder shares of a particular class, 2% of the product of (x) the Company’s average gross assets and (y) the ratio of Non-founder ~~share~~shares Average Adjusted Capital (as defined below), for a particular class to total Average Adjusted Capital and (ii) for the Founder shares of a particular class, 1% of the product of (x) the Company’s average gross assets and (y) the ratio of outstanding Founder ~~share~~shares Average Adjusted Capital for a particular class to total Average Adjusted Capital, in each case excluding cash, and is payable monthly in arrears. The management fee for a certain month is calculated based on the average value of the Company’s gross assets at the end of that month and the immediately preceding calendar month. The determination of gross assets reflects changes in the fair market value of the Company’s assets, which does not necessarily equal their notional value, reflecting both realized and unrealized capital appreciation or depreciation. The base management fee may be reduced or deferred by the Manager and the Sub-Manager under the Management Agreement and the Expense Support and Conditional Reimbursement Agreement described below. For purposes of this calculation, “Average Adjusted Capital” for an applicable class is computed on the daily Adjusted Capital for such class for the actual number of days in such applicable month. “Adjusted Capital” is defined as cumulative proceeds generated from sales of the Company’s shares of a particular share class (including proceeds from the sale of shares pursuant to the distribution reinvestment plan, if any), net of upfront selling commissions and dealer manager fees (“sales load”), if any, reduced for the full amounts paid for share repurchases pursuant to any share repurchase program, if any, and adjusted for share conversions, if any, for such class.

~~Table of Contents~~

~~CNL STRATEGIC CAPITAL, LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2022~~

Total Return Incentive Fee on Income to the Manager and Sub-Manager — The Company also pays each of the Manager and the Sub-Manager 50% of the total return incentive fee for their services under the Management Agreement and the Sub-Management Agreement. The Company recorded total return incentive fees of approximately ~~$3.1~~$3.7 million and ~~$1.4~~$3.1 million during the quarters ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~approximately $7.7~~$8.7 million and ~~$6.3~~$7.7 million during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

The total return incentive fee is based on the Total Return to Shareholders (as defined below) for each share class in any calendar year, payable annually in arrears. The Company accrues (but does not pay) the total return incentive fee on a quarterly basis, to the extent that it is earned, and performs a final reconciliation and makes required payments at completion of each calendar year. The total return incentive fee may be reduced or deferred by the Manager and the Sub-Manager under the Management Agreement and the Expense Support and Conditional Reimbursement Agreement described below. For purposes of this calculation, “Total Return to Shareholders” for any calendar quarter is calculated for each share class as the change in the net asset value for such share class plus total distributions for such share class calculated based on the Average Adjusted Capital for such class as of such calendar quarter end. The terms “Total Return to Non-founder Shareholders” and “Total Return to Founder Shareholders” means the Total Return to Shareholders specifically attributable to each particular share class of Non-founder shares or Founder shares, as applicable.

The total return incentive fee for each share class is calculated as follows:

•No total return incentive fee will be payable in any calendar year in which the annual Total Return to Shareholders of a particular share class does not exceed 7% (the “Annual Preferred Return”).

•As it relates to the Non-founder shares, all of the Total Return to Shareholders with respect to each particular share class of Non-founder shares, if any, that exceeds the annual preferred return, but is less than or equal to 8.75%, or the “Non-founder breakpoint,” in any calendar year, will be payable to the Manager (“Non-founder Catch Up”). The Non-Founder Catch Up is intended to provide an incentive fee of 20% of the Total Return to Non-founder Shareholders of a particular share class once the Total Return to Non-founder Shareholders of a particular class exceeds 8.75% in any calendar year.

•As it relates to Founder shares, all of the Total Return to Founder Shareholders with respect to each particular share class of Founder shares, if any, that exceeds the annual preferred return, but is less than or equal to 7.777%, or the “founder breakpoint,” in any calendar year, will be payable to the Manager (“Founder Catch Up”). The Founder Catch Up is intended to provide an incentive fee of 10% of the Total Return to Founder Shareholders of a particular share class once the Total Return to Founder Shareholders of a particular class exceeds 7.777% in any calendar year.

•For any quarter in which the Total Return to Shareholders of a particular share class exceeds the relevant breakpoint, the total return incentive fee of a particular share class shall equal, for Non-founder shares, 20% of the Total Return to Non-founder Shareholders of a particular class, and for Founder shares, 10% of the Total Return to Founder Shareholders of a particular class, in each case because the annual preferred and relevant catch ups will have been achieved.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2023

•For purposes of calculating the Total Return to Shareholders, the change in the Company’s net asset value is subject to a High Water Mark. The “High Water Mark” is equal to the highest year-end net asset value, for each share class of the Company since inception, adjusted for any special distributions resulting from the sale of the Company’s assets, provided such adjustment is approved by the Company’s board of directors. If, as of each calendar year end, the Company’s net asset value for the applicable share class is (A) above the High Water Mark, then, for such calendar year, the Total Return to Shareholders calculation will include the increase in the Company’s net asset value for such share class in excess of the High Water Mark, and (B) if the Company’s net asset value for the applicable share class is below the High Water Mark, for such calendar year, (i) any increase in the Company’s per share net asset value will be disregarded in the calculation of Total Return to Shareholders for such share class while (ii) any decrease in the Company’s per share net asset value will be included in the calculation of Total Return to Shareholders for such share class. ~~For~~With respect to the calculation of Total Return to Shareholders, the following tables provides the applicable High Water Marks for the years ended December 31, ~~2022~~2023 and ~~2021, the High Water Marks were as follows:~~2022:

For the year ended: Class FA Class A Class T Class D Class I Class S
December 31, 2022 $ 32.62 $ 30.78 $ 30.66 $ 30.35 $ 31.18 $ 32.84
December 31, 2021 29.97 28.76 28.67 28.24 29.06 30.08

~~Table of Contents~~

~~CNL STRATEGIC CAPITAL, LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2022~~


For the year ended:	Class FA		Class A		Class T		Class D		Class I		Class S
December 31, 2023	$	34.90	$	32.45	$	32.46	$	32.11	$	32.88	$	35.39
December 31, 2022	32.62		30.78		30.66		30.35		31.18		32.84

For purposes of this calculation, “Average Adjusted Capital” for an applicable class is computed on the daily Adjusted Capital for such class for the actual number of days in such applicable quarter. The annual preferred return of 7% and the relevant breakpoints of 8.75% and 7.777%, respectively, are also adjusted for the actual number of days in each calendar year, measured as of each calendar quarter end.

Reimbursement to Manager and Sub-Manager for Operating Expenses and Pursuit Costs — The Company reimburses the Manager and the Sub-Manager and their respective affiliates for certain third party operating expenses and pursuit costs incurred in connection with their provision of services to the Company, including fees, costs, expenses, liabilities and obligations relating to the Company’s activities, acquisitions, dispositions, financings and business, subject to the terms of the Company’s limited liability company agreement, the Management Agreement, the Sub-Management Agreement and the Expense Support and Conditional Reimbursement Agreement (as defined below). The Company does not reimburse the Manager and Sub-Manager for administrative services performed by the Manager or Sub-Manager for the benefit of the Company.

Expense Support and Conditional Reimbursement Agreement — The Company entered into an expense support and conditional reimbursement agreement with the Manager and the Sub-Manager, as amended, (the “Expense Support and Conditional Reimbursement Agreement”), which became effective on February 7, 2018, pursuant to which each of the Manager and the Sub-Manager agrees to reduce the payment of base management fees, total return incentive fees and the reimbursements of reimbursable expenses due to the Manager and the Sub-Manager under the Management Agreement and the Sub-Management Agreement, as applicable, to the extent that the Company’s annual regular cash distributions exceed its annual net income (with certain adjustments). The amount of such expense support is equal to the annual (calendar year) excess, if any, of (a) the distributions (as defined in the Expense Support and Conditional Reimbursement Agreement) declared and paid (net of the Company’s distribution reinvestment plan) to shareholders minus (b) the available operating funds, as defined in the Expense Support and Conditional Reimbursement Agreement (the “Expense Support”).

The Expense Support amount is borne equally by the Manager and the Sub-Manager and is calculated as of the last business day of the calendar year. Until the Expense Support and Conditional Reimbursement Agreement is terminated, the Manager and Sub-Manager shall equally conditionally reduce the payment of fees and reimbursements of reimbursable expenses in an amount equal to the conditional waiver amount (as defined in and subject to limitations described in the Expense Support and Conditional Reimbursement Agreement). The term of the Expense Support and Conditional Reimbursement Agreement has the same initial term and renewal terms as the Management Agreement or the Sub-Management Agreement, as applicable, to the Manager or the Sub-Manager. Expense support is paid by the Manager and Sub-Manager annually in arrears.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2023

If, on the last business day of the calendar year, the annual (calendar year) year-to-date available operating funds exceeds the sum of the annual (calendar year) year-to-date distributions paid per share class (the “Excess Operating Funds”), the Company uses such Excess Operating Funds to pay the Manager and the Sub-Manager all or a portion of the outstanding unreimbursed Expense Support amounts for each share class, as applicable, subject to certain conditions (the “Conditional Reimbursements”) as described further in the Expense Support and Conditional Reimbursement Agreement. The Company’s obligation to make Conditional Reimbursements shall automatically terminate and be of no further effect three years following the date which the Expense Support amount was provided and to which such Conditional Reimbursement relates, as described further in the Expense Support and Conditional Reimbursement Agreement.

Since inception, the Company has received cumulative Expense Support of approximately $5.1 million. ~~During~~Of the ~~quarter ended~~Expense Support received as of September 30, ~~2021, the Company recorded Expense Support of~~2023, approximately ~~$(4.5)~~$4.3 million ~~which represented a reversal of expense support accrued through June 30, 2021~~had been reimbursed and ~~Expense Support reimbursement of~~ approximately ~~$1.1 million. The Company reimbursed approximately $1.8~~$0.2 million ~~of Expense Support to the Manager and Sub-Manager~~was no longer eligible for ~~the year ended December 31, 2021.~~reimbursement. As of September 30, ~~2022,~~2023, the remaining amount of Expense Support collected from the Manager and Sub-Manager subject to reimbursement was approximately ~~$3.2 million. The~~$0.6 million, of which the Company ~~recorded~~had accrued reimbursement of ~~Expense Support in the condensed consolidated statements of operations of~~ approximately ~~$0.2~~$0.6 million ~~and $2.5 million during the quarter and nine months ended September 30, 2022, respectively.~~

~~Table of Contents~~

~~CNL STRATEGIC CAPITAL, LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2022~~

The following table summarizes Expense Support received (excluding years for which reimbursement eligibility has expired), Expense Support reimbursed and the remaining Expense Support that may become reimbursable, subject to the conditions of reimbursement defined in the Expense Support and Conditional Reimbursement Agreement, as of September 30, 2022 (in thousands):

For the Year Ended Amount of Expense Support Received
Expense Support Reimbursed(1)
Expense Support Subject to Reimbursement(2)
Reimbursement Eligibility Expiration
December 31, 2019 $ 1,372 $ (970) $ 402 March 31, 2023
December 31, 2020 3,301 (509) 2,792 March 31, 2024
$ 4,673 $ (1,479) $ 3,194

~~FOOTNOTES:~~

~~(1)Represents Expense Support reimbursed to the Manager and Sub-Manager accrued as of December 31, 2021 and paid~~ during the nine months ended September 30, ~~2022, related to Expense Support received for the years ended December 31, 2020 and 2019. The Company also reimbursed $(353) related to Expense Support received for the year ended December 31, 2018.~~

~~(2)~~Represents remaining Expense Support that is subject to reimbursement, which is calculated by share class and subject to limitations as defined in the Expense Support and Conditional Reimbursement Agreement. During the nine months ended September 30, 2022, management accrued reimbursement of expense support of $2,535.2023. Management believes that Expense Support reimbursement payments by the Company to the Manager and Sub-Manager for unreimbursed Expense Support in excess of this accrual amount are not probable under the terms of the Expense Support and Conditional Reimbursement Agreement as of September 30, ~~2022.~~2023.

Distributions

Individuals and entities affiliated with the Manager and Sub-Manager owned approximately 0.4 million ~~and 0.4 million~~ shares as of September 30, ~~2022~~2023 and ~~2021, respectively.~~2022. These individuals and entities received distributions from the Company of approximately $0.1 million ~~and $0.2 million~~ during each of the quarters ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and $0.3 ~~million and $0.5~~ million during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Related party fees and expenses incurred for the quarter and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 are summarized below (in thousands):


						Quarter Ended September 30,						Nine Months Ended September 30,									Quarter Ended September 30,						Nine Months Ended September 30,
Related Party	Related Party			Source Agreement & Description		2022			2021			2022			2021		Related Party		Source Agreement & Description		2023			2022			2023			2022
Managing Dealer	Managing Dealer			Managing Dealer Agreement: Commissions		$	565		$	542		$	1,335		$	1,084	Managing Dealer		Managing Dealer Agreement: Commissions		$	824		$	565		$	2,160		$	1,335
				Dealer manager fees		288			296			689			580				Dealer manager fees		271			288			687			689
				Distribution and shareholder servicing fees		210			104			549			247				Distribution and shareholder servicing fees		310			210			873			549
Manager and Sub-Manager	Manager and Sub-Manager			Management Agreement and Sub-Management Agreement: Organization and offering reimbursement(1)(2)		756			688			2,002			1,741		Manager and Sub-Manager		Management Agreement and Sub-Management Agreement: Offering expense reimbursement(1)(2)		1,071			756			3,022			2,002
				Base management fees(1)		2,425			1,287			6,417			3,277				Base management fees(1)		3,505			2,425			9,342			6,417
				Total return incentive fees(1)		3,090			1,419			7,723			6,289				Total return incentive fees(1)		3,743			3,090			8,710			7,723
Manager and Sub-Manager				Expense Support and Conditional Reimbursement Agreement: Expense Support		—			4,495			—			—

		Manager and Sub-Manager	Manager and Sub-Manager		Reimbursement of Expense Support			183			1,055			2,535			1,055	Manager and Sub-Manager		Expense Support and Condition Reimbursement Agreement: Reimbursement of Expense Support			—			183			644			2,535
				Administrative Services Agreement: Reimbursement of third-party operating expenses(1)		13			41			70			97		Manager		Administrative Services Agreement: Reimbursement of third-party operating expenses(1)		26			13			74			70
				Sub-Management Agreement: Reimbursement of third-party pursuit costs(1)(3)		—			137			339			651		Sub-Manager		Sub-Management Agreement: Reimbursement of third-party pursuit costs(1)(3)		682			—			1,228			339

FOOTNOTES:

(1)Expenses subject to Expense ~~Support.~~Support, if applicable. There was no Expense Support recorded for the nine months ended September 30, 2023 and 2022.

(2)~~Organization reimbursements are expensed on the Company’s condensed consolidated statements of operations as incurred.~~ Offering expense reimbursements are capitalized on the Company’s condensed consolidated statements of assets and liabilities as deferred offering expenses and expensed to the Company’s condensed consolidated statements of operations over the lesser of the offering period or 12 months.

~~Table of Contents~~

~~CNL STRATEGIC CAPITAL, LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2022~~

(3)Includes reimbursement of third-party fees incurred for investments that did not close, including fees and expenses associated with performing due diligence reviews.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2023

The following table presents amounts due to related parties net as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022

Total return incentive fee		$	7,723	$	7,283
Due to related parties:						Due to related parties:
Total return incentive fees						Total return incentive fees	$	(8,710)	$	(11,456)
Reimbursement of Expense Support	Reimbursement of Expense Support	2,535		1,831		Reimbursement of Expense Support	(644)		(2,449)
Base management fees	Base management fees	774		578		Base management fees	(1,157)		(864)
Organization and offering expenses		259		176
Offering expenses						Offering expenses	(230)		(331)
Distribution and shareholder servicing fees	Distribution and shareholder servicing fees	72		53		Distribution and shareholder servicing fees	(102)		(84)
Reimbursement of third-party operating expenses and pursuit costs	Reimbursement of third-party operating expenses and pursuit costs	9		1		Reimbursement of third-party operating expenses and pursuit costs	(2)		(425)
Total due to related parties	Total due to related parties	$	11,372	$	9,922	Total due to related parties	$	(10,845)	$	(15,609)

6. Distributions

The Company’s board of directors declared distributions on a monthly basis in each of the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (nine record dates). ~~Declared~~The Company’s distributions declared prior to December 2022 were paid on a monthly basis one month in arrears. The Company’s distributions declared beginning in December 2022 are paid ~~and reinvested monthly~~ in ~~arrears.~~the same month as the declared record date. The following table reflects the total distributions declared during the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands except per share data):


		Nine Months Ended September 30,													Nine Months Ended September 30,
		2022						2021							2023						2022
Distribution Period	Distribution Period	Distributions Declared(1)		Distributions Reinvested(2)		Cash Distributions Net of Distributions Reinvested (2)		Distributions Declared(1)(2)		Distributions Reinvested (2)		Cash Distributions Net of Distributions Reinvested (2)		Distribution Period	Distributions Declared(1)		Distributions Reinvested(2)		Cash Distributions Net of Distributions Reinvested(2)		Distributions Declared(1)(2)		Distributions Reinvested(2)		Cash Distributions Net of Distributions Reinvested(2)
First Quarter	First Quarter	$	4,928	$	1,630	$	3,298	$	3,290	$	789	$	2,501	First Quarter	$	6,601	$	2,590	$	4,011	$	4,928	$	1,630	$	3,298
Second Quarter	Second Quarter	5,259		1,819		3,440		3,618		972		2,646		Second Quarter	7,195		2,976		4,219		5,259		1,819		3,440
Third Quarter	Third Quarter	5,627		2,036		3,591		4,037		1,224		2,813		Third Quarter	7,865		3,401		4,464		5,627		2,036		3,591

		$	15,814	$	5,485	$	10,329	$	10,945	$	2,985	$	7,960		$	21,661	$	8,967	$	12,694	$	15,814	$	5,485	$	10,329

FOOTNOTES:

(1) The Company’s board of directors declared distributions per share on a monthly basis. See Note 12. “Financial Highlights” for distributions declared by share class. Monthly distributions declared per share for each share class were as follows:


Record Date Period	Record Date Period	Class FA		Class A		Class T		Class D		Class I		Class S		Record Date Period	Class FA		Class A		Class T		Class D		Class I		Class S
January 1, 2023 - September 30, 2023														January 1, 2023 - September 30, 2023	$	0.104167	$	0.104167	$	0.083333	$	0.093750	$	0.104167	$	0.104167
January 1, 2022 - September 30, 2022	January 1, 2022 - September 30, 2022	$	0.104167	$	0.104167	$	0.083333	$	0.093750	$	0.104167	$	0.104167	January 1, 2022 - September 30, 2022	0.104167		0.104167		0.083333		0.093750		0.104167		0.104167
January 1, 2021 - September 30, 2021		0.104167		0.104167		0.083333		0.093750		0.104167		0.104167

(2) Amounts based on distribution record date.

The sources of declared distributions on a GAAP basis were as follows (in thousands):


		Nine Months Ended September 30,									Nine Months Ended September 30,
		2022				2021					2023				2022
		Amount		% of Distributions Declared		Amount		% of Distributions Declared			Amount		% of Distributions Declared		Amount		% of Distributions Declared
Net investment income(1)	Net investment income(1)	$	12,040	76.1	%	$	6,944	63.4	%	Net investment income(1)	$	17,274	79.7	%	$	12,040	76.1	%
Distributions in excess of net investment income(2)	Distributions in excess of net investment income(2)	3,774		23.9		4,001		36.6		Distributions in excess of net investment income(2)	4,387		20.3		3,774		23.9
Total distributions declared	Total distributions declared	$	15,814	100.0	%	$	10,945	100.0	%	Total distributions declared	$	21,661	100.0	%	$	15,814	100.0	%

FOOTNOTES:

(1) Net investment income includes ~~reimbursement of~~ Expense Support reimbursement, net of ~~$2,535~~$644 and ~~$1,055~~$2,535 for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. See Note 5. “Related Party Transactions” for additional information.

(2) Consists of distributions made from offering proceeds for the periods presented.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2022~~2023

In September ~~2022,~~2023, the Company’s board of directors declared a monthly cash distribution on the outstanding shares of all classes of common shares of record on October ~~28, 2022~~26, 2023 of $0.104167 per share for Class FA shares, $0.104167 per share for Class A shares, $0.083333 per share for Class T shares, $0.093750 per share for Class D shares, $0.104167 per share for Class I shares and $0.104167 per share for Class S shares.

