TCW Direct Lending LLC - FORM 10-Q - EX-99.1

Attached files

file	filename
EX-32.2 - EX-32.2 - TCW Direct Lending LLC	d614337dex322.htm
EX-32.1 - EX-32.1 - TCW Direct Lending LLC	d614337dex321.htm
EX-31.2 - EX-31.2 - TCW Direct Lending LLC	d614337dex312.htm
EX-31.1 - EX-31.1 - TCW Direct Lending LLC	d614337dex311.htm
10-Q - FORM 10-Q - TCW Direct Lending LLC	d614337d10q.htm

TCW Direct Lending Strategic Ventures LLC

Consolidated Financial Statements

September 30, 2018

TCW Direct Lending Strategic Ventures LLC

(A Delaware Limited Liability Company)

CONTENTS


	Page(s)

Consolidated Financial Statements

Consolidated Schedules of Investments as of September 30, 2018 (unaudited) and December 31, 2017		2-5

Consolidated Statements of Assets and Liabilities as of September 30, 2018 (unaudited) and December 31, 2017		6

Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017 (unaudited)		7

Consolidated Statements of Changes in Members’ Capital for the nine months ended September 30, 2018 and 2017 (unaudited)		8

Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 (unaudited)		9

Notes to Consolidated Financial Statements (unaudited)		10-21

Administration		22

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited)

September 30, 2018


Industry	Issuer	Acquisition Date		Investment	% of Members’ Capital	Par Amount		Maturity Date		Amortized Cost		Fair Value
DEBT
Beverages
	Cold Spring Brewing Company⁽¹⁾		05/15/18	Term Loan 7.41% (LIBOR + 5.25% , 1.00% Floor)	9.3%		32,705,380		05/15/24	$	32,051,526	$	32,607,264

Chemicals
	Ascensus Specialties LLC (fka Vertellus Performance Chemicals LLC)⁽¹⁾		09/22/17	First Lien Term Loan 9.00% (LIBOR + 6.75% , 1.25% Floor)	10.4%		36,450,000		09/22/22		35,761,626		36,632,250

Commercial Services & Supplies
	School Specialty, Inc.⁽¹⁾		04/07/17	Delayed Draw Term Loan 8.50% (LIBOR + 6.25% , 1.00% Floor)	1.0%		3,484,500		04/07/22		3,484,500		3,449,655
	School Specialty, Inc.		04/07/17	Term Loan A 8.42% (LIBOR + 6.25% , 1.00% Floor)	7.0%		25,035,920		04/07/22		24,619,817		24,785,561

					8.0%						28,104,317		28,235,216

Construction & Engineering
	Intren, LLC		07/18/17	Term Loan 8.85% (LIBOR + 6.75% , 1.25% Floor)	2.7%		12,094,231		07/18/23		11,901,010		9,651,196

Distributors
	ASC Acquisition Holdings, LLC⁽¹⁾		12/16/16	First Lien Term Loan 9.85% (LIBOR + 7.50% , 1.00% Floor)	5.0%		18,322,031		12/15/21		18,086,907		17,644,116

Diversified Telecommunication Services
	Alaska Communications Systems Holdings, Inc.		05/08/18	Term Loan A1 7.24% (LIBOR + 5.00% , 1.00% Floor)	0.3%		885,536		03/13/22		885,773		885,536
	Alaska Communications Systems Holdings, Inc.		03/28/17	Term Loan A2 9.24% (LIBOR + 7.00% , 1.00% Floor)	2.9%		10,151,036		03/13/23		10,038,896		10,151,036

					3.2%						10,924,669		11,036,572

Food Products
	Bumble Bee Holdings, Inc.		08/15/17	Term Loan B1 10.31% (LIBOR + 8.00% , 1.00% Floor)	8.4%		30,034,671		08/15/23		29,544,923		29,343,873
	Connors Bros. Clover Leaf Seafoods Company (Canada) (an affiliate of Bumble Bee Holdings, Inc.)		08/15/17	Term Loan B2 10.31% (LIBOR + 8.00% , 1.00% Floor)	2.4%		8,509,329		08/15/23		8,370,575		8,313,615
	Harvest Hill Beverage Company		05/01/17	First Out Term Loan 8.75% (LIBOR + 6.50% , 1.00% Floor)	20.8%		72,985,080		01/19/21		72,186,437		72,985,080

					31.6%						110,101,935		110,642,568

Health Care Equipment & Supplies
	SmileDirectClub, LLC⁽¹⁾		02/07/18	Delayed Draw Term Loan 10.10% (LIBOR + 8.00% , 1.00% Floor)	9.8%		33,558,063		02/06/23		28,027,886		34,397,015
	SmileDirectClub, LLC		02/07/18	Term Loan 10.10% (LIBOR + 8.00% , 1.00% Floor)	8.2%		28,178,526		02/06/23		22,472,633		28,882,989

					18.0%						50,500,519		63,280,004

Hotels, Restaurants & Leisure
	FQSR, LLC⁽¹⁾		05/14/18	2018 Delayed Draw Term Loan 7.82% (LIBOR + 5.50% , 1.00% Floor)	0.1%		451,685		05/14/23		451,685		450,330
	FQSR, LLC		05/14/18	2018 Term Loan 7.82% (LIBOR + 5.50% , 1.00% Floor)	4.8%		16,729,324		05/14/23		16,221,876		16,679,136
	OTG Management, LLC		06/30/16	Delayed Draw Term Loan 11.34% (LIBOR + 9.00% , 1.00% Floor)	1.7%		5,862,394		08/26/21		5,862,394		5,891,706
	OTG Management, LLC⁽¹⁾		01/26/18	Incremental Delayed Draw Term Loan 11.34% (LIBOR + 9.00% , 1.00% Floor)	1.3%		4,414,038		08/26/21		4,356,875		4,436,108
	OTG Management, LLC		06/30/16	Term Loan 11.34% (LIBOR + 9.00% , 1.00% Floor)	9.5%		33,324,731		08/26/21		32,937,829		33,491,355

					17.4%						59,830,659		60,948,635

Household Products
	Nice-Pak Products, Inc.		06/12/15	Senior Secured Term Loan 7.41% (LIBOR + 5.25% , 1.00% Floor)	26.4%		93,510,551		06/12/20		92,770,023		92,668,956

Information Technology Services
	ENA Holding Corporation		05/06/16	First Lien Term Loan 9.24% (LIBOR + 7.00% , 1.00% Floor)	6.4%		22,706,943		05/06/21		22,417,021		22,275,511
	ENA Holding Corporation⁽¹⁾		05/06/16	Revolver 9.24% (LIBOR + 7.00% , 1.00% Floor)	0.7%		2,430,406		05/06/21		2,430,406		2,384,228

