Table of Contents
 
 UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2019
 OR
 ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                to
 Commission File No. 814-01248
 TCG BDC II, INC.
 (Exact name of Registrant as specified in its charter)
 Maryland81-5320146(State or other jurisdiction ofincorporation or organization)(I.R.S. EmployerIdentification Number)
 520 Madison Avenue, 40th Floor, New York, NY 10022
 (Address of principal executive office) (Zip Code)
 (212) 813-4900
 (Registrant’s telephone number, including area code)
 
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each classTrading Symbol(s)Name of each exchange on which registeredNoneNoneNone
 Securities registered pursuant to Section 12(g) of the Act:
 Common Stock, par value $0.01 per share
 (Title of Class)
 
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No x
 Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No x
 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  ☐
 Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☐    No  ☐
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
 Large accelerated filer☐Accelerated filer☐Non-accelerated filerxSmaller reporting company☐Emerging growth companyx
 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No x
 As of June 30, 2019, there was no established public market for the registrant's common stock.
 The number of shares of the registrant’s common stock, $0.01 par value per share, outstanding at March 3, 2020 was 35,769,223 .
 Documents Incorporated by Reference: Portions of the registrant’s Proxy Statement for its 2019 Annual Meeting of Stockholders to be filed not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K are incorporated by reference into Part III of this Form 10-K.
 
  
 Table of Contents
 
 TCG BDC II, INC.
 INDEX
 
 Part IItem 1.Business3Item 1A.Risk Factors21Item 1B.Unresolved Staff Comments45Item 2.Properties45Item 3.Legal Proceedings45Item 4.Mine Safety Disclosures45Part IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities46Item 6.Selected Financial Data47Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations48Item 7A.Quantitative and Qualitative Disclosures About Market Risk61Item 8.Financial Statements and Supplementary Data62Item 9.Changes and Disagreements with Accountants on Accounting and Financial Disclosure102Item 9A.Controls and Procedures102Item 9B.Other Information102Part IIIItem 10.Directors, Executive Officers and Corporate Governance104Item 11.Executive Compensation104Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters104Item 13.Certain Relationships and Related Transactions, and Director Independence104Item 14.Principal Accountant Fees and Services104Part IVItem 15.Exhibits and Financial Statement Schedules105Item 16.Form 10-K Summary106
 
 
  
 Table of Contents
 
 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 We have included or incorporated by reference in this Form 10-K, and from time to time our management may make, “forward-looking statements”. These forward-looking statements are not historical facts, but instead relate to future events or the future performance or financial condition of TCG BDC II, Inc. (together with its consolidated subsidiary, “we,” “us,” “our,” “BDC II” or the “Company”). These statements are based on current expectations, estimates and projections about us, our current or prospective portfolio investments, our industry, our beliefs, and our assumptions. The forward-looking statements contained in this Form 10-K and the documents incorporated by reference herein involve a number of risks and uncertainties, including statements concerning:
 
 •our, or our portfolio companies’, future business, operations, operating results or prospects; •the return or impact of current and future investments; •the general economy and its impact on the industries in which we invest; •the impact of any protracted decline in the liquidity of credit markets on our business; •the impact of fluctuations in interest rates on our business; •our future operating results; •the impact of changes in laws, policies or regulations (including the interpretation thereof) affecting our operations or the operations of our portfolio companies; •the valuation of our investments in portfolio companies, particularly those having no liquid trading market; •our ability to recover unrealized losses; •market conditions and our ability to access alternative debt markets and additional debt and equity capital; •our contractual arrangements and relationships with third parties; •uncertainty surrounding the financial stability of the United States, Europe and China; •the social, geopolitical, financial, trade and legal implications of Brexit; •the financial condition of and ability of our current and prospective portfolio companies to achieve their objectives; •competition with other entities and our affiliates for investment opportunities; •the speculative and illiquid nature of our investments; •the use of borrowed money to finance a portion of our investments; •our expected financings and investments; •the adequacy of our cash resources and working capital; •the timing, form and amount of any dividend distributions; •the timing of cash flows, if any, from the operations of our portfolio companies; •the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments; •currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars; •the ability of The Carlyle Group Employee Co., L.L.C. to attract and retain highly talented professionals that can provide services to our investment adviser and administrator; •our ability to maintain our status as a business development company; •an inability to replicate the historical success of Carlyle; and •our intent to satisfy the requirements of a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. 
 1
  Table of Contents
 
 We use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may,” “plans,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “targets,” “projects,” “outlook,” “potential,” “predicts” and variations of these words and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Our actual results and condition could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” in Part I, Item 1A of and elsewhere in this Form 10-K.
 We have based the forward-looking statements included in this Form 10-K on information available to us on the date of this Form 10-K, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission (the “SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
 
 
 2
  
 Table of Contents
 
 PART I
 In this annual report, except where the context suggests otherwise:
 •the terms “we,” “us,” “our,” “Company” and “BDC II” refer to TCG BDC II, Inc., a Maryland corporation, and its consolidated subsidiary; •the term "SPV" refers to TCG BDC II SPV LLC, our wholly owned and consolidated subsidiary; •the term “Carlyle” refers to The Carlyle Group Inc. (formerly, The Carlyle Group L.P.) (NASDAQ: CG) and its affiliates and its consolidated subsidiaries (other than portfolio companies of its affiliated funds); •the term “CDL” refers to the Carlyle Direct Lending platform, which is Carlyle’s direct lending business unit that operates within the broader Carlyle Global Credit segment; •the terms “CGCA” and “Administrator” refer to Carlyle Global Credit Administration L.L.C., our administrator, a wholly owned and consolidated subsidiary of Carlyle; •the terms “CGCIM” and “Investment Adviser” refer to Carlyle Global Credit Investment Management L.L.C., our investment adviser, a wholly owned and consolidated subsidiary of Carlyle; and •references to “this Form 10-K” are to our Annual Report on Form 10-K for the year endedDecember 31, 2019. 
 Item 1. Business
 We are an externally managed, non-diversified closed-end investment company focused on lending to middle market companies which commenced operations in September 2017. We are managed by our Investment Adviser, a wholly owned subsidiary of The Carlyle Group Inc. We have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”). In addition, we have elected to be treated, and intend to continue to comply with the requirements to qualify annually, as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the “Code”).
 Our investment objective is to generate attractive risk-adjusted returns and current income primarily by investing in senior secured term loans to U.S. middle market companies in which private equity sponsors hold, directly or indirectly, a financial interest in the form of debt and/or equity. Our core investment strategy focuses on lending to U.S. middle market companies, which we define as companies with approximately $25 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”), which we believe is a useful proxy for cash flow. We complement this core strategy with additive, diversifying assets including, but not limited to, specialty lending investments. We seek to achieve our investment objective primarily through direct origination of secured debt instruments, including first lien senior secured loans (which may include stand-alone first lien loans, first lien/last out loans and “unitranche” loans) and second lien senior secured loans (collectively, “Middle Market Senior Loans”), with the balance of our assets invested in higher yielding investments (which may include unsecured debt, mezzanine debt and investments in equities).
 We invest primarily in loans to middle market companies whose debt, if rated, is rated below investment grade, and, if not rated, would likely be rated below investment grade if it were rated (that is, below BBB- or Baa3, which is often referred to as “junk”). Exposure to below investment grade instruments involves certain risks, including speculation with respect to the borrower’s capacity to pay interest and repay principal. See Item 1A of this Form 10-K “ Risk Factors—Risks Related to Our Investments—Our investments are risky and speculative. ”
 We generate revenues primarily in the form of interest income from the investments we hold. In addition, we generate income from dividends on direct equity investments, capital gains on the sales of loans and debt and equity securities and various loan origination and other fees.
 In conducting our investment activities, we believe that we benefit from the significant scale and resources of Carlyle, including our Investment Adviser and its affiliates.
 Formation Transactions and Corporate Structure
 We were formed on February 10, 2017 as a Maryland corporation with the name Carlyle Private Credit, Inc., and our name was changed to TCG BDC II, Inc. on March 3, 2017. We are structured as an externally managed, non-diversified closed-end investment company. We have elected to be regulated as a BDC under the Investment Company Act. We also have elected
 
 3
  Table of Contents
 
 to be treated, and intend to continue to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code.
 We conducted a private offering (the “Private Offering”) of our shares of common stock to investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). On September 11, 2017 (the "Commencement", or the "Initial Closing Date"), we completed our initial closing of capital commitments of $185.8 million. We have held additional closings subsequent to the Initial Closing Date, with our final closing occurring on November 9, 2018. At each closing during the Private Offering, each investor participating in that closing made a capital commitment to purchase shares of our common stock pursuant to a subscription agreement entered into with us. Investors will be required to fund drawdowns to purchase shares of our common stock up to the amount of their respective capital commitments on an as-needed basis with a minimum of eight business days’ prior notice to the investors.
 We commenced our loan origination and investment activities shortly after our initial capital drawdown from our investors in the Private Offering (the “Initial Drawdown” and the date on which the Initial Drawdown occurred, the “Initial Drawdown Date”), which was called on September 22, 2017 and settled by October 4, 2017. The proceeds from the Initial Drawdown and the Subscription Facility provided us with the necessary capital to commence operations. We anticipate raising additional equity capital for investment purposes through additional capital drawdowns from our investors in the Private Offering. We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the Investment Company Act. See “ —Regulation—General—Regulation as a Business Development Company—Indebtedness and Senior Securities .”
 Our Investment Adviser
 Our investment activities are managed by our Investment Adviser. The principal executive offices of our Investment Adviser are located at 520 Madison Avenue, 40th Floor, New York, NY 10022, with additional offices in Chicago, Boston and Los Angeles. Our Investment Adviser is responsible for sourcing potential investments, conducting research and due diligence on prospective investments, analyzing and structuring investments and monitoring investments on an ongoing basis.
 Our Investment Adviser is served by origination, capital markets, underwriting and portfolio management teams comprised of experienced investment professionals across Carlyle's Global Credit segment, as defined below. Our investment approach is focused on long-term credit performance and principal preservation. Our Investment Adviser’s investment team utilizes a rigorous, systematic, and consistent investment process, refined over Carlyle’s 32-year history investing in private markets across multiple cycles, designed to achieve enhanced risk-adjusted returns.
 Our Investment Adviser’s five-person investment committee is responsible for reviewing and approving our investment opportunities. The members of the investment committee have experience investing through different credit cycles. The investment committee is led by Mark Jenkins, a Managing Director and Head of Global Credit at Carlyle.
 Our Investment Adviser also serves, and may serve in the future, as investment adviser to other existing and future affiliated BDCs that have investment objectives similar to our investment objectives.
 Our Investment Adviser entered into a personnel agreement with The Carlyle Group Employee Co., L.L.C. (“Carlyle Employee Co.”), an affiliate of our Investment Adviser, pursuant to which Carlyle Employee Co. provides our Investment Adviser with access to investment professionals that comprise our Investment Adviser’s investment team. As of December 31, 2019 , our Investment Adviser’s investment team included 125 investment professionals across the Global Credit segment. The five members of our Investment Adviser’s investment committee have an average of over 25 years of industry experience. In addition, our Investment Adviser and its investment team are supported by a team of finance, operations and administrative professionals currently employed by Carlyle Employee Co., a wholly owned subsidiary of Carlyle.
 Our Investment Adviser, its investment professionals, our executive officers and directors, and other current and future principals of our Investment Adviser serve or may serve as investment advisers, officers, directors or principals of entities or investment funds that operate in the same or a related line of business as we do and/or investment funds, accounts and other similar arrangements advised by Carlyle. An affiliated investment fund, account or other similar arrangement currently formed or formed in the future and managed by our Investment Adviser or its affiliates may have overlapping investment objectives and strategies with our own and, accordingly, may invest in asset classes similar to those targeted by us. As a result, our Investment Adviser and/or its affiliates may face conflicts of interest arising out of the investment advisory activities of our Investment Adviser and other operations of Carlyle. See “ —Allocation of Investment Opportunities and Potential Conflicts of Interest ” and “ Risk Factors—Risks Related to Our Business and Structure—There are significant potential conflicts of interest,
 
 4
  Table of Contents
 
 including the management of other investment funds and accounts by our Investment Adviser, which could impact our investment returns ” in Part I, Item 1A of this Form 10-K for more information.
 Our Administrator
 CGCA, a Delaware limited liability company, serves as our Administrator. Pursuant to an administration agreement between us and the Administrator (the “Administration Agreement”), our Administrator provides services to us and we reimburse our Administrator for its costs and expenses and our allocable portion of overhead incurred by our Administrator in performing its obligations under the Administration Agreement, including our allocable portion of the compensation of certain of our officers and staff. In addition, our Administrator has entered into a sub-administration agreement with Carlyle Employee Co. (the “Carlyle Sub-Administration Agreement”), which provides our Administrator with access to personnel. Our Administrator has also entered into a sub-administration agreement with State Street Bank and Trust Company (“State Street” and such agreement, the “State Street Sub-Administration Agreement” and, together with the Carlyle Sub-Administration Agreement, the “Sub-Administration Agreements”), pursuant to which State Street provides for certain administrative and professional services. State Street also serves as our custodian.
 Carlyle
 Our Investment Adviser and Administrator are affiliates of Carlyle. Carlyle is a global investment firm with deep industry expertise that deploys private capital across four business segments: Corporate Private Equity, Real Assets, Global Credit and Investment Solutions. With $224 billion of assets under management (“AUM”) as of December 31, 2019, Carlyle’s purpose is to invest wisely and create value on behalf of its investors, portfolio companies and the communities in which we live and invest. Carlyle employs more than 1,775 employees, including 671 investment professionals in 32 offices across six continents, and serves more than 2,600 active carry fund investors from 94 countries.
 Established in 1999 with its first high yield fund, Carlyle’s Global Credit segment advises a group of 64 active funds that span the credit spectrum: liquid credit, illiquid credit, and real assets credit. Taken together, these various capital sources provide the opportunity for Carlyle to offer highly customizable and creative financing solutions to borrowers to meet their specific capital needs. In 2019, Carlyle hired several new senior investment professionals to expand Global Credit’s investment breadth and geographical presence.
 Primary areas of focus for Carlyle’s Global Credit segment include:
 •Loans andStructured Credit.The structured credit funds invest primarily in performing senior secured bank loans through structured vehicles and other investment vehicles. In 2019, in addition to multiple resets and refinancings, Carlyle closed three new U.S. CLOs and two CLOs in Europe with a total of $1.8 billion and $0.9 billion, respectively, or AUM at December 31, 2019. As ofDecember 31, 2019, Carlyle’s loans and structured credit team advised 49 structured credit funds and two carry funds in the United States, Europe, and Asia totaling, in the aggregate, approximately $27 billion in AUM. •Direct Lending.Carlyle’s direct lending business includes Carlyle’s BDCs, which invest primarily in first lien loans (which include unitranche, “first out” and “last out” loans) and second lien loans of middle market companies, typically defined as companies with annual EBITDA ranging from $25 million to $100 million, which often lack access to the broadly syndicated loan and bond markets. In 2019, Carlyle expanded its direct lending capabilities by adding personnel to bolster its underwriting capabilities. As ofDecember 31, 2019, Carlyle’s direct lending investment team advised six funds consisting of two BDCs (including CGBD) and four separately managed accounts, totaling, in the aggregate, approximately more than $5 billion in AUM. •Opportunistic Credit.Carlyle’s opportunistic credit team invests primarily in highly-structured and privately-negotiated capital solutions supporting corporate borrowers through secured loans, senior subordinated debt, mezzanine debt, convertible notes, and other debt like instruments, as well as preferred and common equity in such borrowers. The team will also look to invest in special situations (i.e., event-driven opportunities that exhibit hybrid credit and equity features) as well as market dislocations (i.e., primary and secondary market investments in liquid debt instruments that arise as a result of temporary market volatility). As ofDecember 31, 2019, Carlyle’s opportunistic credit team advised one fund and one separately managed account totaling, in the aggregate, more than $3 billion in AUM. •Distressed Credit.The distressed credit funds generally invest in liquid and illiquid securities and obligations, including secured debt, senior and subordinated unsecured debt, convertible debt obligations, preferred stock and public and private equity of financially distressed companies in defensive and asset-rich industries. In 
 5
  Table of Contents
 
 certain investments, these funds may seek to restructure pre-reorganization debt claims into controlling positions in the equity of the reorganized companies. As of December 31, 2019 , Carlyle’s distressed credit team advised three funds totaling, in the aggregate, approximately $3 billion in AUM.
 •Aircraft Financing and Servicing.Carlyle Aviation Partners, Ltd. (“Carlyle Aviation Partners”) is Carlyle's multi-strategy investment platform that is engaged in commercial aviation aircraft financing and investment and providing investment management services related to the commercial aviation industry. As ofDecember 31, 2019, Carlyle Aviation Partners had approximately $7 billion in AUM across four active carry funds, securitization vehicles and liquid strategies. •Energy Credit.Carlyle’s energy credit team invests primarily in privately-negotiated mezzanine debt investments in North American energy and power projects and companies. As ofDecember 31, 2019, Carlyle’s energy credit team advised two funds with approximately $3 billion in AUM. •Capital Solutions.Carlyle Capital Solutions (“CCS”) is Carlyle's loan syndication and capital markets business that launched in 2018. The primary focus of Carlyle Capital Solutions is to originate and syndicate loans and underwrite securities of both third parties and Carlyle portfolio companies. Competitive Strengths
 Carlyle Global Credit’s key competitive strengths are based on Carlyle’s integrated platform, which allows it to mitigate competition and thereby improve our ability to deliver on the expectations of shareholders.  The following characteristics distinguish Carlyle’s capabilities:
 Market Leading Direct Origination Platform . We have access to Carlyle Global Credit’s large direct origination platform, including a dedicated financial sponsor coverage team and the sourcing capabilities of other investment professionals on the platform who regularly generate attractive investment opportunities for the Company. Through these integrated efforts, the origination team generates, and expects to continue to generate, a significant amount of differentiated, directly originated deal flow from which to select attractive investment opportunities.
 Broad Product Capabilities . Carlyle Global Credit offers a broad range of leveraged finance products to the marketplace, which allows us to invest across the entire capital structure, as well as via specialty products such as asset-based loans. These integrated and differentiated capabilities make our investment highly relevant to borrowers, as Carlyle Global Credit can construct comprehensive, tailored financing solutions. By doing so, Carlyle Global Credit is able to more frequently assert greater control over structure, price and terms of investments, which we can leverage in seeking to generate attractive risk-adjusted returns for our stockholders.
 Scaled Capital Base. With $49 billion of AUM, we believe Carlyle Global Credit’s hold sizes are among the largest in the market. Carlyle Global Credit's ability to deploy comparatively larger amounts of capital delivers certainty of execution for borrowers and mitigates the threat of competition, resulting in the ability to drive terms and generate attractive investment opportunities. In addition, scaled capital deployment allows Carlyle Global Credit to establish leadership positions in financing transactions, which results in improved informational access and incremental influence and control in debt financings.
 Depth of Expertise . We benefit from our Investment Adviser’s utilization of the broader resources of Carlyle, which includes access to Carlyle’s relationships and institutional knowledge from over three decades of private market investing. Our Investment Adviser's dedicated, sector aligned underwriting teams have significant experience and tenure. These teams leverage Carlyle’s broader resources – over 670 investment professionals, 45 operating executives, information obtained through direct ownership of over 265 companies, lending relationships with over 700 companies, and in-house government affairs and economic research teams – to generate differentiated diligence insights and inform fundamental credit selection. As a firm, Carlyle seeks to bring the collective power of the global platform with respect to individual investments. We believe this integrated and collaborative approach allows us to move faster, and with higher conviction, than many of our competitors.
 Rigorous Investment Process Conducted by Experienced Investment Team. Carlyle employs a robust, iterative and heavily documented underwriting process. Our Investment Adviser’s investment team comprises investment professionals who have extensive middle market lending experience. As of December 31, 2019 , the investment team included 125 investment professionals across the Global Credit segment. The five members of our Investment Adviser’s investment committee have an average of over 25 years of industry experience. We believe the breadth and depth of the investment team's experience in sourcing, structuring, executing, and monitoring a broad range of investments provides us with a significant competitive advantage in building a high quality portfolio of investments.
 
 6
  Table of Contents
 
 Defensive Investment Approach. Our portfolio has been defensively constructed, and is highly diversified by borrower, industry sector, sponsor relationships and other metrics. As of December 31, 2019 , we had a portfolio of 87 investments in 68 portfolio companies across 21 industries and 45 unique sponsors. As of December 31, 2019 , approximately 98.6% of our debt investments bore interest at floating rates, primarily subject to interest rate floors, and 84.7% of our portfolio was invested in first lien debt investments (including 2.6% first lien/last out loans).
 Market Opportunity
 We believe the middle market lending environment provides attractive investment opportunities as a result of a combination of the following factors:
 Favorable Market Environment. We believe the middle market remains one of the most attractive investment areas due to its large size, superior value relative to the broadly syndicated loan market, and supply-demand imbalance that continues to favor non-bank lenders. We believe market yields remain attractive and leverage levels at middle market companies are stable, creating a favorable investment environment.
 Large and Growing U.S. Middle Market. The U.S. middle market is the largest market by many measures, which is expected to enable us to invest selectively as approximately 70% of middle market loan volume is sponsor-backed. According to S&P Capital IQ, as of December 31, 2019 , there are over 70,000 U.S. middle market companies generating between $20 million and $1 billion in annual revenue, compared with approximately 3,500 companies with revenue greater than $1 billion. We believe these middle market companies, both sponsored and non-sponsored, represent a significant growth segment of the U.S. economy and often require substantial capital investments to grow.
 Benefits of Traditional Middle Market Focus – Leverage, Pricing and Risk. According to the S&P Global Market Intelligence LCD Quarterly Leveraged Lending Review (Q4 2018) and Fitch U.S. Leveraged Loan Default Insight (January 25, 2019), middle market companies, which we primarily categorize as borrowers with EBITDA between $25 million and $100 million, are generally less levered, have larger equity contributions, and experience lower rates of default versus large cap broadly syndicated loans, which we define as loans to borrowers with greater than $100 million of EBITDA. Middle market loans relative to broadly syndicated loans also tend to achieve more attractive economics in the form of upfront fees, spreads, and prepayment penalties, and benefit from stronger defensive structures through terms including, but not limited to documentation, asset security, priority in payments, covenants, and information/governance, all of which potentially provide more favorable protection against credit deterioration. Middle market lenders like us are also often able to complete more thorough due diligence investigations prior to investment than lenders in the broadly syndicated space. We believe the confluence of these factors have resulted in, over the three-year period from 2017 to 2019, middle market loans driving an approximate 150 to 200 basis points spread premium over broadly syndicated loans according to the S&P Global Market Intelligence LCD Leveraged Loan Index, without taking incremental credit risk as evidenced by lower default rates and higher recovery rates as compared to broadly syndicated loans.
 Market Environment Favors Non-Traditional Lenders. Traditional middle market lenders, such as commercial and regional banks and commercial finance companies, have contracted their origination and lending activities and are focusing on more liquid asset classes or have exited the business. At the same time, institutional investors have sought to invest in larger, more liquid offerings, limiting the ability of middle market companies to raise debt capital through public capital markets. This has resulted in other capital providers, such as specialty finance companies, structured-credit vehicles such as CLOs, BDCs, and private investment funds, actively investing in the middle market. We believe the aforementioned changes and restrictions have created a large and growing market opportunity for alternative lenders such as us.
 Favorable Capital Markets Trends. Current and future demand for middle market financings, driven by private equity investment and upcoming maturities are expected to provide us with ample deal flow. Current data from the Refinitiv LPC Middle Market Quarterly Report (as of December 31, 2019) suggests that approximately $597 billion of upcoming loan maturities for middle market companies are due between 2020 and 2026, and the Preqin PE North American Report suggests that there is approximately $700 billion of uninvested private equity capital as of December 31, 2019. We believe these refinancings and uninvested capital will provide a steady flow of attractive opportunities for well-positioned lenders with deep and longstanding sponsor and market relationships, particularly for providers of full capital structure financing solutions.
 Investment Strategy
 Our investment strategy is a continuation of a strategy adopted by the CDL platform. We focus on investing primarily in companies that we believe at the time of investment to be established and stable, with positive cash flow. Our investment
 
 7
  Table of Contents
 
 portfolio is anticipated to primarily be composed of investments in senior secured loans, second lien secured loans and, potentially to a significantly lesser extent, subordinated loans of private, U.S. middle market companies. Our Investment Adviser aims to maintain an appropriate allocation among the various types of senior secured term loans, as well as junior secured debt and unsecured subordinated debt, to allow us to achieve our returns while maintaining our desired credit risk profile.
 We typically target portfolio companies that exhibit some or all of the following characteristics at the time of investment:
 •EBITDA of $25–$100 million; •Minimum of 35% original sponsor cash equity in each transaction (typically higher); •Sustainable leading positions in their respective markets; •Scalable revenues and operating cash flow; •Experienced management teams with successful track records; •Stable, predictable cash flows with low technology and market risks; •Diversified product offering and customer base; •Low capital expenditures requirements; •A North American base of operations; •Strong customer relationships; •Products, services or distribution channels having distinctive competitive advantages; and •Defensible niche strategy or other barriers to entry. Once we are fully invested, our investments in a portfolio company are expected generally to comply with the following limits, measured as a percentage of the sum of our aggregate capital commitments of $1.2 billion and our use of leverage up to the maximum amount permitted by the Investment Company Act (currently limited to a debt-to-equity ratio of 1 to 1):
 •represent between 2% and 4%; •no single portfolio company typically represent more than 10%; •no single industry typically represent more than 20%; and •our aggregate investments in non-U.S. portfolio companies typically do not exceed more than 10%. We measure our compliance with these limits at the time of each investment. Before we are fully invested, our investments may fall outside of the above ranges.
 Our Investment Adviser’s investment team intends to use a disciplined, credit-driven investment strategy that is a continuation of CDL’s strategy, including:
 •pursuing investments in senior secured loans, and aiming to maintain the appropriate allocation among the various types of senior secured loans, as well as junior secured debt to allow us to achieve its returns while maintaining its desired credit risk profile; •performing in-depth due diligence on companies, management teams and sponsors, and conducting fundamental credit and valuation analyses; •seeking to structure investments to provide us with security, current cash pay interest, and additional upside through original issue discount (“OID”) or other fees; and •active management of portfolio investments through ongoing dialogue with equity owners and management, monitoring of operational results, financial reports and compliance with covenants, company visits, and periodic evaluation of potential exit alternatives for part or all of each investment. Investment Criteria and Transactional Structures
 We invest primarily in transactions supported by private equity sponsors. We seek to invest in the following types of assets, with an emphasis on senior debt:
 •traditional cash flow senior secured debt; •unitranche senior secured debt financings; 
 8
  Table of Contents
 
 •“last out” unitranche debt; •second lien senior debt; •traditional subordinated debt; •preferred and common equity co-investments; and •secondary and other opportunistic asset purchases. As noted above, we may also from time to time participate in traditional subordinated debt financings, preferred and common equity co-investments. We may also make secondary purchases of all of the above types of investments and other securities on an opportunistic basis.
 Investment Approach and Risk Monitoring of Investments
 Our Investment Adviser utilizes a rigorous, systematic and consistent due diligence underwriting process to evaluate all investment opportunities. Our Investment Adviser’s investment teams primarily consist of origination professionals, underwriters and portfolio management professional. An investment team works on a particular transaction from initial screening through closing, and the same team continues to monitor the credit for the life cycle of the investment.
 We view our investment process as consisting of the phases described below:
 Origination. Our Investment Adviser has built a strong direct origination platform. Our Investment Adviser’s origination team sources approximately 1,000 opportunities per year with an ultimate investment rate by us of less than 5% annually. The scale of our Investment Adviser’s origination platform allows us to maximize access to investment opportunities, enhance overall investment selectivity and diversify risks in our portfolio. We further seek to reduce risk by partnering with experienced sponsors with strong track records. We believe lending to companies owned by leading private equity firms (versus non-sponsored companies) has several important and potentially defensive characteristics.
 Carlyle's financial sponsor origination team covers over 200 private equity firms, generally organized on a regional basis with offices in Boston, Chicago, Los Angeles and New York. It is their responsibility to source specific opportunities, identify potential loan candidates, and apply creative and flexible solutions to solve clients’ financing needs. Each originator maintains long-standing relationships with potential sources of deal flow and is responsible for covering a specified target market. We believe those originators’ strength and breadth of relationships, combined with our platform's capabilities, allow us to source investments across a wide range of markets enabling our Investment Adviser to be highly selective in recommending investments.
 Transaction Screening. After the senior originator has completed an initial screen, the investment team will prepare and present a screening memo that includes, but is not limited to, a business description, proposed transaction financing structures, preliminary financial analysis (including a cash flow forecast incorporating downside scenarios), debt and equity comparables, and the team's initial assessment of investment merits and key risks and market/industry considerations to a screening committee of senior members of the Direct Lending team (the "Screening Committee"). Based on feedback from the committee, the deal team will prepare and disseminate an outcome email that documents the takeaways from the meeting, including preferred financing structure as well as terms, key diligence items, and next steps.
 Underwriting. Following an indication from the Screening Committee to move forward in the diligence process, the investment team will compile a detailed diligence list and prepare for in-depth credit analysis. During the investment process, the investment team works closely with the private equity sponsor / borrower in all aspects of due diligence. Formal due diligence includes meeting with the management team, reviewing the data room and performing key financial analysis, creating a more detailed financial model with sensitivities across various market environments, reviewing sell-side and third party research including industry reports and financial diligence, following up with industry experts within the Carlyle network for additional feedback and drafting the commitment papers and term sheet. As part of the extensive due diligence process, the investment team fully leverages all internal Carlyle resources to aid in investment decisions. This includes, as needed, speaking to Carlyle Private Equity investment professionals (in accordance with information barrier restrictions), Carlyle operating executives, Carlyle’s Chief Economist & Director of Research, Carlyle’s government affairs professionals, and any executive within Carlyle’s private equity portfolio, which includes over 275 companies worldwide. In addition, the investment team may utilize third party expert networks to supplement its work to gain further insight into company and industry factors from various thought leaders across the company’s markets. This part of the process is iterative and involves re-screening with members of the Investment Adviser's investment committee before seeking final investment committee approval. Over the course of the underwriting process, the investment team crafts a fulsome memo, with diligence completed on a variety of industry, company-specific, financial and legal topics that includes, but is not limited to, the following:
 
 9
  Table of Contents
 
 •Overview of the opportunity, investment team recommendation, and risks and mitigants •Structure, terms and pricing of the proposed facilities •Sources and uses and capitalization table •Industry diligence, including growth, key trends, risk of disruption, competitive landscape, borrower's market position, fragmentation and consolidation, M&A trends / multiples, barriers to entry and regulatory framework •Details on core product and service offering, including revenue visibility and quality, revenue and gross profit build-up by key products / services (including price and volume trends, if applicable), and other relevant sector-specific metrics •Customer diligence, including concentration, wallet share, tenure, health of customer base, contract details (if applicable), and sales and marketing strategy •Supply chain diligence, including supplier concentration, raw material exposure and logistics •Details on operations, including IT and technology, operating footprint (including real estate and leases, if applicable), distribution, and employee base •Financial diligence, including cyclicality, seasonality, fixed and variable costs, EBITDA adjustments, capital expenditures, working capital, taxes, foreign exchange exposure, and off-balance sheet liabilities •Financial model, including detailed, bottom-up cash flow model with sensitivities for key business risks •Debt and equity comparables •Details on management team and private equity sponsor (if applicable) •Details on legal documentation, including construction of EBITDA, affirmative and negative covenants (including financial covenants), events of default, enforcement of remedies, security and collateral package (including protections around material IP or other key collateral), voting provisions, and other key terms •Environmental, regulatory, or legal issues and insurance coverage •Adherence with environmental, social and governance policies •Items as to which approval is conditional and which require further due diligence and/or subsequent resolution Monitoring. We view proactive portfolio monitoring as a vital part of the investment process, which includes the continuous review by the portfolio management, underwriting and workout teams, with multiple layers of risk review and oversight. Our Investment Adviser utilizes a proprietary credit surveillance dashboard, an objective rules-based Internal Risk Rating system and proprietary valuation model to assess risk in the portfolio. The portfolio management process involves a variety of ongoing and scheduled reviews that allow for early detection of issues and escalation to the Investment Committee and workout team to avoid credit losses. This process includes detailed weekly portfolio dashboard updates, monthly reviews of watch list credits, quarterly meetings to conduct formal portfolio reviews, focused on technical analysis of financial performance, and portfolio diversification, and ongoing ad-hoc meetings to handle borrower-specific requests, including follow-on transactions and amendments. Our Investment Adviser supplements these processes with additional analyses and projections, including stress scenarios, to assess the potential exposure of our portfolio to variable macroeconomic factors and market conditions. For more information on the Internal Risk Ratings of our portfolio, see Part II, Item 7 of this Form 10-K “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Portfolio and Investment Activity .”
 
