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10-Q 1 d748901d10q.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2019

☐	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 814-01246

TCW DIRECT LENDING VII LLC

(Exact Name of Registrant as Specified in Its Charter)


Delaware		82-2252672
(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.

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered

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 ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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 ☒

As of June 30, 2019, there was no established public market for the Registrant’s common units. The number of the Registrant’s common units outstanding at August 12, 2019 was 13,734,010.

TCW DIRECT LENDING VII LLC

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2019

Table of Contents


	INDEX	PAGE NO.

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Schedule of Investments as of June 30, 2019 (unaudited) and December 31, 2018		2

	Consolidated Statements of Assets and Liabilities as of June 30, 2019 (unaudited) and December 31, 2018		9

	Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018 (unaudited)		10

	Consolidated Statements of Changes in Members’ Capital for the three and six months ended June 30, 2019 and 2018 (unaudited)		11

	Consolidated Statement of Cash Flows for the six months ended June 30, 2019 (unaudited)		12

	Notes to Consolidated Financial Statements (unaudited)		13

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		40

Item 4.	Controls and Procedures		41

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		41

Item 1A.	Risk Factors		41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		41

Item 3.	Defaults Upon Senior Securities		41

Item 4.	Mine Safety Disclosures		41

Item 5.	Other Information		41

Item 6.	Exhibits		42

SIGNATURES			43

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Unaudited)

As of June 30, 2019


Industry	Issuer	Acquisition Date		Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
	Non-Controlled/Non-Affiliated Investments Debt
Aerospace & Defense
	Navistar Defense, LLC		12/31/18	Term Loan B - 8.66% (LIBOR + 6.25%, 1.50% Floor)		4.6	%	$	21,885,626		12/29/23	$	21,325,201	$	22,104,483
	Sparton Corporation(1)		03/04/19	First Lien Term Loan - 9.76% (LIBOR + 7.25%, 1.50% Floor)		9.0	%		42,721,313		03/04/24		41,766,094		42,635,870

						13.6	%		64,606,939				63,091,295		64,740,353

Auto Components
	Shipston Group U.S. Inc.(1)		09/28/18	Term Loan - 8.85% (LIBOR + 6.25%, 1.25% Floor)		5.4	%		26,036,788		09/28/23		25,671,995		25,932,641

						5.4	%		26,036,788				25,671,995		25,932,641

Communications Equipment
	AVI-SPL, Inc.		05/16/18	Third Additional Term Loan - 8.32% (LIBOR + 5.88%, 1.00% Floor)		6.2	%		29,585,593		04/27/21		29,494,296		29,822,278
	Production Resource Group, LLC(1)		08/21/18	Term Loan - 9.53% (LIBOR + 7.00%, 1.00% Floor)		6.1	%		29,989,286		08/21/24		29,218,864		28,939,661

						12.3	%		59,574,879				58,713,160		58,761,939

Construction & Engineering
	UniTek Acquisition, Inc.		08/20/18	Delayed Draw Term Loan B - 7.83% (LIBOR + 5.50%, 1.00% Floor)		0.8	%		3,657,052		08/20/24		3,657,053		3,572,940
	UniTek Acquisition, Inc.		08/20/18	Term Loan B - 7.83% (LIBOR + 5.50%, 1.00% Floor)		3.7	%		18,285,262		08/20/24		17,899,108		17,864,701

						4.5	%		21,942,314				21,556,161		21,437,641

Electronic Equipment, Instruments & Components
	SMTC Corporation(2)		11/08/18	Term Loan A - 9.41% (LIBOR + 7.00%, 1.75% Floor)		6.0	%		29,906,155		11/08/23		28,561,378		28,351,035
	SMTC Corporation(2)		11/08/18	Term Loan B - 12.91% (LIBOR + 10.50%, 1.75% Floor)		1.5	%		7,268,332		11/08/23		6,878,239		7,268,331

						7.5	%		37,174,487				35,439,617		35,619,366

Energy Equipment & Services
	Profrac Services, LLC		09/07/18	Term Loan B - 8.66% (LIBOR + 6.25%, 1.25% Floor)		7.6	%		37,178,514		09/07/23		36,552,719		36,323,408
	PSS Industrial Group Corp.		04/12/19	Term Loan - 8.20% (LIBOR + 6.00%, 1.00% Floor)		6.2	%		29,910,730		04/10/25		29,190,285		29,820,998

						13.8	%		67,089,244				65,743,004		66,144,406

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of June 30, 2019


Industry	Issuer	Acquisition Date		Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
Food Products
	Hometown Food Company(3)		08/31/18	Term Loan - 7.41% (LIBOR + 5.00%, 1.25% Floor)		8.3	%	$	40,027,178		08/31/23	$	39,269,785	$	39,867,069

						8.3	%		40,027,178				39,269,785		39,867,069

Household Durables
	Greenfield World Trade, Inc.(1)		03/04/19	Last Out Term Loan - 11.66% (LIBOR + 9.25%, 1.50% Floor)		9.0	%		42,815,353		03/04/24		41,964,932		42,686,907
	SLogic Holding Corp.(1)		06/29/18	Term Loan B - 8.31% (LIBOR + 5.87%, 1.00% Floor)		5.8	%		28,108,766		06/22/23		27,884,530		27,771,461

						14.8	%		70,924,119				69,849,462		70,458,368

Information Technology Services
	Corcentric, Inc.		11/15/18	Term Loan - 9.20% (LIBOR + 7.00%, 1.50% Floor)		4.1	%		19,590,120		11/15/23		19,161,767		19,413,809
	Corcentric, Inc.		11/15/18	Delayed Draw Term Loan - 9.20% (LIBOR + 7.00%, 1.50% Floor)		2.7	%		13,060,080		11/15/23		13,060,080		12,942,539

						6.8	%		32,650,200				32,221,847		32,356,348

Media
	Encompass Digital Media, Inc.		10/01/18	First Lien Term Loan - 10.09% inc. PIK (LIBOR + 6.38%, 1.25% Floor, 1.13% PIK)		6.1	%		29,469,360		09/28/23		29,131,914		29,115,728
	Encompass Digital Media, Inc.(3)		10/01/18	Revolver - 10.09% (LIBOR + 7.50%, 1.25% Floor)		0.2	%		938,807		09/28/23		938,807		927,541

						6.3	%		30,408,167				30,070,721		30,043,269

Metals & Mining
	DBM Global, Inc.		11/30/18	Term Loan - 8.26% (LIBOR + 5.85%, 1.50% Floor)		10.4	%		49,462,075		11/30/23		48,588,741		49,907,234

						10.4	%		49,462,075				48,588,741		49,907,234

Multiline Retail
	Torrid LLC		06/14/19	Term Loan - 9.19% (LIBOR + 6.75%, 1.00% Floor)		7.5	%		35,560,000		12/14/24		34,766,704		35,880,040

						7.5	%		35,560,000				34,766,704		35,880,040

Personal Products
	VPI Aware Topco, LLC(4)		11/13/18	First Out Term Loan - 8.33% (LIBOR + 6.00%, 1.00% Floor)		11.0	%		52,489,641		11/13/23		51,343,349		52,489,641

						11.0	%		52,489,641				51,343,349		52,489,641

Professional Services
	Winsight, LLC(3)		11/15/18	Term Loan - 8.41% (LIBOR + 6.00%, 1.00% Floor)		5.1	%		24,262,265		11/15/23		23,635,293		24,383,576

						5.1	%		24,262,265				23,635,293		24,383,576

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of June 30, 2019


Industry	Issuer	Acquisition Date		Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
Textiles, Apparel & Luxury Goods
	Centric Brands Inc.(2)		10/29/18	Term Loan - 8.58% (LIBOR + 6.00%, 1.50% Floor)		7.2	%	$	34,154,834		10/29/23	$	33,560,807	$	34,154,834
	Keeco Holdings, LLC		09/19/18	Term Loan - 10.89% (LIBOR + 7.75 %, 1.75% Floor)		12.1	%		59,483,359		03/15/24		58,405,514		57,817,825

