TCW Direct Lending LLC - FORM 10-Q

TCW Direct Lending LLC - FORM 10-Q - August 11, 2016

Attached files

Attached files

TCW Direct Lending LLC Reports

file	filename
EX-99.1 - EX-99.1 - TCW Direct Lending LLC	d217053dex991.htm
EX-32.2 - EX-32.2 - TCW Direct Lending LLC	d217053dex322.htm
EX-32.1 - EX-32.1 - TCW Direct Lending LLC	d217053dex321.htm
EX-31.2 - EX-31.2 - TCW Direct Lending LLC	d217053dex312.htm
EX-31.1 - EX-31.1 - TCW Direct Lending LLC	d217053dex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2016

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

For the transition period from to

Commission file number 814-01069

TCW DIRECT LENDING LLC

(Exact Name of Registrant as Specified in Its Charter)


Delaware		46-5327366
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

200 Clarendon Street, Boston, MA		02116
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (617) 936-2275

Not applicable

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 ¨ No x

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ¨ No x

The number of the Registrant’s common units outstanding at August 11, 2016 was 20,134,698.

TCW DIRECT LENDING LLC

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2016

Table of Contents


	INDEX	PAGE NO.
PART I.	FINANCIAL INFORMATION		2

Item 1.	Financial Statements		2

	Schedules of Investments as of June 30, 2016 (Unaudited) and December 31, 2015		2

	Statements of Assets and Liabilities as of June 30, 2016 (Unaudited) and December 31, 2015		7

	Statements of Operations for the three and six months ended June 30, 2016 and 2015 (Unaudited)		8

	Statements of Changes in Members’ Capital for the six months ended June 30, 2016 and 2015 (Unaudited)		9

	Statements of Cash Flows for the six months ended June 30, 2016 and 2015 (Unaudited)		10

	Notes to Financial Statements (Unaudited)		11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		34

Item 4.	Controls and Procedures		34

PART II.	OTHER INFORMATION		35

Item 1.	Legal Proceedings		35

Item 1A.	Risk Factors		35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		35

Item 3.	Defaults Upon Senior Securities		35

Item 4.	Mine Safety Disclosures		35

Item 5.	Other Information		35

Item 6.	Exhibits		36

SIGNATURES			37

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

TCW Direct Lending LLC

Schedule of Investments

As of June 30, 2016

(Unaudited)


Industry	Issuer	Acquisition Date	Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value

	Non-Controlled/Non-Affiliated Investments Debt
Chemicals
	Revere Industries, LLC	08/20/15	First Lien Term Loan - 9.50% (LIBOR + 8.50%, 1.00% Floor)		3.0	%		20,021,431		08/20/19		19,629,156		20,021,431

					3.0	%		20,021,431				19,629,156		20,021,431


Communications Equipment
	Aclara Technologies, LLC	12/21/15	Term Loan - 9.00% (LIBOR + 7.50%, 1.50% Floor)		7.5	%		49,500,000		03/28/19		49,125,983		49,995,000

					7.5	%		49,500,000				49,125,983		49,995,000


Diversified Consumer Services
	Pre Paid Legal Services, Inc.	06/09/15	First Lien Term Loan - 6.50% (LIBOR + 5.25%, 1.25% Floor)		2.3	%		15,386,713		07/01/19		15,336,770		15,337,476

					2.3	%		15,386,713				15,336,770		15,337,476


Diversified Financial Services
	Verus Financial, LLC	04/12/16	Term Loan - 8.00% (LIBOR + 7.25%, 0.75% Floor)		2.6	%		17,390,625		04/12/21		17,058,152		17,420,189

					2.6	%		17,390,625				17,058,152		17,420,189


Food Products
	AmeriQual Group, LLC	03/31/16	First Lien Term Loan - 8.50% (LIBOR + 7.75%, 0.75% Floor)		2.0	%		13,755,525		01/20/21		13,560,002		13,798,167

	Harvest Hill Beverage Company	01/20/16	First Lien, First Out Term Loan - 5.00% (LIBOR + 4.00%, 1.00% Floor)		4.5	%		30,162,248		01/19/21		29,750,201		29,923,966

	Harvest Hill Beverage Company(2)	01/20/16	First Lien, Last Out Term Loan - 7.25% (LIBOR + 6.25%, 1.00% Floor)		16.7	%		111,818,816		01/19/21		110,291,259		111,986,545

					21.2	%		141,981,064				140,041,460		141,910,511

					23.2	%		155,736,589				153,601,462		155,708,678


Health Care Providers & Services
	Help at Home, LLC(3)	08/03/15	Revolver - 10.00% (Prime + 6.50%, 3.50% Floor)		0.2	%		1,351,351		08/03/20		1,351,351		1,335,811

	Help at Home, LLC(2)	08/03/15	Term Loan B - 10.00% (Prime + 6.50%, 3.50% Floor)		6.4	%		43,040,541		08/03/20		42,607,771		42,954,459

					6.6	%		44,391,892				43,959,122		44,290,270


Industry	Issuer	Acquisition Date	Investment	% of Net Assets			Par Amount		Maturity Date	Amortized Cost		Fair Value

Hotels, Restaurants & Leisure
	Controladora Dolphin Discovery, S.A De C.V. Mexico(4)	10/09/15	Senior Secured Notes - 11.00% (LIBOR + 10.00%, 1.00% Floor)		6.2	%		41,437,500	10/09/20		40,730,142		41,474,794

					6.2	%		41,437,500			40,730,142		41,474,794

	OTG Management, LLC(1)	06/30/16	Delayed Draw Term Loan - 8.75% (LIBOR + 7.25%, 1.50% Floor)		6.3	%		41,971,782	12/11/17		41,971,782		41,850,064

	OTG Management, LLC(1)	06/30/16	First Lien Term Loan - 8.75% (LIBOR + 7.25%, 1.50% Floor)		4.0	%		27,173,549	12/11/17		27,173,549		27,094,745

					10.3	%		69,145,331			69,145,331		68,944,809

					16.5	%		110,582,831			109,875,473		110,519,603


Household Durables
	Cedar Electronics Holdings, Corp(2)	7/01/2015	Senior Term Loan – 6.50% (LIBOR + 6.00%, 0.50% Floor)		3.2	%		21,879,600	6/26/20		21,468,948		21,805,209


	Robertshaw US Holding Corp	06/15/16	Term Loan B - 9.00% (LIBOR + 7.50%, 1.50% Floor)		9.4	%		62,872,302	06/18/19		62,478,286		62,979,185

	Robertshaw US Holding Corp	06/15/16	Term Loan C - 9.00% (LIBOR + 7.50%, 1.50% Floor)		0.7	%		4,750,013	06/18/19		4,750,013		4,753,813

					10.1	%		67,622,315			67,228,299		67,732,998

					13.3	%		89,501,915			88,697,247		89,538,207


Industrial Conglomerates
	H-D Advanced Manufacturing Company	06/30/15	First Lien First Out Term Loan - 5.00% (LIBOR + 4.00%, 1.00% Floor, 1.16% PIK)		4.7	%		33,558,824	06/30/20		33,156,558		31,447,974

	H-D Advanced Manufacturing Company(2)	06/30/15	First Lien Last Out Term Loan - 8.00% (LIBOR + 7.00%, 1.00% Floor, 5.27% PIK)		13.0	%		108,625,000	06/30/20		107,322,927		87,171,562

					17.7	%		142,183,824			140,479,485		118,619,536


Information Technology Services
	ENA Holding Corporation(5)	05/06/16	First Lien Term Loan - 8.00% (LIBOR + 7.00%, 1.00% Floor)		4.7	%		32,029,043	05/05/21		31,493,194		31,763,202

					4.7	%		32,029,043			31,493,194		31,763,202


Metals & Mining
	Pace Industries, Inc.	06/30/15	First Lien Term Loan - 9.25% (LIBOR + 8.25%, 1.00% Floor)		13.2	%		89,100,000	06/30/20		88,031,970		88,681,230

					13.2	%		89,100,000			88,031,970		88,681,230


Road & Rail
	Total Military Management, Inc.(2)	04/14/15	Second Out Term Loan - 7.75% (LIBOR + 6.75%, 1.00% Floor)		12.5	%		88,000,000	10/14/20		86,453,685		83,749,600

					12.5	%		88,000,000			86,453,685		83,749,600


Software
	Quicken Parent Corp.(6)	04/01/16	First Lien Term Loan - 9.50% (LIBOR + 8.50%, 1.00% Floor)		3.8	%		25,486,875	04/01/21		25,293,141		25,629,602


Industry	Issuer	Acquisition Date		Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value

Textiles, Apparel & Luxury Goods
	Differential Brands Group, Inc.		01/28/16	Term Loan - 9.64% (LIBOR + 9.00%, 0.50% Floor)		4.2	%		28,556,500		01/28/21		28,099,158		28,262,368

	Frontier Spinning Mills, Inc.(2)		05/19/15	Last Out Term Loan B - 9.25% (LIBOR + 8.25%, 1.00% Floor)		1.9	%		14,308,806		04/30/20		14,201,827		12,355,654

						6.1	%		42,865,306				42,300,985		40,618,022


	Equity							Shares				Cost
	Verus Financial, LLC(7)		05/20/16	Common Stock		1.3	%		8,750				8,507,135		8,507,135


	Total Non-Controlled/Non-Affiliated Investments					134.3	%						919,842,960		900,299,181


								Shares				Cost
	Controlled/Affiliated Investments
Investment Funds & Vehicles	TCW Direct Lending Strategic Ventures LLC(4)(8)		06/05/15	Preferred membership interests		38.8	%		245,161				245,160,910		260,313,318

				Common membership interests		0.0	%		800				800,000		236,568


	Total Controlled/Affiliated Investments					38.8	%						245,960,910		260,549,886


	Cash Equivalents

	Blackrock Liquidity Funds, Yield 1.00%					0.0	%						7,005		7,005


	Total Investments 173.1%											$	1,165,810,875	$	1,160,856,072

	Net unrealized depreciation on unfunded commitments (0.0%)													$	(129,385	)

	Liabilities in Excess of Other Assets (73.1%)													$	(490,251,970	)

	Net Assets 100.0%													$	670,474,717

(1)

Excluded from the investment total above is a delayed draw term loan commitment in an amount not to exceed $12,761,249, an interest rate of LIBOR plus 7.25%, with a LIBOR Floor of 1.50%, and a maturity of December 11, 2017. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(37,008) as of June 30, 2016.