 
 10
  Table of Contents
 
 Portfolio Composition
 As of December 31, 2019 and 2018 , the fair value of our investments was approximately $1,370.1 million and $510.4 million, respectively, in 68 and 41 portfolio companies, respectively. The type, geography and industry composition of our investments, each as a percentage of the fair value of our investments as of December 31, 2019 and 2018 , were as follows:
 As of December 31,Type—% of Fair Value20192018First Lien Debt (excluding First Lien/Last Out)82.03%85.96%First Lien/Last Out Unitranche2.63—Second Lien Debt14.4312.97Equity Investments0.911.07Total100.00%100.00%
 As of December 31,Type—% of Fair Value of First and Second Lien Debt20192018Floating Rate98.56%100.00%Fixed Rate1.44—Total100.00%100.00%
 As of December 31,Geography—% of Fair Value20192018Canada4.21%3.06%Cyprus1.42—Jamaica0.01—Luxembourg2.67—United Kingdom2.651.90United States89.0495.04Total100.00%100.00%
 
 11
  Table of Contents
 
 As of December 31,Industry—% of Fair Value20192018Aerospace & Defense5.98%—%Automotive2.831.11Banking, Finance, Insurance & Real Estate9.42—Beverage, Food & Tobacco3.465.46Business Services13.348.52Capital Equipment3.29—Chemicals, Plastics & Rubber1.971.94Construction & Building1.69—Consumer Services1.600.90Containers, Packaging & Glass7.837.93Durable Consumer Goods0.76—Energy: Oil & Gas0.711.90Forest Products & Paper—1.19Healthcare & Pharmaceuticals8.2916.63High Tech Industries6.3911.13Hotel, Gaming & Leisure4.085.48Media: Broadcast & Subscription4.064.18Non-durable Consumer Goods—1.47Retail4.16—Software14.1415.84Sovereign & Public Finance2.737.55Telecommunications2.707.19Transportation: Cargo0.571.58Total100.00%100.00%
 See the Consolidated Schedules of Investments as of December 31, 2019 and 2018 in our consolidated financial statements in Part II, Item 8 of this Form 10-K for more information on these investments, including a list of companies and type, cost and fair value of investments.
 Allocation of Investment Opportunities and Potential Conflicts of Interest
 An affiliated investment fund, account or other similar arrangement currently formed or formed in the future and managed by our Investment Adviser or its affiliates may have overlapping investment objectives and strategies with our own and, accordingly, may invest in asset classes similar to those targeted by us. This creates potential conflicts in allocating investment opportunities among us and such other investment funds, accounts and similar arrangements, particularly in circumstances where the availability or liquidity of such investment opportunities is limited or where co-investments by us and other funds, accounts or arrangements are not permitted under applicable law, as discussed below.
 For example, Carlyle sponsors several investment funds, accounts and other similar arrangements, including, without limitation, structured credit funds, future closed-end registered investment companies, BDCs, carry funds, and managed accounts. The SEC has granted us exemptive relief that permits us and certain of our affiliates to co-invest in suitable negotiated investments (the “Exemptive Relief”). If Carlyle is presented with investment opportunities that generally fall within our investment objective and other board-established criteria and those of other Carlyle funds, accounts or other similar arrangements (including other existing and future affiliated BDCs) whether focused on a debt strategy or otherwise, Carlyle allocates such opportunities among us and such other Carlyle funds, accounts or other similar arrangements in a manner consistent with the Exemptive Relief, our Investment Adviser’s allocation policies and procedures and Carlyle’s other allocation policies and procedures, where applicable, as discussed below. More specifically, investment opportunities in suitable negotiated investments for investment funds, accounts and other similar arrangements managed by our Investment Adviser, and other funds, accounts or similar arrangements managed by affiliated investment advisers that seek to co-invest with us or other Carlyle BDCs, are allocated in accordance with the Exemptive Relief. Investment opportunities for all other investment funds, accounts and other similar arrangements not managed by our Investment Adviser are allocated in accordance with their respective investment advisers’ and Carlyle’s other allocation policies and procedures. Such policies and procedures may result
 
 12
  Table of Contents
 
 in certain investment opportunities that are attractive to us being allocated to other funds that are not managed by our Investment Adviser. Carlyle’s, including our Investment Adviser’s, allocation policies and procedures are designed to allocate investment opportunities fairly and equitably among its clients over time, taking into account a variety of factors which may include the sourcing of the transaction, the nature of the investment focus of each such other Carlyle fund, accounts or other similar arrangements, each fund’s, account’s or similar arrangement’s desired level of investment, the relative amounts of capital available for investment, the nature and extent of involvement in the transaction on the part of the respective teams of investment professionals, any requirements contained in the governing agreements of the Carlyle funds, accounts or other similar arrangements and other considerations deemed relevant by Carlyle in good faith, including suitability considerations and reputational matters. The application of these considerations may cause differences in the performance of different Carlyle funds, accounts and similar arrangements that have similar strategies.
 Because we are a BDC, we are not generally permitted to make loans to companies controlled by Carlyle or other funds managed by Carlyle.
 We are also not permitted to make any co-investments with clients of our Investment Adviser or its affiliates (including any fund managed by Carlyle) without complying with our Exemptive Relief, subject to certain exceptions, including with respect to our downstream affiliates. Co-investments made under the Exemptive Relief are subject to compliance with the conditions and other requirements contained in the Exemptive Relief, which could limit our ability to participate in a co-investment transaction. We may also co-invest with funds managed by Carlyle or any of its downstream affiliates, subject to compliance with applicable law and regulations, existing regulatory guidance, and our Investment Adviser’s and Carlyle’s other allocation policies and procedures.
 While Carlyle and our Investment Adviser seek to implement their respective allocation processes in a fair and equitable manner under the particular circumstances, there can be no assurance that it will result in equivalent allocation of or participation in investment opportunities or equivalent performance of investments allocated to us as compared to the other entities. In some cases, due to information barriers that are in place, we and other Carlyle investment funds, accounts or other similar arrangements may compete with each other for specific investment opportunities without being aware that they are competing with each other. Carlyle has a conflict system in place above these information barriers to identify potential conflicts early in the process and determine if an allocation decision needs to be made or if an investment is precluded. If the conflicts system detects a potential conflict, the legal and compliance departments of Carlyle assess investment opportunities to determine whether a particular investment opportunity is required to be allocated to a particular investment fund, account or other similar arrangement (including us) or is prohibited from being allocated to a particular investment fund, account or similar arrangement. Subject to a determination by the legal and compliance departments (if applicable), portfolio management teams and, as applicable, the Investment Adviser's allocation committees, are then charged with ensuring that investment opportunities are allocated to the appropriate investment fund, account or similar arrangement in accordance with our Investment Adviser's allocation policies and procedures. In addition, in some cases Carlyle and our Investment Adviser may make investment recommendations to investment funds, accounts and other similar arrangements where the investment funds, accounts and other similar arrangements make the investment independently of Carlyle and our Investment Adviser. As a result, there are circumstances where investments appropriate for us are instead allocated, in whole or in part, to such other investment funds, accounts or other similar arrangements irrespective of our Investment Adviser’s and Carlyle’s other policies and procedures regarding allocation of investments. Where Carlyle otherwise has discretion to allocate investment opportunities among various funds, accounts and other similar arrangements, it should be noted that Carlyle may determine to allocate such investment opportunities away from us.
 During periods of unusual market conditions, our Investment Adviser may deviate from its normal trade allocation practices. For example, this may occur with respect to the management of unlevered and/or long-only investment funds, accounts or similar arrangements that are typically managed on a side-by-side basis with levered and/or long-short investment funds, accounts or similar arrangements.
 Election to be Taxed as a RIC
 We have elected to be treated, and intend to continue to qualify annually, as a RIC for U.S. federal income tax purposes under Subchapter M of the Code. As a RIC, we generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute to our stockholders as dividends. Instead, dividends we distribute generally will be taxable to the holders of our common stock, and any net operating losses, foreign tax credits and other tax attributes may not pass through to the holders of our common stock. To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, we must distribute to our stockholders on an annual basis at least 90% of our investment company taxable income (generally, our net ordinary income plus the excess of our realized net short-term capital gains over realized net long-term capital losses,
 
 13
  Table of Contents
 
 determined without regard to the dividends paid deduction) for any taxable year (the “Annual Distribution Requirement”). The following discussion assumes that we qualify as a RIC and have satisfied the Annual Distribution Requirement. If we (1) qualify as a RIC, and (2) satisfy the Annual Distribution Requirement, then we are not subject to U.S. federal income tax on the portion of our net taxable income we distribute (or are deemed to distribute) to stockholders. We are subject to U.S. federal income tax at regular corporate rates on any income or capital gains not distributed (or deemed distributed) to our stockholders.
 In addition, if we fail to distribute in a timely manner an amount at least equal to the sum of (1) 98% of our ordinary income for the calendar year, (2) 98.2% of our 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 (the “Excise Tax Distribution Requirements”), we are liable for a 4% excise tax on the portion of the undistributed amounts of such income that are less than the amounts required to be distributed based on the Excise Tax Distribution Requirements. For this purpose, however, any ordinary income or capital gain net income retained by us that is subject to corporate income tax for the tax year ending in that calendar year is considered to have been distributed by year end (or earlier if estimated taxes are paid).
 In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things:
 •continue to qualify as a BDC under the Investment Company Act at all times during each taxable year; •derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities or foreign currencies, net income from certain “qualified publicly traded partnerships,” or other income derived with respect to our business of investing in such stock or securities or foreign currencies (the “90% Gross Income Test”); and •diversify our holdings so that at the end of each quarter of the taxable year: •at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and •no more than 25% of the value of our assets is invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer, or two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses, or of certain “qualified publicly traded partnerships” (the “Diversification Tests”). Moreover, our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our qualification as a RIC, including the Diversification Tests. If we dispose of assets in order to meet the Annual Distribution Requirement or the Excise Tax Distribution Requirements, we may make such dispositions at times that, from an investment standpoint, are not advantageous. If we are prohibited from making distributions or are unable to raise additional debt or equity capital or sell assets to make distributions, we may not be able to make sufficient distributions to satisfy the Annual Distribution Requirement, and therefore would not be able to maintain our qualification as a RIC. Additionally, we may make investments that result in the recognition of ordinary income rather than capital gain, or that prevent us from accruing a long-term holding period. These investments may prevent us from making capital gain distributions as described below. We intend to monitor our transactions, make the appropriate tax elections and make the appropriate entries in our books and records when we make any such investments in order to mitigate the effect of these rules.
 A RIC is limited in its ability to deduct expenses in excess of its “investment company taxable income” (which is, generally, ordinary income plus net realized short-term capital gains in excess of net realized long-term capital losses). If our expenses in a given year exceed gross taxable income, we would have a net operating loss for that year. However, a RIC is not permitted to carry forward net operating losses to subsequent years. In addition, expenses can be used only to offset investment company taxable income, not net capital gain. Due to these limits on the deductibility of expenses, we may for U.S. federal income tax purposes have aggregate taxable income for several years that we distribute and that is taxable to our stockholders even if such income is greater than the aggregate net income we actually earned during those years. Such distributions may be made from our cash assets or by liquidation of investments, if necessary. We may realize gains or losses from such liquidations. In the event we realize net capital gains from such transactions, a holder may receive a larger capital gain distribution than the holder would have received in the absence of such transactions.
 
 14
  Table of Contents
 
 Regulation
 General—Regulation as a Business Development Company
 We have elected to be regulated as a BDC under the Investment Company Act and have elected to be treated as a RIC under the Code. A BDC must be organized in the United States for the purpose of investing in or lending to primarily private companies and making significant managerial assistance available to them. A BDC may use capital provided by public stockholders and from other sources to make long-term, private investments in businesses.
 We may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC unless authorized by vote of a majority of the outstanding voting securities, as required by the Investment Company Act. A majority of the outstanding voting securities of a company is defined under the Investment Company Act as the lesser of: (a) 67% or more of such company’s voting securities present at a meeting if more than 50% of the outstanding voting securities of such company are present or represented by proxy, or (b) more than 50% of the outstanding voting securities of such company. We do not anticipate any substantial change in the nature of our business.
 As with other companies regulated by the Investment Company Act, a BDC must adhere to certain substantive regulatory requirements. A majority of our directors must be persons who are not “interested persons,” as that term is defined in Section 2(a)(19) of the Investment Company Act (such directors are referred to as the “Independent Directors” and the directors who are not Independent Directors are referred to as the “Interested Directors”). We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect the BDC. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.
 The Investment Company Act contains prohibitions and restrictions relating to certain transactions between BDCs and certain affiliates (including any investment advisers or sub-advisers), principal underwriters and certain affiliates of those affiliates or underwriters. Because we are a BDC, we are not generally permitted to make loans to companies controlled by Carlyle or other funds managed by Carlyle. We are also not permitted to make any co-investments with our Investment Adviser or its affiliates (including any fund managed by Carlyle) without complying with our Exemptive Relief, subject to certain exceptions, including with respect to our downstream affiliates. Co-investments made under the Exemptive Relief are subject to compliance with the conditions and other requirements contained in the Exemptive Relief, which could limit our ability to participate in a co-investment transaction. We may also co-invest with funds managed by Carlyle or any of its downstream affiliates, subject to compliance with applicable law and regulations, existing regulatory guidance, and our Investment Adviser’s allocation policies and procedures.
 As a BDC, we are generally required to meet a minimum "asset coverage" ratio of at least 200% after each issuance of senior securities. “Asset coverage” generally refers to a company’s total assets, less all liabilities and indebtedness not represented by “senior securities,” as defined in the Investment Company Act, divided by total senior securities representing indebtedness and, if applicable, preferred stock. “Senior securities” for this purpose includes borrowings from banks or other lenders, debt securities and preferred stock.
 We may invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions. With respect to such securities, we may, for the purpose of public resale, be deemed an “underwriter” as that term is defined in the Securities Act of 1933, as amended (the “Securities Act”). Our intention is to not write (sell) or buy put or call options to manage risks associated with the publicly traded securities of our portfolio companies. We may enter into hedging transactions to manage the risks associated with interest rate and currency fluctuations. We may purchase or otherwise receive warrants or options to purchase the common stock of our portfolio companies in connection with acquisition financings or other investments. In connection with such an acquisition, we may acquire rights to require the issuers of acquired securities or their affiliates to repurchase them under certain circumstances.
 We do not intend to acquire securities issued by any investment company that exceed the limits imposed by the Investment Company Act. Under these limits, except for registered money market funds, we generally cannot acquire more than 3% of the voting stock of any investment company, invest more than 5% of the value of our total assets in the securities of one investment company or invest more than 10% of the value of our total assets in the securities of investment companies in the aggregate. The portion of our portfolio invested in securities issued by investment companies ordinarily will subject our stockholders to additional indirect expenses. Our investment portfolio is also subject to diversification requirements by virtue of our intended status to be a RIC for U.S. tax purposes. See Part I, Item 1A of this Form 10-K “ Risk Factors—Risks Related to Our Business and Structure ” for more information.
 
 15
  Table of Contents
 
 In addition, investment companies registered under the Investment Company Act and private funds that are excluded from the definition of “investment company” pursuant to either Section 3(c)(1) or 3(c)(7) of the Investment Company Act may not acquire directly or through a controlled entity more than 3% of our total outstanding voting stock (measured at the time of the acquisition), unless the funds comply with an exemption under the Investment Company Act. As a result, certain of our investors may hold a smaller position in our shares than if they were not subject to these restrictions.
 We are generally not able to issue and sell our common stock at a price below net asset value ("NAV") per share. See Part I, Item 1A of this Form 10-K “Risk Factors—Risks Related to Our Business and Structure—Regulations governing our operation as a BDC affect our ability to, and the way in which we will, raise additional capital. As a BDC, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage. ” We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current NAV of our common stock if our Board of Directors determines that such sale is in our best interests and the best interests of our stockholders, and our stockholders approve such sale. In addition, we may generally issue new shares of our common stock at a price below NAV in rights offerings to existing stockholders, in payment of dividends and in certain other limited circumstances.
 We are subject to periodic examination by the SEC for compliance with the Investment Company Act.
 As a BDC, we are subject to certain risks and uncertainties. See Part I, Item 1A of this Form 10-K “ Risk Factors—Risks Related to Our Business and Structure. ”
 Qualifying Assets
 As a BDC, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities and indebtedness of private U.S. companies and certain public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. We also may invest up to 30% of our portfolio in non-qualifying assets, as permitted by the Investment Company Act. Specifically, as part of this 30% basket, we may invest in entities that are not considered “eligible portfolio companies” (as defined in the Investment Company Act), including companies located outside of the United States, entities that are operating pursuant to certain exceptions under the Investment Company Act, and publicly traded entities whose public equity market capitalization exceeds the levels provided for under the Investment Company Act.
 Managerial Assistance to Portfolio Companies
 As a BDC, we must offer, and must provide upon request, significant managerial assistance to certain of our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. Our Investment Adviser may provide all or a portion of this assistance pursuant to our administration agreement, the costs of which will be reimbursed by us. We may receive fees for these services.
 Temporary Investments
 Pending investment in other types of “qualifying assets,” as described above, our investments may consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as “temporary investments,” so that 70% of our assets are qualifying assets. We may also invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our gross assets constitute repurchase agreements from a single counterparty, we would not meet the diversification tests in order to qualify as a RIC. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. Our Investment Adviser will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.
 Indebtedness and Senior Securities
 We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the Investment Company Act, is at least equal to 200% immediately after each such issuance. In addition, while any senior securities remain outstanding, we must make provisions to prohibit any
 
 16
  Table of Contents
 
 distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage. For a discussion of the risks associated with leverage, see Part I, Item 1A of this Form 10-K “ Risk Factor—Risks Relating to Our Business and Structure—Regulations governing our operation as a BDC affect our ability to, and the way in which we will, raise additional capital. As a BDC, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage. ”
 Codes of Ethics
 We and our Investment Adviser have each adopted a code of ethics pursuant to Rule 17j-1 under the Investment Company Act and Rule 204A-1 under the Advisers Act, respectively (collectively, the “Rule 17j-1 Codes of Ethics”), which establish procedures for personal investments and restricts certain transactions and apply to, among others, our Chief Executive Officer and Chief Financial Officer. The Rule 17j-1 Codes of Ethics generally do not permit investments by personnel subject to them in securities that may be purchased or sold by us. We have also adopted a Code of Ethics for Principal Executive and Senior Financial Officers under the Sarbanes-Oxley Act of 2002 (the “SOX Code of Ethics”), which applies to, among others, our Chief Executive Officer and Chief Financial Officer.
 We hereby undertake to provide a copy of these codes of ethics to any person, without charge, upon request. Requests for a copy of these codes of ethics may be made in writing addressed to the Secretary of the Company, Erik Barrios, TCG BDC II, Inc., 520 Madison Avenue, 40th Floor, New York, NY. The SOX Code of Ethics is also available free of charge on our website (https://www.carlyle.com/our-business/global-credit/direct-lending).
 
 There have been no material changes to the Rule 17j-1 Code of Ethics or the SOX Code of Ethics or material waivers of the code that apply to our Chief Executive Officer or Chief Financial Officer.
 Compliance Policies and Procedures
 We and our Investment Adviser have each adopted and implemented written policies and procedures reasonably designed to detect and prevent violation of the federal securities laws and are required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation. Our Chief Compliance Officer is responsible for administering these policies and procedures.
 Sarbanes-Oxley Act of 2002
 The Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”) imposes a wide variety of regulatory requirements on publicly-held companies and their insiders. Many of these requirements affect us. For example:
 
 •pursuant to Rule 13a-14 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), our Chief Executive Officer and Chief Financial Officer must certify the accuracy of the consolidated financial statements contained in our periodic reports; •pursuant to Item 307 of Regulation S-K, our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures; •pursuant to Rule 13a-15 of the Exchange Act, our management must prepare a report regarding its assessment of our internal control over financial reporting and, starting from the date on which we are both (i) not an emerging growth company under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”) and (ii) are a reporting company that meets the definition of an “accelerated filer” or a “large accelerated filer” under Rule 12b-2 under the Exchange Act, must obtain an audit of the effectiveness of internal control over financial reporting performed by our independent registered public accounting firm; and •pursuant to Item 308 of Regulation S-K and Rule 13a-15 of the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to material weaknesses. The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder. We will continue to monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance therewith.
 
 17
  Table of Contents
 
 Compliance with the JOBS Act
 We currently are, and following the completion of this offering expect to remain, an “emerging growth company,” as defined in the JOBS Act until the earliest of:
 •up to five years measured from the date of the first sale of common equity securities pursuant to an effective registration statement; •the last day of the first fiscal year in which our annual gross revenues are $1.07 billion or more; •the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period; and •the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of the common stock that is held by non-affiliates exceeds $700 million as of any June 30. Under the JOBS Act, we are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act, which would require that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting. As long as we remain an emerging growth company or a reporting company that does not meet the definition of an “accelerated filer” or a “large accelerated filer” under Rule 12b-2 under the Exchange Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. This may increase the risk that material weaknesses or other deficiencies in our internal control over financial reporting go undetected. See Part I, Item 1A of this Form 10-K “ Risk Factors—Risks Relating to Our Business and Structure—If we fail to maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act, we may not be able to timely or accurately report our financial results, which could have a material adverse effect on our business .”
 In addition, Section 7(a)(2)(B) of the Securities Act and Section 13(a) of the Exchange Act, as amended by Section 102(b) of the JOBS Act, provide that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards. However, pursuant to Section 107 of the JOBS Act, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
 Proxy Voting Policies and Procedures
 We have delegated our proxy voting responsibility to our Investment Adviser. The proxy voting policies and procedures of our Investment Adviser are set forth below. These guidelines are reviewed periodically by our Investment Adviser and our Independent Directors, and, accordingly, are subject to change.
 An investment adviser registered under the Advisers Act has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, our Investment Adviser recognizes that it must vote portfolio securities in a timely manner free of conflicts of interest and in the best interests of its clients.
 These policies and procedures for voting proxies are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.
 Our Investment Adviser will vote proxies relating to our portfolio securities in what it perceives to be the best interest of our stockholders. Our Investment Adviser will review on a case-by-case basis each proposal submitted to a stockholder vote to determine its impact on the portfolio securities held by us. Although our Investment Adviser will generally vote against proposals that may have a negative impact on our portfolio securities, it may vote for such a proposal if there exist compelling long-term reasons to do so.
 Our Investment Adviser’s proxy voting decisions will be made by its investment committee. To ensure that the vote is not the product of a conflict of interest, our Investment Adviser will require that: (1) anyone involved in the decision making process disclose to our Investment Adviser’s investment committee, and Independent Directors, any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (2) employees involved in the decision making process or vote administration are prohibited from revealing how our Investment Adviser intends to vote on a proposal in order to reduce any attempted influence from interested parties.
 
 18
  Table of Contents
 
 Stockholders may obtain information regarding how we voted proxies by making a written request for proxy voting information to:  TCG BDC II, Inc., c/o Carlyle Global Credit Investment Management L.L.C., 520 Madison Avenue, 40 th Floor, New York, NY 10022.
 Privacy Principles
 We endeavor to maintain the privacy of our stockholders and to safeguard their non-public personal information. The following information is provided to help stockholders understand what non-public personal information we collect, how we protect that information and why, in certain cases, we may share that information with select other parties.
 We may collect non-public personal information about stockholders from our subscription agreements or other forms, such as name, address, account number and the types and amounts of investments, and information about transactions with us or our affiliates, such as participation in other investment programs, ownership of certain types of accounts or other account data and activity. We may disclose the non-public personal information that we collect from our stockholders or former stockholders, as described above, to our affiliates and service providers and as allowed by applicable law or regulation. Any party that receives this information from us is permitted to use it only for the services required by us and as allowed by applicable law or regulation, and is not permitted to share or use this information for any other purpose. We permit access only by authorized personnel who need access to that non-public personal information to provide services to us and our stockholders. We also maintain physical, electronic and procedural safeguards for non-public personal information that are designed to comply with applicable law.
 Reporting Obligations and Available Information
 We furnish our stockholders with annual reports containing audited financial statements, quarterly reports, and such other periodic reports as we determine to be appropriate or as may be required by law. We are required to comply with all periodic reporting, proxy solicitation and other applicable requirements under the Exchange Act.
 Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Definitive Proxy Statement on Schedule 14A, as well as reports on Forms 3, 4 and 5 regarding directors, officers or 10% beneficial owners of us, filed or furnished pursuant to section 13(a), 15(d) or 16(a) of the Exchange Act, are available free of charge on our website (https://www.carlyle.com/our-business/global-credit/direct-lending).
 The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us, which can be accessed at www.sec.gov.
 Competition
 Our primary competitors in providing financing to middle market companies include public and private funds, other BDCs, commercial and investment banks, collateralized loan obligations, commercial finance companies and, to the extent they provide an alternative form of financing, private equity and hedge funds. Many of our potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that will not be available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we do, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the Investment Company Act and the Code impose on us. We cannot assure you that the competitive pressures we will face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are consistent with our investment objective.
 We expect to use the expertise of the members of our Investment Adviser’s investment committee and its investment team to assess investment risks and determine appropriate pricing for our investments. In addition, we expect that extensive direct origination resources, broad product capabilities, ability to commit capital in scale and the depth of expertise of our Investment Adviser’s investment team will enable us to learn about and compete effectively for, financing opportunities with attractive middle market companies in the industries in which we seek to invest. For additional information concerning the competitive risks we face, see Part I, Item 1A of this Form 10-K “Risk Factors—Risks Related to Our Investments—We operate in a highly competitive market for investment opportunities, and compete with investment vehicles sponsored or advised by our affiliates”.
 
 19
  Table of Contents
 
 Staffing
 We do not currently have any employees. Our interim Treasurer and principal accounting officer, a Managing Director of Carlyle, and our Chief Compliance Officer and Secretary, a Vice President of Carlyle, are retained by our Administrator pursuant to the Carlyle Sub-Administration Agreement. Each of these professionals performs their respective functions for us under the terms of our Administration Agreement.
 Our day-to-day investment operations are managed by our Investment Adviser. Pursuant to its personnel agreement with Carlyle Employee Co., our Investment Adviser has access to the members of its investment committee, and a team of additional experienced investment professionals who, collectively, comprise the Investment Adviser’s investment team. Our Investment Adviser may hire additional investment professionals to provide services to us.
 Private Offering
 We have entered into separate subscription agreements with qualified investors providing for the private placement of shares of our common stock pursuant to the Private Offering.
 Closings
 The first date on which we accepted subscriptions for shares of our common stock to be issued in the Private Offering is referred to as the “Initial Closing Date.”  The last date on which we are authorized to accept subscriptions for shares of our common stock to be issued in the Private Offering must occur no later than 12 months following the Initial Closing Date, which is referred to as the “Final Closing Date”, provided that our Board of Directors may extend the Final Closing Date by up to an additional six-month period in its sole discretion (the end of such six-month period is referred to as the “Outside Date”).
 
 On September 11, 2017, which is the Initial Closing Date, we completed our initial closing of capital commitments of $185.8 million. Our Final Closing Date occurred on September 11, 2018. On August 6, 2018, our Board of Directors approved an extension of the Final Closing Date.  We have held additional closings subsequent to the Initial Closing Date, with our final closing occurring on November 9, 2018, which is the Outside Date.
 
 Capital Drawdowns
 Investors are required to fund drawdowns to purchase shares of our common stock up to the amount of their respective capital commitments each time we deliver a drawdown notice, which is issued based on our anticipated investment activities and capital needs and at least eight business days prior to funding. All purchases are generally made pro rata, in accordance with the remaining capital commitments of all investors, at a per share price equal to then-current NAV per share of our common stock as determined within two business days of the applicable drawdown notice, subject to the limitations of Section 23 under the Investment Company Act (which generally prohibits us from selling shares at a price below the then-current NAV per share of our common stock as determined within 48 hours, excluding Sundays and holidays, of such issuance, subject to certain exceptions).
 The initial capital drawdown from investors in the Private Offering (the “Initial Drawdown” and the date on which the Initial Drawdown occurs, the “Initial Drawdown Date”) was called on September 22, 2017 and settled by October 4, 2017. The NAV per share of the Company’s common stock in the Initial Drawdown was deemed to be $20.
 Investment Period
 The investment period commenced on the Initial Closing Date and will continue until the third anniversary of the Final Closing Date, regardless of whether the Final Closing Date is extended to the Outside Date, provided that it may be extended by our Board of Directors, in its discretion, for one additional one-year period, and, such end date may be further extended thereafter with the approval of holders of a majority of the shares of our common stock (such period, including any extensions, the “Investment Period”). In addition, our Board of Directors may terminate the Investment Period at any time in its discretion. Therefore, our Investment Period commenced on September 11, 2017 and will continue until September 11, 2021, unless extended or earlier terminated as noted above.
 Drawdowns may be issued at any time prior to the expiration of the Investment Period for any permitted purpose.
 Following the end of the Investment Period, we will have the right to issue drawdowns only (i) to pay, and/or establish reserves for, our actual or anticipated expenses, including management and incentive fees, any amounts that may become due under any borrowings or other financings or similar obligations and any other liabilities, contingent or otherwise, whether incurred
 
 20
  Table of Contents
 
 before or after the end of the Investment Period, (ii) to fulfill investment commitments made or approved by our Investment Adviser’s investment committee prior to the expiration of the Investment Period, (iii) to engage in hedging transactions, (iv) fund follow-on investments made in existing portfolio companies (including transactions to hedge interest rate relating to such additional investment), (v) fund obligations under any of our guarantee or indemnity made during the Investment Period, (vi) fulfill obligations with respect to any purchase price due from an investor on a drawdown date that such investor fails to pay or (vii) as necessary for us to comply with applicable laws and regulations, including the Investment Company Act and the Code.
 Right to Redraw Capital
 Unused capital commitments will be increased by the aggregate amount of (i) any portion of distributions made by us to an investor during the Investment Period which represents (A) proceeds realized from the sale or repayment of any investment (as opposed to investment income) during the Investment Period (but not in excess of the cost of any such investment) or (B) a return of such investor’s capital contributions to the Company, as determined by the Board of Directors, and (ii) any amount drawn down by us from unused capital commitments to pay management fees, incentive fees, organizational expenses or our expenses may, to the extent such investor receive subsequent distributions (each such amount as described in clauses (i) and (ii), “Returned Capital”).
 Recycling
 Subject to the requirements in the Code and the terms of any borrowings or other financings or similar obligations, proceeds realized by us from the sale or repayment of any investment (as opposed to investment income) during the Investment Period (but not in excess of the cost of any such investment), may be retained and be used by us for purposes making investments or paying management fees, incentive fees, or our expenses. Any amounts so reinvested will not reduce an investor’s unused capital commitment.
 Company Term
 The term of the Company is seven years from the Final Closing Date or, if the Final Closing Date is extended, the Outside Date, subject to the Board of Directors’ right to liquidate the Company at any time and to extend the term of the Company for up to two successive one-year periods (the seven year period and successive extensions, the “Term”). Upon the request of the Board of Directors and the approval of holders of a majority of the outstanding shares of our common stock, the Term of the Company may be further extended. Therefore, our Term will end on November 9, 2025, the seven year anniversary of the Outside Date, unless extended as noted above.
 The Company will be dissolved (i) upon the expiration of its Term (as such Term may be extended pursuant to the above) or (ii) at any time upon a decision of our Board of Directors, subject to any necessary stockholder approvals and applicable requirements of the Investment Company Act.
 Transfer of Our Common Stock
 No investor who participated in the Private Offering will be permitted to sell, assign, transfer or otherwise dispose of its shares or capital commitment unless we provide our prior written consent and the transfer is otherwise made in accordance with applicable law.
 Sponsor Commitment
 Certain members of our senior management team, Carlyle officers, employees, equity holders, advisers, operating executives, consultants, professionals and affiliates have collectively committed to invest at least 3% of the aggregate investor capital commitments (excluding any investors affiliated with Carlyle) or approximately $36 million by the end of the Outside Date (such amount, the “Carlyle Aggregate Commitment”). Carlyle will be permitted, but in no event will be required, to increase the Carlyle Aggregate Commitment at any time prior to the expiration or termination of the Investment Period.
 
 Item 1A. Risk Factors
 An investment in the Company involves a high degree of risk. You should carefully consider these risk factors, together with all of the other information included in this report, before you decide whether to make an investment in the Company. There can be no assurance that the Company’s investment objective will be achieved or that an investor will receive a return of its capital. In addition, there will be occasions when the Investment Adviser and its affiliates may encounter potential conflicts of interest in connection with the Company. The risks set out below are not the only risks we face. Additional risks and
 
 21
  Table of Contents
 
 uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. The following considerations, in addition to the considerations set forth elsewhere herein, should be carefully evaluated before making an investment in the Company. If any of the following events occur, our business, financial condition and operating result could be materially and adversely affected. In such case, our NAV could decline, and you may lose all or part of your investment.
 Risks Related to Our Business and Structure
 We are a new company and have limited operating history.
 We are a new company with limited operating history, and as a result, we have limited financial information on which investors can evaluate an investment in us or our prior performance. The results of any other businesses or companies that have or have had an investment objective which is similar to, or different from, our investment objective are not indicative of the results that we may achieve. We expect to have a different investment portfolio from other businesses or companies. Accordingly, our results may differ from and are independent of the results obtained by such businesses or companies. Moreover, past performance is no assurance of future returns.
 We are subject to all of the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objective and that the value of investors’ investments could decline substantially or that investors’ investments could become worthless. We anticipate that it could take some time to invest substantially all of the capital we raised due to market conditions generally and the time necessary to identify, evaluate, structure, negotiate and close suitable investments in private middle market companies.
 Our limited term and limited Investment Period may impact our investment strategy.
 Unless earlier liquidated by our Board of Directors or extended by our Board of Directors (and, to the extent necessary, holders of a majority of the shares of our common stock), our Term will end on November 9, 2025, the seven year anniversary of the Outside Date. Due to our finite Term, we may be required to sell investments at an inopportune time, which could adversely affect our performance and/or cause us to seek to invest in loans with a shorter term than would be the case if our Term was longer, which might adversely affect the nature and/or quality of our investments. Following the expiration of the Investment Period, we will not be permitted to reinvest proceeds realized by us from the sale or repayment of any investment. Accordingly, we may be required to distribute such proceeds to stockholders, which may cause our fixed expenses to increase as a percentage of assets under management. In addition, any proceeds realized by us from the sale or repayment of investments could result in an increased concentration of our portfolio, which could increase the risks associated with ownership of our common stock.
 Capital markets may experience periods of disruption and instability. These market conditions may materially and adversely affect debt and equity capital markets in the United States and abroad, which may have a negative impact on our business and operations.
 The U.S. and global capital markets have in the past and may in the future experience periods of extreme volatility and disruption during economic downturns and recessions. Increases to budget deficits or direct and contingent sovereign debt, may create concerns about the ability of certain nations to service their sovereign debt obligations, and risks resulting from any such debt crisis in Europe, the U.S. or elsewhere could have a detrimental impact on the global economy, sovereign and non-sovereign debt in certain countries and the financial condition of financial institutions generally. Austerity measures that certain countries may agree to as part of any debt crisis or disruptions to major financial trading markets may adversely affect world economic conditions, our business and the businesses of our portfolio companies. In June 2016, the United Kingdom held a referendum in which voters approved an exit from the European Union ("Brexit"). The UK officially left the EU on January 31, 2020 and an 11-month transition period commenced to obtain a new trade agreement. The implications of the withdrawal and the pending trade agreement are unclear. Disruptions in the capital markets, which may be caused by political trends and government actions in the U.S. and elsewhere, could adversely affect our business and the businesses of our portfolio companies and the broader financial and credit markets. Disruptions may also reduce the availability of debt and equity capital for the market as a whole and to financial firms, in particular. At various times, such disruptions have resulted in, and may in the future result in, a lack of liquidity in parts of the debt capital markets, significant write-offs in the financial services sector and the repricing of credit risk. Such conditions may occur for a prolonged period of time again and may materially worsen in the future, including as a result of U.S. government shutdowns or future downgrades to the U.S. government’s sovereign credit rating or the perceived credit worthiness of the U.S. or other large global economies. Unfavorable economic conditions, including future recessions, could also increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us.
 
 22
  Table of Contents
 
 These conditions may cause us to reduce the volume of loans we originate and/or fund, adversely affect the value of our portfolio investments or otherwise have a material adverse effect on our business, financial condition, results of operations and cash flows.
 Economic recessions or downturns could impair our portfolio companies and harm our operating results.
 Many of the portfolio companies in which we make investments may be susceptible to economic slowdowns or recessions and may be unable to repay the loans we made to them during these periods. Therefore, our non-performing assets may increase and the value of our portfolio may decrease during these periods as we are required to record our investments at their current fair value. Adverse economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our and our portfolio companies’ funding costs, limit our and our portfolio companies’ access to the capital markets or result in a decision by lenders not to extend credit to us or our portfolio companies. These events could prevent us from increasing investments and harm our operating results.
 A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, acceleration of the time when the loans are due and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize the portfolio company’s ability to meet its obligations under the debt that we hold. We may incur additional expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, including the extent to which we will actually provide significant managerial assistance to that portfolio company, a bankruptcy court might subordinate all or a portion of our claim to that of other creditors.
 Changes to U.S. tariff and import/export regulations may have a negative effect on our portfolio companies and, in turn, harm us.
 There has been ongoing discussion and commentary regarding potential, significant changes to U.S. trade policies, treaties and tariffs, resulting in significant uncertainty about the future relationship between the United States and other countries with respect to trade policies, treaties and tariffs. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. Any of these factors could depress economic activity and restrict our portfolio companies’ access to suppliers or customers and have a material adverse effect on their business, financial condition and results of operations, which in turn would negatively impact us.
 We are dependent upon our Investment Adviser for our future success.
 We do not have any employees. We depend on the diligence, skill and network of business contacts of our Investment Adviser’s investment professionals and CDL to source appropriate investments for us. We depend on members of our Investment Adviser’s investment team to appropriately analyze our investments and our Investment Adviser’s investment committee to approve and monitor our middle market portfolio investments. Our Investment Adviser’s investment committee, together with the other members of its investment team, evaluate, negotiate, structure, close and monitor our investments. Our future success will depend on the continued availability of the members of our Investment Adviser’s investment committee and the other investment professionals available to our Investment Adviser. Neither we nor our Investment Adviser has employment agreements with these individuals or other key personnel, and we cannot provide any assurance that unforeseen business, medical, personal or other circumstances would not lead any such individual to terminate his or her relationship with us. The loss of any senior investment professionals to which our Investment Adviser has access, including members of our Investment Adviser's investment committee, or a significant number of the investment professionals of our Investment Adviser, could have a material adverse effect on our ability to achieve our investment objective as well as on our financial condition and results of operations. In addition, we cannot assure you that CGCIM will remain our investment adviser or that we will continue to have access to Carlyle’s investment professionals or its information and deal flow.  If, due to extraordinary market conditions or other reasons, we and other funds managed by our Investment Adviser or its affiliates were to incur substantial losses, the revenues of our Investment Adviser and its affiliates may decline substantially. Such losses may hamper our Investment Adviser's and its affiliates' ability to provide the same level of service to us as it would have. Further, there can be no assurance that CGCIM will replicate its own or Carlyle’s historical success, and we caution you that our investment returns could be substantially lower than the returns achieved by other Carlyle-managed funds.
 