					7.1%						24,847,427		24,659,739

Internet & Direct Marketing Retail
	Lulu’s Fashion Lounge, LLC		08/28/17	First Lien Term Loan 9.24% (LIBOR + 7.00% , 1.00% Floor)	3.4%		11,897,812		08/28/22		11,617,670		12,016,791

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

TCW Direct Lending Strategic Ventures LLC

(A Delaware Limited Liability Company)

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (continued)

September 30, 2018


Industry	Issuer	Acquisition Date		Investment	% of Members’ Capital		Par Amount		Maturity Date		Amortized Cost		Fair Value
DEBT (continued)
Machinery
	Texas Hydraulics Holdings, Inc.		03/27/18	Term Loan 9.00% (LIBOR + 6.75% , 1.25% Floor)		9.9%		34,613,023		03/27/23	$	34,147,288	$	34,682,249

Pharmaceuticals
	Noramco, LLC⁽²⁾		07/01/16	Senior Term Loan 10.72% (LIBOR + 8.00% , 1.00% Floor, 0.38% PIK)		7.7%		29,311,587		07/01/21		29,097,777		27,054,595

Textiles, Apparel & Luxury Goods
	Differential Brands Group, Inc.		01/28/16	Term Loan 13.14% (LIBOR + 10.75% , 0.50% Floor)		4.7%		16,695,000		01/28/21		16,559,080		16,411,185

TOTAL DEBT (164.8%)						164.8%						566,302,433		578,171,336

EQUITY							Shares/ Contracts				Cost
Health Care Equipment & Supplies

	SmileDirectClub, LLC		02/07/18	Class W-1 Warrant		2.0%		575				3,540,341		6,916,516
	SmileDirectClub, LLC		02/07/18	Class W-2 Warrant		2.4%		1,149				7,080,683		8,550,383

TOTAL EQUITY (4.4%)						4.4%						10,621,024		15,466,899

	Total Portfolio Investments (169.2%)										$	576,923,457	$	593,638,235

	Cash Equivalents (12.9%)
	Blackrock Liquidity Funds Fed Fund - Institutional Shares, Yield 1.96%					12.9%		45,196,111				45,196,111		45,196,111

											$	622,119,568	$	638,834,346

	Net unrealized depreciation on unfunded commitments (-0.1%)													(461,482	)
	Other Liabilities in Excess of Other Assets (-82.0%)													(287,644,340	)

	Members’ Capital (100.0%)												$	350,728,524

⁽¹⁾

Excluded from the investment above, is an unfunded loan commitment for a delayed draw term loan or revolving credit. The Company earns an unused fee on the unfunded commitment during the commitment period. The expiration date of the commitment period may be earlier then the maturity date of the investment stated above. See Note [8]—Commitments and Contingencies.

⁽²⁾	In addition to interest earned based on the stated interest rate of this loan, the Company is entitled to receive an additional interest amount on the “first out” tranche of the portfolio company’s first lien senior secured loans.

LIBOR—London Interbank Offered Rate, generally 1-Month or 3-Month


Geographic Breakdown of Portfolio
United States	99	%
Canada	1	%

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2017


Industry	Issuer	Acquisition Date		Investment	% of Members’ Capital	Par Amount		Maturity Date		Amortized Cost		Fair Value
DEBT
Chemicals
	Vertellus Performance Chemicals LLC⁽¹⁾		09/22/17	First Lien Term Loan 8.32% (LIBOR + 6.75% , 1.25% Floor)	11.1%		36,726,136		09/22/22	$	35,902,136	$	36,358,875

Commercial Services & Supplies
	School Specialty, Inc.		04/07/17	Term Loan 7.71% (LIBOR + 6.25% , 1.00% Floor)	8.4%		27,553,716		04/07/22		26,998,389		27,719,038
	School Specialty, Inc.⁽¹⁾		04/07/17	Delayed Draw Term Loan 7.81% (LIBOR + 6.25% , 1.00% Floor)	1.1%		3,573,846		04/07/22		3,573,846		3,595,289

					9.5%						30,572,235		31,314,327

Construction & Engineering
	Intren, LLC		07/18/17	Term Loan 8.11% (LIBOR + 6.75% , 1.25% Floor)	4.3%		14,524,038		07/18/23		14,255,821		14,175,462

Distributors
	ASC Acquisition Holdings, LLC⁽¹⁾		12/16/16	First Lien Term Loan 8.89% (LIBOR + 7.50% , 1.00% Floor)	7.2%		24,287,344		12/15/21		23,903,005		23,583,011

Diversified Telecommunication Services
	Alaska Communications Systems Holdings, Inc.		03/28/17	First Lien Term Loan 8.57% (LIBOR + 7.00% , 1.00% Floor)	2.6%		8,678,250		03/13/23		8,545,853		8,591,468

Food Products
	Bumble Bee Holdings, Inc.		08/15/17	Term Loan B1 9.44% (LIBOR + 8.00% , 1.00% Floor)	9.1%		30,262,206		08/15/23		29,693,021		29,929,322
	Connors Bros. Clover Leaf Seafoods Company (Canada) (an affiliate of Bumble Bee Holdings, Inc.)		08/15/17	Term Loan B2 9.44% (LIBOR + 8.00% , 1.00% Floor)	2.6%		8,573,794		08/15/23		8,412,534		8,479,482
	Harvest Hill Beverage Company		05/01/17	First Out Term Loan 8.07% (LIBOR + 6.50% , 1.00% Floor)	24.4%		80,591,841		01/19/21		79,423,596		80,269,474

					36.1%						117,529,151		118,678,278

Hotels, Restaurants & Leisure
	FQSR, LLC⁽¹⁾		03/23/17	Delayed Draw Term Loan 7.95% (LIBOR + 6.25% , 1.00% Floor)	3.3%		10,868,325		03/24/22		10,605,151		10,846,588
	FQSR, LLC		03/23/17	Term Loan 7.95% (LIBOR + 6.25% , 1.00% Floor)	1.0%		3,132,150		03/24/22		3,132,150		3,125,886
	OTG Management, LLC⁽¹⁾		06/30/16	Delayed Draw Term Loan 9.98% (LIBOR + 8.50% , 1.00% Floor)	1.2%		4,150,575		08/26/21		4,150,575		4,146,424
	OTG Management, LLC		06/30/16	First Lien Term Loan 9.88% (LIBOR + 8.50% , 1.00% Floor)	13.0%		42,729,641		08/26/21		42,105,779		42,686,912

					18.5%						59,993,655		60,805,810

Household Products
	Nice-Pak Products, Inc.		06/12/15	Senior Secured Term Loan 6.92% (LIBOR + 5.50% , 1.00% Floor)	29.0%		95,198,002		06/12/20		94,500,040		95,198,002