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

(3)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $5,405,405, and an interest rate at the option of the borrower of Prime (Prime + 6.50%, 3.50% floor) or LIBOR (LIBOR + 7.50%, 1.00% floor), and a maturity of August 3, 2020. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(62,162) as of June 30, 2016.

(4)	The investment is not a qualifying asset as defined in Section 55(a) under the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets.

(5)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $4,804,290, an interest rate of LIBOR plus 7.00%, with a LIBOR Floor of 1.00%, and a maturity of May 5, 2021. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(39,876) as of June 30, 2016.

(6)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $1,725,000, an interest rate of LIBOR plus 8.50%, with a LIBOR Floor of 1.00%, and a maturity of April 1, 2021. This investment is accruing an unused commitment fee of 1.00% per annum. The change in unrealized appreciation (depreciation) on this commitment is $9,660 as of June 30, 2016.

(7)	Holdings of Verus Financial LLC common stock are through Verus Holdings LLC, a special purpose vehicle

(8)

As defined in the Investment Company Act of 1940, the investment is deemed to be a “controlled affiliated person” of the Company because the Company owns, either directly or indirectly, 25% or more of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company.

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

Prime - Prime Rate


Country Breakdown of Portfolio
United States	96.4	%
Mexico	3.6	%

See notes to financial statements

TCW Direct Lending LLC

Schedule of Investments

As of December 31, 2015


Industry	Issuer	Acquisition Date	Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value

	Non-Controlled/Non-Affiliated Investments
Auto Components
	Pittsburgh Glass Works LLC ⁽¹⁾	11/25/15	First Lien Term Loan - 9.00% (LIBOR + 8.00%, 1.00 Floor)		7.7	%	$	50,000,000		11/25/21	$	49,508,444	$	49,950,000

Chemicals
	Revere Industries, LLC	08/20/15	First Lien Term Loan - 9.50% (LIBOR + 8.5%, 1.00% Floor)		6.5	%		43,052,885		08/20/19		42,075,281		42,536,250

Communications Equipment
	Aclara Technologies, LLC	12/21/15	First Lien Term Loan - 9.00% (LIBOR + 7.50%, 1.50% Floor)		6.7	%		43,168,605		03/28/19		42,775,275		43,427,616

Diversified Consumer Services
	PrePaid Legal Services, Inc.	06/09/15	First Lien Term Loan - 6.50% (LIBOR + 5.25%, 1.25% Floor)		2.2	%		14,483,333		06/01/19		14,420,992		14,410,917

Health Care Providers & Services
	Help at Home, Inc. ⁽¹⁾	08/03/15	First Lien Term Loan B -10.00% (Prime + 6.50%, 3.25% Floor)		6.5	%		43,175,676		08/03/20		42,705,972		42,398,513

	Help at Home, Inc. ⁽²⁾	08/03/15	First Lien - Revolver - 10.00% (Prime + 6.50%, 3.25% Floor)		0.8	%		5,270,270		08/03/20		5,270,270		5,170,135

					7.3	%		48,445,946				47,976,242		47,568,648


Hotels, Restaurants & Leisure
	Controladora Dolphin Discovery, S.A De C.V. Mexico ⁽³⁾	10/09/15	First Lien Term Loan - 11.00% (LIBOR + 10.00%, 1.00 Floor)		6.4	%		42,500,000		10/09/20		41,689,317		41,990,000

Household Durables
	Cedar Electronics Holdings, Corp. ⁽¹⁾	07/01/15	First Lien Term Loan - 7.50% (Prime + 4.00%, 3.50% Floor)		3.4	%		22,181,000		06/26/20		21,712,652		22,070,095

Industrial Conglomerates
	H-D Advanced Manufacturing Company ⁽¹⁾	06/30/15	First Lien Term Loan A - 8.00% (LIBOR + 7.00%, 1.00% Floor)		20.8	%		143,591,912		06/30/20		141,656,132		135,143,228

Metals & Mining
	Pace Industries, Inc.	06/30/15	First Lien Term Loan - 9.25% (LIBOR + 8.25%, 1.00% Floor)		13.6	%		89,550,000		06/30/20		88,342,766		88,654,500

Road & Rail
	Total Military Management, Inc.	04/14/15	First Lien Term Loan - 7.75% (LIBOR + 6.75%, 1.00 Floor)		13.3	%		88,000,000		10/14/20		86,319,746		86,592,000

Textiles, Apparel & Luxury Goods
	Frontier Spinning Mills, Inc. ⁽¹⁾	05/19/15	First Lien Term Loan B - 9.25% (LIBOR + 8.25%, 1.00% Floor)		2.2	%		14,515,385		04/30/20		14,387,068		14,283,138


	Total Non-Controlled/Non-Affiliated Investments				90.1	%						590,863,915		586,626,392

TCW Direct Lending LLC

Schedule of Investments

As of December 31, 2015 (continued)


						Shares		Cost		Fair Value

	Controlled/Affiliated Investments
Investment Funds & Vehicles	TCW Direct Lending Strategic Ventures LLC ⁽³⁾⁽⁴⁾	06/05/2015	Preferred membership interests	31.7	%		199,760	$	199,760,000	$	206,595,336

			Common membership interests	0.0	%		800		800,000		39,943


	Total Controlled/Affiliated Investments			31.7	%				200,560,000		206,635,279


	Cash Equivalents

	Blackrock Liquidity Funds, Yield 0.35%			25.9	%		168,850,468		168,850,468		168,850,468


	Total Investments 147.7%							$	960,274,383	$	962,112,139

	Net unrealized depreciation on unfunded commitments (0.0%)									$	(28,243	)

	Liabilities in Excess of Other Assets (47.7%)									$	(310,780,753	)

	Net Assets 100.0%									$	651,303,143

⁽¹⁾	In addition to the interest earned based on the stated interest rate of this loan, the Company is entitled to receive an additional interest amount on the “first out” tranche of the portfolio company’s first lien senior secured loans.

⁽²⁾

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $1,486,486, and an interest rate at the option of the borrower of Prime (Prime + 6.50%, 3.25% floor) or LIBOR (LIBOR + 7.50%, 1.00% floor), and a maturity of August 3, 2020. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(28,234) as of December 31, 2015.

⁽³⁾	The investment is not a qualifying asset as defined in Section 55(a) under the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets.

⁽⁴⁾

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

Prime - Prime Rate


Country Breakdown of Portfolio
United States	95.6	%
Mexico	4.4	%

See notes to financial statements

TCW Direct Lending LLC

Statements of Assets and Liabilities

(Dollar amounts in thousands, except unit data)


	As of June 30, 2016 (unaudited)			As of December 31, 2015
Assets

Investments, at fair value
Non controlled/non-affiliated investments (amortized cost of $919,843 and $590,864, respectively)	$	900,299		$	586,626
Controlled affiliated investments (cost of $245,961 and $200,560, respectively)		260,550			206,635
Cash and cash equivalents		147,211			180,436
Receivable for investments sold		—			27,098
Deferred financing costs		3,124			4,263
Capital call due from Members		—			933
Interest receivable		5,900			2,653
Prepaid and other assets		295			157

Total Assets	$	1,317,379		$	1,008,801


Liabilities
Credit facility payable	$	635,000		$	329,000
Management fees payable		11,187			27,737
Net unrealized depreciation on unfunded commitments		129			28
Interest and credit facility expense payable		240			496
Directors’ fees payable		114			—
Other accrued expenses and other liabilities		234			237

Total Liabilities	$	646,904		$	357,498


Commitments and Contingencies (Note 5)

Members’ Capital
Preferred units: (no units issued and outstanding)	$	—		$	—
Common unitholders commitment: ( 20,134,698 and 20,134,698 units issued and outstanding, respectively)		2,013,470			2,013,470
Common unitholders undrawn commitment: ( 20,134,698 and 20,134,698 units issued and outstanding, respectively)		(1,204,791	)		(1,349,024	)
Common unitholders return of capital		(144,233	)		—
Common unitholder offering costs		(853	)		(853	)
Common unitholder tax reclassification (Note 8)		(9,620	)		(9,620	)

Common unitholder capital		653,973			653,973
Accumulated net realized loss		(3,770	)		(3,888	)
Accumulated net investment gain (loss)		25,356			(591	)
Net unrealized appreciation (depreciation) on investments		(5,084	)		1,809

Members’ Capital	$	670,475		$	651,303

Total Liabilities and Members’ Capital	$	1,317,379		$	1,008,801

Net Asset Value Per Unit (accrual base) (Note 9)	$	93.14		$	99.35

See notes to financial statements

TCW Direct Lending LLC

Statements of Operations (unaudited)

(Dollar amounts in thousands, except unit data)


	For the three months ended June 30,						For the six months ended June 30,
	2016			2015			2016			2015
Investment Income:
Interest income from non-controlled/non-affiliated investments		23,981			4,397			42,653			6,707
Dividend income from controlled affiliated investments		3,320			—			4,963			—
Other fee income		652			—			652			—

Total investment income		27,953			4,397			48,268			6,707


Expenses:
Management fees		7,550			7,550			15,101			20,143
Interest and credit facility expenses		3,123			1,408			5,976			2,469
Administrative fees		252			135			513			266
Professional fees		243			269			389			313
Directors’ fees		73			70			144			145
Other expenses		102			103			198			185

Total expenses		11,343			9,535			22,321			23,521
Expense recaptured/(reimbursed) by the Investment Adviser		—			—			—			312

Net expenses		11,343			9,535			22,321			23,833


Net investment income (loss)	$	16,610		$	(5,138	)	$	25,947		$	(17,126	)


Net realized and unrealized gain (loss) on investments
Net realized gain on investments from non-controlled/non-affiliated investments		118			1,987			118			1,995
Net change in unrealized appreciation (depreciation) from non-controlled/non-affiliated investments		(5,148	)		4,941			(15,407	)		4,819

Net change in unrealized appreciation from controlled affiliated investments		3,685			397			8,514			397

Net realized and unrealized gain (loss) on investments	$	(1,345	)	$	7,325		$	(6,775	)	$	7,211

Net increase (decrease) in Members’ Capital from operations	$	15,265		$	2,187		$	19,172		$	(9,915	)