 
 23
  Table of Contents
 
 Our financial condition, results of operations and ability to achieve our investment objective depend on our ability to source investments, access financing and manage future growth effectively.
 Our ability to achieve our investment objective and to grow depends on our ability to acquire suitable investments and monitor and administer those investments, which depends, in turn, on our Investment Adviser’s ability to identify, invest in and monitor companies that meet our investment criteria.
 Accomplishing this result on a cost-effective basis is largely a function of our Investment Adviser’s structuring of the investment process, its ability to provide competent, attentive and efficient services to us and its ability to access financing for us on acceptable terms. Our Investment Adviser’s investment team has substantial responsibilities under the investment advisory agreement between us and our Investment Adviser (the “Investment Advisory Agreement”) and in connection with managing us and certain other investment funds and accounts advised by our Investment Adviser, and may also be called upon to provide managerial assistance to our portfolio companies. These demands on their time, which will increase as the number of investments grow, may distract them or slow the rate of investment. In order for us to grow, Carlyle will need to hire, train, supervise, manage and retain new employees. However, we can offer no assurance that any such investment professionals will contribute effectively to the work of our Investment Adviser. Any failure to manage our future growth effectively could have a material adverse effect on our business, financial condition and results of operations.
 We may need to raise additional capital to grow because we must distribute most of our income.
 We may need additional capital to fund growth in our investments. We expect to continue to issue equity securities in connection with capital drawdowns from our investors in the Private Offering and expect to continue to borrow from financial institutions in the future. A reduction in the availability of new capital could limit our ability to grow. We have elected to be treated, and intend to qualify annually, as a RIC for U.S. federal income tax purposes under Subchapter M of the Code. To maintain our status as a RIC, among other requirements, we must distribute on a timely basis at least 90% of our investment company taxable income to our stockholders to maintain our RIC status. As a result, any such cash earnings may not be available to fund investment originations or repay maturing debt.
 We have borrowed under credit facilities and in the future may borrow under additional debt facilities from financial institutions. On October 3, 2017, we entered into a senior secured revolving credit facility (as amended, the "Subscription Facility") with a maximum principal amount of $265 million as of December 31, 2019 . In addition, on April 1, 2019, our wholly owned subsidiary, the SPV, entered into a senior secured revolving credit facility (as amended, the "SPV Credit Facility" and together with the Subscription Facility, the "Credit Facilities") with a maximum principal amount of $600 million as of December 31, 2019 .
 We expect to issue additional debt and equity securities to fund our growth. If we fail to obtain funds from such sources or from other sources to fund our investments, it could limit our ability to grow, which may have an adverse effect on the value of our securities. We may pursue growth through acquisitions or strategic investments in new businesses. Completion and timing of any such acquisitions or strategic investments may be subject to a number of contingencies and risks. There can be no assurance that the integration of an acquired business will be successful or that an acquired business will prove to be profitable or sustainable.
 In addition, as a BDC, our ability to borrow or issue preferred stock may be restricted if our total assets are less than 200% of our total borrowings and preferred stock. Furthermore, equity capital may be difficult to raise because, subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price per share less than NAV without first obtaining approval for such issuance from our stockholders and our Independent Directors.
 Our investors have obligations to satisfy capital calls.
 Capital calls will be issued by us from time to time at our discretion, including after the end of our Investment Period to satisfy certain specified uses, based upon our assessment of our needs and opportunities. To satisfy such capital calls, our investors may need to maintain a substantial portion of their commitment in assets that can be readily converted to cash. Except as specifically set forth in the subscription agreement, each investor’s obligation to satisfy capital calls will be unconditional. An investor’s obligation to satisfy capital calls will not in any manner be contingent upon our performance or prospects or upon any assessment thereof provided by our Investment Adviser. Capital calls may not provide all of the information an investor desires in a particular circumstance, and such information may not be made available and will not be a condition precedent for an investor to meet its funding obligation. Additionally, and notwithstanding the foregoing, our Investment Adviser will not be obligated to call 100% of any investor’s commitment during our Term.
 
 24
  Table of Contents
 
 If one or more of our investors are unable to make, or are contractually excused from making, their capital calls on any one investment, the capital call of the other investors will increase accordingly, possibly materially. The fees, costs and expenses incurred by our investors in fulfilling a capital call (whether it is bank fees, wire fees, value-added tax or other applicable charge imposed on an investor (including the fees, costs and expenses incurred by an investor in converting its local currency into dollars, if applicable)) will be borne solely by such investor and will be in addition to the amounts required by capital calls (and will not be part of or otherwise reduce their commitments and/or unpaid capital commitment, as applicable).
 We may be unable to pay our obligations when due if our investors fail to pay installments of their capital commitments to us when due.
 If an investor fails to pay installments of its capital commitment to us when due, and if the contributions made by non-defaulting investors and borrowings by us are inadequate to cover the defaulted contribution, we may be unable to pay our obligations when due. As a result, we may be subjected to significant penalties that could materially adversely affect the returns to our investors (including non-defaulting investors).
 Any failure on our part to maintain our status as a BDC or RIC would reduce our operating flexibility, may hinder our achievement of our investment objective, may limit our investment choices and may subject us to greater regulation.
 The Investment Company Act imposes numerous constraints on the operations of BDCs and RICs that do not apply to other types of investment vehicles. For example, under the Investment Company Act, we are required as a BDC to invest at least 70% of our total assets in specified types of “qualifying assets,” primarily in private U.S. companies or thinly-traded U.S. public companies, cash, cash equivalents, U.S. government securities and other high quality debt investments that mature in one year or less. In addition, in order to continue to qualify as a RIC for U.S. federal income tax purposes, we are required to satisfy certain source-of-income, diversification and distribution requirements. These constraints, among others, may hinder our ability to take advantage of attractive investment opportunities and to achieve our investment objective. See Part I, Item 1 of this Form 10-K “ Business—Election to be Taxed as a RIC .”
 Furthermore, any failure to comply with the requirements imposed on us as a BDC by the Investment Company Act could cause the SEC to bring an enforcement action against us and/or expose us to claims of private litigants. In addition, upon approval of a majority of our outstanding voting securities as required by the Investment Company Act, we may elect to withdraw our status as a BDC. If we decide to withdraw our election, or if we otherwise fail to qualify, or maintain our qualification, as a BDC, we might be regulated as a closed-end investment company that is required to register under the Investment Company Act, which would subject us to additional regulatory restrictions, significantly decrease our operating flexibility and could significantly increase our cost of doing business. In addition, any such failure could cause an event of default under our outstanding indebtedness, which could have a material adverse effect on our business, financial condition or results of operations.
 Regulations governing our operation as a BDC affect our ability to, and the way in which we will, raise additional capital. As a BDC, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage.
 We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the Investment Company Act. In addition, we may seek to securitize certain of our loans. Under the provisions of the Investment Company Act, we are permitted, as a BDC, to issue senior securities only in amounts such that our asset coverage ratio, as defined in the Investment Company Act, equals at least 200% of total assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy this test, which may prohibit us from paying dividends and could prevent us from maintaining our status as a RIC or may prohibit us from repurchasing shares of our common stock. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. Accordingly, any failure to satisfy this test could have a material adverse effect on our business, financial condition or results of operations. As of December 31, 2019 , our asset coverage calculated in accordance with the Investment Company Act was 213.72% . Also, any amounts that we use to service our indebtedness would not be available for distributions to our common stockholders. Furthermore, as a result of issuing senior securities, our common stockholders would also be exposed to typical risks associated with increased leverage, including an increased risk of loss resulting from increased indebtedness.
 If we issue preferred stock, the preferred stock would rank “senior” to common stock in our capital structure, preferred stockholders would have separate voting rights on certain matters and might have other rights, preferences, or privileges more favorable than those of our common stockholders, and the issuance of preferred stock could have the effect of delaying,
 
 25
  Table of Contents
 
 deferring or preventing a transaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in their best interest.
 We are not generally able to issue and sell our common stock at a price below the NAV per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current NAV per share of our common stock if our Board of Directors determines that such sale is in the best interests of us and our stockholders and our stockholders approve such sale. If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage ownership of our stockholders at that time will decrease, and holders of our common stock might experience dilution.
 
 We borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us.
 As part of our business strategy, we, including through our wholly owned subsidiary, borrow from and may in the future issue senior debt securities to banks, insurance companies and other lenders. Holders of these loans or senior securities would have fixed-dollar claims on our assets that are superior to the claims of our stockholders. If the value of our assets decreases, leverage will cause our NAV to decline more sharply than it otherwise would have without leverage. Similarly, any decrease in our income would cause our net income to decline more sharply than it would have if we had not borrowed. This decline could negatively affect our ability to make dividend payments on our common stock.
 Our ability to service our borrowings depends largely on our financial performance and is subject to prevailing economic conditions and competitive pressures. The amount of leverage that we employ will depend on our Investment Adviser’s and our Board of Directors’ assessment of market and other factors at the time of any proposed borrowing. We cannot assure you that we will be able to continue to obtain credit at all or on terms acceptable to us.
 In addition to having fixed-dollar claims on our assets that are superior to the claims of our common stockholders, obligations to lenders may be secured by a first priority security interest in our portfolio of investments, our cash, and/or our right to call unused capital commitments from the stockholders. The lenders (or their agent) of our Subscription Facility have the right on behalf of us to directly call unused capital commitments and enforce remedies against the stockholders under certain circumstances. In the case of a liquidation event, such as the liquidation, dissolution or winding up of the Company, lenders and other creditors would receive proceeds to the extent of their security interest before any distributions are made to the stockholders.
 Our Credit Facilities impose financial and operating covenants that restrict our business activities, remedies on default and similar matters. As of December 31, 2019 , we were in material compliance with the operating and financial covenants of our Credit Facilities. However, our continued compliance with these covenants depends on many factors, some of which are beyond our control. Accordingly, although we believe we will continue to be in compliance, we cannot assure you that we will continue to comply with the covenants in our Credit Facilities. Failure to comply with these covenants could result in a default. If we were unable to obtain a waiver of a default from the lenders or holders of that indebtedness, as applicable, those lenders or holders could accelerate repayment under that indebtedness, which may result in cross-acceleration of other indebtedness. An acceleration could have a material adverse impact on our business, financial condition and results of operations. Lastly, we may be unable to obtain additional leverage, which would, in turn, affect our return on capital.
 As of December 31, 2019 , we had $648.2 million of outstanding indebtedness under our Credit Facilities. Our weighted average effective interest rate as of December 31, 2019 , was 3.91% , excluding fees (such as fees on undrawn amounts and amortization of upfront fees). Since we generally pay interest at a floating rate on our Credit Facilities, an increase in interest rates will generally increase our borrowing costs.
 The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns on our portfolio, net of expenses. The calculations in the table below are hypothetical, and actual returns may be higher or lower than those appearing in the table below.
 Assumed Return on OurPortfolio(Net of Expenses)Assumed annual returns on Company's portfolio (net of expenses)(10)%(5)%0%5%10%Corresponding return to common stockholder(1)(22.61)%(13.03)%(3.44)%6.15%15.74%
 (1)Assumes, as ofDecember 31, 2019, (i)$1,413.6 millionin total assets, (ii)$648.2 millionin outstanding indebtedness, (iii)$737.1 millionin net assets and (iv) weighted average effective interest rate, excluding fees (such as fees on undrawn amounts and amortization of financing costs), of3.91%. 
 26
  Table of Contents
 
 Based on an outstanding indebtedness of $648.2 million as of December 31, 2019 , and the weighted average effective annual interest rate, excluding fees (such as fees on undrawn amounts and amortization of financing costs), of 3.91% as of that date, our investment portfolio at fair value would have had to produce an annual return of approximately 1.79% to cover annual interest payments on the outstanding debt. For more information on our indebtedness, see Part II, Item 7 of this Form 10-K “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources. ”
 Our indebtedness could adversely affect our business, financial conditions or results of operations.
 We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our credit facilities or otherwise in an amount sufficient to enable us to repay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before it matures. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all. If we cannot service our indebtedness, we may have to take actions such as selling assets or seeking additional equity. We cannot assure you that any such actions, if necessary, could be effected on commercially reasonable terms or at all, or on terms that would not be disadvantageous to our stockholders or on terms that would not require us to breach the terms and conditions of our existing or future debt agreements.
 Changes in interest rates may increase our cost of capital, reduce the ability of our portfolio companies to service their debt obligations and decrease our net investment income.
 General interest rate fluctuations and changes in credit spreads on floating rate loans may have a substantial negative impact on our investments and investment opportunities and, accordingly, may have a material adverse effect on our rate of return on invested capital, our net investment income and our NAV. Substantially all of our debt investments have variable interest rates that reset periodically based on benchmarks such as the London Interbank Offered Rate (“LIBOR” or “L”) and the U.S. Prime Rate (“Prime Rate” or “P”), so an increase in interest rates from their historically low present levels may make it more difficult for our portfolio companies to service their obligations under the debt investments that we hold. Rising interest rates could also cause portfolio companies to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults.
 Furthermore, because we typically borrow money to make investments, our net investment income depends, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income to the extent we use debt to finance our investments. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income.
 In general, rising interest rates will negatively impact the price of a fixed rate debt instrument and falling interest rates will have a positive impact on price. Adjustable rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules.
 In addition, a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate in our Investment Advisory Agreement and may result in a substantial increase in the amount of incentive fees payable to our Investment Adviser with respect to our pre-incentive fee net investment income. Also, an increase in interest rates available to investors could make an investment in our common stock less attractive if we are not able to increase our distribution rate, which could reduce the value of our common stock.
 
 Changes in or the discontinuation of LIBOR may adversely affect our business and results of operations.
 On July 27, 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be enacted in the United Kingdom or elsewhere. It is possible that banks will not continue to provide submissions for the calculation of LIBOR. Similarly, it is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become accepted alternatives to LIBOR, or what the effect of any such changes in views or alternatives may have on the financial markets for LIBOR-linked financial instruments.
 
 27
  Table of Contents
 
 To identify a successor rate for U.S. dollar LIBOR, the Alternative Reference Rates Committee (the "ARRC"), a U.S.-based group convened by the Federal Reserve and the Federal Reserve Bank of New York, was formed. Financial regulators in the United Kingdom, the European Union, Japan and Switzerland also formed working groups with the aim of recommending alternatives to LIBOR denominated in their local currencies. The ARRC has identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative rate for LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. Although SOFR appears to be the preferred replacement rate for U.S. dollar LIBOR, it is unclear if other benchmarks may emerge or if other rates will be adopted outside the U.S.
 The expected discontinuance of LIBOR may require us to renegotiate the credit agreements extending beyond 2021 with our portfolio companies that utilize LIBOR as a factor in determining the interest rate, in order to replace LIBOR with the new standard that is established, which may have an adverse effect on our ability to receive attractive returns.
 In addition, if LIBOR ceases to exist, we may need to renegotiate certain terms of our Credit Facilities. If we are unable to do so, amounts outstanding under the Credit Facilities may bear interest at a higher rate, which would increase the cost of our borrowings and, in turn, affect our return on capital.
 Depending on several factors, including those set forth above, and the related costs of negotiating and documenting necessary changes to documentation, our business, financial condition and results of operations could be materially adversely impacted by the market transition or reform of certain reference rates and benchmarks. Other factors include the pace of the transition to replacement or reformed rates, the specific terms and parameters for and market acceptance of any alternative reference rates, prices and liquidity of trading markets for products based on alternative reference rates, and our ability to transition and develop appropriate systems and analytics for one or more alternative reference rates.
 We may experience fluctuations in our quarterly results.
 We could experience fluctuations in our quarterly operating results due to a number of factors, including, the pace at which investments are made, the interest rate payable on the debt securities we acquire, the default rate on such securities, rates of repayment, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses and changes in unrealized appreciation or depreciation, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.
 There are significant potential conflicts of interest, including the management of other investment funds and accounts by our Investment Adviser, which could impact our investment returns.
 Our executive officers and directors, other current and future principals of our Investment Adviser and certain members of our Investment Adviser’s investment committee currently serve, and may continue to serve, as officers, directors or principals of other entities and affiliates of our Investment Adviser and funds managed by our affiliates that operate in the same or a related line of business as we do. Currently, our executive officers, as well as the other principals of our Investment Adviser manage other funds affiliated with Carlyle, including other existing and future affiliated BDCs, including TCG BDC, Inc. (“BDC I”). In addition, our Investment Adviser’s investment team has responsibilities for sourcing and managing U.S. middle market debt investments for certain other investment funds and accounts. Accordingly, they have obligations to investors in those entities, the fulfillment of which may not be in the best interests of, or may be adverse to the interests of, us or our stockholders. Although the professional staff of our Investment Adviser will devote as much time to our management as appropriate to enable our Investment Adviser to perform its duties in accordance with the Investment Advisory Agreement, the investment professionals of our Investment Adviser may have conflicts in allocating their time and services among us, on the one hand, and investment vehicles managed by Carlyle or one or more of its affiliates on the other hand.
 Our Investment Adviser and its affiliated investment managers may face conflicts in allocating investment opportunities between us and affiliated investment vehicles that have overlapping objectives with ours. For example, certain affiliated investment vehicles may have arrangements that provide for higher management or incentive fees, greater expense reimbursements or overhead allocations, or permit the Investment Adviser and its affiliates to receive transaction fees not permitted under the Investment Company Act, all of which may contribute to this conflict of interest and create an incentive for our Investment Adviser or its affiliated investment managers to favor such other accounts. Furthermore, our Investment Adviser and its affiliated investment managers may form vehicles for the benefit of third-party investors that will be entitled to a portion of the allocation with respect to an investment. Such co-investment rights could result in us being allocated a smaller share of an investment than would otherwise be the case in the absence of such co-investment rights. Although our Investment Adviser will endeavor to allocate investment opportunities in a fair and equitable manner in accordance with its allocation policies and procedures, it is possible that, in the future, we may not be given the opportunity to participate in investments made by
 
 28
  Table of Contents
 
 investment funds managed by our Investment Adviser or an investment manager affiliated with our Investment Adviser, including Carlyle.
 We and our affiliates own and may continue to own investments at different levels of a portfolio company’s capital structure or otherwise own different classes of a portfolio company’s securities, which may give rise to conflicts of interest or perceived conflicts of interest. Conflicts may also arise because portfolio decisions regarding our portfolio may benefit our affiliates. Our affiliates may pursue or enforce rights with respect to one of our portfolio companies, and those activities may have an adverse effect on us.
 It is possible that Carlyle or an affiliated investment vehicle will invest in a company that is or becomes a competitor of a portfolio company of ours. Such investment could create a conflict between us, on the one hand, and Carlyle or the affiliated investment vehicle, on the other hand. In such a situation, Carlyle or our Investment Adviser may also have a conflict in the allocation of its own resources to our portfolio company. In addition, certain affiliated investment vehicles will be focused primarily on investing in other funds that may have strategies that overlap and/or directly conflict and compete with us.
 As a result of the expansion of Carlyle’s platform into various lines of business in the alternative asset management industry, Carlyle is subject to a number of actual and potential conflicts of interest and subject to greater regulatory oversight than that to which it would otherwise be subject if it had just one line of business. In addition, as Carlyle expands its platform, the allocation of investment opportunities among its investment funds, including us, is expected to become more complex. In addressing these conflicts and regulatory requirements across Carlyle’s various businesses, Carlyle has implemented and may continue to implement certain policies and procedures. For example, Carlyle has established an information barrier between Carlyle Global Credit, on the one hand, and the rest of Carlyle, on the other, which restricts the communications of Carlyle Global Credit with other Carlyle investment professionals pursuant to the information barrier policy. In addition, we may come into possession of material non-public information with respect to issuers in which we may be considering making an investment. As a consequence, we may be precluded from providing such information or other ideas to other funds affiliated with Carlyle that may benefit from such information or we may be precluded from otherwise consummating a contemplated investment. To the extent we or any other funds affiliated with Carlyle fail to appropriately deal with any such conflicts, it could negatively impact our reputation or Carlyle’s reputation and our ability to raise additional funds and the willingness of counterparties to do business with us or result in potential litigation against us.
 In the ordinary course of business, we enter and may continue to enter into transactions with affiliates and portfolio companies that may be considered related party transactions. We have implemented certain policies and procedures whereby certain of our executive officers screen each of our transactions for any possible affiliations between the proposed portfolio investment, us and other affiliated persons, including our Investment Adviser, stockholders that own more than 5% of us, employees, officers and directors of us and our Investment Adviser and certain persons directly or indirectly controlling, controlled by or under common control with the foregoing persons. We will not enter into any agreements unless and until we are satisfied that doing so will not raise concerns under the Investment Company Act or, if such concerns exist, we have taken appropriate actions to seek Board of Directors review and approval or SEC exemptive relief for such transaction.
 In the course of our investing activities, we pay management and incentive fees to our Investment Adviser and reimburse our Investment Adviser for certain expenses it incurs in accordance with our Investment Advisory Agreement. The base management fee is based on our gross assets and the incentive fee is paid on income, both of which include leverage. As a result, investors in our common stock invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in a lower rate of return than an investor might achieve through direct investments. Because the incentive fees are based on gross assets, our Investment Adviser benefits to the extent we incur debt or use leverage. Accordingly, there may be times when the senior management team of our Investment Adviser has interests that differ from those of our stockholders, giving rise to a conflict.
 In addition, we pay our Administrator, an affiliate of our Investment Adviser, its costs and expenses and our allocable portion of overhead incurred by it in performing its obligations under the Administration Agreement, including, compensation paid to or compensatory distributions received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and their respective staff who provide services to us, operations staff who provide services to us, and internal audit staff in their role of performing our Sarbanes-Oxley Act internal control assessment. These arrangements create conflicts of interest that our Board of Directors monitors. Despite Carlyle’s good faith judgment to arrive at a fair and reasonable expense allocation methodology, the use of any particular methodology may lead us to bear relatively more expense in certain instances and relatively less in other instances compared to what we would have borne if a different methodology had been used. However, Carlyle seeks to make allocations that are equitable on an overall basis in its good faith judgment.
 
 29
  Table of Contents
 
 We may be obligated to pay our Investment Adviser incentive compensation even if we incur a loss.
 Our Investment Adviser is entitled to incentive compensation for each calendar quarter in an amount equal to a percentage of the excess of our pre-incentive fee net investment income for that quarter (before deducting incentive compensation) above a performance threshold for that quarter. We use net assets in calculating our performance threshold, which results in a lower hurdle rate than if we used gross assets like we do for determining our base management fee. Our pre-incentive fee net investment income for incentive compensation purposes excludes realized and unrealized capital losses and depreciation that we may incur in the calendar quarter, even if such capital losses or depreciation result in a net loss on our statement of operations for that quarter. Thus, we may be required to pay our Investment Adviser incentive compensation for a calendar quarter even if there is a decline in the value of our portfolio or we incur a net loss for that quarter.
 Our fee structure may induce our Investment Adviser to pursue speculative investments and incur leverage, and investors may bear the cost of multiple levels of fees and expenses.
 The incentive fees payable by us to our Investment Adviser may create an incentive for our Investment Adviser to pursue investments on our behalf that are riskier or more speculative than would be the case in the absence of such compensation arrangement. The incentive fees payable to our Investment Adviser are calculated based on a percentage of our return on invested capital. This may encourage our Investment Adviser to use leverage to increase the return on our investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would impair the value of our common stock.
 The “catch-up” portion of the incentive fees may encourage our Investment Adviser to accelerate or defer interest payable by portfolio companies from one calendar quarter to another, potentially resulting in fluctuations in timing and dividend amounts.
 Additionally, the incentive fee payable by us to our Investment Adviser may create an incentive for our Investment Adviser to cause us to realize capital gains or losses that may not be in the best interests of us or our stockholders. Under the incentive fee structure, our Investment Adviser benefits when we recognize capital gains and, because our Investment Adviser determines when an investment is sold, our Investment Adviser controls the timing of the recognition of such capital gains. Our Board of Directors is charged with protecting our stockholders’ interests by monitoring how our Investment Adviser addresses these and other conflicts of interest associated with its management services and compensation.
 We may invest, to the extent permitted by law, in the securities and instruments of other investment companies, including private funds, and, to the extent we so invest, bear our ratable share of any such investment company’s expenses, including management and performance fees. We also remain obligated to pay management and incentive fees to our Investment Adviser with respect to the assets invested in the securities and instruments of other investment companies. With respect to each of these investments, each of our stockholders bears his or her share of the management and incentive fees of our Investment Adviser as well as indirectly bearing the management and performance fees and other expenses of any investment companies in which we invest.
 We will be subject to corporate-level income tax if we are unable to maintain our qualification as a RIC for U.S. federal income tax purposes under Subchapter M of the Code.
 Although we have elected to be treated, and intend to qualify annually, as a RIC for U.S. federal income tax purposes under Subchapter M of the Code, we cannot assure you that we will be able to maintain RIC status. To maintain RIC status and be relieved of U.S. federal income taxes on income and gains distributed to our stockholders, we must, among other things, have in effect an election to be treated, and continue to qualify, as a BDC under the Investment Company Act at all times during each taxable year and meet the Annual Distribution Requirement, the 90% Gross Income Test and the Diversification Tests (each as defined and explained more fully in Part I, Item 1 of this Form 10-K “ Business-Election to be Taxed as a RIC. ”).
 If we fail to maintain our RIC status for any reason, and we do not qualify for certain relief provisions under the Code, we would be subject to corporate-level U.S. federal income tax (and any applicable U.S. state and local taxes) regardless of whether we make any distributions to our stockholders. In this event, the resulting taxes and any resulting penalties could substantially reduce our net assets, the amount of our income available for distribution and the amount of our distributions to our stockholders, which would have a material adverse effect on our financial performance. For additional discussion regarding the tax implications of a RIC, see Part I, Item 1 of this Form 10-K “ Business—Election to be Taxed as a RIC. ”
 
 30
  Table of Contents
 
 We may have difficulty satisfying the Annual Distribution Requirement in order to maintain our RIC status if we recognize income before or without receiving cash representing such income.
 We may make investments that produce income that is not matched by a corresponding cash receipt by us, such as original issue discount (“OID”), which may arise, for example, if we receive warrants in connection with the making of a loan, or payment-in-kind (“PIK”) interest representing contractual interest added to the loan principal balance and due at the end of the loan term. Any such income would be treated as income earned by us and therefore would be subject to the Annual Distribution Requirement (as defined and explained more fully in Part I, Item 1 of this Form 10-K “ Business-Election to be Taxed as a RIC. ”). Such investments may require us to borrow money or dispose of other securities in order to comply with those requirements. However, under the Investment Company Act, we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless an “asset coverage” test is met. See Part I, Item 1 of this Form 10-K “ Business—Regulation—Indebtedness and Senior Securities .”
 If we are prohibited from making distributions or are unable to raise additional debt or equity capital or sell assets to make distributions, we may not be able to make sufficient distributions to satisfy the Annual Distribution Requirement, and therefore would not be able to maintain our qualification as a RIC. Additionally, we may make investments that result in the recognition of ordinary income rather than capital gain, or that prevent us from accruing a long-term holding period. These investments may prevent us from making capital gain distributions. See Part I, Item 1 of this Form 10-K “ Business—Election to be Taxed as a RIC. ”
 A portion of our income and fees may not be qualifying income for purposes of the income source requirement.
 Some of the income and fees that we may recognize will not satisfy the income source requirement applicable to RICs. In order to ensure that such income and fees do not disqualify us as a RIC for a failure to satisfy such requirement, we may be required to recognize such income and fees indirectly through one or more entities treated as corporations for U.S. federal income tax purposes. Such corporations will be required to pay U.S. corporate income tax on their earnings, which ultimately will reduce the amount of income available for distribution.
 If we are not treated as a “publicly offered regulated investment company,” as defined in the Code, certain U.S. stockholders will be treated as having received a dividend from us in the amount of such U.S. stockholders’ allocable share of the management and incentive fees paid to our Investment Adviser and certain of our other expenses, and these fees and expenses will be treated as miscellaneous itemized deductions of such U.S. stockholders.
 We expect to be treated as a “publicly offered regulated investment company” as a result of shares of our common stock being held by at least 500 persons at all times during the taxable year. However, we cannot assure you that we will be treated as a publicly offered regulated investment company for all years. If we are not treated as a publicly offered regulated investment company for any calendar year, each U.S. stockholder that is an individual, trust or estate will be treated as having received a dividend from us in the amount of such U.S. stockholder’s allocable share of the management and incentive fees paid to our Investment Adviser and certain of our other expenses for the calendar year, and these fees and expenses will be treated as miscellaneous itemized deductions of such U.S. stockholder. Miscellaneous itemized deductions generally are deductible by a U.S. stockholder that is an individual, trust or estate only to the extent that the aggregate of such U.S. stockholder’s miscellaneous itemized deductions exceeds 2% of such U.S. stockholder’s adjusted gross income for U.S. federal income tax purposes, are not deductible for purposes of the alternative minimum tax and are subject to the overall limitation on itemized deductions under the Code. See Part I, Item 1 of this Form 10-K “ Business—Election to be Taxed as a RIC. ”
 We expend significant financial and other resources to comply with the requirements of being registered under the Exchange Act.
 We may incur legal, accounting and other expenses to comply with the requirements of being registered under the Exchange Act, including costs associated with the reporting requirements of the Exchange Act and requirements of the Sarbanes-Oxley Act. These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting, which are discussed below and in “ Item 1. Business—Regulation—Sarbanes-Oxley Act of 2002 .” In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal controls, significant resources and management oversight is required. We will continue to implement procedures, processes, policies and practices for the purpose of addressing the standards and requirements applicable to public companies. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. We expect to incur significant additional annual expenses related to these steps and, among other things, directors’ and officers’ liability insurance, director fees, reporting
 
 31
  Table of Contents
 
 requirements of the SEC, transfer agent fees, additional administrative expenses payable to our Administrator to compensate them for hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses.
 The systems and resources necessary to comply with public company reporting requirements will increase further once we cease to be an “emerging growth company” under the JOBS Act. As long as we remain an emerging growth company or a reporting company that does not meet the definition of an “accelerated filer” or a “large accelerated filer” under Rule 12b-2 under the Exchange Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We intend to remain an emerging growth company, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an emerging growth company as of the following December 31.
 If we fail to maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act, we may not be able to timely or accurately report our financial results, which could have a material adverse effect on our business.
 We are obligated to maintain proper and effective internal control over financial reporting, including the internal control evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act. We will not be required to comply with all of the requirements under Section 404 of the Sarbanes-Oxley Act until the date (i) we are no longer an emerging growth company under the JOBS Act and (ii) we are a reporting company that meets the definition of an “accelerated filer” or a “large accelerated filer” under Rule 12b-2 under the Exchange Act. Accordingly, our internal controls over financial reporting do not currently meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act that we may eventually be required to meet. Specifically, we are required to conduct annual management assessments of the effectiveness of our internal controls over financial reporting. However, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until the date (i) we are no longer an emerging growth company under the JOBS Act and (ii) we are a reporting company that does not meet the definition of an “accelerated filer” or a “large accelerated filer” under Rule 12b-2 under the Exchange Act. If we are not able to implement the applicable requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or with adequate compliance, our operations, financial reporting or financial results could be adversely affected. Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC, and result in a breach of the covenants under the agreements governing any of our financing arrangements. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Additionally, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm were to report a material weakness in our internal controls over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports. This could materially adversely affect us.
 
 Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our operations, financial reporting or financial results could be harmed and we could fail to meet our financial reporting obligations.
 Certain investors are limited in their ability to make significant investments in us.
 Private funds that are excluded from the definition of “investment company” either pursuant to Section 3(c)(1) or 3(c)(7) of the Investment Company Act are restricted from acquiring directly or through a controlled entity more than 3% of our total outstanding voting stock (measured at the time of the acquisition). Investment companies registered under the Investment Company Act and BDCs are also subject to this restriction as well as other limitations under the Investment Company Act that would restrict the amount that they are able to invest in our securities. As a result, certain investors will be limited in their ability to make significant investments in us at a time that they might desire to do so.
 Our Board of Directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners.
 Under the Maryland General Corporation Law (“MGCL”) and our Articles of Amendment and Restatement (as amended from time to time, the “Charter”), our Board of Directors is authorized to classify and reclassify any authorized but unissued shares of stock into one or more classes of stock, including preferred stock. Prior to the issuance of shares of each
 
 32
  Table of Contents
 
 class or series, the Board of Directors is required by Maryland law and our Charter to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the Board of Directors could authorize the issuance of shares of preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of our common stock or otherwise be in their best interest. The cost of any such reclassification would be borne by our existing common stockholders. Certain matters under the Investment Company Act require the separate vote of the holders of any issued and outstanding preferred stock. For example, holders of preferred stock would vote separately from the holders of common stock on a proposal to cease operations as a BDC. In addition, the Investment Company Act provides that holders of preferred stock are entitled to vote separately from holders of common stock to elect two preferred stock directors. We currently have no plans to issue preferred stock, but may determine to do so in the future. The issuance of preferred stock convertible into shares of common stock might also reduce the net income per share and NAV per share of our common stock upon conversion, provided, that we will only be permitted to issue such convertible preferred stock to the extent we comply with the requirements of Section 61 of the Investment Company Act, including obtaining common stockholder approval. In addition, under the Investment Company Act, participating preferred stock and preferred stock constitutes a “senior security” for purposes of the 200% asset coverage test. These effects, among others, could have an adverse effect on an investment in our common stock.
 Provisions of the MGCL and of our Charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.
 The MGCL and our Charter and bylaws contain provisions that may discourage, delay or make more difficult a change in control of us or the removal of our directors. We are subject to the Maryland Business Combination Act (“MBCA”), subject to any applicable requirements of the Investment Company Act. Our Board of Directors has adopted a resolution exempting from the MBCA any business combination between us and any other person, subject to prior approval of such business combination by our Board of Directors, including approval by a majority of our Independent Directors. If the resolution exempting business combinations is repealed or our Board of Directors does not approve a business combination, the MBCA may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer. Our bylaws exempt from the Maryland Control Share Acquisition Act (“Control Share Act”) acquisitions of our stock by any person. If we amend our bylaws to repeal the exemption from the Control Share Act, the Control Share Act also may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such a transaction. However, we will amend our bylaws to be subject to the Control Share Act only if our Board of Directors determines that it would be in our best interests and if the SEC staff does not object to our determination that our being subject to the Control Share Act does not conflict with the Investment Company Act.
 We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our Charter classifying our Board of Directors in three classes serving staggered three-year terms, and authorizing our Board of Directors to classify or reclassify shares of our stock in one or more classes or series, to cause the issuance of additional shares of our stock, to amend our Charter without stockholder approval and to increase or decrease the number of shares of stock or the number of shares of stock of any class or series that we have authority to issue. These provisions, as well as other provisions of our Charter and bylaws, may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders.
 Our Board of Directors may change our investment objective, operating policies and strategies without prior notice and without stockholder approval.
 Our Board of Directors has the authority to modify or, if applicable, waive our investment objectives, operating policies and strategies without prior notice (except as required by the Investment Company Act) and without stockholder approval. In addition, none of our investment policies is fundamental and any of them may be changed without stockholder approval. However, absent stockholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. We cannot predict the effect any changes to our current investment objectives, operating policies or strategies would have on our business, operating results and value of our stock. Nevertheless, the effects may adversely affect our business and impact our ability to make distributions.
 We are highly dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect our business and our ability to pay dividends.
 Our business is highly dependent on the communications and information systems of our Investment Adviser, its affiliates and third parties. Any failure or interruption of those systems or services, including as a result of the termination or suspension of an agreement with any third-party service providers, could cause delays or other problems in our activities. Our
 
 33
  Table of Contents
 
 financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control and adversely affect our business. There could be:
 •sudden electrical or telecommunications outages; •natural disasters such as earthquakes, tornadoes and hurricanes; •disease pandemics; •events arising from local or larger scale political or social matters, including terrorist acts; and •cyber-attacks. These events, in turn, could have a material adverse effect on our operating results and negatively affect our business and our ability to pay dividends to our stockholders.
 Cybersecurity risks and cyber incidents may adversely affect our business or those of our portfolio companies by causing a disruption to our operations, a compromise or corruption of confidential information and/or damage to business relationships, or those of our portfolio companies, all of which could negatively impact our business, results of operations or financial condition.
 A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to, use, alteration or destruction of our information systems for purposes of misappropriating assets, obtaining ransom payments, stealing confidential information, corrupting data or causing operational disruption, or may involve phishing. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen information, misappropriation of assets, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships. This could result in significant losses, reputational damage, litigation, regulatory fines or penalties, or otherwise adversely affect our business, financial condition or results of operations. In addition, we may be required to expend significant additional resources to modify our protective measures and to investigate and remediate vulnerabilities or other exposures arising from operational and security risks. The costs related to cybersecurity incidents may not be fully insured or indemnified. As our and our portfolio companies’ reliance on technology has increased, so have the risks posed to our information systems, both internal and those provided by our Adviser and third-party service providers, and the information systems of our portfolio companies. We, our Adviser and its affiliates have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a risk of a cyber incident, may be ineffective and do not guarantee that a cyber incident will not occur or that our financial results, operations or confidential information will not be negatively impacted by such an incident.
 Third parties with which we do business (including, but not limited to, service providers, such as accountants, custodians, transfer agents and administrators, and the issuers of securities in which we invest) may also be sources or targets of cybersecurity or other technological risks. We outsource certain functions and these relationships allow for the storage and processing of our information and assets, as well as certain investor, counterparty, employee and borrower information. While we engage in actions to reduce our exposure resulting from outsourcing, we cannot control the cybersecurity plans and systems put in place by these third parties and ongoing threats may result in unauthorized access, loss, exposure or destruction of data, or other cybersecurity incidents, with increased costs and other consequences, including those described above. Privacy and information security laws and regulation changes, and compliance with those changes, may also result in cost increases due to system changes and the development of new administrative processes.
 Changes in laws or regulations governing our business or the businesses of our portfolio companies, changes in the interpretation thereof or newly enacted laws or regulations, and any failure by us or our portfolio companies to comply with these laws or regulations may adversely affect our business and the businesses of our portfolio companies.
 We and our portfolio companies are subject to laws and regulations at the U.S. federal, state and local levels and, in some cases, foreign levels. These laws and regulations, as well as their interpretation, may change from time to time, and new laws, regulations and interpretations may also come into effect. Any such new or changed laws or regulations could have a material adverse effect on our business or the business of our portfolio companies. The legal, tax and regulatory environment for BDCs, investment advisers and the instruments that they utilize (including derivative instruments) is continuously evolving. In addition, there is significant uncertainty regarding recently enacted legislation and the regulations that have recently been adopted and future regulations that may or may not be adopted pursuant to such legislation) and, consequently, the full impact that such legislation will ultimately have on us and the markets in which we trade and invest is not fully known. Such
 
 34
  Table of Contents
 
 uncertainty and any resulting confusion may itself be detrimental to the efficient functioning of the markets and the success of certain investment strategies.
 On February 3, 2017, President Trump signed Executive Order 13772 (the “Executive Order”) announcing the new Administration’s policy to regulate the U.S. financial system in a manner consistent with certain “Core Principles,” including regulation that is efficient, effective and appropriately tailored. The Executive Order directed the Secretary of the Treasury, in consultation with the heads of the member agencies of the Financial Stability Oversight Council, to report to the President on the extent to which existing laws, regulations and other government policies promote the Core Principles and to identify any laws, regulations or other government policies that inhibit federal regulation of the U.S. financial system.
 
 On June 12, 2017, the U.S. Department of the Treasury published the first of several reports in response to the Executive Order on the depository system covering banks and other savings institutions. On October 6 , 2017, the Treasur y r e l ease d a seco nd r eport out linin g ways to s tr ea mlin e and r e form the U.S. re g ulatory sys tem for ca pital markets, followed b y a third r eport, on October 2 6 , 2 017 , exa minin g the current re g ulatory framework for the asset management and in surance indu st rie s . The Treasury released a fourth report on July 31, 2018 describing recommendations relating to nonbank financial institutions, financial technology and innovation. Subsequent reports are expected to address retail and institutional investment products and vehicles.
 On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, which significantly revised the Internal Revenue Code, including, a reduction in the corporate income tax rate, a new limitation on the deductibility of interest expense, and significant changes to the taxation of income earned from foreign sources and foreign subsidiaries. The Tax Cuts and Jobs Act also authorizes the IRS to issue regulations with respect to the new provisions. Among other things, Tax Reform limits the ability of borrowers to fully deduct interest expense. This could potentially affect the loan market, for example by impacting the demand for loans available from us or the terms of such loans.  The changes to interest deductibility, utility of net operating losses and other provisions of Tax Reform could also in certain circumstances increase the U.S. tax burden on our portfolio assets which, in turn, could negatively impact their ability to service their interest expense obligations to us
 On May 24, 2018, President Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act, which leaves the architecture and core features of the Dodd-Frank Act intact but significantly recalibrates applicability thresholds, revises various post-crisis regulatory requirements, and provides targeted regulatory relief to certain financial institutions. Among the most significant of its amendments to the Dodd-Frank Act are a substantial increase in the $50 billion asset threshold for automatic regulation of bank holding companies as “systemically important financial institutions” (“SIFIs”) an exemption from the Volcker Rule for insured depository institutions with less than $10 billion in consolidated assets and lower levels of trading assets and liabilities, as well as amendments to the liquidity leverage ratio and supplementary leverage ratio requirements. The effect of this change and any further rules or regulations are and could be complex and far-reaching, and the change and any future laws or regulations or changes thereto could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely impact our business, financial condition and results of operations.
 In addition, as private equity firms become more influential participants in the U.S. and global financial markets and economy generally, there recently has been pressure for greater governmental scrutiny and/or regulation of the private equity industry. It is uncertain as to what form and in what jurisdictions such enhanced scrutiny and/or regulation, if any, on the private equity industry may ultimately take. Therefore, there can be no assurance as to whether any such scrutiny or initiatives will have an adverse impact on the private equity industry, including our ability to effect operating improvements or restructurings of our portfolio companies or otherwise achieve our objectives.
 Over the last several years, there also has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulation. While it cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulation of non-bank credit extension could negatively impact our operating results or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business.
 Our Investment Adviser, Administrator and sub-administrators are able to resign upon 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
 Our Investment Adviser, our Administrator and our sub-administrators have the right to resign under the Investment Advisory Agreement, the Administration Agreement and the Sub-Administration Agreements, respectively, upon 60 days’ written notice, whether a replacement has been found or not. If any of them resigns, it may be difficult to find a replacement
 
 35
  Table of Contents
 
 with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If a replacement is not found quickly, our business, results of operation and financial condition as well as our ability to pay distributions are likely to be adversely affected and the value of our shares may decline. In addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our Investment Adviser, our Administrator and their affiliates, including certain of our sub-administrators. Even if a comparable service provider or individuals performing such services are retained, whether internal or external, their integration into our business and lack of familiarity with our investment objective may result in additional costs and time delays that may materially adversely affect our business, results of operations and financial condition. Moreover, the termination by our Investment Adviser of our Investment Advisory Agreement for any reason will be an event of default under the SPV Credit Facility, which could result in the immediate acceleration of the amounts due under the SPV Credit Facility. Similarly, it will be an event of default under the Subscription Facility if our Investment Adviser or an affiliate of our Investment Adviser ceases to manage us, which could result in the immediate acceleration of the amounts due under the Subscription Facility.
 Our Investment Adviser’s liability is limited under the Investment Advisory Agreement, and we are required to indemnify our Investment Adviser against certain liabilities, which may lead our Investment Adviser to act in a riskier manner on our behalf than it would when acting for its own account.
 Our Investment Adviser has not assumed any responsibility to us other than to render the services described in the Investment Advisory Agreement, and it will not be responsible for any action of our Board of Directors in declining to follow our Investment Adviser’s advice or recommendations. Pursuant to the Investment Advisory Agreement, our Investment Adviser and its members and their respective officers, managers, partners, agents, employees, controlling persons and members and any other person or entities affiliated with it will not be liable to us for their acts under the Investment Advisory Agreement, absent willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties. We have agreed to indemnify, defend and protect our Investment Adviser and its members and their respective officers, managers, partners, agents, employees, controlling persons and members and any other person or entities affiliated with it with respect to all damages, liabilities, costs and expenses arising out of or otherwise based upon the performance of any of our Investment Adviser’s duties or obligations under the Investment Advisory Agreement or otherwise as an Investment Adviser for us, and not arising out of willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties under the Investment Advisory and Agreement. These protections may lead our Investment Adviser to act in a riskier manner when acting on our behalf than it would when acting for its own account. See “ Risk Factors — Risks Related to Our Business and Structure — Our fee structure may induce our Investment Adviser to pursue speculative investments and incur leverage, and investors may bear the cost of multiple levels of fees and expenses. ”
 Risks Related to Our Investments
 Our investments are risky and speculative.
 We invest primarily in loans to middle market companies whose debt, if rated, is rated below investment grade and, if not rated, would likely be rated below investment grade if it were rated. Investments rated below investment grade are generally considered higher risk than investment grade instruments. Bonds that are rated below investment grade are sometimes referred to as “high yield bonds” or “junk bonds.” Exposure to below investment grade instruments involves certain risks, including speculation with respect to the borrower’s capacity to pay interest and repay principal. In our first lien senior secured loans, the fact that a loan is secured does not guarantee that we will receive principal and interest payments according to the loan’s terms, or at all, or that we will be able to collect on the loan should we be forced to enforce our remedies. To the extent we hold second lien senior secured loans and junior debt investments, holders of first lien loans may be repaid before us in the event of a bankruptcy or other insolvency proceeding. This may result in an above average amount of risk and loss of principal. Unitranche loans generally allow the borrower to make a large lump sum payment of principal at the end of the loan term, and there is a heightened risk of loss if the borrower is unable to pay the lump sum or refinance the amount owed at maturity. When we invest in loans, we have acquired and may in the future acquire equity securities as well. However, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.
 
 36
  Table of Contents
 
 In addition, investing in middle market companies involves a number of significant risks, including:
 •these companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing on any guarantees or security we may have obtained in connection with our investment; •they typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns; •they are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on a portfolio company and, in turn, on us; •there is generally little public information about these companies. These companies and their financial information are usually not subject to the Exchange Act and other regulations that govern public companies, and we may be unable to uncover all material information about these companies, which may prevent us from making a fully informed investment decision and cause us to lose money on our investments; •they generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our executive officers, directors and our Investment Adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; •changes in laws and regulations, as well as their interpretations, may adversely affect their business, financial structure or prospects; and •they may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity. Our portfolio securities are generally illiquid and typically do not have a readily available market price and, in such a case, we will value these securities at fair value as determined in good faith under procedures adopted by our Board of Directors, which valuation is inherently subjective and may not reflect what we may actually realize from the sale of the investment.
 Substantially all of our portfolio investments are in the form of debt investments that are not publicly traded and are illiquid compared to publicly traded securities, and there can be no assurance that we will be able to realize returns on such investments in a timely manner. The fair value of these illiquid portfolio securities is not readily determinable, and the due diligence process that our Investment Adviser undertakes in connection with our investments may not reveal all the facts that may be relevant in connection with such investment. We value these investments on at least a quarterly basis in accordance with our valuation policy, which is at all times consistent with accounting principles generally accepted in the United States (“U.S. GAAP”). Our Board of Directors utilizes the services of a third-party valuation firm to aid it in determining the fair value of these investments as well as the recommendations of our Investment Adviser’s investment professionals, which are based upon the most recent portfolio company financial statements available and projected financial results of each portfolio company. The Board of Directors discusses valuations and determines the fair value in good faith based on the input of our Investment Adviser and the third-party valuation firm. The participation of our Investment Adviser in our valuation process, and the indirect pecuniary interest in our Investment Adviser by the Interested Directors on our Board of Directors, could result in a conflict of interest, because our Investment Adviser is receiving performance-based incentive fees.
 The factors that are considered in the fair value pricing of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings, the markets in which the portfolio company does business, comparisons to publicly traded companies, discounted cash flow, relevant credit market indices, and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate our valuation. Because such valuations, and particularly valuations of private investments and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Also, since these valuations are, to a large extent, based on estimates, comparisons and qualitative evaluations of private information, it could make it more difficult for investors to value accurately our investments and could lead to undervaluation or overvaluation of our common stock. In addition, the valuation of these types of securities may result in substantial write-downs and earnings volatility. If our Investment Adviser is unable to uncover all
 
 37
  Table of Contents
 
 material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments. Also, privately held companies frequently have less diverse product lines and smaller market presence than larger competitors.
 Decreases in the market values or fair values of our investments are recorded as unrealized depreciation. The effect of all of these factors on our portfolio can reduce our NAV by increasing net unrealized depreciation in our portfolio. Depending on market conditions, we could incur substantial realized losses and may suffer unrealized losses, which could have a material adverse impact on our business, financial condition and results of operations.
 Our NAV as of a particular date may be materially greater than or less than the value that would be realized if our assets were to be liquidated as of such date. For example, if we were required to sell a certain asset or all or a substantial portion of our assets on a particular date, the actual price that we would realize upon the disposition of such asset or assets could be materially less than the value of such asset or assets as reflected in our NAV. Volatile market conditions could also cause reduced liquidity in the market for certain assets, which could result in liquidation values that are materially less than the values of such assets as reflected in our NAV.
 We operate in a highly competitive market for investment opportunities, and compete with investment vehicles sponsored or advised by our affiliates.
 The activity of identifying, completing and realizing attractive investments is highly competitive and involves a high degree of uncertainty. The availability of investment opportunities generally will be subject to market conditions. In particular, in light of changes in such conditions, including changes in long-term interest rates, certain types of investments may not be available to us on terms that are as attractive as the terms on which opportunities were available to previous investment programs sponsored by Carlyle. A number of entities compete with us to make the types of investments that we target in middle market companies. We compete with other BDCs, public and private funds, commercial and investment banks, commercial finance companies, and, to the extent they provide an alternative form of financing, private equity funds, some of which are affiliates of us. Furthermore, over the past several years, an ever-increasing number of debt and credit opportunities funds have been formed and many such existing funds have grown substantially in size. Additional funds with similar objectives may be formed in the future by Carlyle or by other unrelated parties. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. Consequently, it is possible that competition for appropriate investment opportunities may increase, thus reducing the number of investment opportunities available to us and adversely affecting the terms upon which investments can be made. Furthermore, many of our competitors are not subject to the regulatory restrictions that the Investment Company Act and the Code impose on us. The competitive pressures we face may have a material adverse effect on our business, financial condition and results of operations. As a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and, accordingly, we may incur legal, due diligence and other costs on investments which may not be successful and we may not recover all of our costs, which would adversely affect returns. We can offer no assurance that we will be able to identify and make investments that are consistent with our investment objective.
 We do not seek to compete primarily based on the interest rates we offer, and we believe that some of our competitors may make loans with interest rates that are comparable to or lower than the rates we offer. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. However, if we match our competitors’ pricing, terms and structure, we may experience decreased net interest income and increased risk of credit loss.
 Our portfolio companies may be highly leveraged.
 Some of our portfolio companies are highly leveraged, which may have adverse consequences to these companies and to us as an investor. These companies may be subject to restrictive financial and operating covenants and the leverage may impair these companies’ ability to finance their future operations and capital needs. As a result, these companies’ flexibility to respond to changing business and economic conditions and to take advantage of business opportunities may be limited. Further, a leveraged company’s income and net assets will tend to increase or decrease at a greater rate than if borrowed money were not used. Moreover, rising interest rates may significantly increase a company's or project's interest expense, or a significant industry downturn may affect a company's ability to generate positive cash flow, in either case causing an inability of a leveraged company to service outstanding debt. In the event such leveraged company cannot generate adequate cash flow to meet debt obligations, the company may default on its loan agreements or be forced into bankruptcy resulting in a restructuring or liquidation of the company. Leveraged companies may enter into bankruptcy proceedings at higher rates than companies that are not leveraged.
 Depending on the facts and circumstances of our investments and the extent of our involvement in the management of a portfolio company, upon the bankruptcy of a portfolio company, a bankruptcy court may recharacterize our debt investments
 
 38
  Table of Contents
 
 as equity interests and subordinate all or a portion of our claim to that of other creditors. This could occur even though we may have structured our investment as senior debt.
 Our portfolio companies may incur debt that ranks equally with, or senior to, some of our investments in such companies and if there is a default, we may experience a loss on our investment.
 To the extent we invest in second lien, mezzanine or other instruments, our portfolio companies may be permitted to incur other debt that ranks equally with, or senior to, such debt instruments. By their terms, such debt instruments may provide that the holders are entitled to receive payment of interest or principal on or before the dates on which we will be entitled to receive payments in respect of the debt securities in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. In such cases, after repaying such senior creditors, such portfolio company may not have sufficient remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt securities in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
 The rights we may have with respect to the collateral securing the debt investments we make in our portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected.
 We may also make unsecured loans to portfolio companies. Liens on such portfolio companies’ collateral, if any, will secure the portfolio company’s obligations under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured loan agreements. The holders of obligations secured by such liens will generally control the liquidation of, and be entitled to receive proceeds from, any realization of such collateral to repay their obligations in full before us. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy our unsecured loan obligations after payment in full of all secured loan obligations. If such proceeds were not sufficient to repay the outstanding secured loan obligations, then our unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company’s remaining assets, if any.
 Our portfolio may be concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry.
 We are classified as a non-diversified investment company within the meaning of the Investment Company Act, which means that we are not limited by the Investment Company Act with respect to the proportion of our assets that we may invest in securities of a single issuer, excluding limitations on investments in other investment companies. Although we do not intend to focus our investments in any specific industries, our portfolio may be concentrated in a limited number of portfolio companies and industries. Beyond the asset diversification requirements associated with our qualification as a RIC under Subchapter M of the Code and under the Credit Facilities, we do not have fixed guidelines for diversification, and while we do not target any specific industries, our investments may be concentrated in relatively few industries. As a result, the aggregate returns we will realize may be significantly adversely affected if a small number of investments perform poorly or if we need to write down the value of one or more investments. Additionally, a downturn in any particular industry in which we are invested could also significantly impact our aggregate returns.
 Declines in the prices of corporate debt securities and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our NAV through increased net unrealized depreciation.
 As a BDC, we are required to account for our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by or under the direction of our Board of Directors. Decreases in the market values or fair values of our investments are recorded as unrealized depreciation. Depending on market conditions, we could incur substantial
 
 39
  Table of Contents
 
 realized losses and suffer additional unrealized losses, which would reduce our NAV and have a material adverse impact on our business, financial condition and results of operations.
 To the extent we make investments in restructurings and reorganizations they may be subject to greater regulatory and legal risks than other traditional direct investments in portfolio companies.
 We have in the past and may in the future make investments in restructurings that involve, or otherwise invest in the debt securities of, companies that are experiencing or are expected to experience severe financial difficulties. These severe financial difficulties may never be overcome and may cause such companies to become subject to bankruptcy proceedings. As such, these investments could subject us to certain additional potential liabilities that may exceed the value of our original investment therein. The level of analytical sophistication, both financial and legal, necessary for successful financing to companies experiencing significant business and financial difficulties is unusually high.
 We have not yet identified all of the portfolio companies we will invest in.
 We have not yet identified all of the potential investments for our portfolio that we will acquire with the proceeds of the Private Offering. Our Investment Adviser will select our investments over time. Our stockholders will have no input with respect to investment decisions. These factors increase the uncertainty, and thus the risk, of investing in our common stock.
 The financial projections of our portfolio companies could prove inaccurate.
 We generally evaluate the capital structure of portfolio companies on the basis of financial projections prepared by the management of such portfolio companies. These projected operating results are normally based primarily on judgments of the management of the portfolio companies. In all cases, projections are only estimates of future results that are based upon assumptions made at the time that the projections are developed. General economic conditions, which are not predictable with accuracy, along with other factors may cause actual performance to fall short of the financial projections that were used to establish a given portfolio company’s capital structure. Because of the leverage that is typically employed by our portfolio companies, this could cause a substantial decrease in the value of our investment in the portfolio company. The inaccuracy of financial projections could thus cause our performance to fall short of our expectations.
 In addition, when sourcing debt investments, we expect to rely significantly upon representations made to us by the borrower. There can be no assurance that such representations are accurate or complete, or that any due diligence undertaken would identify any misrepresentation or omission.
 The due diligence investigation that our Investor Adviser carries out with respect to an investment opportunity may not reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity, and will not result in the investment being successful.
 Before we make investments, our Investment Adviser will typically conduct due diligence that it deems reasonable and appropriate based on the facts and circumstances applicable to each investment. Due diligence may entail evaluation of important and complex business, financial, tax, accounting, environmental and legal issues. Outside consultants, legal advisors, accountants, credit rating agencies, investment banks and other third parties may be involved in the due diligence process to varying degrees depending on the type of investment. When conducting due diligence and making an assessment regarding an investment, our Investment Adviser will rely on the resources available to it, including information provided by the portfolio companies and, in some circumstances, third-party investigations. In addition, investment analyses and decisions by our Investment Adviser may be required to be undertaken on an expedited basis to take advantage of certain investment opportunities. In such cases, the information available to our Investment Adviser at the time of making an investment decision may be limited. The due diligence investigation that our Investment Adviser carries out with respect to an investment opportunity may not reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity. Moreover, the due diligence investigation does not ensure that such investment will be successful. In addition, Carlyle’s Environmental, Social and Governance program may cause us not to make an investment we otherwise would have made or impact other action taken or refrained from.
 Our portfolio companies prepay loans from time to time, which may have the effect of reducing our investment income if the returned capital cannot be invested in transactions with equal or greater yields.
 Loans are generally prepayable at any time, most of them at no premium to par. We are generally unable to predict the rate and frequency of such repayments. Whether a loan is prepaid will depend both on the continued positive performance of the portfolio company and the existence of favorable financing market conditions that allow such portfolio company the ability
 
 40
  Table of Contents
 
 to replace existing financing with less expensive capital. In periods of rising interest rates, the risk of prepayment of floating rate loans may increase if other financing sources are available. As market conditions change frequently, we will often be unable to predict when, and if, this may be possible for each of our portfolio companies. In the case of some of these loans, having the loan called early may have the effect of reducing our actual investment income below our expected investment income if the capital returned cannot be invested in transactions with equal or greater yields.
 Our ability to enter into transactions with Carlyle and our other affiliates is restricted.
 As a BDC, we are required to comply with certain regulatory requirements. We and any company controlled by us, on the one hand, and our upstream affiliates, or our Investment Adviser and its affiliates, on the other hand, are prohibited under the Investment Company Act from knowingly participating in certain transactions without the prior approval of our Independent Directors (as defined below) and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities is our upstream affiliate for purposes of the Investment Company Act, and we or a company controlled by us are generally prohibited from buying or selling any security (other than our securities) from or to such affiliate, absent the prior approval of our Independent Directors and so long as such person does not own more than 25% of our outstanding voting securities or otherwise control us. We or a company controlled by us are prohibited from buying or selling any security from or to our Investment Adviser or its affiliates, or any person who owns more than 25% of our voting securities or is otherwise deemed to control, be controlled by, or be under common control with, us, with such persons, absent the prior approval of the SEC.
 The Investment Company Act also prohibits certain “joint” transactions with our upstream affiliates, or our Investment Adviser or its affiliates, which could include investments in the same portfolio company (whether at the same or different times), without prior approval of our Independent Directors and, in some cases, the SEC (other than in certain limited situations pursuant to current regulatory guidance as described below). The analysis of whether a particular transaction constitutes a joint transaction requires a review of the relevant facts and circumstances then existing. The SEC has granted us Exemptive Relief that permits us and certain present and future funds advised by our Investment Adviser and certain other present and future investment advisers controlling, controlled by or under common control with our Investment Adviser to co-invest in suitable negotiated investments. Co-investments made under the Exemptive Relief are subject to compliance with the conditions and other requirements contained in the Exemptive Relief, which could limit our ability to participate in a co-investment transaction. In addition to co-investing pursuant to our Exemptive Relief, we may also co-invest with funds managed by Carlyle or any of its downstream affiliates, subject to compliance with applicable law and regulations, existing regulatory guidance, our Investment Adviser’s allocation procedures and Carlyle’s other allocation policies and procedures, where applicable. For example, we may invest alongside such investors consistent with guidance promulgated by the SEC staff permitting us and an affiliated person to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that we negotiate no term other than price. We may, in certain cases, also make investments in securities owned by affiliates that we acquire from non-affiliates. In such circumstances, our ability to participate in any restructuring of such investment or other transaction involving the issuer of such investment may be limited, and as a result, we may realize a loss on such investments that might have been prevented or reduced had we not been restricted in participating in such restructuring or other transaction.
 Our failure to make follow-on investments in our portfolio companies could impair the value of our investments.
 Following an initial investment in a portfolio company, we have made and may continue to make additional investments in that portfolio company as “follow-on” investments to:
 •increase or maintain in whole or in part our equity ownership percentage; •exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or •attempt to preserve or enhance the value of our investment. We may elect not to make follow-on investments, may be constrained in our ability to employ available funds, or otherwise may lack sufficient funds to make those investments. We have the discretion to make any follow-on investments, subject to the availability of capital resources. However, doing so could be placing even more capital at risk in existing portfolio companies.
 The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful investment. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a
 
 41
  Table of Contents
 
 follow-on investment because we may not want to increase our concentration of risk, because we prefer other opportunities or because we are inhibited by compliance with BDC requirements or the desire to maintain our tax status.
 The disposition of our investments may result in contingent liabilities.
 A significant portion of our investments involve private securities. In connection with the disposition of an investment in private securities, we may be required to make representations about the business and financial affairs of the portfolio company typical of those made in connection with the sale of a business. We may also be required to indemnify the purchasers of such investment to the extent that any such representations turn out to be inaccurate or with respect to potential liabilities. These arrangements may result in contingent liabilities that ultimately result in funding obligations that we must satisfy through our return of distributions previously made to us.
 Because we generally do not hold controlling equity interests in our portfolio companies, we may not be in a position to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments.
 Although we may do so in the future, currently we do not intend to hold controlling equity positions in our portfolio companies. Accordingly, we may not be able to control decisions relating to a minority equity investment, including decisions relating to the management and operation of the portfolio company and the timing and nature of any exit. As a result, we are subject to the risk that a portfolio company may make business decisions with which we disagree, and that the management and/or stockholders of a portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity of the investments that we typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company and may therefore suffer a decrease in the value of our investments. If any of the foregoing were to occur, our financial condition, results of operations and cash flow could suffer as a result.
 We may expose ourselves to risks if we engage in hedging transactions.
 If we engage in hedging transactions, we may expose ourselves to risks associated with such transactions. We may utilize instruments such as forward contracts, credit default swaps, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates, credit risk premiums, and market interest rates. Hedging against a decline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, such hedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for gain if the values of the underlying portfolio positions should increase. It may not be possible to hedge against an exchange rate or interest rate fluctuation at an acceptable price. The success of any hedging transactions we may enter into will depend on our ability to correctly predict movements in currencies and interest rates. Therefore, while we may enter into such transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange rates or interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the effect of the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as a result of factors not related to currency fluctuations. Income derived from hedging transactions is generally not eligible to be distributed to non-U.S. stockholders free from U.S. withholding tax. We may be unable or determine not to hedge against particular risks, including if we determine that available hedging transactions are not available at an appropriate price.
 There are certain risks associated with holding debt obligations that have original issue discount or payment-in-kind interest.
 OID may arise if we hold securities issued at a discount or in certain other circumstances. OID and PIK create the risk that incentive fees will be paid to the Investment Adviser based on non-cash accruals that ultimately may not be realized, while the Investment Adviser will be under no obligation to reimburse us for these fees. We hold investments that result in OID interest and PIK interest.
 
 42
  Table of Contents
 
 The higher interest rates of OID instruments reflect the payment deferral and increased credit risk associated with these instruments, and OID instruments generally represent a significantly higher credit risk than coupon loans. Even if the accounting conditions for income accrual are met, the borrower could still default when our actual collection is supposed to occur at the maturity of the obligation.
 OID instruments may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral. OID income may also create uncertainty about the source of our cash dividends.
 For accounting purposes, any cash dividends to stockholders representing OID income are not treated as coming from paid-in capital, even if the cash to pay them comes from the proceeds of issuances of our common stock. As a result, despite the fact that a dividend representing OID income could be paid out of amounts invested by our stockholders, the Investment Company Act does not require that stockholders be given notice of this fact by reporting it as a return of capital.
 PIK interest has the effect of generating investment income at a compounding rate, thereby further increasing the incentive fees payable to the Investment Adviser. Similarly, all things being equal, the deferral associated with PIK interest also increases the loan-to-value ratio at a compounding rate.
 Our investments may be affected by force majeure events.
 Our investments may be affected by force majeure events (e.g. events beyond the control of the party claiming that the event has occurred, including, without limitation, acts of God, fire, flood, earthquakes, outbreaks of infectious disease, pandemic or any other serious public health concern, war, trade war, cyber security breaches, terrorism and labor strikes). Some force majeure events may adversely affect the ability of a party (including a portfolio company or a counterparty to us or a portfolio company) to perform its obligations until it is able to remedy the force majeure event. In addition, the cost to a portfolio company or us of repairing or replacing damaged assets resulting from such force majeure event could be considerable. Certain force majeure events (such as war or an outbreak of an infectious disease) could have a broader negative impact on the world economy and international business activity generally, or in any of the countries in which we may invest specifically.
 Risks Related to an Investment in Our Common Stock
 Investing in our common stock may involve a high degree of risk.
 The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and volatility or loss of principal. Our investments in portfolio companies may be highly speculative and aggressive, and therefore an investment in our common stock may not be suitable for someone with lower risk tolerance.
 Our investors are subject to transfer restrictions.
 Our investors may not sell, assign, transfer or otherwise dispose of (in each case, a “Transfer”) any common stock unless (i) we give consent and (ii) the Transfer is made in accordance with applicable securities laws. No Transfer will be effectuated except by registration of the Transfer on our books. Each transferee must agree to be bound by these restrictions and all other obligations as an investor in us.
 An investor may be subject to filing requirements under the Exchange Act as a result of an investment in us.
 Because our common stock is registered under the Exchange Act, ownership information for any person who beneficially owns 5% or more of our common stock must be disclosed in a Schedule 13G or other filings with the SEC. Beneficial ownership for these purposes is determined in accordance with the rules of the SEC, and includes having voting or investment power over the securities. Although we will provide in our quarterly consolidated financial statements the amount of outstanding stock and the amount of the investor’s stock, the responsibility for determining the filing obligation and preparing the filing remains with the investor. In addition, owners of 10% or more of our common stock are subject to reporting obligations under Section 16(a) of the Exchange Act.
 An investor may be subject to the short-swing profits rules under the Exchange Act as a result of an investment in us.
 
 43
  Table of Contents
 
 Persons with the right to appoint a director or who hold 10% or more of a class of our shares may be subject to Section 16(b) of the Exchange Act, which recaptures for the benefit of the issuer profits from the purchase and sale of registered stock within a six-month period.
 There is a risk that our stockholders may not receive distributions or that our distributions may not grow over time and a portion of our distributions to you may be a return of capital for U.S. federal income tax purposes.
 We intend to make distributions on a quarterly basis to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. If we declare a dividend, we may be forced to sell some of our investments in order to make cash dividend payments. In addition, due to the asset coverage test applicable to us as a BDC, we may be limited in our ability to make distributions. The Credit Facilities may also limit our ability to declare dividends if we default under certain provisions. Further, if we invest a greater amount of assets in equity securities that do not pay current dividends, it could reduce the amount available for distribution. See Part II, Item 5 of this Form 10-K “ Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Distributions. ”
 The distributions we pay to our stockholders in a year may exceed our taxable income for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes that would reduce a stockholder’s adjusted tax basis in its shares of our common stock and correspondingly increase such stockholder’s gain, or reduce such stockholder’s loss, on disposition of such shares. Distributions in excess of a stockholder’s adjusted tax basis in its shares of our common stock will constitute capital gains to such stockholder.
 We may have difficulty paying our required distributions if we recognize taxable income before or without receiving cash representing such income.
 For U.S. federal income tax purposes, we will include in our taxable income certain amounts that we have not yet received in cash, such as OID or accruals on a contingent payment debt instrument, which may occur if we receive warrants in connection with the origination of a loan or possibly in other circumstances or contracted PIK interest, which generally represents contractual interest added to the loan balance and due at the end of the loan term. Such OID and PIK interest will be included in our taxable income before we receive any corresponding cash payments. We also may be required to include in our taxable income certain other amounts that we will not receive in cash. The credit risk associated with the collectability of deferred payments may be increased as and when a portfolio company increases the amount of interest on which it is deferring cash payment through deferred interest features. Our investments with a deferred interest feature may represent a higher credit risk than loans for which interest must be paid in full in cash on a regular basis. For example, even if the accounting conditions for income accrual are met, the borrower could still default when our actual collection is scheduled to occur upon maturity of the obligation.
 Because in certain cases we may recognize taxable income before or without receiving cash representing such income, we may have difficulty making distributions to our stockholders that will be sufficient to enable us to meet the Annual Distribution Requirement necessary for us to maintain our status as a RIC. Accordingly, we may need to sell some of our assets at times and/or at prices that we would not consider advantageous, we may need to raise additional equity or debt capital, or we may need to forego new investment opportunities or otherwise take actions that are disadvantageous to our business (or be unable to take actions that are advantageous to our business) to enable us to make distributions to our stockholders that will be sufficient to enable us to meet the Annual Distribution Requirement. If we are unable to obtain cash from other sources to meet the Annual Distribution Requirement, we may fail to qualify for the U.S. federal income tax benefits allowable to RICs and, thus, become subject to a corporate-level U.S. federal income tax (and any applicable U.S. state and local taxes). Alternatively, we may, with the consent of all our shareholders, designate an amount as a consent dividend ( i.e. , a deemed dividend). In that case, although we would not distribute any actual cash to our shareholders, the consent dividend would be treated like an actual dividend under the Code for all U.S. federal income tax purposes. This would allow us to deduct the amount of the consent dividend and our shareholders would be required to include that amount in income as if it were actually distributed. For additional discussion regarding the tax implications of a RIC, see Part I, Item 1 of this Form 10-K “ Business—Election to be Taxed as a RIC .”
 Non-U.S. stockholders may be subject to withholding of U.S. federal income tax on dividends we pay.
 Distributions of our “investment company taxable income” to a non-U.S. stockholder that are not effectively connected with the non-U.S. stockholder’s conduct of a trade or business within the United States may be subject to withholding of U.S. federal income tax at a 30% rate (or lower rate provided by an applicable income tax treaty) to the extent of our current or accumulated earnings and profits. Certain properly designated dividends are generally exempt from withholding of U.S. federal income tax, including certain dividends that are paid in respect of our (i) “qualified net interest
 
 44
  Table of Contents
 
 income” (generally, our U.S.-source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which we or the non-U.S. stockholder are at least a 10% shareholder, reduced by expenses that are allocable to such income) or (ii) “qualified short-term capital gains” (generally, the excess of our net short-term capital gain over our long-term capital loss for such taxable year), and certain other requirements were satisfied. No assurance can be given as to whether any of our distributions will be eligible for this exemption from withholding of U.S. federal income tax or, if eligible, will be designated as such by us. See Part I, Item 1 of this Form 10-K “ Business—Election to be Taxed as a RIC .”
 