Information Technology Services
	ENA Holding Corporation⁽¹⁾		05/06/16	First Lien Term Loan 8.69% (LIBOR + 7.00% , 1.00% Floor)	4.3%		14,268,715		05/06/21		14,104,130		14,268,715

Internet & Direct Marketing Retail
	Lulu’s Fashion Lounge, LLC		08/28/17	First Lien Term Loan 8.57% (LIBOR + 7.00% , 1.00% Floor)	3.9%		12,621,328		08/28/22		12,267,282		12,861,133

Pharmaceuticals
	Noramco, LLC⁽²⁾		07/01/16	Senior Term Loan 9.72% (LIBOR + 8.00% , 1.00% Floor, 0.38% PIK)	9.1%		30,672,215		07/01/21		30,427,289		30,028,099

Software
	Mavenir Private Holdings II Ltd. (UK)⁽³⁾(an affiliate of Mavenir, Inc.)		08/19/16	First Lien Term Loan 11.89% (LIBOR + 9.50% , 1.00% Floor, 1.00% PIK)	5.4%		17,960,526		08/19/22		17,960,526		17,834,802
	Mavenir, Inc. (fka Xura, Inc.)		08/19/16	First Lien Term Loan 11.89% (LIBOR + 9.50% , 1.00% Floor, 1.00% PIK)	11.5%		38,049,712		08/19/22		37,191,252		37,783,364

					16.9%						55,151,778		55,618,166

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

TCW Direct Lending Strategic Ventures LLC

(A Delaware Limited Liability Company)

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

December 31, 2017


Industry	Issuer	Acquisition Date		Investment	% of Members’ Capital		Par Amount		Maturity Date		Amortized Cost		Fair Value
DEBT (continued)
Textiles, Apparel & Luxury Goods
	Differential Brands Group, Inc.		01/28/16	Term Loan 12.20% (LIBOR + 10.50% , 0.50% Floor)		4.9%		17,370,000		01/28/21	$	17,183,156	$	15,980,399

	Total Portfolio Investments (157.4%)											$514,335,531		$517,461,745

	Cash Equivalents (21.3%)
	Blackrock Liquidity Funds Fed Fund—Institutional Shares, Yield 1.17%					21.3%		69,959,177				69,959,177		69,959,177

											$	584,294,708	$	587,420,922

	Net unrealized depreciation on unfunded commitments (-0.1%)													(352,994	)
	Other Liabilities in Excess of Other Assets (-78.6%)													(258,421,599	)

	Members’ Capital (100.0%)													$328,646,329

⁽¹⁾

⁽²⁾	In addition to interest earned based on the stated interest rate of this loan, the Company is entitled to receive an additional interest amount on the “first out” tranche of the portfolio company’s first lien senior secured loans.

⁽³⁾	Mavenir Private Holdings II Ltd. (UK) Term Loan is held through TCW Direct Lending Strategic Luxembourg VI S.à.r.l., a special purpose vehicle.

LIBOR—London Interbank Offered Rate, generally 1-Month or 3-Month


Geographic Breakdown of Portfolio
United States	95	%
United Kingdom	3	%
Canada	2	%

Total	100	%

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

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES


	As of September 30, 2018 (unaudited)		As of December 31, 2017
Assets
Portfolio of Investments, at fair value (amortized cost of $ 576,923 and $ 514,336, respectively)	$	593,638	$	517,462
Cash and cash equivalents		56,818		105,496
Interest receivable		3,861		5,085
Prepaid and other assets		64		38

Total Assets	$	654,381	$	628,081

Liabilities
Credit facility payable	$	300,000	$	296,200
Interest and credit facility expenses payable		3,026		2,818
Net unrealized depreciation on unfunded commitments		461		353
Sub-administrator and custody fees payable		147		50
Audit fees payable		15		8

Other fees payable		3		6

Total Liabilities	$	303,652	$	299,435

Members’ Capital	$	350,729	$	328,646

Commitments and Contingencies (Note 8)
Members’ Capital
Preferred members	$	350,701	$	324,623
Noncontrolling interest in consolidated subsidiary fund		28		4,023

Members’ Capital	$	350,729	$	328,646


Members’ Capital Represented by:	Preferred Members			Common Members			Noncontrolling interest in consolidated subsidiary fund			Members’ Capital
Net contributed capital	$	454,279		$	1,000		$	3,507		$	458,786
Net distributed capital		(223,636	)		(1,000	)		(4,215	)		(228,851	)
Cumulative net income, before organization costs		120,058			704			736			121,498
Organization costs		—			(704	)		—			(704	)

Total Members’ Capital as of September 30, 2018 (Unaudited)	$	350,701		$	—		$	28		$	350,729


Members Capital Represented by:	Preferred Members			Common Members			Noncontrolling interest in consolidated subsidiary fund			Members’ Capital
Net contributed capital	$	427,279		$	1,000		$	3,507		$	431,786
Net distributed capital		(177,512	)		(1,000	)		—			(178,512	)
Cumulative net income, before organization costs		74,856			704			516			76,076
Organization costs		—			(704	)		—			(704	)

Total Members’ Capital as of December 31, 2017	$	324,623		$	—		$	4,023		$	328,646

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

TCW Direct Lending Strategic Ventures LLC

(A Delaware Limited Liability Company)

(Dollar amounts in thousands)

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


	For the three months ended September 30, 2018			For the three months ended September 30, 2017			For the nine months ended September 30, 2018		For the nine months ended September 30, 2017
Investment Income:
Interest income	$	15,410		$	15,161		$	45,113	$	39,927
Fee income		—			(881	)		—		114

Total Investment Income		15,410			14,280			45,113		40,041

Expenses:
Interest and credit facility expenses		4,484			4,289			13,758		12,971
Sub-administrator and custody fees		105			107			340		336
Valuation fees		41			37			112		82
Insurance fees		24			33			66		79
Audit fees		16			16			58		82
Legal fees		10			8			29		44
Tax service fee		—			—			15		—
Formation costs		—			—			—		4
Professional fees		—			—			—		8
Other		1			2			23		18

Total expense		4,681			4,492			14,401		13,624

Net investment income		10,729			9,788			30,712		26,417

Net realized and unrealized gain/(loss) on investments
Net realized gain/(loss) on investments		109			1,137			1,229		2,299
Net change in unrealized appreciation/(depreciation) on investments		12,453			(629	)		13,481		(4,016	)

Net realized and unrealized gain/(loss) on investments		12,562			508			14,710		(1,717	)

Net increase in Members’ Capital from operations	$	23,291		$	10,296		$	45,422	$	24,700

Less: Net increase in Members’ Capital attributable to noncontrolling interest in consolidated subsidiary fund		(1	)		83			220		197