7. Capital Transactions

Public Offerings

Under the Follow-On Public ~~Offerings,~~Offering, the Company has offered and continues to offer up to $1.0 billion of shares, on a best efforts basis, which means that CNL Securities Corp., as the Managing Dealer of the Follow-On Public ~~Offerings,~~Offering, uses its best effort but is not required to sell any specific amount of shares. The Company is offering, in any combination, four classes of shares in the Follow-On Public Offering: Class A shares, Class T shares, Class D shares and Class I shares. The initial minimum permitted purchase amount is $5,000 in shares. There are differing selling fees and commissions for each share class. The Company also pays distribution and shareholder servicing fees, subject to certain limits, on the Class T and Class D shares sold in the Public Offerings (excluding sales pursuant to the Company’s distribution reinvestment plan). The public offering price, selling commissions and dealer manager fees per share class are determined monthly as approved by the Company’s board of directors. As of September ~~30, 2022,~~29, 2023, the public offering price was ~~$34.60~~$36.24 per Class A share, ~~$33.18~~$34.80 per Class T share, ~~$31.27~~$32.81 per Class D share and ~~$32.13~~$33.61 per Class I share.

The Company is also offering, in any combination, up to $100.0 million of Class A shares, Class T shares, Class D shares and Class I shares to be issued pursuant to its distribution reinvestment plan.

See Note 13. “Subsequent Events” for additional information related to the Follow-On Public Offering.

The following tables summarize the total shares issued and proceeds received by share class in connection with the Public Offerings, excluding shares repurchased through the Share Repurchase Program described further below, for the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands except per share data):


		Nine Months Ended September 30, 2022																Nine Months Ended September 30, 2023
		Proceeds from Public Offerings							Distributions Reinvested(1)			Total						Proceeds from Public Offerings							Distributions Reinvested			Total
Share Class	Share Class	Shares Issued	Gross Proceeds		Sales Load(2)		Net Proceeds to Company		Shares Issued	Proceeds to Company		Shares Issued	Net Proceeds to Company(3)		Average Net Proceeds per Share		Share Class	Shares Issued	Gross Proceeds		Sales Load(2)		Net Proceeds to Company		Shares Issued	Proceeds to Company		Shares Issued	Net Proceeds to Company		Average Net Proceeds per Share

Class A	Class A	503	$	16,978	$	(1,232)	$	15,746	38	$	1,213	541	$	16,959	$	31.31	Class A	1,989	$	67,210	$	(1,944)	$	65,266	59	$	1,920	2,048	$	67,186	$	32.81
Class T	Class T	531	17,394		(792)		16,602		26	821		557	17,423		31.28		Class T	569	19,526		(903)		18,623		40	1,299		609	19,922		32.74
Class D	Class D	646	20,010		—		20,010		18	576		664	20,586		30.96		Class D	521	16,897		—		16,897		34	1,089		555	17,986		32.45
Class I	Class I	2,493	79,118		—		79,118		86	2,661		2,579	81,779		31.71		Class I	2,945	97,820		—		97,820		139	4,659		3,084	102,479		33.22

		4,173	$	133,500	$	(2,024)	$	131,476	168	$	5,271	4,341	$	136,747	$	31.49		6,024	$	201,453	$	(2,847)	$	198,606	272	$	8,967	6,296	$	207,573	$	32.98


		Nine Months Ended September 30, 2021																Nine Months Ended September 30, 2022
		Proceeds from Public Offerings							Distributions Reinvested(1)			Total						Proceeds from Public Offerings							Distributions Reinvested(1)			Total
Share Class	Share Class	Shares Issued	Gross Proceeds		Sales Load(2)		Net Proceeds to Company		Shares Issued	Proceeds to Company		Shares Issued	Net Proceeds to Company(3)		Average Net Proceeds per Share		Share Class	Shares Issued	Gross Proceeds		Sales Load(2)		Net Proceeds to Company		Shares Issued	Proceeds to Company		Shares Issued	Net Proceeds to Company		Average Net Proceeds per Share

Class A	Class A	310	$	10,087	$	(735)	$	9,352	32	$	965	342	$	10,317	$	30.17	Class A	503	$	16,978	$	(1,232)	$	15,746	38	$	1,213	541	$	16,959	$	31.31
Class T	Class T	644	20,442		(928)		19,514		12	367		656	19,881		30.30		Class T	531	17,394		(792)		16,602		26	821		557	17,423		31.28
Class D	Class D	456	13,691		—		13,691		9	263		465	13,954		30.02		Class D	646	20,010		—		20,010		18	576		664	20,586		30.96
Class I	Class I	2,327	71,122		—		71,122		40	1,202		2,367	72,324		30.55		Class I	2,493	79,118		—		79,118		86	2,661		2,579	81,779		31.71

		3,737	$	115,342	$	(1,663)	$	113,679	93	$	2,797	3,830	$	116,476	$	30.41		4,173	$	133,500	$	(2,024)	$	131,476	168	$	5,271	4,341	$	136,747	$	31.49

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CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2022~~2023

FOOTNOTES:

(1)Amounts are based on distribution reinvestment date. Distributions ~~are~~ declared ~~monthly and~~during the nine months ended September 30, 2022 were paid or reinvested one month in arrears.

(2)The Company incurs selling commissions and dealer manager fees on the sale of Class A and Class T shares sold through the Public Offerings. See Note 5. “Related Party Transactions” for additional information regarding up-front selling commissions and dealer manager fees.

~~(3)Approximately $17.0 million and $16.7 million of net proceeds for shares sold and issued on September 30, 2022 and 2021, respectively, was received in cash in October 2022 and 2021, respectively.~~

Share Repurchase Program

In accordance with the Share Repurchase Program, the total amount of aggregate repurchases of Class FA, Class A, Class T, Class D, Class I and Class S shares is limited to up to 2.5% of the aggregate net asset value per calendar quarter (based on the aggregate net asset value as of the last date of the month immediately prior to the repurchase date) and up to 10% of the aggregate net asset value per year (based on the average aggregate net asset value as of the end of each of the Company’s trailing four quarters). Unless the Company’s board of directors determines otherwise, the Company limits the number of shares to be repurchased during any calendar quarter to the number of shares the Company can repurchase with the proceeds received from the sale of shares under its distribution reinvestment plan in the previous quarter. Notwithstanding the foregoing, atAt the sole discretion of the Company’s board of directors, the Company may ~~also~~ use ~~other~~ sources, including, but not limited to, offering proceeds and borrowings to repurchase shares.

During the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, the Company received requests for the repurchase of approximately ~~$18.2~~$15.6 million and ~~$2.8~~$18.2 million, respectively, of the Company’s common ~~shares which exceeded proceeds from its distribution reinvestment plan in the applicable periods by approximately $13.3 million and $0.6 million, respectively.~~shares. The Company’s board of directors approved the ~~use of other sources to satisfy~~ repurchase ~~requests received in excess of proceeds received from the distribution reinvestment plan.~~requests.

The following table summarizes the shares repurchased during the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands except per share data):


		Shares Repurchased	Total Consideration		Average Price Paid per Share			Shares Repurchased	Total Consideration		Average Price Paid per Share
Class FA	Class FA	296	$	9,829	$	33.24	Class FA	42	$	1,480	$	35.57
Class A	Class A	23	735		31.36		Class A	55	1,811		32.78
Class T	Class T	11	334		31.27		Class T	57	1,844		33.05
Class D	Class D	16	507		31.00		Class D	31	1,003		32.65
Class I	Class I	212	6,746		31.84		Class I	266	8,909		33.33
Class S	Class S	1	28		33.74		Class S	14	534		36.42
Nine Months Ended September 30, 2022		559	$	18,179	$	32.53
Nine Months Ended September 30, 2023							Nine Months Ended September 30, 2023	465	$	15,581	$	33.48


		Shares Repurchased	Total Consideration		Average Price Paid per Share			Shares Repurchased	Total Consideration		Average Price Paid per Share
Class FA	Class FA	18	$	565	$	32.05	Class FA	296	$	9,829	$	33.24
Class A	Class A	18	527		29.88		Class A	23	735		31.36
Class T	Class T	16	493		29.86		Class T	11	334		31.27
Class D	Class D	5	147		29.32		Class D	16	507		31.00
Class I	Class I	34	1,050		30.75		Class I	212	6,746		31.84
Nine Months Ended September 30, 2021		91	$	2,782	$	30.59
Class S							Class S	1	28		33.74
Nine Months Ended September 30, 2022							Nine Months Ended September 30, 2022	559	$	18,179	$	32.53

As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had a payable for shares repurchased of approximately ~~$2.1~~$6.8 million and ~~$0.5~~$2.4 million, respectively, which were paid in October and January ~~2022,~~2023, respectively.

Share Conversions

Class T and Class D shares are converted into Class A shares once the maximum amount of distribution and shareholder servicing fees for those particular shares has been met. The shares to be converted are multiplied by the applicable conversion rate, the numerator of which is the net asset value per share of the share class being converted and the denominator of which is the net asset value per Class A share.

During the nine months ended September 30, 2023, approximately 301,000 Class T shares were converted to approximately 301,000 Class A shares at an average conversion rate of 1.00. During the nine months ended September 30, 2022, approximately 41,000 Class T shares were converted to approximately 40,000 Class A shares at an average conversion rate of 1.00.

~~Table of Contents~~

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2022~~2023

During the nine months ended September 30, 2022, 40,513 Class T shares were converted to 40,441 Class A shares at an average conversion rate of 1.00. There were no share conversions during the nine months ended September 30, 2021.

8. Borrowings

In September 2021, the Company entered into a second amended and restated loan agreement (the “2021 Loan Agreement”) and related promissory note with United Community Bank (d/b/a Seaside Bank and Trust) for a $25.0 million line of credit. The Company did not borrow any amounts under the 2021 Line of Credit and the Company’s ability to request draws under the 2021 Loan Agreement expired in August 2022.

In August 2022, the Company entered into a ~~new~~ loan agreement (the “2022 Loan Agreement”) and related promissory note with First Horizon Bank for a $50.0 million revolving line of credit (the “2022 Line of Credit”). In connection with the 2022 Loan Agreement, the Company iswas required to pay a total commitment fee to First Horizon Bank of $0.25 million, of which $0.13 million was paid during the nine months ended September 30, ~~2022.~~2023. The 2022 Line of Credit iswas available for advances through August 2023 and the Company extended the 2022 Line of Credit through December 2023.

The Company is required to pay a fee to First Horizon with each advance under the 2022 Line of Credit in anthe amount equal to 0.05% of the amount of each borrowing. The Company is also required to pay interest on the borrowed amount at a rate per year equal to the 30-day ~~secured overnight financing rate~~Secured Overnight Financing Rate (“SOFR”) plus 2.75%. Interest payments are due monthly in arrears. Furthermore, the Company is required to pay a quarterly unused line fee when the average outstanding balance of the 2022 Line of Credit is less than $25.0 million. Unused line ~~fee payments~~fees are due quarterly in arrears.

The Company may prepay, without penalty, all or any part of the borrowings under the 2022 Loan Agreement at any time and such borrowings are required to be repaid within 180 days of the borrowing date. Under the 2022 Loan Agreement, the Company is required to comply with certain covenants including the provision of financial statements on a quarterly basis, a restriction from incurring any debt, and restrictions on the transfer and sale of assets held by certain subsidiaries. Additionally, the Company has a covenant related to its fair market value of investments as a multiple of borrowings outstanding.

In connection with the 2022 Loan Agreement, the Company entered into a pledge and security agreement (“Pledge Agreement”) in favor of the lender under the 2022 Line of Credit. Under the Pledge Agreement, the Company is required to contribute proceeds from the Follow-On Public Offering to pay down the outstanding debt to the extent there are any borrowings outstanding under the 2022 Loan Agreement.

The Company had not borrowed any amounts under the 2022 Line of Credit as of September 30, ~~2022.~~2023.

9. Income Taxes

The Company incurs income tax expense (benefit) related to its Taxable Subsidiaries. The components of income tax expense (benefit) were as follows during the quarter and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):

Quarter Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Current tax expense $ 128 $ 985 $ 244 $ 1,125
Deferred tax (benefit) expense (357) 500 226 519
Total income tax expense $ (229) $ 1,485 $ 470 $ 1,644


	Quarter Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Current tax expense	$	—	$	128	$	—	$	244
Deferred tax expense (benefit)	2,088		(357)		4,242		226
Total income tax expense (benefit)	$	2,088	$	(229)	$	4,242	$	470

The effective tax rate for the nine months ended September 30, 2023 and 2022 was 9.2% and ~~2021 was~~ 1.2% ~~and 4.2%~~, respectively. The primary items giving rise to the difference between the 21.0% federal statutory rate applicable to corporations and the effective tax rates are due to state taxes and the benefits of the partnership structure.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2022~~2023

Significant components of the Company’s deferred tax assets and liabilities as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows (in thousands):


		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022
Deferred tax assets:	Deferred tax assets:					Deferred tax assets:
Carryforwards for net operating loss	Carryforwards for net operating loss	$	803	$	533	Carryforwards for net operating loss	$	1,421	$	770
Unrealized depreciation on investments						Unrealized depreciation on investments	627		—
Other	Other	30		18		Other	14		27
Valuation Allowance		(40)		(22)
Valuation allowance						Valuation allowance	(901)		(60)
Total deferred tax assets	Total deferred tax assets	793		529		Total deferred tax assets	1,161		737
Deferred tax liabilities:	Deferred tax liabilities:					Deferred tax liabilities:

Unrealized appreciation on investments	Unrealized appreciation on investments	(2,896)		(2,406)		Unrealized appreciation on investments	(9,650)		(4,984)
Total deferred tax liabilities	Total deferred tax liabilities	(2,896)		(2,406)		Total deferred tax liabilities	(9,650)		(4,984)
Deferred tax liabilities, net	Deferred tax liabilities, net	$	(2,103)	$	(1,877)	Deferred tax liabilities, net	$	(8,489)	$	(4,247)

10. Concentrations of Risk

The Company had ~~one~~two portfolio ~~company (Lawn Doctor)~~companies which met at least one of the significance tests under Rule 10-01(b) of Regulation S-X ~~(the “Significance Tests”)~~ for at least one of the periods presented in the condensed consolidated financial statements.

The portfolio companies are required to make monthly interest payments on their debt, with the debt principal due upon maturity. Failure of any of these portfolio companies to pay contractual interest payments could have a material adverse effect on the Company’s results of operations and cash flows from operations, which would impact its ability to make distributions to shareholders.

11. Commitments & Contingencies

See Note 5. “Related Party Transactions” for information on contingent amounts due to the Manager and Sub-Manager for the reimbursement of ~~organization and~~ offering costs under the Public Offerings and for the reimbursement of Expense Support.

From time to time, the Company and officers or directors of the Company may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its businesses. As of September 30, ~~2022,~~2023, the Company was not involved in any legal proceedings.

In addition, in the normal course of business, the Company enters into contracts with its vendors and others that provide for general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company. However, based on experience, the Company expects that risk of loss to be remote.

~~Table of Contents~~

~~CNL STRATEGIC CAPITAL, LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2022~~

12. Financial Highlights

The following are schedules of financial highlights of the Company attributed to each class of shares for the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands except per share data):

Nine Months Ended September 30, 2022
Class FA
Shares Class A
Shares Class T
Shares Class D
Shares Class I
Shares Class S
Shares
OPERATING PERFORMANCE PER SHARE
Net Asset Value, Beginning of Period $ 32.62 $ 30.78 $ 30.66 $ 30.35 $ 31.18 $ 32.84
Net investment income, before reimbursement of Expense Support(1)
1.26 0.68 0.47 0.54 0.65 1.20
Reimbursement of Expense Support(1)(2)
(0.33) (0.16) — — (0.12) —
Net investment income(1)
0.93 0.52 0.47 0.54 0.53 1.20
Net realized and unrealized gains, net of taxes(1)(3)
1.54 1.56 1.55 1.54 1.58 1.56
Net increase resulting from investment operations 2.47 2.08 2.02 2.08 2.11 2.76
Distributions to shareholders(4)
(0.94) (0.94) (0.75) (0.84) (0.94) (0.94)
Net decrease resulting from distributions to shareholders (0.94) (0.94) (0.75) (0.84) (0.94) (0.94)
Net Asset Value, End of Period $ 34.15 $ 31.92 $ 31.93 $ 31.59 $ 32.35 $ 34.66
Net assets, end of period $ 145,589 $ 64,443 $ 67,539 $ 52,356 $ 251,558 $ 61,183
Average net assets(5)
$ 146,998 $ 52,817 $ 56,318 $ 38,532 $ 204,736 $ 59,389
Shares outstanding, end of period 4,263 2,019 2,115 1,657 7,777 1,765
Distributions declared $ 4,143 $ 1,580 $ 1,349 $ 1,048 $ 6,039 $ 1,655
Total investment return based on net asset value before total return incentive fee(6)
8.52 % 8.33 % 8.14 % 8.34 % 8.32 % 9.48 %
Total investment return based on net asset value after total return incentive fee(6)
7.52 % 6.85 % 6.67 % 6.96 % 6.86 % 8.52 %
RATIOS/SUPPLEMENTAL DATA (not annualized):
Ratios to average net assets:(5)(7)
Total operating expenses before total return incentive fee 1.00 % 2.43 % 3.13 % 3.09 % 2.51 % 1.13 %
Total operating expenses before reimbursement of Expense Support 1.83 % 4.13 % 4.79 % 4.85 % 4.20 % 2.04 %
Total operating expenses after reimbursement of Expense Support 2.81 % 4.65 % 4.79 % 4.85 % 4.60 % 2.04 %
Net investment income before total return incentive fee 3.63 % 3.35 % 3.16 % 3.50 % 3.35 % 4.49 %
Net investment income 2.80 % 1.65 % 1.50 % 1.74 % 1.67 % 3.58 %


	Nine Months Ended September 30, 2023
	Class FA Shares		Class A Shares		Class T Shares		Class D Shares		Class I Shares		Class S Shares
OPERATING PERFORMANCE PER SHARE
Net Asset Value, Beginning of Period	$	34.90	$	32.45	$	32.46	$	32.11	$	32.88	$	35.39
Net investment income, before Expense Support (reimbursement)(1)	1.21		0.58		0.46		0.58		0.65		1.16
Expense Support (reimbursement)(1)(2)	(0.15)		—		—		—		—		—
Net investment income(1)	1.06		0.58		0.46		0.58		0.65		1.16
Net realized and unrealized gains, net of taxes(1)(3)	1.01		1.04		1.01		1.01		1.01		1.01

2830

~~Table of Contents~~

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2022~~2023


		Nine Months Ended September 30, 2021																			Nine Months Ended September 30, 2023
		Class FA Shares			Class A Shares			Class T Shares			Class D Shares			Class I Shares			Class S Shares				Class FA Shares			Class A Shares			Class T Shares			Class D Shares			Class I Shares			Class S Shares
OPERATING PERFORMANCE PER SHARE
Net Asset Value, Beginning of Period		$	29.97		$	28.76		$	28.67		$	28.24		$	29.06		$	30.08
Net investment income before reimbursement of Expense Support(1)		0.97			0.38			0.23			0.37			0.37			0.89
Reimbursement of Expense Support(1)(2)		(0.17)			(0.03)			(0.16)			(0.16)			—			—
Net investment income(1)		0.80			0.35			0.07			0.21			0.37			0.89
Net realized and unrealized gains, net of taxes(1)(3)		2.61			2.63			2.66			2.66			2.69			2.61
Net increase resulting from investment operations	Net increase resulting from investment operations	3.41			2.98			2.73			2.87			3.06			3.50			Net increase resulting from investment operations	2.07			1.62			1.47			1.59			1.66			2.17
Distributions to shareholders(4)	Distributions to shareholders(4)	(0.94)			(0.94)			(0.75)			(0.84)			(0.94)			(0.94)			Distributions to shareholders(4)	(0.94)			(0.94)			(0.75)			(0.84)			(0.94)			(0.94)

Net decrease resulting from distributions to shareholders	Net decrease resulting from distributions to shareholders	(0.94)			(0.94)			(0.75)			(0.84)			(0.94)			(0.94)			Net decrease resulting from distributions to shareholders	(0.94)			(0.94)			(0.75)			(0.84)			(0.94)			(0.94)

Net Asset Value, End of Period	Net Asset Value, End of Period	$	32.44		$	30.80		$	30.65		$	30.27		$	31.18		$	32.64		Net Asset Value, End of Period	$	36.03		$	33.13		$	33.18		$	32.86		$	33.60		$	36.62