 Item 1B. Unresolved Staff Comments
 None.
 
 Item 2. Properties
 We maintain our principal executive office at 520 Madison Avenue, 40 th Floor, New York, NY 10022. We do not own any real estate.
 
 Item 3. Legal Proceedings
 The Company may become party to certain lawsuits in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. The Company is not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against the Company. See also Note 9 to the consolidated financial statements in Part II, Item 8 of this Form 10-K.
 
 Item 4. Mine Safety Disclosures
 Not applicable.
 
 45
  
 Table of Contents
 
 PART II
 
 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (dollar amounts in thousands, except per share data)
 Market Information
 Our outstanding common stock will be offered and sold in transactions exempt from registration under Section 4(a)(2) of the Securities Act and Regulation D, as well as under Regulation S under the Securities Act. There is no established public trading market for our common stock currently, nor can we give any assurance that one will develop.
 Holders
 As of March 3, 2020 , there were approximately 2,829 holders of record of our common stock.
 Distributions
 To the extent that we have taxable income available, we intend to distribute quarterly dividends to our stockholders. The amount of our dividends, if any, will be determined by our Board of Directors. Any dividends to our stockholders will be declared out of assets legally available for distribution. We anticipate that our distributions will generally be paid from taxable earnings, including interest and capital gains generated by our investment portfolio, and any other income, including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees, that we receive from portfolio companies. However, if we do not generate sufficient taxable earnings during a year, all or part of a distribution may constitute a return of capital. The specific tax characteristics of our dividends and other distributions will be reported to stockholders after the end of each calendar year.
 We have elected to be treated, and intend to continue to qualify annually, as a RIC. To maintain our qualification as a RIC, we must, among other things, distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, to our stockholders on an annual basis. In order to avoid certain excise taxes imposed on RICs, we intend to distribute during each calendar year an amount at least equal to the sum of: (1) 98% of our ordinary income for the calendar year; (2) 98.2% of our capital gain net income (both long-term and short-term) for the one-year period ending on October 31 of the calendar year; and, (3) any undistributed ordinary income and capital gain net income for preceding years that were not distributed during such years and on which we paid no U.S. federal income tax less certain over-distributions in prior years. In addition, although we currently intend to distribute realized net capital gains (i.e., net long term capital gains in excess of short term capital losses), if any, at least annually, we may in the future decide to retain such capital gains for investment, pay U.S. federal income tax on such amounts at regular corporate tax rates, and elect to treat such gains as deemed distributions to stockholders. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and, to the extent that we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the Investment Company Act or if distributions are limited by the terms of any of our borrowings.
 Dividends and distributions, if any, are paid in cash to our stockholders. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and, if we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the Investment Company Act or if distributions are limited by the terms of any of our borrowings.
 During the period from September 11, 2017 (Commencement) to December 31, 2017, no dividends or distributions had been declared or paid by the Company.
 Recent Sales of Unregistered Securities and Use of Proceeds
 Except as previously reported by the Company on its current reports on Form 8-K, the Company did not sell any securities within the past three years that were not registered under the Securities Act.
 
 46
  
 Table of Contents
 
 Item 6. Selected Financial Data
 The tables below set forth our selected consolidated historical financial data for the periods indicated. The selected consolidated historical financial data as of and for the years ended December 31, 2019 and 2018 , and as of and for the period from Commencement through December 31, 2017 have been derived from our audited consolidated financial statements, which are included in “ Financial Statements and Supplementary Data ” in Part II, Item 8 of this Form 10-K. Our historical results are not necessarily indicative of future results. The selected financial data in this section is not intended to replace the consolidated financial statements and is qualified in its entirety by the consolidated financial statements and related notes included in this filing.
 The selected consolidated financial information and other data presented below should be read in conjunction with the information contained in Part II, Item 7 of this Form 10-K “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ,” the audited consolidated financial statements and the notes thereto in Part II, Item 8 of this Form 10-K, “ Financial Statements and Supplementary Data ”.
 For the years ended December 31,For the period from Commencement through20192018December 31, 2017(dollar amounts in thousands, except per share data)Consolidated Statements of Operations DataIncomeTotal investment income$84,140$26,308$991ExpensesTotal expenses34,84812,2541,699Net investment income (loss)49,29214,054(708)Net realized gain (loss) on investments and non-investment assets and liabilities173(24)—Net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities2,166(3,465)882Net increase (decrease) in net assets resulting from operations51,63110,565174Per Share DataBasic and diluted net investment income$2.10$1.78$(0.50)Basic and diluted earnings$2.20$1.34$0.12Dividends declared(1)$1.98$1.53$—
 (1)Per share dividends declared by the Company’s Board of Directors for the years endedDecember 31, 2019and2018. As of and for the years/period ended December 31,201920182017(dollar amounts in thousands, except per share data)Consolidated Statements of Assets and Liabilities DataInvestments—non-controlled/non-affiliated, at fair value$1,370,148$510,427$81,289Cash and cash equivalents18,9374,24570,570Total assets1,413,646520,196154,458Secured borrowings648,200217,70060,750Total liabilities676,537230,98271,736Total net assets737,109289,21482,722Net assets per share$20.61$20.32$20.03Other Data:Number of portfolio companies at year end68419Average funded investments in new portfolio companies(1)$21,969$11,376$8,487Total return based on NAV(2)11.17%9.09%0.15%
 
 47
  Table of Contents
 
 (1)Average is calculated per portfolio company based on the total amount funded during the period divided by the number of investments made in portfolio companies during the period. (2)Total return is based on the change in NAV per share plus the declared dividends during year endedDecember 31, 2019and2018and the period from Commencement through December 31, 2017 divided by the beginning NAV for the period. Total return for the year/period endedDecember 31, 2019,2018and2017was inclusive of$0.07,$0.11and$0.26, respectively, per share increase in NAV related to the offering price of the Company’s common stock. Excluding the effects of the higher offering price of the Company’s common stock, total return would have been10.83%,8.54%and(1.15)%, respectively (refer to Note 7 to the consolidated financial statements in Part II, Item 8 of this Form 10-K for additional information). 
 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollar amounts in thousands, except per share data, unless otherwise indicated)
 The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part II, Item 6 of this Form 10-K “Selected Financial Data” and our consolidated financial statements and related notes in Part II, Item 8 of this Form 10-K “Financial Statements and Supplementary Data.” This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to those described in Part I, Item 1A of this Form 10-K “Risk Factors.” Our actual results could differ materially from those anticipated by such forward-looking information due to factors discussed under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this Form 10-K.
 Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) within this section is focused on the years ended December 31, 2019 and 2018, including year-to-year comparisons between these years. Our MD&A for the period from September 11, 2017 (commencement of operations) (“Commencement”) through December 31, 2017, including comparisons between the year of 2018 and the period from Commencement through December 31, 2017, can be found in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2018.
 OVERVIEW
 We were incorporated on February 10, 2017 as a Maryland corporation with the name Carlyle Private Credit, Inc., and our name was changed to TCG BDC II, Inc. on March 3, 2017. We are structured as an externally managed, non-diversified closed-end investment company. We are conducting the Private Offering of our shares of common stock to investors in reliance on exemptions from the registration requirements of the Securities Act. We have elected to be regulated as a BDC under the Investment Company Act. We have elected to be treated, and intend to continue to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code.
 Our investment objective is to generate attractive risk adjusted returns and current income primarily by investing in senior secured term loans to U.S. middle market companies in which private equity sponsors hold, directly or indirectly, a financial interest in the form of debt and/or equity. Our core investment strategy focuses on lending to U.S. middle market companies, which we define as companies with approximately $25 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”), which we believe is a useful proxy for cash flow. We complement this core strategy with additive, diversifying assets including, but not limited to, specialty lending investments. We seek to achieve our investment objective primarily through direct origination of secured debt instruments, including first lien senior secured loans (which may include stand-alone first lien loans, first lien/last out loans and “unitranche” loans) and second lien senior secured loans (collectively, “Middle Market Senior Loans”), with the balance of our assets invested in higher yielding investments (which may include unsecured debt, mezzanine debt and investments in equities).
 We invest primarily in loans to middle market companies whose debt, if rated, is rated below investment grade, and, if not rated, would likely be rated below investment grade if it were rated (that is, below BBB- or Baa3, which is often referred to as "junk"). Exposure to below investment grade instruments involves certain risks, including speculation with respect to the borrower's capacity to pay interest and repay principal. See Item 1A of this Form 10-K “ Risk Factors—Risks Related to Our Investments—Our investments are risky and speculative. ”
 We are externally managed by our Investment Adviser, an investment adviser registered under the Advisers Act. Our Administrator provides the administrative services necessary for us to operate. Both our Investment Adviser and our Administrator are wholly owned subsidiaries of Carlyle Investment Management L.L.C., a subsidiary of Carlyle.
 In conducting our investment activities, we believe that we benefit from the significant scale and resources of Carlyle, including our Investment Adviser and its affiliates.
 
 48
  Table of Contents
 
 KEY COMPONENTS OF OUR CONSOLIDATED RESULTS OF OPERATIONS
 Investments
 Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt available to middle market companies, the general economic environment and the competitive environment for the type of investments we make.
 Revenue
 We generate revenue primarily in the form of interest income on debt investments we hold. In addition, we generate income from dividends on direct equity investments, capital gains on the sales of loans and debt and equity securities and various loan origination and other fees. Our debt investments generally have a stated term of five to eight years and generally bear interest at a floating rate usually determined on the basis of a benchmark such as LIBOR. Interest on these debt investments is generally paid quarterly. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments fluctuates significantly from period to period. Our portfolio activity also reflects the proceeds of sales of securities. We may also generate revenue in the form of commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees.
 Expenses
 Our primary operating expenses include the payment of: (i) investment advisory fees, including management fees and incentive fees, to our Investment Adviser pursuant to an investment advisory agreement (the “Investment Advisory Agreement”) between us and our Investment Adviser; (ii) costs and other expenses and our allocable portion of overhead incurred by our Administrator in performing its administrative obligations under an administration agreement (the “Administration Agreement”) between us and our Administrator; and (iii) other operating expenses as detailed below:
 
 •our organization expenses and initial offering costs incurred prior to the filing of our election to be regulated as a BDC (the initial offering costs amortized over the 12 months beginning on the Initial Drawdown Date) in an amount of $1,500; •administration fees payable under our Administration Agreement and Sub-Administration Agreements, including related expenses; •the costs of any other offerings of our common stock and other securities, if any; •calculating individual asset values and our net asset value (including the cost and expenses of any independent valuation firms); •expenses, including travel expenses, incurred by our Investment Adviser, or members of our Investment Adviser team managing our investments, or payable to third parties, performing due diligence on prospective portfolio companies and, if necessary, expenses of enforcing our rights; •the management fee and any incentive fee payable under our Investment Advisory Agreement; •certain costs and expenses relating to distributions paid on our shares; •debt service and other costs of borrowings or other financing arrangements; •the allocated costs incurred by our Investment Adviser in providing managerial assistance to those portfolio companies that request it; •amounts payable to third parties relating to, or associated with, making or holding investments; •the costs associated with subscriptions to data service, research-related subscriptions and expenses and quotation equipment and services used in making or holding investments; •transfer agent and custodial fees; •costs of hedging; •commissions and other compensation payable to brokers or dealers; •federal and state registration fees; •any U.S. federal, state and local taxes, including any excise taxes; •independent director fees and expenses; •costs of preparing financial statements and maintaining books and records, costs of preparing tax returns, costs of Sarbanes-Oxley Act compliance and attestation and costs of filing reports or other documents with the SEC (or other 
 49
  Table of Contents
 
 regulatory bodies), and other reporting and compliance costs, including registration and listing fees, and the compensation of professionals responsible for the preparation or review of the foregoing;
 •the costs of any reports, proxy statements or other notices to our stockholders (including printing and mailing costs), the costs of any stockholders’ meetings and the compensation of investor relations personnel responsible for the preparation of the foregoing and related matters; •the costs of specialty and custom software for monitoring risk, compliance and overall portfolio, including any development costs incurred prior to the filing of our election to be regulated as a BDC; •our fidelity bond; •directors and officers/errors and omissions liability insurance, and any other insurance premiums; •indemnification payments; •direct fees and expenses associated with independent audits, agency, consulting and legal costs; and •all other expenses incurred by us or our Administrator in connection with administering our business, including our allocable share of certain officers and their staff compensation. We expect our general and administrative expenses to be relatively stable or to decline as a percentage of total assets during periods of asset growth and to increase during periods of asset declines.
 PORTFOLIO AND INVESTMENT ACTIVITY
 Below is a summary of certain characteristics of our investment portfolio as of December 31, 2019 , 2018 , and 2017 .
 As of December 31,201920182017Number of investments874910Number of portfolio companies68419Number of industries21176Number of sponsors45319Percentage of total investment fair value:First Lien Debt (excluding First Lien/Last Out)82.0%86.0%61.6%First Lien/Last Out Unitranche2.6%—%—%Second Lien Debt14.4%13.0%37.9%Total secured debt99.1%99.0%99.5%Equity investments0.9%1.0%0.5%Percentage of debt investment fair value:Floating rate(1)98.6%100.0%100.0%Fixed interest rate1.4%—%—%
 (1) Primarily subject to interest rate floors
 
 50
  Table of Contents
 
 Our investment activity for the years ended December 31, 2019 and 2018 and for the period from Commencement through December 31, 2017 is presented below (information presented herein is at amortized cost unless otherwise indicated):
 For the year ended December 31,For the period from Commencement through20192018December 31, 2017Investments:Total investments, beginning of period$513,010$80,407$—New investments purchased966,653489,16884,865Net accretion of discount on investments4,1141,22616Net realized gain (loss) on investments269(24)—Investments sold or repaid(115,615)(57,767)(4,474)Total Investments, end of period$1,368,431$513,010$80,407Principal amount of investments funded:First Lien Debt (excluding First Lien/Last Out)$775,308$433,367$54,698First Lien/Last Out Unitranche36,910——Second Lien Debt167,74060,14730,838Equity Investments5,4325,267438Total$985,390$498,781$85,974Principal amount of investments sold or repaid:First Lien Debt (excluding First Lien/Last Out)$(80,689)$(34,569)$(4,549)First Lien/Last Out Unitranche(223)——Second Lien Debt(34,848)(23,227)—Total$(115,760)$(57,796)$(4,549)Number of new funded investments444310Average amount of new funded investments$21,969$11,376$8,487Percentage of new funded debt investments at floating interest rates97.79%100.0%100.0%Percentage of new funded debt investments at fixed interest rates2.21%—%—%
 As of December 31, 2019 and 2018 , investments consisted of the following:
 December 31, 2019December 31, 2018Amortized CostFair ValueAmortized CostFair ValueFirst Lien Debt (excluding First Lien/Last Out)$1,123,859$1,123,850$440,694$438,742First Lien/Last Out Unitranche36,11036,056——Second Lien Debt197,196197,73266,61166,207Equity Investments11,26612,5105,7055,478Total$1,368,431$1,370,148$513,010$510,427
 
 The weighted average yields (1) for our first and second lien debt, based on the amortized cost and fair value as of December 31, 2019 and 2018 , were as follows:
 December 31, 2019December 31, 2018Amortized CostFair ValueAmortized CostFair ValueFirst Lien Debt (excluding First Lien/Last Out)8.06%8.06%8.76%8.80%First Lien/Last Out Unitranche9.63%9.65%—%—%First Lien Debt Total8.11%8.11%8.76%8.80%Second Lien Debt10.24%10.21%10.90%10.96%First and Second Lien Debt Total8.42%8.42%9.04%9.09%
 (1)Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as ofDecember 31, 2019and2018. Weighted average yield on debt and income producing securities at fair value is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at fair value included in such securities. 
 51
  Table of Contents
 
 Weighted average yield on debt and income producing securities at amortized cost is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at amortized cost included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented above.
 See the Consolidated Schedules of Investments as of December 31, 2019 and 2018 , in our consolidated financial statements in Part II, Item 8 of this Form 10-K “Financial Statements and Supplementary Data” for more information on these investments, including a list of companies and type and amount of investments.
 As part of the monitoring process, our Investment Adviser has developed risk assessment policies pursuant to which it regularly assesses the risk profile of each of our debt investments and rates each of them based on the following categories, which we refer to as “Internal Risk Ratings”:
 Internal Risk Ratings Definitions
 RatingDefinition1Performing—Low Risk:Borrower is operating more than 10% ahead of the base case.2Performing—Stable Risk:Borrower is operating within 10% of the base case (above or below). This is the initial rating assigned to all new borrowers.3Performing—Management Notice:Borrower is operating more than 10% below the base case. A financial covenant default may have occurred, but there is a low risk of payment default.4Watch List:Borrower is operating more than 20% below the base case and there is a high risk of covenant default, or it may have already occurred. Payments are current although subject to greater uncertainty, and there is moderate to high risk of payment default.5Watch List—Possible Loss:Borrower is operating more than 30% below the base case. At the current level of operations and financial condition, the borrower does not have the ability to service and ultimately repay or refinance all outstanding debt on current terms. Payment default is very likely or may have occurred. Loss of principal is possible.6Watch List—Probable Loss:Borrower is operating more than 40% below the base case, and at the current level of operations and financial condition, the borrower does not have the ability to service and ultimately repay or refinance all outstanding debt on current terms. Payment default is very likely or may have already occurred. Additionally, the prospects for improvement in the borrower’s situation are sufficiently negative that impairment of some or all principal is probable.
 Our Investment Adviser’s risk rating model is based on evaluating portfolio company performance in comparison to the base case when considering certain credit metrics including, but not limited to, adjusted EBITDA and net senior leverage as well as specific events including, but not limited to, default and impairment.
 Our Investment Adviser monitors and, when appropriate, changes the investment ratings assigned to each debt investment in our portfolio. In connection with our quarterly valuation process, our Investment Adviser reviews our investment ratings on a regular basis. The following table summarizes the Internal Risk Ratings as of December 31, 2019 and 2018 :
 December 31, 2019December 31, 2018(dollar amounts in millions)Fair Value% of Fair ValueFair Value% of Fair ValueInternal Risk Rating 1$36.72.70%$——%Internal Risk Rating 21,202.788.59477.894.63Internal Risk Rating 373.25.3920.94.14Internal Risk Rating 433.42.466.21.23Internal Risk Rating 511.50.85——Internal Risk Rating 6————Total$1,357.6100.00%$504.9100.00%
 As of December 31, 2019 and 2018 , the weighted average Internal Risk Rating of our debt investment portfolio was 2.1 and 2.1 , respectively. As of December 31, 2019 and 2018 , 5 and 1 of our debt investments, with an aggregate fair value of $44.9 million and $6.2 million , respectively, were assigned an Internal Risk Rating of 4–6.
 
 52
  
 Table of Contents
 
 CONSOLIDATED RESULTS OF OPERATIONS
 For the years ended December 31, 2019 and 2018 and the period from Commencement through December 31, 2017
 The net increase or decrease in net assets from operations may vary substantially from period to period as a result of various factors, including the recognition of realized gains and losses and net change in unrealized appreciation and depreciation. As a result, quarterly comparisons may not be meaningful.
 Investment Income
 Investment income for the years ended  December 31, 2019 and 2018 and the period from Commencement through December 31, 2017 was as follows:
 For the years ended December 31,For the period from Commencement through20192018December 31, 2017First Lien Debt$66,896$19,504$627Second Lien Debt17,2096,804364Cash35——Total investment income$84,140$26,308$991
 The increase in investment income for the year ended December 31, 2019 from the comparable period in 2018 was primarily driven by our deployment of capital and increasing invested balance. The size of our portfolio at amortized cost increased to $1,368,431 as of December 31, 2019 from $513,010 as of December 31, 2018 , and total principal amount of investments outstanding increased to $1,374,033 as of December 31, 2019 from $522,410 as of December 31, 2018 . As of December 31, 2019 , the weighted average yield of our first and second lien debt on amortized cost decreased to 8.42% from 9.04% as of December 31, 2018 primarily due to a decrease in LIBOR.
 Interest income on our first and second lien debt investments is dependent on the composition and credit quality of the portfolio. Generally, we expect the portfolio to generate predictable quarterly interest income based on the terms stated in each loan’s credit agreement. As of December 31, 2019 , 1 loan in the portfolio with a fair value of $11,469 was on non-accrual status, which represented approximately 0.8% of the total investments at fair value. The remaining first and second lien debt investments were performing and current on their interest payments as of December 31, 2019 and for the year then ended. As of December 31, 2018 and 2017 and for the year/period then ended, all of our first and second lien debt investments were performing and current on their interest payments.
 Net investment income (loss) for the years ended  December 31, 2019 and 2018 and the period from Commencement through December 31, 2017 was as follows: For the years ended December 31,For the period from Commencement through20192018December 31, 2017Total investment income$84,140$26,308$991Total expenses34,84812,2541,699Net investment income (loss)$49,292$14,054$(708)
 
 53
  Table of Contents
 
 Expenses
 For the years ended December 31,For the period from Commencement through20192018December 31, 2017Organization costs$—$7$381Offering cost—795317Management fees6,2592,174252Net investment income incentive fee8,7011,881—Professional fees852626163Administrative service fees27043552Interest expense15,5004,38883Credit facility fees2,1031,115185Directors’ fees and expenses19520049Other general and administrative968633217Total expenses$34,848$12,254$1,699
 
 Interest expense and credit facility fees for the years ended  December 31, 2019 and 2018 and the period from Commencement through December 31, 2017 were comprised of the following:
 For the years ended December 31,For the period from Commencement through20192018December 31, 2017Interest expense$15,500$4,388$83Facility unused commitment fee89941687Amortization of deferred financing costs1,20469998Total interest expense and credit facility fees$17,603$5,503$268Cash paid for interest expense$13,274$2,683$25
 The increase in interest expense for the year ended December 31, 2019 compared to the comparable period in 2018 was driven by increased drawings under the Credit Facilities related to increased deployment of capital for investments. For the years ended December 31, 2019 and 2018 , the average interest rate on borrowings increased to 3.90% from 3.74% , and average principal debt outstanding increased to $392,145 from $115,637 .
 The increase in management fees and incentive fees for the year ended  December 31, 2019 compared to the comparable period in 2018 were driven by our increased deployment of capital. For the years ended  December 31, 2019 and 2018 , management fees were $6,259 and $2,174 , respectively, incentive fees related to pre-incentive fee net investment income were $8,701 and $1,881 , respectively, and there were no incentive fees related to realized capital gains as computed in accordance with the Investment Advisory Agreement. For the years ended  December 31, 2019 and 2018 , there were no accrued capital gains incentive fees based upon the cumulative net realized and unrealized appreciation (depreciation). The accrual for any capital gains incentive fee under accounting principles generally accepted in the United States (“U.S. GAAP”) in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. No incentive fees on capital gains have been paid for the years ended  December 31, 2019 and 2018 . See Note 4 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for more information on the incentive and management fees.
 Professional fees include legal, rating agencies, audit tax, valuation, technology and other professional fees incurred related to the management of the company. Administrative service fees represent fees paid to the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our executive officers and their respective staff. Other general and administrative expenses include insurance, filing, research, subscriptions and other costs. The increase in professional fees, administrative service fees and other general and administrative expenses for the years ended  December 31, 2019 and 2018 was primarily driven by the deployment of capital.
 
 54
  Table of Contents
 
 Net Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) on Investments
 Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments for the years ended  December 31, 2019 and 2018 and the period from Commencement through December 31, 2017 were as follows:
 For the years ended December 31,For the period from Commencement through20192018December 31, 2017Net realized gain (loss) on investments$269$(24)$—Net change in unrealized appreciation (depreciation) on investments4,300(3,465)882Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments$4,569$(3,489)$882
 During the year ended  December 31, 2019 , we had realized gains on two investments totaling $299 and realized losses on one investment totaling $30. During the year ended December 31, 2018, we have realized losses on one investment totaling $24. During the years ended  December 31, 2019 and 2018 , we had a change in unrealized appreciation on 58 and 13 investments, respectively, totaling approximately $13,256 and $971 , respectively, which was offset by a change in unrealized depreciation on 33 and 35 investments, respectively, totaling approximately $8,956 and $4,436 , respectively.
 
 Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments by the type of investments for the years ended  December 31, 2019 and 2018 and the period from Commencement through December 31, 2017 were as follows:
 For the year endedFor the year endedFor the period from Commencement throughDecember 31, 2017December 31, 2019December 31, 2018Net realized gain (loss) on investmentsNet change in unrealized appreciation (depreciation) on investmentsNet realized gain (loss) on investmentsNet change in unrealized appreciation (depreciation) on investmentsNet realized gain (loss) on investmentsNet change in unrealized appreciation (depreciation) on investmentsFirst Lien Debt$—$1,889$(24)$(2,576)$—$624Second Lien Debt—940—(662)—258Equity Investments2691,471—(227)——Total$269$4,300$(24)$(3,465)$—$882
 Net change in unrealized appreciation (depreciation) in our investments for the year ended  December 31, 2019 compared to the comparable period in 2018 was primarily due to changes in various inputs utilized under our valuation methodology, including, but not limited to, market spreads, leverage multiples and borrower ratings.
 
 FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
 We generate cash from the net proceeds of offerings of our common stock and through cash flows from operations, including investment sales and repayments as well as income earned on investments and cash equivalents. We may also fund a portion of our investments through borrowings under the Credit Facilities and the issuance of debt, as well as through securitization of a portion of our existing investments. The primary use of existing funds and any funds raised in the future is expected to be for investments in portfolio companies, repayment of indebtedness, cash distributions to our stockholders and for other general corporate purposes.
 We entered into a senior secured revolving credit facility with a lender on October 3, 2017, which was subsequently amended on March 14, 2018 and November 16, 2018 (as amended, the “Subscription Facility”). The maximum principal amount of the Subscription Facility was reduced to $265,000 as of December 31, 2019 from $375,000 as of December 31, 2018 and is subject to availability under the Subscription Facility, which is based on certain of the Company's unfunded investor equity capital commitments, and restrictions imposed on borrowings under the Investment Company Act. The Subscription Facility has a maturity date of October 3, 2020, with two one-year extension options, subject to the Company’s and the lender’s consent. The Company may borrow amounts in U.S. Dollars or certain other permitted currencies. Borrowings under the Subscription Facility bear interest initially at LIBOR plus an applicable spread of 1.55% per year. The Company is also required to pay an undrawn commitment fee of 0.25% per year. Subject to certain exceptions, the Subscription Facility is secured by a first lien security interest in our equity investors’ unfunded capital commitments.
 
 55
  Table of Contents
 
 We entered into a senior secured revolving credit facility with a lender on April 1, 2019 (the “SPV Credit Facility”, together with the Subscription Facility, the "Credit Facilities"), which was subsequently amended on October 25, 2019. The maximum principal amount of the SPV Credit Facility was increased to $600,000 as of December 31, 2019 from $300,000 at the closing of the facility on April 1, 2019, and is subject to availability under the SPV Credit Facility and restrictions imposed on borrowings under the Investment Company Act. The SPV Credit Facility has a maturity date of April 1, 2024, with one one-year extension option, subject to the SPV's and the lender's consent. The SPV may borrow amounts in U.S. Dollars or certain other permitted currencies. Borrowings under the SPV Credit Facility bear interest initially at LIBOR (or, if applicable, a rate based on the prime rate or federal funds rate) plus 2.25% per year with a 0.45% step-up based on collateral coverage and asset mix. The SPV is also required to pay an undrawn commitment fee of between 0.50% and 0.75% per year. Payments under the SPV Credit Facility are made quarterly. The lenders have a first lien security interest on substantially all of the assets of the SPV.
 Although we believe that we and the SPV will remain in compliance, there are no assurances that we or the SPV will continue to comply with the covenants in the Credit Facilities, as applicable. Failure to comply with these covenants could result in a default under the Subscription Facility and/or the SPV Credit Facility that, if we or the SPV were unable to obtain a waiver from the applicable lenders, could result in the immediate acceleration of the amounts due under the Subscription Facility and/or the SPV Credit Facility, and thereby have a material adverse impact on our business, financial condition and results of operations.
 For more information on the Credit Facilities, see Note 5 to the consolidated financial statements in Part II, Item 8 of this Form 10-K.
 As of December 31, 2019 and 2018 , we had $18,937 and $4,245 respectively, in cash and cash equivalents. The Credit Facilities consisted of the following as of December 31, 2019 and 2018 :
 December 31, 2019Total FacilityBorrowingsOutstandingUnusedPortion(1)AmountAvailable(2)Subscription Facility$265,000$231,700$33,300$25,749SPV Credit Facility600,000416,500183,500183,500Total$865,000$648,200$216,800$209,249December 31, 2018Total FacilityBorrowingsOutstandingUnusedPortion(1)AmountAvailable(2)Subscription Facility$375,000$217,700$157,300$157,300Total$375,000$217,700$157,300$157,300
 (1)The unused portion is the amount upon which commitment fees are based. (2)Available for borrowing based on the computation of collateral to support the borrowings and subject to compliance with applicable covenants and financial ratios. 
 Equity Activity
 Shares issued and outstanding as of December 31, 2019 and 2018 were 35,769,223 and 14,229,500 , respectively. The following table summarizes activity in the number of shares of our common stock outstanding during the years ended December 31, 2019 and 2018 :
 For the year ended December 31,20192018Shares outstanding, beginning of period14,229,5004,130,683Common stock issued21,539,72310,098,817Shares outstanding, end of period35,769,22314,229,500
 
 56
  Table of Contents
 
 Contractual Obligations
 A summary of our significant contractual payment obligations was as follows as of December 31, 2019 and 2018 :
 As of December 31,Payment Due by Period20192018Less than 1 Year$231,700$—1-3 Years—217,7003-5 Years416,500—More than 5 Years——Total$648,200$217,700
 As of December 31, 2019 and 2018 , $648,200 and $217,700 , respectively, of secured borrowings were outstanding under the Credit Facilities. For the years ended December 31, 2019 and 2018 , we incurred $15,500 and $4,388 , respectively, of interest expense and $899 and $416 , respectively, of unused commitment fees.
 
 OFF BALANCE SHEET ARRANGEMENTS
 In the ordinary course of our business, we enter into contracts or agreements that contain indemnifications or warranties. Future events could occur which may give rise to liabilities arising from these provisions against us. We believe that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in these consolidated financial statements as of December 31, 2019 and 2018 , in Part II, Item 8 of this Form 10-K, for any such exposure.
 We have in the past and may in the future become obligated to fund commitments such as revolving credit facilities, bridge financing commitments, or delayed draw commitments.
 
 We had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of the indicated dates:
 Par Value as of December 31,20192018Unfunded delayed draw commitments$79,156$64,927Unfunded revolving term loan commitments54,24928,006Total unfunded commitments$133,405$92,933
 
 DIVIDENDS AND DISTRIBUTIONS TO COMMON STOCKHOLDERS
 The following table summarizes our dividends declared and payable since inception through December 31, 2019 : Date DeclaredRecord DatePayment DatePer Share AmountMarch 12, 2018March 12, 2018April 17, 2018$0.30June 6, 2018June 6, 2018July 18, 2018$0.37September 13, 2018September 13, 2018October 18, 2018$0.40December 26, 2018December 26, 2018January 18, 2019$0.46March 12, 2019March 12, 2019April 18, 2019$0.47June 11, 2019June 11, 2019July 18, 2019$0.51September 10, 2019September 10, 2019October 18, 2019$0.50December 10, 2019December 10, 2019January 17, 2020$0.50
 
 CRITICAL ACCOUNTING POLICIES
 The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Changes in the economic environment, financial markets,
 
 57
  Table of Contents
 
 and any other parameters used in determining such estimates could cause actual results to differ. Our critical accounting policies, including those relating to the valuation of our investment portfolio, are described below. The critical accounting policies should be read in connection with our “ Risk Factors ” in Part I, Item 1A of this Form 10-K.
 Fair Value Measurements
 The Company applies fair value accounting in accordance with the terms of Financial Accounting Standards Board ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. The Company values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e. “consensus pricing”). When doing so, the Company determines whether the quote obtained is sufficient according to U.S. GAAP to determine the fair value of the security. The Company may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.
 Securities/instruments that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or the Board of Directors, does not represent fair value shall each be valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment and include comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses. The process generally used to determine the applicable value is as follows: (i) the value of each portfolio company or investment is initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments, a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs is used to determine a preliminary value, which is also reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of members of senior management; (iii) the Board of Directors engages a third-party valuation firm to provide positive assurance on portions of the Middle Market Senior Loans and equity investments portfolio each quarter (such that each non-traded investment is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of management’s preliminary valuation and conclusion on fair value; (iv) the Audit Committee of the Board of Directors (the “Audit Committee”) reviews the assessments of the Investment Adviser and the third-party valuation firm and provides the Board of Directors with any recommendations with respect to changes to the fair value of each investment in the portfolio; and (v) the Board of Directors discusses the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.
 
 All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:
 
 •the nature and realizable value of any collateral; •call features, put features and other relevant terms of debt; •the portfolio company’s leverage and ability to make payments; •the portfolio company’s public or private credit rating; •the portfolio company’s actual and expected earnings and discounted cash flow; •prevailing interest rates and spreads for similar securities and expected volatility in future interest rates; •the markets in which the portfolio company does business and recent economic and/or market events; and •comparisons to comparable transactions and publicly traded securities. Investment performance data utilized are the most recently available financial statements and compliance certificate received from the portfolio companies as of the measurement date which in many cases may reflect a lag in information.
 Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.
 
 58
  Table of Contents
 
 In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the consolidated financial statements as of December 31, 2019 and 2018 .
 U.S. GAAP establishes a hierarchical disclosure framework which ranks the level of observability of market price inputs used in measuring investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.
 For further information on the fair value hierarchies, our framework for determining fair value and the composition of our portfolio, see Note 3 to the consolidated financial statements in Part II, Item 8 of this Form 10-K.
 Use of Estimates
 The preparation of consolidated financial statements in Part II, Item 8 of this Form 10-K in conformity with U.S. GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on incentive fees involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements in Part II, Item 8 of this Form 10-K. Actual results could differ from these estimates and such differences could be material.
 Investments
 Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the Consolidated Statements of Operations in Part II, Item 8 of this Form 10-K reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
 
 
 Revenue Recognition
 Interest from Investments and Realized Gain/Loss on Investments
 Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. At time of exit, the realized gain or loss on an investment is the difference between the amortized cost at time of exit and the cash received at exit using the specific identification method.
 The Company has loans in its portfolio that contain payment-in-kind (“PIK”) provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. Such income is included in interest income in the Consolidated Statements of Operations included in Part II, Item 8 of this Form 10-K.
 Other Income
 Other income may include income such as consent, waiver, amendment, unused, syndication and prepayment fees associated with the Company’s investment activities as well as any fees for managerial assistance services rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. The Company may receive fees for guaranteeing the outstanding debt of a portfolio company. Such fees are amortized into other
 
 59
  Table of Contents
 
 income over the life of the guarantee. The unamortized amount, if any, is included in other assets in the Consolidated Statements of Assets and Liabilities included in Part II, Item 8 of this Form 10-K.
 Non-Accrual Income
 Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid current and, in management’s judgment, are likely to remain current. Management may not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.
 Income Taxes
 For federal income tax purposes, the Company has elected to be treated as a RIC under the Code, and intends to make the required distributions to its stockholders as specified therein. In order to qualify as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute.
 