Net increase in Members’ Capital from operations attributable to the Preferred Members from operations	$	23,292		$	10,213		$	45,202	$	24,503

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

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL (Unaudited)


						For the nine months ended September 30, 2018
	Preferred Members			Common Members		Noncontrolling interest in consolidated subsidiary fund			Total
Net increase in Members’ Capital resulting from operations
Net investment income	$	30,580		$	—	$	132		$	30,712
Net realized gain/(loss) on investments		1,164			—		65			1,229
Net change in unrealized appreciation/(depreciation) on investments		13,458			—		23			13,481

Net increase in Members’ Capital resulting from operations		45,202			—		220			45,422
Net decrease in Members’ Capital resulting from capital activity
Contributions from Members		27,000			—		—			27,000
Distributions to Members		(46,124	)		—		(4,215	)		(50,339	)

Net decrease in Members’ Capital resulting from capital activity		(19,124	)		—		(4,215	)		(23,339	)

Total increase (decrease) in Members’ Capital		26,078			—		(3,995	)		22,083

Members’ Capital, beginning of the period		324,623			—		4,023			328,646

Members’ Capital, end of the period	$	350,701		$	—	$	28		$	350,729


						For the nine months ended September 30, 2017
	Preferred Members			Common Members		Noncontrolling interest in consolidated subsidiary fund			Total
Net increase in Members’ Capital resulting from operations
Net investment income	$	26,059		$	—	$	358		$	26,417
Net realized gain/(loss) on investments		2,295			—		4			2,299
Net change in unrealized appreciation/(depreciation) on investments		(3,851	)		—		(165	)		(4,016	)

Net increase in Members’ Capital resulting from operations		24,503			—		197			24,700
Net decrease in Members’ Capital resulting from capital activity
Contributions from Members		14,572			—		—			14,572
Distributions to Members		(18,062	)		—		—			(18,062	)

Net decrease in Members’ Capital resulting from capital activity		(3,490	)		—		—			(3,490	)

Total increase in Members’ Capital		21,013			—		197			21,210

Members’ Capital, beginning of the period		308,955			—		3,696			312,651

Members’ Capital, end of the period	$	329,968		$	—	$	3,893		$	333,861

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

TCW Direct Lending Strategic Ventures LLC

(A Delaware Limited Liability Company)

(Dollar amounts in thousands)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	For the nine months ended September 30, 2018			For the nine months ended September 30, 2017
Cash Flows from Operating Activities
Net increase in members’ capital resulting from operations	$	45,422		$	24,700
Adjustments to reconcile the net increase in members’ capital resulting from operations to net cash used in operating activities:
Purchases of investments		(150,524	)		(233,619	)
Proceeds from sales and paydowns of investments		93,219			198,192
Net realized (gain)/loss on investments		(1,229	)		(2,299	)
Net change in unrealized (appreciation)/depreciation on investments		(13,481	)		4,016
Interest paid-in-kind		(378	)		—
Accretion of discount		(3,675	)		(3,442	)
Increase (decrease) in operating assets and liabilities:
(Increase) decrease in interest receivable		1,224			(1,292	)
(Increase) decrease in prepaid and other assets		(26	)		61
Increase (decrease) in interest and credit facility expenses payable		208			235
Increase (decrease) in sub-administrator and custody fees payable		97			1
Increase (decrease) in audit fees payable		7			15
Increase (decrease) in insurance fees payable		—			33
Increase (decrease) in other fees payable		(3	)		(7	)
Increase (decrease) in valuation fees payable		—			(37	)
Increase (decrease) in professional fees payable		—			(5	)

Net cash used in operating activities		(29,139	)		(13,448	)

Cash Flows from Financing Activities
Contributions from Members		27,000			14,572
Distributions to Members		(46,124	)		(18,062	)
Distribution to minority interest		(4,215	)		—
Proceeds from credit facility		20,500			105,827
Repayments of credit facility		(16,700	)		(82,377	)

Net cash (used in) provided by financing activities		(19,539	)		19,960

Net (decrease) increase in cash		(48,678	)		6,512

Cash and cash equivalents, beginning of the period		105,496			90,427

Cash and cash equivalents, end of the period	$	56,818		$	96,939

Supplemental disclosure of cash flow information and non-cash financing activities
Credit facility—interest and unused fee paid	$	13,264		$	12,158

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.	ORGANIZATION

Investment Objective: TCW Direct Lending Strategic Ventures LLC (the “Fund”) is a closed-end investment company formed as a Delaware limited liability company for the purpose of investing in corporate senior secured middle-market floating rate loans. Investments may include other loans and securities received as a result of the restructuring, workout or bankruptcy of an existing loan.

Consolidated Subsidiary Fund: On September 19, 2016, the Fund formed TCW Direct Lending Strategic Luxembourg VI S.à.r.l., (the “Luxembourg Company”) a private limited liability company under the laws of Luxembourg, of which the Fund owns 81.6% of the membership interests. The Luxembourg Company was formed to invest in Luxembourg or abroad.

Limited Liability Company Agreement: The Amended and Restated Limited Liability Company agreement (the “Agreement”), dated June 5, 2015, was entered into by and among TCW Direct Lending LLC, an affiliated fund (also known as the “BDC”) and two third-party members (the “Third-Party Members”). The BDC and each Third-Party Member own a Preferred Membership Interest (collectively the “Preferred Members”) and a Common Membership Interest (collectively the “Common Members”) (together, the “Members”). The BDC owns 80% of the Preferred and Common Membership Interests and the Third-Party Members own the remaining 20% of Preferred and Common Membership Interests. The initial closing date of the Fund was June 5, 2015 (“Initial Closing Date”).

The Agreement amends and restates the original agreement, dated May 26, 2015 that the BDC entered into as the sole member of the Fund.

Term: The Fund will continue until the sixth anniversary of the Initial Closing Date unless dissolved earlier or extended for two additional one-year periods by the BDC, in its sole discretion upon notice to the Management Committee. Thereafter, the term of the Fund may be extended by the BDC for additional one-year periods, in each case with the prior consent of the Management Committee.

Commitment Period: The Commitment Period commenced on June 5, 2015, the Initial Closing Date, and will end on the third anniversary of the Initial Closing Date subject to termination or extension by the Management Committee as provided in the Agreement.

Management Committee: Pursuant to the Agreement, the management committee of the Fund has exclusive responsibility for the management, policies and control of the Fund. The BDC and one of the two Third-Party Members, collectively, each appointed one voting member of the Management Committee. The Management Committee can act on behalf and in the name of the Fund to implement the objectives of the Fund and exercise any rights and powers the Fund may possess. The Management Committee will authorize portfolio investment activity, transactions between the Fund and the BDC, and other Members and borrowings of the Fund.