Net assets, end of period	Net assets, end of period	$	147,969		$	41,851		$	39,665		$	27,652		$	134,054		$	57,778		Net assets, end of period	$	151,426		$	148,708		$	86,091		$	81,512		$	389,435		$	64,108
Average net assets(5)	Average net assets(5)	$	144,325		$	35,346		$	25,327		$	17,260		$	91,833		$	56,108		Average net assets(5)	$	149,822		$	97,541		$	85,440		$	71,323		$	336,616		$	63,431
Shares outstanding, end of period	Shares outstanding, end of period	4,561			1,359			1,294			914			4,299			1,770			Shares outstanding, end of period	4,202			4,489			2,594			2,481			11,590			1,751
Distributions declared	Distributions declared	$	4,289		$	1,095		$	628		$	487		$	2,786		$	1,660		Distributions declared	$	3,965		$	2,770		$	1,953		$	1,851		$	9,470		$	1,652
Total investment return based on net asset value before total return incentive fee(6)	Total investment return based on net asset value before total return incentive fee(6)	12.76		%	12.72		%	11.08		%	11.80		%	12.38		%	13.10		%	Total investment return based on net asset value before total return incentive fee(6)	6.51		%	5.92		%	5.75		%	6.17		%	6.25		%	6.91		%
Total investment return based on net asset value after total return incentive fee(6)	Total investment return based on net asset value after total return incentive fee(6)	11.33		%	10.48		%	9.61		%	10.29		%	10.65		%	11.77		%	Total investment return based on net asset value after total return incentive fee(6)	5.80		%	5.06		%	4.58		%	5.03		%	5.11		%	6.21		%
RATIOS/SUPPLEMENTAL DATA (not annualized):	RATIOS/SUPPLEMENTAL DATA (not annualized):																			RATIOS/SUPPLEMENTAL DATA (not annualized):
Ratios to average net assets:(5)(7)	Ratios to average net assets:(5)(7)																			Ratios to average net assets:(5)(7)
Total operating expenses before total return incentive fee	Total operating expenses before total return incentive fee	1.15		%	2.37		%	3.94		%	3.54		%	3.12		%	1.37		%	Total operating expenses before total return incentive fee	0.95		%	2.97		%	2.93		%	2.61		%	2.31		%	1.02		%
Total operating expenses before reimbursement of Expense Support		2.35		%	4.78		%	6.04		%	5.74		%	5.47		%	2.60		%
Total operating expenses after reimbursement of Expense Support		2.90		%	4.88		%	6.58		%	6.27		%	5.41		%	2.60		%
Net investment income before total return incentive fee		3.74		%	3.56		%	2.34		%	2.90		%	3.51		%	4.04		%
Total operating expenses before Expense Support (reimbursement)																				Total operating expenses before Expense Support (reimbursement)	1.59		%	4.23		%	4.06		%	3.85		%	3.58		%	1.69		%
Total operating expenses after Expense Support (reimbursement)																				Total operating expenses after Expense Support (reimbursement)	2.00		%	4.23		%	4.06		%	3.85		%	3.59		%	1.69		%
Net investment income before total return incentive fee(8)																				Net investment income before total return incentive fee(8)	3.64		%	3.02		%	2.53		%	3.03		%	3.21		%	3.90		%
Net investment income	Net investment income	2.54		%	1.15		%	0.24		%	0.70		%	1.22		%	2.81		%	Net investment income	3.00		%	1.75		%	1.41		%	1.79		%	1.95		%	3.23		%


	Nine Months Ended September 30, 2022
	Class FA Shares			Class A Shares			Class T Shares			Class D Shares			Class I Shares			Class S Shares
OPERATING PERFORMANCE PER SHARE
Net Asset Value, Beginning of Period	$	32.62		$	30.78		$	30.66		$	30.35		$	31.18		$	32.84
Net investment income before Expense Support (reimbursement)(1)	1.26			0.68			0.47			0.54			0.65			1.20
Expense Support (reimbursement)(1)(2)	(0.33)			(0.16)			—			—			(0.12)			—
Net investment income(1)	0.93			0.52			0.47			0.54			0.53			1.20
Net realized and unrealized gains, net of taxes(1)(3)	1.54			1.56			1.55			1.54			1.58			1.56
Net increase resulting from investment operations	2.47			2.08			2.02			2.08			2.11			2.76
Distributions to shareholders(4)	(0.94)			(0.94)			(0.75)			(0.84)			(0.94)			(0.94)

Net decrease resulting from distributions to shareholders	(0.94)			(0.94)			(0.75)			(0.84)			(0.94)			(0.94)

Net Asset Value, End of Period	$	34.15		$	31.92		$	31.93		$	31.59		$	32.35		$	34.66

Net assets, end of period	$	145,589		$	64,443		$	67,539		$	52,356		$	251,558		$	61,183
Average net assets(5)	$	146,998		$	52,817		$	56,318		$	38,532		$	204,736		$	59,389
Shares outstanding, end of period	4,263			2,019			2,115			1,657			7,777			1,765
Distributions declared	$	4,143		$	1,580		$	1,349		$	1,048		$	6,039		$	1,655
Total investment return based on net asset value before total return incentive fee(6)	8.52		%	8.33		%	8.14		%	8.34		%	8.32		%	9.48		%
Total investment return based on net asset value after total return incentive fee(6)	7.52		%	6.85		%	6.67		%	6.96		%	6.86		%	8.52		%
RATIOS/SUPPLEMENTAL DATA (not annualized):
Ratios to average net assets:(5)(7)
Total operating expenses before total return incentive fee	1.00		%	2.43		%	3.13		%	3.09		%	2.51		%	1.13		%
Total operating expenses before Expense Support (reimbursement)	1.83		%	4.13		%	4.79		%	4.85		%	4.20		%	2.04		%
Total operating expenses after Expense Support (reimbursement)	2.81		%	4.65		%	4.79		%	4.80		%	4.60		%	2.04		%
Net investment income before total return incentive fee(8)	3.63		%	3.35		%	3.16		%	3.50		%	3.35		%	4.49		%
Net investment income	2.80		%	1.65		%	1.50		%	1.74		%	1.67		%	3.58		%

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2023

FOOTNOTES:

(1)The per share amounts presented are based on weighted average shares outstanding.

(2)~~Reimbursement of~~ Expense Support (reimbursement) is accrued throughout the year and is subject to a final calculation as of the last business day of the calendar year.

(3)The amount shown at this caption is the balancing figure derived from the other figures in the schedule. The amount shown at this caption for a share outstanding throughout the period may not agree with the change in the aggregate gains and losses in portfolio investments for the period because of the timing of sales and repurchases of the Company’s shares in relation to fluctuating fair values for the portfolio investments.

(4)The per share data for distributions is the actual amount of distributions paid or payable per common share outstanding during the entire period; distributions per share are rounded to the nearest $0.01.

(5)The computation of average net assets during the period is based on net assets measured at each month end, adjusted for capital contributions or withdrawals during the month.

(6)Total investment return is calculated for each share class as the change in the net asset value for such share class during the period and assuming all distributions are reinvested. Class FA assumes distributions are reinvested in Class A shares and all other share classes assume distributions are reinvested in the same share class, including Class S shares which do not participate in the distribution reinvestment plan. Amounts are not annualized and are not representative of total return as calculated for purposes of the total return incentive fee described in Note 5. “Related Party Transactions.” See footnote (8) below for information regarding the percentage of total incentive fees covered by expense support by share class for all periods presented. Since there is no public market for the Company’s shares, terminal market value per share is assumed to be equal to net asset value per share on the last day of the period presented. The Company’s performance changes over time and currently may be different than that shown above. Past performance is no guarantee of future results. Investment performance is presented without regard to sales load that may be incurred by shareholders in the purchase of the Company’s shares.

(7)Actual results may not be indicative of future results. Additionally, an individual investor’s ratios may vary from the ratios presented for a share class as a whole.

(8)

~~Table~~Amounts represent net investment income before total return incentive fee and related expense support as a percentage of ~~Contents~~average net assets. For the nine months ended September 30, 2023 and 2022, none of the total return incentive fees were covered by Expense Support.

~~CNL STRATEGIC CAPITAL, LLC~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2022~~

13. Subsequent Events

Distributions

In October ~~2022,~~2023, the Company’s board of directors declared a monthly cash distribution on the outstanding shares of all classes of common shares of record on November ~~29, 2022~~27, 2023 of $0.104167 per share for Class FA shares, $0.104167 per share for Class A shares, $0.083333 per share for Class T shares, $0.093750 per share for Class D shares, $0.104167 per share for Class I shares and $0.104167 per share for Class S shares.

Offerings

In October ~~2022,~~2023, the Company’s board of directors approved new per share offering prices for each share class in the Follow-On Public Offering. The new offering prices are effective as of October ~~27, 2022.~~30, 2023. The following table provides the new offering prices and applicable upfront selling commissions and dealer manager fees for each share class available in the Follow-On Public Offering:


		Class A		Class T		Class D		Class I			Class A		Class T		Class D		Class I
Effective October 27, 2022:
Effective October 30, 2023:										Effective October 30, 2023:
Offering Price, Per Share	Offering Price, Per Share	$	34.89	$	33.52	$	31.59	$	32.35	Offering Price, Per Share	$	36.21	$	34.83	$	32.86	$	33.60
Selling Commissions, Per Share	Selling Commissions, Per Share	2.09		1.01		—		—		Selling Commissions, Per Share	2.17		1.04		—		—
Dealer Manager Fees, Per Share	Dealer Manager Fees, Per Share	0.88		0.58		—		—		Dealer Manager Fees, Per Share	0.91		0.61		—		—

Capital Transactions

During the period October 1, ~~2022~~2023 through November ~~10, 2022,~~7, 2023, the Company received additional net proceeds from the Follow-On Public Offering and distribution reinvestment plan of the following (in thousands except per share data):

Proceeds from Follow-On Public Offering Distribution Reinvestment Plan Total
Share Class Shares Gross Proceeds Sales Load Net Proceeds to Company Shares Gross Proceeds Shares Net Proceeds to Company Average Net Proceeds per Share
Class A 42 $ 1,445 $ (101) $ 1,344 9 $ 268 51 $ 1,612 $ 31.90
Class T 112 3,739 (178) 3,561 6 219 118 3,780 31.92
Class D 74 2,339 — 2,339 6 174 80 2,513 31.58
Class I 242 7,838 — 7,838 24 754 266 8,592 32.34
470 $ 15,361 $ (279) $ 15,082 45 $ 1,415 515 $ 16,497 $ 32.08

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2023


	Proceeds from Follow-On Public Offering							Distribution Reinvestment Plan			Total
Share Class	Shares	Gross Proceeds		Sales Load		Net Proceeds to Company		Shares	Gross Proceeds		Shares	Net Proceeds to Company		Average Net Proceeds per Share

Class A	256	$	8,681	$	(209)	$	8,472	10	$	338	266	$	8,810	$	33.12
Class T	53	1,848		(86)		1,762		5	151		58	1,913		32.98
Class D	55	1,794		—		1,794		4	138		59	1,932		32.75
Class I	208	6,997		—		6,997		19	623		227	7,620		33.57

	572	$	19,320	$	(295)	$	19,025	38	$	1,250	610	$	20,275	$	33.24

Investments

In October 2023, the Company acquired, through a wholly-owned subsidiary Sill Strategic Capital EquityCo, LLC, an approximately 99.1% equity ownership interest in WCG Sill Adjusting LLC (“Sill”). The Company’s total investment of $74.4 million in Sill is comprised of a common equity interest investment of approximately $58.5 million and a concurrent debt investment of approximately $15.9 million in the form of senior secured debt.

The Company made an additional equity investment in Resolution Economics, LLC (“Resolution Economics”) of approximately $1.6 million in November 2023. Resolution Economics acquired a division of Biddle Consulting Group, Inc. headquartered in Folsom, CA. The acquired division is a provider of outsourced affirmative action plan services and other compliance related services.

Borrowings

In October 2023, the Company extended the 2022 Line of Credit through December 2023.

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

The following discussion is based on the unaudited condensed consolidated financial statements as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, and for the quarter and nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022. Amounts as of December 31, ~~2021~~2022 included in the unaudited condensed consolidated statements of assets and liabilities have been derived from the audited consolidated financial statements as of that date. This information should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto, as well as the audited consolidated financial statements, notes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (our “Form 10-K”). Capitalized terms used in this Item 2 have the same meaning as in the accompanying unaudited condensed financial statements unless otherwise defined herein.

Statement Regarding Forward-Looking Information

Certain statements in this quarterly report on Form 10-Q for the quarterly period ended September 30, ~~2022~~2023 (this “Quarterly Report”) constitute “forward-looking statements.” Forward-looking statements are statements that do not relate strictly to historical or current facts, but reflect management’s current understandings, intentions, beliefs, plans, expectations, assumptions and/or predictions regarding the future of our business and its performance, the economy and other future conditions and forecasts of future events and circumstances. Forward-looking statements are typically identified by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,” “continues,” “pro forma,” “may,” “will,” “seeks,” “should” and “could,” and words and terms of similar substance, although not all forward-looking statements include these words. The forward-looking statements contained in this Quarterly Report involve risks and uncertainties, including statements as to:

•our future operating results;

•our business prospects and the prospects of our businesses and other assets;

•unanticipated costs, delays and other difficulties in executing our business strategy;

•performance of our businesses and other assets relative to our expectations and the impact on our actual return on invested equity, as well as the cash provided by these assets;

•our contractual arrangements and relationships with third parties;

•actual and potential conflicts of interest with the Manager, the Sub-Manager and their respective affiliates;

•the dependence of our future success on the general economy and its effect on the industries in which we target, including rising interest rates, inflationary pressures, recessionary concerns or global supply chain issues;

•events or circumstances which undermine confidence in the financial markets or otherwise have a broad impact on financial markets, such as the sudden instability or collapse of large depository institutions or other significant corporations, terrorist attacks, natural or man-made disasters, pandemics such as the novel coronavirus (“COVID-19”) pandemic or threatened or actual armed conflicts;

•the use, adequacy and availability of proceeds from our current public offering, financing sources, working capital or borrowed money to finance a portion of our business strategy and to service our outstanding indebtedness;

•the timing of cash flows, if any, from our businesses and other assets;

•the ability of the Manager and the Sub-Manager to locate suitable acquisition opportunities for us and to manage and operate our businesses and other assets;

•the ability of the Manager, the Sub-Manager and their respective affiliates to attract and retain highly talented professionals;

•the ability to operate our business efficiently, manage costs (including general and administrative expenses) effectively and generate cash flow;

•the lack of a public trading market for our shares;

•the ability to make and the amount and timing of anticipated future distributions;

•estimated net asset value per share of our shares;

•the loss of our exemption from the definition of an “investment company” under the Investment Company Act of 1940, as amended (the “Investment Company Act”);

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•fiscal policies or inaction at the U.S. federal government level, which may lead to federal government shutdowns or negative impacts on the U.S economy;

•the degree and nature of our competition; or

•the effect of changes to government regulations, accounting rules or tax legislation.

~~Table of Contents~~

In addition, these forward-looking statements are subject to risks related to the COVID-19 pandemic, many of which are unknown, including the duration of the pandemic, the extent of the adverse health impact on the general population and on our customers, and in particular our personnel, its impact on the economy including record inflationary pressures, increases in interest rates and global supply chain issues, the extent and impact of governmental responses, and the impact of operational changes we or our businesses may implement in response to the pandemic.

Our forward-looking statements are not guarantees of our future performance and shareholders are cautioned not to place undue reliance on any forward-looking statements. While we believe our forward-looking statements are reasonable, such statements are inherently susceptible to uncertainty and changes in circumstances. As with any projection or forecast, forward-looking statements are necessarily dependent on assumptions, data and/or methods that may be incorrect or imprecise, and may not be realized. Our forward-looking statements are based on our current expectations and a variety of risks, uncertainties and other factors, many of which are beyond our ability to control or accurately predict.

Important factors that could cause our actual results to vary materially from those expressed or implied in our forward-looking statements include, but are not limited to, the factors listed and described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Risk Factors” sections of the Company’s documents filed from time to time with the U.S. Securities and Exchange Commission, including, but not limited to, our Form 10-K and this Quarterly Report.

All written and oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by these cautionary statements. Forward-looking statements speak only as of the date on which they are made; we undertake no obligation to, and expressly disclaim any obligation to, update or revise forward-looking statements to reflect new information, changed assumptions, the occurrence of subsequent events, or changes to future operating results over time unless otherwise required by law.

Overview

CNL Strategic Capital, LLC is a limited liability company that primarily seeks to acquire and grow durable, middle-market U.S. businesses. We are externally managed by the Manager, CNL Strategic Capital Management, LLC, an entity that is registered as an investment adviser under the Advisers Act. The Manager is controlled by CNL Financial Group, LLC, a private investment management firm specializing in alternative investment products. We have engaged the Manager under the Management Agreement pursuant to which the Manager is responsible for the overall management of our activities and sub-managed by the Sub-Manager, Levine Leichtman Strategic Capital, LLC, a registered investment adviser, under the Sub-Management Agreement pursuant to which the Sub-Manager is responsible for the day-to-day management of our assets. The Sub-Manager is an affiliate of Levine Leichtman Capital Partners, LLC.

The Manager and the Sub-Manager are collectively responsible for sourcing potential acquisitions and debt financing opportunities, subject to approval by the Manager’s management committee that such opportunity meets our investment objectives and final approval of such opportunity by our board of directors, and monitoring and managing the businesses we acquire and/or finance on an ongoing basis. The Sub-Manager is primarily responsible for analyzing and conducting due diligence on prospective acquisitions and debt financings, as well as the overall structuring of transactions.

Since we commenced operations on February 7, 2018, we have acquired equity and debt investments in 12 middle market U.S. ~~businesses with annual revenues primarily between $15 million and $250 million.~~businesses. Our businesses generally have a track record of stable and predictable operating performance, are highly cash flow generative and have management teams who have a meaningful ownership stake in their respective company. As of September 30, ~~2022,~~2023, we had ~~eight~~nine investments structured as controlling equity interests in combination with debt positions and three investments structured as minority equity interests in combination with debt positions. All of our debt investments were current as of September 30, ~~2022.~~2023.

We were formed as a Delaware limited liability company on August 9, 2016 and we operate and intend to continue to operate our business in a manner that will permit us to avoid registration under the Investment Company Act. We are not a “blank check” company within the meaning of Rule 419 of the Securities Act. We commenced operations on February 7, 2018.

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Our Common Shares Offerings

Public Offerings

On March 7, 2018, we commenced the Initial Public Offering of up to $1.1 billion of shares, which included up to $100.0 million of shares being offered through our distribution reinvestment plan, pursuant to the Initial Registration Statement. On November 1, 2021, we commenced the Follow-On Public Offering of up to $1.1 billion of shares, which includes up to $100.0 million of shares being offered through our distribution reinvestment plan, of our shares, upon which the Initial Registration Statement was deemed terminated.

Through September 30, ~~2022,~~2023, we had received net proceeds from the Public Offerings of approximately ~~$417.7~~$681.7 million, including approximately ~~$12.5~~$24.4 million received through our distribution reinvestment plan. As of September 30, ~~2022,~~2023, the public offering price was ~~$34.60~~$36.24 per Class A share, ~~$33.18~~$34.80 per Class T share, ~~$31.27~~$32.81 per Class D share and ~~$32.13~~$33.61 per Class I share. See Note 7. “Capital Transactions” and Note 13. “Subsequent Events” in Item 1. “Financial Statements” for additional information regarding the Initial Public Offering.

Through September 30, ~~2022,~~2023, we had incurred selling commissions and dealer manager fees of approximately ~~$7.4~~$10.9 million from the sale of Class A shares and Class T shares in the Public Offerings. The Class D shares and Class I shares sold through September 30, ~~2022~~2023 were not subject to selling commissions and dealer manager fees. We also incurred obligations to reimburse the Manager and Sub-Manager for ~~organization and~~ offering costs of approximately ~~$6.2~~$10.0 million based on actual amounts raised through the Public Offerings through September 30, ~~2022.~~2023. These ~~organization and~~ offering costs related to the Public Offerings were advanced by the Manager and Sub-Manager, as described further in Note 5. “Related Party Transactions” of Item 1. “Financial Statements.”

We are currently offering, in any combination, four classes of shares: Class A shares, Class T shares, Class D shares and Class I shares (collectively, “Non-founder shares”) through the Follow-On Public Offering. There are differing selling fees and commissions for each share class. We also pay distribution and shareholder servicing fees, subject to certain limits, on the Class T and Class D shares sold in the Public Offerings (excluding ~~sales~~shares sold pursuant to our distribution reinvestment plan).

In October ~~2022,~~2023, our board of directors approved new per share public offering prices for each share class in the Follow-On Public Offering. The new public offering prices are effective as of October ~~27, 2022.~~30, 2023. The following table provides the new public offering prices and applicable upfront selling commissions and dealer manager fees for each share class available in the Follow-On Public Offering:


		Class A		Class T		Class D		Class I			Class A		Class T		Class D		Class I
Effective October 27, 2022:
Effective October 30, 2023:										Effective October 30, 2023:
Public Offering Price, Per Share	Public Offering Price, Per Share	$	34.89	$	33.52	$	31.59	$	32.35	Public Offering Price, Per Share	$	36.21	$	34.83	$	32.86	$	33.60
Selling Commissions, Per Share	Selling Commissions, Per Share	2.09		1.01		—		—		Selling Commissions, Per Share	2.17		1.04		—		—
Dealer Manager Fees, Per Share	Dealer Manager Fees, Per Share	0.88		0.58		—		—		Dealer Manager Fees, Per Share	0.91		0.61		—		—

Since we commenced operations on February 7, 2018, we have raised total net offering proceeds (including amounts raised from our private offerings and Public Offerings) of approximately ~~$593.1~~$857.1 million, including approximately ~~$12.5~~$24.4 million received through our distribution reinvestment ~~plan.~~plan as of September 30, 2023.

