NF Investment Corp. - FORM 10-Q

NF Investment Corp. - FORM 10-Q - May 8, 2015

Attached files

Attached files

NF Investment Corp. Reports

file	filename
EX-32.2 - EX-32.2 - NF Investment Corp.	d910362dex322.htm
EX-32.1 - EX-32.1 - NF Investment Corp.	d910362dex321.htm
EX-31.2 - EX-31.2 - NF Investment Corp.	d910362dex312.htm
EX-31.1 - EX-31.1 - NF Investment Corp.	d910362dex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2015

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

For the transition period to

Commission File No. 000-54961

NF INVESTMENT CORP.

(Exact name of Registrant as specified in its charter)

Maryland

61-1696304

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

520 Madison Avenue, 38th Floor, New York, NY 10022

(Address of principal executive office) (Zip Code)

(212) 813-4900

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ¨ No ¨

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class	Outstanding at May 8, 2015
Common stock, $0.01 par value		5,734,034

NF INVESTMENT CORP.

INDEX


Part I.	Financial Information

Item 1.	Financial Statements

	Consolidated Statements of Assets and Liabilities as of March 31, 2015 (unaudited) and December 31, 2014	3

	Consolidated Statements of Operations for the three month periods ended March 31, 2015 (unaudited) and March 31, 2014 (unaudited)	4

	Consolidated Statements of Changes in Net Assets for the three month periods ended March 31, 2015 (unaudited) and March 31, 2014 (unaudited)	5

	Consolidated Statements of Cash Flows for the three month periods ended March 31, 2015 (unaudited) and March 31, 2014 (unaudited)	6

	Consolidated Schedules of Investments as of March 31, 2015 (unaudited) and December 31, 2014	7

	Notes to Consolidated Financial Statements (unaudited)	15

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49

Item 4.	Controls and Procedures	50

Part II.	Other Information

Item 1.	Legal Proceedings	51

Item 1A.	Risk Factors	51

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51

Item 3.	Defaults Upon Senior Securities	51

Item 4.	Mine Safety Disclosures	51

Item 5.	Other Information	51

Item 6.	Exhibits	51

	Signatures	52

NF INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(dollar amounts in thousands, except per share data)


	March 31, 2015			December 31, 2014
	(unaudited)
ASSETS
Investments—non-controlled/non-affiliated, at fair value (amortized cost of $203,805 and $183,390, respectively)	$	203,449		$	182,076
Cash and cash equivalents		2,852			2,548
Deferred financing costs		1,865			1,981
Interest receivable		628			422
Prepaid expenses and other assets		9			18

Total assets	$	208,803		$	187,045

LIABILITIES
Payable for investments purchased	$	4,158		$	14,718
Secured borrowings (Note 5)		94,603			80,903
Due to Investment Adviser		26			12
Interest and credit facility fees payable (Note 5)		402			338
Management fees payable (Note 4)		119			171
Dividend payable (Note 7)		1,645			1,247
Administrative service fees payable (Note 4)		17			25
Other accrued expenses and liabilities		365			322

Total liabilities		101,335			97,736

Commitments and contingencies (Notes 6 and 10)
NET ASSETS
Common stock, $0.01 par value; 200,000,000 shares authorized; 5,481,510 shares and 4,618,564 shares, respectively, issued and outstanding		55			46
Paid-in capital in excess of par value		108,470			91,478
Offering costs		(45	)		(45	)
Accumulated net investment income (loss), net of cumulative dividends of $4,228 and $2,583, respectively		(656	)		(856	)
Accumulated net realized gain (loss)		—			—
Accumulated net unrealized appreciation (depreciation)		(356	)		(1,314	)

Total net assets	$	107,468		$	89,309

NET ASSETS PER SHARE	$	19.61		$	19.34

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

NF INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollar amounts in thousands, except per share data)

(unaudited)


	For the three month periods ended
	March 31, 2015		March 31, 2014
Investment income:
Interest income from non-controlled/non-affiliated investments	$	2,929	$	969

Total investment income		2,929		969

Expenses:
Management fees (Note 4)		119		41
Professional fees		106		283
Administrative service fees (Note 4)		33		53
Interest expense (Note 5)		413		110
Credit facility fees (Note 5)		270		202
Directors’ fees and expenses		59		63
Transfer agency fees		7		9
Other general and administrative		77		56

Total expenses		1,084		817

Net investment income (loss)		1,845		152
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments:
Net realized gain (loss) on investments—non-controlled/non-affiliated		—		—
Net change in unrealized appreciation (depreciation) on investments—non-controlled/non-affiliated		958		144

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments		958		144

Net increase (decrease) in net assets resulting from operations	$	2,803	$	296

Basic and diluted earnings per common share (Note 7)	$	0.56	$	0.12

Weighted-average shares of common stock outstanding—Basic and Diluted (Note 7)		5,037,064		2,378,487

Dividends declared per common share (Note 7)	$	0.30	$	0.04

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

NF INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(dollar amounts in thousands)

(unaudited)


	For the three month periods ended
	March 31, 2015			March 31, 2014
Increase (decrease) in net assets resulting from operations:
Net investment income (loss)	$	1,845		$	152
Net realized gain (loss) on investments—non-controlled/non-affiliated		—			—
Net change in unrealized appreciation (depreciation) on investments—non-controlled/non-affiliated		958			144

Net increase (decrease) in net assets resulting from operations		2,803			296

Capital transactions:
Common stock issued		17,001			18,334
Dividends declared (Note 10)		(1,645	)		(128	)

Total capital share transactions		15,356			18,206

Net increase (decrease) in net assets		18,159			18,502

Net assets at beginning of period		89,309			43,937

Net assets at end of period	$	107,468		$	62,439

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

NF INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollar amounts in thousands)

(unaudited)


	For the three month periods ended
	March 31, 2015			March 31, 2014
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations	$	2,803		$	296
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Amortization of deferred financing costs		134			91
Net accretion of discount on securities		(87	)		(47	)
Net realized (gain) loss on investments—non-controlled/non-affiliated		—			—
Net change in unrealized (appreciation) depreciation on investments—non-controlled/non-affiliated		(958	)		(144	)
Cost of investments purchased and change in payable for investments purchased		(33,819	)		(18,389	)
Proceeds from repayments of investments		2,931			3,200
Changes in operating assets:
Interest receivable		(206	)		14
Prepaid expenses and other assets		9			20
Changes in operating liabilities:
Due to Investment Adviser		14			(423	)
Interest and credit facility fees payable		64			63
Management fees payable		(52	)		14
Administrative service fees payable		(8	)		4
Other accrued expenses and liabilities		43			79

Net cash provided by (used in) operating activities		(29,132	)		(15,222	)

Cash flows from financing activities:
Proceeds from issuance of common stock		17,001			18,334
Borrowings on Revolving Credit Facility and Facility		35,700			2,500
Repayments of Facility		(22,000	)		—
Debt issuance costs		(18	)		—
Dividends paid in cash		(1,247	)		—

Net cash provided by (used in) financing activities		29,436			20,834

Net increase (decrease) in cash and cash equivalents		304			5,612
Cash and cash equivalents, beginning of period		2,548			12,219

Cash and cash equivalents, end of period	$	2,852		$	17,831

Supplemental disclosures:
Interest paid during the period	$	361		$	50
Dividends declared during the period	$	1,645		$	128
Financing costs due to Investment Adviser	$	—		$	572

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

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of March 31, 2015

(dollar amounts in thousands)

(unaudited)


Investments— non-controlled/non-affiliated ⁽¹⁾	Industry	Interest Rate			Maturity Date		Acquisition Date		Par Amount		Amortized Cost ⁽⁶⁾		Fair Value ⁽⁷⁾		Percentage of Net Assets
First Lien Debt (92.90%)
Access CIG, LLC ^{(2) (3) (5)}	Business Services		6.00	%		10/17/2021		10/16/2014	$	4,988	$	4,941	$	5,019		4.67	%
AF Borrower LLC (Accuvant) ^{(2) (3) (5)}	High Tech Industries		6.25			1/28/2022		12/15/2014		3,000		2,941		3,004		2.79
Alpha Packaging Holdings, Inc.^{(2) (3) (5)}	Containers, Packaging & Glass		5.25			5/12/2020		5/9/2014		3,846		3,842		3,771		3.51
American Tire Distributors, Inc.^{(2) (3) (5)}	Automotive		7.00			6/1/2018		6/12/2014		1,061		1,062		1,061		0.99
Anaren, Inc.^{(2) (3) (4)}	Telecommunications		5.50			2/18/2021		2/18/2014		3,345		3,316		3,302		3.07
APX Group Inc. ^{(5) (8)}	Consumer Services		6.38			12/1/2019		10/15/2014		2,500		2,428		2,488		2.32
Aquilex LLC ^{(2) (3) (4)}	Environmental Industries		5.00			12/31/2020		12/20/2013		3,456		3,452		3,426		3.19
Ascensus, Inc.^{(2) (3) (4)}	Banking, Finance, Insurance & Real Estate		5.00			12/2/2019		12/2/2013		5,925		5,901		5,873		5.46
Blue Bird Body Company ^{(2) (3) (4)}	Transportation: Consumer		6.50			6/27/2020		7/22/2014		3,703		3,535		3,597		3.35
Brooks Equipment Company, LLC^{(2) (3) (5)}	Construction & Building		6.75			8/29/2020		8/29/2014		1,949		1,934		1,934		1.80
Capstone Logistics Acquisition, Inc. ^{(2) (3) (5)}	Transportation: Cargo		5.50			10/7/2021		10/3/2014		4,987		4,941		4,895		4.55
Castle Management Borrower LLC (Highgate Hotels L.P.) ^{(2) (3) (4)}	Hotel, Gaming & Leisure		5.50			9/18/2020		10/10/2014		2,488		2,467		2,463		2.29
Central Security Group, Inc. ^{(2) (3) (4)}	Consumer Services		6.25			10/6/2020		10/3/2014		4,988		4,918		4,945		4.60
Consolidated Aerospace Manufacturing, LLC ^{(2) (3) (4)}	Aerospace & Defense		5.00			3/27/2020		2/28/2014		1,848		1,843		1,803		1.68
Coyote Logistics, LLC ^{(2) (3) (5)}	Transportation: Cargo		6.25			3/26/2022		3/24/2015		4,200		4,159		4,196		3.90
CRCI Holdings, Inc. (CLEAResult Consulting, Inc.) ^{(2) (3) (4)}	Utilities: Electric		5.25			7/10/2019		7/29/2014		1,985		1,978		1,951		1.82
DTZ U.S. Borrower, LLC ^{(2) (3) (4)}	Construction & Building		5.50			11/5/2021		10/28/2014		3,491		3,442		3,509		3.26
EP Minerals, LLC ^{(2) (3) (4)}	Metals & Mining		5.50			8/20/2020		8/20/2014		3,483		3,467		3,458		3.22
FCX Holdings Corp. ^{(2) (3) (5)}	Capital Equipment		5.50			8/4/2020		8/4/2014		3,772		3,769		3,709		3.45
Genex Holdings, Inc. ^{(2) (3) (5)}	Banking, Finance, Insurance & Real Estate		5.25			5/30/2021		5/22/2014		2,672		2,661		2,677		2.49
Green Energy Partners/Stonewall LLC ^{(2) (3) (5) (11)}	Energy: Electricity		6.50			11/13/2021		11/12/2014		1,700		1,668		1,710		1.59
Hercules Achievement, Inc. (Varsity Brands Holding Co., Inc.) ^(2) (3) (5)	Durable Consumer Goods		6.00			12/11/2021		12/10/2014		4,988		4,940		5,034		4.68
Indra Holdings Corp. (Totes Isotoner)^{(2) (3) (5)}	Non-durable Consumer Goods		5.25			5/1/2021		4/29/2014		4,963		4,919		4,853		4.52
InterWrap Corp. (Canada)^{(2) (3) (4) (8)}	Construction & Building		5.25			11/1/2018		10/31/2013		1,924		1,912		1,891		1.76
Miller Heiman, Inc. ^{(2) (3) (10)}	Business Services		6.75			9/30/2019		10/1/2013		6,691		6,614		6,449		6.00
MSX International, Inc. ^{(2) (3) (4)}	Automotive		6.00			8/21/2020		8/18/2014		2,331		2,310		2,304		2.14
National Technical Systems, Inc.^{(2) (3) (9)}	Aerospace & Defense		6.75			11/22/2018		11/22/2013		4,877		4,844		4,837		4.50
NES Global Talent Finance US LLC (United Kingdom) ^{(2) (3) (4) (8)}	Energy: Oil & Gas		6.50			10/3/2019		10/2/2013		3,391		3,338		3,304		3.07
Novetta, LLC ^{(2) (3) (5)}	Aerospace & Defense		6.00			10/2/2020		11/19/2014		2,517		2,496		2,491		2.32
Pelican Products, Inc. ^{(2) (3) (4)}	Containers, Packaging & Glass		5.25			4/11/2020		4/8/2014		3,013		3,000		2,970		2.76
Phillips-Medisize Corporation ^{(2) (3) (5)}	Chemicals, Plastics & Rubber		4.75			6/16/2021		6/13/2014		2,481		2,471		2,479		2.31
Prowler Acquisition Corp. ^{(2) (3) (4)}	Wholesale		5.50			1/28/2020		1/24/2014		4,349		4,314		3,888		3.62
PSC Industrial Holdings Corp. ^{(2) (3) (4)}	Environmental Industries		5.75			12/5/2020		12/5/2014		2,993		2,965		2,964		2.76
PSI Services LLC ^{(2) (3) (4) (12)}	Business Services		7.75			2/27/2021		2/27/2015		4,000		3,884		4,058		3.78
QoL Meds, LLC ^{(2) (3) (4)}	Retail		5.50			7/15/2020		7/14/2014		2,706		2,693		2,706		2.52