Administration Agreement: The Fund entered into an Administration Agreement with TCW Asset Management Company LLC (“TAMCO”), dated June 5, 2015 to furnish, or arrange for others to furnish, administrative services necessary for the operation of the Fund. In connection therein, TAMCO, as Administrator retained the services of State Street Bank and Trust Company to assist in providing certain administrative, accounting, operational, investor and financial reporting services for the Fund.

Custody Services Agreement: The Fund entered into a Custody Services Agreement dated June 3, 2015 with State Street Bank and Trust Company to provide custodian services for the Fund.

TCW Direct Lending Strategic Ventures LLC

(A Delaware Limited Liability Company)

September 30, 2018

Capital Commitments: Commitments from the Preferred Members and Preferred Members as Common Members are as follows. The commitment amount funded does not include amounts contributed in anticipation of a potential investment that the Fund did not consummate and therefore returned to the Members’ as unused capital. As of September 30, 2018, aggregate commitments and commitments funded were as follows:


	Committed Capital		Commitments Funded		Percentage Funded
Preferred Membership Interests	$	600,000,000	$	454,279,088		75.7	%
Common Membership Interests		2,000,000		1,000,000		50.0	%

Total	$	602,000,000	$	455,279,088

Recallable Amounts: Each Preferred Member may be required to re-contribute amounts previously distributed equal to 100% of distributions of proceeds during the Commitment Period representing a return of capital contributions made in respect of the Preferred Membership Interest. The recallable amounts as of September 30, 2018 were as follows:

Recallable
Amounts

Recallable
Amounts Funded

Percentage
Funded

Preferred Membership Interests

127,837,000

none

n/a

2.	SIGNIFICANT ACCOUNTING POLICIES

The Fund is an investment company following the accounting and reporting guidance in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) No. 946 Financial Services – Investment Companies.

Basis of Presentation: The Fund’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for investment companies.

These consolidated financial statements include the accounts of the Fund and the Luxembourg Company. All significant intercompany transactions and balances have been eliminated in consolidation.

Noncontrolling interest in consolidated subsidiary fund: As the Luxembourg Company is consolidated, but not 100% owned, a portion of the income or loss and corresponding members’ capital is allocated to owners other than the Fund in proportion to their relative ownership interest. The aggregate of the income or loss and corresponding members’ capital that is not owned by the Fund is included in noncontrolling interest in consolidated subsidiary fund in the consolidated financial statements. The primary components of noncontrolling interest in the consolidated subsidiary fund are separately presented in the Fund’s consolidated statement of changes in members’ capital. The net increase in members’ capital from operations includes the net increase attributable to the noncontrolling interest in consolidated subsidiary fund on the Fund’s consolidated statement of operations.

Use of Estimates: The preparation of the accompanying financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting year. Actual results could differ from those estimates.

Investments: The Fund records investment transactions on the trade date. The Fund considers trade date for investments not traded on a recognizable exchange, or traded in the over-the-counter markets, to be the date on which the Fund receives legal or contractual title to the asset and bears the risk of loss.

Income Recognition: Interest and unused commitment fee income are recorded on an accrual basis unless doubtful of collection or the related investment is in default. Realized Gains and losses on investments are recorded on a specific identification basis. Amendment, consent, waiver and forbearance fees received in exchange for a concession that result in a change in yield are recognized immediately when earned as interest income. The Fund typically receives a fee in the form of a discount to the purchase price at the time it funds an investment in a loan. The discount is accreted to interest income over the life of the respective

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

loan, as reported in the Statement of Operations, and reflected in the amortized cost basis of the investment. Discounts associated with a revolver are treated as a discount to the issuers’ term loan. In the event there is a fee associated with a delayed draw that remains unfunded, the Fund will recognize the fee as fee income immediately. Fee income received form the Advisor that the Advisor received from a portfolio company for services rendered, are recognized immediately as income.

Cash and Cash Equivalents: The Fund considers cash equivalents to be liquid investments, including money market funds or individual securities purchased with an original maturity of three months or less. Fund cash and cash equivalents are generally comprised of money market funds and demand deposits, valued at cost, which approximates fair value.

Income Taxes: The Fund is exempt from federal and state income taxes and, consequently, no income tax provision has been made in the accompanying financial statements.

The Fund has invested in numerous jurisdictions and is therefore subject to varying policies and statutory time limitations with respect to examination of tax positions. The Fund reviews and evaluates tax positions in its major jurisdictions and determines whether or not there are uncertain tax positions that require financial statement recognition.

The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. As of and during the period ended September 30, 2018 and 2017, the Fund did not have a liability for any unrecognized tax benefits nor did it recognize any interest and penalties related to unrecognized tax benefits.

The Fund is subject to examination by U.S. federal tax authorities for returns filed for the prior three years and by state tax authorities for returns filed for the prior four years.

Subsequent Events: The Management Committee evaluated the activity of the Fund through November x 2018 the date that the financial statements are available to be issued, and concluded that no subsequent events have occurred that would require recognition or disclosure.

3.	INVESTMENT VALUATIONS AND FAIR VALUE MEASUREMENTS

Investments at Fair Value: Investments held by the Fund for which market quotes are readily available are valued at fair value. Fair value is generally determined on the basis of last reported sales price or official closing price on the primary exchange in which each security trades, or if no sales are reported, based on the midpoint of the valuation range obtained for debt investments from a quotation reporting system, established market makers or pricing service.

Investments held by the Fund for which market quotes are not readily available or market quotations are not considered reliable are valued at fair value by the Management Committee based on similar instruments, internal assumptions and the weighting of the best available pricing inputs.

Fair Value Hierarchy: Assets and liabilities are classified by the Fund based on valuation inputs used to determine fair value into three levels.

Level 1 values are based on unadjusted quoted market prices in active markets for identical assets.

Level 2 values are based on significant observable market inputs, such as quoted prices for similar assets and quoted prices in inactive markets or other market observable inputs.

Level 3 values are based on significant unobservable inputs that reflect the Fund’s determination of assumptions that market participants might reasonably use in valuing the assets.

TCW Direct Lending Strategic Ventures LLC

(A Delaware Limited Liability Company)

September 30, 2018

Categorization within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The valuation levels are not necessarily an indication of the risk associated with investing in these securities.

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Schedule of Investments as of September 30, 2018.


Investments	Level 1		Level 2		Level 3		Total
Debt	$	—	$	—	$	578,171,336	$	578,171,336

Equity	$	—	$	—	$	15,466,899	$	15,466,899

Cash equivalents	$	45,196,111	$	—	$	—	$	45,196,111

Total	$	45,196,111	$	—	$	593,638,235	$	638,834,346

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Schedule of Investments as of December 31, 2017.