						19.3	%		93,638,193				91,966,321		91,972,659

	Total Debt Investments					146.6	%						691,927,455		699,994,550


	Equity							Shares
Electronic Equipment, Instruments & Components
	SMTC Corporation(2),(5)			Warrant, expires 11/08/25		0.4	%		441,939				1,683,112		1,666,107

						0.4	%		441,939				1,683,112		1,666,107

	Total Non-Controlled/Non-Affiliated Investments*					147.0	%					$	693,610,567	$	701,660,657


												Cost

	Cash Equivalents
	Blackrock Liquidity Funds, Yield 2.29%					22.3	%		106,466,011			$	106,466,011	$	106,466,011

	Total Investments 169.3%											$	800,076,578	$	808,126,668

	Net unrealized depreciation on unfunded commitments (0.0%)													$	(151,063	)

	Liabilities in Excess of Other Assets (69.3%)													$	(330,604,620	)

	Net Assets 100.0%													$	477,370,985

The fair value of the SMTC Corporation warrants represent the quoted market price of the issuer’s stock as of June 30, 2019 and is considered to be a Level 1 security within the Fair Value Hierarchy. The fair value of each non-controlled/non-affiliated investment was determined using significant unobservable inputs and is considered to be Level 3 within the Fair Value Hierarchy. See Note 3 “Investment Valuations and Fair Value Measurements.”

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of June 30, 2019

(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)

The investment is not a qualifying asset as defined in Section 55(a) under the Investment Company Act of 1940, as amended. A business development company may not acquire an 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. As of June 30, 2019, $71,440,307 or 8.59% of the Company’s total assets were represented by “non-qualifying assets.”

(3)

Excluded from the investment above, is an unfunded loan commitment for a delayed draw term loan or revolving credit. The Company earns an unused fee on the unfunded commitment during the commitment period. The expiration date of the commitment period may be earlier than the maturity date of the investment stated above. See Note 5 - Commitments and Contingencies.

(4)	The Company is required to disburse a portion of its interest income from this term loan to the “first out” tranche holders of the portfolio company’s first lien senior secured loans.

(5)	Non-income producing.

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

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $184,249,482, and $29,353,730, respectively, for the six months ended June 30, 2019. Aggregate acquisitions includes investment assets received as payment in kind. Aggregate dispositions includes principal paydowns on and maturities of debt investments.


Country Breakdown of Portfolio
United States	100.0	%

See Notes to Consolidated Financial Statements.

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments

As of December 31, 2018


Industry	Issuer	Acquisition Date		Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
	Non-Controlled/Non-Affiliated Investments Debt
Aerospace & Defense
	Navistar Defense, LLC		12/31/18	Term Loan B - 8.78% (LIBOR + 6.25%, 1.50% Floor)		7.1	%	$	28,594,286		12/29/23	$	27,792,057	$	28,594,286

						7.1	%		28,594,286				27,792,057		28,594,286

Auto Components
	Shipston Group U.S. Inc.(1)		09/28/18	Term Loan - 8.64% (LIBOR + 6.25%, 1.25% Floor)		6.4	%		26,036,788		09/28/23		25,629,158		25,672,273

						6.4	%		26,036,788				25,629,158		25,672,273

Commercial Services & Supplies
	Production Resource Group, LLC(1)		08/21/18	Term Loan - 9.65% (LIBOR + 7.00%, 1.00% Floor)		7.2	%		29,989,286		08/21/24		29,144,195		28,789,714

						7.2	%		29,989,286				29,144,195		28,789,714

Communications Equipment
	AVI-SPL, Inc.		05/27/18	Third Additional Term Loan - 8.23% (LIBOR + 5.88%, 1.00% Floor)		8.1	%		32,971,189		04/27/21		32,841,540		32,608,506

						8.1	%		32,971,189				32,841,540		32,608,506

Construction & Engineering
	UniTek Acquisition, Inc.		08/20/18	Delayed Draw Term Loan B - 8.02% (LIBOR + 5.50%, 1.00% Floor)		0.9	%		3,675,476		08/20/24		3,675,476		3,609,317
	UniTek Acquisition, Inc.		08/20/18	Term Loan B - 8.02% (LIBOR + 5.50%, 1.00% Floor)		4.5	%		18,377,379		08/20/24		17,950,141		18,046,586

						5.4	%		22,052,855				21,625,617		21,655,903

Electronic Equipment, Instruments & Components
	SMTC Corporation(2),(3)		11/08/18	Term Loan A - 10.50% (PRIME + 5.00%, 4.75% Floor)		9.3	%		39,020,690		11/01/23		37,064,419		37,264,758
	SMTC Corporation(2),(3)		11/08/18	Term Loan B - 14.00% (PRIME + 8.50%, 4.75% Floor)		2.2	%		9,364,965		11/01/23		8,804,591		9,018,462

						11.5	%		48,385,655				45,869,010		46,283,220

Energy Equipment & Services
	Profrac Services, LLC		09/07/18	2018 Term Loan B - 8.52% (LIBOR + 5.75%, 1.25% Floor)		9.7	%		39,476,063		09/07/23		38,731,763		38,883,921

						9.7	%		39,476,063				38,731,763		38,883,921

Food Products
	Hometown Food Company(2)		08/31/18	Term Loan - 7.78% (LIBOR + 5.25%, 1.25% Floor)		10.2	%		41,290,814		08/31/23		40,416,099		40,754,034

						10.2	%		41,290,814				40,416,099		40,754,034

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2018


Industry	Issuer	Acquisition Date		Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
	Non-Controlled/Non-Affiliated Investments Debt (continued)
Household Durables
	ShelterLogic Group(1)		06/29/18	Term Loan B - 8.38% (LIBOR + 5.87%, 1.00% Floor)		7.0	%	$	28,394,134		06/22/23	$	28,139,227	$	28,110,193

						7.0	%		28,394,134				28,139,227		28,110,193

Information Technology Services
	Corcentric, Inc.		11/15/18	Term Loan - 8.86% (LIBOR + 6.00%, 1.50% Floor)		4.9	%		19,788,000		11/15/23		19,306,033		19,570,332
	Corcentric, Inc.		11/15/18	Delayed Draw Term Loan - 8.89% (LIBOR + 6.00%, 1.50% Floor)		3.2	%		13,192,000		11/15/23		13,192,000		13,046,888

						8.1	%		32,980,000				32,498,033		32,617,220

Media
	Encompass Digital Media, Inc.		10/01/18	First Lien Term Loan - 10.03% inc. PIK (LIBOR + 6.38%, 1.25% Floor, 1.13% PIK)		7.2	%		29,330,694		09/28/23		28,953,607		29,096,049
	Encompass Digital Media, Inc.(2)		10/01/18	Revolver - 10.01% (LIBOR + 7.50%, 1.25% Floor)		0.1	%		361,080		09/28/23		361,080		358,191

						7.3	%		29,691,774				29,314,687		29,454,240

	Winsight, LLC(2)		11/15/18	Term Loan - 9.12% (LIBOR + 6.50%, 1.00% Floor)		6.1	%		24,384,186		11/15/23		23,682,288		24,311,033

						13.4	%		54,075,960				52,996,975		53,765,273

Metals & Mining
	DBM Global, Inc.		11/30/18	Term Loan - 8.66% (LIBOR + 5.85%, 1.50% Floor)		12.5	%		50,730,333		11/30/23		49,734,020		50,020,109

						12.5	%		50,730,333				49,734,020		50,020,109

Personal Products
	VPI Aware Topco, LLC(5)		11/01/18	First Out Term Loan - 8.87% (LIBOR + 6.00%, 1.00% Floor)		13.1	%		52,877,470		11/13/23		51,591,010		52,560,205