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of March 31, 2015

(dollar amounts in thousands)

(unaudited)


Investments— non-controlled/non-affiliated ⁽¹⁾	Industry	Interest Rate			Maturity Date		Acquisition Date		Par Amount		Amortized Cost ⁽⁶⁾		Fair Value ⁽⁷⁾		Percentage of Net Assets
First Lien Debt (92.90%) (continued)
RCHP, Inc. (Regionalcare) ^{(2) (3) (4)}	Healthcare & Pharmaceuticals		6.00	%		4/23/2019		4/21/2014	$	6,586	$	6,529	$	6,592		6.13	%
SolAero Technologies Corp. ^{(2) (3) (5)}	Telecommunications		5.75			12/10/2020		12/9/2014		3,727		3,694		3,640		3.39
Sterling Infosystems, Inc. ^{(2) (3) (4)}	Business Services		5.50			5/13/2021		5/12/2014		2,978		2,965		2,976		2.77
Synarc-Biocore Holdings, LLC ^{(2) (3) (4)}	Healthcare & Pharmaceuticals		5.50			3/10/2021		3/6/2014		4,455		4,417		4,342		4.04
Systems Maintenance Services Holding, Inc.^{(2) (3) (4)}	High Tech Industries		5.00			10/18/2019		10/18/2013		3,222		3,212		3,170		2.95
TASC, Inc. ^{(2) (3)(4) (8)}	Aerospace & Defense		7.00			5/23/2020		12/17/2014		4,987		4,790		5,025		4.68
Teaching Strategies, LLC ^{(2) (3) (4)}	Media: Advertising, Printing & Publishing		6.00			10/1/2019		2/5/2015		4,968		4,948		4,940		4.60
The Hygenic Corporation (Performance Health) ^{(2) (3) (4)}	Non-durable Consumer Goods		6.00			10/11/2020		2/27/2015		4,000		3,944		4,012		3.73
The SI Organization, Inc.^{(2) (3) (4)}	Aerospace & Defense		5.75			11/23/2019		5/16/2014		4,675		4,635		4,694		4.37
The Topps Company, Inc. ^{(2) (3) (4)}	Non-durable Consumer Goods		7.25			10/2/2018		10/1/2013		4,019		3,989		4,019		3.74
Transilwrap Company, Inc.^{(2) (3) (4)}	Chemicals, Plastics & Rubber		5.00			11/22/2019		10/20/2013		4,915		4,909		4,815		4.48
U.S. Farathane, LLC ^{(2) (3) (5)}	Automotive		6.75			12/23/2021		2/6/2015		3,342		3,275		3,331		3.10
Violin Finco S.A.R.L. (Alexander Mann Solutions) (United Kingdom) ^{(2) (3) (4) (8)}	Business Services		5.75			12/20/2019		12/18/2013		3,456		3,429		3,456		3.22
Vitera Healthcare Solutions, LLC ^{(2) (3) (4)}	Healthcare & Pharmaceuticals		6.00			11/4/2020		11/1/2013		3,328		3,301		3,318		3.09
W/S Packaging Group, Inc. ^{(2) (3) (4)}	Containers, Packaging & Glass		5.00			8/9/2019		8/8/2013		4,309		4,296		4,226		3.93
Watchfire Enterprises, Inc. ^{(2) (3) (4)}	Media: Advertising, Printing & Publishing		5.00			10/2/2020		10/2/2013		3,448		3,437		3,386		3.15
Zest Holdings, LLC ^{(2) (3) (4)}	Durable Consumer Goods		5.25			8/16/2020		8/18/2014		4,123		4,124		4,051		3.77

*First Lien Debt Total*											$	189,259	$	189,012		175.88	%

Second Lien Debt (7.10%)
AF Borrower LLC (Accuvant) ^{(2) (3) (5)}	High Tech Industries		10.00	%		1/28/2023		12/15/2014	$	2,000	$	1,981	$	1,919		1.78	%
Allied Security Holdings LLC. ^{(2) (3) (5)}	Business Services		8.00			8/14/2021		9/25/2014		2,000		1,986		1,993		1.85
Berlin Packaging L.L.C ^{(2) (3) (5)}	Containers, Packaging & Glass		7.75			10/1/2022		9/24/2014		1,800		1,787		1,808		1.68
Charter NEX US Holdings, Inc. ^{(2) (3) (5)}	Chemicals, Plastics & Rubber		9.25			2/5/2023		1/30/2015		2,000		1,971		1,935		1.80
Creganna Finance (US) LLC (Ireland) ^{(2) (3) (5) (8)}	Healthcare & Pharmaceuticals		9.00			6/1/2022		11/20/2014		2,100		2,080		2,113		1.97
Genex Holdings, Inc. ^{(2) (3) (5)}	Banking, Finance, Insurance & Real Estate		8.75			5/30/2022		12/1/2014		1,000		987		953		0.89
Jazz Acquisition, Inc. (Wencor)^{(2) (3) (5)}	Aerospace & Defense		7.75			6/19/2022		6/25/2014		800		797		738		0.69
Phillips-Medisize Corporation ^{(2) (3) (5)}	Chemicals, Plastics & Rubber		8.25			6/16/2022		6/13/2014		1,500		1,487		1,399		1.30
TASC, Inc. ^{(4) (8)}	Aerospace & Defense		12.00			5/23/2021		12/17/2014		1,500		1,470		1,579		1.47

*Second Lien Debt Total*											$	14,546	$	14,437		13.43	%

Total Investments—non-controlled/non-affiliated											$	203,805	$	203,449		189.31	%

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of March 31, 2015

(dollar amounts in thousands)

(unaudited)

(1)

Unless otherwise indicated, issuers of debt investments of NF Investment Corp. (“NFIC” or 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 of March 31, 2015, 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 of March 31, 2015, the Company is not an “affiliated person” of any portfolio company.

(2)

Variable rate loans to the portfolio companies bear interest at a rate that may be determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the Prime Rate), which generally resets quarterly. For each such loan, the Company has provided the interest rate in effect as of March 31, 2015.

(3)	Loan includes interest rate floor feature.

(4)

These assets are owned by the Company’s wholly owned subsidiary, NFIC SPV LLC (the “Borrower Sub”). The Borrower Sub has a senior secured revolving credit facility (as amended, the “Revolving Credit Facility”). The lenders of the Revolving Credit Facility have a first lien security interest in substantially all of the assets of the Borrower Sub (see Note 5, Borrowings) and such assets are assets of the Borrower Sub to satisfy obligations of the Borrower Sub under the Revolving Credit Facility and are not available to creditors of the Company.

(5)

These assets are owned by the Company. The Company has a senior secured revolving credit facility (as amended, the “Facility”). The lender of the Facility has a perfected first-priority security interest in substantially all of the portfolio investments held by each of the Company and certain domestic subsidiaries of the Company. The lender of the Facility also has a perfected first-priority security interest in the unfunded investor equity capital commitments (provided that the amount of unfunded capital commitments ultimately available to the lender is limited to $34,000) and such security interest will be released upon the earlier of (a) the date eligible investments held by the Company are equal to or greater than $62,500 and the Facility’s borrowing base equity test is satisfied and (b) the date the borrower has received equity capital contributions in an amount equal to $34,000 (see Note 5, Borrowings).

(6)	Amortized cost represents original cost, including origination fees, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.

(7)	Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (Notes 2 and 3), pursuant to the Company’s valuation policies.

(8)

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.

(9)

National Technical Systems, Inc. has an undrawn delayed draw term loan of $49 par value at LIBOR + 5.50%, 1.25% floor, and an undrawn revolver of $226 par value at LIBOR + 5.50%, 1.25% floor. An unused rate of 1.25% and 0.50% is charged on the delayed draw term loan and revolver principal, respectively, while undrawn. The delayed draw term loan ($741 drawn par value and $49 undrawn par value) and revolver are both owned by the Company as indicated in Note 5 above. The term loan of $4,136 par value is owned by the Borrower Sub as indicated in Note 4 above.

(10)	Miller Heiman, Inc. is partially owned by the Company ($2,453 par value) as indicated in Note 5 above with the remaining $4,238 par value owned by the Borrower Sub as indicated in Note 4 above.

(11)	Green Energy Partners/Stonewall LLC has an undrawn delayed draw term loan of $1,700 par value at LIBOR + 5.50%, 1.00% floor. An unused rate of 3.00% is charged on the principal while undrawn.

(12)	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 arrangement amongst lenders (“AAL”) in the syndicate.

As of March 31, 2015, investments—non-controlled/non-affiliated, at fair value consisted of the following:


Type	Amortized Cost		Fair Value		% of Fair Value
First Lien Debt	$	189,259	$	189,012		92.90	%
Second Lien Debt		14,546		14,437		7.10

Total	$	203,805	$	203,449		100.00	%

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of March 31, 2015

(dollar amounts in thousands)

(unaudited)

The industrial composition of investments—non-controlled/non-affiliated at fair value as of March 31, 2015 was as follows:


Industry	Amortized Cost		Fair Value		% of Fair Value
Aerospace & Defense	$	20,875	$	21,167		10.41	%
Automotive		6,647		6,696		3.29
Banking, Finance, Insurance & Real Estate		9,549		9,503		4.67
Business Services		23,819		23,951		11.77
Capital Equipment		3,769		3,709		1.82
Chemicals, Plastics & Rubber		10,838		10,628		5.22
Construction & Building		7,288		7,334		3.61
Consumer Services		7,346		7,433		3.66
Containers, Packaging & Glass		12,925		12,775		6.28
Durable Consumer Goods		9,064		9,085		4.47
Energy: Electricity		1,668		1,710		0.84
Energy: Oil & Gas		3,338		3,304		1.62
Environmental Industries		6,417		6,390		3.14
Healthcare & Pharmaceuticals		16,327		16,365		8.04
High Tech Industries		8,134		8,093		3.98
Hotel, Gaming & Leisure		2,467		2,463		1.21
Media: Advertising, Printing & Publishing		8,385		8,326		4.09
Metals & Mining		3,467		3,458		1.70
Non-durable Consumer Goods		12,852		12,884		6.33
Retail		2,693		2,706		1.33
Telecommunications		7,010		6,942		3.41
Transportation: Cargo		9,100		9,091		4.47
Transportation: Consumer		3,535		3,597		1.77
Utilities: Electric		1,978		1,951		0.96
Wholesale		4,314		3,888		1.91

Total	$	203,805	$	203,449		100.00	%

The geographical composition of investments – non-controlled/non-affiliated at fair value as of March 31, 2015 was as follows:


Geography	Amortized Cost		Fair Value		% of Fair Value
Canada	$	1,912	$	1,891		0.93	%
Ireland		2,080		2,113		1.04
United Kingdom		6,767		6,760		3.32
United States		193,046		192,685		94.71

Total	$	203,805	$	203,449		100.00	%

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

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of December 31, 2014

(dollar amounts in thousands)