Investments	Level 1		Level 2		Level 3		Total
Debt	$	—	$	—	$	517,461,745	$	517,461,745

Cash equivalents	$	69,959,177	$	—	$	—	$	69,959,177

Total	$	69,959,177	$	—	$	517,461,745	$	587,420,922

The following tables provide a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the three and nine months ended September 30, 2018:


	Debt			Equity
Balance at June 30, 2018	$	579,842,960		$	7,160,654
Accreted Discounts		1,231,800			—
Purchases		13,423,953			—
Sales and paydowns		(19,232,365	)		—
Realized gain/(loss)		110,325			—
Change in unrealized appreciation/(depreciation)		2,794,663			8,306,245

Balance at September 30, 2018	$	578,171,336		$	15,466,899

Change in unrealized appreciation/(depreciation) in Investments still held as of September 30, 2018	$	2,794,663		$	8,306,245

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)


	Debt			Equity
Balance at December 31, 2017	$	517,461,745		$	—
Accreted Discounts		3,674,742			—
Purchases		140,281,662			10,621,024
Sales and paydowns		(93,219,196	)		—
Realized gain/(loss)		1,229,693			—
Change in unrealized appreciation/(depreciation)		8,742,690			4,845,875

Balance at September 30, 2018	$	578,171,336		$	15,466,899

Change in unrealized appreciation/(depreciation) in Investments still held as of September 30, 2018	$	9,209,078		$	4,845,875

The following tables provide a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the three and nine months ended September 30, 2017:


	Debt			Equity
Balance at June 30, 2017	$	536,094,675		$	—
Accreted Discounts		2,144,592			—
Purchases		110,601,083			—
Sales and paydowns		(117,561,863	)		—
Realized gain/(loss)		1,137,973			—
Change in unrealized appreciation/(depreciation)		(617,135	)		—

Balance at September 30, 2017	$	531,799,325		$	—

Change in unrealized appreciation/(depreciation) in Investments still held as of September 30, 2017	$	109,109		$	—

TCW Direct Lending Strategic Ventures LLC

(A Delaware Limited Liability Company)

September 30, 2018


	Debt			Equity
Balance at December 31, 2016	$	493,861,756		$	557,682
Accreted Discounts		3,442,316			—
Purchases		231,098,711			2,520,432
Sales and paydowns		(194,827,520	)		(3,365,339	)
Realized gain/(loss)		1,992,749			306,647
Change in unrealized appreciation/(depreciation)		(3,768,687	)		(19,422	)

Balance at September 30, 2017	$	531,799,325		$	—

Change in unrealized appreciation/(depreciation) in Investments still held as of September 30, 2017	$	(1,229,940	)	$	—

Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. During the three and nine months period ended September 30, 2018 and 2017 the Fund did not have any transfers between levels.

Level 1 Assets (Investments): The valuation techniques and significant inputs used to determine fair value are as follows:

Registered Investment Companies, (Level 1), include registered open-end investment companies that are valued based upon the reported net asset value of such investment.

Level 3 Assets (Investments): The following valuation techniques and significant inputs are used to determine fair value of investments in private debt for which reliable market quotations are not available. Some of the inputs are independently observable however, a significant portion of the inputs and the internal assumptions applied are unobservable.

Debt, (Level 3), includes investments in privately originated senior secured debt. Such investments are valued based on specific pricing models, internal assumptions and the weighting of the best available pricing inputs. A discounted cash flow approach incorporating a weighted average cost of capital approach and shadow rating method are generally used to determine fair value. Standard pricing inputs include, but are not limited to, the financial health of the issuer: place in the capital structure; value of other issuer debt; credit, industry, and market risk and events.

Preferred Equity (Level 3), includes investments in preferred equity issued under the same market conditions as the privately originated senior secured debt. Such investments are valued based on specific pricing models, internal assumptions and the weighting of the best available pricing inputs. The relative value approach is used. Relative value takes into account the implied yield of the senior secured debt measured in terms of risk, liquidity and return relative to the debt. Pricing inputs include, but not limited to, financial health, and relevant business developments of the issuer; EBITDA, market multiples of comparable companies, comparable market transactions and recent trades or transactions; issuer, industry and market expectations, risks and events.

Pricing inputs and weightings applied to determine value require subjective determination. Accordingly, valuations do not necessarily represent the amounts that may eventually be realized from sales or other dispositions of investments.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

The following table summarizes by major security type the valuation techniques and quantitative information utilized in determining the fair value of the Level 3 investments as of September 30, 2018.

Investment
Type

Fair Value at
September 30,
2018

Valuation
Technique

Unobservable Input

Range

Weighted
Average

Impact to Valuation
from an Increase in Input

Debt

360,429,595

Income method

Weighted average cost of capital

6.9% to 20.7%

10.7%

Decrease

Shadow credit rating method

B+ to CCC-

N/A

Increase

Debt

154,461,737

Income method

Shadow credit rating method

B to CCC+

N/A

Increase

Debt

63,280,004

Income method

IRR DCF

12.3% to 14.3%

13.3%

Decrease

Shadow credit rating method

B to B-

N/A

Increase

Total Debt

578,171,336

Equity

15,466,899

Income method

Implied Volatility

44.3% to 44.3%

44.3%

Increase

Risk Free Rate

2.6% to 2.6%

2.6%

Increase

Expected Term

1.0 yrs to 1.0 yrs

1.0 yrs

Increase

Total

593,638,235

The following table summarizes by major security type the valuation techniques and quantitative information utilized in determining the fair value of the Level 3 investments as of December 31, 2017.

Investment
Type

Fair Value at
December 31,
2017

Valuation
Technique

Unobservable Input

Range

Weighted
Average

Impact to Valuation
from an Increase in
Input

Debt

343,165,301

Income method

Weighted average cost of capital

6.4% to 18.7%

9.6%

Decrease

Shadow credit rating method

B to CCC

N/A

Increase

Debt

174,296,444

Income method

Shadow credit rating method

B- to CCC

N/A

Increase

Total

517,461,745

Valuation Process: Oversight for determining fair value is the responsibility of the Management Committee (with input from an independent valuation firm retained by the Fund). The Fund and Management Committee value the investments at fair value on a quarterly basis and whenever required. The Fund engaged an external, independent valuation firm to assist the Management Committee in determining the fair market value of the Fund’s investments for which market quotations are not readily available.

The Fund and its Management Committee undertake a multi-step valuation process for investments whose market prices are not otherwise readily available. Unless noted, the Fund is utilizing the midpoint of a valuation range provided by an external, independent valuation firm. The Management Committee may approve a value other than the midpoint if it believes that is the fair value. Based on its review of the external, independent valuation firm’s range and related documentation, valuation of the Fund’s investments are determined by the Management Committee.