						13.1	%		52,877,470				51,591,010		52,560,205

Textiles, Apparel & Luxury Goods
	Centric Brands Inc.(3)		10/29/18	Term Loan - 8.51% (LIBOR + 6.00%, 1.50% Floor)		8.4	%		34,326,466		10/29/23		33,660,718		33,777,243
	Keeco Holdings, LLC		09/19/18	Term Loan - 9.47% (LIBOR + 7.00 %, 1.00% Floor)		6.2	%		24,833,813		09/19/23		24,357,394		24,833,813

						14.6	%		59,160,279				58,018,112		58,611,056

	Total Debt Investments					134.3	%						535,026,816		538,925,913

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2018


Industry	Issuer	Acquisition Date	Investment	% of Net Assets			Shares		Maturity Date	Amortized Cost		Fair Value
	Equity
Electronic Equipment, Instruments & Components
	SMTC Corporation(3)(4)		Warrant, expires 11/08/25		0.4	%		393,902		$	1,532,279	$	1,607,120

	Total Equity Investments				0.4	%		393,902			1,532,279		1,607,120

	Total Non-Controlled/Non-Affiliated Investments*				134.7	%				$	536,559,095	$	540,533,033

	Cash Equivalents
	Blackrock Liquidity Funds, Yield 2.31%				37.5	%		150,656,465		$	150,656,465	$	150,656,465

	Total Investments 172.2%									$	687,215,560	$	691,189,498

	Unrealized depreciation on unfunded commitments (0.1%)											$	(398,576	)

	Liabilities in Excess of Other Assets (72.1%)											$	(289,386,856	)

	Net Assets 100.0%											$	401,404,066

The fair value of the SMTC Corporation warrants represent the quoted market price of the issuer’s stock as of December 31, 2018 and is considered to be a Level 1 security within the Fair Value Hierarchy. The fair value of each non-controlled/non-affiliated investment was determined using significant unobservable inputs and is considered to be Level 3 within the Fair Value Hierarchy. See Note 3 “Investment Valuations and Fair Value Measurements.”

(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)

(3)

The investment is not a qualifying asset as defined in Section 55(a) under the Investment Company Act of 1940, as amended. A business development company may not acquire an 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. As of December 31, 2018, $81,667,583 or 11.55% of the Company’s total assets were represented by “non-qualifying assets.”

(4)	Non-income producing.

(5)	The Company is required to disburse a portion of its interest income from this term loan to the “first out” tranche holders of the portfolio company’s first lien senior secured loans.

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

Prime—Prime Rate

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $699,789,640 and $165,062,154, respectively, for the year ended December 31, 2018. Aggregate acquisitions includes investment assets received as payment in kind. Aggregate dispositions includes principal paydowns on and maturities of debt investments.


Country Breakdown of Portfolio
United States	100.0	%

See Notes to Consolidated Financial Statements.

TCW DIRECT LENDING VII LLC

Consolidated Statements of Assets and Liabilities

(Dollar amounts in thousands, except unit data)


	As of June 30, 2019 (unaudited)			As of December 31, 2018
Assets
Investments, at fair value
Non-controlled/non-affiliated investments (amortized cost of $693,611 and $536,559, respectively)	$	701,661		$	540,533
Cash and cash equivalents		127,432			160,995
Deferred financing costs		7,978			2,454
Interest receivable		2,868			2,106
Prepaid and other assets		—			804

Total Assets	$	839,939		$	706,892

Liabilities
Credit facilities payable	$	352,000		$	300,000
Incentive fee payable		4,525			—
Interest and credit facilities expense payable		2,540			893
Management fees payable		2,465			2,308
Unrealized depreciation on unfunded commitments		151			399
Directors’ fees payable		150			15
Organization costs payable to Adviser		—			741
Offering costs payable to Adviser		—			633
Directors’ fees reimbursable to Adviser		—			92
Other accrued expenses and other liabilities		737			407

Total Liabilities	$	362,568		$	305,488

Commitments and Contingencies (Note 5)
Members’ Capital
Common Unitholders’ commitment (13,734,010 and 10,672,260 units issued and outstanding, respectively)	$	1,373,401		$	1,067,226
Common Unitholders’ undrawn commitment (13,734,010 and 10,672,260 units issued and outstanding, respectively)		(913,401	)		(668,226	)
Common Unitholders’ offering costs		(633	)		(633	)

Common Unitholders’ capital		459,367			398,367
Accumulated Earnings		18,004			3,037

Total Members’ Capital	$	477,371		$	401,404

Total Liabilities and Members’ Capital	$	839,939		$	706,892

Net Asset Value Per Unit (Note 9)	$	101.26		$	100.23

See Notes to Consolidated Financial Statements.

TCW DIRECT LENDING VII LLC

Consolidated 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,
	2019			2018			2019		2018
Investment Income:
Interest income from non-controlled/non-affiliated investments	$	17,108		$	359		$	31,602	$	359
Interest income from non-controlled/non-affiliated investments paid-in-kind		85			—			139		—
Other fee income from non-controlled/non-affiliated investments		71			—			71		—

Total investment income		17,264			359			31,812		359

Expenses:
Interest and credit facilities expenses		5,239			201			9,196		201
Management fees		2,536			98			4,641		98
Incentive fees		112			—			4,525		—
Professional fees		366			51			686		51
Administrative fees		234			161			419		161
Directors’ fees		96			176			190		190
Organization costs		—			—			—		95
Other expenses		40			—			96		—

Total expenses		8,623			687			19,753		796

Expenses recaptured by the Investment Adviser		—			597			—		488

Net expenses		8,623			1,284			19,753		1,284

Net investment income (loss)	$	8,641		$	(925	)	$	12,059	$	(925	)

Net realized and unrealized gain (loss) on investments
Net realized gain on non-controlled/non-affiliated investments		31			—			449		—
Net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments		(587	)		407			4,324		407

Net realized and unrealized (loss) gain on investments	$	(556	)	$	407		$	4,773	$	407

Net increase (decrease) in Members’ Capital from operations	$	8,085		$	(518	)	$	16,832	$	(518	)

Basic and diluted:
Income (Loss) per unit	$	0.59		$	(0.10	)	$	1.22	$	(0.10	)

See Notes to Consolidated Financial Statements.

TCW DIRECT LENDING VII LLC

Consolidated Statements of Changes in Members’ Capital (Unaudited)

(Dollar amounts in thousands, except unit data)


	Common Unitholders’ Capital			Accumulated Earnings (Loss)			Total
Members’ Capital at March 31, 2018	$	1		$	—		$	1
Net Increase (Decrease) in Members’ Capital Resulting from Operations:
Net investment loss		—			(925	)		(925	)
Net change in unrealized appreciation/depreciation on investments		—			407			407
Increase in Members’ Capital Resulting from Capital Activity:
Contributions		75,200			—			75,200

Total Increase (Decrease) in Members’ Capital for the three months ended June 30, 2018		75,200			(518	)		74,682

Members’ Capital at June 30, 2018	$	75,201		$	(518	)	$	74,683


Members’ Capital at December 31, 2017	$	1		$	—		$	1
Net Increase (Decrease) in Members’ Capital Resulting from Operations:
Net investment loss		—			(925	)		(925	)
Net change in unrealized appreciation/depreciation on investments		—			407			407
Increase in Members’ Capital Resulting from Capital Activity:
Contributions		75,200			—			75,200

Total Increase (Decrease) in Members’ Capital for the six months ended June 30, 2018		75,200			(518	)		74,682

Members’ Capital at June 30, 2018	$	75,201		$	(518	)	$	74,683


Members’ Capital at March 31, 2019	$	389,367		$	9,919		$	399,286
Net Increase (Decrease) in Members’ Capital Resulting from Operations:
Net investment income		—			8,641			8,641
Net realized gain on investments		—			31			31
Net change in unrealized appreciation/depreciation on investments		—			(587	)		(587	)
Increase in Members’ Capital Resulting from Capital Activity:
Contributions		70,000			—			70,000

Total Increase in Members’ Capital for the three months ended June 30, 2019		70,000			8,085			78,085

Members’ Capital at June 30, 2019	$	459,367		$	18,004		$	477,371


Members’ Capital at December 31, 2018	$	398,367		$	3,037		$	401,404
Net Increase (Decrease) in Members’ Capital Resulting from Operations:
Net investment income		—			12,059			12,059
Net realized gain on investments		—			449			449
Net change in unrealized appreciation/depreciation on investments		—			4,324			4,324
Distributions to Members from:
Distributable earnings		—			(1,865	)		(1,865	)
Return of unused capital		(146,453	)		—			(146,453	)
Increase in Members’ Capital Resulting from Capital Activity:
Contributions		207,453			—			207,453

Total Increase In Members’ Capital for the six months ended June 30, 2019		61,000			14,967			75,967

Members’ Capital at June 30, 2019	$	459,367		$	18,004		$	477,371

See Notes to Consolidated Financial Statements.