Basic and diluted:
Income (Loss) per unit	$	0.76		$	0.11		$	0.95		$	(0.52	)

See notes to financial statements

TCW Direct Lending LLC

Statements of Changes in Members’ Capital (unaudited)

(Dollar amounts in thousands, except unit data)


	For the six months ended June 30, 2016			For the six months ended June 30, 2015
Net Increase (Decrease) in Members’ Capital Resulting from Operations:
Net investment income (loss)	$	25,947		$	(17,126	)
Net realized gain on investments		118			1,995
Net change in unrealized appreciation (depreciation) on investments		(6,893	)		5,216

Net Increase (Decrease) in Members’ Capital from Operations		19,172			(9,915	)

Distributions to shareholders from:
Return of capital		(144,233	)		—

Total distributions to shareholders		(144,233	)		—

Increase (Decrease) in Members’ Capital Resulting from Capital Activity
Contributions		144,233			405,302
Offering costs		—			(663	)

Total Increase in Members’ Capital Resulting from Capital Activity		144,233			404,639


Total Increase in Members’ Capital		19,172			394,724


Members’ Capital, beginning of period		651,303			64,528

Members’ Capital, end of period	$	670,475		$	459,252


Accumulated net investment gain (loss)	$	25,356		$	(21,428	)

See notes to financial statements

TCW Direct Lending LLC

Statements of Cash Flows (unaudited)

(Dollar amounts in thousands, except unit data)


	For the six months ended June 30, 2016			For the six months ended June 30, 2015
Cash Flows from Operating Activities
Net increase (decrease) in net assets resulting from operations	$	19,172		$	(9,915	)
Adjustments to reconcile the net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchases of investments		(515,601	)		(586,034	)
Proceeds from sales and paydowns of investments		143,771			126,043
Net realized (gain) loss on investments		(118	)		(1,995	)
Net change in unrealized (appreciation) depreciation on investments		6,893			(5,216	)
Amortization of premium and accretion of discount, net		(2,432	)		(281	)
Amortization of deferred financing costs		1,139			783
Increase (decrease) in operating assets and liabilities:
(Increase) decrease in prepaid offering costs		—			663
(Increase) decrease in interest receivable		(3,247	)		(1,289	)
(Increase) decrease in receivable from Investment Adviser		—			311
(Increase) decrease in receivable for investments sold		27,098			—
(Increase) decrease in prepaid and other assets		(138	)		—
Increase (decrease) in management fees payable		(16,550	)		20,143
Increase (decrease) in initial organizational expense payable to affiliate		—			(682	)
Increase (decrease) in offering costs payable to affiliate		—			(663	)
Increase (decrease) in interest and credit facility expense payable		(256	)		297
Increase (decrease) in directors’ fees payable		114			(52	)
Increase (decrease) in other accrued expenses and liabilities		(3	)		(219	)

Net cash provided by (used in) operating activities	$	(340,158	)	$	(458,106	)


Cash Flows from Financing Activities
Contributions from Members		—			405,302
Capital call due from Members, net		933			100
Offering costs paid		—			(663	)
Deferred financing costs paid		—			(644	)
Proceeds from credit facility		576,000			429,000
Repayments of credit facility		(270,000	)		(49,000	)

Net cash provided by financing activities	$	306,933		$	784,095

Net increase (decrease) in cash and cash equivalents	$	(33,225	)	$	325,989
Cash and cash equivalents, beginning of period	$	180,436		$	6,967

Cash and cash equivalents, end of period	$	147,211		$	332,956


Supplemental and non-cash financing activities
Interest expense paid	$	4,238		$	924
Deemed purchase and return of capital from Investment Funds & Vehicles	$	26,068		$	—
In-kind transfer of investments	$	—		$	111,656
Deemed distribution/re-contribution	$	144,233		$	—

See notes to financial statements

TCW DIRECT LENDING LLC

Notes to Financial Statements (Unaudited)

(dollar amount in thousands, except for unit data)

June 30, 2016

1. Organization and Basis of Presentation

Organization: TCW Direct Lending LLC (the “Company” and “our”), was formed as a Delaware corporation on March 20, 2014 and converted to a Delaware limited liability company on April 1, 2014. We conducted a private offering of our limited liability company units (the “Common Units”) to investors in reliance on exemptions from the registration requirements of the U.S. Securities Act of 1933, as amended (the “Securities Act”). The Company has engaged TCW Asset Management Company LLC (“TAMCO”), an affiliate of The TCW Group, Inc. (“TCW”) to be its adviser (the “Adviser”). On May 13, 2014 (“Inception Date”), the Company sold and issued 10 Common Units at an aggregate purchase price of $1 to TAMCO.

The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). We have also elected to be treated for U.S. Federal income tax purposes as a Regulated Investment Company (a “RIC”) under Subchapter M of the U.S Internal Revenue Code of 1986, as amended (the “Code”) for the taxable year ending December 31, 2015 and subsequent years. We will be required to continue to meet the minimum distribution and other requirements for RIC qualification. As a BDC and a RIC, we are required to comply with certain regulatory requirements.

Term: The term of the Company will continue until the sixth anniversary of the Initial Closing Date, September 14, 2020 unless extended or sooner dissolved as provided in the limited liability agreement or by operation of law. The Company may extend the term for two additional one-year periods upon written notice to the Members at least 90 days prior to the expiration of the term or the end of the first one-year period. Thereafter, the term may be extended for successive one-year periods, with the vote or consent of a supermajority in interest of the Common Unitholders.

Commitment Period: The Commitment Period commenced on September 19, 2014 (the “Initial Closing Date”) and will end on the third anniversary of the Initial Closing Date.

Capital Commitments: On September 19, 2014 (the “Initial Closing Date”), the Company began accepting subscription agreements from investors for the private sale of its Common Units. On March 19, 2015, the Company completed its final private placement of its Common Units. Subscription agreements with commitments (“Commitments”) from investors totaling $2,013,470 for the purchase of Common Units were accepted. Each Common Unitholder is obligated to contribute capital equal to their Commitment and each Unit’s Commitment obligation is $100.00 per unit. The amount of capital that remains to be drawn down and contributed is referred to as an “Undrawn Commitment”.

The commitment amount funded does not include amounts contributed in anticipation of a potential investment that the Company did not consummate and therefore returned to the Members’ as unused capital. As of June 30, 2016 aggregate Commitments, Undrawn Commitments and subscribed for Units of the Company follow:


	Commitments		Undrawn Commitments		% of Commitments Funded			Units
Common Unitholder	$	2,013,470	$	1,204,791		40.2	%		20,134,698

Recallable Amount: A Common Unitholder may be required to re-contribute amounts distributed equal to 75% of the principal amount or the cost portion of any Portfolio Investment that is fully repaid to or otherwise fully recouped by the Company within one year of the Company’s investment. The Recallable Amount is excluded from the calculation of the accrual based net asset value.

The Recallable Amount as of June 30, 2016 is $63,750.

Investments Transferred In-Kind:

In partial satisfaction of its capital commitment to TCW Direct Lending Strategic Ventures LLC (“Strategic Ventures”), the Company transferred in-kind 100% of its investment interest in two loans with a fair market value of $111,656 to Strategic Ventures on June 3, 2015. Investments transferred include Motor Coach Industries International, Inc. term loan A and term loan B, outstanding par amount, on a combined basis of $66,656 and Angie’s List , Inc. term loan, outstanding par amount of $45,000 and an unfunded delayed draw of $18,750.

The amount realized on the investment and corresponding in-kind transfer of $111,656 recognized by the Company equaled the fair value of such investments on the date of transfer.

2. Significant Accounting Policies

Basis of Presentation: The accompanying financial statements of the Company are prepared in accordance with the instructions to Form 10-Q. The Company is an investment company following accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies (“ASC Topic 946”). Certain prior period amounts in the Statement of Operations relating to audit, legal, valuation and tax service fees have been reclassified into “Professional Fees” and sub-administrator, transfer agent and custody fee expense have been reclassified into “Administrative Fees.” On the Statements of Assets and Liabilities certain prior period amounts in sub-administrator, transfer agent and custody fees, insurance, audit and tax service and valuations service fee payables have been reclassified into “Other accrued expenses and liabilities.” The unaudited financial statements reflect all normal recurring adjustments, which are, in the opinion of management, necessary for the fair presentation of the Company’s results for the interim periods presented. The results of operations for interim periods are not indicative of results to be expected for the full year. These reclassifications have been made to conform to the current period presentation.

Amounts as of December 31, 2015 included in the unaudited financial statements have been derived from the audited financial statements as of that date. Certain financial information that is normally included in annual financial statements, including certain financial statement footnotes, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), is not required for interim reporting purposes and has been condensed or omitted herein. These financial statements should be read in conjunction with the Company’s financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the Securities and Exchange Commission (“SEC”) on March 30, 2016.

Use of Estimates: The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities at the date of the financial statements, (ii) the reported amounts of income and expenses during the years presented and (iii) disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

Investments: The Company measures the value of its investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosure (“ASC Topic 820”), issued by FASB. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC Topic 820, the Company considers its principal market to be the market that has the greatest volume and level of activity.

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

Income Recognition: Interest income is recorded on an accrual basis unless doubtful of collection or the related investment is in default. Realized gains and losses on investments are recorded on a specific identification basis. The Company typically receives a fee in the form of a discount to the purchase price at the time it funds an investment in a loan. The discount is accreted to interest income over the life of the respective loan, as reported in the Statement of Operations, and reflected in the amortized cost basis of the investment. Discounts associated with a revolver are treated as a discount to the issuers’ term loan. In the event there is a fee associated with a delayed draw that remains unfunded, the Company will recognize the fee as fee income immediately. Ongoing facility, commitment or other additional fees including, prepayment fees, consent fees and forbearance fees are recognized immediately when earned as income.

Deferred Financing Costs: Deferred financing costs incurred by the Company in connection with the revolving credit facility, including arrangement fees, upfront fees and legal fees, are amortized on a straight-line basis over the term of the revolving credit facility.

Organization and Offering Costs: Costs incurred to organize the Company totaling $665 were expensed as incurred. Offering costs totaling $853 were accumulated and charged directly to Members’ Capital after the end of the period during which Common Units were offered (the “Closing Period”). The Company did not bear more than an amount equal to 10 basis points of the aggregate capital commitments of the Company for organization and offering expenses.

