NC SLF 10Q 2022 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________

FORM 10-Q

___________________________________

(Mark One)


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

For the quarterly period ended March 31, 2022


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

Commission file number: 814-01407

NC SLF INC.

(Exact name of registrant as specified in charter)


Maryland						86-2404661
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


430 Park Avenue, 14th Floor New York, NY						10022
(Address of principal executive offices)						(Zip Code)

(212) 207-2003

(Registrant’s telephone number, including area code)

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

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

None

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 x No o

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 o No o

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. o

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

As of May 9, 2022, the registrant had 13,477,668 shares of common stock, $0.01 par value, outstanding.

TABLE OF CONTENTS


		Page
Part I	Financial Information
Item. 1	Consolidated Financial Statements (Unaudited)	6
	Consolidated Statements of Assets and Liabilities as of March 31, 2022 (Unaudited) and December 31, 2021	6
	Consolidated Statement of Operations for the Three Months Ended March 31, 2022 (Unaudited)	7
	Consolidated Statement of Changes in Net Assets for the Three Months Ended March 31, 2022 (Unaudited)	8
	Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2022 (Unaudited)	9
	Consolidated Schedules of Investments as of March 31, 2022 (Unaudited) and December 31, 2021	10
	Notes to Consolidated Financial Statements (Unaudited)	14
Item 2 .	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40
Part II	OTHER INFORMATION	41
Item. 1	Legal Proceedings	41
Item. 1A	Risk Factors	41
Item. 2	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item. 3	Defaults Upon Senior Securities	41
Item. 4	Mine Safety Disclosures	41
Item. 5	Other Information	41
Item. 6	Exhibits	42
Signatures		43

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” “outlook,” “potential,” “predicts” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including, without limitation:

•our future operating results;

•our business prospects and the prospects of our portfolio companies;

•the dependence of our future success on the general economy and its impact on the industries in which we invest;

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

•the impact of increased competition;

•an economic downturn and its impact on the ability of our portfolio companies to operate and the investment opportunities available to us;

•the impact of interest rate volatility, including the decommissioning of LIBOR, on our business and our portfolio companies;

•the impact of supply chain constraints and labor difficulties on our portfolio companies and the global economy;

•the elevated level of inflation, and its impact on our portfolio companies and on the industries in which we invest;

•the impact of geopolitical conditions, including the ongoing conflict between Ukraine and Russia and its impact on financial market volatility, global economic markets, and various sectors, industries and markets for commodities globally, such as oil and natural gas;

•our contractual arrangements and relationships with third parties;

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

•actual and potential conflicts of interest with the Investment Adviser and/or its affiliates;

•the ability of our portfolio companies to achieve their objectives;

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

•the adequacy of our cash resources and working capital;

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

•the ability of the Investment Adviser to locate suitable investments for us and to monitor and administer our investments;

•the ability of the Investment Adviser to retain highly talented professionals;

•our ability to qualify and maintain our qualification as a regulated investment company (a “RIC”) and operate as a business development company (“BDC”); and

•the impact of future legislation and regulation on our business and our portfolio companies.

Additionally, our actual results and financial condition may differ materially as a result of the continuing impact of the coronavirus (“COVID-19”) pandemic, including, without limitation:

•the length and duration of the COVID-19 pandemic in the United States as well as worldwide and the magnitude of the economic impact of that pandemic;

•the ongoing effect of the full COVID-19 pandemic on our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives; and

•the ongoing effect of the disruptions caused by the COVID-19 pandemic on our ability to continue to effectively manage our business (including our ability to source and close new investment opportunities), on the availability of equity and debt capital and our use of borrowed money to finance a portion of our investments.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this report should not be regarded as a representation by us that our plans and objectives will be achieved. These forward-looking statements apply only as of the date of this report. We do not undertake any obligation to update or revise any forward-looking statements or any other information contained herein, except as required by applicable law.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

NC SLF INC.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(dollars in thousands, except share and per share data)


	March 31, 2022		December 31, 2021
	Unaudited
Assets
Investments
Non-controlled/non-affiliated company investments, at fair value (amortized cost of $137,629, and $116,152, respectively)	$	136,994	$	116,347
Cash and cash equivalents	63,481		40,794
Interest receivable	581		253
Receivable for investments sold	111		1

Prepaid expenses	41		69
Total assets	201,208		157,464

Liabilities
Secured borrowings (net of $121 and $148 deferred financing cost, respectively)	$	64,879	$	64,852
Payable for investments purchased	—		32,056
Interest Payable	33		86


Distributions payable	1,483		—
Directors’ fees payable (See Note 4)	15		15
Accounts payable and accrued expenses	362		258
Total liabilities	66,772		97,267

Commitments and contingencies (See Note 6)

Net Assets: (See Note 7)
Common shares, par value $0.01 per share, 500,000,000 shares authorized, 13,477,668 and 6,000,100 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	$	135	$	60
Paid-in-capital in excess of par value	134,855		59,930
Total distributable earnings (loss)	(554)		207
Total net assets	134,436		60,197

Total liabilities and net assets	$	201,208	$	157,464

Net asset value per share (See Note 8)	$	9.97	$	10.03

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

NC SLF INC.

CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(dollars in thousands, except share and per share data)


	For the Three Months Ended March 31, 2022
Investment income:
Non-controlled/non-affiliated company investments:
Interest income	$	1,945
Other income	2
Total investment income	1,947

Expenses:
Interest and debt financing expenses	$	198

Management fees (See Note 4)	370
Professional fees	94
Directors’ fees (See Note 4)	15
Administration fees (See Note 4)	57
Other general and administrative expenses	34
Total expenses before management fee waiver	768
Management fee waiver (See Note 4)	(370)
Net expenses after management fee waiver	398

Net investment income (loss)	1,549

Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on non-controlled/non-affiliated company investments	3
Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliated company investments	(830)
Total net realized and unrealized gain (loss) on investments	(827)

Net increase (decrease) in net assets resulting from operations	$	722

Per share data:
Net investment income (loss) per share	$	0.12
Net increase (decrease) in net assets resulting from operations per share	$	0.06
Weighted average common shares outstanding	12,397,575

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

NC SLF INC.

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS (Unaudited)

(dollars in thousands, except share and per share data)


	For the Three Months Ended March 31, 2022
Increase (decrease) in net assets resulting from operations:
Net investment income (loss)	$	1,549
Net realized gain (loss) on investments	3
Net change in unrealized appreciation (depreciation) on investments	(830)
Net increase (decrease) in net assets resulting from operations	722
Shareholder distributions:
Distributions of investment income	(1,483)
Net increase (decrease) in net assets resulting from shareholder distributions	(1,483)
Capital share transactions:
Issuance of common shares	75,000
Net increase (decrease) in net assets resulting from capital share transactions	75,000
Total increase (decrease) in net assets	74,239
Net assets, at beginning of period	60,197
Net assets, at end of period	$	134,436

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

NC SLF INC.

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

(dollars in thousands, except share and per share data)


	For the Three Months Ended March 31, 2022
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations	$	722

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities
Purchase of investments	(21,699)
Proceeds from principal repayments of investments and sales of investments	297
Amortization of premium/accretion of discount, net	(72)
Net realized (gain) loss on investments	(3)
Net change in unrealized (appreciation) depreciation on investments	830
Amortization of deferred financing costs	68
Changes in operating assets and liabilities:
Interest receivable	(328)
Receivable for investments sold	(110)
Prepaid expenses	28


Payable for investments purchased	(32,056)
Interest payable	(53)


Accounts payable and accrued expenses	104
Net cash provided by (used in) operating activities	(52,272)

Cash flows from financing activities:
Proceeds from issuance of common shares	75,000
Proceeds from secured borrowings	65,000
Repayments of secured borrowings	(65,000)
Payments of deferred financing costs	(41)
Net cash provided by (used in) financing activities	74,959

Net increase (decrease) in cash and cash equivalents	22,687
Cash and cash equivalents, beginning of period	40,794
Cash and cash equivalents, end of period	$	63,481

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	77

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

NC SLF INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED)

March 31, 2022

(dollars in thousands)


Portfolio Company (1) (2)	Footnotes	Investment	Spread Above Reference Rate (3)	Interest Rate (3)		Maturity Date	Par Amount		Amortized Cost		Fair Value		% of Net Assets (5)

Investments
Debt Investments
Automotive
American Auto Auction Group	(4)	First Lien Term Loan	S + 5.00%	5.80	%	12/30/2027	$	10,708	$	10,604	$	10,605	7.9	%
Total Automotive									10,604		10,605		7.9	%

Capital Equipment
Hyperion		First Lien Term Loan	L + 4.50%	5.01	%	8/28/2028	4,326		4,308		4,300		3.2	%
Total Capital Equipment									4,308		4,300		3.2	%

Chemicals, Plastics, & Rubber
Ascensus Specialties	(4) (8)	First Lien Term Loan	L + 4.25%	5.00	%	6/30/2028	14,400		14,139		14,279		10.6	%
Total Chemicals, Plastics, & Rubber									14,139		14,279		10.6	%

Construction & Building
Sciens Building Solutions, LLC	(4) (8)	First Lien Term Loan	L + 5.75%	6.63	%	12/15/2027	10,196		10,003		9,983		7.4	%
Sciens Building Solutions, LLC (Delayed Draw)	(4) (6) (8)	First Lien Term Loan	L + 5.75%	6.50	%	12/15/2027	5,323		160		99		0.1	%
Total Construction & Building									10,163		10,082		7.5	%

Consumer Goods: Durable
Petmate	(4)	First Lien Term Loan	L + 5.50%	6.51	%	9/15/2028	12,981		12,858		12,548		9.3	%
Total Consumer Goods: Durable									12,858		12,548		9.3	%

Containers, Packaging & Glass
Pelican Products	(4) (8)	First Lien Term Loan	L + 4.25%	5.26	%	12/29/2028	7,980		7,903		7,840		5.8	%
Resource Label Group	(4) (8)	First Lien Term Loan	L + 4.25%	5.00	%	7/7/2028	4,940		4,922		4,909		3.7	%
Total Containers, Packaging & Glass									12,825		12,749		9.5	%

Healthcare & Pharmaceuticals
Gastro Health	(4)	First Lien Term Loan	L + 4.50%	5.51	%	7/3/2028	5,544		5,518		5,516		4.1	%
Gastro Health (Delayed Draw)	(4)	First Lien Term Loan	L + 4.50%	5.51	%	7/3/2028	1,848		1,840		1,839		1.4	%
PromptCare	(4) (8)	First Lien Term Loan	L + 6.00%	7.00	%	9/1/2027	9,379		9,218		9,226		6.9	%
PromptCare (Delayed Draw)	(4) (6) (8)	First Lien Term Loan	L + 6.00%	7.00	%	9/1/2027	3,986		817		791		0.6	%
Total Healthcare & Pharmaceuticals									17,393		17,372		13.0	%

High Tech Industries
Revalize (Delayed Draw)	(4) (8)	First Lien Term Loan	L + 5.75%	6.76	%	4/15/2027	1,263		1,252		1,247		0.9	%
Revalize (Delayed Draw)	(4) (6) (8)	First Lien Term Loan	L + 5.75%	6.75	%	4/15/2027	1,912		(9)		(25)		—	%

NC SLF INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED)

March 31, 2022

(dollars in thousands)


Portfolio Company (1) (2)	Footnotes	Investment	Spread Above Reference Rate (3)	Interest Rate (3)		Maturity Date	Par Amount	Amortized Cost		Fair Value		% of Net Assets (5)

Revalize (Delayed Draw)	(4) (8)	First Lien Term Loan	L + 5.75%	6.76	%	4/15/2027	5,075	5,059		5,009		3.6	%
Total High Tech Industries								6,302		6,231		4.5	%

Services: Business
AG Group Holdings, Inc.	(4)	First Lien Term Loan	S + 4.25%	4.75	%	12/29/2028	10,535	10,509		10,434		7.8	%
Business Solver	(4) (8)	First Lien Term Loan	L + 5.75%	6.50	%	12/1/2027	8,982	8,897		8,835		6.6	%
Business Solver (Delayed Draw)	(4) (6) (8)	First Lien Term Loan	L + 5.75%	6.50	%	12/1/2027	2,418	(11)		(39)		—	%
Integrated Power Services	(4)	First Lien Term Loan	L + 4.75%	5.76	%	11/22/2028	3,529	3,495		3,499		2.6	%
Integrated Power Services (Delayed Draw)	(4) (6)	First Lien Term Loan	L + 4.75%	5.75	%	11/22/2028	1,550	671		665		0.5	%
LSCS Holdings Inc.		First Lien Term Loan	L + 4.50%	5.00	%	12/16/2028	11,281	11,228		11,183		8.3	%
Soliant Health	(4)	First Lien Term Loan	L + 4.25%	5.00	%	3/31/2028	7,991	7,973		7,948		5.9	%
Total Services: Business								42,762		42,525		31.7	%

Services: Consumer
All My Sons	(4)	First Lien Term Loan	L + 5.00%	5.75	%	10/25/2028	6,335	6,275		6,303		4.7	%
Total Services: Consumer								6,275		6,303		4.7	%

Total Debt Investments								137,629		136,994		101.9	%

Cash equivalents	(7)							$	800	$	800	0.6	%
Total Investments								$	138,429	$	137,794	102.5	%

_______________

(1)All investments are non-controlled/non-affiliated investments as defined by the Investment Company Act of 1940, as amended (the "1940 Act"). The 1940 Act classifies investments based on the level of control that the Company maintains in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be “non-controlled” when the Company owns 25% or less of the portfolio company’s voting securities and “controlled” when the Company owns more than 25% of the portfolio company’s voting securities. The 1940 Act also classifies investments further based on the level of ownership that the Company maintains in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as “non-affiliated” when the Company owns less than 5% of a portfolio company’s voting securities and “affiliated” when the Company owns 5% or more of a portfolio company’s voting securities.