 The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.
 In addition, based on the excise distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding year. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed.
 The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely than not” to be sustained by the applicable tax authority. All penalties and interest associated with income taxes, if any, are included in income tax expense.
 The SPV is a disregarded entity for tax purposes and is consolidated with the tax return of the Company.
 Dividends and Distributions to Common Stockholders
 To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its common stockholders. Dividends and distributions to common stockholders are recorded on the record date. The amount to be distributed is determined by the Board of Directors each quarter and is generally based upon the taxable earnings estimated by management and available cash. Net realized capital gains, if any, are generally distributed at least annually, although the Company may decide to retain such capital gains for investment.
 
 RELATED PARTY TRANSACTIONS
 Investment Advisory Agreement
 On June 26, 2017, the Company entered into an investment advisory agreement (the “Investment Advisory Agreement”) with the Investment Adviser. The initial term of the Investment Advisory Agreement is two years from June 26, 2017 and, unless terminated earlier, the Investment Advisory Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by the vote of the Board of Directors and by the vote of a majority of the directors who are not “interested persons” as defined in Section 2(a)(19) of the Investment Company Act (the “Independent Directors”). The Investment Advisory Agreement will automatically terminate in the event of an assignment and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party. On May 6, 2019, the Company’s Board of Directors, including a majority of the Independent Directors, approved at an in-person meeting the continuance of the Company’s Investment Advisory Agreement with the Adviser for an additional one year term.
 Pursuant to the Investment Advisory Agreement and subject to the overall supervision of the Board of Directors, the Investment Adviser provides investment advisory services to the Company. For providing these services, the Investment Adviser receives fees from the Company consisting of two components—a management fee and an incentive fee.
 The management fee has been calculated and payable quarterly in arrears at an annual rate of 1.25% of the Company’s average Capital Under Management (as defined below) at the end of the then-current quarter and the prior calendar quarter (and, in the case of the Company’s first quarter, the Company’s Capital Under Management as of such quarter-end). “Capital Under Management” means cumulative capital called, less cumulative distributions categorized as Returned Capital (as defined in Part I, Item 1 of this Form 10-K “ Business — Private Offering — Right to Redraw Capital .”). For the avoidance of doubt, Capital Under Management does not include capital acquired through the use of leverage, and Returned Capital does not include distributions of the Company’s investment income (i.e., proceeds received in respect of interest payments, dividends or fees, net of expenses) or net realized capital gains to the investors.
 The incentive fee consists of two parts. The first part has been calculated and payable quarterly in arrears and equals 15% of pre-incentive fee net investment income for the immediately preceding calendar quarter, subject to a preferred return of 1.75% per quarter (7% annualized), or “hurdle rate,” and a “catch-up” feature. The second part has been determined and payable in arrears as of the end of each calendar year in an amount equal to 15% of realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation less the aggregate amount of any previously paid capital gain incentive fees, provided that no incentive fee on capital gains is payable to the Investment Adviser unless cumulative total return exceeds a 7% annual return on weighted average cumulative capital called less cumulative distributions categorized as Returned Capital.
 On June 26, 2017, the Investment Adviser entered into a personnel agreement with Carlyle Employee Co., pursuant to which Carlyle Employee Co. provides the Investment Adviser with access to investment professionals.
 Administration Agreement
 On April 18, 2017, the Company entered into an administration agreement (the “Administration Agreement”) with the Administrator. The initial term of the Administration Agreement is two years from April 18, 2017 and, unless terminated earlier, the Administration Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board of Directors or by a majority vote of the outstanding voting securities of the Company and (ii) the vote of a majority of the Company’s Independent Directors. The Administration Agreement may not be assigned by a party without the consent of the other party and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party. On May 6, 2019, the Company’s Board of Directors, including a majority of the Independent Directors, approved at an in-person meeting the continuance of the Company’s Administration Agreement with the Administrator for an additional one-year term.
 Pursuant to the Administration Agreement, the Administrator provides services and receives reimbursements equal to an amount that reimburses the Administrator for its costs and expenses and the Company's allocable portion of overhead incurred by the Administrator in performing its obligations under the Administration Agreement, including the Company's allocable portion of the compensation paid to or compensatory distributions received by the Company’s officers (including the Chief Compliance Officer and Chief Financial Officer) and respective staff who provide services to the Company, operations staff who provide services to the Company, and any internal audit staff, to the extent internal audit performs a role in the Company's Sarbanes-Oxley Act internal control assessment. Reimbursement under the Administration Agreement occurs quarterly in arrears.
 Sub-Administration Agreements
 On June 26, 2017, the Administrator entered into sub-administration agreements with Carlyle Employee Co. (the “Carlyle Sub-Administration Agreement”). Pursuant to the Carlyle Sub-Administration Agreements, Carlyle Employee Co. provides the Administrator with access to personnel.
 On June 22, 2017, the Administrator entered into a sub-administration agreement with State Street Bank and Trust Company (“State Street” and, such agreement, the “State Street Sub-Administration Agreement” and, together with the Carlyle Sub-Administration Agreements, the “Sub-Administration Agreements”).
 On May 6, 2019, the Company’s Board of Directors, including a majority of the Independent Directors, approved at an in-person meeting the continuance of the Company’s Sub-Administration Agreements for an additional one-year term.
 Placement Fees
 On June 26, 2017, the Company entered into a placement fee arrangement with TCG Securities, L.L.C. (“TCG”), a licensed broker-dealer and an affiliate of the Investment Adviser, which may require stockholders to pay a placement fee to TCG for TCG’s services.
 Board of Directors
 The Company’s Board of Directors currently consists of five members, three of whom are Independent Directors. The Board of Directors has established an audit committee and a pricing committee of the Board of Directors, and may establish additional committees in the future.
 
 60
  
 Table of Contents
 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 We are subject to financial market risks, including changes in the valuations of our investment portfolio and interest rates.
 Valuation Risk
 Our investments may not have a readily available market price, and we value these investments at fair value as determined in good faith by our Board of Directors in accordance with our valuation policy. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and it is possible that the difference could be material.
 Interest Rate Risk
 As of December 31, 2019 , on a fair value basis, two of our debt investments bear interest at a fixed rate. All of our other debt investments bear interest at a floating rate, which primarily are subject to interest rate floors. Interest rates on the investments held within our portfolio of investments are typically based on floating LIBOR, with many of these investments also having a LIBOR floor. Additionally, our Credit Facilities are also subject to floating interest rates and are currently paid based on floating LIBOR rates.
 Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. There can be no assurance that a significant change in market interest rates will not have a material adverse effect on our income in the future.
 The following table estimates the potential changes in net cash flow generated from interest income, should interest rates increase or decrease by 100, 200 or 300 basis points. Interest income is calculated as revenue from interest generated from our settled portfolio of debt investments held as of December 31, 2019 and 2018 . These hypothetical calculations are based on a model of the settled debt investments in our portfolio held as of December 31, 2019 and 2018 , and are only adjusted for assumed changes in the underlying base interest rates and the impact of that change on interest income. Interest expense is calculated based on outstanding secured borrowings as of December 31, 2019 and 2018 , and based on the terms of our Credit Facilities. Interest expense on our Credit Facilities is calculated using the interest rate as of December 31, 2019 and 2018 , adjusted for the hypothetical changes in rates, as shown below. We intend to continue to finance a portion of our investments with borrowings and the interest rates paid on our borrowings may impact significantly our net interest income.
 
 We regularly measure exposure to interest rate risk. We assess interest rate risk and manage interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on that review, we determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates.
 Based on our Consolidated Statements of Assets and Liabilities as of December 31, 2019 and 2018 , the following table shows the annual impact on net investment income of base rate changes in interest rates for our settled debt investments (considering interest rate floors for variable rate instruments) and outstanding secured borrowings assuming no changes in our investment and borrowing structure:
 As of December 31, 2019As of December 31, 2018Basis Point ChangeInterest IncomeInterest ExpenseNet Investment IncomeInterest IncomeInterest ExpenseNet Investment IncomeUp 300 basis points$40,344$(19,382)$20,962$15,441$(6,531)$8,910Up 200 basis points$26,896$(12,921)$13,975$10,294$(4,354)$5,940Up 100 basis points$13,448$(6,461)$6,987$5,147$(2,177)$2,970Down 100 basis points$(11,620)$6,461$(5,159)$(5,147)$2,177$(2,970)Down 200 basis points$(13,878)$11,996$(1,882)$(8,267)$4,354$(3,913)Down 300 basis points$(14,265)$11,996$(2,269)$(8,495)$4,921$(3,574)
 
 
 61
  
 Table of Contents
 
 Item 8. Financial Statements and Supplementary Data
 TCG BDC II, INC.
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Report of Independent Registered Public Accounting Firm63Consolidated Statements of Assets and Liabilities as of December 31, 2019 and 201864Consolidated Statements of Operations for the years ended December 31, 2019 and 2018 and the period from September 11, 2017 (Commencement) to December 31, 201765Consolidated Statements of Changes in Net Assets for the years ended December 31, 2019 and 2018 and the period from September 11, 2017 (Commencement) to December 31, 201766Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018 and the period from September 11, 2017 (Commencement) to December 31, 201767Consolidated Schedules of Investments as of December 31, 2019 and 201876Notes to Consolidated Financial Statements82
 
 62
  
 Table of Contents
 
 Report of Independent Registered Public Accounting Firm
 
 The Board of Directors and Stockholders of
 TCG BDC II, Inc.
 
 Opinion on the Financial Statements
 
 We have audited the accompanying consolidated statements of assets and liabilities of TCG BDC II, Inc. (the “Company”), including the consolidated schedules of investments, as of December 31, 2019 and 2018, and the related consolidated statements of operations, changes in net assets and cash flows for the years ended December 31, 2019 and 2018 and the period from September 11, 2017 (commencement of operations) to December 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations, changes in its net assets, and its cash flows for the years ended December 31, 2019 and 2018 and the period from September 11, 2017 (commencement of operations) to December 31, 2017, in conformity with U.S. generally accepted accounting principles.
 
 Basis for Opinion
 
 These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
 We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
 
 Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of December 31, 2019 and 2018, by correspondence with the custodian and debt agents. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
 
 
 /s/ Ernst & Young LLP
 
 We have served as the Company's auditor since 2017.
 
 New York, NY
 March 4, 2020
 
 63
  
 Table of Contents
 
 TCG BDC II, INC.
 CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
 (dollar amounts in thousands, except per share data)
 
 December 31, 2019December 31, 2018ASSETSInvestments—non-controlled/non-affiliated, at fair value (amortized cost of $1,368,431 and $513,010, respectively)$1,370,148$510,427Cash and cash equivalents18,9374,245Deferred financing costs3,2631,527Receivable for investment sold6,1601,243Interest receivable from non-controlled/non-affiliated investments12,8082,181Prepaid expenses and other assets2,330573Total assets$1,413,646$520,196LIABILITIESSecured borrowings (Note 5)$648,200$217,700Payable for investments purchased—1,870Due to Investment Adviser51618Interest and credit facility fees payable (Note 5)4,2251,848Dividend Payable (Note 7)17,2756,545Management and incentive fees payable (Note 4)4,9042,020Administrative service fees payable (Note 4)3345Other accrued expenses and liabilities1,384936Total liabilities676,537230,982Commitments and contingencies (Notes 6 and 9)NET ASSETSCommon stock, $0.01 par value; 200,000,000 shares authorized; 35,769,223, and 14,229,500 shares issued and outstanding at December 31, 2019 and 2018, respectively358142Paid-in capital in excess of par value736,328291,820Subscribed but unissued shares—24,953Subscription receivable—(24,953)Total distributable earnings (loss)423(2,748)Total net assets$737,109$289,214NET ASSETS PER SHARE$20.61$20.32
 
 The accompanying notes are an integral part of these consolidated financial statements.
 
 64
  
 Table of Contents
 
 TCG BDC II, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (dollar amounts in thousands, except per share data)
 
 For the Years Ended December 31,For the period from September 11, 2017 (Commencement) through December 31, 201720192018Investment income:From non-controlled/non-affiliated investments:Interest income$79,210$25,003$767Other income4,9301,305224Total investment income from non-controlled/non-affiliated investments84,14026,308991Total investment income84,14026,308991Expenses:Organization costs (Note 2)—7381Offering costs (Note 2)—795317Management fees (Note 4)6,2592,174252Net Investment Income Incentive fees (Note 4)8,7011,881—Professional fees852626163Administrative service fees (Note 4)27043552Interest expense (Note 5)15,5004,38883Credit facility fees (Note 5)2,1031,115185Directors’ fees and expenses19520049Other general and administrative968633217Total expenses34,84812,2541,699Net investment income (loss)49,29214,054(708)Net realized gain (loss) and net change in unrealized appreciation (depreciation)Net realized gain (loss) from:Non-controlled/non-affiliated investments269(24)—Currency gains (losses) on non-investment assets and liabilities(96)——Net change in unrealized appreciation (depreciation):Non-controlled/non-affiliated investments4,300(3,465)882Net change in unrealized currency gains (losses) on non-investment assets and liabilities(2,134)——Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities2,339(3,489)882Net increase (decrease) in net assets resulting from operations$51,631$10,565$174Basic and diluted earnings per common share (Note 7)$2.20$1.34$0.12Weighted-average shares of common stock outstanding—Basic and Diluted (Note 7)23,431,4447,907,9491,421,700
 
 The accompanying notes are an integral part of these consolidated financial statements.
 
 65
  
 Table of Contents
 
 TCG BDC II, INC.
 CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
 (dollar amounts in thousands)
 
 For the Year Ended December 31,For the period from Commencement through December 31, 201720192018Increase (decrease) in net assets resulting from operations:Net investment income (loss)$49,292$14,054$(708)Net realized gain (loss) on investments and non-investment assets and liabilities173(24)—Net change in unrealized appreciation (depreciation) on investments4,300(3,465)882Net change in unrealized currency gains (losses) on non-investment assets and liabilities(2,134)——Net increase (decrease) in net assets resulting from operations51,63110,565174Capital transactions:Common stock issued444,943210,30682,548Dividends Declared (Note 10)(48,679)(14,379)—Net increase (decrease) in net assets resulting from capital share transactions396,264195,92782,548Net increase (decrease) in net assets447,895206,49282,722Net assets at beginning of year/period289,21482,722—Net assets at end of year/period$737,109$289,214$82,722
 
 The accompanying notes are an integral part of these consolidated financial statements.
 
 66
  
 Table of Contents
 
 TCG BDC II, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (dollar amounts in thousands)
 For the Year Ended December 31,For the period from Commencement through December 31, 201720192018Cash flows from operating activities:Net increase (decrease) in net assets resulting from operations$51,631$10,565$174Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:Amortization of deferred financing costs1,20469998Amortization of deferred offering costs—795317Net accretion of discount on investments(4,114)(1,226)(16)Paid-in-kind interest(1,557)——Net realized (gain) loss on investments and non-investment assets and liabilities(173)24—Net change in unrealized (appreciation) depreciation on investments(4,300)3,465(882)Net change in unrealized currency (gains) losses on non-investment asset and liabilities2,134——Cost of investments purchased and change in payable for investments purchased(967,056)(494,761)(77,402)Proceeds from sales and repayments of investments and change in receivable for investments sold110,69856,5244,474Changes in operating assets:Interest receivable(10,627)(1,760)(421)Prepaid expenses and other assets(1,757)(202)(371)Changes in operating liabilities:Due to Investment Adviser498(2,729)538Interest and credit facility fees payable2,3771,702146Management and incentive fee payable2,8841,768252Administrative service fees payable(45)—22Other accrued expenses and liabilities481603343Net cash provided by (used in) operating activities(817,722)(424,533)(72,728)Cash flows from financing activities:Proceeds from issuance of common stock444,943210,30682,548Borrowings on SPV Credit Facility and Subscription Facility986,666367,05081,225Repayments of SPV Credit Facility and Subscription Facility(558,300)(210,100)(20,475)Dividends paid in cash(37,948)(7,834)—Debt issuance costs paid(2,947)(1,136)—Offering cost paid—(78)—Net cash provided by (used in) financing activities832,414358,208143,298Net increase (decrease) in cash and cash equivalents14,692(66,325)70,570Cash and cash equivalents, beginning of year/period4,24570,570—Cash and cash equivalents, end of year/period$18,937$4,245$70,570Supplemental disclosures:Deferred financing cost due$—$—$1,188Offering costs due$—$—$1,034Interest paid during the year/period$13,274$2,683$25Dividends declared during the year/period$48,679$14,379$—
 The accompanying notes are an integral part of these consolidated financial statements.
 
 67
  
 TCG BDC II, INC.
 CONSOLIDATED SCHEDULE OF INVESTMENTS
 As of December 31, 2019
 (dollar amounts in thousands)
 
 Investments—non-controlled/non-affiliated(1)FootnotesIndustryReference Rate & Spread(2)Interest Rate(2)Acquisition DateMaturity DatePar/ Principal AmountAmortized Cost(4)Fair Value(5)Percentage of Net AssetsFirst Lien Debt (84.66%)Aero Operating, LLC (Dejana Industries, Inc.)^+(2) (3) (6)Business ServicesL + 7.25%9.03%1/5/201812/29/2022$6,737$6,687$6,6040.90%Airnov, Inc.^+(2) (3) (6)Containers, Packaging & GlassL + 5.25%6.15%12/20/201912/19/202542,70842,00942,0065.70Alpine SG, LLC^+(2) (3)High Tech IndustriesL + 6.50%8.42%2/2/201811/16/202215,30115,18715,2442.07American Physician Partners, LLC^+(2) (3) (6)Healthcare & PharmaceuticalsL + 6.50%8.44%1/7/201912/21/202138,23537,82038,1105.17Analogic Corporation^+(2) (3) (6)Healthcare & PharmaceuticalsL + 6.00%7.79%6/22/20186/22/202434,78434,19034,0274.62Anchor Hocking, LLC^(2) (3)Durable Consumer GoodsL + 8.75%10.65%1/25/20191/25/202410,70710,41010,3591.41Apptio, Inc.^+(2) (3) (6)SoftwareL + 7.25%8.96%1/10/20191/10/202535,54134,87235,2374.78Aurora Lux FinCo S.Á.R.L. (Accelya) (Luxembourg)+(2) (3) (7)SoftwareL + 6.00%5.46%12/24/201912/24/202637,50036,56336,5634.96Avenu Holdings, LLC+(2) (3)Sovereign & Public FinanceL + 5.25%7.19%9/28/20189/28/202438,66538,12637,2275.05Barnes & Noble, Inc.^+(2) (3) (10)RetailL + 5.50%9.06%8/7/20198/7/202417,63717,22317,1962.33BMS Holdings III Corp.^+(2) (3) (6)Construction & BuildingL + 5.25%7.19%9/30/20199/30/202623,27522,54923,1823.14Central Security Group, Inc.+(2) (3)Consumer ServicesL + 5.63%7.42%4/5/201810/6/20213,4913,4813,0020.41Chartis Holding, LLC^+(2) (3) (6)Business ServicesL + 5.25%7.28%5/1/20195/1/202537,94937,10737,5655.10Chemical Computing Group ULC (Canada)^+(2) (3) (6) (7)SoftwareL + 5.25%7.04%8/30/20188/30/202314,67414,50014,5391.97Circustrix Holdings, LLC^+(2) (3) (6)Hotel, Gaming & LeisureL + 5.50%7.29%2/2/201812/6/20219,3979,3319,2471.25Comar Holding Company, LLC^+(2) (3) (6)Containers, Packaging & GlassL + 5.25%7.04%6/18/20186/18/202427,78327,25327,1013.68Cority Software Inc. (Canada)^+(2) (3) (6) (7)SoftwareL + 5.50%7.59%7/2/20197/2/202643,80042,87742,8645.82Derm Growth Partners III, LLC (Dermatology Associates)^(2) (3) (9)Healthcare & PharmaceuticalsL + 6.25% (100% PIK)8.19%2/15/20185/31/202216,26216,13611,4691.56Digicel Limited (Jamaica)^+(7)Telecommunications6.00%6.00%7/23/20194/15/20212502021950.03DTI Holdco, Inc.^(2) (3)High Tech IndustriesL + 4.75%6.67%12/18/20189/30/20231,9741,8721,8410.25Ensono, LP+(2) (3)TelecommunicationsL + 5.25%7.04%4/30/20186/27/20258,5378,4668,5371.16Ethos Veterinary Health LLC^(2) (3) (6)Consumer ServicesL + 4.75%6.79%5/17/20195/15/202610,86910,74710,8071.47GRO Sub Holdco, LLC (Grand Rapids)^(2) (3) (6)Healthcare & PharmaceuticalsL + 6.00%7.94%2/28/20182/22/20236,4656,3846,0850.83iCIMS, Inc.^+(2) (3) (6)SoftwareL + 6.50%8.29%9/12/20189/12/202423,93023,50723,9283.25Innovative Business Services, LLC^+(2) (3) (6)High Tech IndustriesL + 5.50%7.52%4/5/20184/5/202316,14315,76815,8802.15
 
 68
  TCG BDC II, INC.
 CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
 As of December 31, 2019
 (dollar amounts in thousands)
 
 Investments—non-controlled/non-affiliated(1)FootnotesIndustryReference Rate & Spread(2)Interest Rate(2)Acquisition DateMaturity DatePar/ Principal AmountAmortized Cost(4)Fair Value(5)Percentage of Net AssetsK2 Insurance Services, LLC^+(2) (3) (6)Banking, Finance, Insurance & Real EstateL + 5.00%7.21%7/3/20197/1/202422,02721,48522,0622.99Kaseya Inc.^(2) (3) (6)High Tech IndustriesL + 5.50%, 1.00% PIK7.71%5/3/20195/2/202519,54519,14919,5902.66Lifelong Learner Holdings, LLC^+(2) (3) (6)Business ServicesL + 5.75%7.49%10/18/201910/18/202647,04645,94446,4796.31Liqui-Box Holdings, Inc.^(2) (3) (6)Containers, Packaging & GlassL + 4.50%6.41%6/3/20196/3/2024—(26)(37)(0.01)Mailgun Technologies, Inc.^(2) (3) (6)High Tech IndustriesL + 5.00%6.95%3/26/20193/26/202520,19419,79819,8702.70National Carwash Solutions, Inc.^+(2) (3) (6)AutomotiveL + 6.00%7.69%8/7/20184/28/20239,5119,3019,4111.28NES Global Talent Finance US, LLC (United Kingdom)+(2) (3) (7)Energy: Oil & GasL + 5.50%7.42%5/9/20185/11/20239,8909,7639,7631.32Nexus Technologies, LLC+(2) (3)High Tech IndustriesL + 5.50%, 1.50% PIK7.44%12/11/201812/5/20236,1726,1215,6210.76Northland Telecommunications Corporation^+(2) (3) (6)Media: Broadcast & SubscriptionL + 5.75%7.54%10/1/201810/1/202555,74954,93855,6607.55Paramit Corporation^(2) (3)Capital EquipmentL + 4.50%6.22%5/3/20195/3/20256,2986,2446,2680.85PF Growth Partners, LLC^(2) (3) (6)Hotel, Gaming & LeisureL + 5.00%6.79%7/1/20197/11/20257,1617,0457,1350.97PPC Flexible Packaging, LLC+(2) (3) (6)Containers, Packaging & GlassL + 5.50%7.21%11/23/201811/23/202415,43315,21815,2912.07Pretium Packaging, LLC+(2) (3)Containers, Packaging & GlassL + 5.00%6.90%8/15/201911/14/202319,22419,05019,2242.61Propel Insurance Agency, LLC^(2) (3)Banking, Finance, Insurance & Real EstateL + 4.25%6.44%4/30/20196/1/20242,3632,3472,3530.32Redwood Services Group, LLC^+(2) (3)High Tech IndustriesL + 6.00%8.12%11/13/20186/6/20238,4278,3638,3421.13Riveron Acquisition Holdings, Inc.+(2) (3)Banking, Finance, Insurance & Real EstateL + 6.00%8.19%5/22/20195/22/202519,96919,60819,5872.66RSC Acquisition, Inc.^+(2) (3) (6)Banking, Finance, Insurance & Real EstateL + 5.50%7.38%11/1/201911/1/202655,95054,77855,5147.53Sapphire Convention, Inc. (Smart City)^+(2) (3) (6)TelecommunicationsL + 5.25%7.26%11/20/201811/20/202528,57728,00628,3293.84Smile Doctors, LLC^+(2) (3) (6)Healthcare & PharmaceuticalsL + 6.00%7.94%10/6/201710/6/202222,22722,10021,9962.98Sovos Brands Intermediate, Inc.+(2) (3)Beverage, Food & TobaccoL + 5.00%6.79%11/16/201811/20/202519,89919,72519,7502.68SPay, Inc.^+(2) (3) (6)Hotel, Gaming & LeisureL + 5.75%7.54%6/15/20186/17/202420,51220,17918,6942.54Tank Holding Corp.^(2) (3) (6)Capital EquipmentL + 4.00%5.76%3/26/20193/26/2024————The Leaders Romans Bidco Limited (United Kingdom)^(2) (3) (6) (7)Banking, Finance, Insurance & Real EstateL + 6.75%, 3.50% PIK7.54%7/23/20196/30/2024£19,61224,88726,5663.60Transform SR Holdings, LLC+(2) (3) (10)RetailL + 7.25%9.18%2/11/20192/12/202419,05018,88718,8602.56Trump Card, LLC^+(2) (3) (6)Transportation: CargoL + 5.50%7.44%6/26/20184/21/20227,9187,8657,8691.07Turbo Buyer, Inc. (Portfolio Holdings, Inc.)^+(2) (3) (6)AutomotiveL + 6.00%7.69%12/2/201912/2/202527,89727,03327,4393.72
 
 69
  TCG BDC II, INC.
 CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
 As of December 31, 2019
 (dollar amounts in thousands)
 
 Investments—non-controlled/non-affiliated(1)FootnotesIndustryReference Rate & Spread(2)Interest Rate(2)Acquisition DateMaturity DatePar/ Principal AmountAmortized Cost(4)Fair Value(5)Percentage of Net AssetsUSLS Acquisition, Inc.^+(2) (3) (6)Business ServicesL + 5.75%7.69%11/30/201811/30/202422,13921,74621,6742.94Unifrutti Financing PLC (Cyprus)^(2) (3) (7)Beverage, Food & Tobacco7.50%, 1.00% PIK8.50%9/15/20199/15/2026€18,17019,03619,3972.63VRC Companies, LLC+(2) (3) (6)Business ServicesL + 6.50%8.29%1/29/20193/31/202344,73144,23144,6816.06Westfall Technik, Inc.^+(2) (3) (6)Chemicals, Plastics & RubberL + 5.75%7.66%9/13/20189/13/202427,97327,34626,9623.66WP CPP Holdings, LLC (CPP)^(2) (3)Aerospace & DefenseL + 3.75%5.55%7/18/20194/30/202520,00019,81819,8262.69Zemax Software Holdings, LLC^+(2) (3) (6)SoftwareL + 5.75%7.69%6/25/20186/25/202410,1469,96610,0871.37Zenith Merger Sub, Inc.^+(2) (3) (6)Business ServicesL + 5.25%7.19%12/13/201712/13/202316,94816,75116,8282.28First Lien Debt Total$1,159,969$1,159,906157.36%Second Lien Debt (14.43%)Access CIG, LLC^(2) (3)Business ServicesL + 7.75%9.44%2/14/20182/27/2026$2,700$2,680$2,6810.36%Aimbridge Acquisition Co., Inc.^(2) (3)Hotel, Gaming & LeisureL + 7.50%9.19%2/1/20192/1/202721,04720,52820,8622.83Brave Parent Holdings, Inc.+(2) (3)SoftwareL + 7.50%9.42%10/3/20184/19/202619,06218,67218,2612.48Outcomes Group Holdings, Inc.^(2) (3)Business ServicesL + 7.50%9.40%10/23/201810/26/20264,5004,4904,4870.61Higginbotham Insurance Agency, Inc.^(2) (3)Banking, Finance, Insurance & Real EstateL + 7.50%9.29%12/3/201912/19/20252,5002,4752,4930.34Jazz Acquisition, Inc.^(2) (3)Aerospace & DefenseL + 8.00%9.94%6/13/20196/18/202723,45023,11723,2253.15Le Tote, Inc.^(2) (3)RetailL + 6.75%8.50%11/8/201911/8/202421,42820,90720,8922.83Pathway Vet Alliance, LLC^(2) (3) (6)Consumer ServicesL + 8.50%10.44%11/14/201912/23/20258,0507,8148,0741.10Pharmalogic Holdings Corp.^(2) (3)Healthcare & PharmaceuticalsL + 8.00%9.79%6/7/201812/11/20238007977960.11Quartz Holding Company (QuickBase, Inc.)^(2) (3)SoftwareL + 8.00%9.71%4/2/20194/2/202711,90011,67911,6621.58Tank Holding Corp.+(2) (3)Capital EquipmentL + 8.25%11.03%3/26/20193/26/202737,38036,72537,2235.05Ultimate Baked Goods MIDCO, LLC (Rise Baking)+(2) (3)Beverage, Food & TobaccoL + 8.00%9.79%8/9/20188/9/20268,3338,1878,2431.12WP CPP Holdings, LLC (CPP)+(2) (3)Aerospace & DefenseL + 7.75%9.68%7/18/20194/30/202639,50039,12538,8335.27Second Lien Debt Total$197,196$197,73226.83%
 
 
 70
  TCG BDC II, INC.
 CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
 As of December 31, 2019
 (dollar amounts in thousands)
 
 Investments—non-controlled/non-affiliated(1)FootnotesIndustryAcquisitionDateShares/ UnitsCostFair Value(5)Percentage ofNet AssetsEquity Investment (0.91%)(5)(8)ANLG Holdings, LLC^(8)Healthcare & Pharmaceuticals6/22/2018880$880$9730.13%Avenu Holdings, LLC^(8)Sovereign & Public Finance9/28/20181721721540.02Chartis Holding, LLC^(8)Business Services5/1/20194334335890.08Cority Software Inc. (Canada)^(8)Software7/2/20192502503060.04GRO Sub Holdco, LLC (Grand Rapids)^(8)Healthcare & Pharmaceuticals3/29/20185005001370.02K2 Insurance Services, LLC^(8)Banking, Finance, Insurance & Real Estate7/3/20194334334860.07Mailgun Technologies, Inc.^(8)High Tech Industries3/26/20194244246050.08North Haven Goldfinch Topco, LLC^(8)Containers, Packaging & Glass6/18/20182,3152,3152,5420.34Paramit Corporation^(8)Capital Equipment6/17/20191505005010.07PPC Flexible Packaging, LLC^(8)Containers, Packaging & Glass2/1/20199659651,1740.16SiteLock Group Holdings, LLC^(8)High Tech Industries4/5/20184464465870.08Tank Holding Corp.^(8)Capital Equipment3/26/20198508501,0350.14Turbo Buyer, Inc. (Portfolio Holdings, Inc.)^(8)Automotive12/2/20191,9251,9251,9250.26USLS Acquisition, Inc.^(8)Business Services11/30/20186416417200.10Zenith American Holding, Inc.^(8)Business Services12/13/20174402204180.06Zillow Topco LP^(8)Software6/25/20183133123580.05Equity Investments Total$11,266$12,5101.71%Total investments—non-controlled/non-affiliated$1,368,431$1,370,148185.88%Total investments$1,368,431$1,370,148185.88%
 
 ^ Denotes that all or a portion of the assets are owned by TCG BDC II, Inc. (together with its consolidated subsidiary, “we,” “us,” “our,” “BDC II” or the “Company”). Accordingly, such assets are not available to creditors of TCG BDC II SPV LLC (the “SPV”).
 + Denotes that all or a portion of the assets are owned by the Company's wholly owned subsidiary, the SPV. The SPV has entered into a senior secured revolving credit facility (as amended, the “SPV Credit Facility” and, together with the Subscription Facility, the “Credit Facilities”). The lenders of the SPV Credit Facility have a first lien security interest in substantially all of the assets of the SPV (see Note 5, Borrowings to these consolidated financial statements). Accordingly, such assets are not available to creditors of the Company.
 (1)Unless otherwise indicated, issuers of debt and equity investments held by the Company are domiciled in the United States. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As ofDecember 31, 2019, the Company does not “control” any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As ofDecember 31, 2019, the Company is not an “affiliated person” of any of these portfolio companies. Certain portfolio company investments are subject to contractual restrictions on sales. (2)Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as ofDecember 31, 2019. As ofDecember 31, 2019, the reference rates for all LIBOR loans were the 30-day LIBOR at1.76%, the 90-day LIBOR at1.91%and the 180-day LIBOR rate at1.91%. (3)Loan includes interest rate floor feature, which is generally 1.00%. (4)Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method. 
 71
  TCG BDC II, INC.
 CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
 As of December 31, 2019
 (dollar amounts in thousands)
 
 (5)Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements, to these consolidated financial statements), pursuant to the Company’s valuation policy. The fair value of all first lien and second lien debt investments and equity investments was determined using significant unobservable inputs. (6)As ofDecember 31, 2019, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans: Investments—non-controlled/non-affiliatedTypeUnused FeePar/ Principal AmountFair ValueFirst and Second Lien Debt—unfunded delayed draw and revolving term loans commitmentsAero Operating, LLC (Dejana Industries, Inc.)Revolver1.00%$333$(6)Airnov, Inc.Revolver0.504,167(63)American Physician Partners, LLCRevolver0.501,500(5)Analogic CorporationRevolver0.503,029(61)Apptio, Inc.Revolver0.502,367(19)BMS Holdings III Corp.Delayed Draw1.006,667(21)Chartis Holding, LLCRevolver0.502,401(20)Chartis Holding, LLCDelayed Draw0.506,402(52)Chemical Computing Group ULC (Canada)Revolver0.50903(8)Comar Holding Company, LLCDelayed Draw1.005,136(103)Comar Holding Company, LLCRevolver0.501,168(23)Cority Software Inc. (Canada)Revolver0.503,000(60)Ethos Veterinary Health LLCDelayed Draw1.002,696(12)GRO Sub Holdco, LLC (Grand Rapids)Revolver0.501,071(54)iCIMS, Inc.Revolver0.501,252—Innovative Business Services, LLCRevolver0.502,232(32)K2 Insurance Services, LLCRevolver0.502,2903K2 Insurance Services, LLCDelayed Draw1.005,3446Kaseya Inc.Revolver0.506611Kaseya Inc.Delayed Draw0.501,9184Lifelong Learner Holdings, LLCRevolver0.503,802(38)Lifelong Learner Holdings, LLCDelayed Draw—5,756(58)Liqui-Box Holdings, Inc.Revolver0.502,630(37)Mailgun Technologies, Inc.Revolver0.501,342(20)National Carwash Solutions, Inc.Revolver0.50310(2)National Carwash Solutions, Inc.Delayed Draw1.003,352(25)Northland Telecommunications CorporationRevolver0.503,646(5)Pathway Vet Alliance, LLCDelayed Draw1.007,95012PF Growth Partners, LLCDelayed Draw1.001,028(3)PPC Flexible Packaging, LLCRevolver0.501,957(16)RSC Acquisition, Inc.Revolver0.501,824(13)
 
 72
  TCG BDC II, INC.
 CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
 As of December 31, 2019
 (dollar amounts in thousands)
 
 RSC Acquisition, Inc.Delayed Draw1.001,994(15)Sapphire Convention, Inc. (Smart City)Revolver0.504,528(34)Smile Doctors, LLCRevolver0.50707(7)Smile Doctors, LLCDelayed Draw1.001,477(14)SPay, Inc.Revolver0.50682(58)Tank Holding Corp.Revolver0.5047—The Leaders Romans Bidco Limited (United Kingdom)Delayed Draw1.69£3,533(94)Trump Card, LLCRevolver0.50369(2)Turbo Buyer, Inc. (Portfolio Holdings, Inc.)Revolver0.502,151(28)Turbo Buyer, Inc. (Portfolio Holdings, Inc.)Delayed Draw1.004,904(64)USLS Acquisition, Inc.Revolver0.50946(19)VRC Companies, LLCDelayed Draw0.755,095(5)Westfall Technik, Inc.Revolver0.50431(11)Westfall Technik, Inc.Delayed Draw1.0012,190(304)Zemax Software Holdings, LLCRevolver0.501,284(7)Zenith Merger Sub, Inc.Delayed Draw1.003,714(20)Zenith Merger Sub, Inc.Revolver0.501,219(7)Total unfunded commitments$133,405$(1,419)
 
 (7)The Company has determined the indicated investments are non-qualifying assets under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets. (8)Security acquired in transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act, unless otherwise noted. As ofDecember 31, 2019, the aggregate fair value of these securities is$12,510, or1.71%of the Company's net assets. (9)Loan was on non-accrual status as ofDecember 31, 2019. (10)In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company is entitled to receive additional interest as a result of an agreement among lenders as follows: Barnes & Noble, Inc. (1.83%). Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments. 
 