Cash and Cash Equivalents: The Company considers all investments with a maturity of three months or less at the time of acquisition to be cash equivalents. At June 30, 2016 cash and cash equivalents is comprised of demand deposits and highly liquid investments with maturities of three months or less, which approximate fair value.

Income Taxes: The Company has elected to be treated as a RIC under the Code for the taxable year ended December 31, 2015. So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. Federal income taxes on any ordinary income or capital gains that it distributes at least annually to its stockholders as dividends. Rather, any tax liability related to income earned and distributed by the Company represents obligations of the Company’s investors and will not be reflected in the financial statements of the Company.

Accounting Pronouncements Recently Adopted: In February 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”), which amends the consolidation requirements in ASC 810 and significantly changes the consolidation analysis required under U.S. GAAP. The FASB’s focus during deliberations was largely on the investment management industry. The key amendments that are going to have significant impact on Company’s consolidation conclusion include:

•

Limited partnerships will be variable interest entities (VIEs), unless the limited partners have either substantive kick-out or participating rights. Although more partnerships will be VIEs, it is less likely that a general partner will consolidate a limited partnership.

•

The ASU changes the effect that fees paid to a decision maker or service provider have on the consolidation analysis. Specifically, it is less likely that the fees themselves will be considered a variable interest, that an entity will be a VIE, or that consolidation will result.

•

The deferral of ASU 2009-17 for investments in certain investment funds has been eliminated. Therefore, investment managers, general partners, and investors in these investment funds will need to perform a drastically different consolidation evaluation.

•

For entities other than limited partnerships, the ASU clarifies how to determine whether the equity holders (as a group) have power over the entity (this will most likely result in a change to current practice). The clarification could affect whether the entity is a VIE.

ASU 2015-02 became effective for the Company on January 1, 2016. The adoption of ASU 2015-02 had no material impact on the Company’s financial statements.

The Company adopted ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs. The Company also adopted ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements – Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015. Together, these ASUs required, in most cases, that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. Debt issuance costs incurred in connection with line-of-credit arrangements, however, may continue to be presented as an asset in the balance sheet. The adoption of ASU No. 2015-03 and ASU 2015-15 had no material impact on the Company’s financial statements.

In May 2015, the FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. This guidance is effective for annual reporting periods, and the interim periods within those periods, beginning after December 15, 2015. The adoption of ASU No. 2015-07 had no material impact on the Company’s financial statements.

3. Investment Valuations and Fair Value Measurements

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

Investments for which market quotes are not readily available or are not considered reliable are valued at fair value and approved by the Board of Directors (the “Board”) based on similar instruments, internal assumptions and the weighting of the best available pricing inputs.

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

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

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

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

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

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

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

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

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

Equity, (Level 3), include common stock. Such securities are valued based on specific pricing models, internal assumptions and the weighting of the best available pricing inputs. A market approach is generally used to determine fair value. Pricing inputs include, but are not limited to, financial health, and relevant business developments of the issuer; EBITDA, market multiples of comparable companies, comparable market transactions and recent trades or transactions; issuer, industry and market events; contractual or legal restrictions on the sale of the security. A liquidity discount based on current market expectations, future events, minority ownership position and the period management reasonably expects to hold the investment may be applied.

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

Net Asset Value (“NAV”) (Investment Funds and Vehicles): Equity investments in affiliated investment fund (Strategic Ventures) are valued based on the NAV reported by the investment fund. Investments held by the affiliated fund include debt investments in privately originated senior secured debt. Such investments held by the affiliated fund are valued using the same methods, approach and standards applied above to debt investments held by the Company. The Company’s ability to withdraw from the fund is subject to restrictions. The term of the fund will continue until June 5, 2021 unless dissolved earlier or extended for two additional one-year periods by the Company, in its full discretion. The Company can further extend the term of the fund for additional one-year periods, upon notice to and consent from the funds management committee. The Company is entitled to income and principal distributed by the fund.

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Schedule of Investments as of June 30, 2016:


Investments	Level 1		Level 2		Level 3		NAV		Total
Debt	$	—	$	—	$	891,792	$	—	$	891,792
Equity		—		—		8,507		—		8,507
Investment Funds & Vehicles⁽¹⁾		—		—		—		260,550		260,550
Cash equivalents		7		—		—		—		7

Total Assets	$	7	$	—	$	900,299	$	260,550	$	1,160,856

⁽¹⁾

Includes equity investments in Strategic Ventures. In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Statements of Assets and Liabilities.

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Schedule of Investments as of December 31, 2015:


Investments	Level 1		Level 2		Level 3		NAV		Total
Debt	$	—	$	—	$	586,626	$	—	$	586,626
Investment Funds & Vehicles⁽¹⁾		—		—		—		206,635		206,635
Cash equivalents		168,850		—		—		—		168,850

Total Assets	$	168,850	$	—	$	586,626	$	206,635	$	962,111

⁽¹⁾

The following table provides a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the three and six months ended June 30, 2016:


	Debt			Equity			Total
Balance, March 31, 2016	$	792,636		$	—		$	792,636
Purchases		228,716			8,750			237,466
Sales and paydowns of investments		(126,318	)		(243	)		(126,561	)
Amortization of discount/(premium)		1,702			—			1,702
Net realized gains (losses)		118			—			118
Net change in unrealized appreciation/ (depreciation)		(5,062	)		—			(5,062	)

Balance, June 30, 2016	$	891,792		$	8,507			900,299

Change in net unrealized appreciation (depreciation) in investments held as of June 30, 2016	$	(4,620	)	$	—		$	(4,620	)

	Debt			Equity			Total
Balance, December 31, 2015	$	586,626		$	—		$	586,626
Purchases		454,048			8,750			462,798
Sales and paydowns of investments		(136,126	)		(243	)		(136,369	)
Amortization of discount/(premium)		2,432			—			2,432
Net realized gains (losses)		118			—			118
Net change in unrealized appreciation/ (depreciation)		(15,306	)		—			(15,306	)

Balance, June 30, 2016	$	891,792		$	8,507		$	900,299

Change in net unrealized appreciation (depreciation) in investments held as of June 30, 2016	$	(14,864	)	$	—		$	(14,864	)

The following table provides a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the three and six months ended June 30, 2015:


	Debt				Debt
Balance, March 31, 2015	$	112,078		Balance, December 31, 2014	$	112,500
Purchases		431,405		Purchases		431,405
Sales and paydowns of investments ⁽¹⁾		(112,147	)	Sales and paydowns of investments ⁽¹⁾		(112,569	)
Amortization of discount/(premium)		167		Amortization of discount/(premium)		281
Net realized gains (losses)		1,987		Net realized gains (losses)		1,995
Net change in unrealized appreciation/ (depreciation)		4,941		Net change in unrealized appreciation/ (depreciation)		4,819

Balance, June 30, 2015	$	438,431		Balance, June 30, 2015	$	438,431

Change in net unrealized appreciation (depreciation) in investments held as of June 30, 2015		4,941				7,006

⁽¹⁾	Includes in-kind transfer of $111,656.

Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. During the six months ended June 30, 2016, the Company did not have any transfers between levels.

Level 3 Valuation and Quantitative Information: The following table summarizes the valuation techniques and quantitative information utilized in determining the fair value of the Level 3 investments as of June 30, 2016.

Investment Type

Fair Value at
June 30, 2016

Valuation
Technique

Unobservable Input

Range

Weighted
Average

Impact to
Valuation from
an Increase in
Input

Debt

804,620

Income method

Weighted average
cost of capital

5.0% - 21.5%

9.2

Decrease

Shadow Credit
Rating

CCC- to BB

N/A

Increase

Debt

87,172

Market method

EV Implied Multiple

8.0x to 9.0x

N/A

Increase

Equity

8,507

Market method

EV Implied Multiple

10.75x to 11.75x

N/A

Increase

Investment Type

Fair Value at
December 31, 2015

Valuation
Technique

Unobservable Input

Range

Weighted
Average

Impact to
Valuation from
an Increase in
Input

Debt

586,262

Income method

Weighted average
cost of capital

Shadow Credit
Rating

6.4% - 14.5%

CCC+ to B+

10.7

N/A

Decrease

Increase

Valuation Process:

Oversight for determining fair value is the responsibility of the Board of the Company (with input from the Adviser and an external, independent valuation firm retained by the Company). The Company and the Adviser value the investments at fair value on a quarterly basis and whenever required by the Company’s operating agreement. The Company has engaged an external, independent valuation firm to assist the Board in determining the fair market value of the Company’s investments for which market quotations are not readily available.

The Adviser undertakes a multi-step valuation process for investments whose market prices are not otherwise readily available. Unless noted, the Company is utilizing the midpoint of a valuation range provided by an external, independent valuation firm and approved by the Board. The Board may approve a value other than the midpoint if it believes that is the fair value. Based on its review of the external, independent valuation firm’s range and related documentation, the Adviser documents the valuation recommendations. The Adviser provides the valuation recommendation for each investment to the Company’s audit committee, based on / along with the independent valuation report. After the Company’s audit committee reviews the valuation recommendations, the Board discusses the portfolio company and investment valuations with the Adviser and determines the fair value of these investments in good faith.

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

4. Agreements and Related Party Transactions

Advisory Agreement:

On September 15, 2014, the Company entered into an Investment Advisory and Management Agreement (the “Advisory Agreement”) with the Adviser, its registered investment adviser under the Investment Advisers Act of 1940, as amended. The Advisory Agreement was approved by the Board at an in-person meeting. Unless earlier terminated, the Advisory Agreement will remain in effect for a period of two years and will remain in effect from year to year thereafter if approved annually by (i) the vote of the Board, or by the vote of a majority of our outstanding voting securities, and (ii) the vote of a majority of the independent directors of the Board.