(2)The issuer of the debt investment held by the Company is domiciled in the United States.

(3)All of the investments bear interest at rates that may be determined by reference to London Interbank Offered Rate (“LIBOR” or "L"), as well as Secured Overnight Financing Rate ("SOFR" or "S"), which reset monthly or quarterly. For each such investment, the Company has provided the spread over LIBOR and SOFR and the current contractual interest rate in effect at March 31, 2022. As of March 31, 2022, the effective rates for the 1M L and 3M L are 0.46%, and 1.01%, respectively. As of March 31, 2022, the effective rates for 1M S and 3M S are 0.31%, and 0.65%, respectively. For portfolio companies with multiple interest rate contracts, the interest rate shown is a weighted average current interest rate in effect as of March 31, 2022. Certain investments are subject to a LIBOR floor. For fixed rate loans, a spread above a reference rate is not applicable.

(4)Investment valued using unobservable inputs (Level 3). See Note 3 “Fair Value Measurements” for more information.

(5)Percentage is based on net assets of $134,436 as of March 31, 2022.

(6)Position is an unfunded loan commitment, and no interest is being earned. The investment may be subject to an unused/letter of credit facility fee.

(7)Cash equivalents balance represents amounts held in an interest-bearing money market fund issued by U.S. Bank National Association.

(8)Investment is a unitranche position.

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

NC SLF INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2021

(dollars in thousands)


Portfolio Company (1) (2)	Footnotes	Investment	Spread Above Reference Rate (3)	Interest Rate (3)		Maturity Date	Par Amount		Amortized Cost		Fair Value		% of Net Assets (5)

Investments
Debt Investments
Capital Equipment
Hyperion	(4)	First Lien Term Loan	L + 4.50%	5.00	%	8/28/2028	$	4,337	$	4,317	$	4,321	7.2	%
Total Capital Equipment									4,317		4,321		7.2	%

Chemicals, Plastics, & Rubber
Ascensus Specialties	(4) (8)	First Lien Term Loan	L + 4.25%	5.00	%	6/30/2028	14,436		14,162		14,319		23.8	%
Total Chemicals, Plastics, & Rubber									14,162		14,319		23.8	%

Construction & Building
Sciens Building Solutions, LLC	(4) (8)	First Lien Term Loan	L + 5.75%	6.50	%	12/15/2027	10,222		10,019		10,019		16.6	%
Sciens Building Solutions, LLC (Delayed Draw)	(4) (6) (8)	First Lien Term Loan	L + 5.75%	6.50	%	12/15/2027	5,323		(53)		(53)		(0.1	%)
Total Construction & Building									9,966		9,966		16.5	%

Consumer Goods: Durable
Petmate	(4)	First Lien Term Loan	L + 5.50%	6.25	%	9/15/2028	13,014		12,884		12,884		21.4	%
Total Consumer Goods: Durable									12,884		12,884		21.4	%

Containers, Packaging & Glass
Pelican Products	(4) (8)	First Lien Term Loan	L + 4.25%	4.75	%	12/29/2028	8,000		7,920		7,920		13.2	%
Resource Label Group	(8)	First Lien Term Loan	L + 4.25%	5.00	%	7/7/2028	4,952		4,933		4,951		8.2	%
Total Containers, Packaging & Glass									12,853		12,871		21.4	%

Healthcare & Pharmaceuticals
Gastro Health	(4)	First Lien Term Loan	L + 4.50%	5.25	%	7/3/2028	5,558		5,530		5,558		9.2	%
Gastro Health (Delayed Draw)	(4)	First Lien Term Loan	L + 4.50%	5.25	%	7/3/2028	1,853		1,491		1,500		2.5	%
PromptCare	(4) (8)	First Lien Term Loan	L + 6.00%	7.00	%	9/1/2027	9,403		9,230		9,248		15.4	%
PromptCare (Delayed Draw)	(4) (8)	First Lien Term Loan	L + 6.00%	7.00	%	9/1/2027	3,988		819		793		1.3	%
Total Healthcare & Pharmaceuticals									17,070		17,099		28.4	%

High Tech Industries
Revalize (Delayed Draw)	(4) (8)	First Lien Term Loan	L + 5.75%	6.75	%	4/15/2027	1,266		1,254		1,266		2.1	%
Revalize (Delayed Draw)	(4) (6) (8)	First Lien Term Loan	L + 5.75%	6.75	%	4/15/2027	1,912		(9)		(1)		—	%
Revalize (Delayed Draw)	(4) (8)	First Lien Term Loan	L + 5.75%	6.75	%	4/15/2027	5,084		5,067		5,027		8.3	%
Total High Tech Industries									6,312		6,292		10.4	%

NC SLF INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2021

(dollars in thousands)


Portfolio Company (1) (2)	Footnotes	Investment	Spread Above Reference Rate (3)	Interest Rate (3)		Maturity Date	Par Amount	Amortized Cost		Fair Value		% of Net Assets (5)

Services: Business
Busines Solver	(4) (8)	First Lien Term Loan	L + 5.75%	6.50	%	12/1/2027	8,982	8,893		8,893		14.8	%
Busines Solver (Delayed Draw)	(4) (6) (8)	First Lien Term Loan	L + 5.75%	6.50	%	12/1/2027	2,418	(12)		(12)		—	%
Integrated Power Services	(4)	First Lien Term Loan	L + 4.75%	5.50	%	11/22/2028	3,538	3,502		3,502		5.8	%
Integrated Power Services (Delayed Draw)	(4)	First Lien Term Loan	L + 4.75%	5.50	%	11/22/2028	1,552	672		672		1.1	%
LSCS Holdings Inc	(4)	First Lien Term Loan	L + 4.50%	5.00	%	12/16/2028	11,310	11,253		11,253		18.7	%
Soliant Health	(4)	First Lien Term Loan	L + 4.25%	5.00	%	3/31/2028	8,012	7,992		7,999		13.3	%
Total Services: Business								32,300		32,307		53.7	%

Services: Consumer
All My Sons	(4)	First Lien Term Loan	L + 5.00%	5.75	%	10/25/2028	6,351	6,288		6,288		10.4	%
Total Services: Consumer								6,288		6,288		10.4	%

Total Debt Investments								116,152		116,347		193.2	%

Cash equivalents	(7)							$	39,949	$	39,949	66.4	%
Total Investments								$	156,101	$	156,296	259.6	%

_______________

(2)The issuer of the debt investment held by the Company is domiciled in the United States.

(3)The majority of the investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate (“LIBOR” or “L”) which reset monthly or quarterly. For each such investment, the Company has provided the spread over LIBOR and the current contractual interest rate in effect at December 31, 2021. As of December 31, 2021, rates for 1M L and 3M L are 0.10% and 0.21%, respectively. For portfolio companies with multiple interest rate contracts, the interest rate shown is a weighted average current interest rate in effect as of December 31, 2021. Certain investments are subject to a LIBOR floor. For fixed loans, a spread above reference rate is not applicable.

(4)Investment valued using unobservable inputs (Level 3). See Note 3 “Fair Value Measurements” for more information.

(5)Percentage is based on net assets of $60,197 as of December 31, 2021.

(6)Position is an unfunded loan commitment, and no interest is being earned. The investment may be subject to an unused/letter of credit facility fee.

(7)Cash equivalents balance represents amounts held in an interest-bearing money market fund issued by U.S. Bank National Association.

(8)Investment is a unitranche position.

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

NC SLF INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(dollars amounts in thousands, except per share data)

1.ORGANIZATION

NC SLF Inc. (the “Company”) was formed on January 29, 2021, as a corporation under the laws of the state of Maryland. The Company is a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, the Company has elected, and intends to qualify annually, to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the “Code”). The Company was initially funded on April 16, 2021 (the “Commencement of Operations”).

Churchill Asset Management LLC (the “Investment Adviser”) is a Delaware limited liability company registered as an investment adviser with the Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended. The Investment Adviser manages the Company’s day-to-day operations and provides it with investment advisory and management services. Nuveen Churchill Administration LLC (the “Administrator”) provides the administrative services necessary to conduct the Company's day-to-day operations. Teachers Insurance and Annuity Association of America (“TIAA”) is the ultimate parent company of the Investment Adviser and the Administrator.

The Company's investment objective is to generate current income and capital appreciation primarily by investing in or originating first lien and unitranche leveraged loans made to private-equity owned U.S. middle-market companies that require capital for growth, acquisitions, recapitalizations, refinancings and leveraged buyouts, which the Investment Adviser believes have sustainable, leading positions in their respective markets with scalable revenues and operating cash flow, experienced management teams, and other positive business characteristics. The Company expects to make investments through both primary originations and open-market secondary purchases. The Company will predominantly target investments in U.S. middle market businesses. The Company defines middle market businesses as those businesses with annual earnings before interest, taxes, depreciation, and amortization of approximately $10 million to $200 million. The Company will focus on making loans that it directly originates to U.S. middle market companies that are meeting their financial and operational obligations, with a portfolio expected to comprise primarily of first-lien senior secured debt and unitranche loans.

NC SLF SPV I, LLC (“SPV I”) is a Delaware limited liability company that was formed on August 10, 2021. SPV I is a wholly owned subsidiary of the Company and is consolidated in these consolidated financial statements commencing from the date of its formation. As of March 31, 2022, SPV I had not commenced operations.

The Company may from time to time conduct a private offering of its common stock to “accredited investors” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (the "1933 Act"), in reliance on exemptions from the registration requirements of the 1933 Act (the “Private Offering”). Each investor will purchase shares pursuant to a subscription agreement entered into with the Company. The Company completed its initial closing of the Private Offering on June 21, 2021 (the “Initial Closing Date”) and subsequently commenced investment operations. The Company may conduct subsequent closings at times during its investment period (the “Investment Period”), which commenced on the Initial Closing Date and shall initially continue until the 48-month anniversary of the Initial Closing Date, subject to automatic extensions thereafter, each for an additional one-year period, unless the holders of a majority of the Company's outstanding common stock elect to forego any such extension upon not less than ninety days prior written notice. Holders of a majority of the Company's outstanding common stock may also terminate the Investment Period as of any earlier anniversary of the Initial Closing Date upon not less than ninety days written notice. Each investor will be expected to make capital contributions to purchase the Company's common stock each time a drawdown notice is issued based on such investor's capital commitment. Pursuant to the subscription agreement entered into with each investor, the Company shall commence the wind up of operations two years following the expiration of the Investment Period, subject to additional extensions, each for an additional one-year period, upon approval of the holders of a majority of the Company's then outstanding common stock.

2.SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“US GAAP”). The Company is an investment company for the purposes of accounting and financial reporting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services—Investment Companies, and pursuant to Regulation S-X. US GAAP for an investment company requires investments to be recorded at fair value. The carrying value for all other assets and liabilities approximates their fair value.