 As of December 31, 2019 , investments at fair value consisted of the following: TypeAmortized CostFair Value% of Fair ValueFirst Lien Debt (excluding First Lien/Last Out)$1,123,859$1,123,85082.03%First Lien/Last Out Unitranche36,11036,0562.63Second Lien Debt197,196197,73214.43Equity Investments11,26612,5100.91Total$1,368,431$1,370,148100.00%
 
 73
  TCG BDC II, INC.
 CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
 As of December 31, 2019
 (dollar amounts in thousands)
 
 The rate type of debt investments at fair value as of December 31, 2019 was as follows: Rate TypeAmortized CostFair Value% of Fair Value of First and Second Lien DebtFloating Rate$1,337,927$1,338,04698.56%Fixed Rate19,23819,5921.44Total$1,357,165$1,357,638100.00%
 
 The industry composition of investments at fair value as of December 31, 2019 was as follows: IndustryAmortized CostFair Value% of Fair ValueAerospace & Defense$82,060$81,8845.98%Automotive38,25938,7752.83Banking, Finance, Insurance & Real Estate126,013129,0619.42Beverage, Food & Tobacco46,94847,3903.46Business Services180,930182,72613.34Capital Equipment44,31945,0273.29Chemicals, Plastics & Rubber27,34626,9621.97Construction & Building22,54923,1821.69Consumer Services22,04221,8831.60Containers, Packaging & Glass106,784107,3017.83Durable Consumer Goods10,41010,3590.76Energy: Oil & Gas9,7639,7630.71Healthcare & Pharmaceuticals118,807113,5938.29High Tech Industries87,12887,5806.39Hotel, Gaming & Leisure57,08355,9384.08Media: Broadcast & Subscription54,93855,6604.06Retail57,01756,9484.16Software193,198193,80514.14Sovereign & Public Finance38,29837,3812.73Telecommunications36,67437,0612.70Transportation: Cargo7,8657,8690.57Total$1,368,431$1,370,148100.00%
 
 
 74
  TCG BDC II, INC.
 CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
 As of December 31, 2019
 (dollar amounts in thousands)
 
 The geographical composition of investments at fair value as of December 31, 2019 was as follows: GeographyAmortized CostFair Value% of Fair ValueCanada$57,627$57,7094.21%Cyprus19,03619,3971.42Jamaica2021950.01Luxembourg36,56336,5632.67United Kingdom34,65036,3292.65United States1,220,3531,219,95589.04Total$1,368,431$1,370,148100.00%
 
 The accompanying notes are an integral part of these consolidated financial statements.
 
 
 75
  
 TCG BDC II, INC.
 SCHEDULE OF INVESTMENTS
 As of December 31, 2018
 (dollar amounts in thousands)
 
 Investments—non-controlled/non-affiliated (1)FootnotesIndustryReference Rate & Spread (2)Interest Rate (2)Acquisition DateMaturity DatePar/ Principal AmountAmortized Cost (4)Fair Value (5)Percentage of Net AssetsFirst Lien Debt (85.96%)Aero Operating, LLC (Dejana Industries, Inc.)(2)(3)(6)Business ServicesL + 7.25%9.60%1/5/201812/29/2022$6,805$6,749$6,7202.32%Alpine SG, LLC(2)(3)High Tech IndustriesL + 6.00%8.52%2/2/201811/16/20229,6959,6139,6593.34Analogic Corporation(2)(3)(6)Healthcare & PharmaceuticalsL + 6.00%8.52%6/22/20186/22/202435,24934,53634,41411.90Avenu Holdings, LLC(2)(3)Sovereign & Public FinanceL + 5.25%8.05%9/28/20189/28/202439,05638,40038,35413.26Central Security Group, Inc.(2)(3)Consumer ServicesL + 5.63%8.15%4/5/201810/6/20214,6804,6614,5871.59Chemical Computing Group ULC (Canada)(2)(3)(6)(7)SoftwareL + 5.50%8.02%8/30/20188/30/202315,79415,56515,6185.40CircusTrix Holdings, LLC(2)(3)(6)Hotel, Gaming & LeisureL + 5.50%8.02%2/2/201812/16/20219,2129,1348,9723.10Comar Holding Company, LLC(2)(3)(6)Containers, Packaging & GlassL + 5.25%7.77%6/18/20186/18/202427,08626,45026,5069.17Dade Paper & Bag, LLC(2)(3)Forest Products & PaperL + 7.00%9.24%1/24/20186/9/20246,2826,2296,0802.10Datto, Inc.(2)(3)(6)High Tech IndustriesL + 8.00%10.46%12/7/201712/7/202217,66717,44217,4986.05Derm Growth Partners III, LLC (Dermatology Associates)(2)(3)(6)Healthcare & PharmaceuticalsL + 6.25%9.05%2/15/20185/31/202214,34214,13014,1194.88DTI Holdco, Inc.(2)(3)High Tech IndustriesL + 4.75%7.28%12/18/20189/30/20231,9951,8701,8600.64Ensono, LP(2)(3)TelecommunicationsL + 5.25%7.77%4/30/20186/27/20258,6238,5428,4502.92GRO Sub Holdco, LLC (Grand Rapids)(2)(3)(6)Healthcare & PharmaceuticalsL + 6.00%8.80%2/28/20182/22/20246,6616,4896,2092.15iCIMS, Inc.(2)(3)(6)SoftwareL + 6.50%8.94%9/12/20189/12/202420,02519,61619,2976.67Innovative Business Services, LLC(2)(3)(6)High Tech IndustriesL + 5.50%7.91%4/5/20184/5/202316,30715,77115,9485.51National Carwash Solutions, Inc.(2)(3)(6)AutomotiveL + 6.00%8.35%8/7/20184/28/20235,8435,6615,6881.98NES Global Talent Finance US, LLC (United Kingdom)(2)(3)(7)Energy: Oil & GasL + 5.50%8.03%5/9/20185/11/20239,9929,8319,6953.35Nexus Technologies, LLC(2)(3)High Tech IndustriesL + 5.50%8.30%12/11/201812/5/20236,2346,1776,1582.13North American Dental Management, LLC(2)(3)(6)Healthcare & PharmaceuticalsL + 5.25%8.04%10/26/20187/7/20233,4223,2643,2761.13Northland Telecommunications Corporation(2)(3)(6)Media: Broadcast & SubscriptionL + 5.75%8.10%10/1/201810/1/202521,63821,29921,3117.37PPC Flexible Packaging, LLC(2)(3)(6)Containers, Packaging & GlassL + 5.25%7.77%11/23/201811/23/202411,96211,76411,8394.09PSI Services, LLC(2)(3)Business ServicesL + 5.00%7.52%9/19/20181/20/20234,5464,4894,4451.54Redwood Services Group, LLC(2)(3)High Tech IndustriesL + 6.00%8.71%11/13/20186/6/20235,3235,2775,2421.81Sapphire Convention, Inc. (Smart City)(2)(3)(6)TelecommunicationsL + 5.25%7.89%11/20/201811/20/202528,86628,21328,2649.77Smile Doctors, LLC(2)(3)(6)Healthcare & PharmaceuticalsL + 5.75%8.55%10/6/201710/6/202218,15517,96717,7826.15Sovos Brands Intermediate, Inc.-2Beverage, Food & TobaccoL + 5.00%7.64%11/16/201811/20/202520,10019,90219,7826.84SPay, Inc.(2)(3)(6)Hotel, Gaming & LeisureL + 5.75%8.22%6/15/20186/15/202419,90919,34319,0096.57Trump Card, LLC(2)(3)(6)Transportation: CargoL + 5.00%7.80%6/26/20184/21/20228,1578,0878,0362.78USLS Acquisition, Inc.(2)(3)(6)Business ServicesL + 5.75%8.46%11/30/201811/30/202417,73017,28117,1785.94
 
 76
  TCG BDC II, INC.
 SCHEDULE OF INVESTMENTS (Continued)
 As of December 31, 2018
 (dollar amounts in thousands)
 
 Investments—non-controlled/non-affiliated (1)FootnotesIndustryReference Rate & Spread (2)Interest Rate (2)Acquisition DateMaturityDatePar/PrincipalAmountAmortizedCost (4)FairValue (5)Percentageof NetAssetsFirst Lien Debt (85.96%) (continued)Westfall Technik, Inc.(2)(3)(6)Chemicals, Plastics & RubberL + 5.00%7.79%9/13/20189/13/2024$10,585$10,219$9,9023.42%Zemax Software Holdings, LLC(2)(3)(6)SoftwareL + 5.75%8.55%6/25/20186/25/202410,24810,05110,1443.51Zenith Merger Sub, Inc.(2)(3)(6)Business ServicesL + 5.50%8.30%12/13/201712/13/20236,7586,6726,7002.32First Lien Debt Total$440,694$438,742151.70%Second Lien Debt (12.97%)Access CIG, LLC(2)(3)(6)Business ServicesL + 7.75%10.46%2/14/20182/27/2026$2,700$2,676$2,6500.92%Argon Medical Devices Holdings, Inc.(2)(3)Healthcare & PharmaceuticalsL + 8.00%10.52%11/2/20171/23/20267,5007,4677,4462.57Brave Parent Holdings, Inc.(2)(3)SoftwareL + 7.50%10.02%10/3/20184/19/202619,06218,61718,3016.33Outcomes Group Holdings, Inc.-2Business ServicesL + 7.50%10.28%10/23/201810/26/20264,5004,4904,4471.54PharmaLogic Holdings Corp.(2)(3)(6)Healthcare & PharmaceuticalsL + 8.00%10.52%6/7/201812/11/20235635605630.19Project Accelerate Parent, LLC(2)(3)SoftwareL + 8.50%10.89%1/2/20181/2/202617,50017,09717,1965.95Santa Cruz Holdco, Inc.(2)(3)Non-durable Consumer GoodsL + 8.25%10.69%12/15/201712/13/20247,6007,5327,4962.59Ultimate Baked Goods MIDCO, LLC (Rise Baking)(2)(3)Beverage, Food & TobaccoL + 8.00%10.52%8/9/20188/9/20268,3338,1728,1082.80Second Lien Debt Total$66,611$66,20722.89%
 Investments—non-controlled/non-affiliated (1)FootnotesIndustryAcquisitionDateShares/ UnitsCostFair Value (5)Percentage ofNet AssetsEquity Investment (1.07%)(5)(8)ANLG Holdings, LLCHealthcare & Pharmaceuticals43.273879,689$880$8800.30%Avenu Holdings, LLCSovereign & Public Finance43.371172,4131721720.06GRO Sub Holdco, LLC (Grand Rapids)Healthcare & Pharmaceuticals43.188500,0005002190.09North Haven Goldfinch Topco, LLCContainers, Packaging & Glass43.2692,314,8152,3152,1020.73SiteLock Group Holdings, LLCHigh Tech Industries43.195446,4284464460.15USLS Acquisition, Inc.Business Services43.434640,5696416410.22Zenith American Holding, Inc.Business Services43.082438,3564387050.24Zillow Topco LPSoftware43.276312,5003133130.11Equity Investments Total$5,705$5,4781.90%Total investments—non-controlled/non-affiliated$513,010$510,427176.49%Total investments$513,010$510,427176.49%
 
 77
  TCG BDC II, INC.
 SCHEDULE OF INVESTMENTS (Continued)
 As of December 31, 2018
 (dollar amounts in thousands)
 
 (1)Unless otherwise indicated, issuers of debt and equity investments held by the Company) are domiciled in the United States. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As ofDecember 31, 2018, the Company does not “control” any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As ofDecember 31, 2018, the Company is not an “affiliated person” of any of these portfolio companies. Certain portfolio company investments are subject to contractual restrictions on sales. (2)Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as ofDecember 31, 2018. As ofDecember 31, 2018, the reference rates for all LIBOR loans were the 30-day LIBOR at 2.50%, the 90-day LIBOR at 2.81% and the 180-day LIBOR rate at 2.88%. (3)Loan includes interest rate floor feature, which is generally 1.00%. (4)Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method. (5)Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements, to these consolidated financial statements), pursuant to the Company’s valuation policy. The fair value of all first lien and second lien debt investments and equity investments was determined using significant unobservable inputs. 
 78
  TCG BDC II, INC.
 SCHEDULE OF INVESTMENTS (Continued)
 As of December 31, 2018
 (dollar amounts in thousands)
 
 (6)As ofDecember 31, 2018, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans: Investments—non-controlled/non-affiliatedTypeUnused FeePar/ Principal AmountFair ValueFirst and Second Lien Debt—unfunded delayed draw and revolving term loans commitmentsAero Operating LLC (Dejana Industries, Inc.)Revolver1.00%$423$(5)Analogic CorporationRevolver0.503,365(73)Chemical Computing Group ULCRevolver0.50903(9)CircusTrix Holdings, LLCDelayed Draw1.001,115(26)Comar Holding Company, LLCDelayed Draw1.005,136(87)Comar Holding Company, LLCRevolver0.502,129(36)Datto, Inc.Revolver0.50360(3)Derm Growth Partners III, LLC (Dermatology Associates)Delayed Draw1.002,735(34)Derm Growth Partners III, LLC (Dermatology Associates)Revolver0.50846(10)GRO Sub Holdco, LLC (Grand Rapids)Delayed Draw1.007,000(85)GRO Sub Holdco, LLC (Grand Rapids)Revolver0.501,071(13)iCIMS, Inc.Revolver0.501,252(43)Innovative Business Services, LLCDelayed Draw1.003,886(62)Innovative Business Services, LLCRevolver0.502,232(36)National Carwash Solutions, Inc.Delayed Draw1.003,817(57)National Carwash Solutions, Inc.Revolver0.50632(9)North American Dental Management, LLCDelayed Draw1.004,986(86)Northland Telecommunications CorporationRevolver0.501,702(24)PharmaLogic Holdings Corp.Delayed Draw1.00236—PPC Flexible Packaging, LLCRevolver0.501,737(16)Sapphire Convention, Inc. (Smart City)Revolver0.504,528(82)Smile Doctors, LLCDelayed Draw1.006,394(97)Smile Doctors, LLCRevolver0.5051(1)SPay, Inc.Delayed Draw1.0010,227(197)SPay, Inc.Revolver0.50546(19)Trump Card, LLCRevolver0.50635(9)USLS Acquisition, Inc.Delayed Draw1.004,137(98)USLS Acquisition, Inc.Revolver0.501,419(34)Westfall Technik, Inc.Delayed Draw1.0015,258(372)Westfall Technik, Inc.Revolver0.502,155(53)Zemax Software Holdings, LLCRevolver0.501,284(11)Zenith Merger Sub, Inc.Revolver0.50736(6)Total unfunded commitments$92,933$(1,693)
 
 79
  TCG BDC II, INC.
 SCHEDULE OF INVESTMENTS (Continued)
 As of December 31, 2018
 (dollar amounts in thousands)
 
 (2)The Company has determined the indicated investments are non-qualifying assets under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets. (3)Security acquired in transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act, unless otherwise noted. As ofDecember 31, 2018, the aggregate fair value of these securities is $5,478, or 1.90% of the Company's net assets. 
 
 As of December 31, 2018 , investments at fair value consisted of the following: TypeAmortized CostFair Value% of Fair ValueFirst Lien Debt$440,694$438,74285.96%Second Lien Debt66,61166,20712.97Equity Investments5,7055,4781.07Total$513,010$510,427100.00%
 The rate type of debt investments at fair value as of December 31, 2018 was as follows: Rate TypeAmortized CostFair Value% of Fair Value of First and Second Lien DebtFloating Rate$507,305$504,949100.00%Total$507,305$504,949100.00%
 
 
 80
  TCG BDC II, INC.
 SCHEDULE OF INVESTMENTS (Continued)
 As of December 31, 2018
 (dollar amounts in thousands)
 
 The industry composition of investments at fair value as of December 31, 2018 was as follows: IndustryAmortized CostFair Value% of Fair ValueAutomotive$5,661$5,6881.11%Beverage, Food & Tobacco28,07427,8905.46Business Services43,43643,4868.52Chemicals, Plastics & Rubber10,2199,9021.94Consumer Services4,6614,5870.90Containers, Packaging & Glass40,52940,4477.93Energy: Oil & Gas9,8319,6951.90Forest Products & Paper6,2296,0801.19Healthcare & Pharmaceuticals85,79384,90816.63High Tech Industries56,59656,81111.13Hotel, Gaming & Leisure28,47727,9815.48Media: Broadcast & Subscription21,29921,3114.18Non-durable Consumer Goods7,5327,4961.47Software81,25980,86915.84Sovereign & Public Finance38,57238,5267.55Telecommunications36,75536,7147.19Transportation: Cargo8,0878,0361.58Total$513,010$510,427100.00%
 
 The geographical composition of investments at fair value as of December 31, 2018 was as follows: GeographyAmortized CostFair Value% of Fair ValueCanada$15,565$15,6183.06%United Kingdom9,8319,6951.90United States487,614485,11495.04Total$513,010$510,427100.00%
 
 
 
 
 The accompanying notes are an integral part of these consolidated financial statements.
 
 
 81
  
 Table of Contents
 
 TCG BDC II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 As of December 31, 2019
 (dollar amounts in thousands, except per share data)
 
 1. ORGANIZATION
 TCG BDC II, Inc. (“BDC II” or the “Company”) is a Maryland corporation formed on February 10, 2017 with the name Carlyle Private Credit, Inc., which was changed to TCG BDC II, Inc. on March 3, 2017. The Company is structured as an externally managed, non-diversified closed-end investment company. The Company is managed by its investment adviser, Carlyle Global Credit Investment Management L.L.C., “CGCIM” or “Investment Adviser”), a wholly owned subsidiary of The Carlyle Group L.P. The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”). In addition, the Company intends to elect to be treated, and to comply with the requirements to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the “Code”).
 The Company’s investment objective is to generate attractive risk adjusted returns and current income primarily by investing in senior secured term loans to U.S. middle market companies in which private equity sponsors hold, directly or indirectly, a financial interest in the form of debt and/or equity. The Company's core investment strategy focuses on lending to U.S. middle market companies, which the Company defines as companies with approximately $ 25 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”), which the Company believes is a useful proxy for cash flow. The Company complements this core strategy with additive, diversifying assets including, but not limited to, specialty lending investments. The Company seeks to achieve its investment objective primarily through direct origination of secured debt instruments, including first lien senior secured loans (which may include stand-alone first lien loans, first lien/last out loans and “unitranche” loans) and second lien senior secured loans (collectively, “Middle Market Senior Loans”), with the balance of its assets invested in higher yielding investments (which may include unsecured debt, mezzanine debt and investments in equities).
 The Company invests primarily in loans to middle market companies whose debt, if rated, is rated below investment grade, and if not rated, would likely be rated below investment grade if it were rated (that is, below BBB- or Baa3, which is often referred to as "junk"). Exposure to below investment grade instruments involves certain risks, including speculation with respect to the borrower's capacity to pay interest and repay principal. See Item 1A of this Form 10-K, "Risk Factors—Risks Related to out Investments—Our investments are risky and speculative."
 On September 11, 2017 ("Commencement"), the Company completed its initial closing of capital commitments (the “Initial Closing”) and subsequently commenced substantial investment operations.
 The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.
 The Company is externally managed by the Investment Adviser, an investment adviser registered under the Investment Advisers Act of 1940, as amended. Carlyle Global Credit Administration L.L.C., (“CGCA” or the “Administrator”) provides the administrative services necessary for the Company to operate. Both the Investment Adviser and the Administrator are wholly owned subsidiaries of Carlyle Investment Management L.L.C., a subsidiary of The Carlyle Group Inc. “Carlyle” refers to The Carlyle Group Inc. and its affiliates and its consolidated subsidiaries (other than portfolio companies of its affiliated funds), a global investment firm publicly traded on the Nasdaq Global Select Market under the symbol “CG”. Refer to the sec.gov website for further information on Carlyle.
 TCG BDC II SPV LLC (the “SPV”) is a Delaware limited liability company that was formed on January 28, 2019. The SPV invests in first and second lien senior secured loans. The SPV is a wholly owned subsidiary of the Company and is consolidated in these consolidated financial statements commencing from the date of its formation, January 28, 2019.
 As a BDC, the Company is required to comply with certain regulatory requirements. As part of these requirements, the Company must not acquire any assets other than “qualifying assets” specified in the Investment Company Act unless, at the time the acquisition is made, at least 70% of its total assets are qualifying assets (with certain limited exceptions).
 To qualify as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements and timely distribute to its stockholders generally at least 90% of its investment company taxable income, as
 
 82
  Table of Contents
 
 defined by the Code, for each year. Pursuant to this election, the Company generally does not have to pay corporate level taxes on any income that it distributes to stockholders, provided that the Company satisfies those requirements.
 
 2. SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
 The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The Company is an investment company for the purposes of accounting and financial reporting in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies ("ASC 946") . The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the SPV. All significant intercompany balances and transactions have been eliminated. U.S. GAAP for an investment company requires investments to be recorded at fair value. The carrying value for all other assets and liabilities approximates their fair value.
 The annual consolidated financial statements have been prepared in accordance with U.S. GAAP for annual financial information and pursuant to the requirements for reporting on Form 10-K and Article 6 of Regulation S-X. In the opinion of management, all adjustments considered necessary for the fair presentation of consolidated financial statements for the year and period presented have been included.
 Use of Estimates
 The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on management and incentive fees involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements. Actual results could differ from these estimates and such differences could be material.
 Investments
 Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the accompanying Consolidated Statements of Operations reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. See Note 3 to these consolidated financial statements for further information about fair value measurements.
 Cash and Cash Equivalents
 Cash and cash equivalents consist of demand deposits and highly liquid investments (e.g. money market funds, U.S. treasury notes) with original maturities of three months or less. Cash equivalents are carried at amortized cost, which approximates fair value. The Company’s cash and cash equivalents are held with two large financial institutions and cash held in such financial institutions may, at times, exceed the Federal Deposit Insurance Corporation insured limit.
 Revenue Recognition
 Interest from Investments and Realized Gain/Loss on Investments
 Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. At time of exit, the realized gain or loss on an investment is the difference between the amortized cost at time of exit and the cash received at exit using the specific identification method.
 
 83
  Table of Contents
 
 The Company may have loans in its portfolio that contain payment-in-kind (“PIK”) provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. Such income is included in interest income in the Consolidated Statements of Operations. As of December 31, 2019 , the fair value of the loans with PIK provisions was $82,643 which represented approximately 6.0% of the total investments at fair value. For the year ended December 31, 2019 , the Company earned $1,318 in PIK income, which is included in interest income in the accompanying Consolidated Statements of Operations.  As of and for the year/period ended December 31, 2018 and 2017 , no loans in the portfolio contained PIK provisions.
 Other Income
 Other income may include income such as consent, waiver, amendment, unused, underwriting and prepayment fees associated with the Company’s investment activities as well as any fees for managerial assistance services rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. The Company may receive fees for guaranteeing the outstanding debt of a portfolio company. Such fees are amortized into other income over the life of the guarantee. The unamortized amount, if any, is included in other assets in the accompanying Consolidated Statements of Assets and Liabilities. For the years ended December 31, 2019 and 2018 and for the period from Commencement through December 31, 2017 , the Company earned $4,930 , $ 1,305 and $224 , respectively, in other income, primarily from unused fees.
 Non-Accrual Income
 Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid current and, in management’s judgment, are likely to remain current. Management may not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. As of December 31, 2019 , the fair value of the loan in the portfolio on non-accrual status was $11,469, which represented approximately 0.8% of the total investments at fair value. The remaining first and second lien debt investments were performing and current on their interest payments as of December 31, 2019 and for the year then ended. As of December 31, 2018 and 2017, no loans in the portfolio were on non-accrual status.
 Credit Facilities — Related Costs, Expenses and Deferred Financing Costs
 Interest expense and unused commitment fees on the Subscription Facility and the SPV Credit Facility are recorded on an accrual basis. Unused commitment fees are included in credit facility fees in the accompanying Consolidated Statements of Operations.
 The Credit Facilities are recorded at carrying value, which approximates fair value.
 Deferred financing costs include capitalized expenses related to the closing or amendments of the Credit Facilities. Amortization of deferred financing costs for each credit facility is computed on the straight-line basis over the respective term of each credit facility. The unamortized balance of such costs is included in deferred financing costs in the accompanying Consolidated Statements of Assets and Liabilities. The amortization of such costs is included in credit facility fees in the accompanying Consolidated Statements of Operations.
 Organization and Offering Costs
 The Company agreed to reimburse the Investment Adviser for initial organization and offering costs incurred on behalf of the Company up to $1,500. As of December 31, 2019 , 2018 and 2017 , $1,500, $1,500 and $1,415, respectively, of initial organization and offering costs had been incurred by the Company and $629, $544 and $0, respectively, of excess initial organization and offering costs had been incurred by the Investment Adviser. The $1,500 of incurred organization and offering costs are allocated to all stockholders based on their respective capital commitment and are re-allocated amongst all stockholders at the time of each capital drawdown subsequent to the Initial Closing. The Company’s initial organization costs incurred were expensed and the initial offering costs are being amortized over one year.
 
 84
  Table of Contents
 
 Income Taxes
 For U.S. federal income tax purposes, the Company has elected to be treated as a RIC under the Code, and intends to make the required distributions to its stockholders as specified therein. In order to qualify as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute.
 The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.
 In addition, based on the excise distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding year. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed.
 The Company 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. The SPV is a disregarded entity for tax purposes and is consolidated with the tax return of the Company. All penalties and interest associated with income taxes, if any, are included in income tax expense.
 Dividends and Distributions to Common Stockholders
 To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its common stockholders. Dividends and distributions to common stockholders are recorded on the record date. The amount to be distributed is determined by the Board of Directors each quarter and is generally based upon the taxable earnings estimated by management and available cash. Net realized capital gains, if any, are generally distributed at least annually, although the Company may decide to retain such capital gains for investment.
 Dividends and distributions, if any, are paid in cash to common stockholders.
 Functional Currency
 The functional currency of the Company is the U.S. Dollar. Investments are generally made in the local currency of the country in which the investment is domiciled and are translated into U.S. Dollars with foreign currency translation gains or losses recorded within net change in unrealized appreciation (depreciation) on investments in the accompanying consolidated Statements of Operations. Foreign currency translation gains and losses on non-investment assets and liabilities are separately reflected in the accompanying Consolidated Statements of Operations.
 Recent Accounting Standards Updates
 
 In August 2018, the Securities and Exchange Commission (the "SEC") adopted amendments to certain disclosure requirements intended to eliminate redundant, duplicative, overlapping, outdated, or superseded disclosures, in light of other SEC disclosure requirements, U.S. GAAP requirements, or changes in the information environment in its Disclosure Update and Simplification release (the “DUS Release”). The Company adopted the DUS Release on November 5, 2018, which did not have a material impact on the Company’s consolidated financial statements.
 
 In September 2018, related to the DUS Release, the FASB issued Compliance and Disclosure Interpretation 105.09 guidance (“CDI 105.09”) on compliance with the new requirement to present changes in shareholders’ equity in interim financial statements within Form 10-Q filings. The DUS Release requires disclosure of changes in shareholders’ equity within a registrant’s Form 10-Q filing on a quarter-to-date and year-to-date basis for both the current year and prior year comparative periods. CDI 105.09 notes that the SEC would not object if a registrant first discloses the changes in shareholders’ equity in its Form 10-Q for the quarter that begins after November 5, 2018. The Company adopted the new requirement to present changes in shareholders’ equity in interim financial statements within Form 10-Q filings starting with the quarter that began on January
 
 85
  Table of Contents
 
 1, 2019. The adoption of the new requirement did not have a material impact on the Company’s consolidated financial statements.
 On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . This ASU is intended to introduce new guidance for the accounting for credit losses on instruments within scope based on an estimate of current expected credit losses. The guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company does not expect the adoption of ASU 2016-13 to have a material impact on its financial statements.
 
 3. FAIR VALUE MEASUREMENTS
 The Company applies fair value accounting in accordance with the terms of ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. The Company values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e., “consensus pricing”). When doing so, the Company determines whether the quote obtained is sufficient according to US GAAP to determine the fair value of the security. The Company may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.
 Securities/instruments that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or the Company’s Board of Directors, does not represent fair value shall each be valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment and include comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses. The process generally used to determine the applicable value is as follows: (i) the value of each portfolio company or investment is initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments, a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs is used to determine a preliminary value, which is also reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of members of senior management; (iii) the Board of Directors engages a third-party valuation firm to provide positive assurance on portions of the Middle Market Senior Loans and equity investments portfolio each quarter (such that each non-traded investment is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of management’s preliminary valuation and conclusion on fair value; (iv) the Audit Committee of the Board of Directors (the “Audit Committee”) reviews the assessments of the Investment Adviser and the third-party valuation firm and provides the Board of Directors with any recommendations with respect to changes to the fair value of each investment in the portfolio; and (v) the Board of Directors discusses the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.
 All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:
 
 •the nature and realizable value of any collateral; •call features, put features and other relevant terms of debt; •the portfolio company’s leverage and ability to make payments; •the portfolio company’s public or private credit rating; •the portfolio company’s actual and expected earnings and discounted cash flow; •prevailing interest rates and spreads for similar securities and expected volatility in future interest rates; •the markets in which the portfolio company does business and recent economic and/or market events; and •comparisons to comparable transactions and publicly traded securities. Investment performance data utilized are the most recently available financial statements and compliance certificates received from the portfolio companies as of the measurement date which in many cases may reflect a lag in information.
 
 86
  Table of Contents
 
 Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.
 In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the consolidated financial statements as of December 31, 2019 and 2018 .
 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.
 Investments measured and reported at fair value are classified and disclosed based on the observability of inputs used in determination of fair values, as follows:
 
 •Level 1—inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date. The types of financial instruments in Level 1 generally include unrestricted securities, including equities and derivatives, listed in active markets. The Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price. •Level 2—inputs to the valuation methodology are either directly or indirectly observable as of the reporting date and are those other than quoted prices in active markets. The type of financial instruments in this category generally includes less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs. •Level 3—inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are in this category generally include investments in privately-held entities and certain over-the-counter derivatives where the fair value is based on unobservable inputs. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Investment Adviser’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
 Transfers between levels, if any, are recognized at the beginning of the year in which the transfers occur. For the years ended December 31, 2019 and 2018 , there were no transfers between levels.
 The following tables summarize the Company’s investments measured at fair value on a recurring basis by the above fair value hierarchy levels as of December 31, 2019 and 2018 :
 December 31, 2019Level 1Level 2Level 3TotalAssetsFirst Lien Debt$—$—$1,159,906$1,159,906Second Lien Debt——197,732197,732Equity Investments——12,51012,510Total$—$—$1,370,148$1,370,148
 
 87
  Table of Contents
 
 December 31, 2018Level 1Level 2Level 3TotalAssetsFirst Lien Debt$—$—$438,742$438,742Second Lien Debt——66,20766,207Equity Investments——5,4785,478Total$—$—$510,427$510,427
 The changes in the Company’s investments at fair value for which the Company has used Level 3 inputs to determine fair value and net change in unrealized appreciation (depreciation) included in earnings for Level 3 investments still held are as follows:  Financial AssetsFor the Year Ended December 31, 2019FirstLien DebtSecondLien DebtEquityInvestmentsTotalBalance, beginning of year$438,742$66,207$5,478$510,427Purchases796,206164,6695,778966,653Sales(19,087)—(486)(19,573)Paydowns(61,194)(34,848)—(96,042)Accretion of discount3,350764—4,114Net realized gains (losses)——269269Net change in unrealized appreciation (depreciation)1,8899401,4714,300Balance, end of year$1,159,906$197,732$12,510$1,370,148Net change in unrealized appreciation (depreciation) included in earnings related to investments still held at the reporting date included on the Consolidated Statements of Operations$1,765$1,025$1,471$4,261
 
 Financial AssetsFor the Year Ended December 31, 2018FirstLien DebtSecondLien DebtEquityInvestmentsTotalBalance, beginning of year$50,045$30,806$438$81,289Purchases424,92458,9775,267489,168Sales(1,243)——(1,243)Paydowns(33,297)(23,227)—(56,524)Accretion of discount913313—1,226Net realized gains (losses)(24)——(24)Net change in unrealized appreciation (depreciation)(2,576)(662)(227)(3,465)Balance, end of year$438,742$66,207$5,478$510,427Net change in unrealized appreciation (depreciation) included in earnings related to investments still held at the reporting date included on the Consolidated Statement of Operations$(2,456)$(505)$(227)$(3,188)
 
 The Company generally uses the following framework when determining the fair value of investments that are categorized as Level 3:
 Investments in debt securities are initially evaluated to determine whether the enterprise value of the portfolio company is greater than the applicable debt. The enterprise value of the portfolio company is estimated using a market approach and an income approach. The market approach utilizes market value (EBITDA) multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The Company carefully considers numerous factors when selecting the appropriate companies whose multiples are used to value its portfolio companies. These factors include, but are
 
 88
  Table of Contents
 
 not limited to, the type of organization, similarity to the business being valued, relevant risk factors, as well as size, profitability and growth expectations. The income approach typically uses a discounted cash flow analysis of the portfolio company.
 Investments in debt securities that do not have sufficient coverage through the enterprise value analysis are valued based on an expected probability of default and discount recovery analysis.
 Investments in debt securities with sufficient coverage through the enterprise value analysis are generally valued using a discounted cash flow analysis of the underlying security. Projected cash flows in the discounted cash flow typically represent the relevant security’s contractual interest, fees and principal payments plus the assumption of full principal recovery at the security’s expected maturity date. The discount rate to be used is determined using an average of two market-based methodologies. Investments in debt securities may also be valued using consensus pricing.
 Investments in equities are generally valued using a market approach and/or an income approach. The market approach utilizes EBITDA multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The income approach typically uses a discounted cash flow analysis of the portfolio company.
 The following tables summarize the quantitative information related to the significant unobservable inputs for Level 3 instruments which are carried at fair value as of December 31, 2019 and 2018 :
 Fair Value asValuation TechniquesSignificantUnobservableInputsRangeWeightedAverageof December 31, 2019LowHighInvestments in First Lien Debt$850,376Discounted Cash FlowDiscount Rate4.04%16.36%7.52%309,530Consensus PricingIndicative Quotes77.94%100.00%98.13%Total First Lien Debt1,159,906Investments in Second Lien Debt138,007Discounted Cash FlowDiscount Rate7.40%9.76%8.64%59,725Consensus PricingIndicative Quotes97.50%98.31%98.03%Total Second Lien Debt197,732Investments in Equity12,510Income ApproachDiscount Rate7.76%12.09%7.94%Market ApproachComparable Multiple6.37x16.65x9.22xTotal Equity Investments12,510Total Level 3 Investments$1,370,148
 Fair Value as of December 31, 2018Valuation TechniquesSignificantUnobservableInputsRangeWeightedAverageLowHighInvestments in First Lien Debt$432,295Discounted Cash FlowDiscount Rate5.57%9.63%7.38%6,447Consensus PricingIndicative Quotes93.25%98.00%96.63%Total First Lien Debt438,742Investments in Second Lien Debt63,556Discounted Cash FlowDiscount Rate7.93%9.81%9.41%2,651Consensus PricingIndicative Quotes98.17%98.17%98.17%Total Second Lien Debt66,207Investments in Equity5,478Income ApproachDiscount Rate8.51%12.84%10.14%Market ApproachComparable Multiple7.74x14.70x10.48xTotal Equity Investments5,478Total Level 3 Investments$510,427
 
 The significant unobservable inputs used in the fair value measurement of the Company’s investments in first and second lien debt securities are discount rates, indicative quotes and comparable EBITDA multiples. Significant increases in discount rates would result in a significantly lower fair value measurement. Significant decreases in indicative quotes or comparable EBITDA multiples in isolation may result in a significantly lower fair value measurement.
 The significant unobservable inputs used in the fair value measurement of the Company’s investments in equities are discount rates and comparable EBITDA multiples. Significant increases in discount rates would result in a significantly lower fair value measurement. Significant decreases in comparable EBITDA multiples would result in a significantly lower fair value measurement.
 