Management Fee:

Pursuant to the Advisory Agreement, and subject to the overall supervision of the Board, the Adviser will manage the Company’s day-to-day operations and provide investment advisory services to the Company. The Company will pay to the Adviser, quarterly in advance, a management fee (the “Management Fee”) calculated as follows: (i) for the period starting on the initial closing date and ending on the earlier of (A) the last day of the calendar quarter during which the Commitment Period (as defined below) ends or (B) the last day of the calendar quarter during which the Adviser or an affiliate thereof begins to accrue a management fee with respect to a successor fund, 0.375% (i.e., 1.50% per annum) of the aggregate commitments determined as of the end of the Closing Period, and (ii) for each calendar quarter thereafter during the term of the Company (but not beyond the tenth anniversary of the initial closing date), 0.1875% (i.e., 0.75% per annum) of the aggregate cost basis (whether acquired by the Company with contributions from members, other Company funds or borrowings) of all portfolio investments that have not been sold, distributed to the members, or written off for tax purposes (but reduced by any portion of such cost basis that has been written down to reflect a permanent impairment of value of any portfolio investment), determined in each case as of the first day of such calendar quarter. The Management Fee in respect of the Closing Period will be calculated as if all capital commitments of the Company were made on the initial closing date, regardless of when Common Units were actually funded. The actual payment of the Management Fee with respect to the Closing Period will not be made prior to the first day of the first full calendar quarter following the end of the Closing Period. The “Commitment Period” of the Company will begin on the initial closing date and end on the earlier of (a) three years from the initial closing date and (b) the date on which the undrawn Commitment of each Common Unit has been reduced to zero. While the Management Fee will accrue from the initial closing date, the Adviser intends to defer payment of such fees to the extent that such fees cannot be paid from interest and fee income generated by our investments.

For the three and six months ended June 30, 2016, Management Fees incurred amounted to $7,550 and $15,101, respectively, of which $11,187 remained payable at June 30, 2016. For the three and six months ended June 30, 2015, Management Fees incurred amounted to $7,550 and $20,143, respectively, of which $23,636 remained payable at June 30, 2015.

Transaction and Offset Fees:

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

Since inception of the Company through the three and six month periods ended June 30, 2016, the Adviser was paid directly zero and $652, respectively in such fees. In accordance with the limited liability company agreement, as of June 30, 2016 all of the $652 of such fees has been recorded as fee income. No fees were paid to the Advisor for the three and six month periods ended June 30, 2015.

Incentive Fee:

In addition, the Adviser will receive an incentive fee (the “Incentive Fee”) as follows:

(a) First, no Incentive Fee will be owed until the unitholders have collectively received cumulative distributions pursuant to this clause (a) equal to their aggregate capital contributions in respect of all Common Units;

(b) Second, no Incentive Fee will be owed until the unitholders have collectively received cumulative distributions equal to a 9% internal rate of return on their aggregate capital contributions in respect of all Common Units (the “Hurdle”);

(c) Third, the Adviser will be entitled to an Incentive Fee out of 100% of additional amounts otherwise distributable to unitholders until such time as the cumulative Incentive Fee paid to the Adviser is equal to 20% of the sum of (i) the amount by which the Hurdle exceeds the aggregate capital contributions of the unitholders in respect of all Common Units and (ii) the amount of Incentive Fee being paid to the Adviser pursuant to this clause (c); and

(d) Thereafter, the Adviser will be entitled to an Incentive Fee equal to 20% of additional amounts otherwise distributable to unitholders, with the remaining 80% distributed to the unitholders.

The Incentive Fee will be calculated on a cumulative basis and the amount of the Incentive Fee payable in connection with any distribution (or deemed distribution) will be determined and, if applicable, paid in accordance with the foregoing formula each time amounts are to be distributed to the unitholders.

If the Advisory Agreement terminates early for any reason other than (i) the Adviser voluntarily terminating the agreement or (ii) our terminating the agreement for cause (as set out in the Advisory Agreement), we will be required to pay the Adviser a final incentive fee payment (the “Final Incentive Fee Payment”). The Final Incentive Fee Payment will be calculated as of the date the Advisory Agreement is so terminated and will equal the amount of Incentive Fee that would be payable to the Adviser if (A) all our investments were liquidated for their current value (but without taking into account any unrealized appreciation of any portfolio investment), and any unamortized deferred portfolio investment-related fees would be deemed accelerated, (B) the proceeds from such liquidation were used to pay all our outstanding liabilities, and (C) the remainder were distributed to unitholders and paid as Incentive Fee in accordance with the “waterfall” (i.e., clauses (a) through (d)) described above for determining the amount of the Incentive Fee. We will make the Final Incentive Fee Payment in cash on or immediately following the date the Advisory Agreement is so terminated. The Adviser Return Obligation (defined below) will not apply in connection with a Final Incentive Fee Payment.

For the three and six months ended June 30, 2016, no Incentive Fees were incurred. For the three and six months ended June 30, 2015, no Incentive Fees were incurred.

Administration Agreement:

On September 15, 2014, the Company entered into the Administration Agreement with the Adviser under which the Adviser (or one or more delegated service providers) will oversee the maintenance of our financial records and otherwise assist on the Company’s compliance with regulations applicable to a BDC under the 1940 Act, and a RIC under the Code, to prepare reports to our unitholders, monitor the payment of our expenses and the performance of other administrative or professional service providers, and generally provide us with administrative and back office support. The Company will reimburse the Administrator for expenses incurred by it on behalf of the Company in performing its obligations under the Administration Agreement. Amounts paid pursuant to the Administration Agreement are subject to the annual cap on Company Expenses (as defined below), as described more fully below.

The Company, and indirectly the unitholders, will bear (including by reimbursing the Adviser or Administrator) all other costs and expenses of its operations, administration and transactions, including, without limitation, organizational and offering expenses, management fees, costs of reporting required under applicable securities laws, legal fees of the Company’s counsel and accounting fees. However, the Company will not bear (a) more than an amount equal to 10 basis points of the aggregate capital commitments of the Company for organization and offering expenses in connection with the offering of Common Units through the Closing Period and (b) more than an amount equal to 12.5 basis points of the aggregate Commitments of the Company per annum (pro-rated for partial years) for its costs and expenses other than ordinary operating expenses (“Company Expenses”), including amounts paid to the Administrator under the Administration Agreement and reimbursement of expenses to the Adviser. All expenses that the Company will not bear will be borne by the Adviser or its affiliates. Notwithstanding the foregoing, the cap on Company Expenses does not apply to payments of the Management Fee, Incentive Fee, organizational and offering expenses (which are subject to the separate

cap), amounts payable in connection with the Company’s borrowings (including interest, bank fees, legal fees and other transactional expenses related to any borrowing or borrowing facility and similar costs), costs and expenses relating to the liquidation of the Company, taxes, or extraordinary expenses (such as litigation expenses and indemnification payments).

Direct Lending Strategic Ventures LLC:

On June 5, 2015, the Company, together with an affiliate of Security Benefit Corporation and accounts managed by Oak Hill Advisors, L.P., entered into an Amended and Restated Limited Liability Company Agreement (the “Agreement”) to become members of Strategic Ventures. Strategic Ventures focuses primarily on making senior secured floating rate loans to middle-market borrowers. The Agreement was effective June 5, 2015.

The Company’s capital commitment is $481,600, representing approximately 80% of the preferred and common equity ownership of Strategic Ventures, with the third-party investors representing the remaining capital commitments and preferred and common equity ownership. A portion of the Company’s capital commitment was satisfied by the contribution of two loans to Strategic Ventures. Strategic Ventures also entered into a revolving credit facility to finance a portion of certain eligible investments on June 5, 2015. Effective August 21, 2015, the revolving credit facility increased to $600 million from $500 million. Strategic Ventures is managed by a management committee comprised of two members, one appointed by the Company and one appointed by Oak Hill Advisors, L.P. All decisions of the management committee require unanimous approval of its members. Neither the Company, nor the Adviser will receive management fees from this entity. Although the Company owns more than 25% of the voting securities of Strategic Ventures, the Company does not believe that it has control over Strategic Ventures (other than for purposes of the Investment Company Act).

The Company’s investments in affiliated investments for the six months ended June 30, 2016 were as follows:


	Fair Value as of December 31, 2015		Purchases		Sales		Change in Unrealized Gains (Losses)		Fair Value as of June 30, 2016		Dividend Income
Controlled Affiliates

TCW Direct Lending Strategic Ventures LLC	$	206,635	$	52,803	$	7,402	$	8,514	$	260,550	$	4,963

Total Controlled Affiliates	$	206,635	$	52,803	$	7,402	$	8,514	$	260,550	$	4,963

The Company’s investments in affiliated investments for the year December 31, 2015 were as follows:


	Fair Value as of December 31, 2014		Purchases		Sales		Change in Unrealized Gains (Losses)		Fair Value as of December 31, 2015		Dividend Income
Controlled Affiliates

TCW Direct Lending Strategic Ventures LLC	$	—	$	268,229	$	67,669	$	6,075	$	206,635	$	894

Total Controlled Affiliates	$	—	$	268,229	$	67,669	$	6,075	$	206,635	$	894

5. Commitments and Contingencies

The Company had the following unfunded commitments and unrealized gain/(loss) as of June 30, 2016 by investment:


Unfunded Commitments	Amount		Unrealized gain/(loss)
ENA Holdings Corporation (matures May 2021)	$	4,804	$	(40	)
Help At Home Inc. (matures August 2020)		5,405		(62	)
OTG Management LLC (matures December 2017)		12,761		(37	)
Quicken Parent Corp. (matures February 2017)		1,725		10
Total Unfunded Commitments		24,695		(129	)

The Company’s total capital commitment to its underlying investment in Strategic Ventures is $481,600. As of June 30, 2016, the Company’s unfunded commitment to Strategic Ventures is $235,639.

The Company had the following unfunded commitments and unrealized gain/(loss) as of December 31, 2015 by investment type:


Unfunded Commitments	Amount		Unrealized gain/(loss)
Help At Home Inc. (matures August 2020)	$	1,486	$	(28	)

From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. As of June 30, 2016, management is not aware of any pending or threatened litigation.

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

6. Members’ Capital

As of the six months ended June 30, 2016, the Company did not sell or issue any Common Units at an aggregate purchase price of $100 per unit. The Company processed a deemed distribution and re-contribution on May 20, 2016 for $144,233. The activity for the three and six months ended June 30, 2016 is a follows:


	For the three months ended June 30, 2016		For the six months ended June 30, 2016
Units at beginning of period		20,134,698		20,134,698
Units issued and committed		—		—

Units issued and committed at end of period		20,134,698		20,134,698

As of the six months ended June 30, 2015, the Company sold and issued 11,894,188 Common Units at an aggregate purchase price of $100 per unit. The activity for the three and six months ended June 30, 2015 is a follows:


	For the three months June 30, 2015		For the six months ended June 30, 2015
Units at beginning of period		20,134,698		8,240,510
Units issued and committed		0		11,894,188

Units issued and committed at end of period		20,134,698		20,134,698

7. Credit Facility

On November 12, 2014, the Company entered into a senior secured Revolving Credit Agreement, by and between the Company, as borrower, and Natixis, New York Branch, as administrative agent and committed lender (“Natixis”). That agreement was subsequently amended pursuant to an Amended and Restated Credit Agreement, dated as of December 22, 2014, by and among the Company, Natixis, and various lenders party thereto, which was then further amended pursuant to a Second Amended and Restated Credit Agreement, dated as of July 1, 2015 (as so amended and restated, the “Credit Agreement”).