TCW DIRECT LENDING VII LLC

Consolidated Statements of Cash Flows (Unaudited)

(Dollar amounts in thousands, except unit data)


	For the six months ended June 30,
	2019			2018
Cash Flows from Operating Activities
Net increase (decrease) in net assets resulting from operations	$	16,832		$	(518	)
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		(184,111	)		(61,753	)
Interest income paid-in-kind		(139	)		—
Proceeds from sales and paydowns of investments		29,354			—
Net realized gain on investments		(449	)		—
Net change in unrealized appreciation/depreciation on investments		(4,324	)		(407	)
Amortization of premium and accretion of discount, net		(1,707	)		(8	)
Amortization of deferred financing costs		1,018			55
Increase (decrease) in operating assets and liabilities:
(Increase) decrease in interest receivable		(762	)		(234	)
(Increase) decrease in prepaid and other assets		804			(376	)
(Increase) decrease in organizational costs due from Adviser		—			411
(Increase) decrease in directors’ fees due from Adviser		—			77
Increase (decrease) in incentive fees payable		4,525			—
Increase (decrease) in interest and credit facilities expense payable		1,647			92
Increase (decrease) in management fees payable		157			98
Increase (decrease) in directors’ fees payable		135			164
Increase (decrease) in organization costs payable to Adviser		(741	)		95
Increase (decrease) in offering costs payable to Adviser		(633	)		—
Increase (decrease) in directors’ fees reimbursable to Adviser		(92	)		14
Increase (decrease) in other accrued expenses and liabilities		330			212

Net cash used in operating activities	$	(138,156	)	$	(62,078	)

Cash Flows from Financing Activities
Contributions	$	207,453		$	75,200
Distributions		(1,865	)		—
Return of unused capital		(146,453	)		—
Deferred financing costs paid		(6,542	)		(1,160	)
Proceeds from credit facilities		128,000			57,500
Repayments of credit facilities		(76,000	)		—

Net cash provided by financing activities	$	104,593		$	131,540

Net (decrease) increase in cash and cash equivalents	$	(33,563	)	$	69,462
Cash and cash equivalents, beginning of period	$	160,995		$	1

Cash and cash equivalents, end of period	$	127,432		$	69,463

Supplemental and non-cash financing activities
Interest expense paid	$	5,924		$	4
Deemed distribution of income/contribution from Members	$	1,865		$	—

See Notes to Consolidated Financial Statements.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except for unit data)

June 30, 2019

1. Organization and Basis of Presentation

Organization: TCW Direct Lending VII LLC (the “Company”), was formed as a Delaware limited liability company on May 23, 2017. The Company engaged in a private offering of its common limited liability company units (the “Units”) to investors in reliance on exemptions from the registration requirements of the U.S. Securities Act of 1933, as amended (the “Securities Act”). In addition, the Company may issue preferred units (“Preferred Units”), though it currently has no intention to do so. On August 18, 2017, the Company sold and issued 10 Units at an aggregate purchase price of $1,000 to TCW Asset Management Company LLC (the “Adviser”), an affiliate of the TCW Group, Inc. The Company commenced operations during the second quarter of fiscal year 2018.

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”). The Company has 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”), beginning fiscal year 2018. The Company will be required to meet the minimum distribution and other requirements for RIC qualification. As a BDC and a RIC, the Company will be required to comply with certain regulatory requirements.

During fiscal year 2018, the Company formed two Delaware limited liability companies which each have a single member interest owned by the Company.

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant

intercompany transactions and balances have been eliminated in consolidation.

Term: The term of the Company will continue until the sixth anniversary of the Initial Closing Date (as defined below), April 13, 2024, unless extended or sooner dissolved as provided in the Company’s amended and restated limited liability agreement (the “LLC Agreement”) or by operation of law. The Company may extend the term for two additional one-year periods upon written notice to the holders of the Units (the “Unitholders) and holders of preferred units, if any, (together with the Unitholders, 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 holders of the Units.

Commitment Period: The Commitment Period commenced on April 13, 2018 (the “Initial Closing Date”), the day on which the Company completed the first closing of the sale of its Units to persons not affiliated with the Adviser and will end on May 16, 2021, which is the later of (a) April 13, 2021, three years from the Initial Closing Date and (b) May 16, 2021, three years from the date in which the Company first completed an investment.

The Commitment Period is subject to termination upon the occurrence of a Key Person Event defined as follows: A “Key Person Event” will occur if, during the Commitment Period, (i) Richard T. Miller and one or more of Suzanne Grosso, Mark Gertzof or James S. Bold (each of such four persons, a “Key Person”) fail to devote substantially all of their business time to the investment activities of the Company, the prior funds, any successor funds and any fund(s) managed by the Adviser or an affiliate of the Adviser that co-invest or potentially co-invest with the Company, on a combined basis (together, the “Related Entities”); or (ii) Ms. Grosso, Mr. Gertzof and Mr. Bold all fail to devote substantially all of their business time to the investment activities of the Company and the Related Entities, in each case other than as a result of a temporary disability; provided, that, if a replacement has been approved as described in the paragraphs below, such replacement shall be specifically designated to take the place of one of the above-named individuals and the definition of “Key Person Event” will be amended to take into account such successor. Upon the occurrence of a Key Person Event, and in the event that the Adviser fails to replace the above-referenced individuals in the manner contemplated in this paragraph, the Commitment Period shall be automatically terminated upon such Key Person Event. The Commitment Period will be re-instated upon the vote or written consent of 66 2/3% in interest of the Unitholders. The Adviser is permitted at any time to replace any person designated above with a senior professional (including a Key Person) selected by the Adviser, provided that such replacement has been approved by a majority of the Unitholders (in which case, the approved substitute will be a Key Person in lieu of the person replaced). If such replacement(s) end the occurrence of a Key Person Event, the Commitment Period will automatically be reinstated.

If, during the Commitment Period, any Key Person shall fail to devote substantially all of his or her business time to the investment activities of the Company and the Related Entities other than as a result of a temporary disability (the occurrence of such event, a “Key Person Departure”), the Company shall provide written notice to Unitholders of such Key Person Departure within 30 days of the date of such Key Person Departure.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

1. Organization and Basis of Presentation (Continued)

If a Key Person Departure occurs during the Commitment Period and the Adviser determines to replace such Key Person, the Company shall obtain the approval of such replacement by a majority in interest of the Unitholders no later than the date of the Company’s next annual meeting; provided that the Company may, in its discretion, determine to obtain the approval of such replacement no later than 90 days after the date that the Adviser informs the Company of its proposed replacement of the Key Person.

If the Company fails to obtain approval of a replacement of a Key Person following a Key Person Departure as provided in the paragraph above, then the Key Person Departure shall be permanent and the Adviser shall not be permitted to replace such Key Person.