 89
  Table of Contents
 
 Financial instruments disclosed but not carried at fair value
 The following table presents the carrying value and fair value of the Company’s secured borrowings disclosed but not carried at fair value as of December 31, 2019 and 2018 :
 December 31, 2019December 31, 2018Carrying ValueFair ValueCarrying ValueFair ValueSecured borrowings$648,200$648,200$217,700$217,700Total$648,200$648,200$217,700$217,700
 The carrying values of the secured borrowings approximate their respective fair values and are categorized as Level 3 within the hierarchy. Secured borrowings are valued generally using discounted cash flow analysis. The significant unobservable inputs used in the fair value measurement of the Company’s secured borrowings are discount rates. Significant increases in discount rates would result in a significantly lower fair value measurement.
 The carrying value of other financial assets and liabilities approximates their fair value based on the short term nature of these items.
 
 4. RELATED PARTY TRANSACTIONS
 Investment Advisory Agreement
 On June 26, 2017, the Company entered into an investment advisory agreement (the “Investment Advisory Agreement”) with the Investment Adviser. The initial term of the Investment Advisory Agreement was two years from June 26, 2017 and, unless terminated earlier, the Investment Advisory Agreement renews automatically for successive annual periods, provided that such continuance is specifically approved at least annually by the vote of the Board of Directors and by the vote of a majority of the Independent Directors. The Investment Advisory Agreement will automatically terminate in the event of an assignment and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party. On May 6, 2019, the Company's Board of Directors, including a majority of the Independent Directors, approved at an in-person meeting the continuance of the Company's Investment Advisory Agreement with the Adviser for an additional one-year term.
 Pursuant to the Investment Advisory Agreement and subject to the overall supervision of the Board of Directors, the Investment Adviser provides investment advisory services to the Company. For providing these services, the Investment Adviser receives fees from the Company consisting of two components—a management fee and an incentive fee.
 The management fee has been calculated and payable quarterly in arrears at an annual rate of 1.25% of the Company’s average Capital Under Management (as defined below) at the end of the then-current quarter and the prior calendar quarter (and, in the case of the Company’s first quarter, the Company’s Capital Under Management as of such quarter-end). “Capital Under Management” means cumulative capital called, less cumulative distributions categorized as Returned Capital. “Returned Capital” means unused capital commitments increased by the aggregate amount of (i) any portion of distributions made by the Company to an investor during the Investment Period which represents (A) proceeds realized from the sale or repayment of any investment (as opposed to investment income) during the Investment Period (but not in excess of the cost of any such investment) or (B) a return of such investor’s capital contributions to the Company, as determined by the Board of Directors, and (ii) any amount drawn down by the Company from unused capital commitments to pay management fees, incentive fees, organizational expenses or Company expenses, to the extent such investor receives subsequent distributions. The "Investment Period" commenced on September 11, 2017 and will continue until September 11, 2021, provided that it may be extended thereafter with the approval of holders of a majority of the shares of the Company's common stock. For the avoidance of doubt, Capital Under Management does not include capital acquired through the use of leverage, and Returned Capital does not include distributions of the Company’s investment income (i.e., proceeds received in respect of interest payments, dividends or fees, net of expenses) or net realized capital gains to the investors.
 
 The incentive fee consists of two parts. The first part has been calculated and payable quarterly in arrears and equals 15% of pre-incentive fee net investment income for the immediately preceding calendar quarter, subject to a preferred return of 1.75% per quarter (7% annualized), or “hurdle rate,” and a “catch-up” feature. The second part has been determined and payable in arrears as of the end of each calendar year in an amount equal to 15% of realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation less the aggregate amount of any previously paid capital gain incentive fees, provided that no incentive fee on capital gains is payable to the Investment Adviser unless cumulative total return exceeds a 7% annual return on weighted average cumulative capital called less cumulative distributions categorized as Returned Capital.
 
 90
  Table of Contents
 
 
 
 Below is a summary of the base management fees and incentive fees incurred during the years ended December 31, 2019 and 2018 , and the period from Commencement through December 31, 2017 :
 For the Years Ended December 31,Period from Commencement through December 31, 201720192018Base management fees$6,259$2,174$252Incentive fees on pre-incentive fee net investment income8,7011,881—Realized capital gains incentive fees———Accrued capital gains incentive fees———Total capital gains incentive fees———Total incentive fees8,7011,881—Total base management fees and incentive fees$14,960$4,055$252
 Accrued capital gains incentive fees are based upon the cumulative net realized and unrealized appreciation (depreciation) from inception. Accordingly, the accrual for any capital gains incentive fee under U.S. GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual.
 As of December 31, 2019 and 2018 , $4,904 and $2,020 , respectively, were included in management and incentive fees payable in the accompanying Consolidated Statements of Assets and Liabilities.
 On June 26, 2017, the Investment Adviser entered into a personnel agreement with The Carlyle Group Employee Co., L.L.C. (“Carlyle Employee Co.”), an affiliate of the Investment Adviser, pursuant to which Carlyle Employee Co. provides the Investment Adviser with access to investment professionals.
 Administration Agreement
 On April 18, 2017, the Company entered into an administration agreement (the “Administration Agreement”) with the Administrator. The initial term of the Administration Agreement was two years from April 18, 2017 and, unless terminated earlier, the Administration Agreement renews automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board of Directors or by a majority vote of the outstanding voting securities of the Company and (ii) the vote of a majority of the Company’s Independent Directors. The Administration Agreement may not be assigned by a party without the consent of the other party and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party. On May 6, 2019, the Company’s Board of Directors, including a majority of the Independent Directors, approved at an in-person meeting the continuance of the Company’s Administration Agreement with the Administrator for an additional one-year term.
 Pursuant to the Administration Agreement, the Administrator provides services and receives reimbursements equal to an amount that reimburses the Administrator for its costs and expenses and the Company's allocable portion of overhead incurred by the Administrator in performing its obligations under the Administration Agreement, including the Company's allocable portion of the compensation paid to or compensatory distributions received by the Company’s officers (including the Chief Compliance Officer and Chief Financial Officer) and respective staff who provide services to the Company, operations staff who provide services to the Company, and any internal audit staff , to the extent internal audit performs a role in the Company's internal control assessment under the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act”). Reimbursement under the Administration Agreement occurs quarterly in arrears.
 For the years ended December 31, 2019 and 2018 , and for the period from Commencement through December 31, 2017 , the Company incurred $270 , $435 and $52 , respectively, in fees under the Administrative Agreement, which were included in administrative service fees in the accompanying Consolidated Statements of Operations. As of December 31, 2019 and 2018 , $33 and $45 , respectively, was unpaid and included in administrative service fees payable in the accompanying Consolidated Statements of Assets and Liabilities.
 
 91
  Table of Contents
 
 Sub-Administration Agreements
 On June 26, 2017, the Administrator entered into sub-administration agreements with Carlyle Employee Co. (the “Carlyle Sub-Administration Agreement”). Pursuant to the Carlyle Sub-Administration Agreement, Carlyle Employee Co. provides the Administrator with access to personnel.
 On June 22, 2017, the Administrator entered into a sub-administration agreement with State Street Bank and Trust Company (“State Street” and, such agreement, the “State Street Sub-Administration Agreement” and, together with the Carlyle Sub-Administration Agreements, the “Sub-Administration Agreements”).
 On May 6, 2019, the Company’s Board of Directors, including a majority of the Independent Directors, approved at an in-person meeting the continuance of the Company’s Sub-Administration Agreements for an additional one year term.
 For the years ended December 31, 2019 and 2018 , and for the period from Commencement through December 31, 2017 , fees incurred in connection with the State Street Sub-Administration Agreement, which amounted to $481 , $479 and $73 , respectively, were included in other general and administrative in the accompanying Consolidated Statements of Operations. As of December 31, 2019 and 2018 , $1,033 and $552 , respectively, was unpaid and included in other accrued expenses and liabilities in the accompanying Consolidated Statements of Assets and Liabilities.
 Placement Fees
 On June 26, 2017, the Company entered into a placement fee arrangement with TCG Securities, L.L.C. (“TCG”), a licensed broker-dealer and an affiliate of the Investment Adviser, which may require stockholders to pay a placement fee to TCG for TCG’s services.
 For the years ended December 31, 2019 and 2018 , TCG earned $1,290 and $219, respectively, in placement fees from the Company’s stockholders in connection with the issuance or sale of the Company’s common stock and paid $1,288 and $219, respectively, in placement fees to sub-placement agents. For the period from Commencement through December 31, 2017, TCG earned no placement fees from the Company’s stockholders in connection with the issuance or sale of the Company’s common stock.
 Board of Directors
 The Company’s Board of Directors currently consists of five members, three of whom are Independent Directors. The Board of Directors established an audit committee and a pricing committee of the Board of Directors, and may establish additional committees in the future. For the years ended December 31, 2019 and 2018 and for the period from Commencement through December 31, 2017, the Company incurred $195 , $200 and $49 , respectively, in fees and expenses associated with its Independent Directors’ services on the Company’s Board of Directors and the Audit Committee. As of December 31, 2019 and 2018 , there were no unpaid Directors’ fees and expenses.
 
 5. BORROWINGS
 The Company and the SPV are party to the Credit Facilities. In accordance with the Investment Company Act, the Company is currently only allowed to borrow amounts such that its asset coverage, as defined in the Investment Company Act, is at least 200% after such borrowing. As of December 31, 2019 and 2018 , asset coverage was 213.72% and 232.85% , respectively, and the Company and the SPV were in compliance with all covenants and other requirements of their respective credit facility agreements. Below is a summary of the borrowings and repayments under the Credit Facilities for the years ended December 31, 2019 and 2018 and for the period from Commencement through December 31, 2017.
 For the years ended December 31,For the period from Commencement through20192018December 31, 2017Outstanding borrowing, beginning of period$217,700$60,750$—Borrowings986,666367,05081,225Repayments(558,300)(210,100)(20,475)Foreign currency translation2,134——Outstanding borrowing, end of period$648,200$217,700$60,750
 
 92
  Table of Contents
 
 
 Subscription Facility
 The Company entered into the Subscription Facility with a lender on October 3, 2017, which was subsequently amended on March 14, 2018 and November 16, 2018. The maximum principal amount of the Subscription Facility was $265,000 as of December 31, 2019 (reduced from $375,000 as of December 31, 2018) and is subject to availability under the Subscription Facility, which is based on certain of the Company's unfunded investor equity capital commitments, and restrictions imposed on borrowings under the Investment Company Act. The Subscription Facility has a maturity date of October 3, 2020, with two one-year extension options, subject to the Company’s and the lender’s consent. The Company may borrow amounts in U.S. Dollars or certain other permitted currencies. Borrowings under the Subscription Facility bear interest initially at LIBOR plus an applicable spread of 1.55% per year. The Company is also required to pay an undrawn commitment fee of 0.25% per year.
 Subject to certain exceptions, the Subscription Facility is secured by a first lien security interest in the Company’s unfunded investor equity capital commitments. The Subscription Facility includes customary covenants, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for senior secured revolving credit facilities of this nature.
 SPV Credit Facility
 The SPV entered into the SPV Credit Facility with a lender on April 1, 2019, which was subsequently amended on October 25, 2019. The SPV Credit Facility provides for secured borrowings of $600,000 as of December 31, 2019 (increased from $300,000 at the closing of the facility on April 1, 2019), subject to availability under the SPV Credit Facility and restrictions imposed on borrowings under the Investment Company Act. The SPV Credit Facility has a maturity date of April 1, 2024, with one one-year extension option, subject to the SPV's and the lender's consent. The SPV may borrow amounts in U.S. Dollars or certain other permitted currencies. Borrowings under the SPV Credit Facility bear interest initially at LIBOR (or, if applicable, a rate based on the prime rate or federal funds rate) plus 2.25% per year with a 0.45% step-up based on collateral coverage and asset mix. The SPV is also required to pay an undrawn commitment fee of between 0.50% and 0.75% per year. Payments under the SPV Credit Facility are made quarterly. The lenders have a first lien security interest on substantially all of the assets of the SPV.
 Summary of Credit Facilities
 The Credit Facilities consisted of the following as of December 31, 2019 and 2018 :
 December 31, 2019Total FacilityBorrowingsOutstandingUnusedPortion(1)AmountAvailable(2)Subscription Facility$265,000$231,700$33,300$25,749SPV Credit Facility600,000416,500183,500183,500Total$865,000$648,200$216,800$209,249December 31, 2018Total FacilityBorrowingsOutstandingUnusedPortion(1)AmountAvailable(2)Subscription Facility$375,000$217,700$157,300$157,300Total$375,000$217,700$157,300$157,300
 (1)The unused portion is the amount upon which commitment fees are based. (2)Available for borrowing based on the computation of collateral to support the borrowings and subject to compliance with applicable covenants and financial ratios. 
 93
  Table of Contents
 
 For the years ended December 31, 2019 and 2018 , and the period from Commencement through December 31, 2017, the components of interest expense and credit facility fees were as follows:
 For the years ended December 31,For the period from Commencement through20192018December 31, 2017Interest expense$15,500$4,388$83Facility unused commitment fee89941687Amortization of deferred financing costs1,20469998Total interest expense and credit facility fees$17,603$5,503$268Cash paid for interest expense$13,274$2,683$25Average principal debt outstanding$392,145$115,637$10,567Weighted average interest rate3.90%3.74%3.24%
 As of December 31, 2019 and 2018, the components of interest and credit facility fees payable were as follows:
 As of December 31,20192018Interest expense payable$3,988$1,763Unused commitment fees payable23785Total interest expense and credit facility fees payable$4,225$1,848Weighted average interest rate(1)3.91%4.05%
 (1) Based on floating LIBOR rates.
 
 
 6. COMMITMENTS AND CONTINGENCIES
 A summary of significant contractual payment obligations was as follows as of December 31, 2019 and 2018 :
 December 31,Payment Due by Period20192018Less than 1 Year$231,700$—1-3 Years—217,7003-5 Years416,500—More than 5 Years——Total$648,200$217,700
 
 In the ordinary course of its business, the Company enters into contracts or agreements that contain indemnification or warranties. Future events could occur that lead to the execution of these provisions against the Company. The Company believes that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in the consolidated financial statements as of December 31, 2019 and 2018 for any such exposure.
 
 As of December 31, 2019  and  2018 , the Company had  $1,227,687  and  $1,227,938 , respectively, in total capital commitments from stockholders, of which  $489,896  and  $935,084 , respectively, was unfunded. As of  December 31, 2019  and  2018 , current officers had  $450  and  $725 , respectively, in capita l commitments to the Company.
 
 
 94
  Table of Contents
 
 The Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of the indicated dates:
 Par Value as of December 31,20192018Unfunded delayed draw commitments$79,156$64,927Unfunded revolving term loan commitments54,24928,006Total unfunded commitments$133,405$92,933
 
 7. NET ASSETS
 The Company has the authority to issue 200,000,000 shares of common stock, $0.01 per share par value.
 During the year ended December 31, 2019 , the Company issued 21,539,723 shares for $444,943 . The following table summarizes capital activity during the year ended December 31, 2019 :
 Common StockCapital in Excess of Par ValueSubscribed But Unissued SharesSubscription ReceivableAccumulated Net Investment Income (Loss)Accumulated Net Realized Gain (Loss)Accumulated Net Unrealized Appreciation (Depreciation)Total Net AssetsSharesAmountBalance, beginning of year14,229,500$142$291,820$24,953$(24,953)$(141)$(24)$(2,583)$289,214Common stock issued21,539,723216444,727(24,953)24,953———444,943Net investment income (loss)—————49,292——49,292Net realized gain (loss) on investments - non-controlled/non-affiliated——————269—269Net change in unrealized appreciation (depreciation) on investments———————4,3004,300Realized and unrealized currency gains (losses) on non-investment assets and liabilities———————(96)(2,134)(2,230)Dividends declared—————(48,679)——(48,679)Tax reclassification of stockholders’ equity in accordance with U.S. GAAP——(219)——219———Balance, end of year35,769,223$358$736,328$—$—$691$149(417)$737,109
 
 95
  Table of Contents
 
 During the year ended December 31, 2018, the Company issued 10,098,817 shares for $210,306. The following table summarizes capital activity during the year ended December 31, 2018:
 Common StockCapital in Excess of Par ValueSubscribed But Unissued SharesSubscription ReceivableAccumulated Net Investment Income (Loss)Accumulated Net Realized Gain (Loss) on InvestmentsAccumulated Net Unrealized Appreciation (Depreciation) on InvestmentsTotal Net AssetsSharesAmountBalance, beginning of year4,130,683$41$82,507$—$—$(708)$—$882$82,722Common stock issued10,098,817101210,205—————210,306Subscribed but unissued shares———24,953————24,953Subscription receivable————(24,953)———(24,953)Net investment income (loss)—————14,054——14,054Net realized gain (loss) on investments - non-controlled/non-affiliated——————(24)—(24)Net change in unrealized appreciation (depreciation) on investments———————(3,465)(3,465)Dividends declared—————(14,379)——(14,379)Tax reclassification of stockholders’ equity in accordance with U.S. GAAP——(892)——892———Balance, end of  year14,229,500$142$291,820$24,953$(24,953)$(141)$(24)(2,583)$289,214
 During the period from Commencement through December 31, 2017, the Company issued 4,130,683 shares for $82,548. The following table summarizes capital activity during the period from Commencement through December 31, 2017:
 Common StockCapital in Excess of Par ValueAccumulated Net Investment Income (Loss)Accumulated Net Unrealized Appreciation (Depreciation) on InvestmentsTotal Net AssetsSharesAmountBalance, beginning of period—$—$—$—$—$—Common stock issued4,130,6834182,507——82,548Net investment income (loss)———(708)—(708)Net change in unrealized appreciation (depreciation) on investments————882882Balance, end of period4,130,683$41$82,507$(708)$882$82,722
 
 The following table summarizes total shares issued and proceeds received related to capital activity during the year ended December 31, 2019 :
 Shares IssuedProceeds ReceivedJanuary 10, 20191,218,407$24,953February 28, 20191,677,04935,000March 26, 20191,940,07039,990May 8, 20191,195,61525,000June 26, 20192,912,62460,000August 14, 20192,873,56560,000September 25, 20193,654,97175,000November 6, 20194,847,311100,000December 26, 20191,220,11125,000Total21,539,723$444,943
 
 
 96
  Table of Contents
 
 The following table summarizes total shares issued and proceeds received related to capital activity during the year ended December 31, 2018:
 Shares IssuedProceeds ReceivedMarch 7, 2018240,800$4,941March 28, 2018587,78812,003May 16, 2018694,96014,414June 7, 2018454,5999,469June 20, 20181,947,29239,998August 22, 20181,207,62825,307September 13, 20181,387,27329,174September 26, 20181,206,56025,000November 29, 20182,371,91750,000Total10,098,817$210,306
 
 The following table summarizes total shares issued and proceeds received related to capital activity during the period from Commencement through December 31, 2017:
 Shares IssuedProceeds ReceivedSeptember 19, 2017100$2October 4, 2017875,00417,500November 22, 20171,503,78430,045December 20, 20171,751,79535,001Total4,130,683$82,548
 
 On December 28, 2018, the Company issued a capital call and delivered capital drawdown notices totaling $24,953. Subscribed but unissued shares are presented in equity with a deduction of subscriptions receivable until cash is received for a subscription. There were 1,218,407 subscribed but unissued shares as of December 31, 2018.
 Subscription transactions during the years ended December 31, 2019 and 2018 and during the period from Commencement through December 31, 2017 were executed at an offering price at a premium to net asset value in order to effect a reallocation of organizational costs to subsequent investors. Such subscription transactions increased net asset value by $0.07 per share, $0.11 per share, and $0.26 per share for the years ended December 31, 2019 and 2018 and for the period from Commencement through December 31, 2017, respectively.
 The Company computes earnings per common share in accordance with ASC 260, Earnings Per Share. Basic earnings per common share were calculated by dividing net increase (decrease) in net assets resulting from operations attributable to the Company by the weighted-average number of common shares outstanding for the year/period.
 Basic and diluted earnings per common share were as follows: For the Years Ended December 31,For the period from Commencement through December 31, 201720192018Net increase (decrease) in net assets resulting from operations$51,631$10,565$174Weighted-average common shares outstanding23,431,4447,907,9491,421,700Basic and diluted earnings per common share$2.20$1.34$0.12
 
 97
  Table of Contents
 
 The following table summarizes the Company’s dividends declared since inception:
 Date DeclaredRecord DatePayment DatePer Share AmountMarch 12, 2018March 12, 2018April 17, 2018$0.30June 6, 2018June 6, 2018July 18, 2018$0.37September 13, 2018September 13, 2018October 18, 2018$0.40December 26, 2018December 26, 2018January 18, 2019$0.46March 12, 2019March 12, 2019April 18, 2019$0.47June 11, 2019June 11, 2019July 18, 2019$0.51September 10, 2019September 10, 2019October 18, 2019$0.50December 10, 2019December 10, 2019January 17, 2020$0.50
 
 8. CONSOLIDATED FINANCIAL HIGHLIGHTS
 The following is a schedule of consolidated financial highlights for the years ended December 31, 2019 and 2018 and for the period from Commencement through December 31, 2017:
 For the Years Ended December 31,For the period from Commencement through December 31, 201720192018Per Share Data:Net asset value per share, beginning of year/period$20.32$20.03$20.00Net investment income (loss)(1)2.101.78(0.50)Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments0.10(0.07)0.27Net increase (decrease) in net assets resulting from operations2.201.71(0.23)Dividends declared(2)(1.98)(1.53)—Effect of offering price of subscriptions(3)0.070.110.26Net asset value per share, end of year/period$20.61$20.32$20.03Number of shares outstanding, end of year/period35,769,22314,299,5004,130,683Total return based on net asset value(4)11.17%9.09%0.15%Net assets, end of year/period$737,109$289,214$82,722Ratio to average net assets(5):Expenses before incentive fees5.06%5.84%4.19%Expenses after incentive fees6.74%6.90%4.19%Net investment income (loss)9.54%7.92%(1.75)%Interest expense and credit facility fees3.41%3.10%0.66%Ratios/Supplemental Data:Asset coverage, end of year/period213.72%232.85%236.17%Portfolio turnover12.47%20.41%8.76%Total committed capital, end of year/period1,227,6871,227,938508,928Ratio of total contributed capital to total committed capital, end of year/period60.09%23.85%16.21%Weighted-average shares outstanding23,431,4447,907,9491,421,700
 (1)Net investment income (loss) per share was calculated as net investment income (loss) for the year/period divided by the weighted average number of shares outstanding for the year/period. (2)Dividends declared per share was calculated as the sum of dividends declared during the year/period divided by the number of shares outstanding at the quarter-end date (refer to Note 7, Net Assets, to these consolidated financial statements). (3)Increase (decrease) is due to the offering price of subscriptions during the year/period (refer to Note 7, Net Assets, to these consolidated financial statements). (4)Total return based on net asset value is based on the change in net asset value per share during the year/period plus the declared dividends divided by the beginning net asset value for the year/period. Total return for the years endedDecember 31, 2019, 2018 and 
 98
  Table of Contents
 
 for the period from Commencement through December 31, 2017 is inclusive of an increase (decrease) in net asset value related to the offering price of subscriptions $0.07 per share, $0.11 per share and $0.26 per share, respectively. Excluding the effects of these common stock issuances, total return would have been 10.83% , 8.54% , and (1.15)% , respectively, for the years ended December 31, 2019 and 2018 and for the period from Commencement through December 31, 2017 (refer to Note 7, Net Assets, to these consolidated financial statements). Total return for the period from Commencement through December 31, 2017 has not been annualized.
 (5)These ratios to average net assets for the period from Commencement through December 31, 2017 have not been annualized. The Company commenced operations on September 11, 2017; therefore, ratios to average net assets and portfolio turnover for the period from Commencement through December 31, 2017 may have been different had there been a full year of operations. 
 9. LITIGATION
 The Company may become party to certain lawsuits in the ordinary course of business. The Company does not believe that the outcome of current matters, if any, will materially impact the Company or its consolidated financial statements. As of December 31, 2019 and 2018 , the Company was not subject to any material legal proceedings, nor, to the Company’s knowledge, is any material legal proceeding threatened against the Company.
 In addition, portfolio investments of the Company could be the subject of litigation or regulatory investigations in the ordinary course of business. The Company does not believe that the outcome of any current contingent liabilities of its portfolio investments, if any, will materially affect the Company or these consolidated financial statements.
 
 10. TAX
 The Company has not recorded a liability for any uncertain tax positions pursuant to the provisions of ASC 740, Income Taxes , as of December 31, 2019 and 2018 .
 In the normal course of business, the Company is subject to examination by federal and certain state, local and foreign tax regulators. As of December 31, 2019 the Company has filed a tax return and therefore is subject to examination. The Company has elected a tax year-end of June 30 concurrent with the filing of the Company's first tax return.
 Book and tax basis differences relating to stockholder dividends and distributions and other permanent book and tax differences are reclassified among the Company’s capital accounts. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from U.S. GAAP. As of December 31, 2019 and 2018 , permanent differences primarily due to the tax treatment of offering costs resulted in a net decrease in total distributable loss by $220 and $892, respectively, and net decrease in additional paid-in capital in excess of par by $220 and $892, respectively, on the Consolidated Statements of Assets and Liabilities. Total earnings and NAV were not affected.
 The Company’s taxable income for each period is an estimate and will not be finally determined until the Company files its tax return for each year. Therefore, the final taxable income, and the taxable income earned in each period and carried forward for distribution in the following period, may be different than this estimate. The estimated tax character of dividends declared for the periods from July 1, 2019 to December 31, 2019 and July 1, 2018 to June 30, 2019 was as follows:
 For the period from July 1, 2019 to December 31, 2019For the period from July 1, 2018 to June 30, 2019Ordinary income$30,298$29,188Tax return of capital$—$—
 Income Tax Information and Distributions to Stockholders
 As of June 30, 2019 and June 30, 2018, the components of accumulated earnings (deficit) on a tax basis were as follows:
 As of June 30, 2019As of June 30, 2018Undistributed ordinary income$1,875$376Other book/tax temporary differences(1)(342)(367)Net realized appreciation (depreciation) on investments233—Net unrealized appreciation (depreciation) on investments(1,376)4,327Total accumulated earnings (deficit)$390$4,336
 
 99
  Table of Contents
 
 
 (1)Consists of the unamortized portion of organization costs as of June 30, 2019 and June 30, 2018. As of June 30, 2019 and June 30, 2018, the cost of investments for federal income tax purposes and gross unrealized appreciation and depreciation on investments were as follows:
 As of June 30, 2019As of June 30, 2018Cost of investments$791,927$294,747Gross unrealized appreciation on investments4,0844,410Gross unrealized depreciation on investments(5,460)(83)Net unrealized appreciation (depreciation) on investments$(1,376)$4,327
 On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “RIC Modernization Act”) was enacted which changed various technical rules governing the tax treatment of RICs. The changes are generally effective for taxable years beginning after the date of enactment. Under the RIC Modernization Act, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term losses rather than being considered all short-term as under previous law. As of June 30, 2019, and June 30, 2018, the Company did not have any pre- or post-enactment capital loss carryforwards.
 
 100
  
 Table of Contents
 
 11. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
 2019Q4Q3Q2Q1Total investment income$26,648$23,241$19,149$15,102Net expenses10,9149,5198,1106,305Net investment income (loss)15,73413,72211,0398,797Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities3,311(2,436)(1,088)2,552Net increase (decrease) in net assets resulting from operations19,04511,2869,95111,349NAV per share20.6120.5520.5920.59Basic and diluted earnings per common share$0.58$0.45$0.50$0.71
 2018Q4Q3Q2Q1Total investment income$11,446$7,726$4,393$2,743Net expenses4,1534,3642,2401,497Net investment income (loss)7,2933,3622,1531,246Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments(6,810)(124)2,813632Net increase (decrease) in net assets resulting from operations4833,2384,9661,878NAV per share20.3220.6920.7120.21Basic and diluted earnings per common share$0.04$0.36$0.88$0.44
 2017Q4Q3Total investment income$991$—Net expenses1,305394Net investment income (loss)(314)(394)Net change in unrealized appreciation (depreciation) on investments882—Net increase (decrease) in net assets resulting from operations568(394)NAV per share20.0310.85Basic and diluted earnings per common share$0.33$(178.42)
 
 12. SUBSEQUENT EVENTS
 Subsequent events have been evaluated through the date the consolidated financial statements were issued. There have been no subsequent events that require recognition or disclosure through the date the consolidated financial statements were issued, except as disclosed below.
 On March 4, 2020, the Board of Directors declared a quarterly dividend of $0.53, which is payable on April 17, 2020 to stockholders of record on March 4, 2020.
 
 
 101
  
 Table of Contents
 
 Item 9. Changes and Disagreements with Accountants on Accounting and Financial Disclosure
 None.
 
 Item 9A. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
 As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 of the Exchange Act). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them of material information relating to the Company that is required to be disclosed by us in the reports we file or submit under the Exchange Act.
 Management’s Report on Internal Control Over Financial Reporting
 Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). The Company’s internal control over financial reporting is a process designed under the supervision of its Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its consolidated financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.
 The Company’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the Company’s assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on its consolidated financial statements.
 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 based on the framework established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that the Company’s internal control over financial reporting as of December 31, 2019 was effective.
 This annual report does not include an attestation report of the Company’s registered public accounting firm due to an exemption for emerging growth companies under the JOBS Act.
 Changes in Internal Controls Over Financial Reporting
 There have been no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 Item 9B. Other Information
 On  March 4, 2020, the Board of Directors of the Company appointed Peter Gaunt as the Company’s Treasurer and principal accounting officer, effective March 31, 2020.  Mr. Gaunt will succeed Michele Reing, who has acted in these roles on an interim basis since September 23, 2019. Mr. Gaunt, 38, joined The Carlyle Group, Inc. as a Principal in Carlyle Global Credit in December 2019. Prior to joining Carlyle, Mr. Gaunt was Corporate Controller at Hercules Capital, where he led the accounting, FP&A, Treasury and Capital Markets teams. Prior to Hercules Capital, Mr. Gaunt was a Senior Manager in Ernst &
 
 102
  Table of Contents
 
 Young’s Wealth and Asset Management Practice servicing Business Development Companies, Mortgage REITs, Mutual Funds and Private Equity Funds. Mr. Gaunt also spent time with Credit Suisse in its Asset Management division.
 
 103
  
 Table of Contents
 
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
 Information in response to this item is incorporated by reference from our Proxy Statement relating to our 2020 annual meeting of stockholders. The Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K pursuant to Regulation 14A under the Exchange Act.
 Information relating to our codes of ethics, which apply to, among others, our Chief Executive Officer and Chief Financial Officer, is included in Part I, Item 1 of this Form 10-K “ Business-Regulation-Code of Ethics .”
 
 Item 11. Executive Compensation
 Information in response to this item is incorporated by reference from our Proxy Statement relating to our 2020 annual meeting of stockholders.
 
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 Information in response to this item is incorporated by reference from our Proxy Statement relating to our 2020 annual meeting of stockholders.
 
 Item 13. Certain Relationships and Related Transactions, and Director Independence
 Information in response to this item is incorporated by reference from our Proxy Statement relating to our 2020 annual meeting of stockholders.
 
 Item 14. Principal Accountant Fees and Services
 Information in response to this item is incorporated by reference from our Proxy Statement relating to our 2020 annual meeting of stockholders.
 
 104
  
 Table of Contents
 
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a) Documents filed as part of this annual report
 The following reports and consolidated financial statements are set forth in Part II, Item 8 of this Form 10-K:
 Report of Independent Registered Public Accounting Firm63Consolidated Statements of Assets and Liabilities as of December 31, 2019 and 201864Consolidated Statements of Operations for the years ended December 31, 2019 and 2018 and the period from September 11, 2017 (Commencement) through December 31, 201765Consolidated Statements of Changes in Net Assets for the years ended December 31, 2019 and 2018 and the period from September 11, 2017 (Commencement) through December 31, 201766Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018 and the period from September 11, 2017 (Commencement) through December 31, 201767Consolidated Schedules of Investments as of December 31, 2019 and 201876Notes to Consolidated Financial Statements82
 (b) Exhibits
 The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously field with the SEC:
 
 105
  Table of Contents
 
 3.1Articles of Amendment and Restatement(1)3.2Bylaws(1)4.1Form of Subscription Agreement(1)4.2Description of Registered Securities*10.1Investment Advisory Agreement(1)10.2Administration Agreement(1)10.3Form of Indemnification Agreement(1)10.4Revolving Credit Agreement(1)10.5Master Custodian Agreement(2)10.6First Amendment, dated as of March 14, 2018, to the Revolving Credit Agreement, among TCG BDC II, Inc., as borrower, each of the Lenders party thereto, Bank of America, N.A. as administrative agent, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as lead arranger.(3)10.7Second Amendment, dated as of November 16, 2018, to the Revolving Credit Agreement, among TCG BDC II, Inc., as borrower, each of the Lenders party thereto, and Bank of America, N.A. as administrative agent.(4)10.8Loan and Security Agreement, dated as of April 1, 2019 and Conformed through Amendment No. 1 dated as of October 25, 2019, among TCG BDC II SPV LLC as borrower, the Lenders party hereto, the Collateral Administrator, Collateral Agent and Securities Intermediary Party hereto, JPMorgan Chase Bank, National Association, as Administrative Agent and TCG BDC II, Inc., as Servicer.*21.1List of Subsidiaries*31.1Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.*31.2Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*32.1Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*32.2Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
 
 *Filed herewith. (1)Incorporated by reference to the Company’s Form 10-12G/A filed by the Company on November 20, 2017 (File No. 000-55848) (2)Incorporated by reference to the Company’s Form 10-K filed by the Company on March 1, 2018 (File No. 000-55848) (3)Incorporated by reference to the Company’s Form 10-Q filed by the Company on May 4, 2018 (File No. 000-55848) (4)Incorporated by reference to Exhibit 10.7 to the Company's Form 10-K filed by the Company on February 28, 2019 (File No. 000-55848) 
 Item 16. Form 10-K Summary
 None.
 
 106
  
 Table of Contents
 
 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.
 TCG BDC II, INC.Dated: March 4, 2020By/s/ Linda PaceLinda PaceDirector and Chief Executive Officer (principal executive officer)Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.Dated: March 4, 2020By/s/ Linda PaceLinda PaceDirector and Chief Executive Officer (principal executive officer)Dated: March 4, 2020By/s/ Thomas M. HenniganThomas M. HenniganChief Financial Officer(principal financial officer)Dated: March 4, 2020By/s/ Michele ReingMichele ReingTreasurer(principal accounting officer)Dated: March 4, 2020By/s/ Nigel D.T. AndrewsNigel D.T. AndrewsDirectorDated: March 4, 2020By/s/ Leslie E. BradfordLeslie E. BradfordDirectorDated: March 4, 2020By/s/ Eliot P.S. MerrillEliot P.S. MerrillDirectorDated: March 4, 2020By/s/ John G. NestorJohn G. NestorDirector
 
 
 
 
 
 
 107
  Table of Contents
 
 
 
 108