The Credit Agreement provides for a revolving credit line of up to $750 million (with sublimits for letters of credit of up to $50 million and short-term “swingline” loans of up to $10 million), subject to the available Borrowing Base (generally, a percentage of remaining unfunded commitments from certain eligible Company investors), and is secured by the undrawn commitments together with the recallable amounts of the Company’s investors generally. The initial lender commitment was $250 million which periodically increased up to an aggregate amount of $750 million. The stated maturity date of the Credit Agreement is November 10, 2017, unless such date is extended at the Company’s option no more than two times for a term of up to twelve months per such extension. Borrowings under the Credit Agreement bear interest at a rate equal to either (a) adjusted eurodollar rate calculated in a customary manner plus 1.70%, (b) commercial paper rate plus 1.70%, or (c) a base rate calculated in a customary manner (which will never be less than the adjusted eurodollar rate plus 1.00%) plus 0.70%.

As of June 30, 2016 and December 31, 2015, the commitment amounts were $750,000 and $750,000, respectively and the amounts outstanding under the Credit Facility were $635,000 and $329,000, respectively. The carrying amount of the amount outstanding under the Credit Facility, which is categorized as Level 2 within the fair value hierarchy as of June 30, 2016 and December 31, 2015, approximates its fair value. Valuation techniques and significant inputs used to determine fair value include Company details, credit, market and liquidity risk and events, financial health of the Company, place in the capital structure, interest rate and terms and condition. The Company incurred $6,415 in connection with obtaining the Credit Facility, which the Company has recorded as deferred financing costs on its statement of asset and liabilities and is amortizing these fees over the life of the Credit Facility. As of June 30, 2016 and December 31, 2015, $3,124 and $4,263, respectively, of such prepaid deferred financing costs had yet to be amortized.

The summary information regarding the Credit Facility for the three and six months ended June 30, 2016 was as follows:


	For the three months ended June 30,						For the six months ended June 30,
	2016			2015			2016			2015
Borrowing interest expense	$	2,332		$	681		$	4,257		$	944
Unused fees		202			317			542			705
Administrative fees		19			18			38			37
Amortization of financing costs		570			392			1,139			783

Total		3,123			1,408			5,976			2,469

Weighted average interest rate		2.18	%		1.89	%		2.18	%		1.88	%
Average outstanding balance		430,066			142,527			393,110			99,613

8. Income Taxes

The Company has elected to be treated as a BDC under the 1940 Act and has elected to be treated as a RIC under the Code. So long as the Company maintains its status as a RIC, it will generally not pay corporate-level U.S. Federal income or excise taxes on any ordinary income or capital gains that it distributes at least annually to its common unitholders as dividends. The Company elected to be taxed as a RIC in 2015. Built-in gains by a C-Corp transferred to a RIC are subject to tax. The company does not anticipate a tax on its built-in gains due its current net operating losses.

Federal Income Taxes

It is the policy of the Company to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and distribute all of its net taxable income and any net realized gains on investments to its shareholders. Therefore, no federal income tax provision is required.

As of June 30, 2016 and December 31, 2015, the Company’s aggregate investment unrealized appreciation and depreciation for Federal income tax purposes were as follows:


	June 30, 2016			December 31, 2015
Cost of investments for federal income tax purposes	$	1,165,811		$	795,312
Unrealized appreciation	$	21,671		$	5,828
Unrealized depreciation	$	26,626		$	7,879
Net unrealized appreciation (depreciation) on investments	$	(4,955	)	$	(2,051	)

The Company did not have any unrecognized tax benefits at December 31, 2015, nor were there any increases or decreases in unrecognized tax benefits for the period then ended; and therefore no interest or penalties were accrued. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three and four fiscal years, respectively.

9. Financial Highlights

Selected data for a unit outstanding throughout the six months ended June 30, 2016 and June 30, 2015 is below. The accrual base Net Asset Value is calculated by subtracting the per unit income (loss) from investment operations from the beginning Net Asset Value per unit and reflects all units issued and outstanding.


	For the Six Months Ended June 30, 2016			For the Six Months Ended June 30, 2015
Net Asset Value Per Unit (accrual base), Beginning of Period	$	99.35		$	99.84

Net Income in Common Unitholder NAV from Prior Year⁽¹⁾		—			0.09

Income from Investment Operations:
Net investment income (loss)⁽²⁾		1.29			(0.88	)
Net realized and unrealized gain (loss)		(.34	)		0.36

Total from investment operations		.95			(0.52	)
Less Distributions:
From net investment income		0.00			0.00
From net realized gains		0.00			0.00
Return of capital		(7.16	)		0.00

Total distributions		(7.16	)		—


Net Asset Value Per Unit (accrual base), End of Period	$	93.14		$	99.41

Common Unitholder Total Return⁽³⁾⁽⁷⁾		2.9	%		-7.1	%

Common Unitholder IRR⁽⁴⁾		0.9	%		—	%

Ratios and Supplemental Data
Members’ Capital, end of period	$	670,475		$	459,252
Units outstanding, end of period		20,134,698			20,134,698

Ratios based on average net assets of Member’s Capital:
Ratio of total expenses to average net assets⁽⁵⁾		6.81	%		14.87	%
Expenses recaptured by Investment Adviser⁽⁶⁾		—	%		0.20	%

Ratio of net expenses to average net assets⁽⁵⁾		6.81	%		15.07	%
Ratio of financing cost to average net assets⁽⁷⁾		0.91	%		1.56	%
Ratio of net investment income (loss) before expense recapture to average net assets⁽⁵⁾		7.91	%		(10.63	)%
Ratio of net investment income (loss) to average net assets⁽⁵⁾		7.91	%		(10.83	)%
Credit facility payable		635,000			435,000
Asset coverage ratio		2.1			2.1
Portfolio turnover rate⁽⁷⁾		14	%		64	%

⁽¹⁾	Net increase in Common Unitholder NAV from prior year is a one-time adjustment to account for the increase in the Common Units issued from January 1, 2015 through the final closing date of March 19, 2015.

⁽²⁾	Per unit data was calculated using the number of common units issued and outstanding as of June 30, 2016.

⁽³⁾	The Total Return for the six months ended June 30, 2016 and June 30, 2015 were calculated by taking the net income (loss) of the Company for the period divided by the weighted average capital contributions from the members during the period. The return is net of management fees and expenses.

⁽⁴⁾	The Internal Rate of Return (IRR) since inception for the Common Unitholders’, after management fees, financing costs and operating expenses is 0.9% through June 30, 2016.

The IRR is computed based on cash flow due dates contained in notices to Member’s (contributions from and distributions to the Common Unitholders) and the net assets (residual value) of the Members’ capital account at period end.

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

⁽⁵⁾	Annualized except for organizational costs.

⁽⁶⁾	Annualized.

⁽⁷⁾	Not annualized.

10. Subsequent Events

The Company evaluates the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements are issued. There have been no subsequent events that require recognition or disclosure through the date the financial statement was available to be issued other than those described below.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information contained in this section should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. This discussion also should be read in conjunction with the “Cautionary Statement Regarding Forward Looking Statements” set forth on page 3 of this quarterly report. All dollar amounts are presented in thousands.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

•

an economic downturn could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or a significant portion of our investments in such portfolio companies;

•

a contraction of available credit could impair our lending and investment activities;

•

interest rate volatility could adversely affect our results, particularly if we elect to use leverage as part of our investment strategy;

•

our future operating results;

•

our business prospects and the prospects of our portfolio companies;

•

our contractual arrangements and relationships with third parties;

•

the ability of our portfolio companies to achieve their objectives;

•

competition with other entities and our affiliates for investment opportunities;

•

an inability to replicate the historical success of any previously launched fund managed by the direct lending team of our investment adviser, TCW Asset Management Company (the “Adviser”);

•

the speculative and illiquid nature of our investments;

•

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

•

the adequacy of our financing sources and working capital;

•

the costs associated with being a public entity;

•

the loss of key personnel;

•

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

•

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

•

the ability of The TCW Group, Inc. to attract and retain highly talented professionals that can provide services to the Adviser in its capacity as our investment adviser and administrator;

•

our ability to qualify and maintain our qualification as a regulated investment company, or “RIC,” under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended, or the “Code,” and as a business development company (“BDC”) under the Investment Company Act of 1940;

•

the effect of legal, tax and regulatory changes; and

•

the other risks, uncertainties and other factors we identify under “Item 1A. Risk Factors” in the Form 10-K that we filed with the SEC on March 30, 2016 and in this report.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, some of those assumptions are based on the work of third parties and any of those assumptions could prove to be inaccurate; as a result, the forward-looking statements based on those assumptions also could prove to be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this report should not be regarded as a representation by us that our plans and objectives will be achieved. You should not place undue reliance on these forward-looking statements, which apply only as of the date

of this report. We do not undertake any obligation to update or revise any forward-looking statements or any other information contained herein, except as required by applicable law. The safe harbor provisions of Section 21E of the 1934 Act, which preclude civil liability for certain forward-looking statements, do not apply to the forward-looking statements in this report because we are an investment company.

Overview

We were formed on April 1, 2014 as a limited liability company under the laws of the State of Delaware. We have filed an election to be regulated as a BDC under the 1940 Act. We have also elected to be treated for U.S. federal income tax purposes as a RIC under the Code for the taxable year ending December 31, 2015 and subsequent years. We are required to continue to meet the minimum distribution and other requirements for RIC qualification. As such, we will be required to comply with various regulatory requirements, such as the requirement to invest at least 70% of our assets in “qualifying assets,” source of income limitations, asset diversification requirements, and the requirement to distribute annually at least 90% of our taxable income and tax-exempt interest.