In accordance with the Company’s LLC Agreement, the Company may complete investment transactions that were significantly in process as of the end of the Commitment Period and which the Company reasonably expects to be consummated prior to 90 days subsequent to the expiration date of the Commitment Period. The Company may also effect follow-on investments up to an aggregate maximum of 10% of Capital Commitments (as defined below).

Capital Commitments: On the Initial Closing Date, the Company began accepting subscription agreements from investors for the private sale of its Units. On January 14, 2019, the Company completed its fourth and final closing sale of Units.

As of June 30, 2019, the Company had sold 13,734,010 Units for an aggregate offering price of $1,373,401. Each Unitholder is obligated to contribute capital equal to its respective capital commitment to the Company (the “Commitment”) and each Unit’s Commitment obligation is $100.00 per unit. The sale of the Units was made pursuant to subscription agreements entered into by the Company and each investor. Under the terms of the subscription agreements, the Company may draw down all or any portion of the undrawn commitment with respect to each Unit generally upon at least ten business days’ prior written notice to the unitholders. 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, 2019, aggregate Commitments, Undrawn Commitments and subscribed for Units of the Company were as follows:


	Commitments		Undrawn Commitments		% of Commitments Funded			Units
Unitholder	$	1,373,401	$	913,401		33.5	%		13,734,010

Recallable Amount: A Unitholder may be required to re-contribute amounts distributed equal to (a) such Unitholder’s share of all portfolio investments that are repaid to the Company, or otherwise recouped by the Company, and distributed to the Unitholder, in whole or in part, during or after the Commitment period, reduced by (b) all re-contributions made by such Unitholder. This amount, (the “Recallable Amount”) is excluded from the calculation of the accrual based net asset value.

The Recallable Amount as of June 30, 2019 was $0.

2. Significant Accounting Policies

Basis of Presentation: The Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). 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 946”). The Company has also consolidated the results of its wholly-owned subsidiaries in its consolidated financial statements in accordance with ASC 946.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

2. Significant Accounting Policies (Continued)

Use of Estimates: The preparation of the consolidated 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 consolidated 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 consolidated financial statements. Actual results could differ from those estimates, and such differences could be material.

Investments: The Company measures the fair value of its investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosure (“ASC 820”). 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 820, the Company considers the principal market of its investments to be the market in which the investment trades with the greatest volume and level of activity.

Transactions: The Company records investment transactions on the trade date. The Company considers the 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, using the effective-interest method assuming there are no questions as to collectability, and reflected in the amortized cost basis of the investment. Discounts associated with a revolver as well as fees associated with a delayed draw that remains unfunded are treated as a discount to the issuer’s term loan. 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 Credit Facilities (as defined in Note 7 to the Consolidated Financial Statements), including arrangement fees, upfront fees and legal fees, are amortized on a straight-line basis over the term of the respective credit facility.

Organization and Offering Costs: The Company expensed organization costs totaling $740 (net of $380 in Adviser reimbursement) since its inception through December 31, 2018. No additional organization costs were incurred during the three and six months ended June 30, 2019. Offering costs totaling $633 (net of $324 in Adviser reimbursement) was charged directly to Members’ Capital on December 31, 2018. No additional offering costs were incurred during the three and six months ended June 30, 2019. The Company did not bear more than an amount equal to 10 basis points of the aggregate capital commitments 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, 2019, cash and cash equivalents are comprised of demand deposits and highly liquid investments with maturities of three months or less. Cash equivalents are carried at amortized costs which approximates fair value, and are classified as Level 1 in the GAAP valuation hierarchy.

Income Taxes: The Company has elected to be regulated as a BDC under the 1940 Act. The Company also elected to be treated as a RIC under the Code beginning with the taxable year ending December 31, 2018. 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 consolidated financial statements of the Company.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

2. Significant Accounting Policies (Continued)

Recent Accounting Pronouncements: On May 28, 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance in this update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, this Update supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition–Construction-Type and Production-Type Contracts. This update is effective for fiscal years beginning after December 15, 2017. The Company adopted this ASU during the second quarter of fiscal 2018 and such adoption did not have a material impact on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities. The amendments in this update makes improvements to the requirements for accounting for equity investments and simplify the impairment assessment of equity investments. For public entities this update is effective for fiscal years beginning after December 15, 2017. The Company adopted this ASU during the second quarter of fiscal 2018 and such adoption did not have a material impact on the Company’s consolidated financial statements.

In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instrument —Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this update provide a variety of technical corrections and improvements to how entities should account for financial instruments and shorten the amortization period for certain callable debt securities held at premium. For public entities, this update is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years beginning after June 15, 2018. The Company adopted this ASU during the third quarter of fiscal 2018 and such adoption did not have a material impact on the Company’s consolidated financial statements.

On August 17, 2018, the SEC issued a final rule that reduces or eliminates certain disclosure requirements under Regulation S-X, and expands others. This final rule was effective for the Company beginning January 1, 2018. As a result of this final rule, the Company has presented in its Consolidated Statements of Assets and Liabilities its total accumulated earnings (loss), rather than its components.

On August 28, 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The updated guidance modifies the disclosure requirements on fair value measurements by (1) removing certain disclosure requirements including policies related to valuation processes and the timing of transfers between levels of the fair value hierarchy, (2) amending disclosure requirements related to measurement uncertainty from the use of significant unobservable inputs, and (3) adding certain new disclosure requirements including changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods therein, with early adoption permitted. As permitted by the ASU, the Company early adopted the following applicable provisions of the ASU:

•

removed the Company’s disclosure of policy for timing of transfers between levels;

•

removed the disclosure describing the Company’s valuation process for Level 3 fair value measurements;

•

for investments measured using net asset values, disclosed (1) the timing of liquidation of an investee’s assets and (2) the date when redemption restrictions will lapse, to the extent that such information has been publicly announced by the investee; and

•

disclosed information about the uncertainty of Level 3 fair value measurements as of the reporting date, rather than at a point in the future.

The Company is currently evaluating the effect of additional disclosures prescribed by this ASU on its consolidated financial statements.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

3. Investment Valuation 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:

Equity, (Level 1), includes common stock valued at the closing price on the primary exchange in which the security trades.

Level 3 Assets (Investments): The following valuation techniques and significant inputs are used to determine the 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), includes 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 or, in some cases, an enterprise value waterfall method. 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.

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.

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Consolidated Schedule of Investments as of June 30, 2019:


Investments	Level 1		Level 2		Level 3		Total
Debt	$	—	$	—	$	699,995	$	699,995
Equity		1,666		—		—		1,666
Cash equivalents		106,466		—		—		106,466

Total Assets	$	108,132	$	—	$	699,995	$	808,127

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

3. Investment Valuation and Fair Value Measurements (Continued)

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Consolidated Schedule of Investments as of December 31, 2018:


Investments	Level 1		Level 2		Level 3		Total
Debt	$	—	$	—	$	538,926	$	538,926
Equity		1,607		—		—		1,607
Cash equivalents		150,656		—		—		150,656

Total Assets	$	152,263	$	—	$	538,926	$	691,189

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, 2019 and 2018:


	Debt			Total
Balance, April 1, 2019	$	642,315		$	642,315
Purchases*		64,711			64,711
Sales and paydowns of investments		(7,121	)		(7,121	)
Amortization of premium and accretion of discount, net		855			855
Net realized gains		31			31
Net change in unrealized appreciation/depreciation		(796	)		(796	)

Balance, June 30, 2019	$	699,995		$	699,995

Change in net unrealized appreciation/depreciation in investments held as of June 30, 2019	$	(758	)	$	(758	)

*	Includes payments received in-kind


	Debt			Total
Balance, January 1, 2019	$	538,926		$	538,926
Purchases*		184,099			184,099
Sales and paydowns of investments		(29,354	)		(29,354	)
Amortization of premium and accretion of discount, net		1,707			1,707
Net realized gains		449			449
Net change in unrealized appreciation/depreciation		4,168			4,168