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Portfolio and Investment Activity

As of September 30, ~~2022,~~2023, we had invested in ~~eleven~~12 portfolio companies, consisting of equity investments and debt investments in each portfolio company. The table below presents our portfolio company investments (in millions):


			As of September 30, 2022														As of September 30, 2023
			Equity Investments				Debt Investments(1)										Equity Investments				Debt Investments(1)
Portfolio Company	Portfolio Company	Initial Investment Date	Ownership %		Cost Basis		Senior Secured Debt	Interest Rate		Maturity Date	Cost Basis		Total Cost Basis(2)		Portfolio Company	Initial Investment Date	Ownership %		Cost Basis		Senior Secured Debt	Interest Rate		Maturity Date	Cost Basis		Total Cost Basis(2)
Lawn Doctor															Lawn Doctor	2/7/2018	61	%	$	27.6	Second Lien	16.0	%	7/7/2026	$	15.0	$	42.6
Lawn Doctor	Lawn Doctor	2/7/2018	61	%	$	27.8	Second Lien	16.0	%	7/7/2026	$	15.0	$	42.8	Lawn Doctor	6/30/2023	—		—		First Lien	(3)		2/7/2025	29.5		29.5
Polyform	Polyform	2/7/2018	87		15.6		First Lien	16.0		2/7/2026	15.7		31.3		Polyform	2/7/2018	87		15.6		First Lien	16.0		2/7/2026	15.7		31.3
Roundtables	Roundtables	8/1/2019	81		32.4		Second Lien	16.0		8/1/2025	12.1		44.5		Roundtables	8/1/2019	81		33.5		Second Lien	16.0		8/1/2025	12.1		45.6
Roundtables	Roundtables	11/13/2019	—		—		First Lien	8.0		11/13/2022	2.0		2.0		Roundtables	11/13/2019	—		—		First Lien	8.0		8/1/2024	2.0		2.0
Milton	Milton	11/21/2019	13		6.6		Second Lien	15.0		12/19/2027	3.4		10.0		Milton	11/21/2019	13		6.6		Second Lien	15.0		12/19/2027	3.4		10.0
Resolution Economics	Resolution Economics	1/2/2020	8		7.1		Second Lien	15.0		1/2/2026	2.8		9.9		Resolution Economics	1/2/2020	8		7.1		Second Lien	15.0		1/2/2026	2.8		9.9
Blue Ridge(3)		3/24/2020	16		12.9		Second Lien	15.0		12/28/2028	2.6		15.5
Blue Ridge															Blue Ridge	3/24/2020	16		12.9		Second Lien	15.0		12/28/2028	2.6		15.5
HSH	HSH	7/16/2020	75		17.3		First Lien	15.0		7/16/2027	24.4		41.7		HSH	7/16/2020	75		17.3		First Lien	15.0		7/16/2027	24.4		41.7
ATA(4)		4/1/2021	75		37.1		First Lien	15.0		4/1/2027	37.0		74.1
ATA															ATA	4/1/2021	75		37.1		First Lien	15.0		4/1/2027	37.0		74.1
Douglas	Douglas	10/7/2021	90		35.5		Second Lien	16.0		10/7/2028	15.0		50.5		Douglas	10/7/2021	90		35.5		Second Lien	16.0		10/7/2028	15.0		50.5
Clarion(5)		12/9/2021	98		50.8		First Lien	15.0		12/9/2028	22.5		73.3
Clarion															Clarion	12/9/2021	98		50.8		First Lien	15.0		12/9/2028	22.5		73.3
Vektek	Vektek	5/6/2022	84		56.9		Second Lien	15.0		11/6/2029	24.4		81.3		Vektek	5/6/2022	84		56.9		Second Lien	15.0		11/6/2029	24.4		81.3
Vektek															Vektek	6/30/2023	—		—		First Lien	(3)		5/6/2029	24.9		24.9
TacMed															TacMed	3/24/2023	95		77.0		First Lien	16.0		3/24/2030	29.0		106.0
					$	300.0					$	176.9	$	476.9					$	377.9					$	260.3	$	638.2

FOOTNOTES:

(1) The note purchase agreements contain customary covenants and events of default. As of September 30, ~~2022,~~2023, all of our portfolio companies were in compliance with their respective debt covenants.

(2) See the Schedule of Investments and Note 3. “Investments” of Item 1. “Financial Statements” for additional information related to our investments, including fair values as of September 30, ~~2022.~~2023.

(3) ~~Includes additional $2.9 million equity investment made~~As of September 30, 2023, the senior debt investments in ~~August 2022.~~

~~(4) Includes additional $1.1 million equity investment made in February 2022.~~

~~(5) Includes additional $4.0 million equity investment made in June 2022.~~Lawn Doctor and Vektek accrue interest at a per annum rate of SOFR + 4.60% and SOFR + 4.35%, respectively. SOFR at September 30, 2023 was 5.32%.

The portfolio companies are required to make monthly interest payments on their debt, with the debt principal due upon maturity. Failure of any of these portfolio companies to pay contractual interest payments could have a material adverse effect on our results of operations and cash flows from operations, which would impact our ability to make distributions to shareholders. See our Form 10-K for the year ended December 31, ~~2021~~2022 for additional information regarding our portfolio companies and their related business activities.

We also held investments in U.S. Treasury ~~Bills~~bills with a fair value of approximately ~~$60.1~~$50.0 million as of September 30, ~~2022.~~2023.

Our Portfolio Companies

The below information regarding our portfolio companies contains financial measures utilized by management to evaluate the operating performance and liquidity of our portfolio companies that are not calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Each of these measures, Adjusted EBITDA and Adjusted Free Cash Flow (“FCF”), should not be considered in isolation from or as superior to or as a substitute for net income (loss), income (loss) from operations, net cash provided by (used in) operating activities, or other financial measures determined in accordance with GAAP. We use these non-GAAP financial measures to supplement our GAAP results in order to provide a more complete understanding of the factors and trends affecting our portfolio companies. We present these non-GAAP measures quarterly for our portfolio companies in which we own a controlling equity interest and annually for all of our portfolio companies.

Table of Contents

You are encouraged to evaluate the adjustments to Adjusted EBITDA and Adjusted FCF, including the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA and Adjusted FCF, you should be aware that in the future our portfolio companies may incur expenses that are the same as or similar to some of the adjustments in this presentation. The presentations of Adjusted EBITDA and Adjusted FCF should not be construed as an inference that the future results of our portfolio companies will be unaffected by unusual or non-recurring items.

~~Table of Contents~~

We caution investors that amounts presented in accordance with our definitions of Adjusted EBITDA and Adjusted ~~Free Cash Flow~~FCF may not be comparable to similar measures ~~disclosures~~disclosed by other companies, because not all companies calculate these non-GAAP measures in the same manner. Because of these limitations and additional limitations described below, Adjusted EBITDA and Adjusted FCF should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on the GAAP results and using Adjusted EBITDA and Adjusted FCF only as supplemental measures.

Additionally, we provide our proportionate share of each non-GAAP measure because our ownership percentage of each portfolio company varies. We urge investors to consider our ownership percentage of each portfolio company when evaluating the results of each of our portfolio companies.

Adjusted EBITDA

When evaluating the performance of our portfolio, we monitor Adjusted EBITDA to measure the financial and operational performance of our portfolio companies and their ability to pay contractually obligated debt payments to us. In connection with this evaluation, the Manager and Sub-Manager review monthly portfolio company operating performance versus budgeted expectations and conduct regular operational review calls with the management teams of the portfolio companies.

We present Adjusted EBITDA as a supplemental measure of the performance of our portfolio companies because we believe it assists investors in comparing the performance of such businesses across reporting periods on a consistent basis by excluding items that we do not believe are indicative of their core operating performance.

We define Adjusted EBITDA as net income (loss), plus (i) interest expense, net, and loan cost amortization, (ii) taxes and (iii) depreciation and amortization, as further adjusted for certain other non-recurring items that we do not consider indicative of the ongoing operating performance of our portfolio companies. These further adjustments are itemized below. Our proportionate share of Adjusted EBITDA is calculated based on our equity ownership percentage at period end.

Adjusted EBITDA has limitations as an analytical tool. Some of these limitations are: (i) Adjusted EBITDA does not reflect cash expenditures, or future requirements, for capital expenditures or contractual commitments; (ii) Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; (iii) Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on indebtedness; (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements; (v) Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we do not consider to be indicative of the ongoing operations of our portfolio companies; and (vi) other companies in similar industries as our portfolio companies may calculate Adjusted EBITDA differently, limiting its usefulness as a comparative measure.

Adjusted Free Cash Flow

We monitor Adjusted FCF to measure the liquidity of our portfolio companies. We present Adjusted FCF as a supplemental measure of the performance of our portfolio companies since such measure reflects the cash generated by the operating activities of our portfolio companies and to the extent such cash is not distributed to us, it generally represents cash used by the portfolio companies for the repayment of debt, investing in expansions or acquisitions, reserve requirements or other corporate uses by such portfolio companies, and such uses reduce our potential need to make capital contributions to the portfolio companies for our proportionate share of cash needed for such items. We use Adjusted FCF as a key factor in our planning for, and consideration of, acquisitions, the payment of distributions and share repurchases.

We define Adjusted FCF as cash from operating activities less capital expenditures, net of proceeds from the sale of property and equipment, of our portfolio companies, as further adjusted for certain non-recurring items. These further adjustments are itemized below. Our proportionate share of Adjusted FCF is calculated based on our equity ownership percentage at period end. Adjusted FCF does not represent cash available to our ~~business~~Company except to the extent it is distributed to us, and to the extent actually distributed to us, we may not have control in determining the timing and amount of distributions from our portfolio companies, and therefore, we may not receive such cash.

Table of Contents

Adjusted FCF has limitations as an analytical tool. Some of these limitations are: (i) Adjusted FCF does not account for future contractual commitments; (ii) Adjusted FCF excludes required debt service payments; (iii) Adjusted FCF does not reflect the impact of certain cash charges resulting from matters we do not consider to be indicative of the on-going operations of our portfolio companies; and (iv) other companies in similar industries as our portfolio companies may calculate Adjusted FCF differently, limiting its usefulness as a comparative measure. This non-GAAP measure should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes or as an alternative to operating cash flows presented in accordance with GAAP.

~~Table of Contents~~

Our aggregate proportionate share of Adjusted FCF from our controlled equity investments was approximately ~~$10.7~~$13.9 million and ~~$13.2~~$10.7 million for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. As discussed above, cash not distributed to us is used by our portfolio companies for various reasons, including, but not limited to, repayment of debt, investing in acquisitions and general cash reserves. ~~See below for the calculation of Adjusted FCF for each of our controlled equity investments.~~

Lawn Doctor

As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, Lawn Doctor ~~Inc. (“Lawn Doctor”)~~ had total assets of approximately ~~$101.4~~$100.0 million and ~~$106.2~~$104.3 million, respectively. In October 2022, Lawn Doctor acquired a controlling equity interest in Elite Window Cleaning Inc., a Canadian-based franchisor offering window cleaning, gutter cleaning and power washing services to residential and commercial customers.

The following tables reconcile our proportionate share of Adjusted EBITDA and Adjusted FCF from net income and cash provided by operating activities, respectively, of Lawn Doctor for the quarter and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenues	Revenues	$	8,414	$	7,927	$	29,960	$	27,716	Revenues	$	9,499	$	8,414	$	31,693	$	29,960

Net income (GAAP)	Net income (GAAP)	$	860	$	596	$	2,612	$	2,405	Net income (GAAP)	$	816	$	860	$	1,918	$	2,612
Interest and debt related expenses	Interest and debt related expenses	1,268		1,131		3,614		3,147		Interest and debt related expenses	1,493		1,268		4,550		3,614
Depreciation and amortization	Depreciation and amortization	625		633		1,861		1,880		Depreciation and amortization	659		625		1,955		1,861
Income tax expense	Income tax expense	286		15		841		627		Income tax expense	199		286		677		841
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	3,039	$	2,375	$	8,928	$	8,059	Adjusted EBITDA (non-GAAP)	$	3,167	$	3,039	$	9,100	$	8,928

Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)	Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)	$	1,840	$	1,438	$	5,405	$	4,879	Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)	$	1,917	$	1,840	$	5,509	$	5,405


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023		2022
Cash provided by operating activities (GAAP)	Cash provided by operating activities (GAAP)	$	3,507	$	2,003	Cash provided by operating activities (GAAP)	$	1,009	$	3,507
Capital expenditures(2)	Capital expenditures(2)	(172)		(128)		Capital expenditures(2)	(183)		(172)
Adjusted FCF (non-GAAP)	Adjusted FCF (non-GAAP)	$	3,335	$	1,875	Adjusted FCF (non-GAAP)	$	826	$	3,335

Our Proportionate Share of Adjusted FCF (non-GAAP)(1)	Our Proportionate Share of Adjusted FCF (non-GAAP)(1)	$	2,019	$	1,135	Our Proportionate Share of Adjusted FCF (non-GAAP)(1)	$	500	$	2,019

FOOTNOTES:

(1)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, ~~2022~~2023 and ~~2021,~~2022, we owned approximately 61% of Lawn Doctor.

(2)Capital expenditures relate to the purchase of property, plant and equipment.

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Polyform

As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, Polyform Products, Co. (“Polyform”) had total assets of approximately ~~$37.9~~$34.4 million and ~~$38.9~~$36.8 million, respectively. The following tables reconcile our proportionate share of Adjusted EBITDA and Adjusted FCF from net (loss) income and cash provided by operating activities, respectively, of Polyform for the quarter and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenues	Revenues	$	4,769	$	4,996	$	18,234	$	16,521	Revenues	$	4,236	$	4,769	$	12,355	$	18,234

Net income (GAAP)		$	11	$	82	$	1,346	$	1,377
Net (loss) income (GAAP)										Net (loss) income (GAAP)	$	(222)	$	11	$	(619)	$	1,346
Interest and debt related expenses	Interest and debt related expenses	736		736		2,184		2,184		Interest and debt related expenses	733		736		2,168		2,184
Depreciation and amortization	Depreciation and amortization	458		434		1,370		1,301		Depreciation and amortization	465		458		1,395		1,370
Income tax expense		5		34		539		552
Income tax (benefit) expense										Income tax (benefit) expense	(88)		5		(246)		539
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	1,210	$	1,286	$	5,439	$	5,414	Adjusted EBITDA (non-GAAP)	$	888	$	1,210	$	2,698	$	5,439

Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)	Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)	$	1,054	$	1,120	$	4,739	$	4,717	Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)	$	774	$	1,054	$	2,351	$	4,739


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023		2022
Cash provided by operating activities (GAAP)	Cash provided by operating activities (GAAP)	$	2,842	$	1,418	Cash provided by operating activities (GAAP)	$	1,139	$	2,842
Capital expenditures(2)	Capital expenditures(2)	(290)		(675)		Capital expenditures(2)	(155)		(290)
Adjusted FCF (non-GAAP)	Adjusted FCF (non-GAAP)	$	2,552	$	743	Adjusted FCF (non-GAAP)	$	984	$	2,552

Our Proportionate Share of Adjusted FCF (non-GAAP)(1)	Our Proportionate Share of Adjusted FCF (non-GAAP)(1)	$	2,224	$	647	Our Proportionate Share of Adjusted FCF (non-GAAP)(1)	$	857	$	2,224

FOOTNOTES:

(1)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, ~~2022~~2023 and ~~2021,~~2022, we owned approximately 87% of Polyform.

(2)Capital expenditures relate to the purchase of property, plant and equipment.

Roundtables

As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, Auriemma U.S. Roundtables (“Roundtables”) had total assets of approximately ~~$65.3~~$64.9 million and ~~$64.0~~$62.3 million, respectively. In August 2023, Roundtables acquired insideARM, a U.S.-based company providing services to the third-party debt collection industry.

The following tables reconcile our proportionate share of Adjusted EBITDA and Adjusted FCF from net ~~(loss)~~ income and cash provided by operating activities, respectively, of Roundtables for the quarter and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenues	Revenues	$	3,933	$	3,422	$	11,371	$	9,642	Revenues	$	4,551	$	3,933	$	12,750	$	11,371

Net income (GAAP)	Net income (GAAP)	$	133	$	117	$	496	$	231	Net income (GAAP)	$	330	$	133	$	809	$	496
Interest and debt related expenses	Interest and debt related expenses	662		656		1,951		1,944		Interest and debt related expenses	664		662		1,955		1,951
Depreciation and amortization	Depreciation and amortization	508		487		1,523		1,353		Depreciation and amortization	519		508		1,541		1,523
Income tax expense	Income tax expense	226		27		218		57		Income tax expense	100		226		246		218
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	1,529	$	1,287	$	4,188	$	3,585	Adjusted EBITDA (non-GAAP)	$	1,613	$	1,529	$	4,551	$	4,188

Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)	Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)	$	1,235	$	1,040	$	3,382	$	2,896	Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)	$	1,303	$	1,235	$	3,675	$	3,382

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		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023		2022
Cash provided by operating activities (GAAP)	Cash provided by operating activities (GAAP)	$	4,536	$	4,428	Cash provided by operating activities (GAAP)	$	4,972	$	4,536
Capital expenditures(2)	Capital expenditures(2)	(69)		(48)		Capital expenditures(2)	(42)		(69)
Adjusted FCF (non-GAAP)	Adjusted FCF (non-GAAP)	$	4,467	$	4,380	Adjusted FCF (non-GAAP)	$	4,930	$	4,467

Our Proportionate Share of Adjusted FCF (non-GAAP)(1)	Our Proportionate Share of Adjusted FCF (non-GAAP)(1)	$	3,608	$	3,537	Our Proportionate Share of Adjusted FCF (non-GAAP)(1)	$	3,981	$	3,608

FOOTNOTES:

(1)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, ~~2022~~2023 and ~~2021,~~2022, we owned approximately 81% of Roundtables.

(2)Capital expenditures relate to the purchase of property, plant and equipment.

HSH

As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, Healthcare Safety Holdings, LLC (“HSH”) had total assets of approximately ~~$48.8~~$45.3 million and ~~$53.9~~$48.2 million, respectively. The following tables reconcile our proportionate share of Adjusted EBITDA and Adjusted FCF from net income and cash provided by operating activities, respectively, of HSH for the quarter and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenues	Revenues	$	9,503	$	7,884	$	27,369	$	24,014	Revenues	$	9,176	$	9,503	$	26,869	$	27,369

Net income (GAAP)	Net income (GAAP)	$	693	$	89	$	1,420	$	848	Net income (GAAP)	$	797	$	693	$	2,329	$	1,420
Interest and debt related expenses	Interest and debt related expenses	958		956		2,837		2,834		Interest and debt related expenses	921		958		2,752		2,837
Depreciation and amortization	Depreciation and amortization	891		928		2,748		2,794		Depreciation and amortization	746		891		2,251		2,748
Income tax expense	Income tax expense	297		25		610		239		Income tax expense	309		297		906		610
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	2,839	$	1,998	$	7,615	$	6,715	Adjusted EBITDA (non-GAAP)	$	2,773	$	2,839	$	8,238	$	7,615

Our Proportionate Share of Adjusted EBITDA (non-GAAP)~~(2)~~(1)	Our Proportionate Share of Adjusted EBITDA (non-GAAP)~~(2)~~(1)	$	2,115	$	1,488	$	5,674	$	5,003	Our Proportionate Share of Adjusted EBITDA (non-GAAP)~~(2)~~(1)	$	2,066	$	2,115	$	6,138	$	5,674


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023		2022
Cash provided by operating activities (GAAP)	Cash provided by operating activities (GAAP)	$	613	$	951	Cash provided by operating activities (GAAP)	$	5,059	$	613
Capital expenditures(2)	Capital expenditures(2)	(158)		(128)		Capital expenditures(2)	(71)		(158)
Adjusted FCF (non-GAAP)	Adjusted FCF (non-GAAP)	$	455	$	823	Adjusted FCF (non-GAAP)	$	4,988	$	455

Our Proportionate Share of Adjusted FCF (non-GAAP)(1)	Our Proportionate Share of Adjusted FCF (non-GAAP)(1)	$	339	$	613	Our Proportionate Share of Adjusted FCF (non-GAAP)(1)	$	3,717	$	339

FOOTNOTES:

(1)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, ~~2022~~2023 and ~~2021,~~2022, we owned approximately 75% of HSH.

(2)Capital expenditures relate to the purchase of property, plant and equipment.

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ATA

As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, ATA Holding Company, LLC (“ATA”) had total assets of approximately ~~$97.6~~$90.2 million and ~~$100.5~~$95.6 million, respectively. We acquired our investment in ATA in April 2021. In February 2022, ATA acquired Absolute Title, Inc., which is a title services business providing services to the residential and commercial markets, in Ann Arbor, Michigan.