NC SLF INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(dollars amounts in thousands, except per share data)

Use of Estimates

The preparation of the consolidated financial statements in conformity with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash represents cash deposits held at financial institutions, which at times may exceed U.S. federally insured limits. Cash equivalents include short-term highly liquid investments, such as money market funds, that are readily convertible to cash and have original maturities of three months or less. Cash and cash equivalents are carried at cost, which approximates fair value.

Valuation of Portfolio Investments

At all times consistent with US GAAP, the 1940 Act and ERISA (as described below), the Company will conduct a valuation of its assets, pursuant to which its net asset value (“NAV”) is determined.

The Company's underlying assets are considered, for purposes of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any regulations promulgated thereunder, and Section 4975 of the Code, to be assets of certain employee benefit plans and other plans that purchase shares. The Company's investments and the activities of the Investment Adviser are subject to and, in certain cases, limited by, such laws.

Portfolio investments are valued in accordance with the fair value principles established by FASB ASC Topic 820, Fair Value Measurement (“ASC Topic 820”) and in accordance with the 1940 Act and ERISA rules. ASC Topic 820’s definition of fair value focuses on the amount that would be received to sell the asset or paid to transfer the liability in the principal or most advantageous market, and prioritizes the use of market-based inputs (observable) over entity-specific inputs (unobservable) within a measurement of fair value.

ASC Topic 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. ASC Topic 820 also provides guidance regarding a fair value hierarchy, which prioritizes information used to measure fair value and the effect of fair value measurements on earnings, and provides for enhanced disclosures determined by the level within the hierarchy of information used in the valuation. In accordance with ASC Topic 820, these inputs are summarized in the three levels listed below:

•Level 1 — Valuations are based on unadjusted, quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

•Level 2 — Valuations are based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

•Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

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

Active, publicly-traded instruments are classified as Level 1 and their values are generally based on quoted market prices, even if both the market’s normal daily trading volume is not sufficient to absorb the quantity held and placing orders to sell the position in a single transaction might affect the quoted price.

Fair value is generally determined as the price that would be received for an investment in a current sale, which assumes an orderly market is available for the market participants at the measurement date. If available, the fair value of investments is based on directly observable market prices or on market data derived from comparable assets. The Company’s valuation policy considers the fact that no ready market may exist for some of the securities in which we invest and that fair value for those investments must be determined using unobservable inputs.

NC SLF INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(dollars amounts in thousands, except per share data)

Portfolio investments are valued on a quarterly basis, or more frequently if required under the 1940 Act. For purposes of the 1940 Act, the Board of Directors of the Company (the “Board”) is ultimately and solely responsible for determining the fair value of our portfolio investments on a quarterly basis in good faith, including investments that are not publicly traded, those whose market prices are not readily available and any other situation where our portfolio investments require a fair value determination. Security transactions are accounted for on a trade date basis.

Because (i) “benefit plan investors”, as defined in Section 3(42) of ERISA (“Benefit Plan Investors”), hold 25% or more of the Company’s outstanding shares, and (ii) the Company’s shares are not listed on a national securities exchange, unaffiliated third-parties (“Sub-Administrator(s)”) have been engaged to independently value the Company’s portfolio investments, in consultation with the Investment Adviser. The Company’s quarterly valuation procedures followed by the Sub-Administrator(s) are set forth below:

1.Portfolio investments for which market quotations are readily available on an exchange are valued at such market quotations based on the closing price indicated from independent pricing services.

2.Portfolio investments for which indicative prices are obtained from various pricing services and/or brokers or dealers are valued through a multi-step valuation process, as described below, to determine whether the quote(s) obtained is representative of fair value in accordance with US GAAP.

a.For portfolio investments, the personnel of one of the Sub-Administrators, in consultation with the investment professionals of the Investment Adviser, looks at the number of quotes readily available and perform the following:

i.Portfolio investments for which four or more quotes are received from a pricing service are valued using the mean of the bid and ask of the quotes obtained. If the variance between the bid and ask is greater than 10 percent, the personnel of the Sub-Administrator, in consultation with the investment professionals of the Investment Adviser, evaluate the reasonableness of the quotes, and if the quotes are determined to not be representative of fair value, the personnel of the Sub-Administrator, in consultation with the investment professionals of the Investment Adviser, value the investment in accordance with (3) below;

ii.Portfolio investments for which three quotes are received from a pricing service are first validated by the Sub-Administrator, in consultation with the investment professionals of the Investment Adviser. The personnel of the Sub-Administrator, in consultation with the investment professionals of the Investment Adviser, evaluate the reasonableness of the quotes, and if the quotes are determined to be representative of fair value, then the mean of the bid and ask of the quotes is used. If the quotes are deemed to not be representative of fair value, then the personnel of the Sub-Administrator, in consultation with the investment professionals of the Investment Adviser, value the investment in accordance with (3) below; and

iii.Portfolio investments for which two or less quotes are received from a pricing service the investment is valued in accordance with (3) below.

3.Portfolio investments for which quotations are not readily available through exchanges, pricing services, brokers, or dealers are valued utilizing the following valuation process:

a.Each portfolio company or investment is initially valued by the personnel of one of the Sub-Administrators, in consultation with the investment professionals of the Investment Adviser; and

b.Preliminary valuation conclusions are then reviewed and validated with the Investment Adviser’s senior management.

The values assigned to portfolio investments are based upon available information and do not necessarily represent amounts which might ultimately be realized, since such amounts depend on future circumstances and cannot be reasonably determined until the individual positions are liquidated. Due to the inherent uncertainty of determining the fair value of portfolio investments that do not have a readily available market value, the fair value of the Company’s portfolio investments may fluctuate from period to period and the fluctuations could be material.

NC SLF INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(dollars amounts in thousands, except per share data)

For all valuations, the Audit Committee of the Board (the “Audit Committee”), which consists solely of directors who are not ‘‘interested persons’’ of the Company, as such term is used under Section 2(a)(19) of the 1940 Act (the ‘‘Independent Directors’’), will review these preliminary valuations and the Board, a majority of whom are Independent Directors, will discuss the valuations and determine the fair value of each portfolio investment in the portfolio in good faith; provided, however, that to the extent the Company’s assets are treated as ‘‘plan assets’’ for purposes of ERISA, the Sub-Administrators will determine valuations using only those valuation methodologies reviewed and approved by the Audit Committee and the Board, and the Board will accept such valuations prepared by the Sub-Administrators in accordance therewith.

Investment Transactions and Revenue Recognition

Investment transactions are recorded on the applicable trade date. Any amounts related to purchases, sales and principal paydowns that have traded, but not settled, are reflected as either a receivable for investments sold or payable for investments purchased on the consolidated statements of assets and liabilities. Realized gains and losses on investment transactions are determined on a specific identification basis and are included as net realized gain (loss) on investments in the consolidated statements of operations. Net change in unrealized appreciation (depreciation) on investments is recognized in the consolidated statements of operations and reflects the period’s change in fair value and cost of investments.

Interest income, including amortization of premium and accretion of discount on loans, and expenses are recorded on the accrual basis. The Company accrues interest income if it expects that ultimately it will be able to collect such income. Generally, when a payment default occurs on a loan in the portfolio, or if management otherwise believes that the issuer of the loan will not be able to make contractual interest payments or principal payments, the Investment Adviser will place the loan on non-accrual status and the Company will cease recognizing interest income on that loan until all principal and interest is current through receipt or until a restructuring occurs, such that the interest income is deemed to be collectible. However, the Company remains contractually entitled to this interest. The Company may make exceptions to this policy if the loan has sufficient collateral value and is in the process of collection. Accrued interest is written off when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. As of March 31, 2022 and December 31, 2021, there were no loans in the Company's portfolio on non-accrual status.

The Company may have loans in its portfolio that contain payment-in-kind (“PIK”) income provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. As of March 31, 2022 and December 31, 2021, no loans in the portfolio contained PIK income provisions.

Other income may include income such as consent, waiver, amendment, unused, and prepayment fees associated with the Company’s investment activities, as well as any fees for managerial assistance services rendered by the Company to its portfolio companies. Such fees are recognized as income when earned or the services are rendered. For the three months ended March 31, 2022, the Company earned $2 in other income.

Deferred Financing Costs

Deferred financing costs include capitalized expenses related to the closing or amendments of borrowings. Amortization of deferred financing costs is computed on the straight-line basis over the term of the borrowings. The unamortized balance of such costs is included in deferred financing costs in the consolidated statements of assets and liabilities. The amortization of such costs is included in interest and debt financing expenses in the accompanying consolidated statements of operations.

Organizational Expenses and Offering Costs

Organizational expenses consist primarily of legal, incorporation and accounting fees incurred in connection with the organization of the Company. Organizational expenses are expensed as incurred and are shown in the Company's consolidated statements of operations. Any organizational expenses and offering costs in excess of $1 million will be borne by the Investment Adviser and cannot be recouped by the Investment Adviser. For the three months ended March 31, 2022, the Company did not incur any organizational expenses. As of March 31, 2022 and December 31, 2021, $0 and $0, respectively, of organizational expenses were unpaid and are included in accrued organizational expenses in the accompanying consolidated statements of assets and liabilities.

NC SLF INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(dollars amounts in thousands, except per share data)

Offering costs consist primarily of fees and expenses incurred in connection with the offering of shares, legal, printing, and other costs associated with the preparation and filing of applicable registration statements and other offering documents. Offering costs are recognized as a deferred charge and are amortized on a straight-line basis over 12 months. To the extent such expenses relate to equity offerings, these expenses are charged as a reduction of paid-in-capital upon each such offering. For the three months ended March 31, 2022, the Company did not incur any offering costs.

Income Taxes

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

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

In addition, based on the excise distribution requirements, the Company is subject to a 4% nondeductible U.S. federal excise tax on undistributed income unless the Company distributes in a timely manner an amount equal to at least the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding year. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to U.S. federal income tax at corporate rates is considered to have been distributed. The Company intends to timely distribute to its shareholders substantially all of its annual taxable income for each year, except that the Company may retain certain net capital gains for reinvestment and, depending upon the level of taxable income earned in a year, and may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax.

The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely than not” to be sustained by the applicable tax authority. All penalties and interest associated with income taxes, if any, are included in income tax expense. For the three months ended March 31, 2022, the Company did not incur any excise tax expense.

Dividends and Distributions to Common Shareholders

To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its common shareholders. Dividends and distributions to common shareholders are recorded on the applicable record date. The amount to be distributed to common shareholders is determined by the Board each quarter and is generally based upon the taxable earnings estimated by management and available cash. Net realized capital gains, if any, will generally be distributed at least annually, although the Company may decide to retain such capital gains for investment.

Functional Currency

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

NC SLF INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(dollars amounts in thousands, except per share data)

Recent Accounting Standards Updates

The FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting in March 2020. This update provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. This guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company has agreements that have LIBOR as a reference rate with certain portfolio companies and also with certain lenders. Many of these agreements, including the credit agreement relating to the Subscription Facility (refer to Note 5), include an alternative successor rate or language for choosing an alternative successor rate if LIBOR reference is no longer considered to be appropriate. With respect to other agreements, the Company intends to work with its portfolio companies to modify agreements to choose an alternative successor rate. Contract modifications may be required to be evaluated in determining whether the modifications result in the establishment of new contracts or the continuation of existing contracts. The Company plans to adopt this amendment and apply this update, where applicable, to account for contract modifications due to changes in reference rates when LIBOR reference is no longer used. The Company did not utilize the optional expedients and exceptions provided by ASU 2020-04 during the three months ended March 31, 2022. The Company continues to evaluate the impact that the amendments in this update will have on the Company’s consolidated financial statements and disclosures when applied.

SEC Disclosure Update and Simplification

In December 2020, the SEC adopted a new rule providing a framework for fund valuation practices. New Rule 2a-5 under the 1940 Act (“Rule 2a-5”) establishes requirements for determining fair value in good faith for purposes of the 1940 Act. Rule 2a-5 will permit boards, subject to board oversight and certain other conditions, to designate certain parties to perform fair value determinations. Rule 2a-5 also defines when market quotations are “readily available” for purposes of the 1940 Act and the threshold for determining whether a fund must determine the fair value of a security. The SEC also adopted new Rule 31a-4 under the 1940 Act (“Rule 31a-4”), which provides the recordkeeping requirements associated with fair value determinations. Finally, the SEC is rescinding previously issued guidance on related issues, including the role of the board in determining fair value and the accounting and auditing of fund investments. Rule 2a-5 and Rule 31a-4 became effective on March 8, 2021, and have a compliance date of September 8, 2022. A fund may voluntarily comply with the rules after the effective date, and in advance of the compliance date, under certain conditions. Management is currently assessing the impact of these provisions on the Company’s consolidated financial statements and SEC filings.