Balance, June 30, 2019	$	699,995		$	699,995

Change in net unrealized appreciation/depreciation in investments held as of June 30, 2019	$	4,271		$	4,271

*	Includes payments received in-kind

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

3. Investment Valuation and Fair Value Measurements (Continued)


	Debt		Total
Balance, April 1, 2018	$	—	$	—
Purchases*		61,753		61,753
Amortization of premium and accretion of discount, net		8		8
Net change in unrealized appreciation/depreciation		407		407

Balance, June 30, 2018	$	62,168	$	62,168

Change in net unrealized appreciation/depreciation in investments held as of June 30, 2018	$	407	$	407

*	Includes payments received in-kind


	Debt		Total
Balance, January 1, 2018	$	—	$	—
Purchases*		61,753		61,753
Amortization of premium and accretion of discount, net		8		8
Net change in unrealized appreciation/depreciation		407		407

Balance, June 30, 2018	$	62,168	$	62,168

Change in net unrealized appreciation/depreciation in investments held as of June 30, 2018	$	407	$	407

*	Includes payments received in-kind

The Company did not have any transfers between levels during the three and six months ended June 30, 2019 and 2018.

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, 2019:

Investment

Type

Fair Value

Valuation

Technique

Unobservable

Input

Range

Weighted
Average

Impact to

Valuation

from an

Increase

in Input

Debt

506,973

Income Method

Weighted Average Cost of Capital

6.2% to 14.7%

9.0%

Decrease

Shadow Credit Rating

B+ to CCC+

N/A

Increase

Debt

164,082

Income Method

Shadow Credit Rating

B+ to CCC+

N/A

Increase

Debt

28,940

Income Method

Shadow Discount Rate

10.1%

Decrease

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

3. Investment Valuation and Fair Value Measurements (Continued)

The following table summarizes the valuation techniques and quantitative information utilized in determining the fair value of the Level 3 investments as of December 31, 2018:

Investment

Type

Fair Value

Valuation

Technique

Unobservable

Input

Range

Weighted
Average

Impact to

Valuation

from an

Increase

in Input

Debt

362,597

Income Method

Weighted Average Cost of Capital

7.7% to 11.8%

9.3%

Decrease

Shadow Credit Rating

B+ to B-

N/A

Increase

Debt

147,539

Income Method

Shadow Credit Rating

B+ to CCC+

N/A

Increase

Debt

28,790

Income Method

Shadow Discount Rate

10.8% to 11.5%

11.2%

Decrease

The Company utilizes the midpoint of a valuation range provided by an external, independent valuation firm.

4. Agreements and Related Party Transactions

Advisory Agreement: On December 29, 2017, the Company entered into the 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 became effective upon its execution. 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 the Company’s outstanding voting securities, and (ii) the vote of a majority of the Board who are not “interested persons” (as defined in Section 2(a)(19) of the 1940 Act) of the Company, the Adviser or any of their respective affiliates (the “Independent Directors”). The Advisory Agreement will automatically terminate in the event of an assignment by the Adviser. The Advisory Agreement may be terminated by either party, by vote of the Company’s Board, or by a vote of the majority of the Company’s outstanding voting units, without penalty upon not less than 60 days’ prior written notice to the applicable party. If the Advisory Agreement is terminated according to this paragraph, the Company will pay the Adviser a pro-rated portion of the Management Fee and Incentive Fee (each as defined below).

Pursuant to the Advisory Agreement, the Adviser will:

•

determine the composition of the Company’s portfolio, the nature and timing of the changes to the Company’s portfolio and the manner of implementing such changes;

•

identify, evaluate and negotiate the structure of the investments the Company makes (including performing due diligence on the Company’s prospective portfolio companies);

•

determine the assets the Company will originate, purchase, retain or sell;

•

close, monitor and administer the investments the Company makes, including the exercise of any rights in the Company’s capacity as a lender; and

•

provide the Company such other investment advice, research and related services as the Company may, from time to time, require.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

4. Agreements and Related Party Transactions (Continued)

The Company pays to the Adviser, quarterly in arrears, a management fee in cash (the “Management Fee”) calculated as follows: 0.375% (i.e., 1.50% per annum) of the average gross assets of the Company on a consolidated basis, with the average determined based on the gross assets of the Company as of the end of the three most recently completed calendar months. “Gross assets” means the amortized cost of portfolio investments of the Company (including portfolio investments purchased with borrowed funds and other forms of leverage, such as Preferred Units, public and private debt issuances, derivative instruments, repurchase agreements and other similar instruments or arrangements) 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), and excluding cash and cash equivalents. The Management Fee payable for any partial month or quarter will be appropriately pro-rated. The Adviser may defer its right to receive current payment of such fee until the Company is notified otherwise.

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 equal to their aggregate contributions to the Company in respect of all 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 contributions to the Company in respect of all 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 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 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 in respect of all Units, with the remaining 80% distributed to the Unitholders.

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

For purposes of calculating the Incentive Fee, aggregate contributions shall not include Earnings Balancing Contributions or Late-Closer Contributions, and the distributions to Unitholders shall not include distributions attributable to Late-Closer Contributions. Earnings Balancing Contributions received by the Company will not be treated as amounts distributed to Unitholders for purposes of calculating the Incentive Fee. In addition if distributions to which a Defaulting Member otherwise would have been entitled have been withheld pursuant to 6.2.4 of the TCW Direct Lending VII LLC Agreement (the “LLC Agreement”), the amounts so withheld shall be treated for such purposes as having been distributed to such Defaulting Member. The amount of any distribution of securities made in kind shall be equal to the fair market value of those securities at the time of distribution determined pursuant to 13.4 of the LLC Agreement.

If the Advisory Agreement terminates early for any reason other than (i) the Adviser voluntarily terminating the agreement or (ii) the Company terminating the agreement for cause (as set out in the Advisory Agreement), the Company 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 of the Company’s 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 were deemed accelerated, (B) the proceeds from such liquidation were used to pay all of the Company’s 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. The Company will make the Final Incentive Fee Payment in cash on or immediately following the date the Advisory Agreement is so terminated.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

4. Agreements and Related Party Transactions (Continued)

Adviser Return Obligation: After the Company has made its final distribution of assets in connection with its dissolution, if the Adviser has received aggregate payments of Incentive Fees in excess of the amount the Adviser was entitled to receive pursuant to “Incentive Fee” above, then the Adviser will return to the Company, on or before 90 days after such final distribution of assets, an amount equal to such excess (the “Adviser Return Obligation”). Notwithstanding the preceding sentence, in no event will the Adviser be required to return to the Company an amount greater than the aggregate Incentive Fees paid to the Adviser, reduced by the excess of (a) the aggregate federal, state and local income tax liability the Adviser incurred in connection with the payment of such Incentive Fees, over (b) an amount equal to the U.S. federal and state tax benefits available to the Adviser by virtue of the payment made by the Adviser pursuant to its Adviser Return Obligation.