Each investor was required to enter into a subscription agreement in connection with its Commitment (a “Subscription Agreement”). Under the terms of the subscription agreements, the Company may generally draw down all or any portion of the undrawn commitment with respect to each Common Unit upon at least ten business days’ prior written notice to the Unitholders. Investors have entered into subscription agreements for 20,134,698 Common Units of the Company issued and outstanding representing a total of $2.013 billion of committed capital.

Revenues

We generate revenues in the form of interest income and capital appreciation by providing private capital to middle market companies operating in a broad range of industries primarily in the United States. We do not anticipate the Direct Lending Team to originate investments for us with PIK interest features, although, we may have investments with payment-in-kind (“PIK”) interest features in limited circumstances involving debt restructurings or work-outs of current investments. Our highly negotiated private investments may include senior secured loans, unsecured senior loans, subordinated and mezzanine loans, convertible securities, equity securities, and equity-linked securities such as options and warrants. However, our investment bias will be towards adjustable-rate, senior secured loans. We do not anticipate a secondary market developing for our private investments.

We are primarily focused on investing in senior secured debt obligations, although there may be occasions where the investment may be unsecured. We also consider an equity investment as the primary security, in combination with a debt obligation, or as a part of total return strategy. Our investments are mostly in corporations, partnerships or other business entities. Additionally, in certain circumstances, we may co-invest with other investors and/or strategic partners through indirect investments in portfolio companies through a joint venture vehicle, partnership or other special purpose vehicle (each, an “Investment Vehicle”). While we invest primarily in U.S. companies, there may be certain instances where we will invest in companies domiciled elsewhere.

Expenses

We do not currently have any employees and do not expect to have any employees. Services necessary for our business are provided through the Administration Agreement and the Advisory Agreement.

We will bear (including by reimbursing the Adviser or Administrator) all costs and expenses of our operations, administration and transactions, including, without limitation, organizational and offering expenses, management fees, costs of reporting required under applicable securities laws, legal fees of our counsel and accounting fees. However, we will not bear (a) more than an amount equal to 10 basis points of the aggregate Commitments for organization and offering expenses in connection with the offering of Common Units through the Closing Period and (b) more than an amount equal to 12.5 basis points of the aggregate Commitments per annum (pro-rated for partial years) for our Operating Expenses, including amounts paid to the Administrator under the Administration Agreement and reimbursement of expenses to the Adviser and its affiliates. Notwithstanding the foregoing, the cap on Operating Expenses does not apply to payments of the Management Fee, Incentive Fee, organizational and offering expenses (which are subject to the separate cap described above), amounts payable in connection with our borrowings (including interest, bank fees, legal fees and other transactional expenses related to any borrowing or borrowing facility and similar costs), costs and expenses relating to our liquidation of the Company, taxes, or extraordinary expenses (such as litigation expenses and indemnification payments to either the Adviser or the Administrator). All expenses that we will not bear will be borne by the Adviser or its affiliates.

Operating expenses for the three and six months ended June 30, 2016 and 2015 were as follows (dollar amounts in thousands):


	For the three months ended June 30, 2016 (unaudited)		For the three months ended June 30, 2015 (unaudited)
Expenses
Management fees	$	7,550	$	7,550
Interest and credit facility expenses		3,123		1,408
Administrative fees		252		135
Professional fees		243		269
Directors’ fees		73		70
Other expenses		102		103

Total expenses	$	11,343	$	9,535

Expense recaptured by the Investment Adviser		—		—

Net Expenses	$	11,343	$	9,535


	For the six months ended June 30, 2016 (unaudited)		For the six months ended June 30, 2015 (unaudited)
Expenses
Management fees	$	15,101	$	20,143
Interest and credit facility expenses		5,976		2,469
Administrative fees		513		266
Professional fees		389		313
Directors’ fees		144		145
Other expenses		198		185

Total expenses	$	22,321	$	23,521

Expense recaptured by the Investment Adviser		—		312

Net Expenses	$	22,321	$	23,833

Our total operating expenses were $11.3 million and $9.5 million for the three months ended June 30, 2016 and 2015, respectively. Our operating expenses include management fees attributed to the Adviser of $7.6 million and $7.6 million for the three months ended June 30, 2016 and 2015, respectively. Interest and credit facility and administrative fees expenses increased vs. the prior year and reflect the increase our business activity and related increase in credit facility outstanding. Other expenses are consistent with prior year amounts.

For the six months ended June 30, 2016 and 2015, our net operating expenses were $22.3 million and $23.8 million, respectively. Our operating expenses include management fees attributed to the Adviser of $15.1 million and $20.1 million for the six months ended June 30, 2016 and 2015, respectively. The management fees for the six months ended June 30, 2015 of $20.1 million included $5.0 million for the final placements of Common Units from the Initial Closing Date of September 14, 2014 through those closings. The operating expenses in all categories except directors’ fees increased vs. the prior year period and reflect Company expenses consistent with regular operations vs. the prior period’s commencement of operations activity. Net expenses include an expense recapture of $0.3 million in the six months ended June 30, 2015 which offset the expense reimbursement by the Investment Adviser of $0.3 million in 2014 related to the expense limitation on organization expenses as outlined in the Advisory Agreement.

Net Investment Income (Loss)

Our net investment income (loss) for the three months ended June 30, 2016 and 2015 was $16.6 million and ($5.1) million, respectively. The income for the three months ended June 30, 2016 is attributable to current operations and the increase in the number of debt investments to 18 from 14 as of March 31, 2016 for the Company. The loss for the three months ended June 30, 2015 was attributable to the commencement of investment operations and ongoing costs in the period.

Our net investment income (loss) for the six months ended June 30, 2016 and 2015 was $25.9 million and ($17.1) million, respectively. The income for the six months ended June 30, 2016 is attributable to current operations and the increase in the number of debt investments to 18 from 11 as of December 31, 2015 for the Company. The loss for the six months ended June 30, 2015 was attributable to the commencement of investment operations, management fees charged on new commitments and ongoing costs in the period.

Net Realized Gain from Non-controlled/Non-affiliated Investments

The Company had a realized gain for the three months and six months ended June 30, 2016 of $0.1 million vs. a $2.0 million gain for the three and six months ended June 30, 2015. The gain in 2015 resulted primarily from the transfer of investments to TCW Direct Lending Strategic Ventures LLC and the corresponding realization of origination fees from the transferred investments.

Net Change in Unrealized Appreciation / Depreciation from non-controlled/non-affiliated investments

For the three months ended June 30, 2016, our net change in unrealized depreciation on investments totaled $5.1 million and is primarily attributable to the Company’s investments in H-D Advanced Manufacturing and Frontier Spinning Mills, Inc. which recorded decreases of $4.3 million and $1.8 million, respectively in fair value for the quarter ended June 30, 2016. The Company’s remaining investments recorded unrealized appreciation of $1.0 million.

For the three months ended June 30, 2015, our net change in unrealized appreciation on investments totaled $4.9 million and resulted from origination fees from investments in the quarter.

For the six months ended June 30, 2016, our net change in unrealized depreciation on investments totaled $15.4 million and is primarily attributable to the Company’s investments in H-D Advanced Manufacturing and Frontier Spinning Mills, Inc. which recorded decreases of $15.2 and $2.4 million in the six months ended June 30, 2016. The Company’s remaining investments recorded unrealized appreciation of $2.2 million.

For the six months ended June 30, 2015, our net change in unrealized depreciation on investments totaled $4.8 million and resulted from origination fees from investments in the six months ended June 30, 2015.

Net Change in Unrealized Appreciation from controlled/affiliated investments

Our unrealized appreciation from controlled affiliated investments of $3.7 million and $0.4 million for the three months ended June 30, 2016 and 2015, respectively. This activity relates to loans originated in 2016 and undistributed profits from TCW Strategic Ventures for which commenced operation in June 2015.

For the six months ended June 30, 2016 and 2015, our unrealized appreciation from controlled affiliated investments was $8.5 million and $0.4million, respectively resulting from loans originated in 2016 and undistributed profits from TCW Strategic Ventures.

Net Increase (Decrease) in Members’ Capital from Operations

Our net increase in Members’ Capital from operations for the three months ended June 30, 2016 and 2015 was $15.3 million and $2.2 million, respectively. This increase reflects the increase in operations, loan originations and activity vs. the prior year where we had just commenced operations.

For the six months ended June 30, 2016 our net increase in Members’ Capital from operations was $19.2 million vs. a decrease of $9.9 million in for the six months ended June 30, 2015. This increase reflects the increase in operations, loan originations and activity vs. the prior year where we had just commenced operations.

Financial Condition, Liquidity and Capital Resources

On March 19, 2015 we completed the final private placement of Common Units. We generate cash from (1) drawing down capital in respect of Units, (2) cash flows from investments and operations and (3) borrowings from banks or other lenders.

Our primary use of cash is for (1) investments in portfolio companies and other investments to comply with certain portfolio diversification requirements, (2) the cost of operations (including expenses, the Management Fee, the Incentive Fee, and any indemnification obligations), (3) debt service of any borrowings and (4) cash distributions to the Unitholders.

As of June 30, 2016 and December 31, 2015, aggregate Commitment, Undrawn Commitments and subscribed for Units of the Company are as follows (dollar amounts in thousands):


	June 30, 2016			December 31, 2015
Commitments	$	2,013,470		$	2,013,470
Undrawn commitments	$	1,204,791		$	1,349,024
Percentage of commitments funded		40.2	%		33.0	%
Units		20,134,698			20,134,698

Natixis Credit Agreement

As of June 30, 2016 and December 31, 2015, the credit facility commitment amounts were $750 million and $750 million, respectively and the amounts outstanding under the Credit Facility were $635 million and $329 million, respectively. The carrying amount of the amount outstanding under the Credit Facility, which is categorized as Level 2 within the fair value hierarchy as of June 30, 2016 and December 31, 2015, approximates its fair value. Valuation techniques and significant inputs used to determine fair value include Company details, credit, market and liquidity risk and events, financial health of the Company, place in the capital structure, interest rate and terms and condition. The Company incurred $6.4 million in connection with obtaining the Credit Facility, which the Company has recorded as deferred financing costs on its statement of asset and liabilities and is amortizing these fees over the life of the Credit Facility. As of June 30, 2016 and December 31, 2015, $3.1 million and $4.3 million, respectively, of such prepaid deferred financing costs had yet to be amortized.