The Fund uses all relevant factors in determining fair value including, without limitation, any of the following factors as may be deemed relevant by the Committee: current financial position and current and historical operating results of the issuer; sales prices of recent public or private transactions in the same or similar securities, including transactions on any securities exchange on which such securities are listed or in the over-the-counter market; general level of interest rates; recent trading volume of the security; restrictions on transfer including the Fund’s right, if any, to require registration of its securities by the issuer under the securities laws; any liquidation preference or other special feature or term of the security; significant recent events affecting the Portfolio Investment, including any pending private placement, public offering, merger, or acquisition; the price paid by the Fund to acquire the asset; the percentage of the issuer’s outstanding securities that is owned by the Fund and all other factors affecting value.

TCW Direct Lending Strategic Ventures LLC

(A Delaware Limited Liability Company)

September 30, 2018

4.	ALLOCATIONS AND DISTRIBUTIONS

Allocation of profit and loss: Income, expenses, gains and losses of the Fund are allocated among the Members in such a manner that, at the end of each period, each Member’s capital account is equal to the respective net amount, positive or negative, which would be distributed to such Member if the Fund were to liquidate the assets of the Fund for an amount equal to book value and distribute the proceeds in a manner consistent with the distribution priorities described in the Agreement.

Distribution: Interest, dividends, other cash flow received by the Fund in respect of Portfolio Investments (“Interest Amounts”) and proceeds attributable to the repayment or disposition of Portfolio Investments (“Proceeds”) received by the Fund are distributed by the Fund to the Members to the extent that such Interest Amounts and Proceeds are available to the Fund after the application of the priority of payments stipulated in the Credit Agreement and after taking into account reserves and working capital needs.

Interest Amounts available to the Fund for distribution to the Members will be distributed in the following order and priorities:

First, one-hundred percent (100%) to the Preferred Members in an amount equal to any declared and unpaid dividends on Preferred Membership Interests, which amounts shall be distributed pro rata among the Preferred Members in accordance with their respective entitlements to such dividends.

Second, one-hundred percent (100%) to the payment of Fund expenses; and

Thereafter, one-hundred percent (100%) to the Common Members, which amounts shall be distributed among the Common Members pro rata based on their respective Unreturned Contributions or, if the Unreturned Contributions of the Common Members equal zero, pro rata based on the respective Commitments of such Common Members in their capacities as Preferred Members with respect to Preferred Membership Interest.

Proceeds available to the Fund for distribution to the Members will be distributed in the following order and priorities:

First one-hundred percent (100%) to the Preferred Members in an amount equal to any declared and unpaid dividends on Preferred Membership Interests, which amounts shall be distributed pro rata among the Preferred Members in accordance with their respective entitlements to such dividends,

Second, one-hundred percent (100%) to the Preferred Members pro rata based on, and up to the amount of, their respective Unreturned Contributions; and

Preferred Member Dividends: Each Preferred Membership Interest is entitled to quarterly dividends at a rate equal to LIBOR plus 6.50% per annum (subject to a LIBOR floor of 1.5% per annum) of the Unreturned Contributions associated with their Preferred Membership Interest. Dividends are cumulative and paid when declared by the Management Committee.

Unreturned Contributions: With respect to any Member in respect of each class such Member holds, an amount equal to the excess, if any, of (a) the aggregate contributions of such Member over (b) the aggregate amount distributed to such Member from Proceeds (other than amounts paid in respect of dividends to such Member).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

5.	FUND EXPENSES

The Fund is responsible for all costs and expenses which include organizational expenses, operating expenses; investigative, travel, legal and other transactional expenses incurred with respect to the acquisition, formation, holding and disposition of the Fund’s Portfolio Investments or incurred in connection with Portfolio Investments or transactions not consummated; costs and expenses relating to the liquidation of the Fund; taxes, or extraordinary expenses (such as litigation expenses and indemnification payments to either the Management Committee or the Administrative Agent); valuation-related costs and expenses; and all other costs and expenses of the Fund’s operations, administration and transactions.

Organizational Expenses: Organization expenses will be paid from capital contributions called from the holders of Common Membership Interests. As of September 30, 2018 and December 31, 2017, organization expenses paid inception-to-date total $704,290 and $704,290 respectively.

Portfolio Investment Expenses: Expenses related to Portfolio Investments will be paid from capital contributions called from Preferred Membership Interests.

Fund Expenses: Other Fund expenses including those related to unconsummated investments will be paid first from Interest Amounts as provided for in the above Distribution footnote. To the extent that such Interest Amounts are insufficient or unavailable to pay expenses when due, such expenses will be paid from capital contributions called from the holders of Common Membership Interests provided that the aggregate amount called for Fund expenses (including organizational expenses) does not exceed $2 million. To the extent that the foregoing sources of payment are insufficient or unavailable to pay when due, such expenses will be paid from capital contributions called from the Preferred Members.

6.	ADVISER FEE INCOME

Any (i) transaction, advisory, consulting, management, monitoring, directors’ or similar fees, (ii) closing, investment banking, finders’, transaction or similar fees, (iii) commitment, breakup or topping fees or litigation proceeds and (iv) other fee or payment of services performed or to be performed with respect to an investment or proposed investment received from or with respect to Portfolio Companies or prospective Portfolio Companies in connection with the Fund’s activities will be allocated pro rata among the Fund and any other funds or accounts advised by the Adviser participating in such investment and the Fund’s share will be the property of the Fund. Notwithstanding the foregoing, for administrative or other reasons, certain fees described in clauses (i) through (iv) above (including any fees for administrative agent services provided by the Adviser or an affiliate with respect to a particular loan or portfolio of loans made by the Fund) may be paid to the Adviser or the affiliate (rather than directly to the Fund), in which case the amount of such fees (net of any related expenses associated with the generation of such fees borne by the Adviser or such affiliate that have not been and will not be reimbursed by the Portfolio Company) shall be paid to the Fund.

Since inception of the Fund through September 30, 2018 and December 31, 2017 the Adviser was paid directly $443,808, of which $114,141 was paid during the period ended December 31, 2017. Since Inception of the Fund through September 30, 2018 and December 31, 2017, the Fund has recognized $443,808 of these fees.

No fees were paid to the Adviser for the three and nine months period ended September 30, 2018.