3.Fair Value Measurements

Fair Value Disclosures

The following tables presents the fair value measurements of investments, by major class, and cash equivalents as of March 31, 2022 and December 31, 2021, according to the fair value hierarchy:


As of March 31, 2022	Level 1		Level 2		Level 3		Total
Assets:
First Lien Term Loans	$	—	$	15,483	$	121,511	$	136,994
Cash Equivalents	800		—		—		800
Total	$	800	$	15,483	$	121,511	$	137,794


As of December 31, 2021	Level 1		Level 2		Level 3		Total
Assets:
First Lien Term Loans	$	—	$	4,951	$	111,396	$	116,347
Cash Equivalents	39,949		—		—		39,949
Total	$	39,949	$	4,951	$	111,396	$	156,296

NC SLF INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(dollars amounts in thousands, except per share data)

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the three months ended March 31, 2022:


	First Lien Term Loans		Total
Balance as of December 31, 2021	$	111,396	$	111,396
Purchase of investments	21,699		21,699
Proceeds from principal repayments and sales of investments	(258)		(258)

Amortization of premium/accretion of discount, net	67		67
Net realized gain (loss) on investments	3		3
Net change in unrealized appreciation (depreciation) on investments	(774)		(774)
Transfers out of Level 3	(15,573)		(15,573)
Transfers to Level 3	4,951		4,951
Balance as of March 31, 2022	$	121,511	$	121,511

Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliated company investments still held as of March 31, 2022	$	(774)	$	(774)

For the three months ended March 31, 2022, there were two investments that transferred out of Level 3 to Level 2 and one investment that transferred out of Level 2 to Level 3.

Significant Unobservable Inputs

ASC Topic 820 requires disclosure of quantitative information about the significant unobservable inputs used in the valuation of assets and liabilities classified as Level 3 within the fair value hierarchy. The valuation techniques and significant unobservable inputs used in Level 3 fair value measurements of assets as of March 31, 2022 and December 31, 2021 were as follows:


Investment Type	Fair Value as of March 31, 2022		Valuation Techniques	Unobservable Inputs	Ranges		Weighted Average
First Lien Term Loans	$	47,446	Recent Transactions	Transaction Price	98.3	99.8	99.2
First Lien Term Loans	74,065		Yield Method	Implied Discount Rate	7.0	9.3	8.5
Total	$	121,511


Investment Type	Fair Value as of December 31, 2021		Valuation Techniques	Unobservable Inputs	Ranges		Weighted Average
First Lien Term Loans	$	61,366	Recent Transactions	Transaction Price	98.0	99.5	99.0
First Lien Term Loans	50,030		Yield Method	Implied Discount Rate	5.9	8.2	6.8
Total	$	111,396

Debt investments are generally valued using an income analysis, which weighs market yield and credit performance discount rates. The market yield analysis compares market yield movements from the date of the closing of the investment to the reporting date. The credit performance analysis determines a yield per unit of leverage at closing and compares that to a current yield per unit of leverage (factoring any change in pricing and change in leverage as a result of the borrower’s actual performance) as of the reporting date. Material underperformance will typically require an increase in the weighting towards the credit performance analysis.

Alternative valuation methodologies may be used as appropriate for debt investments, and can include a market analysis, income analysis, or liquidation (recovery) analysis. A recent transaction, if applicable, may also be factored into the valuation if the transaction price is believed to be an indicator of value.

Weighted average inputs are calculated based on the relative fair value of the investments. Significant increases (decreases) in discount rates could result in lower (higher) fair value measurements. Significant decreases (increases) in comparable multiples may result in lower (higher) fair value measurements.

NC SLF INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(dollars amounts in thousands, except per share data)

4.RELATED PARTY TRANSACTIONS

Investment Management Agreement

The Company entered into an investment management and advisory agreement (the “Investment Management Agreement”) with the Investment Adviser. Under the Investment Management Agreement, the Investment Adviser manages the day-to-day operations of, and provides investment advisory and management services to, the Company. The Board, including all of the Independent Directors, approved the Investment Management Agreement in accordance with, and on the basis of an evaluation satisfactory to such directors as required by, the 1940 Act.

The Company pays the Investment Adviser a fee for its services under the Investment Management Agreement consisting of an annual base management fee (the “Management Fee”). During the Investment Period, the Management Fee is calculated at an annual blended rate with respect to the Company’s Assets Invested (defined below) at the end of each quarterly period by reference to (i) 0.75% in case of Assets Invested equal to or less than $500 million, (ii) 0.65% in case of Assets Invested greater than $500 million and equal to or less than $1 billion and (iii) 0.60% in case of Assets Invested greater than $1 billion. “Assets Invested” shall mean, as of the end of each quarterly period, the sum of the Company’s (i) drawn Capital Commitments (as such term is defined in the subscription agreements executed by each of the Company’s Shareholders), and (ii) outstanding principal on borrowings. For the avoidance of doubt, the quarterly Management Fees payable to the Investment Adviser shall be calculated based on the lower of the actual Assets Invested as of the end of any quarter and the target Assets Invested for that quarter as set forth in the Investment Management Agreement. The Management Fee is payable quarterly in arrears.

During the Investment Period, the Management Fee payable each quarter shall be reduced by an amount equal to the marginal fee rate applied to the Company’s most recently acquired investment, multiplied by the Company's cumulative impairments and realized losses since inception (calculated net of any subsequently reversed impairments, realized losses and appreciation on net assets received in connection with written-down assets and reorganizations) (the “Cumulative Losses”) on the Company’s portfolio of investments (collectively, the “Withheld Amounts”). For a period of three years from the date of a previous reduction of the Management Fee by the Withheld Amounts (the "Recoupment Period"), any portion of such Withheld Amounts that is attributable to a subsequently reversed impairment and realized loss shall be payable to our Investment Adviser in the quarter in which such reversal occurs. In addition, upon expiration of each annual period and subject to the term of the Recoupment Period, the Investment Adviser shall be entitled to an amount equal to the portion of such Withheld Amounts that would have been payable if Cumulative Losses had been calculated net of cumulative realized capital gains on the applicable portfolios of investments.

After the Investment Period, the Management Fee shall be calculated at a rate equal to the Applicable Ratio (as defined below) per annum on the basis of the Company's Assets Invested as of the end of the most recently completed calendar quarter and shall be payable quarterly in arrears. The term "Applicable Ratio" shall mean a percentage calculated by (i) taking the sum of (A) the Assets Invested equal to or less than $500 million multiplied by 0.75%, plus (B) the Assets Invested greater than $500 million and equal to or less than $1 billion multiplied by 0.65%, plus (C) the Assets Invested greater than $1 billion multiplied by 0.60% and dividing such total by (ii) the total Assets Invested.

For the three months ended March 31, 2022, $370 of management fees were incurred by the Company, of $370 is being waived in accordance with the Fee Waiver Agreement (defined below).

On November 3, 2021, the Company entered into a management fee waiver agreement (the “Fee Waiver Agreement”) with the Investment Adviser, pursuant to which the Investment Adviser agreed to waive 100% of the management fees payable to the Adviser for the fiscal quarters ended September 30, 2021 and December 31, 2021. On March 8, 2022, the Company entered into a management fee waiver agreement with the Investment Adviser (the “Amended Fee Waiver Agreement”), pursuant to which the Investment Adviser agreed to extend the term of the Fee Waiver Agreement and waive 100% of the management fees payable to the Investment Adviser for the fiscal quarter ended March 31, 2022.

For the avoidance of doubt, the Amended Fee Waiver Agreement did not amend the calculation of the Management Fee as set forth in the Investment Management Agreement. Other than the waiver contemplated by the Amended Fee Waiver Agreement, the terms of the Investment Management Agreement remained in full force and effect. Following the fiscal quarter ended March 31, 2022 with respect to the waiver granted by the Investment Adviser on the Management Fee payable, unless otherwise extended by the Company and the Investment Adviser, the Amended Fee Waiver Agreement terminated and the original management fee terms of the Investment Management Agreement are in full force and effect.

NC SLF INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(dollars amounts in thousands, except per share data)

The Fee Waiver Agreement was extended through the fiscal quarter ending June 30, 2022. For more information regarding the extension of the Management Fee waiver, see Note 9.

The Investment Adviser and its affiliates manage other funds that have investment mandates that are similar, in whole or in part, to the Company's investment mandates. The Investment Adviser and its affiliates may determine that an investment is appropriate for the Company or for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, the Investment Adviser or its affiliates may determine that the Company should invest side-by-side with one or more of those other funds. Any such investments will be made only to the extent permitted by applicable law, interpretive positions of the SEC and the Investment Adviser's allocation procedures. On June 7, 2019, the SEC issued an exemptive order to the Investment Adviser and certain other funds and accounts sponsored or managed by the Investment Adviser and/or its affiliates, including future regulated funds such as the Company (the ‘‘Exemptive Order’’), which permits us to co-invest in Portfolio Companies with certain funds or entities managed by the Investment Adviser or its affiliates in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act, subject to the conditions of the Exemptive Order. Pursuant to the Exemptive Order, the Company is permitted to co-invest with its affiliates if a "required majority" (as defined in Section 57(o) of the 1940 Act) of the Company's independent directors make certain conclusions in connection with a co-investment transaction, including, but not limited to, that (1) the terms of the potential co-investment transaction, including the consideration to be paid, are reasonable and fair to the Company and its stockholders and do not involve overreaching in respect of the Company or its stockholders on the part of any person concerned, and (2) the potential co-investment transaction is consistent with the interests of the Company's stockholders and is consistent with its then-current investment objective and strategies. As the Company's assets are treated as "plan assets" under ERISA, the Company will only co-invest in the same issuer with certain funds or entities managed by the Investment Adviser or its affiliates, so long as their and the Company's respective future investments are at the same level of such issuer's capital structure; provided, that in no event will the Company co-invest with any other fund or entity in contravention of the 1940 Act.

In addition, pursuant to an exemptive order issued by the SEC on April 8, 2020 and applicable to all BDCs through December 31, 2020 (the “Temporary Relief”), the Company was permitted, subject to the satisfaction of certain conditions, to co-invest in our existing portfolio companies with certain affiliates that are private funds if such private funds had not previously invested in such existing portfolio company. Without the Temporary Relief, such private funds would not be able to participate in such co-investments with us unless the private funds had previously acquired securities of the portfolio company in a co-investment transaction with the Company. Although the Temporary Relief expired on December 31, 2020, the SEC’s Division of Investment Management had indicated that until March 31, 2022, it would not recommend enforcement action, to the extent that any BDC with an existing co-investment order continues to engage in certain transactions described in the Temporary Relief, pursuant to the same terms and conditions described therein. The conditional exemptive order is no longer effective; however, on April 15, 2022, the Company filed an application to amend the Exemptive Order (the “Application”) to permit the Company to continue to co-invest in its existing portfolio companies with certain affiliates that are private funds if such private funds had not previously invested in such existing portfolio company, subject to certain conditions. There can be no assurance if and when the Company will receive the exemptive order.

Administration Agreement

The Company entered into an administration agreement (the “Administration Agreement”) with the Administrator. Pursuant to the Administration Agreement, the Administrator furnishes the Company with office facilities and equipment and provides clerical, bookkeeping and record keeping and other administrative services at such facilities. The Administrator performs, or oversees the performance of, the required administrative services, which include, among other things, assisting the Company with the preparation of the financial records that the Company is required to maintain and with the preparation of reports to shareholders and reports filed with the SEC. At the request of the Investment Adviser, the Administrator may also provide managerial assistance on the Company’s behalf to those portfolio companies that have accepted the Company’s offer to provide such assistance. The Administrator has entered into a sub-administration agreement with U.S. Bank, National Association (“U.S. Bank”) to provide the Company with certain fund administration and bookkeeping services. For the three months ended March 31, 2022, the Company incurred $57 in Administration fees which are included in Administration fees in the accompanying consolidated statement of operations. As of March 31, 2022 and December 31, 2021, $184 and $133, respectively, were unpaid and are included in Accounts payable and accrued expenses in the accompanying consolidated statements of assets and liabilities.