Investments— non-controlled/non-affiliated ⁽¹⁾	Industry	Interest Rate			Maturity Date		Acquisition Date		Par Amount		Amortized Cost ⁽⁶⁾		Fair Value ⁽⁷⁾		Percentage of Net Assets
First Lien Debt (93.23%)
Access CIG, LLC^{(2) (3) (5)}	Business Services		6.00	%		10/17/2021		10/16/2014	$	5,000	$	4,952	$	4,955		5.55	%
Accuvant Finance LLC^{(2) (3) (5)}	High Tech Industries		7.00			10/22/2020		4/22/2014		1,957		1,942		1,957		2.19
AF Borrower LLC (Accuvant)^{(2) (3) (5)}	High Tech Industries		6.25			1/28/2022		12/15/2014		3,000		2,940		2,960		3.31
Alpha Packaging Holdings, Inc.^{(2) (3) (5)}	Containers, Packaging & Glass		5.25			5/12/2020		5/9/2014		3,856		3,852		3,767		4.22
American Tire Distributors, Inc.^{(2) (3) (5)}	Automotive		5.75			6/1/2018		6/12/2014		1,064		1,064		1,039		1.16
Anaren, Inc.^{(2) (3) (4)}	Telecommunications		5.50			2/18/2021		2/18/2014		3,353		3,324		3,314		3.71
APX Group, Inc.^{(5) (8)}	Consumer Services		6.38			12/1/2019		10/15/2014		2,500		2,422		2,394		2.68
Aquilex LLC ^{(2) (3) (4)}	Environmental Industries		5.00			12/31/2020		12/20/2013		3,465		3,460		3,410		3.82
Ascensus, Inc.^{(2) (3) (4)}	Banking, Finance, Insurance & Real Estate		5.00			12/2/2019		12/2/2013		5,940		5,916		5,871		6.57
Blue Bird Body Company ^{(2) (3) (5)}	Transportation: Consumer		6.50			6/27/2020		7/22/2014		3,750		3,573		3,647		4.08
Brooks Equipment Company, LLC^{(2) (3) (5)}	Construction & Building		6.75			8/29/2020		8/29/2014		1,972		1,957		1,942		2.17
Capstone Logistics Acquisition, Inc.^{(2) (3) (5)}	Transportation: Cargo		5.50			10/7/2021		10/3/2014		4,988		4,939		4,869		5.45
Castle Management Borrower LLC (Highgate Hotels L.P.)^{(2) (3) (5) (12)}	Hotel, Gaming & Leisure		5.50			9/18/2020		10/10/2014		2,195		2,173		2,152		2.41
Central Security Group, Inc.^{(2) (3) (5)}	Consumer Services		6.25			10/6/2020		10/3/2014		5,000		4,928		4,956		5.55
Consolidated Aerospace Manufacturing, LLC ^{(2) (3) (4)}	Aerospace & Defense		5.00			3/27/2020		2/28/2014		1,963		1,957		1,912		2.14
CRCI Holdings, Inc. (CLEAResult Consulting, Inc.) ^{(2) (3) (5)}	Utilities: Electric		5.25			7/10/2019		7/29/2014		1,990		1,982		1,948		2.18
DTZ U.S. Borrower, LLC^{(2) (3) (4)}	Construction & Building		5.50			11/5/2021		10/28/2014		3,500		3,449		3,430		3.84
EP Minerals, LLC ^{(2) (3) (5)}	Metals & Mining		5.50			8/20/2020		8/20/2014		3,491		3,475		3,433		3.84
FCX Holdings Corp. ^{(2) (3) (5)}	Capital Equipment		5.50			8/4/2020		8/4/2014		3,781		3,778		3,704		4.15
Genex Holdings, Inc. ^{(2) (3) (5)}	Banking, Finance, Insurance & Real Estate		5.25			5/30/2021		5/22/2014		2,679		2,667		2,642		2.96
Green Energy Partners/Stonewall LLC^{(2) (3) (5) (13)}	Energy: Electricity		6.50			11/13/2021		11/12/2014		1,700		1,666		1,708		1.91
Hercules Achievement, Inc.(Varsity Brands Holding Co., Inc.) ^(2) (3) (5)	Durable Consumer Goods		6.00			12/11/2021		12/10/2014		5,000		4,951		4,955		5.55
Indra Holdings Corp. (Totes Isotoner)^{(2) (3) (5)}	Non-durable Consumer Goods		5.25			5/1/2021		4/29/2014		4,975		4,930		4,900		5.49
InterWrap Corp. (Canada)^{(2) (3) (4) (8)}	Construction & Building		5.25			11/1/2018		10/31/2013		1,949		1,936		1,909		2.14
Miller Heiman, Inc. ^{(2) (3) (11)}	Business Services		6.75			9/30/2019		10/1/2013		6,735		6,653		6,604		7.40
MSX International, Inc. ^{(2) (3) (5)}	Automotive		6.00			8/21/2020		8/18/2014		2,453		2,430		2,423		2.71
National Technical Systems, Inc.^{(2) (3) (4) (9)}	Aerospace & Defense		6.75			11/22/2018		11/22/2013		4,146		4,112		4,120		4.61
NES Global Talent Finance US LLC (United Kingdom) ^{(2) (3) (4) (8)}	Energy: Oil & Gas		6.50			10/3/2019		10/2/2013		3,413		3,357		3,412		3.82
Novetta, LLC^{(2) (3) (5)}	Aerospace & Defense		6.00			10/2/2020		11/19/2014		2,524		2,501		2,482		2.78
Pelican Products, Inc. ^{(2) (3) (5)}	Containers, Packaging & Glass		5.25			4/11/2020		4/8/2014		3,021		3,007		2,964		3.32
Phillips-Medisize Corporation ^{(2) (3) (5)}	Chemicals, Plastics & Rubber		4.75			6/16/2021		6/13/2014		2,488		2,477		2,430		2.72
Prowler Acquisition Corp. (Pipeline Supply and Service, LLC) ^(2) (3) (4)	Wholesale		5.50			1/28/2020		1/24/2014		4,360		4,324		4,257		4.77
PSC Industrial Holdings Corp.^{(2) (3) (4)}	Environmental Industries		7.00			12/5/2020		12/5/2014		3,000		2,971		2,955		3.31
QoL Meds, LLC ^{(2) (3) (4)}	Retail		5.50			7/15/2020		7/14/2014		2,713		2,700		2,664		2.98

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2014

(dollar amounts in thousands)


Investments— non-controlled/non-affiliated ⁽¹⁾	Industry	Interest Rate			Maturity Date		Acquisition Date		Par Amount		Amortized Cost ⁽⁶⁾		Fair Value ⁽⁷⁾		Percentage of Net Assets
First Lien Debt (93.23%) (continued)
RCHP, Inc. (Regionalcare) ^{(2) (3) (5)}	Healthcare & Pharmaceuticals		6.00	%		4/23/2019		4/21/2014	$	6,597	$	6,537	$	6,543		7.33	%
SolAero Technologies Corp.^{(2) (3) (5)}	Telecommunications		5.75			12/10/2020		12/9/2014		3,750		3,717		3,645		4.08
Sterling Infosystems, Inc. ^{(2) (3) (4)}	Business Services		5.50			5/13/2021		5/12/2014		2,985		2,972		2,965		3.32
Synarc-Biocore Holdings, LLC ^{(2) (3) (4)}	Healthcare & Pharmaceuticals		5.50			3/10/2021		3/6/2014		4,466		4,427		4,318		4.84
System Maintenance Services Holding, Inc.^{(2) (3) (4)}	High Tech Industries		5.00			10/18/2019		10/18/2013		3,230		3,220		3,165		3.54
The SI Organization, Inc.^{(2) (3) (4)}	Aerospace & Defense		5.75			11/23/2019		5/16/2014		4,686		4,644		4,733		5.30
TASC, Inc.^{(2) (3) (5) (8)}	Aerospace & Defense		7.00			5/23/2020		12/17/2014		5,000		4,800		4,900		5.49
The Topps Company, Inc. ^{(2) (3) (4)}	Non-durable Consumer Goods		7.25			10/2/2018		10/1/2013		4,029		3,998		3,977		4.45
Transilwrap Company, Inc.^{(2) (3) (10)}	Chemicals, Plastics & Rubber		5.00			11/22/2019		10/20/2013		4,928		4,921		4,809		5.39
Violin Finco S.A.R.L. (Alexander Mann Solutions) (United Kingdom) ^{(2) (3) (4) (8)}	Business Services		5.75			12/20/2019		12/18/2013		3,465		3,437		3,465		3.88
Vitera Healthcare Solutions, LLC ^{(2) (3) (4)}	Healthcare & Pharmaceuticals		6.00			11/4/2020		11/1/2013		3,337		3,309		3,312		3.71
W/S Packaging Group, Inc. ^{(2) (3) (4)}	Containers, Packaging & Glass		5.00			8/9/2019		8/8/2013		4,320		4,306		4,224		4.73
Watchfire Enterprises.^{(2) (3) (4)}	Media: Advertising, Printing & Publishing		5.00			10/2/2020		10/2/2013		3,456		3,445		3,373		3.78
Zest Holdings, LLC ^{(2) (3) (4)}	Durable Consumer Goods		5.25			8/16/2020		8/18/2014		4,320		4,320		4,234		4.74

*First Lien Debt Total*												170,818		169,748		190.07	%

Second Lien Debt (6.77%)
AF Borrower LLC (Accuvant) ^{(2) (3) (5)}	High Tech Industries		10.00	%		1/28/2023		12/15/2014	$	2,000	$	1,980	$	1,960		2.19	%
Allied Security Holdings LLC. ^{(2) (3) (5)}	Business Services		8.00			8/14/2021		9/25/2014		2,000		1,985		1,963		2.20
Berlin Packaging L.L.C ^{(2) (3) (5)}	Containers, Packaging & Glass		7.75			10/1/2022		9/24/2014		1,800		1,787		1,773		1.99
Creganna Finance (US) LLC (Ireland) ^{(2) (3) (5) (8)}	Healthcare & Pharmaceuticals		9.00			6/1/2022		11/20/2014		2,100		2,080		1,994		2.23
Genex Holdings, Inc. ^{(2) (3) (5)}	Banking, Finance, Insurance & Real Estate		8.75			5/30/2022		12/1/2014		1,000		987		950		1.06
Jazz Acquisition, Inc. (Wencor)^{(2) (3) (5)}	Aerospace & Defense		7.75			6/19/2022		6/25/2014		800		797		750		0.84
Phillips-Medisize Corporation ^{(2) (3) (5)}	Chemicals, Plastics & Rubber		8.25			6/16/2022		6/13/2014		1,500		1,486		1,423		1.59
TASC, Inc.^{(5) (8)}	Aerospace & Defense		12.00			5/23/2021		12/17/2014		1,500		1,470		1,515		1.70

*Second Lien Debt Total*												12,572		12,328		13.80	%

Total Investments—non-controlled/non-affiliated											$	183,390	$	182,076		203.87	%

(1)

Unless otherwise indicated, issuers of debt investments of NFIC are domiciled in the United States. Under 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 of December 31, 2014, 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 of December 31, 2014, the Company is not an “affiliated person” of any portfolio company.

(2)

(3)	Loan includes interest rate floor feature.

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2014

(dollar amounts in thousands)

(4)

These assets are owned by the Borrower Sub. The Borrower Sub has the Revolving Credit Facility. The lenders of the Revolving Credit Facility have a first lien security interest in substantially all of the assets of the Borrower Sub (see Note 5, Borrowings) and such assets are assets of the Borrower Sub to satisfy obligations of the Borrower Sub under the Revolving Credit Facility and are not available to creditors of the Company.

(5)

These assets are owned by the Company. The Company has the Facility. The lender of the Facility has a perfected first-priority security interest in substantially all of the portfolio investments held by each of the Company and certain domestic subsidiaries of the Company. The lender of the Facility also has a perfected first-priority security interest in the unfunded investor equity capital commitments (provided that the amount of unfunded capital commitments ultimately available to the lender is limited to $34,000) and such security interest will be released upon the earlier of (a) the date eligible investments held by the Company are equal to or greater than $62,500 and the Facility’s borrowing base equity test is satisfied and (b) the date the borrower has received equity capital contributions in an amount equal to $34,000 (see Note 5, Borrowings).

(6)	Amortized cost represents original cost, including origination fees, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.

(7)	Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (Notes 2 and 3), pursuant to the Company’s valuation policies.

(8)

(9)

National Technical Systems, Inc. has an undrawn delayed draw term loan of $790 par value at LIBOR + 5.50%, 1.25% floor, and an undrawn revolver of $226 par value at LIBOR + 5.50%, 1.25% floor. An unused rate of 1.25% and 0.50% is charged on the delayed draw term loan and revolver principal, respectively, while undrawn. The delayed draw term loan and revolver are both owned by the Company.

(10)	Transilwrap Company, Inc. is partially owned by the Company ($598 par value) as indicated in Note 5 above with the remaining $4,342 par value owned by the Borrower Sub as indicated in Note 4 above.

(11)	Miller Heiman, Inc. is partially owned by the Company ($2,469 par value) as indicated in Note 5 above with the remaining $4,266 par value owned by the Borrower Sub as indicated in Note 4 above.