The following tables reconcile our proportionate share of Adjusted EBITDA and Adjusted FCF from net income (loss) and cash provided by (used in) operating activities, respectively, of ATA for the quarter and nine months ended September 30, ~~2022~~2023 and ~~2021 (in thousands):~~

Quarter Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022
2021(1)
Revenues $ 17,058 $ 20,072 $ 48,430 $ 40,105
Net income (GAAP) $ 2,034 $ 3,147 $ 2,225 $ 7,131
Interest and debt related expenses 1,533 1,533 4,550 3,050
Depreciation and amortization 1,088 1,043 3,267 2,149
Adjusted EBITDA (non-GAAP) $ 4,655 $ 5,723 $ 10,042 $ 12,330
Our Proportionate Share of Adjusted EBITDA (non-GAAP)(2)
$ 3,492 $ 4,292 $ 7,532 $ 9,247

Nine Months Ended
September 30,
2022
2021(1)
Cash provided by operating activities (GAAP) $ 1,497 $ 9,758
Capital expenditures(3)
(156) (114)
Adjusted FCF (non-GAAP) $ 1,341 $ 9,644
Our Proportionate Share of Adjusted FCF (non-GAAP)(2)
$ 1,006 $ 7,233

~~FOOTNOTES:~~

~~(1)Results are for the period from April 1, 2021 (the date we acquired our investment in ATA) to September 30, 2021.~~

~~(2)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, 2022 and 2021, we owned approximately 75% of ATA.~~

~~(3)Capital expenditures relate to the purchase of property, plant and equipment.~~

~~Douglas Machines Corp.~~

As of September 30, 2022 and December 31, 2021, Douglas Machine Corp. (“Douglas”) had total assets of approximately $59.0 million and $59.1 million, respectively. We acquired our investment in Douglas in October 2021. The following tables reconcile our proportionate share of Adjusted EBITDA and Adjusted FCF from net income and cash provided by operating activities, respectively, of Douglas for the quarter and nine months ended September 30, 2022 (in thousands):


										Quarter Ended September 30,				Nine Months Ended September 30,
		Quarter Ended September 30, 2022		Nine Months Ended September 30, 2022	2023			2022		2023		2022
Revenues	Revenues	$	6,443			$	19,889		Revenues	$	13,376	$	17,058	$	36,326	$	48,430

Net (loss) income (GAAP)		$	(87)			$	84
Net income (loss) (GAAP)									Net income (loss) (GAAP)	$	(93)	$	2,034	$	(2,771)	$	2,225
Interest and debt related expenses	Interest and debt related expenses	619				1,853			Interest and debt related expenses	1,501		1,533		4,505		4,550
Depreciation and amortization	Depreciation and amortization	340				1,025			Depreciation and amortization	1,094		1,088		3,285		3,267
Income tax (benefit) expense		(31)				24
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	841			$	2,986		Adjusted EBITDA (non-GAAP)	$	2,502	$	4,655	$	5,019	$	10,042

Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)	Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)	$	758			$	2,694		Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)	$	1,876	$	3,492	$	3,764	$	7,532

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	Nine Months Ended September 30, 2022
~~Cash used in operating activities (GAAP)~~	$	~~(45)~~
~~Capital expenditures(2)~~	~~(549)~~
~~Adjusted FCF (non-GAAP)~~	$	~~(594)~~

~~Our Proportionate Share of Adjusted FCF (non-GAAP)(1)~~	$	~~(536)~~


	Nine Months Ended September 30,
	2023		2022
Cash provided by (used in) operating activities (GAAP)	$	(1,153)	$	1,497
Capital expenditures(2)	(19)		(156)
Adjusted FCF (non-GAAP)	$	(1,172)	$	1,341

Our Proportionate Share of Adjusted FCF (non-GAAP)(1)	$	(879)	$	1,006

FOOTNOTES:

(1)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, 2023 and 2022, we owned approximately 75% of ATA.

(2)Capital expenditures relate to the purchase of property, plant and equipment.

Douglas

As of September 30, 2023 and December 31, 2022, Douglas Machines Corp. (“Douglas”) had total assets of approximately $56.7 million and $59.3 million, respectively. The following tables reconcile our proportionate share of Adjusted EBITDA and Adjusted FCF from net income (loss) and cash provided by (used in) operating activities, respectively, of Douglas for the quarter and nine months ended September 30, 2023 and 2022 (in thousands):


	Quarter Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues	$	5,855	$	6,443	$	23,862	$	19,889

Net income (loss) (GAAP)	$	(715)	$	(87)	$	511	$	84
Interest and debt related expenses	634		619		1,882		1,853
Depreciation and amortization	383		340		1,060		1,025
Income tax expense (benefit)	(4)		(31)		171		24
Adjusted EBITDA (non-GAAP)	$	298	$	841	$	3,624	$	2,986

Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)	$	268	$	758	$	3,269	$	2,694

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	Nine Months Ended September 30,
	2023		2022
Cash provided by (used in) operating activities (GAAP)	$	1,738	$	(45)
Capital expenditures(2)	(711)		(549)
Adjusted FCF (non-GAAP)	$	1,027	$	(594)

Our Proportionate Share of Adjusted FCF (non-GAAP)(1)	$	927	$	(536)

FOOTNOTES:

(1)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, 2023, we owned approximately 90% of Douglas.

(2)Capital expenditures relate to the purchase of property, plant and equipment.

Clarion ~~Safety Systems, LLC~~

As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, Clarion Safety Systems, LLC (“Clarion”) had total assets of approximately ~~$73.3~~$72.2 million and ~~$69.3~~$73.1 million, respectively. We acquired our investment in Clarion in December 2021. In June 2022, Clarion acquired Machine Safety Specialists, which specializes in engineering consulting services, including machine safety audits and risk assessments, machine safeguarding plans, verification and validation services and other work streams that contribute to clients’ compliance with applicable machine safety standards.

The following tables reconcile our proportionate share of Adjusted EBITDA and Adjusted FCF from net income and cash provided by operating activities, respectively, of Clarion for the quarter and nine months ended September 30, 2023 and 2022 (in thousands):


										Quarter Ended September 30,				Nine Months Ended September 30,
		Quarter Ended September 30, 2022		Nine Months Ended September 30, 2022	2023			2022		2023		2022
Revenues	Revenues	$	3,433			$	9,866		Revenues	$	3,280	$	3,433	$	9,868	$	9,866

Net income (GAAP)	Net income (GAAP)	$	318			$	595		Net income (GAAP)	$	149	$	318	$	384	$	595
Interest and debt related expenses	Interest and debt related expenses	863				2,560			Interest and debt related expenses	852		863		2,545		2,560
Depreciation and amortization	Depreciation and amortization	245				732			Depreciation and amortization	247		245		741		732
Income tax (benefit) expense		130				243
Income tax expense									Income tax expense	58		130		150		243
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	1,556			$	4,130		Adjusted EBITDA (non-GAAP)	$	1,306	$	1,556	$	3,820	$	4,130

Our Proportionate Share of Adjusted EBITDA (non-GAAP)(2)	Our Proportionate Share of Adjusted EBITDA (non-GAAP)(2)	$	1,523			$	4,046		Our Proportionate Share of Adjusted EBITDA (non-GAAP)(2)	$	1,279	$	1,523	$	3,742	$	4,046


	Nine Months Ended September 30, 2022
~~Cash provided by operating activities (GAAP)~~	$	~~958~~
~~Capital expenditures(2)~~	~~(64)~~
~~Adjusted FCF (non-GAAP)~~	$	~~894~~

~~Our Proportionate Share of Adjusted FCF (non-GAAP)(1)~~	$	~~876~~


	Nine Months Ended September 30,
	2023		2022
Cash provided by operating activities (GAAP)	$	1,713	$	958
Capital expenditures(1)	(40)		(64)
Adjusted FCF (non-GAAP)	$	1,673	$	894

Our Proportionate Share of Adjusted FCF (non-GAAP)(2)	$	1,639	$	876

FOOTNOTES:

(1)Capital expenditures relate to the purchase of property, plant and equipment.

(2)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, ~~2022,~~2023, we owned approximately 98% of Clarion.

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Vektek ~~Holdings, LLC~~

As of September 30, 2023 and December 31, 2022, Vektek ~~Holdings, LLC (“Vektek”)~~ had total assets of approximately ~~$118.9 million.~~$114.8 million and $116.7 million, respectively. We acquired our investment in Vektek in May 2022. The following tables reconcile our proportionate share of Adjusted EBITDA and Adjusted FCF from net income and cash provided by operating activities, respectively, of Vektek for the quarter and nine months ended September 30, ~~2022 and for the period from May 6, 2022 (the date we acquired our investment in Vektek) to September 30, 2022~~2023 (in thousands):

Quarter Ended
September 30, 2022
May 6, 2022 to
September 30, 2022
Revenues $ 10,067 $ 15,482
Net loss (GAAP) $ 1,474 $ 329
Interest and debt related expenses 1,418 2,236
Depreciation and amortization 303 488
Income tax expense 57 65
Transaction related expenses(1)
— 1,884
Adjusted EBITDA (non-GAAP) $ 3,252 $ 5,002
Our Proportionate Share of Adjusted EBITDA (non-GAAP)(2)
$ 2,722 $ 4,187


	~~May 6, 2022 to~~ ~~September 30, 2022~~
~~Cash provided by operating activities (GAAP)~~	$	~~1,524~~
~~Capital expenditures(3)~~	~~(141)~~
~~Adjusted FCF (non-GAAP)~~	$	~~1,383~~

~~Our Proportionate Share of Adjusted FCF (non-GAAP)(2)~~	$	~~1,158~~


	Quarter Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues	$	9,898	$	10,067	$	29,684	$	15,482

Net income (GAAP)	$	489	$	1,474	$	1,213	$	329
Interest and debt related expenses	1,565		1,418		5,278		2,236
Depreciation and amortization	911		303		2,715		488
Income tax expense	4		57		18		65
Transaction related expenses(1)	—		—		—		1,884
Adjusted EBITDA (non-GAAP)	$	2,969	$	3,252	$	9,224	$	5,002

Our Proportionate Share of Adjusted EBITDA (non-GAAP)(2)	$	2,486	$	2,722	$	7,722	$	4,187


	Nine Months Ended September 30,
	2023		2022
Cash provided by operating activities (GAAP)	$	3,325	$	1,524
Capital expenditures(3)	(935)		(141)
Adjusted FCF (non-GAAP)	$	2,390	$	1,383

Our Proportionate Share of Adjusted FCF (non-GAAP)(2)	$	2,001	$	1,158

FOOTNOTES:

(1)Initial buyer transaction costs paid by Vektek included in the purchase price. Transaction related expenses are non-recurring.

(2)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, ~~2022,~~2023, we owned approximately 84% of Vektek.

(3)Capital expenditures relate to the purchase of property, plant and equipment.

Tacmed

As of September 30, 2023, Tacmed Holdings, LLC (“TacMed”) had total assets of approximately $114.7 million.

The following tables reconcile our proportionate share of Adjusted EBITDA and Adjusted FCF from net income (loss) and cash provided by operating activities, respectively, of TacMed for the period from March 24, 2023 (the date we acquired our investments in TacMed) to September 30, 2023 (in thousands):

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	Quarter Ended September 30, 2023		For the Period Ended March 24, 2023 through September 30, 2023
Revenues	$	10,341	$	19,697

Net income (loss) (GAAP)	$	2	$	(5,878)
Interest and debt related expenses	1,186		2,453
Depreciation and amortization	1,270		2,636
Income tax benefit	(521)		(1,695)
Transaction related expenses(1)	17		1,959
Purchase accounting impact on cost of goods sold(2)	(708)		2,542
Adjusted EBITDA (non-GAAP)	$	1,246	$	2,017

Our Proportionate Share of Adjusted EBITDA (non-GAAP)(3)	$	1,190	$	1,926


	For the Period Ended March 24, 2023 through September 30, 2023
Cash provided by operating activities (GAAP)	$	1,596
Capital expenditures(4)	(382)
Adjusted FCF (non-GAAP)	$	1,214

Our Proportionate Share of Adjusted FCF (non-GAAP)(3)	$	1,159

FOOTNOTES:

(1)Initial buyer transaction costs paid by TacMed included in the purchase price. Transaction related expenses are non-recurring.

(2)Purchase accounting requires inventory to be recorded at fair value as of the purchase date. As inventory is sold, cost of goods sold is higher than the cost to manufacture inventory due to the step up in fair value. Increased cost of goods sold due to purchase accounting is non-recurring.

(3)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, 2023, we owned approximately 95% of TacMed.

(4)Capital expenditures relate to the purchase of property, plant and equipment.

Other Portfolio Companies

As of September 30, ~~2022,~~2023, we held minority equity and debt positions in three portfolio companies. These portfolio companies completed the following add-on acquisitions during the nine months ended September 30, ~~2022:~~2023:

•In ~~January 2022,~~February 2023, Blue Ridge ESOP Associates (“Blue Ridge”) acquired ~~Nicholas~~a majority investment in Workplace Development Inc., which provides innovative ESOP communication, training and ~~Associates which specializes in~~ownership culture services that complement the ~~design and administration of retirement plans. Additionally, in August 2022,~~services Blue Ridge ~~acquired substantially all of the Tax Benefits Plan Services business of Crowe LLP which specializes in ESOP administration as well as retirement plan and consulting services.~~offers its customers.

•In March ~~2022,~~2023, Milton Industries, Inc. (“Milton”) acquired ~~Thunder Technologies~~Steck Manufacturing, which ~~specializes in critical~~expands Milton’s product suite and ~~demanding hose, rubber and expansion joint applications. Additionally, in July 2022, Milton acquired Lock Technology which provides~~end-market reach to offer specialty tools to the automotive, body shop, towing and public safety end ~~market.~~

•~~In October 2022, Resolutions Economics, LLC (“Resolution Economics”) acquired Berkshire Associates which specializes in outsourced affirmative action plan consulting.~~markets.

Factors Impacting Our Operating Results

We expect that the results of our operations will be affected by a number of factors. Many of the factors that will affect our operating results are beyond our control. We will be dependent upon the earnings of and cash flow from the businesses that we acquire to meet our operating and management fee expenses and to make distributions. These earnings and cash flows, net of any minority interests in these businesses, will be available:

•first, to meet our management fees and corporate overhead expenses; and

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•second, to fund business operations and to make distributions to our shareholders.

~~COVID-19~~

~~See Item 1A. “Risk Factors” in Part I and Item 7. “Management’s Discussion~~Table of ~~Analysis of Financial Condition and Results of Operations” in Part II of our~~ ~~Form 10-K~~Contents for the year ended December 31, 2021 for information regarding the risks of COVID-19. The Company and the operations of its portfolio companies have not been materially adversely affected as a result of the COVID-19 pandemic.

Size of assets

If we are unable to raise substantial funds, we will be limited in the number and type of acquisitions we may make. The size of our assets will be a key revenue driver. Generally, as the size of our assets grows, the amount of income we receive will increase. In addition, our assets may grow at an uneven pace as opportunities to acquire assets may be irregularly timed, and the timing and extent of the Manager’s and the Sub-Manager’s success in identifying such opportunities, and our success in making acquisitions, cannot be predicted.

Market conditions

From time to time, the global capital markets may experience periods of disruption and instability, as we have seen and continue to see with the recent public health crises, including the COVID-19 pandemic, natural disasters and geopolitical events, which could materially and adversely impact the broader financial and credit markets and reduce the availability of debt and equity capital. Furthermore, economic growth remains affected by inflationary pressure and supply chain related disruptions and could be slowed or halted by significant external events. Some of our portfolio companies have experienced supply chain related disruptions from time to time. In some instances, strategic decisions to hold more inventory have been made as a result of ongoing supply chain related disruptions. Significant changes or volatility in the capital markets have and may continue to have a negative effect on the valuations of our businesses and other assets. While all of our assets are likely to not be publicly traded, applicable accounting standards require us to assume as part of our valuation process that our assets are sold in a principal market to market participants (even if we plan on holding an asset long term or through its maturity) and impairments of the market values or fair market values of our assets, even if unrealized, must be reflected in our financial statements for the applicable period, which could result in significant reductions to our net asset value for the period. Significant changes in the capital markets may also affect the pace of our activity and the potential for liquidity events involving our assets. Thus, the illiquidity of our assets may make it difficult for us to sell such assets to access capital if required, and as a result, we could realize significantly less than the value at which we have recorded our assets if we were required to sell them for liquidity purposes.

Liquidity and Capital Resources

General

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments, fund and maintain our assets and operations, repay borrowings, make distributions to our shareholders and other general business needs. We will use significant cash to fund acquisitions, make additional investments in our portfolio companies, make distributions to our shareholders and fund our operations. Additionally, to the extent we have available cash we ~~will~~may make investments in short-term U.S. Treasury ~~Bills.~~bills. Our primary sources of cash will generally consist of:

•the net proceeds from the Public Offerings;

•distributions and interest earned from our assets; and

•proceeds from sales of assets and principal repayments from our assets.

We expect we will have sufficient cash from current sources to meet our liquidity needs for the next twelve months. However, we may opt to supplement our equity capital and increase potential returns to our shareholders through the use of prudent levels of borrowings. We may use debt when the available terms and conditions are favorable to long-term investing and well-aligned with our business strategy. In light of the current economic environment, impacted by rising interest rates, record inflationary pressures due to global supply chain issues, a rise in energy prices, and the impact of the recent public health crises, natural disasters and geopolitical events on the global economy, we are closely monitoring overall liquidity levels and changes in the business performance of our portfolio companies to be in a position to enact changes to ensure adequate liquidity going forward.

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While we generally intend to hold our assets for the long term, certain assets may be sold in order to manage our liquidity needs, meet other operating objectives and adapt to market conditions. The timing and impact of future sales of our assets, if any, cannot be predicted with any certainty.

As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we had cash and cash equivalents of approximately ~~$10.6~~$119.1 million and ~~$58.7~~$36.8 million, respectively.

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Sources of Liquidity and Capital Resources

Offerings. We received approximately ~~$114.4~~$198.6 million and ~~$96.9~~$114.4 million in net proceeds during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, from the Public Offerings, which excludes approximately ~~$5.3~~$9.0 million and ~~$2.8~~$5.3 million raised through our distribution reinvestment plan, respectively. As of September 30, ~~2022,~~2023, we had approximately ~~829~~820 million authorized common shares remaining for sale.

~~Operating Activities.~~ We generated operating cash flows (excluding amounts related to investment activity) of approximately $13.5 million and $14.1 million during the nine months ended September 30, 2022 and 2021, respectively. The decrease in operating cash flows (excluding amounts related to investment activity) for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, is primarily attributable to the timing of payments to our Manager and Sub-Manager for total return incentive fees and Expense Support (reimbursement) which are paid annually in arrears and an increase in base management fees driven by an increase in assets. These decreases in operating cash flows were partially offset by an increase in investment income.

Investments. We received a return of capital from portfolio company investments of approximately $0.2 million ~~and $2.8 million~~ during each of the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Additionally, we received proceeds from sales and redemptions of U.S. Treasury ~~Bills~~bills of approximately ~~$45.1~~$813.7 million, of which approximately $755.0 million was reinvested in new U.S. Treasury bills, during the nine months ended September 30, ~~2022. We did not invest in U.S. Treasury Bills during~~2023. During the nine months ended September 30, ~~2021.~~2022, we received proceeds from sales and redemptions of U.S. Treasury bills of approximately $45.1 million which were reinvested in new U.S. Treasury bills.

Borrowings. We did not borrow any amounts during the nine months ended September 30, ~~2022~~2023 or ~~2021.~~2022. See Note 8. “Borrowings” of Item 1. “Financial Statements” for additional information regarding our $50.0 million line of credit.

Uses of Liquidity and Capital Resources

Investments. We used approximately ~~$89.4~~$161.5 million and ~~$73.0~~$89.4 million of cash to purchase portfolio company investments during the nine months ended September 30, 2023 and 2022, respectively.

We received proceeds from sales and ~~2021.~~redemptions of U.S. Treasury bills of approximately $813.7 million, of which approximately $755.0 million was reinvested in new U.S. Treasury bills, during the nine months ended September 30, 2023. Additionally, we used approximately $105.0 million of cash to purchase U.S. Treasury ~~Bills~~bills during the nine months ended September 30, 2022, which includes reinvestment of proceeds from sales and redemptions of U.S. Treasury ~~Bills~~bills described above of approximately $45.1 million. Our U.S. Treasury ~~Bills~~bills held at September 30, 2023 and 2022 matured in October 2023 and 2022 and we reinvested the proceeds from the redemption in ~~additional~~new U.S. Treasury ~~Bills.~~ bills.