NC SLF INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(dollars amounts in thousands, except per share data)

Directors’ Fees

The Board currently consists of three members, two of whom are Independent Directors. The Board has established an Audit Committee, a Nominating and Corporate Governance Committee, and a Special Transactions Committee, each solely consisting of the Independent Directors, and may establish additional committees in the future. For the three months ended March 31, 2022, the Company incurred $15 in fees which are included in Directors’ fees in the accompanying consolidated statement of operations. As of March 31, 2022 and December 31, 2021, $15 and $15, respectively, were unpaid and are included in Directors’ fees payable in the accompanying consolidated statements of assets and liabilities.

5.SECURED BORROWINGS

On September 9, 2021, the Company entered into a revolving credit agreement (the ‘‘Subscription Facility’’) with Wells Fargo Bank, National Association (“Wells Fargo”), as the administrative agent for certain secured parties, sole lead arranger, bookrunner, letter of credit issuer and the lender.

The Subscription Facility has a stated maturity date of September 9, 2022 (subject to an extension under the revolving credit agreement) and a maximum facility amount of $65,000, subject to availability under the "Borrowing Base". The Borrowing Base is calculated based on the unfunded capital commitments of certain investors that have subscribed to purchase shares of the Company, to the extent the capital commitments of such investors have also been approved by Wells Fargo for inclusion in the Borrowing Base and meet certain additional criteria. The Subscription Facility bears interest at a rate of LIBOR plus 1.90% per annum. The Company also pays an unused commitment fee of 0.25% per annum.

The Subscription Facility is structured as a revolving credit facility secured by the capital commitments of the Company’s subscribed investors. The Subscription Facility contains certain financial covenants and events of default and the Company was in compliance with all covenants and other requirements noted in the Subscription Facility agreement.

In accordance with the 1940 Act, the Company is currently only allowed to borrow amounts such that its asset coverage, as defined in the Investment Company Act, is maintained at a level of at least 150% after such borrowings. As of March 31, 2022 and December 31, 2021, asset coverage was 306.8% and 192.6%, respectively.

The carrying amount of the Company’s assets and liabilities, including the Subscription Facility, other than investments at fair value, approximate fair value due to their short maturities. The borrowings consisted of the following as of March 31, 2022 and December 31, 2021:


	March 31, 2022
	Subscription Facility
Total Commitment	$	65,000
Borrowings Outstanding (1)	65,000
Unused Portion (2)	—
Amount Available (3)	—

_______________

(1)Borrowings outstanding on the consolidated statements of assets and liabilities are net of deferred financing costs.

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

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


	December 31, 2021
	Subscription Facility
Total Commitment	$	65,000
Borrowings Outstanding (1)	65,000
Unused Portion (2)	—
Amount Available (3)	—

_______________

(1)Borrowings outstanding on the consolidated statements of assets and liabilities are net of deferred financing costs.

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

NC SLF INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(dollars amounts in thousands, except per share data)

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

For the three months ended March 31, 2022, the components of interest expense and debt financing expenses were as follows:


	For the Three Months Ended March 31, 2022
Borrowing interest expense	$	102
Unused fees	28
Amortization of deferred financing costs	68
Total interest and debt financing expenses	$	198
Average interest rate (1)	2.7		%
Average daily borrowings	$	19,444

_____________

(1)Average interest rate includes borrowing interest expense and unused fees.

Contractual Obligations

The following tables shows the contractual maturities of our debt obligations as of March 31, 2022 and December 31, 2021:


	Payments Due by Period
As of March 31, 2022	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Subscription Facility	$	65,000	$	65,000	$	—	$	—	$	—
Total debt obligations	$	65,000	$	65,000	$	—	$	—	$	—


	Payments Due by Period
As of December 31, 2021	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Subscription Facility	$	65,000	$	65,000	$	—	$	—	$	—
Total debt obligations	$	65,000	$	65,000	$	—	$	—	$	—

6.COMMITMENTS AND CONTINGENCIES

In the ordinary course of its business, the Company enters into contracts or agreements that contain indemnification or warranties. Future events could occur that might lead to the enforcement of these provisions against the Company. The Company believes that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in the consolidated financial statements as of March 31, 2022 and December 31, 2021 for any such exposure.

As of March 31, 2022 and December 31, 2021, the Company had the following unfunded commitments to fund delayed draw loans:


Portfolio Company	March 31, 2022		December 31, 2021
Business Solver	$	2,418	$	2,418
Gastro Health	—		353
Integrated Power Services	872		872
PromptCare	3,129		3,129
Revalize	1,912		1,912
Sciens Building Solutions, LLC	5,113		5,323
Total unfunded commitments	$	13,444	$	14,007

The Company believes its assets will provide adequate coverage to satisfy these unfunded commitments. As of March 31, 2022, the Company had cash and cash equivalents of $63,481 and undrawn capital commitments of $521,499.

NC SLF INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(dollars amounts in thousands, except per share data)

From time to time, the Company may become a party to certain legal proceedings incidental to the ordinary course of its business. As of March 31, 2022 and December 31, 2021, management was not aware of any pending or threatened litigation.

7.NET ASSETS

The Company has the authority to issue 500,000,000 common shares at $0.01 per share par value. On April 16, 2021 the Company issued 100 common shares for $1 to the Investment Adviser in connection with its formation.

On June 21, 2021, the Company held its Initial Closing and entered into subscription agreements with a number of investors in connection with the Private Offering. Under the terms of the subscription agreements, investors are required to fund drawdowns to purchase the Company's shares of common stock up to the amount of their respective capital commitment each time the Company delivers a drawdown notice. On June 29, 2021, the Investment Adviser transferred its 100 common shares to an affiliated entity of the Company, TIAA SMA Strategies LLC (“TIAA SMA”).

As of March 31, 2022, the Company had received capital commitments totaling $656,500 ($521,499 remaining undrawn), of which $6,500 ($5,163 remaining undrawn) is from TIAA SMA. As of March 31, 2022, TIAA SMA owned 133,442 shares of the Company's common stock.

The following table summarizes total shares issued and proceeds received related to capital activity from inception through March 31, 2022:


Date	Shares Issued	Proceeds Received	Issuance Price per Share
April 16, 2021	100	$1	$10.00
June 29, 2021	6,000,000	$60,000	$10.00
January 14, 2022	7,477,568	$75,000	$10.03

The following table summarizes the Company's dividends declared from inception through March 31, 2022:

Date Declared

Record Date

Payment Date

Dividend per Share

March 30, 2022

March 31, 2022

April 12, 2022

$0.11

NC SLF INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(dollars amounts in thousands, except per share data)

8.CONSOLIDATED FINANCIAL HIGHLIGHTS

The following is a schedule of the Company's financial highlights for the three months ended March 31, 2022:


	For the Three Months Ended March 31, 2022
Per share data:
Net asset value at beginning of period	$	10.03
Net investment income (loss) (1)	0.13
Net realized gain (loss) (2)	0.00
Net change in unrealized appreciation (depreciation)	(0.07)
Net increase (decrease) in net assets resulting from operations (1)	0.06
Stockholder distributions from income (3)	(0.11)
Other (4)	(0.01)
Net asset value at end of period	$	9.97

Net assets at end of period	$	134,436
Shares outstanding at end of period (1)	13,477,668
Total Return (5)	0.55		%

Ratio to average net assets:
Ratio of net expenses to average net assets (6)	2.82		%
Ratio of net investment income to average net assets (6)	5.29		%
Portfolio turnover rate (7)	0.23		%

_______________

(1)The per share data was derived by using the weighted average shares outstanding during the period.

(2)Less than 0.01

(3)The per share data for distributions reflects the actual amount of distributions declared during the period.

(4)Includes the effect of share issuances above (below) net asset value and the impact of different share amounts used in calculating per share data as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on shares outstanding as of a period end or transaction date.

(5)Total return is calculated as the change in net asset value (“NAV”) per share during the period, plus distributions per share, if any, divided by the beginning NAV per share. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at the quarter end NAV per share preceding the distribution.

(6)Ratios are annualized except for amounts relating to organizational costs and the management fee waiver. The ratio of total expenses to average net assets was 3.20% for the three months ended March 31, 2022, excluding the effect of the management fee waiver which represented (0.38)% of average net assets. Average net assets is calculated utilizing quarterly net assets.

(7)Portfolio turnover rate is calculated using the lesser of year-to-date sales or year-to-date purchases over the average of the invested assets at fair value for the periods reported.

9. SUBSEQUENT EVENTS

The Company’s management evaluated subsequent events through the date of issuance of the consolidated financial statements. There have been no subsequent events that occurred during such period that would require disclosure in, or would be required to be recognized in, the consolidated financial statements as of March 31, 2022.

On May 3, 2022, the Company entered into a management fee waiver agreement with the Investment Adviser (the “Second Amended Fee Waiver Agreement”), pursuant to which the Investment Adviser agreed to extend the term of the Fee Waiver Agreement (as discussed in Note 4, Related Party Transactions) and waive 100% of the management fees payable to the Investment Adviser for the fiscal quarter ending June 30, 2022. For the avoidance of doubt, the Second Amended Fee Waiver Agreement does not amend the calculation of the Management Fee as set forth in the Investment Management Agreement. Other than the waiver contemplated by the Second Amended Fee Waiver Agreement, the terms of the Investment Management Agreement will remain in full force and effect. Following the fiscal quarter ending June 30, 2022 with respect to the waiver granted by the Investment Adviser on the Management Fee payable, unless otherwise extended by the Company and the Investment Adviser, the Second Amended Fee Waiver Agreement will terminate and the original management fee terms of the Investment Management Agreement will be in full force and effect.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

The information in this management's discussion and analysis of financial condition and results of operations relates to NC SLF Inc., ("we", "us", "our" or the "Company"). The information contained in this section should be read in conjunction with our consolidated financial statements and related notes and schedules thereto appearing elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements, which relate to future events our future performance or financial condition and involves numerous risks and uncertainties, including, but not limited to, those set forth in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 and Part II, Item 1A of and elsewhere in this Quarterly Report on Form 10-Q. This discussion also should be read in conjunction with the “Forward-Looking Statements” in this Quarterly Report on Form 10-Q. Actual results could differ materially from those implied or expressed in any forward-looking statements.

Overview

We were formed on January 29, 2021, as a corporation under the laws of the state of Maryland. We are a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, we have elected, and intend to qualify annually, to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the “Code”).

Our investment objective is to generate current income and capital appreciation primarily by investing in or originating first lien and unitranche leveraged loans made to private-equity owned U.S. middle-market companies that require capital for growth, acquisitions, recapitalizations, refinancings and leveraged buyouts. We expect to make investments through both primary originations and open-market secondary purchases. We will predominantly target investments in U.S. middle market businesses. We define middle market businesses as those businesses with annual earnings before interest, taxes, depreciation, and amortization of approximately $10 million to $200 million. We will focus on making loans that we directly originate to U.S. middle market companies that are meeting their financial and operational obligations, with a portfolio expected to comprise primarily of first-lien senior secured debt and unitranche loans.

NC SLF SPV I, LLC (“SPV I”) is a Delaware limited liability company that was formed on August 10, 2021. SPV I is a wholly owned subsidiary of the Company and is consolidated in our consolidated financial statements commencing from the date of its formation. As of March 31, 2022, SPV I has not commenced operations.

We offer shares of our common stock to “accredited investors” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (the “1933 Act”) in reliance on exemptions from the registration requirements of the 1933 Act (our “Private Offering”). Each investor will purchase shares pursuant to a subscription agreement entered into with us. The initial closing of our Private Offering was held on June 21, 2021 (“Initial Closing”). We may conduct subsequent closings at times during our investment period (the “Investment Period”), which commenced on the Initial Closing Date and shall initially continue until the 48-month anniversary of the Initial Closing Date, subject to automatic extensions thereafter, each for an additional one year period, unless the holders of a majority of our outstanding common stock elect to forego any such extension upon not less than ninety days prior written notice. Holders of a majority of our outstanding common stock may also terminate the Investment Period as of any earlier anniversary of the Initial Closing Date upon not less than ninety days written notice.