TCW Direct Lending Strategic Ventures LLC

(A Delaware Limited Liability Company)

September 30, 2018

7.	REVOLVING CREDIT AGREEMENT

On June 5, 2015, the Fund, as borrower entered into a Credit Facility with Cortland Capital Market Services LLC, as administrative agent and various financial institutions (the “Lending Group”) to make loans (Advances) to the Fund for the purpose of funding eligible investments. Effective August 21, 2015, the Credit Agreement was amended to increase the Credit Facility to $600 million (“Facility Amount”) from $500 million. The Commitment Period to make an Advance ends on the earlier of the end of the (i) Investment Period and (ii) the Facility Maturity Date. The Investment Period ended on June 5, 2018 or earlier if Member commitments have been reduced to zero. The Facility Maturity Date is June 4, 2021, and may be extended pursuant to the Credit Agreement or end earlier if the Facility Amount is reduced to zero or the Advances automatically become due and payable.

The lender has a priority interest in the interest, dividends and other cash flow received by the Fund (Interest Amounts) and proceeds attributable to the repayment or disposition of Portfolio Investments (Proceeds) received by the Fund as described in note 4 – distribution of Interest Amounts and distribution of Proceeds.

As of September 30, 2018 and December 31, 2017, there were $300,000,000 and $296,200,000, respectively, in Advances outstanding, which approximates fair value.

Interest is payable at a rate equal to LIBOR plus 3.50% per annum (subject to a LIBOR floor of 1.50%) on the amount of Advances outstanding. The Fund received a rating from an approved rating agency commensurate with the rate of interest paid by the Fund. As of September 30, 2018 and December 31, 2017 the all-in rate of interest is 5.57% and 5% respectively.

An unused fee is payable at a rate of 0.50% per annum on the unutilized commitment.

Whenever the Fund is paid an origination, structuring, or similar upfront fee by the obligor of an eligible investment, the Lending Group is entitled to an origination fee equal to 0.75% of the eligible investment funded with the proceeds of Advances.

The summary information regarding the Credit Facility for the three and nine months ended September 30, 2018 and 2017 is as follows (dollar amounts in thousands):


	Three months ended September 30,						Nine months ended September 30,
	2018			2017			2018			2017
Credit facility interest expense	$	4,422		$	3,755		$	12,867		$	11,277
Unused fees		—			381			603			1,116
Administrative fees		12			11			34			34
Origination expense		—			142			154			544
Surveillance expense		50			—			100			—

Total	$	4,484		$	4,289		$	13,758		$	12,971

Weighted average interest rate		5.85	%		5.00	%		5.57	%		5.00	%
Average outstanding balance		300,000,000			297,924,958			309,039,560			301,539,870

As of September 30, 2018 and December 31, 2017, the Fund has complied with the covenant requirements detailed in the Credit Agreement.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

8.	COMMITMENTS AND CONTINGENCIES

At September 30, 2018, the Fund had the following unfunded commitments and unrealized (depreciation) by investment.


Unfunded Commitments	Maturity/ Expiration		Amount		Unrealized (depreciation)
ASC Acquisition Holdings, LLC		December 2018	$	8,521,875	$	(315,309	)
Ascensus Specialties LLC		September 2019		3,681,818		—
Cold Spring Brewing Company		May 2024		2,281,250		(18,250	)
ENA Holding Corporation		May 2021		1,620,270		(32,405	)
FQSR, LLC		May 2023		6,323,595		(50,589	)
OTG Management LLC		August 2021		288,417		—
School Specialty, Inc.		April 2019		4,084,396		(44,928	)
SmileDirectClub, LLC		February 2023		2,305,516		—

Total			$	29,107,137	$	(461,481	)

As of January 1, 2018, the Fund changed its valuation policy to cap fair values of unfunded commitments at par, thereby eliminating unrealized gains on unfunded commitments.

At December 31, 2017, the Fund had the following unfunded commitments and unrealized appreciation/ (depreciation) by investment.


Unfunded Commitments	Maturity/ Expiration		Amount		Unrealized (depreciation)
ASC Acquisition Holdings, LLC		December 2018	$	8,521,875	$	(247,134	)
ENA Holding Corporation		May 2021		2,430,406		(9,722	)
FQSR, LLC		December 2018		1,648,500		(11,540	)
OTG Management LLC		February 2018		1,711,819		(17,118	)
School Specialty, Inc.		April 2019		4,084,396		(12,253	)
Vertellus Performance Chemicals LLC		September 2019		3,681,818		(55,227	)

Total			$	22,078,814	$	(352,994	)

The net change in unrealized appreciation/(depreciation) on these unfunded commitments is included in the Statements of Operations and Statements of Assets and Liabilities.

In the normal course of business, the Fund enters into contracts which provide a variety of representations and warranties, and general indemnifications. Such contracts include those with certain service providers, brokers and trading counterparties. Any exposure to the Fund under these arrangements is unknown as it would involve future claims that may be made against the Fund; however, based on the Fund’s experience, the risk of loss is remote and no such claims are expected to occur. As such, the Fund has not accrued any liability in connection with such indemnifications.

TCW Direct Lending Strategic Ventures LLC

(A Delaware Limited Liability Company)

September 30, 2018

9.	FINANCIAL HIGHLIGHTS

The following summarizes the Fund’s financial highlights for the period ended September 30, 2018 and 2017


	Nine months ended September 30, 2018			Nine months ended September 30, 2017
	Members			Members
As a percentage of average members’ capital
Net investment income ratio (annualized) ¹		11.92	%		10.61	%

Expense ratios ¹
Operating expenses (annualized)		5.61	%		5.54	%

Total expense ratio		5.61	%		5.54	%

¹	The net investment income and expense ratio are calculated for the Members taken as a whole.

The Internal Rates of Return (IRR) since inception of the Members, after financing costs and other operating expenses are 12.5% and 10.9% through September 30, 2018 and, 2017, respectively.

The IRR is computed based on cash flow due dates contained in notices to Members (contributions from and distributions to the Members) and the net assets (residual value) of the Members’ capital account at year end and is calculated for the Members taken as a whole.

The IRR is calculated based on the fair value of investments using principles and methods in accordance with GAAP and does not necessarily represent the amounts that may be realized from sales or other dispositions. Accordingly, the return may vary significantly upon realization.

TCW Direct Lending Strategic Ventures LLC

(A Delaware Limited Liability Company)

ADMINISTRATION

ADMINISTRATOR

TCW Asset Management Company

1251 Avenue of the Americas, Suite 4700

New York, NY 10020

(212) 771-4000

PORTFOLIO MANAGER

Richard T. Miller

Group Managing Director

INDEPENDENT AUDITORS

Deloitte & Touche LLP

555 West 5^th Street

Los Angeles, CA 90013

CUSTODIAN

State Street Bank and Trust Company

One Lincoln Street

Boston, MA 02111

SUB-ADMINISTRATOR

State Street Bank and Trust Company

One Lincoln Street

Boston, MA 02111

TCW Direct Lending LLC - FORM 10-Q - EX-99.1 - November 6, 2018

Attached files

TCW Direct Lending LLC Reports