Operating Activities. We ~~did not purchase U.S. Treasury Bills~~used operating cash flows (excluding amounts related to investment activity) of approximately $10.4 million and $13.5 million during the nine months ended September 30, ~~2021.~~2023 and 2022, respectively. The decrease in the use of operating cash flows (excluding amounts related to investment activity) for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, is primarily attributable to (i) an increase in annual payments to the Manager and Sub-Manager related to total return incentive fees and reimbursement of Expense Support which are paid annually in arrears and (ii) an increase in base management fees driven by an increase in assets, which was partially offset by (iii) an increase in investment income.

Distributions. We paid distributions to our shareholders of approximately ~~$10.2~~$12.7 million and ~~$7.8~~$10.2 million (which excludes distributions reinvested of approximately ~~$5.3~~$9.0 million and ~~$2.8~~$5.3 million, respectively) during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. See “Distributions Declared” below for additional information.

Share Repurchases. We paid approximately ~~$16.6~~$11.2 million and ~~$4.1~~$16.6 million during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, to repurchase shares in accordance with our Share Repurchase Program.

Deferred Financing Costs. We paid approximately ~~$0.2~~$0.1 million and ~~$0.02~~$0.2 million in deferred financing costs during the nine months ended September 30, ~~2022~~2023 and ~~2021, respectively.~~2022.

Reimbursement of Expense Support. During the nine months ended September 30, 2023 and 2022, we reimbursed the Manager and Sub-Manager approximately $2.4 million and $1.8 million, respectively, for Expense Support received in previous years. The Manager and Sub-Manager have provided approximately ~~$3.2~~$0.6 million of Expense Support that has not been reimbursed and that may become subject to reimbursement in the future, of which ~~the Company~~we had accrued reimbursement of approximately ~~$2.5~~$0.6 million as of September 30, ~~2022.~~2023. Expense Support is received or Expense Support reimbursement is paid annually. As of September 30, ~~2022,~~2023, management believes that reimbursement payments by the Company to the Manager and Sub-Manager for the remaining unreimbursed Expense Support are not probable under the terms of the Expense Support and Conditional Reimbursement Agreement. Our obligation to make Conditional Reimbursements will automatically terminate and be of no further effect three years following the date which the Expense Support amount was provided and to which such Conditional Reimbursement relates, as described further in the Expense Support and Conditional Reimbursement Agreement. See Note 5. “Related Party Transactions” of Item 1. “Financial Statements” for additional information.

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Distributions Declared

The Company’s board of directors declared distributions on a monthly basis during the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (nine record dates)~~, and such~~. The Company’s distributions declared prior to December 2022 were paid on a monthly basis one month in arrears. The Company’s distributions declared beginning in December 2022 are paid ~~monthly~~ in ~~arrears.~~the same month as the declared record date. The following table reflects the total distributions declared during the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands except per share data):


		Nine Months Ended September 30,													Nine Months Ended September 30,
		2022						2021							2023						2022
Distribution Period	Distribution Period	Distributions Declared(1)		Distributions Reinvested(2)		Cash Distributions Net of Distributions Reinvested (2)		Distributions Declared(1)(2)		Distributions Reinvested (2)		Cash Distributions Net of Distributions Reinvested (2)		Distribution Period	Distributions Declared(1)		Distributions Reinvested(2)		Cash Distributions Net of Distributions Reinvested (2)		Distributions Declared(1)(2)		Distributions Reinvested (2)		Cash Distributions Net of Distributions Reinvested (2)
First Quarter	First Quarter	$	4,928	$	1,630	$	3,298	$	3,290	$	789	$	2,501	First Quarter	$	6,601	$	2,590	$	4,011	$	4,928	$	1,630	$	3,298
Second Quarter	Second Quarter	5,259		1,819		3,440		3,618		972		2,646		Second Quarter	7,195		2,976		4,219		5,259		1,819		3,440
Third Quarter	Third Quarter	5,627		2,036		3,591		4,037		1,224		2,813		Third Quarter	7,865		3,401		4,464		5,627		2,036		3,591

		$	15,814	$	5,485	$	10,329	$	10,945	$	2,985	$	7,960		$	21,661	$	8,967	$	12,694	$	15,814	$	5,485	$	10,329

FOOTNOTES:

(1) Monthly distributions declared per share for each share class were as follows:


Record Date Period	Record Date Period	Class FA		Class A		Class T		Class D		Class I		Class S		Record Date Period	Class FA		Class A		Class T		Class D		Class I		Class S
January 1, 2023 – September 30, 2023														January 1, 2023 – September 30, 2023	$	0.104167	$	0.104167	$	0.083333	$	0.093750	$	0.104167	$	0.104167
January 1, 2022 – September 30, 2022	January 1, 2022 – September 30, 2022	$	0.104167	$	0.104167	$	0.083333	$	0.093750	$	0.104167	$	0.104167	January 1, 2022 – September 30, 2022	0.104167		0.104167		0.083333		0.093750		0.104167		0.104167
January 1, 2021 – September 30, 2021		0.104167		0.104167		0.083333		0.093750		0.104167		0.104167

(2) Amounts based on distribution record date.

Cash distributions declared net of distributions reinvested were funded from the following sources noted below (in thousands):


		Nine Months Ended September 30,									Nine Months Ended September 30,
		2022				2021					2023				2022
		Amount		Percentage(1)		Amount		Percentage(1)			Amount		Percentage(1)		Amount		Percentage(1)
Net investment income before Expense Support (reimbursement)	Net investment income before Expense Support (reimbursement)	$	14,575	141.1	%	$	7,999	100.5	%	Net investment income before Expense Support (reimbursement)	$	17,918	141.2	%	$	14,575	141.1	%
Expense Support (reimbursement)	Expense Support (reimbursement)	(2,535)		(24.5)		(1,055)		(13.3)		Expense Support (reimbursement)	(644)		(5.1)		(2,535)		(24.5)
Net investment income	Net investment income	12,040		116.6		6,944		87.2		Net investment income	$	17,274	136.1	%	$	12,040	116.6	%
Cash distributions net of distributions reinvested in excess of net investment income(2)		—		—		1,016		12.8

Cash distributions declared, net of distributions reinvested~~(3)~~(2)	Cash distributions declared, net of distributions reinvested~~(3)~~(2)	$	10,329	100.0	%	$	7,960	100.0	%	Cash distributions declared, net of distributions reinvested~~(3)~~(2)	$	12,694	100.0	%	$	10,329	100.0	%

FOOTNOTES:

(1) Represents percentage of cash distributions declared, net of distribution reinvested for the period presented.

(2) ~~Consists of offering proceeds for the nine months ended September 30, 2021.~~

~~(3)~~ Excludes ~~$5,485~~$8,967 and ~~$2,985~~$5,485 of distributions reinvested pursuant to our distribution reinvestment plan during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Distribution amounts and sources of distributions declared vary among share classes. We calculate each shareholder’s specific distribution amount for the period using record and declaration dates. Distributions are declared on all classes of our shares at the same time. Amounts distributed to each class are allocated among the holders of our shares in such class in proportion to their shares. Distributions on the Non-founder shares may be lower than distributions on Founder shares because we are required to pay higher management and total return incentive fees to the Manager and the Sub-Manager with respect to the Non-founder shares. Additionally, distributions on Class T and Class D shares are lower than distributions on Class FA, Class A, Class I and Class S shares because we are required to pay ongoing distribution and shareholder servicing fees with respect to Class T and Class D shares. There is no assurance that we will pay distributions in any particular amount, if at all.

See Note 6. “Distributions” in Item 1. “Financial Statements” for additional disclosures regarding ~~distributions, including per share amounts declared for each share class and sources of total distributions for the periods presented.~~distributions.

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Distribution Reinvestment Plan

We have adopted a distribution reinvestment plan pursuant to which shareholders who purchase shares in the Public Offerings have their cash distributions automatically reinvested in additional shares having the same class designation as the class of shares to which such distributions are attributable, unless such shareholders elect to receive distributions in cash, are residents of Opt-In States, or are clients of certain participating broker-dealers that do not permit automatic enrollment in our distribution reinvestment plan. Opt-In States include Alabama, Arkansas, Idaho, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Nebraska, New Hampshire, New Jersey, North Carolina, Ohio, Oklahoma, Oregon, Vermont and Washington. Shareholders who are residents of Opt-In States, holders of Class FA shares and clients of certain participating broker-dealers that do not permit automatic enrollment in our distribution reinvestment plan automatically receive their distributions in cash unless they elect to have their cash distributions reinvested in additional shares. Cash distributions paid on Class FA shares are reinvested in additional Class A shares. Class S shares do not participate in the distribution reinvestment plan.

The purchase price for shares purchased under our distribution reinvestment plan is equal to the most recently determined and published net asset value per share of the applicable class of shares. Because the distribution and shareholder servicing fee is calculated based on net asset value, it reduces net asset value and/or distributions with respect to Class T shares and Class D shares, including shares issued under the distribution reinvestment plan with respect to such share classes. To the extent newly issued shares are purchased from us under the distribution reinvestment plan or shareholders elect to reinvest their cash distribution in our shares, we retain and/or receive additional funds for acquisitions and general purposes including the repurchase of shares under the Share Repurchase Program.

We do not pay selling commissions or dealer manager fees on shares sold pursuant to our distribution reinvestment plan. However, the amount of the distribution and shareholder servicing fee payable with respect to Class T or Class D shares, respectively, sold in the Public Offerings is allocated among all Class T or Class D shares, respectively, including those sold under our distribution reinvestment plan and those received as distributions.

Our shareholders will be taxed on their allocable share of income, even if their distributions are reinvested in additional shares of our common shares and even if no distributions are made.

Share Repurchase Program

We adopted the Share Repurchase Program effective March 2019, as amended, pursuant to which we conduct quarterly share repurchases to allow our shareholders to sell all or a portion of their shares (at least 5% of his or her shares) back to us at a price equal to the net asset value per share of the month immediately prior to the repurchase date. The repurchase date is generally the last business day of the month of a calendar quarter end. We are not obligated to repurchase shares under the Share Repurchase Program. If we determine to repurchase shares, the Share Repurchase Program also limits the total amount of aggregate repurchases of Class FA, Class A, Class T, Class D, Class I and Class S shares to up to 2.5% of our aggregate net asset value per calendar quarter (based on the aggregate net asset value as of the last date of the month immediately prior to the repurchase date) and up to 10% of our aggregate net asset value per year (based on the average aggregate net asset value as of the end of each of our trailing four quarters). The Share Repurchase Program also includes certain restrictions on the timing, amount and terms of our repurchases intended to ensure our ability to qualify as a partnership for U.S. federal income tax purposes.

The aggregate amount of funds under the Share Repurchase Program is determined on a quarterly basis at the sole discretion of our board of directors. During any calendar quarter, the total amount of aggregate repurchases is limited to the aggregate proceeds from our distribution reinvestment plan during the previous quarter unless our board of directors determines otherwise. At the sole discretion of our board of directors, we may ~~also~~ use ~~other~~ sources, including, but not limited to, offering proceeds and borrowings to repurchase shares.

To the extent that the number of shares submitted to us for repurchase exceeds the number of shares that we are able to purchase, we will repurchase shares on a pro rata basis, from among the requests for repurchase received by us based upon the total number of shares for which repurchase was requested and the order of priority described in the Share Repurchase Program. We may repurchase shares including fractional shares, computed to three decimal places.

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Under the Share Repurchase Program, our ability to make new acquisitions of businesses or increase the current distribution rate may become limited if, over any two-year period, we experience repurchase demand in excess of capacity. If, during any consecutive two year period, we do not have at least one quarter in which we fully satisfy 100% of properly submitted repurchase requests, we will not make any new acquisitions of businesses (excluding short-term cash management investments under 90 days in duration) and we will use all available investable assets (as defined below) to satisfy repurchase requests (subject to the limitations under the Share Repurchase Program) until all Unfulfilled Repurchase Requests have been satisfied. Additionally, during such time as there remains any Unfulfilled Repurchase Requests outstanding from such period, the Manager and the Sub-Manager will defer their total return incentive fee until all such Unfulfilled Repurchase Requests have been satisfied. “Investable assets” includes net proceeds from new subscription agreements, unrestricted cash, proceeds from marketable securities, proceeds from the distribution reinvestment plan, and net cash flows after any payment, accrual, allocation, or liquidity reserves or other business costs in the normal course of owning, operating or selling our acquired businesses, debt service, repayment of debt, debt financing costs, current or anticipated debt covenants, funding commitments related to our businesses, customary general and administrative expenses, customary organizational and offering costs, asset management and advisory fees, performance or actions under existing contracts, obligations under our organizational documents or those of our subsidiaries, obligations imposed by law, regulations, courts or arbitration, or distributions or establishment of an adequate liquidity reserve as determined by our board of directors.

During the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, we received requests for the repurchase of approximately ~~$18.2~~$15.6 million and ~~$2.8~~$18.2 million, respectively, of our common ~~shares, which exceeded proceeds received from our distribution reinvestment plan in the applicable periods by approximately $13.3 million and $0.6 million, respectively.~~shares. Our board of directors approved the ~~use of other sources to satisfy~~ repurchase requests ~~received in excess of proceeds received from the distribution reinvestment plan.~~received.

The following ~~table~~tables summarizes the shares repurchased during the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands except per share data):


		Shares Repurchased	Total Consideration		Average Price Paid per Share			Shares Repurchased	Total Consideration		Average Price Paid per Share
Class FA shares	Class FA shares	296	$	9,829	$	33.24	Class FA shares	42	$	1,480	$	35.57
Class A shares	Class A shares	23	735		31.36		Class A shares	55	1,811		32.78
Class T shares	Class T shares	11	334		31.27		Class T shares	57	1,844		33.05
Class D shares	Class D shares	16	507		31.00		Class D shares	31	1,003		32.65
Class I shares	Class I shares	212	6,746		31.84		Class I shares	266	8,909		33.33
Class S shares	Class S shares	1	28		33.74		Class S shares	14	534		36.42
Nine Months Ended September 30, 2022		559	$	18,179	$	32.53
Nine Months Ended September 30, 2023							Nine Months Ended September 30, 2023	465	$	15,581	$	33.48

Class FA shares	Class FA shares	18	$	565	$	32.05	Class FA shares	296	$	9,829	$	33.24
Class A shares	Class A shares	18	527		29.88		Class A shares	23	735		31.36
Class T shares	Class T shares	16	493		29.86		Class T shares	11	334		31.27
Class D shares	Class D shares	5	147		29.32		Class D shares	16	507		31.00
Class I shares	Class I shares	34	1,050		30.75		Class I shares	212	6,746		31.84
Nine Months Ended September 30, 2021		91	$	2,782	$	30.59
Class S shares							Class S shares	1	28		33.74
Nine Months Ended September 30, 2022							Nine Months Ended September 30, 2022	559	$	18,179	$	32.53

Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto.

Through September 30, ~~2022,~~2023, we had acquired equity and debt investments in ~~eleven~~12 portfolio companies. As of September 30, ~~2022~~2023 and ~~2021,~~2022, the fair value of our portfolio company investments ~~portfolio~~ totaled approximately ~~$572.9~~$779.0 million and ~~$332.2~~$572.9 million, respectively. Additionally, as of September 30, 2023 and 2022, we had invested in U.S. Treasury ~~Bills~~bills with a fair value of $50.0 million and $60.1 ~~million. We did not have any investments in U.S. Treasury Bills as of September 30, 2021.~~million, respectively. See “Portfolio and Investment Activity” above for discussion of the general terms and characteristics of our ~~assets,~~investments, and for information regarding our portfolio companies.

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The following table summarizes our operating results for the quarter and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Total investment income	Total investment income	$	12,213	$	12,867	$	34,063	$	23,153	Total investment income	$	15,921	$	12,213	$	43,745	$	34,063
Total operating expenses	Total operating expenses	(7,293)		(4,221)		(19,244)		(14,029)		Total operating expenses	(10,159)		(7,293)		(25,827)		(19,244)
Expense support (reimbursement)		(183)		(5,550)		(2,535)		(1,055)
Expense support (reimbursement), net										Expense support (reimbursement), net	—		(183)		(644)		(2,535)
Net investment income before taxes	Net investment income before taxes	4,737		3,096		12,284		8,069		Net investment income before taxes	5,762		4,737		17,274		12,284
Income tax expense	Income tax expense	(128)		(985)		(244)		(1,125)		Income tax expense	—		(128)		—		(244)
Net investment income	Net investment income	4,609		2,111		12,040		6,944		Net investment income	5,762		4,609		17,274		12,040

Net change in unrealized appreciation on investments		10,864		1,545		27,565		30,313
Total net realized gain on investments										Total net realized gain on investments	—		—		4		—
Total net change in unrealized appreciation on investments										Total net change in unrealized appreciation on investments	11,966		10,864		24,572		27,565
Net increase in net assets resulting from operations	Net increase in net assets resulting from operations	$	15,473	$	3,656	$	39,605	$	37,257	Net increase in net assets resulting from operations	$	17,728	$	15,473	$	41,850	$	39,605

Investment Income

Investment income consisted of the following for the quarter and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
From portfolio company investments:	From portfolio company investments:									From portfolio company investments:
Interest income	Interest income	$	6,895	$	4,483	$	19,189	$	11,917	Interest income	$	9,436	$	6,895	$	24,277	$	19,189
Dividend income	Dividend income	5,167		8,362		14,710		11,141		Dividend income	5,017		5,167		15,624		14,710
From U.S. treasury bills and cash accounts:
Interest income		151		22		164		95
From U.S. Treasury bills and cash accounts										From U.S. Treasury bills and cash accounts
Interest and dividend income										Interest and dividend income	1,468		151		3,844		164
Total investment income	Total investment income	$	12,213	$	12,867	$	34,063	$	23,153	Total investment income	$	15,921	$	12,213	$	43,745	$	34,063

Interest income from portfolio company investments is generated from our senior secured note investments, ~~all~~the majority of which had fixed rate interest as of September 30, ~~2022~~2023 and ~~2021.~~2022. As of September 30, ~~2022~~2023 and ~~2021,~~2022, our weighted average annual yield on our accruing debt investments was ~~15.2%~~14.2% and ~~15.3%~~15.2%, respectively, based on amortized cost as defined above in “Portfolio and Investment Activity.” Interest income from our debt investments was approximately $9.4 million and $6.9 million during the quarters ended September 30, 2023 and 2022, respectively, and approximately $24.3 million and $19.2 million during the nine months ended September 30, 2023 and 2022, respectively. The increase in interest income from portfolio company investments during the quarter and nine months ended September 30, ~~2022,~~2023, as compared to the quarter and nine months ended September 30, ~~2021,~~2022, is primarily attributable to additional debt investments made during the ~~twelve~~nine months ended September 30, ~~2022~~2023 of approximately ~~$61.9~~$83.5 million.

Dividend income from portfolio company investments is recorded on the record date for privately issued securities, but excludes any portion of distributions that are treated as a return of capital. ~~During~~Dividend income was approximately $5.0 million and $5.2 million for the ~~nine months~~quarters ended September 30, 2023 and 2022, ~~we received dividend income from eight of our majority-owned portfolio companies, as compared to dividend income from four of our majority-owned portfolio companies~~respectively, and approximately $15.6 million and $14.7 million during the nine months ended September 30, ~~2021.~~2023 and 2022, respectively. During each of the nine months ended September 30, 2023 and 2022, we received dividend income from nine and eight of our portfolio companies, respectively.

Our total investment income for the nine months ended September 30, ~~2022,~~2023, resulted in annualized cash yields ranging from ~~2.6%~~4.3% to ~~15.5%~~19.8% based on our investment cost, as compared to ~~3.2%~~2.6% to ~~17.8%~~15.5% for the nine months ended September 30, ~~2021.~~2022.

We began investing in U.S. Treasury bills in the third quarter of 2022 to earn a higher rate of interest on our available cash. During the nine months ended September 30, 2023, our effective yield on U.S. Treasury bills ranged from 3.4% to 5.0%. During the nine months ended September 30, 2022, our effective yield on U.S. Treasury bills ranged from 2.0% to 2.3%.

We do not believe that our interest income, dividend income and total investment income are representative of either our stabilized performance or our future performance. We expect investment income to increase in future periods as we increase our base of assets that we expect to acquire from existing cash, borrowings and an expected increase in capital available for investment using proceeds from the Public Offerings.