Recent COVID-19 Developments

We have been closely monitoring, and will continue to monitor, the impact of the COVID-19 pandemic (including new variants of COVID-19) and its impact on all aspects of our business, including how it will impact our portfolio companies, employees, due diligence and underwriting processes, and financial markets. Given the continued fluidity of the pandemic, we cannot estimate the long-term impact of COVID-19 on our business, future results of operations, financial position or cash flows at this time. Further, the operational and financial performance of the portfolio companies in which we make investments may be significantly impacted by COVID-19, which may in turn impact the valuation of our investments. We believe our portfolio companies have taken, and continue to take, immediate actions to effectively and efficiently respond to the challenges posed by COVID-19 and related restrictions imposed by state and local governments and other private businesses, including developing liquidity plans supported by internal cash reserves, and shareholder support. The COVID-19 pandemic and preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns, cancellations of events and restrictions on travel, significant reductions in demand for certain goods and services, reductions in business activity and financial transactions, supply chain disruptions, labor difficulties and shortages, commodity inflation and elements of economic and financial market instability in the United States and globally. Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter.

Investments

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

To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements. To the extent we continue to qualify as a RIC, we generally will not be subject to U.S federal income tax on any income we timely distribute to our shareholders.

As a BDC, we are required to comply with certain regulatory requirements. For instance, we are generally required to invest at least 70% of our total assets in “qualifying assets,” including securities of private or thinly traded public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less.

As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Under the 1940 Act, the term “eligible portfolio company” includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250.0 million. In addition, we must be organized in the United States to qualify as a BDC.

Revenues

We plan to generate revenues in the form of interest income from the debt securities we hold and dividends and capital appreciation on either direct equity investments or equity interests obtained in connection with originating loans, such as options, warrants or conversion rights. The debt we invest in will typically not be rated by any rating agency, but if it were, it is likely that such debt would be below investment grade. In addition, we (but, for the avoidance of doubt, not our Investment Adviser or Administrator) may also generate revenue in the form of commitment, loan origination, structuring or diligence fees, fees for providing managerial assistance to our portfolio companies, and possibly consulting fees. Certain of these fees may be capitalized and amortized as additional interest income over the life of the related loan.

Expenses

We do not currently have any employees and do not expect to have any employees. Services necessary for our business will be provided through the Administration Agreement and the Investment Management Agreement.

All investment professionals of the Investment Adviser and their respective staffs, when and to the extent engaged in providing investment advisory and management services under the Investment Management Agreement (as opposed to the accounting, compliance and other administrative services set forth below), and the compensation and routine overhead expenses of such personnel allocable to such services, will be provided and paid for by the Investment Adviser and not by us.

The Company will bear its own legal and other expenses incurred in connection with its formation and organization and the offering of its Shares, including external legal and accounting expenses, printing costs, travel and out-of-pocket expenses related to marketing efforts (other than any placement fees, which will be borne by the Investment Adviser directly or pursuant to waivers of the Management Fee), up to a maximum aggregate amount of $1 million.

In addition to Management Fees, except as noted above, we will bear all other costs and expenses that are directly and specifically related to our operations, including without limitation:

•all costs and expenses with respect to the actual or proposed acquisition, financing, holding, monitoring or disposition of our investments, whether such investments are ultimately consummated or not, including, origination fees, syndication fees, due diligence costs, broken deal expenses, bank service fees, fees and expenses of custodians, transfer agents, consultants, experts, travel expenses incurred for investment-related purposes, outside legal counsel, consultants and accountants, administrator’s fees of third party administrators (subject to the below) and financing costs (including interest expenses);

•expenses for liability insurance, including officers and independent directors liability insurance, cyber insurance and other insurance (but excluding the cost of liability insurance covering the Investment Adviser and its officers to the extent that the assets of the Company are treated as ‘‘plan assets’’ for purposes of ERISA);

•extraordinary expenses incurred by the Company (including litigation);

•indemnification and contribution expenses provided, that we will not bear such fees, costs or expenses to the extent that the relevant conduct is not indemnifiable under applicable law, including ERISA, if applicable;

•taxes and other governmental fees and charges;

•administering and servicing and special servicing fees paid to third parties for our benefit;

•the cost of Company-related operational and accounting software and related expenses;

•cost of software (including the fees of third-party software developers) used by the Investment Adviser and its affiliates to track and monitor our investments (specifically, cost of software related to data warehousing, portfolio administration/reconciliation, loan pricing and trade settlement attributable to the Company);

•expenses related to the valuation or appraisal of our investments;

•risk, research and market data-related expenses (including software) incurred for our investments;

•fees, costs and expenses (including legal fees and expenses) incurred to comply with any applicable law, rule or regulation (including regulatory filings such as financial statement filings, ownership filings (Section 16 or Section 13 filings), blue sky filings and registration statement filings, as applicable) to which we are subject or incurred in connection with any governmental inquiry, investigation or proceeding involving us; provided that we will not bear such fees, costs or expenses to the extent that the relevant conduct is not indemnifiable under applicable law, including ERISA, if applicable;

•costs associated with the wind-up, liquidation, dissolution and termination of the Company;

•other legal, operating, accounting, tax return preparation and consulting, auditing and administrative expenses in accordance with the Investment Management Agreement and the Administration Agreement and fees for outside services provided to us or on our behalf; provided that if the assets of the Company are treated as ‘‘plan assets’’ for purposes of ERISA, we will not incur such expenses or fees, if such expenses and fees arise in connection with such services, to the extent that they are performed by the Administrator;

•expenses of the Board (including the reasonable costs of legal counsel, accountants, financial advisors and/or such other advisors and consultants engaged by the Board, as well as travel and out-of-pocket expenses related to the attendance by directors at Board meetings), to the extent permitted under applicable law, including ERISA, if applicable;

•annual or special meetings of the Shareholders;

•the costs and expenses associated with preparing, filing and delivering to Shareholders periodic and other reports and filings required under federal securities laws as a result of our status as a BDC;

•ongoing Company offering expenses;

•federal and state registration fees pertaining to the Company;

•costs of Company-related proxy statements, Shareholders’ reports and notices;

•costs associated with obtaining fidelity bonds as required by the 1940 Act and Section 412 of ERISA;

•printing, mailing and all other similar direct expenses relating to the Company;

•expenses incurred in preparation for or in connection with (or otherwise relating to) any initial public offering or other debt or equity offering conducted by the Company, including but not limited to external legal and accounting expenses, printing costs, travel and out-of-pocket expenses related to marketing efforts; and

•only to the extent (i) Benefit Plan Investors hold less than 25% of our Shares, or (ii) our Shares are Publicly-offered Securities, our allocable portion of overhead, including office equipment and supplies, rent and our allocable portion of the compensation paid to accounting, compliance and administrative staff employed by the Investment Adviser or its affiliates who provide services to the Company necessary for its operation, including related taxes, health insurance and other benefits.

Portfolio and investment activity

Portfolio Composition

Our portfolio and investment activity for the three months ended March 31, 2022 is presented below (information presented herein is at amortized cost unless otherwise indicated) (dollar amounts in thousands):


	For the Three Months Ended March 31, 2022
Investments:
Total investments, beginning of period	$	116,152
Purchase of investments	21,699
Proceeds from principal repayments and sales of investments	(297)
Amortization of premium/accretion of discount, net	72
Net realized gain (loss) on investments	3
Total investments, end of period	$	137,629

Portfolio companies at beginning of period	14
Number of new portfolio companies	2

Portfolio companies at end of period	16

As of March 31, 2022 and December 31, 2021, our investments consisted of the following (dollar amounts in thousands):


	March 31, 2022						December 31, 2021
	Amortized Cost		Fair Value		% of Fair Value		Amortized Cost		Fair Value		% of Fair Value
First-Lien Term Loans	$	137,629	$	136,994	100.00	%	$	116,152	$	116,347	100.00	%
Total	$	137,629	$	136,994	100.00	%	$	116,152	$	116,347	100.00	%
Largest portfolio company investment	$	14,139	$	14,279	10.42	%	$	14,162	$	14,319	12.31	%
Average portfolio company investment	$	8,602	$	8,562	6.25	%	$	8,297	$	8,311	7.14	%

The industry composition of our portfolio as a percentage of fair value as of March 31, 2022 and December 31, 2021 was as follows:


Industry	March 31, 2022		December 31, 2021
Automotive	7.7	%	—	%
Capital Equipment	3.1	%	3.7	%
Chemicals, Plastics, & Rubber	10.4	%	12.2	%
Construction & Building	7.4	%	8.6	%
Consumer Goods: Durable	9.3	%	11.1	%
Containers, Packaging & Glass	9.3	%	11.1	%
Healthcare & Pharmaceuticals	12.7	%	14.7	%
High Tech Industries	4.5	%	5.4	%
Services: Business	31.0	%	27.8	%
Services: Consumer	4.6	%	5.4	%
Total	100.0	%	100.0	%

The weighted average yield of our investment held as of March 31, 2022 and December 31, 2021 were as follows:


	March 31, 2022		December 31, 2021
Weighted average yield on debt and income producing investments, at cost	5.79	%	5.78	%
Weighted average yield on debt and income producing investments, at fair value	5.81	%	5.77	%
Percentage of debt investments bearing a floating rate	100.00	%	100.00	%
Percentage of debt investments bearing a fixed rate	—	%	—	%

The weighted average yield of our debt and income producing securities is not the same as a return on investment for our shareholders, but rather relates to our investment portfolio and is calculated before deduction of all of our fees and expenses. The weighted average yield was computed using the effective interest rates as of each respective date, including accretion of original issue discount. There can be no assurance that the weighted average yield will remain at its current level.

Based on current market conditions, the pace of our investment activities, including originations and repayments, may vary. The strength of the financing and mergers and acquisitions markets and the current low interest rate environment has led to increased originations and repayments, an active pipeline of investment opportunities. However, there have been headwinds in the financing and merger and acquisitions markets resulting from increased inflation, a shifting interest rate environment, geopolitical events (including the war in Ukraine), and the ongoing impact from the COVID-19 globally. We are monitoring the effect that market volatility, including as a result of a rising interest rate environment, may have on our portfolio companies and our investment activities, and we will continue to seek to invest businesses with low levels of cyclicality (i.e., the risk of business cycles or other economic cycles adversely affecting them).

Asset Quality

In addition to various risk management and monitoring tools, we use our Investment Adviser’s investment rating system to characterize and monitor the credit profile and expected level of returns on each investment in our portfolio. Each investment team intends to utilize a systematic, consistent approach to credit evaluation, with a particular focus on an acceptable level of debt repayment and deleveraging under a “base case” set of projections (the “Base Case”), which reflects a more conservative estimate than the set of projections provided by a prospective portfolio company, which the Investment Adviser refer to as the “Management Case.” The following is a description of the conditions associated with each investment rating:

1.Performing - Superior: Borrower is performing significantly above Management Case.

2.Performing - High: Borrower is performing at or near the Management Case (i.e., in a range slightly below to slightly above).

3.Performing - Low Risk: Borrower is operating well ahead of the Base Case to slightly below the Management Case.

4.Performing - Stable Risk: Borrower is operating at or near the Base Case (i.e., in a range slightly below to slightly above). This is the initial rating assigned to all new borrowers.

5.Performing - Management Notice: Borrower is operating below the Base Case. Adverse trends in business conditions and/or industry outlook are viewed as temporary. There is no immediate risk of payment default and only a low to moderate risk of covenant default.

6.Watch List - Low Maintenance: Borrower is operating below the Base Case, with declining margin of protection. Adverse trends in business conditions and/or industry outlook are viewed as probably lasting for more than a year. Payment default is still considered unlikely, but there is a moderate to high risk of covenant default.

7.Watch List - Medium Maintenance: Borrower is operating well below the Base Case, but has adequate liquidity. Adverse trends are more pronounced than in Internal Risk Rating 6 above. There is a high risk of covenant default, or it may have already occurred. Payments are current, although subject to greater uncertainty, and there is a moderate to high risk of payment default.

8.Watch List - High Maintenance: Borrower is operating well below the Base Case. Liquidity may be strained. Covenant default is imminent or may have occurred. Payments are current, but there is a high risk of payment default. Negotiations to restructure or refinance debt on normal terms may have begun. Further significant deterioration appears unlikely and no loss of principal is currently anticipated.