Administration Agreement: On September 25, 2018, the Company entered into an Amended and Restated Administration Agreement (the “Administration Agreement”) with TCW Asset Management Company LLC (the “Administrator”), which amended and restated the Admiration Agreement between the Company and the Administrator entered into on April 16, 2018. Under the Administration Agreement, the Administrator (or one or more delegated service providers) will oversee the maintenance of the Company’s financial records and otherwise assist with the Company’s compliance with regulations applicable to a business development company under the Investment Company Act of 1940, as amended, and a regulated investment company under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended; monitor the payment of the Company’s expenses; oversee the performance of administrative and professional services rendered to the Company by others; be responsible for the financial and other records that the Company is required to maintain; prepare and disseminate reports to Unitholders and reports and other materials to be filed with the SEC or other regulators; assist the Company in determining and publishing (as necessary or appropriate) its net asset value; oversee the preparation and filing of tax returns; generally oversee the payment of expenses; and provide such other services as the Administrator, subject to review of the Company’s board of directors, shall from time to time determine to be necessary or useful to perform its obligations under the Administration Agreement. Payments under the Administration Agreement will be equal to an amount that reimburses the Administrator for the costs and expenses incurred by the Administrator in performing its obligations and providing personnel and facilities under the Administration Agreement. The Administrator shall seek such reimbursement from the Company no more than once during any calendar year and shall only seek such reimbursement when all Company Expenses (as defined below) for such calendar year have been paid or accrued. 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 all costs, expenses and liabilities, other than Adviser Operating Expenses (as defined below) (which shall be borne by the Adviser), in connection with the organization, operations, administration and transactions of the Company (“Company Expenses”). Company Expenses shall include, without limitation: (a) organizational expenses and expenses associated with the issuance of the Units; (b) expenses of calculating the Company’s net asset value (including the cost and expenses of any independent valuation firm); (c) fees payable to third parties, including agents, consultants, attorneys or other advisors, relating to, or associated with, evaluating and making investments; (d) expenses incurred by the Adviser or the Administrator payable to third parties, including agents, consultants, attorneys or other advisors, relating to or associated with monitoring the financial and legal affairs for the Company, providing administrative services, monitoring or administering the Company’s investments and performing due diligence reviews of prospective investments and the corresponding portfolio companies; (e) costs associated with the Company’s reporting and compliance obligations under the Investment Company Act of 1940, the Securities Exchange Act of 1934, as amended, and other applicable federal or state securities laws; (f) fees and expenses incurred in connection with debt incurred to finance the Company’s investments or operations, and payment of interest and repayment of principal on such debt; (g) expenses related to sales and purchases of Units and other securities; (h) Management Fees and Incentive Fees; (i) administrator fees, if any, payable under the Administration Agreement; (j) transfer agent, sub-administrator and custodial fees; (k) expenses relating to the issue, repurchase and transfer of Units to the extent not borne by the relevant transferring Unitholders and/or assignees; (l) federal and state registration fees; (m) federal, state and local taxes and other governmental charges assessed against the Company; (n) independent directors’ fees and expenses and the costs associated with convening a meeting of the Company’s board of directors or any committee thereof; (o) fees and expenses and the costs associated with convening a meeting of the Unitholders or holders of any Preferred Units of the Company, as well as the compensation of an investor relations professional responsible for the coordination and administration of the foregoing; (p) costs of any reports, proxy statements or other notices to Unitholders, including printing and mailing costs; (q) costs and expenses related to the preparation of the Company’s consolidated

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

4. Agreements and Related Party Transactions (Continued)

financial statements and tax returns; (r) the Company’s allocable portion of the fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums; (s) direct costs and expenses of administration, including printing, mailing, long distance telephone, and copying; (t) independent auditors and outside legal costs, including legal costs associated with any requests for exemptive relief, “no-action” positions or other guidance sought from a regulator, pertaining to the Company; (u) compensation of other third party professionals to the extent they are devoted to preparing the Company’s consolidated financial statements or tax returns or providing similar “back office” financial services to the Company; (v) Adviser costs and expenses (excluding travel) in connection with identifying and investigating investment opportunities for the Company, monitoring the investments of the Company and disposing of any such investments; (w) portfolio risk management costs; (x) commissions or brokerage fees or similar charges incurred in connection with the purchase or sale of securities (including merger fees); (y) costs and expenses attributable to normal and extraordinary investment banking, commercial banking, accounting, auditing, appraisal, valuation, administrative agent activities, custodial and registration services provided to the Company, including in each case services with respect to the proposed purchase or sale of securities by the Company that are not reimbursed by the issuer of such securities or others (whether or not such purchase or sale is consummated); (z) costs of amending, restating or modifying the LLC Agreement or Advisory Agreement or related documents of the Company or related entities; (aa) fees, costs, and expenses incurred in connection with the termination, liquidation or dissolution of the Company or related entities and (bb) all other properly and reasonably chargeable expenses incurred by the Company or the Administrator in connection with administering the Company’s business. Notwithstanding the foregoing, in the event of a Reorganization that results in a Public Company or an Extension Fund, including a Reorganization pursuant to which the Company becomes the Public Company or the Extension Fund, the fees, costs and expenses associated with any such restructuring, initial public offering, listing of equity securities or reorganization will be borne appropriately by the Public Company and the Extension Fund (and indirectly only by Unitholders that elect to become investors in the Public Company or the Extension Fund), as the case may be, and no others will directly or indirectly bear such fees, costs or expenses.

However, the Company will not bear (a) more than an amount equal to 10 basis points of investors’ aggregate Commitments for organizational expenses and offering expenses in connection with the offering of Units through the date that is six months after the Initial Closing Date, as it may be extended by the Adviser, and (b) more than an amount equal to 12.5 basis points of aggregate Commitments computed annually for Company Expenses; provided, that, any amount by which actual annual expenses in (b) exceed the 12.5 basis point limit shall be carried over to the next year, without limitation, as additional expense until the earlier of the Reorganization or the dissolution of the Company, with any partial year assessed on a pro rata basis; and provided, further, that in determining the Company Expenses subject to the 12.5 basis point limit in (b), the following expenses shall be excluded and shall be borne by the Company as incurred without regard to the 12.5 basis point limit in (b): the Management Fee, the Incentive Fee, organizational and offering expenses (which are subject to the separate cap), amounts incurred in connection with the Company’s borrowings (including interest, bank fees, legal fees and other transactional expenses arising out of or related to any borrowing or borrowing facility and similar costs), transfer agent fees, federal, state and local taxes and other governmental charges assessed against the Company, out-of-pocket expenses of calculating the Company’s net asset value (including the cost and expenses of any independent valuation firm engaged for that purpose and the costs and expenses of the valuation of the Company’s portfolio investments performed by the Company’s independent auditors in order to comply with applicable Public Company Accounting Oversight Board standards), out-of-pocket costs and expenses incurred in connection with arranging or structuring investments and their ongoing operations (including expenses and liabilities related to the formation and ongoing operations of any special purpose entity or entities in connection with an investment), out-of-pocket legal costs associated with any requests for exemptive relief, “no-action” positions or other guidance sought from a regulator pertaining to the Company, out-of-pocket costs and expenses relating to any Reorganization or liquidation of the Company, and any extraordinary expenses (such as litigation expenses and indemnification payments). Notwithstanding the foregoing, in no event will the Company carryforward to future periods the amount by which actual annual Company Expenses for a year exceed the 12.5 basis point limit for more than three years from the date on which such expenses were reimbursed.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

4. Agreements and Related Party Transactions (Continued)

“Adviser Operating Expenses” means overhead and operating and administrative expenses incurred by or on behalf of the Adviser or any of its affiliates, including the Company, in connection with maintaining and operating the Adviser’s office, including salaries and other compensation (including compensation due to its officers), rent, routine office equipment expense and liability and insurance premiums (other than those incurred in maintaining fidelity bonds and indemnitee insurance policies), in furtherance of providing supervisory investment management services for the Company. Adviser Operating Expenses also includes any expenses incurred by the Adviser or its Affiliates in connection with the Adviser’s registration as an investment adviser under the Investment Advisers Act of 1940, as amended, or with its compliance as a registered investment adviser thereunder.

All Adviser Operating Expenses and all expenses of the Company that the Company will not bear will, as set forth above, will be borne by the Adviser or its affiliates.