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Operating Expenses

Our operating expenses for the quarter and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 were as follows (in thousands):


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Total return incentive fees	Total return incentive fees	$	3,090	$	1,419	$	7,723	$	6,289	Total return incentive fees	$	3,743	$	3,090	$	8,710	$	7,723
Base management fees	Base management fees	2,425		1,287		6,417		3,277		Base management fees	3,505		2,425		9,342		6,417
Organization and offering expenses		756		688		2,002		1,802
Offering expenses										Offering expenses	1,071		756		3,022		2,002
Professional services	Professional services	383		367		1,261		1,140		Professional services	490		383		1,501		1,261
Pursuit costs	Pursuit costs	147		137		486		651		Pursuit costs	682		147		1,228		486
Distribution and shareholder servicing fees	Distribution and shareholder servicing fees	210		104		549		247		Distribution and shareholder servicing fees	310		210		873		549
Custodian and accounting fees	Custodian and accounting fees	66		59		272		174		Custodian and accounting fees	142		66		420		272
Insurance expense	Insurance expense	56		60		172		173		Insurance expense	51		56		157		172
Director fees and expenses	Director fees and expenses	52		50		154		152		Director fees and expenses	50		52		151		154
General and administrative expenses	General and administrative expenses	108		50		208		124		General and administrative expenses	115		108		423		208

Total operating expenses	Total operating expenses	7,293		4,221		19,244		14,029		Total operating expenses	10,159		7,293		25,827		19,244
Expense support		—		4,495		—		—

Reimbursement of expense support	Reimbursement of expense support	183		1,055		2,535		1,055		Reimbursement of expense support	—		183		644		2,535
Net expenses	Net expenses	$	7,476	$	9,771	$	21,779	$	15,084	Net expenses	$	10,159	$	7,476	$	26,471	$	21,779

We consider the following expense categories to be relatively fixed in the near term: insurance expenses and director fees and expenses. Variable operating expenses include total return incentive fees, base management fees, ~~organization and~~ offering expenses, professional services, distribution and shareholder servicing fees, custodian and accounting fees, general and administrative expenses, and pursuit costs. We expect these variable operating expenses to increase in connection with the growth in our asset base (base management fees, total return incentive fees, accounting fees and general and administrative expenses), the number of shareholders and open accounts (professional services, distribution and shareholder servicing fees and custodian and accounting fees), and/or the complexity of our investment processes and capital structure (professional services).

Total Return Incentive Fee

The Manager and Sub-Manager are eligible to receive incentive fees based on the Total Return to Shareholders, as defined in the Management Agreement and Sub-Management Agreement, for each share class in any calendar year, payable annually in arrears. We accrue (but do not pay) the total return incentive fee on a quarterly basis, to the extent that it is earned, and perform a final reconciliation at completion of each calendar year. The total return incentive fee is due and payable to the Manager and Sub-Manager no later than ninety (90) calendar days following the end of the applicable calendar year. The total return incentive fee may be reduced or deferred by the Manager and the Sub-Manager under the Management Agreement and the Expense Support and Conditional Reimbursement Agreement.

We recorded total return incentive fees of approximately ~~$3.1~~$3.7 million and ~~$1.4~~$3.1 million during the quarters ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and approximately ~~$7.7~~$8.7 million and ~~$6.3~~$7.7 million during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The increase in total return incentive fees during the nine months ended September 30, ~~2022,~~2023, as compared to the nine months ended September 30, ~~2021,~~2022, is primarily due to an increase in net investment income ~~offset partially by a decrease~~and an increase in the net change in unrealized appreciation on investments.

Base Management Fee

Our base management fee is calculated for each share class at an annual rate of (i) for the Non-founder shares, 2% of the product of (x) our average gross assets and (y) the ratio of Non-founder share Average Adjusted Capital for a particular class to total Average Adjusted Capital and (ii) for the Founder shares, 1% of the product of (x) our average gross assets and (y) the ratio of outstanding Founder share Average Adjusted Capital to total Average Adjusted Capital, in each case excluding cash, and is payable monthly in arrears.

We incurred base management fees of approximately ~~$2.4~~$3.5 million and ~~$1.3~~$2.4 million during the quarters ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and approximately ~~$6.4~~$9.3 million and ~~$3.3~~$6.4 million during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The increase in base management fees is primarily attributable to the increase in our average gross assets (excluding cash and U.S. Treasury ~~Bills)~~bills) which were approximately ~~$513.5~~$702.1 million and ~~$295.3~~$513.5 million during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

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~~Organization and~~ Offering Expenses

~~Organization expenses are expensed on our condensed consolidated statements of operations as incurred.~~ Offering expenses, which consist of amounts incurred for items such as legal, accounting, regulatory and printing work incurred related to the Public Offerings, are capitalized on our condensed consolidated statements of assets and liabilities as deferred offering expenses and expensed to our condensed consolidated statements of operations over the lesser of the offering period or 12 months; however, the end of the deferral period will not exceed 12 months from the date the offering expense is incurred by the Manager and the Sub-Manager.

We expensed ~~organization and~~ offering expenses of approximately $1.1 million and $0.8 million ~~and $0.7 million~~ during ~~each of~~ the quarters ended September 30, 2023 and 2022, ~~and 2021~~respectively, and approximately ~~$2.0~~$3.0 million and ~~$1.8~~$2.0 million during the nine months ended September 30, 2023 and 2022, respectively. The increase is due to an increase in offering proceeds during the quarter and ~~2021, respectively.~~nine months ended September 30, 2023.

Pursuit Costs

Pursuit costs relate to transactional expenses incurred to identify, evaluate and negotiate acquisitions that ultimately were not consummated. We incurred pursuit costs of approximately $0.7 million and $0.1 million during ~~each of~~ the quarters ended September 30, 2023 and 2022, ~~and 2021,~~respectively, and approximately $1.2 million and $0.5 million ~~and $0.7 million~~ during each of the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Distribution and Shareholder Servicing Fee

The Managing Dealer is eligible to receive a distribution and shareholder servicing fee, subject to certain limits, with respect to our Class T and Class D shares sold in the Public Offerings (excluding Class T shares and Class D shares sold through our distribution reinvestment plan and those received as share distributions) in an amount equal to 1.00% and 0.50%, respectively, of the current net asset value per share.

We incurred distribution and shareholder servicing fees of approximately ~~$0.2~~$0.3 million and ~~$0.1~~$0.2 million during the quarters ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and approximately ~~$0.5~~$0.9 million and ~~$0.2~~$0.5 million during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The increase in distribution and shareholder servicing fees during the quarter and nine months ended September 30, ~~2022,~~2023, is attributable to an increase in Class T and Class D ~~shareholders.~~shares outstanding.

Other Operating Expenses

Other operating expenses (consisting of professional services, insurance expense, custodian and accounting fees, director fees and expenses, and general and administrative expenses) were approximately ~~$0.7~~$0.8 million and ~~$0.6~~$0.7 million during the quarters ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and approximately ~~$2.1~~$2.7 million and ~~$1.8~~$2.1 million during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The increase in other operating expenses during the quarter and nine months ended September 30, ~~2022~~2023 is primarily attributable to an increase in accounting, legal, tax and valuation professional services resulting from an increase in the number of shareholders and investments, as compared to the quarter and nine months ended September 30, ~~2021.~~2022.

Expense Support ~~and Conditional Reimbursement Agreement~~(Reimbursement)

We have entered into an Expense Support and Conditional Reimbursement Agreement with the Manager and the Sub-Manager, pursuant to which each of the Manager and the Sub-Manager agrees to reduce the payment of base management fees, total return incentive fees and the reimbursements of reimbursable expenses due to the Manager and the Sub-Manager under the Management Agreement and the Sub-Management Agreement, as applicable, to the extent that our annual regular cash distributions exceed our annual net income (with certain adjustments). Expense Support is equal to the annual (calendar year) excess, if any, of (a) the distributions (as defined in the Expense Support and Conditional Reimbursement Agreement) declared and paid (net of our distribution reinvestment plan) to shareholders minus (b) the available operating funds (the “Expense Support”). The Expense Support amount is borne equally by the Manager and the Sub-Manager and is calculated as of the last business day of the calendar year. The Manager and Sub-Manager equally conditionally reduce the payment of fees and reimbursements of reimbursable expenses in an amount equal to the conditional waiver amount (as defined in and subject to limitations described in the Expense Support and Conditional Reimbursement Agreement). The term of the Expense Support and Conditional Reimbursement Agreement has the same initial term and renewal terms as the Management Agreement or the Sub-Management Agreement, as applicable to the Manager or the Sub-Manager.

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If, on the last business day of the calendar year, the annual (calendar year) year-to-date available operating funds exceeds the sum of the annual (calendar year) year-to-date distributions paid per share class (the “Excess Operating Funds”), we will use such Excess Operating Funds to pay the Manager and the Sub-Manager all or a portion of the outstanding unreimbursed Expense Support amounts for each share class, as applicable, subject to the Conditional Reimbursements as described further in the Expense Support and Conditional Reimbursement Agreement. Our obligation to make Conditional Reimbursements shall automatically terminate and be of no further effect three years following the date which the Expense Support amount was provided and to which such Conditional Reimbursement relates, as described further in the Expense Support and Conditional Reimbursement Agreement.

Since inception, we have received cumulative Expense Support of approximately $5.1 million. During the quarter and nine months ended September 30, ~~2021,~~2022, we recorded ~~Expense Support of approximately $(4.5) million which represented a reversal of expense support accrued through June 30, 2021 and~~ reimbursement of Expense Support of approximately ~~$1.1~~$0.2 million and $2.5 million. We reimbursed approximately $2.4 million and $1.8 million of Expense Support to the Manager and Sub-Manager for the ~~year~~years ended December 31, ~~2021.~~2022 and 2021, respectively. As of September 30, ~~2022,~~2023, the remaining amount of Expense Support to be collected from the Manager and Sub-Manager subject to reimbursement was approximately ~~$3.2~~$0.6 million. We recorded reimbursement of Expense Support in the condensed consolidated statements of operations of approximately ~~$0.2 million~~$0.0 and ~~$2.5~~$0.6 million during the quarter and nine months ended September 30, ~~2022,~~2023, respectively. The actual amount of Expense Support or Expense Support Reimbursement is determined as of the last business day of each calendar year and is paid within 90 days after each year end per the terms of the Expense Support and Conditional Reimbursement Agreement described above. See Note 5. “Related Party Transactions” of Item 1. “Financial Statements” for additional information.

Other Expenses and Changes in Net Assets

Income Tax Expense

We incur income tax expense to the extent we have or expect to have taxable income or loss for the current period related to our Taxable Subsidiaries. We recorded current income tax ~~expense~~benefit of approximately ~~$0.1 million~~$0 and ~~$1.0~~$0.1 million during the quarters ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and approximately ~~$0.2 million~~$0 and ~~$1.1~~$0.2 million during the nine months ended September 30, 2023 and 2022, ~~and 2021, respectively, which primarily relates to our controlling equity interest in ATA acquired in April 2021.~~respectively.

Net Change in Unrealized Appreciation on Portfolio Company Investments

Unrealized appreciation on portfolio company investments is based on the current fair value of our investments as determined by our board of directors based on inputs from the Sub-Manager and our independent valuation firm and consistent with our valuation policy, which take into consideration, among other factors, actual results of our portfolio companies in comparison to budgeted results for the year, future growth prospects, and the valuations of publicly traded and private comparable companies as determined by our independent valuation firm.

During the quarter and nine months ended September 30, 2023, we recognized a net change in unrealized appreciation on our portfolio company investments of approximately $14.1 million and $28.8 million, respectively. The net change in unrealized appreciation on portfolio company investments included gross unrealized appreciation on eight portfolio companies of approximately $45.6 million, offset partially by gross unrealized depreciation on three portfolio companies of approximately $16.8 million during the nine months ended September 30, 2023. One portfolio company investment has remained flat. Gross unrealized appreciation was primarily due to EBITDA growth and accretive add-on acquisitions. Gross unrealized depreciation was primarily driven by EBITDA declines.

During the quarter and nine months ended September 30, 2022, we recognized a net change in unrealized appreciation on portfolio company investments of approximately $10.5 million and $27.8 million, respectively. The net change in unrealized appreciation on portfolio company investments included gross unrealized appreciation on nine portfolio companies of approximately $31.3 million, offset partially by gross unrealized depreciation on one portfolio company of approximately $3.5 million during the nine months ended September 30, 2022. Gross unrealized appreciation was primarily due to EBITDA growth and accretive add-on ~~acquisitions and EBITDA growth.~~acquisitions. Gross unrealized depreciation was primarily driven by EBITDA declines.

During the quarter and nine months ended September 30, 2021, we recognized a net change in unrealized appreciation on portfolio company investments of approximately $2.0 million and $30.8 million, respectively. The net change in unrealized appreciation on portfolio company investments was driven by gross unrealized appreciation on eight portfolio companies during the nine months ended September 30, 2021, primarily due to EBITDA growth of our portfolio companies and changes in public market multiples. EBITDA growth was partially attributable to accretive add-on acquisitions made by our portfolio companies.

Additionally, we recorded adeferred income tax benefit ~~(provision) for deferred taxes on investments~~(expense) of approximately ~~$0.4~~$(2.1) million and ~~$(0.5)~~$0.4 million during the quarters ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$(0.2)~~approximately $(4.2) million and ~~$(0.5)~~$(0.2) million during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, primarily related to changes in net unrealized appreciation (depreciation) on portfolio company investments held by our Taxable Subsidiaries. ~~As of September 30, 2022, three of our equity investments were held in Taxable Subsidiaries, as compared to one equity investment held in Taxable Subsidiaries as of September 30, 2021.~~

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Net Assets

During the quarter and nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, the net increase in net assets consisted of the following (in thousands):


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Operations	Operations	$	15,473	$	3,656	$	39,605	$	37,257	Operations	$	17,728	$	15,473	$	41,850	$	39,605
Distributions to shareholders	Distributions to shareholders	(5,627)		(4,037)		(15,814)		(10,945)		Distributions to shareholders	(7,865)		(5,627)		(21,661)		(15,814)
Capital transactions	Capital transactions	49,378		45,282		118,568		113,694		Capital transactions	66,913		49,378		191,992		118,568
Net increase in net assets	Net increase in net assets	$	59,224	$	44,901	$	142,359	$	140,006	Net increase in net assets	$	76,776	$	59,224	$	212,181	$	142,359

Operations increased by approximately ~~$11.8 million and~~ $2.3 million during the quarter ~~and nine months~~ ended September 30, ~~2022,~~2023, as compared to the quarter ~~and nine months~~ ended September 30, ~~2021, respectively.~~2022. The increase in operations for the quarter ended September 30, ~~2022,~~2023, as compared to the quarter ended September 30, ~~2021,~~2022, is primarily due to an increase in net investment income of approximately ~~$2.5~~$1.2 million and an increase in the net change in unrealized appreciation on investments of approximately ~~$9.3~~$1.1 million. ~~The increase in operations~~Operations remained consistent for ~~the~~ nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, is primarily due to an increase in net investment income of approximately $5.1 million, offset partially by a decrease in the net change in unrealized appreciation on investments of approximately $2.8 million.2023 and 2022.

Distributions increased approximately ~~$1.6~~$2.2 million and ~~$4.9~~$5.8 million during the quarter and nine months ended September 30, ~~2022,~~2023, as compared to the quarter and nine months ended September 30, ~~2021,~~2022, primarily as a result of an increase in shares outstanding.

Capital transactions increased by approximately ~~$4.1~~$17.5 million and ~~$4.9~~$73.4 million during the quarter and nine months ended September 30, ~~2022,~~2023, as compared to the quarter and nine months ended September 30, ~~2021, respectively.~~2022. The increase in capital transactions for the quarter and nine months ended September 30, ~~2022,~~2023, as compared to the quarter and nine months ended September 30, ~~2021,~~2022, is primarily due to an increase in net proceeds received through the Follow-On Public Offering (including proceeds received through our distribution reinvestment plan) of approximately ~~$5.5~~$22.2 million and ~~$20.3~~$70.8 million ~~respectively, offset partially by an increase~~and a decrease in share repurchases of approximately ~~$1.4~~$4.6 million and ~~$15.4~~$2.6 million, respectively.

Total Returns

The following table illustrates year-to-date (“YTD”), trailing 12 months (“One Year”), trailing 36 months (“Three Year”), Average Annual Return (“AAR”), trailing 60 months (“Five Year”), Average Annual Return (“AAR”) and cumulative total returns with and without upfront selling commissions and dealer manager fees (“sales load”), as applicable. All total returns with sales load assume full upfront selling commissions and dealer manager fees. Total returns are calculated for each share class as the change in the net asset value for such share class during the period and assuming all distributions are reinvested. Class FA assumes distributions are reinvested in Class A shares and all other share classes assume distributions are reinvested in the same share class. Management believes total return is a useful measure of the overall investment performance of our shares.


		Year-To-Date Total Return		One Year Total Return(1)		Three Year Total Return(2)		AAR Since Inception(3)		Cumulative Total Return(3)		Cumulative Total Return Period(3)		YTD Total Return		One Year Total Return(1)		Three Year Total Return(2)		Five Year Total Return(3)		AAR Since Inception(4)		Cumulative Total Return(4)		Cumulative Total Return Period(4)
Class FA (no sales load)	Class FA (no sales load)	7.5	%	9.1	%	40.4	%	14.0	%	65.2	%	February 7, 2018 - September 30, 2022	Class FA (no sales load)	5.8	%	9.0	%	38.2	%	66.4	%	14.2	%	80.1	%	Feb. 7, 2018 - Sep. 30, 2023
Class FA (with sales load)	Class FA (with sales load)	0.5	%	2.0	%	31.3	%	11.7	%	54.5	%	February 7, 2018 - September 30, 2022	Class FA (with sales load)	(1.1)	%	1.9	%	29.2	%	55.6	%	12.1	%	68.4	%	Feb. 7, 2018 - Sep. 30, 2023
Class A (no sales load)	Class A (no sales load)	6.8	%	7.9	%	35.8	%	12.5	%	55.8	%	April 10, 2018 - September 30, 2022	Class A (no sales load)	5.1	%	7.8	%	33.9	%	56.2	%	12.4	%	68.1	%	Apr. 10, 2018 - Sep. 30, 2023
Class A (with sales load)	Class A (with sales load)	(2.2)	%	(1.3)	%	24.2	%	9.5	%	42.6	%	April 10, 2018 - September 30, 2022	Class A (with sales load)	(3.9)	%	(1.3)	%	22.5	%	42.9	%	9.8	%	53.8	%	Apr. 10, 2018 - Sep. 30, 2023
Class I	Class I	6.9	%	7.9	%	36.3	%	12.9	%	57.5	%	April 10, 2018 - September 30, 2022	Class I	5.1	%	7.9	%	34.3	%	57.7	%	12.8	%	69.9	%	Apr. 10, 2018 - Sep. 30, 2023
Class T (no sales load)	Class T (no sales load)	6.7	%	7.6	%	31.9	%	11.0	%	48.1	%	May 25, 2018 - September 30, 2022	Class T (no sales load)	4.6	%	7.2	%	31.1	%	49.4	%	11.0	%	58.7	%	May 25, 2018 - Sep. 30, 2023
Class T (with sales load)	Class T (with sales load)	1.6	%	2.5	%	25.6	%	9.4	%	41.0	%	May 25, 2018 - September 30, 2022	Class T (with sales load)	(0.4)	%	2.1	%	24.9	%	42.3	%	9.6	%	51.1	%	May 25, 2018 - Sep. 30, 2023
Class D	Class D	7.0	%	8.2	%	34.4	%	11.4	%	48.5	%	June 26, 2018 - September 30, 2022	Class D	5.0	%	7.7	%	33.7	%	52.5	%	11.4	%	60.0	%	June 26, 2018 - Sep. 30, 2023
Class S (no sales load)	Class S (no sales load)	8.5	%	10.2	%	N/A		15.6	%	39.0	%	March 31, 2020 - September 30, 2022	Class S (no sales load)	6.2	%	9.4	%	41.0	%	N/A		14.9	%	52.1	%	Mar. 31, 2020 - Sep. 30, 2023
Class S (with sales load)	Class S (with sales load)	4.7	%	6.4	%	N/A		13.6	%	34.1	%	March 31, 2020 - September 30, 2022	Class S (with sales load)	2.5	%	5.6	%	36.0	%	N/A		13.4	%	46.7	%	Mar. 31, 2020 - Sep. 30, 2023

FOOTNOTES:

(1) For the period from October 1, ~~2021~~2022 to September 30, ~~2022.~~2023.

(2) For the period from October 1, ~~2019~~2020 to September 30, ~~2022.~~2023.

(3) For the period from October 1, 2018 to September 30, 2023.

(4) For the period from the date the first share was issued for each respective share class to September 30, ~~2022.~~2023. The AAR since inception is calculated by taking the Cumulative Total Return and dividing it by the cumulative total return period.

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We are not aware of any material trends or uncertainties, favorable or unfavorable, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from our investments, other than those described above and the risk factors identified in Item 1A in Part I of our Form 10-K for the year ended December 31, ~~2021~~2022 and this Quarterly Report, including the negative impacts from recent public health crises, including the ~~continued spread of COVID-19.~~COVID-19 pandemic and variants thereof, natural disasters and geopolitical events.

Our shares are illiquid investments for which there currently is no secondary market. Investors should not expect to be able to resell their shares regardless of how we perform. If investors are able to sell their shares, they will likely receive less than their purchase price. Our net asset value and total returns — which are based in part upon determinations of fair value of Level 3 investments by our board of directors, not active market quotations — are inherently uncertain. Past performance is not a guarantee of future results. Current performance may be higher or lower than the performance data ~~quoted.~~reported above.