(12)	Castle Management Borrower LLC (Highgate Hotels L.P.) has an undrawn delayed draw term loan of $300 par value at LIBOR + 4.50%, 1.00% floor. An unused rate of 1.00% is charged on the principal while undrawn.

(13)	Green Energy Partners/Stonewall LLC has an undrawn delayed draw term loan of $1,700 par value at LIBOR + 5.50%, 1.00% floor. An unused rate of 3.00% is charged on the principal while undrawn.

As of December 31, 2014, investments—non-controlled/non-affiliated, at fair value consisted of the following:


Type	Amortized Cost		Fair Value		% of Fair Value
First Lien Debt	$	170,818	$	169,748		93.23	%
Second Lien Debt		12,572		12,328		6.77

Total	$	183,390	$	182,076		100.00	%

NF INVESTMENT CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2014

(dollar amounts in thousands)

The industrial composition of investments—non-controlled/non-affiliated at fair value as of December 31, 2014 was as follows:


Industry	Amortized Cost		Fair Value		% of Fair Value
Aerospace & Defense	$	20,281	$	20,412		11.21	%
Automotive		3,494		3,462		1.90
Banking, Finance, Insurance & Real Estate		9,570		9,463		5.20
Business Services		19,999		19,952		10.96
Capital Equipment		3,778		3,704		2.03
Chemicals, Plastics & Rubber		8,884		8,662		4.76
Construction & Building		7,342		7,281		4.00
Consumer Services		7,350		7,350		4.04
Containers, Packaging & Glass		12,952		12,728		6.99
Durable Consumer Goods		9,271		9,189		5.05
Energy: Electricity		1,666		1,708		0.94
Energy: Oil & Gas		3,357		3,412		1.87
Environmental Industries		6,431		6,365		3.50
Healthcare & Pharmaceuticals		16,353		16,167		8.88
High Tech Industries		10,082		10,042		5.51
Hotel, Gaming & Leisure		2,173		2,152		1.18
Media: Advertising, Printing & Publishing		3,445		3,373		1.85
Metals & Mining		3,475		3,433		1.89
Non-durable Consumer Goods		8,928		8,877		4.88
Retail		2,700		2,664		1.46
Telecommunications		7,041		6,959		3.82
Transportation: Cargo		4,939		4,869		2.67
Transportation: Consumer		3,573		3,647		2.00
Utilities: Electric		1,982		1,948		1.07
Wholesale		4,324		4,257		2.34

Total	$	183,390	$	182,076		100.00	%

The geographical composition of investments—non-controlled/non-affiliated at fair value December 31, 2014 was as follows:


Geography	Amortized Cost		Fair Value		% of Fair Value
Canada	$	1,936	$	1,909		1.05	%
Ireland		2,080		1,994		1.09	%
United Kingdom		6,794		6,877		3.78	%
United States		172,580		171,296		94.08	%

Total	$	183,390	$	182,076		100.00	%

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

NF INVESTMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

March 31, 2015

(dollar amounts in thousands, except per share data)

1. ORGANIZATION

NF Investment Corp. (“NFIC” or the “Company”) is a Maryland corporation formed on November 1, 2012, and structured as an externally managed, non-diversified closed-end investment company. On August 5, 2013, NFIC filed its election 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”). NFIC has elected to be treated, and intends to continue 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 (the “Code”).

NFIC’s investment objective is to generate current income and capital appreciation primarily through debt investments in U.S. middle market companies, which the Company defines as companies with approximately $10 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”). NFIC seeks to achieve its investment objective by investing primarily in first lien (which may include unitranche loans and the first-out and last-out tranches thereof) and second lien senior secured loans (collectively, “Middle Market Senior Loans”), subject to, in the case of second lien senior secured loans, a limit of 10% of NFIC’s total assets. The Middle Market Senior Loans are generally made to private U.S. middle market companies that are, in many cases, controlled by private equity firms. In addition, NFIC may invest up to 10% of its total assets in high yield securities whose risk profile, as determined at the sole discretion of Carlyle GMS Investment Management L.L.C. (the “Investment Adviser”), is similar to or better than the risk profile of Middle Market Senior Loans. NFIC expects that the composition of its portfolio will change over time given the Investment Adviser’s view on, among other things, the economic and credit environment (including with respect to interest rates) in which the Company is operating.

On August 6, 2013, NFIC completed its initial closing of capital commitments (the “Initial Closing”) and subsequently commenced substantial investment operations. Prior to August 6, 2013, NFIC had not commenced operations and was a development stage company as defined by Accounting Standards Codification (“ASC”) 915, Development Stage Entity. During this time, NFIC focused substantially all of its efforts on establishing its business.

NFIC is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. NFIC will remain an emerging growth company for up to five years following an initial public offering, although if the market value of the common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, NFIC would cease to be an emerging growth company as of the following December 31.

NFIC SPV LLC (the “Borrower Sub”) is a Delaware limited liability company that was formed on June 18, 2013. The Borrower Sub invests in first and second lien senior secured loans. The Borrower Sub is a wholly-owned subsidiary of the Company and is consolidated in these consolidated financial statements commencing from the date of its formation, June 18, 2013.

NFIC is externally managed by its Investment Adviser, an investment adviser registered under the Investment Advisers Act of 1940, as amended. Carlyle GMS Finance Administration L.L.C. (the “Administrator”) provides the administrative services necessary for NFIC 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 L.P. “Carlyle” refers to The Carlyle Group L.P., its affiliates and its consolidated subsidiaries, a global alternative asset manager publicly traded on NASDAQ Global Select Market under the symbol “CG”. Refer to the sec.gov website for further information on Carlyle.

its aggregate capital commitments (a “Qualified IPO”), the Board of Directors (subject to any necessary stockholder approvals and applicable requirements of the Investment Company Act) will use its best efforts to wind down and/or liquidate and dissolve the Company. These efforts may include cash tender offers from time to time as proceeds become available. Refer to sec.gov website for further information on Carlyle GMS Finance, Inc.

As a BDC, NFIC 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).

NFIC has elected to be treated, and intends to continue to comply with the requirements to qualify annually, as a RIC under the Code, and operates in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, NFIC 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 defined by the Code, for each year. Pursuant to this election, NFIC generally does not have to pay corporate level taxes on any income that it distributes to stockholders, provided that NFIC 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 (“US GAAP”). NFIC and the Borrower Sub are both investment companies for the purposes of accounting and financial reporting in accordance with Accounting Standards Update (“ASU”) 2013-08, Financial Services—Investment Companies (“ASU 2013-08”): Amendments to the Scope, Measurement and Disclosure Requirements and NFIC consolidates the Borrower Sub. The consolidated financial statements include the accounts of NFIC and its wholly-owned subsidiary, the Borrower Sub. All significant intercompany balances and transactions have been eliminated. US GAAP for an investment company requires investments to be recorded at fair value. The carrying value for all other assets and liabilities approximates their fair value.

The interim financial statements have been prepared in accordance with US GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X. Accordingly, certain disclosures accompanying the annual consolidated financial statements prepared in accordance with US GAAP are omitted. In the opinion of management, all adjustments considered necessary for the fair presentation of consolidated financial statements for the interim period presented have been included. These adjustments are of a normal, recurring nature. This Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2014. The results of operations for the three month period ended March 31, 2015 is not necessarily indicative of the operating results to be expected for the full year.

Use of Estimates

The preparation of consolidated financial statements in conformity with US 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 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 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 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 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 securities purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of investments represents the original cost, including origination fees, 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 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. As of March 31, 2015 and December 31, 2014 and for the three month periods ended March 31, 2015 and 2014, no loans in the portfolio contained PIK provisions.

Other Income

Other income may include income such as consent, waiver and amendment fees associated with the Company’s investment activities as well as any fees for managerial assistance services rendered by the Company to portfolio companies. Such fees are recognized as income when earned or the services are rendered. The Company may receive a fee for guaranteeing the outstanding debt of a portfolio company. Such fee will be 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 three month periods ended March 31, 2015 and 2014, there was no other income.

Non-Accrual Income

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 March 31, 2015 and December 31, 2014 and for the three month periods ended March 31, 2015 and 2014, no loans in the portfolio were on non-accrual status.

Revolving Credit Facility and Facility Related Costs, Expenses and Deferred Financing Costs (See Note 5, Borrowings)

Interest expense and unused commitment fees on the Revolving Credit Facility and Facility are recorded on an accrual basis. Unused commitment fees are included in credit facility fees in the accompanying Consolidated Statements of Operations.

The Revolving Credit Facility and Facility are recorded at carrying value, which approximates fair value.

Deferred financing costs consist of capitalized expenses related to the closing of the Revolving Credit Facility and Facility. Amortization of deferred financing costs for each credit facility is computed on the straight-line basis over the respective term of each credit facility, except for a portion that was accelerated in connection with the amendment of the Revolving Credit Facility as described in Note 5. 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 NFIC up to $750. As of March 31, 2015 and December 31, 2014, $663 of organization and offering costs had been incurred by NFIC. The $663 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 organization costs incurred are expensed and the offering costs are charged against equity when incurred.

Income Taxes

For federal income tax purposes, NFIC 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, NFIC must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then NFIC 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 NFIC 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, NFIC 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, NFIC is subject to a 4% nondeductible federal excise tax on undistributed income unless NFIC 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 NFIC that is subject to corporate income tax is considered to have been distributed. NFIC intends to make sufficient distributions each taxable year to satisfy the excise distribution requirements.

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 Borrower Sub is a disregarded entity for tax purposes and is consolidated with the tax return of NFIC.

Capital Calls and Dividends and Distributions to Common Stockholders

The Company records the shares issued in connection with capital calls as of the effective date, or due date, of the capital call, which is the date shares are issued. 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 and paid in cash. 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.

Functional Currency

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

Recent Accounting Standards Updates

On April 7, 2015, the Financial Accounting Standards Board issued ASU 2015-3, Interest—Imputation of Interest (Subtopic 835-30)—Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-3”). ASU 2015-3 requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts and premiums. This guidance is effective for the Company on January 1, 2016 and the ASU requires the guidance to be applied on a retrospective basis. This guidance is not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

3. 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 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.

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 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.

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 March 31, 2015 and December 31, 2014.

US 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 I—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 I 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 II—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 III—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, collateralized loan obligations, 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 quarter in which the transfers occur. For the three month periods ended March 31, 2015 and 2014, 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 March 31, 2015 and December 31, 2014:


	March 31, 2015
	Level I		Level II		Level III		Total
Assets
First Lien Debt		—	$	2,488	$	186,524	$	189,012
Second Lien Debt		—		—		14,437		14,437

Total		—	$	2,488	$	200,961	$	203,449


	December 31, 2014
	Level I		Level II		Level III		Total
Assets
First Lien Debt		—	$	2,394	$	167,354	$	169,748
Second Lien Debt		—		—		12,328		12,328

Total		—	$	2,394	$	179,682	$	182,076

The changes in the Company’s investments at fair value for which the Company has used Level III inputs to determine fair value and net change in unrealized appreciation (depreciation) included in earnings for Level III investments still held are as follows:


	Financial Assets For the three month period ended March 31, 2015
	First Lien Debt			Second Lien Debt		Total
Balance, beginning of period	$	167,354		$	12,328	$	179,682
Purchases		21,289			1,970		23,259
Paydowns		(2,931	)		—		(2,931	)
Accretion of discount		77			4		81
Net change in unrealized appreciation (depreciation)		735			135		870

Balance, end of period	$	186,524		$	14,437	$	200,961

Net change in unrealized appreciation (depreciation) included in earnings related to investments still held as of March 31, 2015 included in net change in unrealized appreciation (depreciation) on investments non-controlled/non-affiliated on the Consolidated Statements of Operations	$	750		$	135	$	885


	Financial Assets For the three month period ended March 31, 2014
	First Lien Debt			Total
Balance, beginning of period	$	59,868		$	59,868
Purchases		16,582			16,582
Paydowns		47			47
Accretion of discount		(3,200	)		(3,200	)
Net change in unrealized appreciation (depreciation)		144			144

Balance, end of period	$	73,441		$	73,441

Net change in unrealized appreciation (depreciation) included in earnings related to investments still held as of March 31, 2014 included in net change in unrealized appreciation (depreciation) on investments non-controlled/non-affiliated on the Consolidated Statements of Operations	$	187		$	187

The Company generally uses the following framework when determining the fair value of investments that are categorized as Level III:

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 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.