Investment Activity

Based on fair value as of June 30, 2016, our non-controlled/non-affiliated portfolio was comprised by 18 debt investments and one equity investment. Of these investments, 99.1% were senior secured, first lien or term loans and .9% was common stock. As of June 30, 2015, the 6 debt investments outstanding were 100% first lien investments.

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in industries as of June 30, 2016 and 2015:


	June 30, 2016			June 30, 2015
Chemicals		2.2	%		0.0	%
Communications Equipment		5.6	%		0.0	%
Diversified Consumer Services		1.7	%		8.0	%
Diversified Financial Services		2.9	%		0.0	%
Food Products		17.3	%		0.0	%
Health Care Providers & Services		4.9	%		0.0	%
Hotels, Restaurant & Leisure		12.3	%		0.0	%
Household Durables		9.9	%		33.1	%
Industrial - Conglomerates		13.2	%		0.0	%
Information Technology		3.5	%		0.0	%
Machinery		0.0	%		3.4	%
Media		0.0	%		27.0	%
Metals and Mining		9.9	%		0.0	%
Road and Rail		9.3	%		3.4	%
Software		2.8	%		0.0	%
Textiles, Apparel and Luxury Goods		4.5	%		25.1	%

Total		100.0	%		100.0	%

Interest income from non-controlled/non-affiliated investments was $24.0 million and $4.4 million for the three months ended June 30, 2016 and 2015, respectively. Interest income from non-controlled/non-affiliated investments was $42.7 million and $6.7 million for the six months ended June 30, 2016 and 2015, respectively.

Results of Operations

Our operating results for the three and six months ended June 30, 2016 and 2015 were as follows:


	For the three months ended June 30, 2016 (unaudited)			For the three months ended June 30, 2015 (unaudited)
Total investment income (loss)	$	27,953		$	4,397
Net Expenses		11,343			9,535

Net investment income (loss)		16,610			(5,138	)
Net realized gain on investments		118			1,987
Net change in unrealized depreciation from non-controlled/non-affiliated investments		(5,148	)		4,941
Net change in unrealized appreciation from controlled affiliated investments		3,685			397

Net increase (decrease) in Members’ Capital from operations	$	15,265		$	2,187


	For the six months ended June 30, 2016 (unaudited)			For the six months ended June 30, 2015 (unaudited)
Total investment income (loss)	$	48,268		$	6,707
Net Expenses		22,321			23,833

Net investment income (loss)		25,947			(17,126	)
Net realized gain on investments		118			1,995
Net change in unrealized depreciation from non-controlled/non-affiliated investments		(15,407	)		4,819
Net change in unrealized appreciation from controlled affiliated investments		8,514			397

Net increase (decrease) in Members’ Capital from operations	$	19,172		$	(9,915	)

The investment income of $28.0 million and $4.4 million is interest income from our investments earned for the three months ended June 30, 2016 and 2015 respectively. The investment income of $48.3 million and $6.7 million is interest income from our investments earned for the six months ended June 30, 2016 and 2015 respectively.

Direct Lending Strategic Ventures LLC

On June 5, 2015, the Company, together with an affiliate of Security Benefit Corporation and accounts managed by Oak Hill Advisors, L.P., entered into an Amended and Restated Limited Liability Company Agreement (the “Agreement”) to become members of TCW Direct Lending Strategic Ventures LLC (“TCW Strategic Ventures”). TCW Strategic Ventures will focus primarily on making senior secured floating rate loans to middle-market borrowers. The Agreement was effective June 5, 2015.

The Company’s capital commitment is $481.6 million, representing approximately 80% of the preferred and common equity ownership of TCW Strategic Ventures, with the third-party investors representing the remaining capital commitments and preferred and common equity ownership. A portion of the Company’s capital commitment was satisfied by the contribution of two loans to TCW Strategic Ventures. TCW Strategic Ventures also entered into a $500 million revolving credit facility to finance a portion of certain eligible investments on June 5, 2015. Effective August 21, 2015, the Credit Agreement was amended to increase the revolving credit facility to $600 million from $500 million. TCW Strategic Ventures is managed by a management committee comprised of two members, one appointed by the Company and one appointed by Oak Hill Advisors, L.P. All decisions of the management committee require unanimous approval of its members. Neither the Company, nor the Adviser will receive management fees from this entity. Although the Company owns more than 25% of the voting securities of TCW Strategic Ventures, the Company does not believe that it has control over TCW Strategic Ventures (other than for purposes of the Investment Company Act).

The Company’s investments in affiliated investments for the six months ended June, 2016 were as follows:


	Fair Value as of December 31, 2015		Purchases		Sales		Change in Unrealized Gains (Losses)		Fair Value as of June 30, 2016		Dividend Income
Controlled Affiliates
TCW Direct Lending Strategic Ventures LLC	$	206,635	$	52,803	$	7,402	$	8,514	$	260,550	$	4,963

Total Controlled Affiliates	$	206,635	$	52,803	$	7,402	$	8,514	$	260,550	$	4,963

The Company’s investments in affiliated investments for the year ended December 31, 2015 were as follows:


	Fair Value as of December 31, 2014		Purchases		Sales		Change in Unrealized Gains (Losses)		Fair Value as of December 31, 2015		Dividend Income
Controlled Affiliates
TCW Direct Lending Strategic Ventures LLC	$	—	$	268,229	$	67,669	$	6,075	$	206,635	$	894

Total Controlled Affiliates	$	—	$	268,229	$	67,669	$	6,075	$	206,635	$	894

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires management 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.

In addition to the discussion below, our critical accounting policies are further described in Note 2 to the financial statements. We consider these accounting policies to be critical because they involve management judgments and assumptions, require estimates about matters that are inherently uncertain and are important for understanding and evaluating our reported financial results. These judgments will affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. The critical accounting policies should be read in connection with our risk factors as disclosed in “Item 1A. Risk Factors” in the Form 10-K that we filed with the SEC on March 30, 2016

Investments which we hold for which market quotes are not readily available or are not considered reliable are valued at fair value and approved by our Board of Directors based on similar instruments, internal assumptions and the weighting of the best available pricing inputs.

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

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

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

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

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

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

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

Contractual Obligations

A summary of our contractual payment obligations as of June 30, 2016 and December 31, 2015 is as follows:


Revolving Credit Agreement (1)	Total Facility Commitment		Borrowings Outstanding		Available Amount
Total Debt Obligations – June 30, 2016	$	750,000	$	635,000	$	115,000

Total Debt Obligations - December 31, 2015	$	750,000	$	329,000	$	421,000

(1)	The amount available considers any limitations related to the debt facility borrowing.

The Company had the following unfunded commitments and unrealized gain/(loss) as of June 30, 2016 and December 31, 2015 by investment type:


	June 30, 2016
Unfunded Commitments	Amount		Unrealized gain/(loss)
ENA Holdings Corporation (matures May 2021)	$	4,804	$	(40	)
Help At Home, Inc. (matures August 2020)		5,405		(62	)
OTG Management LLC (matures December 2017)		12,761		(37	)
Quicken Parent Corp. (matures February 2017)		1,725		10

Total Unfunded Commitments	$	25,695	$	(129	)


	December 31, 2015
Unfunded Commitments	Amount		Unrealized gain/(loss)

Help At Home, Inc. (commitment expiration August 2020)	$	1,486	$	(28	)

The Company’s total capital commitment to its underlying investment in TCW Direct Lending Strategic Ventures LLC is $481.6 million. As of June 30, 2016, the Company’s unfunded commitment to Strategic Ventures is $235.6 million.

Recent Developments

None.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

We are subject to financial market risks, including changes in interest rates. At June 30, 2016, 100.0% of our debt investments bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate. The interest rates on such investments generally reset by reference to the current market index after one to six months. At June 30, 2016, the percentage of our floating rate debt investments that bore interest based on an interest rate floor was 100.0%. Floating rate investments subject to a floor generally reset by reference to the current market index after one to six months only if the index exceeds the floor.

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. We assess our portfolio companies periodically to determine whether such companies will be able to continue making interest payments in the event that interest rates increase. There can be no assurances that the portfolio companies will be able to meet their contractual obligations at any or all levels of increases in interest rates.

Based on our June 30, 2016 balance sheet, the following table shows the annual impact on net income (excluding the related incentive compensation impact) of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure (dollar amounts in thousands):


Basis Point Change	Interest Income			Interest Expense			Net Income
Up 300 basis points	$	29,220		$	19,314		$	9,906
Up 200 basis points		17,805			12,877			4,928
Up 100 basis points		6,388			6,439			(51	)
Down 100+ basis points		(0	)		(3,147	)		3,147

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 and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of 1934). Based on that evaluation, our President and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them to material information relating to us that is required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934.

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

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under loans to or other contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Item 1A.

Risk Factors

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Sales of unregistered securities

On September 19, 2014, the Company began accepting subscription agreements from investors for the private sale of its Common Units. The Company continued to enter into subscription agreements through the final closing date of March 19, 2015. Under the terms of the subscription agreements, the Company may generally draw down all or any portion of the undrawn commitment with respect to each Common Unit upon at least ten business days’ prior written notice to the unitholders. The issuance of the Common Units pursuant to these subscription agreements and any draw by the Company under the related commitments is expected to be exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, and Rule 506(c) of Regulation D thereunder.

Issuer purchases of equity securities

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

None.

Item 5.

Other Information

None.

Item 6.

Exhibits.

(a)

Exhibits


3.1		Certificate of Formation (incorporated by reference to Exhibit 3.1 to a registration on Form 10 filed on April 18, 2014)

3.4		Second Amended and Restated Limited Liability Company Agreement, dated September 19, 2014 (incorporated by reference to Exhibit 3.4 to a filing on Form 10-Q filed on November 7, 2014)

31.1*		Certification of President Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

31.2*		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

32.1*		Certification of President Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

32.2*		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

99.1*		Financial Statements of TCW Direct Lending Strategic Ventures LLC for the six months end June 30, 2016 (Unaudited)

*	Filed herewith

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


	TCW DIRECT LENDING LLC

Date: August 11, 2016	By:	/s/ Richard T. Miller
		Richard T. Miller
		President

Date: August 11, 2016	By:	/s/ James G. Krause
		James G. Krause
		Chief Financial Officer

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