Hedging Activities

As of September 30, ~~2022,~~2023, we had not entered into any derivatives or other financial instruments. With respect to any potential financings, general increases in interest rates over time may cause the interest expense associated with our borrowings to increase, and the value of our debt investments to decline. We may seek to stabilize our financing costs as well as any potential decline in our assets by entering into derivatives, swaps or other financial products in an attempt to hedge our interest rate risk. In the event we pursue any assets outside of the United States we may have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar. We may in the future, enter into derivatives or other financial instruments in an attempt to hedge any such foreign currency exchange risk. It is difficult to predict the impact hedging activities may have on our results of operations.

~~Inflation~~

Inflation may affect the fair value of our investments or affect the performance of our portfolio companies. As inflation increases, the fair value of our portfolio companies could decline. Rising inflation has impacted labor rates and input costs at some of our portfolio companies, which may impact margins. We anticipate further cost increases in 2022. Some of our portfolio companies have implemented or will be implementing price increases to minimize the impact on inflationary costs increases on their margins. However, any increases in price may not be sufficient to cover increases in expenses of our portfolio companies. Margin reductions could impact the cash our portfolio companies have available for distributions, which may reduce our dividend income.

Seasonality

We do not anticipate that seasonality will have a significant effect on our results of operations.

Critical Accounting Policies and Use of Estimates

See our Form 10-K for the year ended December 31, ~~2021~~2022 and Note 2. “Significant Accounting Policies” of Part I of this Quarterly Report for a summary of our critical accounting policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We anticipate that our primary market risks will be related to the credit quality of our counterparties, market interest rates and changes in exchange rates. We will seek to manage these risks while, at the same time, seeking to provide an opportunity to shareholders to realize attractive returns through ownership of our shares. Many of these risks have been magnified due to the continuing uncertainties caused by the recent public health crises, including the COVID-19 pandemic, natural disaster and geopolitical events; however, while we continue to monitor the pandemic, its impact on such risks remains uncertain and difficult to predict.

Credit Risk

We expect to encounter credit risk relating to (i) the businesses and other assets we acquire and (ii) our ability to access the debt markets on favorable terms. We will seek to mitigate this risk by deploying a comprehensive review and asset selection process, including scenario analysis, and careful ongoing monitoring of our acquired businesses and other assets as well as mitigation of negative credit effects through back up planning. Nevertheless, unanticipated credit losses could occur, which could adversely impact our operating results.

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Changes in Market Interest Rates

We are subject to financial market risks, including changes in interest rates. Our debt investments are currently structured with fixed interest rates. Returns on investments that carry fixed rates are not subject to fluctuations in payments we receive from our borrowers, and will not adjust should rates move up or down. However, the fair value of our debt investments may be negatively impacted by rising interest rates. We may also invest in floating interest rate debt investments in the future.

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We had not borrowed any money as of September 30, ~~2022.~~2023. However, to the extent that we borrow money to make investments, our net investment income will be dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds. In periods of rising interest rates, our cost of funds may increase, which may reduce our net investment income. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.

Exchange Rate Sensitivity

At September 30, ~~2022,~~2023, we were not exposed to any foreign currency exchange rate risks that could have a material effect on our financial condition or results of operations. Although we do not have any foreign operations, some of the portfolio companies we invest in conduct business in foreign jurisdictions and therefore our investments have an indirect exposure to risks associated with changes in foreign exchange rates.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures are effective at the reasonable assurance level as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed by us in the reports we filed under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the relevant SEC rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the most recent fiscal quarter, there were no changes in internal control over financial reporting (as defined under Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we and individuals employed by us may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our businesses. In addition, our business and the businesses of the Manager, the Sub-Manager and the Managing Dealer are subject to extensive regulation, which may result in regulatory proceedings. Legal proceedings, lawsuits, claims and regulatory proceedings are subject to many uncertainties and their ultimate outcomes are not predictable with assurance.

As of September 30, ~~2022,~~2023, we were not involved in any legal proceedings. Additionally, there is no action, suit or proceeding pending before any court, or, to our knowledge, threatened by any regulatory agency or other third party, against the Manager, the Sub-Manager or the Managing Dealer that would have a material adverse effect on us.

Item 1A. Risk Factors

We have disclosed under the heading “Risk Factors” in our Form 10-K for the year ended December 31, ~~2021,~~2022, risk factors which materially affect our business, financial condition or results of operations. ~~The following risk factor replaces the similar risk factor included in our Form 10-K.~~ You should carefully consider the risk factors set forth in our Form 10-K. You should be aware that these risk factors and other information may not describe every risk facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

~~Our success is dependent on general economic, political and market conditions.~~

Our portfolio companies and the success of our investment activities in particular are affected by global and national economic, political and market conditions generally and also by the local economic conditions where our portfolio companies are located and operate. These factors may affect the businesses our portfolio companies operate, which could impair the profitability or result in losses. In addition, general fluctuations in the market prices of securities and interest rates may affect our investment opportunities and the value of our investments.

Based on expected moderate, but improved, future economic growth, and historically low levels of interest rates, the valuations and pricing of durable/high-quality private companies continued to increase in the last couple years. Nevertheless, the ongoing competition for high quality private companies may reduce anticipated returns in the future. Furthermore, economic growth remains affected by inflationary pressure, rising interest rates, recessionary concerns and supply chain related disruptions and could be slowed or halted by significant external events. For example, in response to recent inflationary pressure, the U.S. Federal Reserve and other global central banks have raised interest rates in 2022 and have indicated likely further interest rate increases. A negative shock to the economy could result in reduced valuations and multiples for the acquisitions. There can be no assurance that our investments will not be adversely affected by a severe slowing of the economy or renewed recession. Fluctuations in interest rates, inflationary pressure, supply chain issues, changes in labor and material costs, and limited availability of capital and other economic conditions beyond our control could negatively affect our portfolio and decrease the value of our investments.

~~Any of the following events could result in substantial impact to our portfolio companies and to the value of our investments in these portfolio companies:~~

•~~changes in global, national, regional or local economic, demographic or capital market conditions;~~

•~~a recession, slowdown or sustained downturn in the U.S. market, and to a lesser extent, the global economy (or any particular segment thereof);~~

•~~overall weakening of, or disruptions in, the financial markets;~~

•~~future adverse acquisitions trends, including increasing multiplies and pricing of private companies, declining yield on investments;~~

•~~future adverse valuation trends, including the compression of the multiples used for valuations;~~

•~~changes in supply of or demand for products/services offered by our portfolio companies;~~

•~~increased competition for businesses/portfolio companies targeted by our investment strategy;~~

•~~increases in interest rates and inflationary pressures on labor rates and input costs, which may impact the margins of our portfolio companies;~~

•any supply chain related disruptions exacerbated by the ongoing COVID-19 pandemic and changes in labor and material costs which may have a pronounced impact on the profitability of our portfolio companies;

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•geopolitical challenges and uncertainties (including wars and other forms of conflict, terrorist acts and security operations), such as the escalating conflict between Russia, Belarus and Ukraine and the severe economic sanctions and export controls imposed by the U.S. and other governments against Russia, Belarus and Russian and Belarusian interests; and

•~~changes in government rules, regulations and fiscal policies, including increases in taxes, changes in zoning laws and increasing costs to comply with environmental laws.~~

~~All of these factors are beyond our control. Any negative changes in these factors could affect our performance and our ability to meet our obligations and make distributions to stockholders.~~

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

~~Use of Proceeds~~

We are currently offering and selling shares under the Follow-On Public Offering pursuant to the Follow-On Registration Statement initially filed with the SEC on February 19, 2021, as amended from time to time. As permitted under applicable securities laws, we continued to offer our common shares in the Initial Public Offering until November 1, 2021 (the effective date of the Follow-On Registration Statement), upon which the Initial Registration Statement was deemed terminated. We intend to offer our common shares in the Follow-On Public Offering until November 2023, unless extended by our board of directors.

Through CNL Securities Corp., the Managing Dealer for the Follow-On Public Offering, we are offering to the public on a best efforts basis up to $1.0 billion shares consisting of Class A shares, Class T shares, Class D shares and Class I shares. We are also offering up to $100.0 million shares to be issued pursuant to our distribution reinvestment plan. The shares being offered can be reallocated among the different classes and between the primary Follow-On Public Offering and the distribution reinvestment plan.

~~The following table presents the net offering proceeds received from the Public Offerings through September 30, 2022 (in thousands):~~

Total
Payments to
Affiliates(1)
Payments to Others
Aggregate price of offering amount registered(2)
$ 1,000,000
Shares sold(3)
13,603
Aggregate amount sold(3)
$ 412,620
Payment of underwriting compensation(4)
(7,353) $ (7,353) $ —
Net offering proceeds to the issuer 405,267
Investments in portfolio companies(5)
(305,690) — (305,690)
Distributions to shareholders(6)
(11,710) (3) (11,707)
Remaining proceeds from the Offering $ 87,867

~~FOOTNOTES:~~

(1) Represents direct or indirect payments to our directors or officers, the Manager, the Sub-Manager and their respective affiliates; to persons owning 10% or more of any class of our shares; and to our affiliates.

(2) We also offered up to $100.0 million of shares to be issued pursuant to our distribution reinvestment plan. The shares offered were permitted to be reallocated among the different classes and between the Public Offerings and the distribution reinvestment plan.

~~(3)~~Excludes approximately $12.5 million (0.4 million shares) issued pursuant to our distribution reinvestment plan, approximately $0.2 million (8,000 shares) of unregistered shares issued to the Manager and the Sub-Manager in a private transaction exempt from the registration requirements pursuant to section 4(a)(2) of the Securities Act, approximately $81.5 million (3.3 million shares) of unregistered Class FA shares sold in our private offering of up to $85 million of Class FA shares and up to $115 million of Class A shares (the “2018 Private Offering”), approximately $43.5 million (1.6 million shares) of unregistered Class FA shares sold in our separate private offerings of up to $50 million each of Class FA shares (the “Class FA Private Offering” and the “Follow-on Class FA Private Offering,” respectively) in 2019, and approximately $52.4 million (1.8 million shares) of unregistered Class S shares sold in our private offering of up to $50 million of Class S shares (the “Class S Private Offering”) in 2020.

~~(4)~~Underwriting compensation includes selling commissions and dealer manager fees paid to the Managing Dealer on shares sold in the Public Offerings; all or a portion of which were permitted to be reallowed to participating broker-dealers. Excludes selling commissions and placement agent fees paid to the Managing Dealer for shares sold in the Follow-On Class FA Private Offering and Class S Private Offering.

~~(5) Excludes approximately $173.9 million funded using proceeds from the 2018 Private Offering, Class FA Private Offering, Follow-On Class FA Private Offering and Class S Private Offering.~~

~~(6)~~Until such time as we have sufficient operating cash flows from our assets, we will pay cash distributions, debt service and/or operating expenses from net proceeds of the Public Offerings. The amounts presented above represent the net proceeds used for such purposes.

~~Table of Contents~~

Repurchase of Shares ~~and Issuer Purchases of Equity Securities~~

In March 2019, our board of directors approved and adopted a share repurchase program, as amended (the “Share Repurchase Program”). The total amount of aggregate repurchases of Class FA, Class A, Class T, Class D, Class I and Class S shares will be limited to up to 2.5% of the aggregate net asset value per calendar quarter (based on the aggregate net asset value as of the last date of the month immediately prior to the repurchase date) and up to 10% of the aggregate net asset value per year (based on the average aggregate net asset value as of the end of each of the Company’s trailing four quarters). Unless our board of directors determines otherwise, we will limit the number of shares to be repurchased during any calendar quarter to the number of shares we can repurchase with the proceeds received from the sale of shares under our distribution reinvestment plan in the previous quarter. Notwithstanding the foregoing, at the sole discretion of our board of directors, we may also use other sources, including, but not limited to, offering proceeds and borrowings to repurchase shares. Our board of directors, in its sole discretion, may amend, suspend or terminate the Share Repurchase Program or waive any of its specific conditions to the extent it is in our best interest, including to ensure our ability to qualify as a partnership for U.S. federal income tax purposes.

During the quarter ended September 30, ~~2022,~~2023, we repurchased the following shares (in thousands except per share data):

Period Total Number of Shares Repurchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan
Maximum Value of Shares That May Yet Be Purchased Under the Plan (1)
July 1, 2022 to July 31, 2022 — $ — — $ 1,819
August 1, 2022 to August 31, 2022 — — — 1,819
September 1, 2022 to September 30, 2022 66 $ 32.38 66 —


Period	Total Number of Shares Repurchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Maximum Value of Shares That May Yet Be Purchased Under the Plan (1)
July 1, 2023 to July 31, 2023	—	$	—	—	$	22,782
August 1, 2023 to August 31, 2023	—	—		—	22,782
September 1, 2023 to September 30, 2023	200	$	33.79	200	16,015

FOOTNOTE:

(1) Repurchases are limited under the Share Repurchase Program as described above. During the quarter ended September 30, ~~2022,~~2023, we received requests for the repurchase of approximately ~~$2,127~~$6,767 of our common ~~shares, which exceeded proceeds from our distribution reinvestment plan in the previous quarter by approximately $307.~~shares. Our board of directors approved the ~~use of other sources to satisfy repurchase requests received in excess of proceeds received from our distribution reinvestment plan.~~repurchases.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

The exhibits required by this item are set forth in the Exhibit Index attached hereto and are file or incorporated as part of this report.

EXHIBIT INDEX

The following exhibits are filed or incorporated as part of this report.


3.1						Certificate of Formation of CNL Strategic Capital, LLC dated August 8, 2016 (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 (File No. 333-222986) filed with the SEC on February 12, 2018).

3.2						~~Fifth~~Sixth Amended and Restated Limited Liability Company Operating Agreement of CNL Strategic Capital, LLC (incorporated by reference to Exhibit ~~3.1~~3.2 to the Company’s ~~Current~~Annual Report on Form ~~8-K~~10-K filed with the SEC on ~~February 5, 2020)~~March 29, 2023).

4.1						Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1 (File No. 333-222986) filed with the SEC on February 12, 2018).

4.2						Form of Subscription Agreement (incorporated by reference to Appendix B to the Prospectus filed pursuant to Rule 424(b)(3) with the SEC on April ~~18, 2022)~~24, 2023).

4.3						~~Third~~Fourth Amended and Restated Share Repurchase Program (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on ~~June 16, 2021).~~

~~10.1~~						~~Loan Agreement dated August~~February 24, ~~2022 by and between the Borrower and First Horizon Bank (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 29, 2022).~~

~~10.2~~						~~Promissory Note dated August 24, 2022 by Borrower in favor of First Horizon Bank (incorporated by reference to Exhibit 10.~~2 ~~to the Company’s Current Report on Form 8-K filed with the SEC on August 29, 2022).~~

~~10.3~~						~~Pledge Agreement dated August 24, 2022 by and between the Company and the Borrower in favor of First Horizon Bank (incorporated by reference to Exhibit 10.~~3 ~~to the Company’s Current Report on Form 8-K filed with the SEC on August 29, 2022).~~

~~10.4~~						~~Guaranty Agreement dated August 24, 2022 by Company in favor of First Horizon Bank (incorporated by reference to Exhibit 10.~~4 ~~to the Company’s Current Report on Form 8-K filed with the SEC on August 29, 2022).~~

~~10.5~~						~~Escrow Amendment dated August 24, 2022 by and between the Company, CNL Securities Corp., and UMB Bank, N.A. (incorporated by reference to Exhibit 10.~~5 ~~to the Company’s Current Report on Form 8-K filed with the SEC on August 29, 2022)~~2023).

31.1*						Certification of Chief Executive Officer of CNL Strategic Capital, LLC, Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*						Certification of Chief Financial Officer of CNL Strategic Capital, LLC, Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*						Certification of Chief Executive Officer and Chief Financial Officer of CNL Strategic Capital, LLC, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*						The following materials from CNL Strategic Capital, LLC Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, ~~2022,~~2023, formatted in iXBRL (Inline eXtensible Business Reporting Language); (i) Condensed Consolidated Statements of Assets and Liabilities, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Changes in Net Assets, (iv) Condensed Consolidated Statements of Cash Flows, (v) Consolidated Schedules of Investments, and (vi) Notes to the Condensed Consolidated Financial Statements.

104						Cover Page Interactive Data File included as Exhibit 101 (embedded within the Inline XBRL document)


*			Filed herewith

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the ~~14th~~9th day of November, ~~2022.~~2023.



						CNL STRATEGIC CAPITAL, LLC

						By:			/s/ Chirag J. Bhavsar
									CHIRAG J. BHAVSAR
									Chief Executive Officer
									(Principal Executive Officer)

						By:			/s/ Tammy J. Tipton
									TAMMY J. TIPTON
									Chief Financial Officer
									(Principal Financial and Accounting Officer)

5860


	September 30, 2022 (Unaudited)		December 31, 2021
Assets
Investments at fair value
Portfolio company investments (amortized cost of $476,901 and $387,754, respectively)	$	572,926	$	455,997
U.S. treasury bills (amortized cost of $60,067 and $—, respectively)	60,075		—
Total investments at fair value	633,001		455,997
Cash	10,631		58,704

Receivable for shares sold	17,042		—


Prepaid expenses and other assets	591		143
Total assets	661,265		514,844
Liabilities

Due to related parties (Note 5)	11,372		9,922
Payable for shares repurchased	2,127		509
Deferred tax liabilities, net	2,103		1,877
Distributions payable	1,933		1,566

Accounts payable and other accrued expenses	1,062		661


Total liabilities	18,597		14,535
Commitments and contingencies (Note 11)
Members’ Equity (Net Assets)
Preferred shares, $0.001 par value, 50,000 shares authorized and unissued	—		—
Class FA Common shares, $0.001 par value, 7,400 shares authorized; 4,844 shares issued; 4,263 and 4,559 shares outstanding, respectively	4		5
Class A Common shares, $0.001 par value, 94,660 shares authorized; 2,068 and 1,486 shares issued, respectively; 2,019 and 1,461 shares outstanding, respectively	2		1
Class T Common shares, $0.001 par value, 558,620 shares authorized, respectively; 2,211 and 1,654 shares issued, respectively; 2,115 and 1,609 shares outstanding, respectively	2		2
Class D Common shares, $0.001 par value, 94,660 shares authorized; 1,685 and 1,020 shares issued, respectively; 1,657 and 1,009 shares outstanding, respectively	2		1
Class I Common shares, $0.001 par value, 94,660 shares authorized; 8,097 and 5,519 shares issued, respectively; 7,777 and 5,410 shares outstanding, respectively	8		5
Class S Common shares, $0.001 par value, 100,000 shares authorized; 1,770 shares issued; 1,765 and 1,766 shares outstanding, respectively	2		2
Capital in excess of par value	561,316		442,752
Distributable earnings	81,332		57,541
Total Members’ Equity	$	642,668	$	500,309

Net assets, Class FA shares	$	145,589	$	148,717
Net assets, Class A shares	64,443		44,958
Net assets, Class T shares	67,539		49,328
Net assets, Class D shares	52,356		30,607
Net assets, Class I shares	251,558		168,704
Net assets, Class S shares	61,183		57,995
Total Members’ Equity	$	642,668	$	500,309


For the Year Ended	Amount of Expense Support Received		Expense Support Reimbursed(1)		Expense Support Subject to Reimbursement(2)		Reimbursement Eligibility Expiration
December 31, 2019	$	1,372	$	(970)	$	402	March 31, 2023
December 31, 2020	3,301		(509)		2,792		March 31, 2024
	$	4,673	$	(1,479)	$	3,194


	Nine Months Ended September 30,
	2022		2021(1)
Cash provided by operating activities (GAAP)	$	1,497	$	9,758
Capital expenditures(3)	(156)		(114)
Adjusted FCF (non-GAAP)	$	1,341	$	9,644

Our Proportionate Share of Adjusted FCF (non-GAAP)(2)	$	1,006	$	7,233


	Quarter Ended September 30, 2022		May 6, 2022 to September 30, 2022
Revenues	$	10,067	$	15,482

Net loss (GAAP)	$	1,474	$	329
Interest and debt related expenses	1,418		2,236
Depreciation and amortization	303		488
Income tax expense	57		65
Transaction related expenses(1)	—		1,884
Adjusted EBITDA (non-GAAP)	$	3,252	$	5,002

Our Proportionate Share of Adjusted EBITDA (non-GAAP)(2)	$	2,722	$	4,187


	Total		Payments to Affiliates(1)		Payments to Others
Aggregate price of offering amount registered(2)	$	1,000,000
Shares sold(3)	13,603

Aggregate amount sold(3)	$	412,620
Payment of underwriting compensation(4)	(7,353)		$	(7,353)	$	—
Net offering proceeds to the issuer	405,267
Investments in portfolio companies(5)	(305,690)		—		(305,690)
Distributions to shareholders(6)	(11,710)		(3)		(11,707)
Remaining proceeds from the Offering	$	87,867