The following tables summarize the quantitative information related to the significant unobservable inputs for Level III instruments which are carried at fair value as of March 31, 2015 and December 31, 2014:


	Fair Value as of March 31, 2015		Valuation Techniques	Significant Unobservable Inputs	Range
	Fair Value as of March 31, 2015		Valuation Techniques	Significant Unobservable Inputs	Low			High			Weighted Average
Investments in First Lien Debt	$	139,836	Discounted Cash Flow	Discount Rate		4.97	%		9.49	%		6.21	%
		46,688	Consensus Pricing	Indicative Quotes		96.38	%		100.94	%		99.86	%

Total First Lien Debt	$	186,524

Investments in Second Lien Debt	$	6,944	Discounted Cash Flow	Discount Rate		9.79	%		11.17	%		10.36	%
		7,493	Consensus Pricing	Indicative Quotes		99.67	%		100.63	%		100.26	%

Total Second Lien Debt	$	14,437

Total Debt	$	200,961

Total Level III Investments	$	200,961


	Fair Value as of December 31, 2014		Valuation Techniques	Significant Unobservable Inputs	Range
	Fair Value as of December 31, 2014		Valuation Techniques	Significant Unobservable Inputs	Low			High			Weighted Average
Investments in First Lien Debt	$	156,534	Discounted Cash Flow	Discount Rate		5.12	%		7.57	%		6.18	%
		10,820	Consensus Pricing	Indicative Quotes		98.50	%		99.33	%		98.73	%

Total First Lien Debt	$	167,354

Investments in Second Lien Debt	$	7,077	Discounted Cash Flow	Discount Rate		9.36	%		10.63	%		10.13	%
		5,251	Consensus Pricing	Indicative Quotes		98.13	%		101.00	%		99.08	%

Total Second Lien Debt	$	12,328

Total Debt	$	179,682

Total Level III Investments	$	179,682

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 and indicative quotes. Significant increases in discount rates would result in a significantly lower fair value measurement. Significant decreases in indicative quotes in isolation may result in a significantly lower fair value measurement.

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 March 31, 2015 and December 31, 2014.


	March 31, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
Secured borrowings	$	94,603	$	94,603	$	80,903	$	80,903

Total	$	94,603	$	94,603	$	80,903	$	80,903

The fair value of secured borrowings is categorized as Level III 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 July 10, 2013, the Company’s Board of Directors, including a majority of the directors who are not “interested persons” as defined in Section 2(a)(19) of the Investment Company Act (“Independent Directors”), approved an investment advisory and management agreement (the “Investment Advisory Agreement”) between the Company and the Investment Adviser in accordance with, and on the basis of an evaluation satisfactory to such directors as required by, Section 15(c) of the Investment Company Act. The initial term of the Investment Advisory Agreement is two years from July 10, 2013 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 Independent Directors. On March 11, 2015, the Company’s Board of Directors, including a majority of the Independent Directors, approved the continuance of the Advisory Agreement for a one year period. The Investment Advisory Agreement will automatically terminate in the event of an assignment and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party. Subject to the overall supervision of the Board of Directors, the Investment Adviser provides investment advisory services to the Company. For providing these services, the Investment Adviser receives management fees from the Company.

The management fee is calculated and payable quarterly in arrears at an annual rate of 0.25% of the average value of the gross assets of the Company at the end of the two most recently completed fiscal quarters, excluding any cash and cash equivalents and including assets acquired with leverage from use of the Revolving Credit Facility and Facility (see Note 5, Borrowings). For purposes of this calculation, cash and cash equivalents include any temporary investments in cash-equivalents, U.S. government securities and other high quality investment grade debt investments that mature in 12 months or less from the date of investment. The management fee for any partial quarter is prorated.

For the three month periods ended March 31, 2015 and 2014, management fees were $119 and $41, respectively.

As of March 31, 2015 and December 31, 2014, $119 and $171, respectively, was included in management fees payable in the accompanying Consolidated Statements of Assets and Liabilities.

On July 10, 2013, 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 July 10, 2013, the Company’s Board of Directors approved an administration agreement (the “Administration Agreement”) between the Company and the Administrator. Pursuant to the Administration Agreement, the Administrator provides services and receives reimbursements equal to an amount that reimburses the Administrator for its costs and expenses and the Company’s allocable portion of overhead incurred by the Administrator in performing its obligations under the Administration Agreement, including the Company’s allocable portion of the compensation paid to or compensatory distributions received by the Company’s officers (including the Chief Compliance Officer and Chief Financial Officer) and respective staff who provide services to the Company, operations staff who provide services to the Company, and any internal audit staff, to the extent internal audit performs a role in the Company’s Sarbanes-Oxley Act internal control assessment. Reimbursement under the Administration Agreement occurs quarterly in arrears.

The initial term of the Administration Agreement is two years from July 10, 2013 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. On March 11, 2015, the Company’s Board of Directors, including a majority of the Independent Directors, approved the continuance of the Administration Agreement for a one year period. The Administration Agreement may not be assigned by a party without the consent of the other party and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party.

For the three month periods ended March 31, 2015 and 2014, NFIC incurred $33 and $53, respectively, in fees under the Administrative Agreement, which are included in administrative service fees in the accompanying Consolidated Statements of Operations. As of March 31, 2015 and December 31, 2014, $17 and $25, respectively, was unpaid and included in administrative service fees payable in the accompanying Consolidated Statements of Assets and Liabilities.

Sub-Administration Agreements

On July 10, 2013, the Administrator entered into sub-administration agreements with Carlyle Employee Co. and CELF Advisors LLP. Pursuant to the agreements, Carlyle Employee Co. and CELF Advisors LLP provide the Administrator with access to personnel.

On July 10, 2013, the Administrator entered into a sub-administration agreement with State Street Bank and Trust Company (as amended, the “Sub-Administration Agreement”). On March 11, 2015, the Company’s Board of Directors, including a majority of the Independent Directors, approved an amendment to the Sub-Administration Agreement. As amended, effective as of April 1, 2015 the initial term of the Sub-Administration Agreement ends on April 1, 2017 and, unless terminated earlier, the Sub-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 the vote of a majority of the outstanding voting securities of the Company and (ii) the vote of a majority of the Company’s Independent Directors. The Sub-Administration Agreement may be terminated upon at least 60 days’ written notice and without penalty by the vote of a majority of the outstanding securities of the Company, or by the vote of the Board of Directors or by either party to the Sub-Administration Agreement.

For the three month periods ended March 31, 2015 and 2014, fees incurred in connection with the Sub-Administration Agreement, which amounted to $45 and $15, respectively, were included in other general and administrative in the accompanying Consolidated Statements of Operations. As of March 31, 2015 and December 31, 2014, $45 and $30, respectively, was unpaid and included in other accrued expenses and liabilities in the accompanying Consolidated Statements of Assets and Liabilities.

Placement Fees

On July 10, 2013, 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 three month periods ended March 31, 2015 and 2014, TCG did not earn or receive any placement fees from NFIC stockholders in connection with the issuance or sale of the Company’s common stock.

Board of Directors

NFIC’s Board of Directors currently consists of five members, three of whom are Independent Directors. On July 10, 2013, the Board of Directors also established an Audit Committee consisting of its Independent Directors, and may establish additional committees in the future. For the three month periods ended March 31, 2015 and 2014, NFIC incurred $59 and $63, respectively, in fees and expenses associated with its Independent Directors and Audit Committee. As of March 31, 2015 and December 31, 2014, $9 and $4, respectively, was unpaid and included in other accrued expenses and liabilities in the accompanying Consolidated Statements of Assets and Liabilities. As of March 31, 2015 and December 31, 2014, certain current directors had committed $1,000 in capital commitments to the Company.

5. BORROWINGS

In accordance with the Investment Company Act, the Company is 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 March 31, 2015 and December 31, 2014, asset coverage was 213.60% and 210.39%, respectively. During the three month period ended March 31, 2015, there were net secured borrowings of $35,700 under the Revolving Credit Facility and Facility and repayments of $22,000 under the Facility. For the three month period ended March 31, 2014, there were secured borrowings of $2,500 under the Revolving Credit Facility and none under the Facility. As of March 31, 2015 and December 31, 2014, there were $94,603 and $80,903, respectively, in secured borrowings outstanding.

Revolving Credit Facility

The Borrower Sub closed on September 12, 2013 the Revolving Credit Facility, which was subsequently amended on July 25, 2014 (the “First Amendment”). The First Amendment, among other things (a) reduced the maximum commitments from $175,000 to $140,000, (b) extended the revolving period from September 12, 2016 to the earlier of September 12, 2017 and the completion of a Qualified IPO by Carlyle GMS Finance, Inc., (c) extended the maturity date from September 12, 2019 to the earlier of September 11, 2020 and the completion of a Qualified IPO by Carlyle GMS Finance, Inc., (d) increased the per annum revolving period rate from the applicable base rate (based on LIBOR, the commercial paper rate, prime rate or the federal funds rate) plus 1.50% to the applicable base rate plus 1.60%, (e) added second lien loans and covenant-lite loans (subject to certain limitations) to the types of assets eligible to be purchased by the Borrower Sub, and (f) modified certain other restrictions and requirements set forth in the Revolving Credit Facility. Advances under the Revolving Credit Facility first became available once the Borrower Sub held at least $10,500 of minimum equity in its assets. The Revolving Credit Facility provides for secured borrowings during the applicable revolving period up to an amount equal to the lesser of $140,000, the borrowing base as calculated pursuant to the terms of the Revolving Credit Facility, and the amount of net cash proceeds and unpledged capital commitments the Company has received with an accordion feature that can, subject to certain conditions, increase the aggregate maximum credit commitment up to an amount not to exceed $262,500, subject to restrictions imposed on borrowings under the Investment Company Act and certain restrictions and conditions set forth in the Revolving Credit Facility, including adequate collateral to support such borrowings. The Revolving Credit Facility has a revolving period through the earlier of September 12, 2017 or the completion of a Qualified IPO by Carlyle GMS Finance, Inc. (with two one-year extension options, subject to the Borrower Sub’s and the lenders’ consent) and a

maturity date of the earlier of September 11, 2020 or the completion of a Qualified IPO by Carlyle GMS Finance, Inc. (extendable in connection with an extension of the revolving period). Base rate borrowings under the Revolving Credit Facility bear interest initially at the applicable commercial paper rate (if the lender is a conduit lender) or LIBOR (or, if applicable, a rate based on the prime rate or federal funds rate) plus 1.60% per year during the revolving period, with pre-determined future interest rate increases of 1.25%-2.15% over the three years following the end of the revolving period. The Borrower Sub is also required to pay an undrawn commitment fee of between 0.25% and 1.00% per year depending on the usage of the Revolving Credit Facility. Payments under the Revolving Credit Facility are made quarterly. The lenders have a first lien security interest on substantially all of the assets of the Borrower Sub.

As part of the Revolving Credit Facility, the Borrower Sub is subject to limitations as to how borrowed funds may be used and the types of loans that are eligible to be acquired by the Borrower Sub including, but not limited to, restrictions on sector and geographic concentrations, loan size, payment frequency, tenor and minimum investment ratings (or estimated ratings). In addition, borrowed funds are intended to be used primarily to purchase first lien loan assets, and the Borrower Sub is limited in its ability to purchase certain other assets (including, but not limited to, second lien loans, covenant-lite loans, revolving and delayed draw loans and discount loans) and other assets are not permitted to be purchased (including, but not limited to paid-in-kind loans). The Revolving Credit Facility has certain requirements relating to interest coverage, collateral quality and portfolio performance, including limitations on delinquencies and charge offs, certain violations of which could result in the immediate acceleration of the amounts due under the Revolving Credit Facility. The Revolving Credit Facility is also subject to a borrowing base that applies different advance rates to assets held by the Borrower Sub based generally on the fair market value of such assets. Under certain circumstances as set forth in the Revolving Credit Facility, the Company could be obliged to repurchase loans from the Borrower Sub.

Related to the First Amendment, which reduced the maximum commitments under the Revolving Credit Facility, $370 of deferred financing costs (representing the prorated financing costs related to the reduction in commitments) were immediately expensed on July 25, 2014 in lieu of continuing to amortize over the term of the Revolving Credit Facility.

As of March 31, 2015 and December 31, 2014, the Borrower Sub was in compliance with all covenants and other requirements of the Revolving Credit Facility.