9.Watch List - Possible Loss: At the current level of operations and financial condition, the borrower does not have the ability to service and ultimately repay or refinance all outstanding debt on current terms. Liquidity is strained. Payment default may have occurred or is very likely in the short term unless creditors grant some relief. Loss of principal is possible.

10.Watch List - Probable Loss: At the current level of operations and financial condition, the borrower does not have the ability to service and ultimately repay or refinance all outstanding debt on current terms. Payment default is very likely or may have already occurred. Liquidity is extremely limited. The prospects for improvement in the borrower’s situation are sufficiently negative that loss of some or all principal is probable.

The Investment Adviser monitors and, when appropriate, changes the investment rating assigned to each investment in our portfolio. Each investment team will review the investment ratings in connection with monthly or quarterly portfolio reviews. As the COVID-19 pandemic continues to evolve, we are maintaining close communications with our portfolio companies to proactively assess and manage potential risks across our debt investment portfolio. We have also increased oversight and analysis of credits in any vulnerable industries in an attempt to improve loan performance and reduce credit risk.

The investments held as of March 31, 2022 and December 31, 2021, had an investment rating of 4 and 4, respectively.

Results of Operations

We commenced loan origination and investment activities on June 30, 2021 and therefore do not have prior periods with which to compare our operating results for the three months ended March 31, 2022. Operating results for the three months ended March 31, 2022 were as follows (dollar amounts in thousands):


	For the Three Months Ended March 31, 2022
Income
Non-controlled/non-affiliated company investments:
Interest income	$	1,945
Other income	2
Total Investment Income	1,947

Expenses
Interest and debt financing expenses	198
Management fees	370
Professional fees	94
Directors’ fees	15
Administration fees	57
Other general and administrative expenses	34
Total expenses before management fee waiver	768
Management fee waiver	(370)
Total expenses after management fee waiver	398

Net investment income (loss)	$	1,549
Net Realized and Change in Unrealized Gains (Losses)
Net realized gains (losses)	$	3
Net change in unrealized gains (losses)	(830)
Total net realized and change in unrealized gains (losses)	(827)
Net increase (decrease) in net assets resulting from operations	$	722

Net increase (decrease) in net assets resulting from operations can vary from period to period as a result of various factors, including the level of new investment commitments, expenses, the recognition of realized gains and losses, and changes in unrealized appreciation and depreciation on the investment portfolio.

Investment income

Our initial investment was purchased on June 30, 2021. Investment income, attributable to interest and fees on our debt investments, for the three months ended March 31, 2022 is driven by our deployment of capital as we continue to ramp up our portfolio.

Expenses

For the three months ended March 31, 2022, $370 of management fees were incurred by the Company, of $370 is being waived in accordance with the Fee Waiver Agreement (defined below).

On November 3, 2021, we entered into a management fee waiver agreement with our Investment Adviser, pursuant to which the Investment Adviser agreed to waive 100% of the management fees payable to the Investment Adviser for the fiscal quarters ended September 30, 2021 and December 31, 2021 (the “Initial Fee Waiver Agreement”). On March 8, 2022, we entered into the a management fee waiver agreement with our Investment Adviser (the “Prior Fee Waiver Agreement”), pursuant to which the Investment Adviser agreed to extend the term of the Initial Fee Waiver Agreement and waive 100% of the management fees payable to the Investment Adviser for the fiscal quarter ended March 31, 2022. The Fee Waiver Agreement was extended through the fiscal quarter ending June 30, 2022. For more information regarding the extension of the Management Fee waiver, see “Other Developments.”

For the avoidance of doubt, the Fee Waiver Agreement does not amend the calculation of the management fee as set forth in the investment advisory and management agreement, dated as of May 31, 2021, by and between us and our Investment Adviser (the “Investment Management Agreement”). Other than the waiver contemplated by the Fee Waiver Agreement, the terms of the Investment Management Agreement will remain in full force and effect. Following the fiscal quarter ending June 30, 2022 with respect to the waiver granted by the Investment Adviser on the management fee payable, unless otherwise extended by the Company and the Investment Adviser, the Fee Waiver Agreement will terminate and the original management fee terms of the Investment Management Agreement will be in full force and effect.

Total operating expenses after management fee waiver for the three months ended March 31, 2022, was $398, which consisted of $198 of interest and debt financing expenses, $94 of professional fees, $15 of Director fees, $57 of administration fees, and $34 of other general and administrative expenses.

Net realized gain (loss) and Net change in unrealized appreciation (depreciation) on investments

As a result of repayment and/or sales activity during the period, we had a net realized gain on investments of $3 for the three months ended March 31, 2022.

We recorded a net change in unrealized depreciation of $(830) for the three months ended March 31, 2022, which reflects the net change in the fair value of our investment portfolio relative to its cost basis over the period.

The total net loss for the three months ended March 31, 2022, was primarily related to the economic uncertainty created by both macroeconomic and geopolitical factors in the financial markets, which directly impacted the valuation of our portfolio investments. The fair value of our portfolio investments for the three months ended March 31, 2022 was also negatively impacted by market volatility and the widening of credit spreads.

Liquidity and Capital Resources

Our liquidity and capital resources are expected to be generated primarily from the proceeds of capital drawdowns of our privately placed capital commitments, cash flows from income earned from our investments, principal repayments and Subscription Facility (as defined below). The expected primary uses of our cash are (i) purchases of investments in portfolio companies, (ii) funding the cost of our operations (including fees paid to our Investment Adviser), (iii) debt service, repayment and other financing costs of our borrowings and (iv) cash distributions to the holders of our shares. This “ Liquidity and Capital Resources” section should be read in conjunction with “Recent COVID-19 Developments” above.

We are generally permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our shares if our asset coverage, as defined in the 1940 Act, is equal to at least 150%, if certain requirements are met. In connection with our organization, our Board and the Investment Adviser (as our initial shareholder at formation) authorized us to adopt the 150% asset coverage ratio. As of March 31, 2022 and December 31, 2021, our asset coverage ratio was 306.8% and 192.6%, respectively.

Cash and cash equivalents as of March 31, 2022, taken together with our uncalled capital commitments of $521,499, is expected to be sufficient for our investment activities and to conduct our operations in the near term. As of March 31, 2022, we had $0.0 available under our Subscription Facility.

For the three months ended March 31, 2022, our cash and cash equivalents balance increased by $22,687. During that period, $52,272 was used for operating activities, primarily due to investment purchases of $21,699, offset by $297 in repayments and sales of investments in portfolio companies. During the same period, $74,959 was provided by financing activities, consisting primarily of proceeds from issuance of common shares of $75,000, proceeds from secured borrowings of $65,000, and repayments of secured borrowings of $65,000.

Equity

Subscriptions and Drawdowns

Our authorized stock consists of 500,000,000 shares of stock, par value $0.01 per share, all of which are initially designated as common stock. On April 16, 2021, we issued 100 common shares for $1 in connection with our formation.

On June 21, 2021, we held our Initial Closing and entered into subscription agreements with a number of investors in connection with the Private Offering of our shares. On June 29, 2021, the Investment Adviser transferred its 100 common shares to an affiliated entity of the Company, TIAA SMA Strategies LLC (“TIAA SMA”). As of March 31, 2022, we had received capital commitments totaling $656,500 ($521,499 remaining undrawn) of which $6,500 ($5,163 remaining undrawn) was from TIAA SMA. As of March 31, 2022, TIAA SMA owned 133,442 shares of the Company's common stock.

The following table summarizes total shares issued and proceeds received related to capital activity from inception through March 31, 2022 (dollar amounts in thousands):


Date	Shares Issued	Proceeds Received	Issuance Price per Share
April 16, 2021	100	$1	$10.00
June 29, 2021	6,000,000	$60,000	$10.00
January 14, 2022	7,477,568	$75,000	$10.03

Dividends and Distributions

To the extent that we have taxable income available, we intend to make quarterly distributions to our common shareholders. Dividends and distributions to common shareholders are recorded on the applicable record date. The amount to be distributed to common shareholders is determined by our Board each quarter and is generally based upon the taxable earnings estimated by management and available cash. Net realized capital gains, if any, will generally be distributed at least annually, although we may decide to retain such capital gains for investment.

The following table summarizes the dividends declared from inception through March 31, 2022:

Date Declared

Record Date

Payment Date

Dividend per Share

March 30, 2022

March 31, 2022

April 12, 2022

$0.11

Income Taxes, Including Excise Taxes

We have elected to be treated, and intend qualify annually, as a RIC under the Code. If we qualify as a RIC, we will not be taxed on our investment company taxable income or realized net capital gains, to the extent that such taxable income or gains are distributed, or deemed to be distributed, to shareholders on a timely basis.

Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation until realized. Dividends declared and paid by us in a year may differ from taxable income for that year as such dividends may include the distribution of current year taxable income or the distribution of prior year taxable income carried forward into and distributed in the current year. Distributions also may include returns of capital.

To qualify for RIC tax treatment, we must, among other things, distribute, with respect to each taxable year, at least 90% of our investment company net taxable income (i.e., our net ordinary income and our realized net short-term capital gains in excess of realized net long-term capital losses, if any). If we qualify as a RIC, we may also be subject to a U.S. federal excise tax, based on distribution requirements of our taxable income on a calendar year basis. Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year distributions into the next year and pay a 4% U.S. federal excise tax on such income. Any such carryover taxable income must be distributed through a dividend declared prior to filing the final tax return related to the year that generated such taxable income.

We intend to distribute to our shareholders between 90% and 100% of our annual taxable income (which includes our taxable interest and fee income). We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. We cannot assure shareholders that they will receive any distributions or distributions at a particular level.

Subscription Facility

On September 9, 2021, we entered into a revolving credit agreement (the ‘‘Subscription Facility’’) with Wells Fargo Bank, National Association (“Wells Fargo”), as the administrative agent for certain secured parties, sole lead arranger, bookrunner, letter of credit issuer and the lender. See Note 5 to the consolidated financial statements in Part I, Item 1, of this Quarterly Report on Form 10-Q for more information on our debt.

The Subscription Facility has a stated maturity date of September 9, 2022 (subject to an extension under the revolving agreement) and a maximum facility amount of $65,000, subject to availability under the "Borrowing Base". The Borrowing Base is calculated based on the unfunded capital commitments of certain investors that have subscribed to purchase shares of the Company, to the extent the capital commitments of such investors have also been approved by Wells Fargo for inclusion in the Borrowing Base and meet certain additional criteria. The Subscription Facility bears interest at a rate of LIBOR plus 1.90% per annum with respect to LIBOR rate loans or the reference rate (as defined in the revolving credit agreement) plus 1.90% per annum with respect to the reference rate loans. We also pay an unused commitment fee of 0.25% per annum.

The Subscription Facility is structured as a revolving credit facility secured by the capital commitments of our subscribed investors. The Subscription Facility contains certain financial covenants and events of default.

Contractual Obligations

The following table shows the contractual maturities of our debt obligations as of March 31, 2022 and December 31, 2021 (dollars amounts in thousands):


	Payments Due by Period
As of March 31, 2022	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Subscription Facility	$	65,000	$	65,000	$	—	$	—	$	—
Total debt obligations	$	65,000	$	65,000	$	—	$	—	$	—


	Payments Due by Period
As of December 31, 2021	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Subscription Facility	$	65,000	$	65,000	$	—	$	—	$	—
Total debt obligations	$	65,000	$	65,000	$	—	$	—	$	—

Related-Party Transactions

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

•the Investment Management Agreement; and

•the Administration Agreement.

In addition to the aforementioned agreements, the SEC has granted an exemptive order (the “Order”) that permits us to participate in negotiated co-investment transactions with certain other funds and accounts sponsored or managed by either of the Investment Adviser and/or its affiliates. Co-investment under the Order is subject to certain conditions therein, including the condition that, in the case of each co-investment transaction, the Board determines that it would be in the Company’s best interest to participate in the transaction. Neither we nor the affiliated funds are obligated to invest or co-invest when investment opportunities are referred to us or them. On April 15, 2022, the Company filed an exemptive application to amend the Order. For more information, see Note 4 to the consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

In the ordinary course of its business, the Company enters into contracts or agreements that contain indemnifications or warranties. Future events could occur which may give rise to liabilities arising from these provisions against us. We believe that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in these consolidated financial statements as of March 31, 2022 and December 31, 2021. We have in the past and may in the future become obligated to fund commitments such as delayed draw commitments. For more information on our off-balance sheet arrangements, commitments and contingencies see Note 6 to the consolidated financial statements in Part I, Item 1 of this Quarterly Report on 10-Q.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ. Our critical accounting policies and estimates, including those relating to the valuation of our portfolio investments, are described below. We consider the most significant accounting policies to be those related to our Valuation of Investments, Fair Valuation Measurements, Income Recognition, and Income Taxes, are described below. The valuation of investments is our most significant critical estimate. The critical accounting policies and estimates should be read in connection with our risk factors as disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Valuation of Portfolio Investments

At all times, consistent with U.S. GAAP, the 1940 Act and ERISA (as described below), we conduct a valuation of our assets, pursuant to which our net asset value is determined.