Facility

The Company closed on March 27, 2014 on the Facility, which was subsequently amended on August 22, 2014 (the “First Facility Amendment”) and on December 12, 2014 (the “Second Facility Amendment”). The First Facility Amendment, among other things added second lien covenant-lite loans (subject to certain limitations) to the types of assets eligible to be used as collateral by the Company for advances. The Second Facility Amendment, among other things (A) reduced interest from either (a) LIBOR plus an applicable spread of (i) prior to the Commitment Termination Date, 2.25% and (ii) following the Commitment Termination Date, 2.65%, or (b) an “alternative base rate” (which is the highest of a prime rate, the federal funds effective rate plus 0.50%, or one month LIBOR plus 1.00%) plus an applicable spread of (i) prior to the Commitment Termination Date, 1.25% and (ii) following the Commitment Termination Date, 1.65% to either (a) LIBOR plus an applicable spread of (i) prior to the Commitment Termination Date, 2.00% and (ii) following the Commitment Termination Date, 2.50%, or (b) an “alternative base rate” (which is the highest of a prime rate, the federal funds effective rate plus 0.50%, or one month LIBOR plus 1.00%) plus an applicable spread of (i) prior to the Commitment Termination Date, 1.00% and (ii) following the Commitment Termination Date, 1.50% and (B) increased the maximum capacity under the Facility after the exercise by the Company of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing from $75,000 to $125,000. Prior to the exercise of the accordion noted above, the maximum principal amount of the Facility is $50,000, subject to availability under the Facility, which is based on certain advance rates multiplied by the value of the Company’s portfolio investments net of certain other indebtedness that the Company may incur in accordance with the terms of the Facility. Proceeds of the Facility may be used for general corporate purposes,

including the funding of portfolio investments. Maximum capacity under the Facility may be increased to $125,000 through the exercise by the Company of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing. The Facility includes a $10,000 limit for swingline loans and a $5,000 limit for letters of credit. The Company may borrow amounts in U.S. dollars, subject to the satisfaction of certain conditions, including certain collateral quality tests. The availability period under the Facility will terminate on March 27, 2017 or earlier under certain conditions specified in the Facility (the “Commitment Termination Date”) and the Facility will mature on March 27, 2020 (the “Maturity Date”). During the period from the Commitment Termination Date to the Maturity Date, the Company will be obligated to make mandatory prepayments under the Facility out of the proceeds of certain asset sales, other recovery events and equity and debt issuances. Amounts drawn under the Facility, including amounts drawn in respect of letters of credit, will bear interest at either (a) LIBOR plus an applicable spread of (i) prior to the Commitment Termination Date, 2.00% and (ii) following the Commitment Termination Date, 2.50%, or (b) an “alternative base rate” (which is the highest of a prime rate, the federal funds effective rate plus 0.50%, or one month LIBOR plus 1.00%) plus an applicable spread of (i) prior to the Commitment Termination Date, 1.00% and (ii) following the Commitment Termination Date, 1.50%. The Company may elect either the LIBOR or the “alternative base rate” at the time of drawdown, and loans may be converted from one rate to another at any time, subject to certain conditions. The Company will also pay a fee of 0.375% on undrawn amounts under the Facility and, in respect of each undrawn letter of credit, a fee and interest rate equal to the then-applicable margin under the Facility while the letter of credit is outstanding.

Subject to certain exceptions, the Facility is secured by a perfected first-priority security interest in substantially all of the portfolio investments held by each of the Company and certain domestic subsidiaries of the Company (such subsidiaries collectively, the “Guarantors”) and the Company’s unfunded investor equity capital commitments (provided that the amount of unfunded capital commitments ultimately available to the lenders is limited to $34,000). The Company is required to cause the Guarantors to guaranty the Facility. The pledge of unfunded investor equity capital commitments shall be released upon the earlier of (a) the date eligible investments held by the Company are equal to or greater than $62,500 and the Facility’s borrowing base equity test is satisfied and (b) the date the borrower has received equity capital contributions in an amount equal to $34,000. Such eligible investments and shareholder equity thresholds have not been satisfied as of March 31, 2015 and December 31, 2014. The Facility includes customary covenants, including certain financial covenants related to asset coverage, shareholders’ equity, liquidity and interest coverage, 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.

As of March 31, 2015 and December 31, 2014, the Company was in compliance with all covenants and other requirements of the Facility.

Summary of Facilities

The facilities of the Company and the Borrower Sub consisted of the following as of March 31, 2015 and December 31, 2014:


	March 31, 2015
	Total Facility		Borrowings Outstanding		Unused Portion ⁽¹⁾		Amount Available ⁽²⁾
Revolving Credit Facility	$	140,000	$	62,603	$	77,397	$	2,890
Facility		50,000		32,000		18,000		10,309

Total	$	190,000	$	94,603	$	95,397	$	13,199


	December 31, 2014
	Total Facility		Borrowings Outstanding		Unused Portion ⁽¹⁾		Amount Available ⁽²⁾
Revolving Credit Facility	$	140,000	$	39,403	$	100,597	$	2,695
Facility		50,000		41,500		8,500		12,638

Total	$	190,000	$	80,903	$	109,097	$	15,333

(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.

As of March 31, 2015 and December 31, 2014, $283 and $231, respectively, of interest expense, $100 and $88, respectively, of unused commitment fees and $19 and $19, respectively, of other fees were included in interest and credit facility fees payable. For the three month periods ended March 31, 2015 and 2014, the average interest rate was 1.92% and 1.66%, respectively, and average principal debt outstanding was $86,066 and $26,634, respectively. As of March 31, 2015 and December 31, 2014, the interest rate was 1.94% and 2.00%, respectively, based on floating LIBOR rates.

For the three month periods ended March 31, 2015 and 2014, the components of interest expense and credit facility fees were as follows:


	For the three month periods ended
	March 31, 2015		March 31, 2014
Interest expense	$	413	$	110
Facility unused commitment fee		120		95
Amortization of deferred financing costs		134		91
Other fees		16		16

Total interest expense and credit facility fees	$	683	$	312

Cash paid for interest expense	$	361	$	50

6. COMMITMENTS AND CONTINGENCIES

A summary of significant contractual payment obligations was as follows as of March 31, 2015 and December 31, 2014:


	Secured Borrowings
Payment Due by Period	March 31, 2015		December 31, 2014
Less than 1 Year	$	—	$	—
1-3 Years		—		—
3-5 Years		32,000		—
More than 5 Years		62,603		80,903

Total	$	94,603	$	80,903

In the ordinary course of its business, the Company enters into contracts or agreements that contain indemnifications 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 March 31, 2015 and December 31, 2014 for any such exposure.

As of March 31, 2015 and December 31, 2014, the Company had $190,077 and $190,077, respectively, in total capital commitments from stockholders, of which $81,042 and $98,041, respectively, was unfunded. As of March 31, 2015 and December 31, 2014, certain current directors had committed $1,000 in capital commitments to the Company.

As of March 31, 2015 and December 31, 2014, there was a $34,000 pledge of unfunded investor equity capital commitments to the lender of the Facility. The $34,000 pledge of unfunded investor equity capital commitments shall be released upon the earlier of (a) the date eligible investments held by the Company are equal to or greater than $62,500 and the Facility’s borrowing base equity test is satisfied and (b) the date the borrower has received equity capital contributions in an amount equal to $34,000. Such eligible investments and shareholder equity thresholds have not been satisfied as of March 31, 2015 and December 31, 2014.

Upon the earlier of August 6, 2018 or the completion of a Qualified IPO by Carlyle GMS Finance, Inc., investors will be released from any further obligation to purchase additional shares of common stock, subject to certain exceptions contained in the subscription agreement.

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
	March 31, 2015		December 31, 2014
Unfunded delayed draw commitments	$	1,749	$	2,790
Unfunded revolving term loan commitments		226		226

Total unfunded commitments	$	1,975	$	3,016

7. NET ASSETS

In connection with its formation, the Company has the authority to issue 200,000,000 shares of common stock, $0.01 per share par value.

During the three month period ended March 31, 2015, the Company issued 862,946 shares for $17,001. The following table summarizes capital activity during the three month period ended March 31, 2015:


	Common Stock				Capital In Excess Of Par Value		Offering Costs			Accumulated Net Investment Income (Loss)			Accumulated Net Unrealized Appreciation (Depreciation) on Investments			Total Net Assets
	Shares		Amount
	Shares		Amount
Balance, beginning of period		4,618,564	$	46	$	91,478	$	(45	)	$	(856	)	$	(1,314	)	$	89,309
Common stock issued		862,946		9		16,992		—			—			—			17,001
Net investment income (loss)		—		—		—		—			1,845			—			1,845
Net change in unrealized appreciation (depreciation) on investments—non-controlled/non-affiliated		—		—		—		—			—			958			958
Dividends declared		—		—		—		—			(1,645	)		—			(1,645	)

Balance, end of period		5,481,510	$	55	$	108,470	$	(45	)	$	(656	)	$	(356	)	$	107,468

During the three month period ended March 31, 2014, the Company issued 925,459 shares for $18,334. The following table summarizes capital activity during the three month period ended March 31, 2014:


	Common Stock				Capital In Excess Of Par Value		Offering Costs			Accumulated Net Investment Income (Loss)			Accumulated Net Change in Unrealized Appreciation (Depreciation) on Investments			Total Net Assets
	Shares		Amount		Capital In Excess Of Par Value		Offering Costs			Accumulated Net Investment Income (Loss)						Total Net Assets
Balance, beginning of period		2,265,375	$	23	$	44,667	$	(45	)	$	(601	)	$	(107	)	$	43,937
Common stock issued		925,459		9		18,325		—			—			—			18,334
Net investment income (loss)		—		—		—		—			152			—			152
Net change in unrealized appreciation (depreciation) on investments—non-controlled/non-affiliated		—		—		—		—			—			144			144
Dividends declared		—		—		—		—			(128	)		—			(128	)

Balance, end of period		3,190,834	$	32	$	62,992	$	(45	)	$	(577	)	$	37		$	62,439

The following table summarizes total shares issued and proceeds received related to capital drawdowns delivered pursuant to subscriptions for the Company’s common stock during the three month period ended March 31, 2015:


	Shares Issued		Proceeds Received
January 16, 2015		203,045	$	4,000
February 26, 2015		659,901		13,001

Total		862,946	$	17,001


	Shares Issued		Proceeds Received
March 21, 2014		925,459	$	18,334

Total		925,459	$	18,334

Subscribed but unissued shares are presented in equity with a deduction of subscriptions receivable until cash is received for a subscription. There were no subscribed but unissued shares as of March 31, 2015 and December 31, 2014.

Subscription transactions during the three month periods ended March 31, 2015 and 2014, were executed at an offering price at a premium to net asset value due to the requirement to use prior quarter net asset value as the offering price unless it would result in the Company selling shares of its common stock at a price below the current net asset value and also in order to effect a reallocation of organizational costs to subsequent investors. Such subscription transactions increased net asset value by $0.06 per share and $0.09 per share, respectively, for the three month periods ended March 31, 2015 and 2014.

As of March 31, 2015 and December 31, 2014, four stockholders represented 97.3% and 96.9%, respectively, of total net assets.

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 period.

Basic and diluted earnings per common share were as follows:


	For the three month periods ended
	March 31, 2015		March 31, 2014
Net increase (decrease) in net assets resulting from operations	$	2,803	$	296
Weighted-average common shares outstanding		5,037,064		2,378,487

Basic and diluted earnings per common share	$	0.56	$	0.12

The following table summarizes the Company’s dividends declared and payable since inception through the quarter ended March 31, 2015:


Date Declared	Record Date	Payment Date	Per Share Amount		Total Amount
March 13, 2014	March 31, 2014	April 14, 2014	$	0.04	$	128
June 26, 2014	June 30, 2014	July 14, 2014	$	0.12	$	383
September 12, 2014	September 18, 2014	October 9, 2014	$	0.24	$	825
December 19, 2014	December 29, 2014	January 26, 2015	$	0.27	$	1,247
March 11, 2015	March 13, 2015	April 17, 2015	$	0.30	$	1,645

8. CONSOLIDATED FINANCIAL HIGHLIGHTS

The following is a schedule of consolidated financial highlights for the three month periods ended March 31, 2015 and 2014:


	For the three month periods ended
	March 31, 2015			March 31, 2014
Per Share Data:
Net asset value per share, beginning of period	$	19.34		$	19.40
Net investment income (loss) ⁽¹⁾		0.37			0.06
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments		0.14			0.06

Net increase (decrease) in net assets resulting from operations		0.51			0.12

Dividends declared⁽²⁾		(0.30	)		(0.04	)
Effect of subscription offering price⁽³⁾		0.06			0.09

Net asset value per share, end of period	$	19.61		$	19.57

Number of shares outstanding, end of period		5,481,510			3,190,834
Total return⁽⁴⁾		2.95	%		1.08	%
Net assets, end of period	$	107,468		$	62,439
Ratio to average net assets:
Operating expenses		1.06	%		6.57	%
Net investment income (loss)		1.80	%		1.22	%
Interest expense and credit facility fees		0.67	%		2.52	%
Ratios/Supplemental Data:
Asset coverage		213.60	%		322.95	%
Portfolio turnover		1.53	%		4.84	%
Total committed capital, end of period	$	190,077		$	190,077
Ratio of total contributed capital to total committed capital, end of period		57.36	%		33.43	%
Weighted-average shares outstanding		5,037,064			2,378,487

(1)	Net investment income (loss) per share was calculated as net investment income (loss) for the period divided by the weighted average number of shares outstanding for the period.

(2)	Dividends declared per share was calculated as the sum of dividends declared on each quarter-end date during the period divided by the number of shares outstanding at each respective quarter-end date (refer to Note 7).

(3)	Increase is due to offering price of subscriptions during the period (refer to Note 7).

(4)

Total return (not annualized) is based on the change in net asset value per share during the period plus the declared dividends, assuming reinvestment of dividends in accordance with the dividend reinvestment plan, divided by the beginning net asset value for the period. Total return for the three month periods ended March 31, 2015 and 2014 is inclusive of $0.06 and $0.09, respectively, per share increase in net asset value for the periods related to the offering price of subscriptions. Excluding the effects of the higher offering price of subscriptions, total return (not annualized) would have been 2.64% and 0.62%, respectively (refer to Note 7).

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 March 31, 2015 and December 31, 2014, 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 March 31, 2015 and December 31, 2014.

In the normal course of business, the Company is subject to examination by federal and certain state, local and foreign tax regulators for the 2013 and 2014 tax years. As of March 31, 2015 and December 31, 2014, the Company had filed tax returns and therefore is subject to examination.

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 three month periods ended March 31, 2015 and 2014 was as follows:


	For the three month periods ended
	March 31, 2015		March 31, 2014
Ordinary income	$	1,645	$	128
Tax return of capital	$	—	$	—

11. 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.

Subsequent to March 31, 2015, the Company borrowed $6,000 under the Facility to fund investment acquisitions and voluntarily repaid $3,000 under the Facility.

On April 17, 2015, the Company issued a capital call and delivered capital drawdown notices totaling $5,000. Proceeds from the capital call and the related issuance of 252,524 shares were due and issued on May 1, 2015. On May 8, 2015, the Company issued a capital call and delivered capital drawdown notices totaling $7,500. Proceeds from the capital call and the related issuance of 375,946 shares is expected on or about May 22, 2015.

Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations.

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

We have included or incorporated by reference in this Form 10-Q, 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 NF Investment Corp. (“we,” “us,” “our,” “NFIC,” 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-Q 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 impact of a protracted decline in the liquidity of credit markets on our business;

•

the impact of fluctuations in interest rates on our business;

•

the impact of changes in laws or regulations (including the interpretation thereof) governing 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;

•

the general economy and its impact on the industries in which we invest;

•

the financial condition of and ability of our current and prospective portfolio companies to achieve their objectives;

•

our expected financings and investments;

•

our ability to successfully integrate any acquisitions;

•

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; and

•

our intent to satisfy the requirements of a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended.

We use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may” 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 our annual report on Form 10-K for the year ended December 31, 2014 and Part II, Item 1A of and elsewhere in this Form 10-Q.

We have based the forward-looking statements included in this Form 10-Q on information available to us on the date of this Form 10-Q, 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.

OVERVIEW

Management’s Discussion and Analysis should be read in conjunction with Part I, Item 1 of this Form 10-Q “Financial Statements.” 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 our annual report on Form 10-K for the year ended December 31, 2014 and Part II, Item 1A of this Form 10-Q “Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements.

NF Investment Corp. (“we”, “us”, “our”, “NFIC” or the “Company”) is a Maryland corporation formed on November 1, 2012, and structured as an externally managed, non-diversified closed-end investment company. On August 5, 2013, NFIC filed its election 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”). NFIC has elected to be treated, and intends to continue 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, (the “Code”).

NFIC’s investment objective is to generate current income and capital appreciation primarily through debt investments in U.S. middle market companies, which we define as companies with approximately $10 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”). NFIC seeks to achieve its investment objective by investing primarily in first lien (which may include unitranche loans and the first-out and last-out tranches thereof) and second lien senior secured loans (collectively, “Middle Market Senior Loans”), subject to, in the case of second lien senior secured loans, a limit of 10% of NFIC’s total assets. The Middle Market Senior Loans are generally made to private U.S. middle market companies that are, in many cases, controlled by private equity firms. In addition, NFIC may invest up to 10% of its total assets in high yield securities whose risk profile, as determined at the sole discretion of CGMSIM, is similar to or better than the risk profile of Middle Market Senior Loans. We expect that the composition of our portfolio will change over time given our Investment Adviser’s view on, among other things, the economic and credit environment (including with respect to interest rates) in which we are operating.

NFIC SPV LLC (the “Borrower Sub”) is a Delaware limited liability company that was formed on June 18, 2013. The Borrower Sub invests in first and second lien senior secured loans. The Borrower Sub is a wholly-owned subsidiary of the Company and is consolidated in our consolidated financial statements included in Part I, Item 1 of this Form 10-Q commencing from the date of its formation, June 18, 2013.

Adviser and the Administrator are wholly-owned subsidiaries of Carlyle Investment Management L.L.C., a subsidiary of The Carlyle Group L.P. “Carlyle” refers to The Carlyle Group L.P., its affiliates and its consolidated subsidiaries, a global alternative asset manager publicly traded on NASDAQ Global Select Market under the symbol “CG”. Refer to the sec.gov website for further information on Carlyle.

After the earlier of May 2, 2018 or the completion of an initial public offering by Carlyle GMS Finance, Inc. (the other BDC managed by the Investment Adviser) that results in an unaffiliated public float of at least 15% of its aggregate capital commitments (a “Qualified IPO”), the Board of Directors (subject to any necessary stockholder approvals and applicable requirements of the Investment Company Act) will use its best efforts to wind down and/or liquidate and dissolve the Company. These efforts may include cash tender offers from time to time as proceeds become available. Refer to sec.gov website for further information on Carlyle GMS Finance, Inc.

PORTFOLIO AND INVESTMENT ACTIVITY

The fair value of our investments was approximately $203,449 comprised of 57 portfolio companies as of March 31, 2015. The fair value of our investments was approximately $182,076 comprised of 52 portfolio companies as of December 31, 2014.

The Company’s investment activity for the three month periods ended March 31, 2015 and 2014 is presented below (information presented herein is at amortized cost unless otherwise indicated).


	For the three month periods ended
	March 31, 2015			March 31, 2014
Investments—non-controlled/non-affiliated:
Total Investments—non-controlled/non-affiliated, beginning of period	$	183,390		$	59,975
New investments		23,259			16,582
Net accretion of discount on securities		87			47
Investments sold or repaid		(2,931	)		(3,200	)

Total Investments—non-controlled/non-affiliated, end of period	$	203,805		$	73,404

Principal amount of investments funded:
First Lien Debt	$	21,590		$	16,712
Second Lien Debt		2,000			—

Total	$	23,590		$	16,712

Principal amount of investments sold or repaid:
First Lien Debt	$	(2,931	)	$	(3,200	)
Second Lien Debt		—			—

Total	$	(2,931	)	$	(3,200	)

Number of new funded investments		8			6
Average new funded investment amount	$	2,907		$	2,764
Percentage of new funded debt investments at floating rates		100	%		100	%

As of March 31, 2015 and December 31, 2014, investments—non-controlled/non-affiliated consisted of the following:


	March 31, 2015				December 31, 2014
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
First Lien Debt	$	189,259	$	189,012	$	170,818	$	169,748
Second Lien Debt		14,546		14,437		12,572		12,328

Total	$	203,805	$	203,449	$	183,390	$	182,076

The weighted average yields ⁽¹⁾ for our first and second lien debt, based on the amortized cost and fair value as of March 31, 2015 and December 31, 2014, were as follows:


	March 31, 2015						December 31, 2014
	Amortized Cost			Fair Value			Amortized Cost			Fair Value
First Lien Debt		5.98	%		5.99	%		5.84	%		5.88	%
Second Lien Debt		9.12			9.19			9.08			9.26

(1)	Yields do not include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of March 31, 2015 and December 31, 2014. 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 March 31, 2015 and December 31, 2014 in our consolidated financial statements in Part I, Item 1 of this Form 10-Q 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 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


Rating		Definition
1		Performing—Low Risk: Borrower is operating more than 10% ahead of the Base Case.

2		Performing—Stable Risk: Borrower is operating within 10% of the Base Case (above or below). This is the initial rating assigned to all new borrowers.

3		Performing—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.

4		Watch 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.

5		Watch 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.

6		Watch 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 March 31, 2015 and December 31, 2014:


	March 31, 2015					December 31, 2014
(dollar amounts in millions)	Fair Value		% of Fair Value			Fair Value		% of Fair Value
Internal Risk Rating 1	$	24.2		11.91	%	$	21.5		11.81	%
Internal Risk Rating 2		158.4		77.85			142.8		78.42
Internal Risk Rating 3		16.9		8.33			17.8		9.77
Internal Risk Rating 4		3.9		1.91			—		—
Internal Risk Rating 5		—		—			—		—
Internal Risk Rating 6		—		—			—		—

Total	$	203.4		100.00	%	$	182.1		100.00	%

RESULTS OF OPERATIONS

For the three month periods ended March 31, 2015 and 2014

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 comparison may not be meaningful.

Investment Income

Interest income for the three month periods ended March 31, 2015 and 2014 were as follows:


	For the three month periods ended
	March 31, 2015		March 31, 2014
Interest income from non-controlled/non-affiliated investments	$	2,929	$	969

Total investment income	$	2,929	$	969

The increase in interest income for the three month periods ended March 31, 2015 and 2014 was driven by our deployment of capital and increasing invested balance. As of March 31, 2015 and December 31, 2014, the size of our portfolio was $203,805 and $183,390, respectively, at amortized cost, with total principal amount of investments outstanding of $205,849 and $185,190, respectively. As of March 31, 2015 and December 31, 2014, the weighted average yield of our first and second lien debt was 6.21% and 6.07%, respectively, on amortized cost.

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 March 31, 2015 and December 31, 2014, all of our first and second lien debt investments were performing and current on their interest payments.

Net investment income (loss) for the three month periods ended March 31, 2015 and 2014 was as follows:


	For the three month periods ended
	March 31, 2015		March 31, 2014
Total investment income from non-controlled/non-affiliated investments	$	2,929	$	969
Total expenses		1,084		817

Net investment income (loss)	$	1,845	$	152

Expenses


	For the three month periods ended
	March 31, 2015		March 31, 2014
Management fees	$	119	$	41
Professional fees		106		283
Administrative service fees		33		53
Interest expense		413		110
Credit facility fees		270		202
Directors’ fees and expenses		59		63
Transfer agency fees		7		9
Other general and administrative		77		56

Total expenses	$	1,084	$	817

Interest expense and credit facility fees for the three month periods ended March 31, 2015 and 2014 were comprised of the following:


	For the three month periods ended
	March 31, 2015		March 31, 2014
Interest expense	$	413	$	110
Facility unused commitment fee		120		95
Amortization of deferred financing costs		134		91
Other fees		16		16

Total interest expense and credit facility fees	$	683	$	312

Cash paid for interest expense	$	361	$	50

The increase in interest expense for the three month period ended March 31, 2015 was driven by increased usage of the facilities and increased deployment of capital to investments. For the three month periods ended March 31, 2015 and 2014, unused commitment fees and amortization of deferred financing costs increased related to fees associated with a second credit facility, the Facility, that closed on March 27, 2014. For the three month periods ended March 31, 2015 and 2014, the average interest rate was 1.92% and 1.66%, respectively, and average principal debt outstanding was $86,066 and $26,634, respectively.

Increased management fees for the three month period ended March 31, 2015 was driven by our deployment of capital and increasing invested balance. See Note 4 to the consolidated financial statements included in Part I, Item 1 of this Form 10-Q for more information on the 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.

Net Realized Gain (Loss) and Net Change in Unrealized Appreciation/ (Depreciation) on Investments

During the three month periods ended March 31, 2015 and 2014, the Company had a change in unrealized appreciation on 45 and 13 investments, respectively, totaling approximately $1,786 and $401, respectively, which was offset by a change in unrealized depreciation on 17 and 8 investments, respectively, totaling approximately $828 and $257, respectively.