Our assets are valued on a quarterly basis, or more frequently if required under the 1940 Act. For purposes of the 1940 Act, the Board of Directors of the Company (the “Board”) is ultimately and solely responsible for determining the fair value of our portfolio investments on a quarterly basis in good faith, including investments that are not publicly traded, those whose market prices are not readily available and any other situation where our portfolio investments require a fair value determination. Security transactions are accounted for on a trade date basis. Because (i) "benefit plan investors", as defined in Section 3(42) of ERISA, ("Benefit Plan Investors"), hold 25% or more of our outstanding shares, and (ii) our shares are not listed on a national securities exchange, one or more unaffiliated third-parties ("Sub-Administrator(s)") have been engaged to independently value our investments, in consultation with the Investment Adviser.

For all valuations, the Audit Committee of our Board (the “Audit Committee”), which consists solely of directors who are not ‘‘interested persons’’ of the Company, as such term is used under Section 2(a)(19) of the 1940 Act (the ‘‘Independent Directors’’), will review these preliminary valuations and our Board, a majority of whom are Independent Directors, will discuss the valuations and determine the fair value of each investment in the portfolio in good faith; provided, however, that to the extent our assets are treated as ‘‘plan assets’’ for purposes of ERISA, the Sub-Administrator(s) will determine valuations using only those valuation methodologies reviewed and approved by the Audit Committee and our Board, and our Board will accept such valuations prepared by the Sub-Administrator(s) in accordance therewith.

Investments for which market quotations are readily available are typically valued at those market quotations. Market quotations are obtained from independent pricing services, where available. Generally investments marked in this manner will be marked at the mean of the bid and ask of the quotes obtained. To validate market quotations, the Sub-Administrator(s) utilize a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. The Sub-Administrator(s) provides their analysis to support their conclusion.

With respect to investments for which market quotations are not readily available, the Sub-Administrator(s) will take into account relevant factors in determining the fair value of our investments, including and in combination of: comparison to publicly traded securities, including factors such as yield, maturity and measures of credit quality; the enterprise value of a portfolio company; the nature and realizable value of any collateral; the portfolio company’s ability to make payments and its earnings and discounted cash flows; and the markets in which the portfolio company does business. Investment performance data utilized are the most recently available financial statements and compliance certificates received from the portfolio companies as of the measurement date which in many cases may reflect a lag in information. The Sub-Administrator(s) provides a fair valuation report, a description of the methodology used to determine the fair value and their analysis and calculations to support their conclusion.

When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Sub-Administrator(s) uses the pricing indicated by the external event to corroborate our valuation.

U.S. GAAP establishes a hierarchical disclosure framework which ranks the level of observability of market price inputs used in measuring investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value. We along with the Sub-Administrator(s) review pricing and methodologies in order to determine if observable market information is being used, versus unobservable inputs.

Our accounting policy on the fair value of our investments is critical because the determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements express the uncertainty with respect to the possible effect of these valuations, and any change in these valuations, on the consolidated financial statements.

For more information on the fair value hierarchies, our framework for determining fair value and the composition of our portfolio see Note 3 to the consolidated financial statements in Part I , Item 1 of this Quarterly Report on Form 10-Q.

Revenue recognition

Our revenue recognition policies are as follows:

Net realized gains (losses) on investments: Gains or losses on investment transactions are determined on a specific identification basis.

Interest Income: Interest income, including amortization of premium and accretion of discount on loans are recorded on the accrual basis. We accrue interest income based on the effective yield if we expect that, ultimately, we will be able to collect such income.

Other income may include income such as consent, waiver, amendment, unused, and prepayment fees associated with our investment activities as well as any fees for managerial assistance services rendered by us to our portfolio companies. Such fees are recognized as income when earned or the services are rendered.

We may have loans in our portfolio that contain payment-in-kind (“PIK”) income provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity.

Non-accrual: Generally, if a payment default occurs on a loan in the portfolio, or if management otherwise believes that the issuer of the loan will not be able to make contractual interest payments or principal payments, the Sub-Adviser will place the loan on non-accrual status and we will cease recognizing interest income on that loan until all principal and interest is current through payment or until a restructuring occurs, such that the interest income is deemed to be collectible. However, we remain contractually entitled to this interest. We may make exceptions to this policy if the loan has sufficient collateral value and is in the process of collection. Accrued interest is written off when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated.

Our accounting policy on interest income recognition is critical because it involves the primary source of our revenue and accordingly is significant to the financial results as disclosed in our consolidated financial statements.

U.S. Federal Income Taxes

We have elected to be treated as a BDC under the 1940 Act. We have elected, and intend to qualify annually, to be treated as a RIC under the Code. So long as we maintain our status as a RIC, we generally will not be subject to U.S. federal income or excise taxes on any ordinary income or capital gains that we timely distribute at least annually to our stockholders as dividends. As a result, any tax liability related to income earned and distributed by us represents obligations of our stockholders and will not be reflected in our consolidated financial statements.

We evaluate tax positions taken or expected to be taken in the course of preparing our financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof. As of March 31, 2022, the Company did not have any uncertain tax positions that met the recognition or measurement criteria, nor did the Company have any unrecognized tax benefits.

Our accounting policy on income taxes is critical because if we are unable to maintain our status as a RIC, we would be required to record a provision for U.S. federal income taxes which may be significant to our financial results.

Other Developments

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Valuation Risk

We have invested, and plan to continue to invest, primarily in illiquid debt and equity securities of private companies. Most of our investments will not have a readily available market price, and we value these investments at fair value as determined in good faith by our Board; provided, however, that to the extent our assets are treated as ‘‘plan assets’’ for purposes of ERISA, the Sub-Administrator will determine valuations using only those valuation methodologies reviewed and approved by the Audit Committee and our Board, and our Board will accept such valuations prepared by the Sub-Administrator in accordance therewith. There is no single standard for determining fair value. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize amounts that are different from the amounts presented and such differences could be material.

Interest Rate Risk

We are subject to interest rate risk. Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing internals between our assets and liabilities and the effect that interest rates may have on our cash flows. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. Our net investment income is also affected by fluctuations in various interest rates, including the decommissioning of LIBOR and changes in alternate rates and prime rates, to the extent our debt investments include floating interest rates. 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. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased. In a prolonged low interest rate environment, the difference between the total interest income earned on interest earning assets and the total interest expense incurred on interest bearing liabilities may be compressed, reducing our net interest income and potentially adversely affecting our operating results. Conversely, in a rising interest rate environment, such difference could potentially increase thereby increasing our net income as indicated per the table below. In March 2022, the Federal Reserve raised interest rates by 0.25%, the first increase since December 2018, and, most recently, in May 2022, raised interest rates by 0.50% and indicated that it would raise rates at each of the remaining meetings in 2022.

As of March 31, 2022, all loans in our investment portfolio had a floating interest rate. Interest rates on the loans held within our portfolio of investments are typically based on floating LIBOR, of which all have a LIBOR floor. Additionally, the Subscription Facility bears interest at a rate of LIBOR plus 1.90% per annum. The Company also pays an unused commitment fee of 0.25% per annum.

The following table estimates the potential changes in net cash flow generated from interest income and expenses, should interest rates increase by 100, 200 or 300 basis points, or decrease by 25 basis points. Interest income is calculated as revenue from interest generated from our portfolio of investments held on March 31, 2022. Interest expense is calculated based on the terms of the Subscription Facility, using the outstanding balance as of March 31, 2022. Interest expense on the Subscription Facility is calculated using the interest rate as of March 31, 2022, adjusted for the impact of hypothetical changes in rates, as shown below. The base interest rate case assumes the rate on our portfolio investment remains unchanged from the actual effective interest rate as of March 31, 2022. This hypothetical calculation is based on a model of the investments held in our portfolio, as of March 31, 2022 and is only adjusted for assumed changes in the underlying base interest rate.

Actual results could differ significantly from those estimated in the table (dollar amounts in thousands).


Changes in Interest Rates	Interest Income		Interest Expense		Net Income
-25 Basis Points	$	(43)	$	(40)	$	(3)
Base Interest Rate	—		—		—
+100 Basis Points	316		160		156
+200 Basis Points	659		321		338
+300 Basis Points	1,001		481		520

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q.

Based on that evaluation, we, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic Securities and Exchange Commission (the “SEC”) filings is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

(b) Changes in Internal Controls Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Neither we nor the Investment Adviser are currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceedings threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under loans to or other contracts with our portfolio companies. Our business also is subject to extensive regulation, which may result in regulatory proceedings against us.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously disclosed under Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2021. For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 11, 2022, which is accessible on the SEC’s website at sec.gov.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Except as previously reported by us on our current reports on Form 8-K, we did not sell any securities during the period covered by this Quarterly Report on Form 10-Q that were not registered under the Securities Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

On November 3, 2021, NC SLF Inc. (the "Company") entered into a management fee waiver agreement with Churchill Asset Management, LLC, the Company’s investment adviser (the “Investment Adviser”), pursuant to which the Investment Adviser agreed to waive 100% of the management fees payable to the Investment Adviser for the fiscal quarters ended September 30, 2021 and December 31, 2021 (the “Initial Fee Waiver Agreement”). On March 8, 2022, the Company entered into the a management fee waiver agreement with the Investment Adviser (the “Prior Fee Waiver Agreement”), pursuant to which the Investment Adviser agreed to extend the term of the Initial Fee Waiver Agreement and waive 100% of the management fees payable to the Investment Adviser for the fiscal quarter ended March 31, 2022. On May 3, 2022, the Company entered into the a management fee waiver agreement with the Investment Adviser (the “Fee Waiver Agreement”), pursuant to which the Investment Adviser agreed to extend the term of the Prior Fee Waiver Agreement and waive 100% of the management fees payable to the Investment Adviser for the fiscal quarter ending June 30, 2022. For the avoidance of doubt, the Fee Waiver Agreement does not amend the calculation of the management fee as set forth in the investment advisory and management agreement, dated as of May 31, 2021, by and between the Company and the Investment Adviser (the “Investment Management Agreement”). Other than the waiver contemplated by the Fee Waiver Agreement, the terms of the Investment Management Agreement will remain in full force and effect. Following the fiscal quarter ending June 30, 2022 with respect to the waiver granted by the Investment Adviser on the management fee payable, unless otherwise extended by the Company and the Investment Adviser, the Fee Waiver Agreement will terminate and the original management fee terms of the Investment Management Agreement will be in full force and effect.

ITEM 6. EXHIBITS


3.1			Articles of Incorporation (1)
3.2			Form of Articles of Amendment and Restatement (2)
3.3			Bylaws (2)
4.1			Form of Subscription Agreement (2)
4.2			Form of Stock Certificate (2)
10.1			Management Fee Waiver Agreement, dated May 3, 2022, by and between NC SLF Inc. and Churchill Asset Management LLC*

31.1			Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended*
31.2			Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended*
32			Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended*

* Filed herewith.

(1)Incorporated by reference to the Registrant's Registration Statement on Form 10 filed on April 1, 2021.

(2)Incorporated by reference to the Registrant's Amendment No. 1 to the Registration Statement on Form 10 filed on May 13, 2021.

SIGNATURES

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


			NC SLF Inc.

			By:			/s/ Kenneth Kencel
						Name: Kenneth Kencel
						Title: President and Chief Executive Officer

			NC SLF Inc.

			By:			/s/ Shai Vichness
						Name: Shai Vichness
						Title: Chief Financial Officer and Treasurer

Date: May 9, 2022

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NC SLF 10-Q2022 Q1 Quarterly report

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