	For the three month periods ended
	March 31, 2015		March 31, 2014
Net realized gain (loss) on investments—non-controlled/non-affiliated		—		—
Net change in unrealized appreciation (depreciation) on investments—non-controlled/non-affiliated		958		144

Net realized gain (loss) and net change in unrealized appreciation/(depreciation) on investments	$	958	$	144

Net realized gain (loss) and net change in unrealized appreciation (depreciation) for the three month periods ended March 31, 2015 and 2014 was as follows:


	For the three month periods ended
	March 31, 2015				March 31, 2014
Type	Net realized gain (loss)		Net change in unrealized appreciation (depreciation)		Net realized gain (loss)		Net change in unrealized appreciation (depreciation)
First Lien Debt	$	—	$	823	$	—	$	144
Second Lien Debt		—		135		—		—

Total	$	—	$	958	$	—	$	144

Net change in unrealized appreciation for the three month period ended March 31, 2015, in our investments, was primarily due to a tightening spread environment during the period.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Company generates 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 Borrower Sub’s Revolving Credit Facility (as defined below) and/or the Company’s Facility (as defined below). The Borrower Sub closed on September 12, 2013 on a senior secured revolving credit facility (as amended, the “Revolving Credit Facility”), which was subsequently amended on July 25, 2014 (the “First Amendment”). The Revolving Credit Facility provides for secured borrowings during the applicable revolving period up to an amount equal to the lesser of $140,000, the borrowing base as calculated pursuant to the terms of the Revolving Credit Facility, and the amount of net cash proceeds and unpledged capital commitments the Company has received with an accordion feature that can, subject to certain conditions, increase the aggregate maximum credit commitment up to an amount not to exceed $262,500, subject to restrictions imposed on borrowings under the Investment Company Act and certain restrictions and conditions set forth in the Revolving Credit Facility, including adequate collateral to support such borrowings. The Revolving Credit Facility imposes financial and operating covenants on us and Borrower Sub that restrict our and its business activities. Continued compliance with these covenants will depend on many factors, some of which are beyond our control. The Company closed on March 27, 2014 on a senior secured revolving credit facility (as amended, the “Facility”) , which was subsequently amended on August 22, 2014 (the “First Facility Amendment”) and on December 12, 2014 (the “Second Facility Amendment”). The maximum principal amount of the Facility is $50,000, subject to availability under the Facility, which is based on certain advance rates multiplied by the value of the Company’s portfolio

investments net of certain other indebtedness that the Company may incur in accordance with the terms of the Facility. Proceeds of the Facility may be used for general corporate purposes, including the funding of portfolio investments. Maximum capacity under the Facility may be increased to $125,000 through the exercise by the Company of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing. The Facility includes a $10,000 limit for swingline loans and a $5,000 limit for letters of credit. Subject to certain exceptions, the Facility is secured by a perfected first-priority security interest in substantially all of the portfolio investments held by each of the Company and certain domestic subsidiaries of the Company (such subsidiaries collectively, the “Guarantors”) and the Company’s unfunded investor equity capital commitments (provided that the amount of unfunded capital commitments ultimately available to the lenders is limited to $34,000). The Company is required to cause the Guarantors to guaranty the Facility. The pledge of unfunded investor equity capital commitments shall be released upon the earlier of (a) the date eligible investments held by the Company are equal to or greater than $62,500 and the Facility’s borrowing base equity test is satisfied and (b) the date the borrower has received equity capital contributions in an amount equal to $34,000. Such eligible investments and shareholder equity thresholds have not been satisfied as of March 31, 2015 and December 31, 2014. The Facility includes customary covenants, including certain financial covenants related to asset coverage, shareholders’ equity, liquidity and interest coverage, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for senior secured revolving credit facilities of this nature.

Although we believe that we and the Borrower Sub will remain in compliance, there are no assurances that we or the Borrower Sub will continue to comply with the covenants in the Facility and Revolving Credit Facility, as applicable. Failure to comply with these covenants could result in a default under the Facility and/or Revolving Credit Facility that, if we or the Borrower Sub were unable to obtain a waiver from the applicable lenders, could result in the immediate acceleration of the amounts due under the Facility and/or Revolving Credit Facility, and thereby have a material adverse impact on our business, financial condition and results of operations.

For more information on the Revolving Credit Facility and Facility, see Note 5 to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.

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.

As of March 31, 2015 and December 31, 2014, the Company had $2,852 and $2,548, respectively, in cash. The facilities of the Company and the Borrower Sub consisted of the following as of March 31, 2015 and December 31, 2014:


	March 31, 2015
	Total Facility		Borrowings Outstanding		Unused Portion ⁽¹⁾		Amount Available ⁽²⁾
Revolving Credit Facility	$	140,000	$	62,603	$	77,397	$	2,890
Facility		50,000		32,000		18,000		10,309

Total	$	190,000	$	94,603	$	95,397	$	13,199


	December 31, 2014
	Total Facility		Borrowings Outstanding		Unused Portion ⁽¹⁾		Amount Available ⁽²⁾
Revolving Credit Facility	$	140,000	$	39,403	$	100,597	$	2,695
Facility		50,000		41,500		8,500		12,638

Total	$	190,000	$	80,903	$	109,097	$	15,333

(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.

Equity Activity

There were $0 and $110,000 of investor equity capital commitments made to the Company during the three month periods ended March 31, 2015 and 2014, respectively. As of March 31, 2015 and December 31, 2014, the Company had $190,077 and $190,077, respectively, in total capital commitments from stockholders, of which $81,042 and $98,041, respectively, was unfunded. As of March 31, 2015 and December 31, 2014, certain current directors had committed $1,000 in capital commitments to the Company.

Shares issued as of March 31, 2015 and December 31, 2014 were 5,481,510 and 4,618,564, respectively.

The following table summarizes activity in the number of shares of our common stock outstanding during the three month periods ended March 31, 2015 and 2014:


	For the three month periods ended
	March 31, 2015		March 31, 2014
Shares in issue, beginning of period		4,618,564		2,265,375
Common stock issued		862,946		925,459

Shares in issue, end of period		5,481,510		3,190,834

Contractual Obligations

A summary of our significant contractual payment obligations was as follows as of March 31, 2015 and December 31, 2014:


	Secured Borrowings
Payment Due by Period	March 31, 2015		December 31, 2014
Less than 1 Year	$	—	$	—
1-3 Years		—		—
3-5 Years		32,000		—
More than 5 Years		62,603		80,903

Total	$	94,603	$	80,903

For more information on the Revolving Credit Facility and Facility, see Note 5 to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.

As of March 31, 2015 and December 31, 2014, $62,603 and $39,043, respectively, of secured borrowings were outstanding under the Revolving Credit Facility and $32,000 and $41,500, respectively, were outstanding

under the Facility. For the three month periods ended March 31, 2015 and 2014, we incurred $413 and $110, respectively, of interest expense and $120 and $95, respectively, of unused commitment fees.

OFF BALANCE SHEET ARRANGEMENTS

In the ordinary course of its business, the Company enters into contracts or agreements that contain indemnifications or warranties. Future events could occur 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 these consolidated financial statements as of March 31, 2015 and December 31, 2014 included in Part I, Item 1 of this Form 10-Q for any such exposure.

We may also enter into future funding commitments such as revolving credit facilities, bridge financing commitments, or delayed draw commitments.

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
	March 31, 2015		December 31, 2014
Unfunded delayed draw commitments	$	1,749	$	2,790
Unfunded revolving term loan commitments		226		226

Total unfunded commitments	$	1,975	$	3,016

DIVIDENDS AND DISTRIBUTIONS TO COMMON STOCKHOLDERS

Dividends and distributions, if any, are paid in cash to common stockholders. The following table summarizes the Company’s dividends declared and payable since inception through the quarter ended March 31, 2015:


Date Declared	Record Date	Payment Date	Per Share Amount		Total Amount		Annualized Dividend Yield⁽¹⁾
March 13, 2014	March 31, 2014	April 14, 2014	$	0.04	$	128		1.12	%
June 26, 2014	June 30, 2014	July 14, 2014	$	0.12	$	383		2.46	%
September 12, 2014	September 18, 2014	October 9, 2014	$	0.24	$	825		5.14	%
December 19, 2014	December 29, 2014	January 26, 2015	$	0.27	$	1,247		6.19	%
March 11, 2015	March 13, 2015	April 17, 2015	$	0.30	$	1,645		6.84	%

(1)	Annualized dividend yield is calculated by dividing the declared dividend by the weighted average of the net asset value at the beginning of the quarter and the capital called during the quarter and annualizing over 4 quarterly periods.

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, 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 consolidated financial statements in Part I, Item 1 of this Form 10-Q and in Part II, Item 8 of the Company’s annual report on Form 10-K for the year ended December 31, 2014.

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 accounting principles generally accepted in the United States (“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 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 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.

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:

•

Transfer between levels, if any, are recognized at the beginning of the quarter in which the transfers occur.

The Company generally uses the following framework when determining the fair value of investments that are categorized as Level III:

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.

The fair value of the secured borrowings approximates its carrying value and is categorized as Level III 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 fair value of other financial assets and liabilities approximates their carrying value based on the short term nature of these items.

See Note 3 to the consolidated financial statements in Part I, Item 1 of this Form 10-Q for further information on fair value measurements.

Use of Estimates

The preparation of consolidated financial statements included in Part I, Item 1 of this Form 10-Q in conformity with US 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 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 fees involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements included in Part I, Item 1 of this Form 10-Q. 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 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 included in Part I, Item 1 of this Form 10-Q 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

Other Income

Other income may include income such as consent, waiver and amendment fees associated with the Company’s investment activities as well as any fees for managerial assistance services rendered by the Company to 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 will be amortized into other 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 I, Item 1 of this Form 10-Q.

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

the level of ICTI earned in a tax year, NFIC 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.

The Borrower Sub is a disregarded entity for tax purposes and is consolidated with the tax return of NFIC.

Capital Calls and Dividends and Distributions to Common Stockholders

Item 3. 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 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 used had a ready market for the investments existed, and it is possible that the difference could be material.

Interest Rate Risk

During the three month periods ended March 31, 2015 and 2014, a majority of the debt investments held in the Company’s portfolio had floating interest rates. Interest rates on the investments held within the Company’s portfolio of investments are typically based on floating LIBOR, with many of these investments also having a LIBOR floor. Additionally, the Company’s 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 the Company’s settled portfolio of investments held as of March 31, 2015 and December 31, 2014. These hypothetical calculations are based on a model of the settled investments in our portfolio, held as of March 31, 2015 and December 31, 2014, 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 March 31, 2015 and December 31, 2014, and based on the terms of the Company’s credit facilities. Interest expense on the Company’s credit facilities is calculated using the interest rate as of March 31, 2015 and December 31, 2014, 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.

The Company regularly measures exposure to interest rate risk. The Company assesses interest rate risk and manages 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 March 31, 2015 and December 31, 2014, the following table shows the annual impact on net investment income of base rate changes in interest rates for our settled investments (considering interest rate floors for variable rate instruments) and outstanding secured borrowings assuming no changes in our investment and borrowing structure:


	As of March 31, 2015									As of December 31, 2014
Basis Point Change	Interest Income			Interest Expense			Net Investment Income			Interest Income			Interest Expense			Net Investment Income
Up 300 basis points	$	4,442		$	(2,838	)	$	1,604		$	3,798		$	(2,427	)	$	1,371
Up 200 basis points	$	2,476		$	(1,892	)	$	584		$	2,121		$	(1,618	)	$	503
Up 100 basis points	$	510		$	(946	)	$	(436	)	$	445		$	(809	)	$	(364	)
Down 100 basis points	$	(11	)	$	167		$	156		$	(50	)	$	139		$	89
Down 200 basis points	$	(21	)	$	167		$	146		$	(99	)	$	139		$	40
Down 300 basis points	$	(32	)	$	167		$	135		$	(149	)	$	139		$	(10	)

Item 4. 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 President (Principal Executive Officer) and our Chief Financial Officer and Treasurer (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 Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our President and our Chief Financial Officer and Treasurer 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.

There have been no changes in our internal control over financial reporting periods during the three month period ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

The Company may become party to certain lawsuits in the ordinary course of business. 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 I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors.

There have been no material changes to the risk factors previously disclosed in our annual report on Form 10-K for the year ended December 31, 2014. For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 27, 2015, which is accessible on the SEC’s website at sec.gov.

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

Except as previously reported by the Company on Form 8-K, we did not sell any equity securities during the period covered in this report that were not registered under the Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.


31.1		Certification of President (Principal Executive Officer) Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.*

31.2		Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*

32.1		Certification of President (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2		Certification 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

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.


	NF INVESTMENT CORP.

Dated: May 8, 2015	By	/s/ Venugopal Rathi
		Venugopal Rathi
		Chief Financial Officer

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