5. Commitments and Contingencies

The Company had the following unfunded commitments and unrealized losses by investment as of June 30, 2019 and December 31, 2018:


		June 30, 2019				December 31, 2018
Unfunded Commitments	Maturity / Expiration	Amount		Unrealized Losses		Amount		Unrealized Losses
Hometown Food Company	August 2023	$	5,881	$	24	$	5,881	$	77
Encompass Digital Media, Inc.	September 2023		1,589		22		2,167		30
SMTC Corporation	May 2019		—		—		3,902		144
Winsight, LLC	November 2023		2,217		11		2,217		16
Winsight, LLC	November 2021		18,842		94		18,842		132

Total		$	28,529	$	151	$	33,009	$	399

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, 2019, the Company 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

The Company’s Unit activity for the three and six months ended June 30, 2019 and 2018 is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Units at beginning of period		13,734,010		10		10,672,260		10
Units issued and committed		—		5,054,250		3,061,750		5,054,250

Units issued and committed at end of period		13,734,010		5,054,260		13,734,010		5,054,260

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

7. Credit Facilities

On May 10, 2018, the Company entered into a Revolving Credit Agreement (the “Natixis Credit Agreement”) among the Company, as borrower, and Natixis, New York Branch (“Natixis”), as administrative agent and the committed lenders, conduit lenders and funding agents. The Natixis Credit Agreement provides for a revolving credit line (the “Natixis Credit Facility”) of up to $150,000 (the “Natixis Maximum Commitment”), subject to the lesser of the “Natixis Borrowing Base” assets or the Natixis Maximum Commitment. The Natixis Borrowing Base assets equal the sum of a percentage of unfunded commitments from certain classes of eligible investors in the Company (the “Natixis Available Commitment”). The Natixis Credit Facility is generally secured by the Natixis Borrowing Base assets.

The Natixis Maximum Commitment may be periodically increased in amounts designated by the Company, up to an aggregate amount of $1 billion. The maturity date of the Natixis Credit Agreement is May 10, 2021, unless such date is extended at the Company’s option no more than two times for a term of up to 364 days after the maturity date per such extension. Borrowings under the Natixis Credit Agreement bear interest at a rate equal to either (a) a base rate calculated in a customary manner plus 0.55% or (b) an adjusted eurodollar rate calculated in a customary manner plus 1.55%. On September 21, 2018, the Natixis Maximum Commitment increased from $150,000 to $275,000. On November 5, 2018, the Natixis Maximum Commitment increased from $275,000 to $400,000.

The Natixis Credit Facility is secured by a first priority security interest, subject to customary exceptions, in (i) all of the capital commitments of the investors in the Company, (ii) the Company’s right to make capital calls, receive payment of capital contributions from the investors and enforce payment of the capital commitments and capital contributions under the Company’s operating agreement and (iii) a cash collateral account into which the capital contributions from the investors are made. The Natixis Credit Facility may be terminated, and any outstanding amounts thereunder may become due and payable, should the Company fail to satisfy certain covenants. As of June 30, 2019, the Company was in compliance with such covenants.

As of June 30, 2019, the Natixis Borrowing Base assets were greater than the Natixis Maximum Commitment. As of December 31, 2018, the Natixis Borrowing Base assets were less than the Natixis Maximum Commitment. A summary of amounts outstanding and available under the Natixis Credit Facility as of June 30, 2019 and December 31, 2018 is as follows:


Natixis Credit Facility	Total Commitment		Borrowings Outstanding		Available Amount⁽¹⁾
As of June 30, 2019	$	400,000	$	252,000	$	148,000
As of December 31, 2018	$	400,000	$	300,000	$	55,000

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

On January 29, 2019, TCW DL VII Financing LLC (the “Borrower” or “TCW DL VII Financing”), a newly-formed, wholly-owned, special purpose financing subsidiary of the Company, entered into a senior secured credit facility (the “PNC Credit Facility” and together with the Natixis Credit Facility, the “Credit Facilities”) pursuant to a credit and security agreement (the “PNC Credit Agreement”) with PNC Bank, National Association (“PNC”), as facility agent, the lenders from time to time party thereto, and State Street Bank and Trust Company, as collateral agent.

Under the PNC Credit Facility, the lenders have agreed to extend credit to the Borrower in an aggregate principal amount of up to $400,000 of revolving and term loans (the “PNC Maximum Commitment”), subject to compliance with a borrowing base (the “PNC Borrowing Base”). The PNC Maximum Commitment may be periodically increased in amounts designated by the Borrower up to an aggregate principal amount of $900,000, subject to lender consent and obtaining commitments for the increase. The Borrower may make borrowings of (i) revolving loans under the PNC Credit Facility during the period commencing January 29, 2019 and ending on January 29, 2022 and (ii) term loans under the PNC Credit Facility during the period commencing January 29, 2019 and ending on January 29, 2020, unless, in the case of (i) and (ii), there is an earlier termination of the PNC Credit Facility or event of default thereunder. The PNC Credit Facility will mature on January 29, 2024. Loans under the PNC Credit Facility bear interest at a fluctuating rate of interest per annum equal to, at the Borrower’s option, either (i) three-month LIBOR plus the facility margin of 2.30% per annum or (ii) the Base Rate plus the facility margin of 2.30% per annum.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

7. Credit Facilities (Continued)

On April 11, 2019, the Borrower amended and restated the PNC Credit Agreement (as amended, the “Amended PNC Credit Agreement”) for the PNC Credit Facility. The Amended PNC Credit Agreement, among other things, (a) increased the total commitments under the PNC Credit Facility from $400,000 to $600,000 (the “Amended PNC Maximum Commitment”) and (b) made certain modifications to the calculation of the borrowing base under the prior facility, including the eligibility requirements of collateral obligations pledged under the PNC Credit Facility and loan portfolio concentration limits.

The Borrower’s obligations under the PNC Credit Facility are secured by a first priority security interest in all of the assets of the Borrower, including its portfolio of loans has been contributed by the Company to the Borrower in exchange for 100% of the membership interest of the Borrower and any payments received in respect of such loans. The Company may contribute or sell to the Borrower additional loans from time to time after the closing date, which shall be pledged in favor of the lenders under the PNC Credit Facility.

Under the PNC Credit Facility, the Borrower has made customary representations and warranties and is required to comply with various affirmative and negative covenants, reporting requirements and other customary requirements for similar credit facilities. The PNC Credit Facility also includes events of default that are customary for similar credit facilities. As of June 30, 2019, the Borrower was in compliance with such covenants.

Borrowings of the Borrower are non-recourse to the Company but are considered borrowings of the Company for purposes of complying with the asset coverage requirements under the Investment Company Act of 1940, as amended.

As of June 30, 2019, the PNC Borrowing Base assets were less than the Amended PNC Maximum Commitment. A summary of amounts outstanding and available under the PNC Credit Facility as of June 30, 2019 is as follows:


PNC Credit Facility	Total Commitment		Borrowings Outstanding		Available Amount⁽¹⁾
As of June 30, 2019	$	600,000	$	100,000	$	334,246

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

All borrowings under the PNC Credit Facility as of June 30, 2019 were from the revolving line of credit. The Borrower had no term loan borrowings under the PNC Credit Facility as of June 30, 2019. The carrying amount of the Credit Facilities, which are categorized as Level 2 within the fair value hierarchy as of June 30, 2019 and December 31, 2018, 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 the Credit Facilities’ terms and conditions. The Company incurred financing costs of $3,000 and $4,400, in connection with the Natixis Credit Agreement and the PNC Credit Agreement, respectively. In addition, the Company incurred an additional $2,070 in financing costs in connection with the Amended PNC Credit Agreement. The Company recorded these costs as deferred financing costs on its Consolidated Statements of Asset and Liabilities and are being amortized over the respective life of the Natixis Credit Facility and PNC Credit Facility. As of June 30, 2019 and December 31, 2018, $7,978 and $2,454, respectively, of such prepaid deferred financing costs had yet to be amortized.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

7. Credit Facilities (Continued)

The summary information regarding the Credit Facilities for the three and six months ended June 30, 2019 and 2018 is as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Credit facilities interest expense	$	3,771		$	45		$	6,862		$	45
Unused fees		818			51			1,266			51
Administrative fees		50			50			50			50
Amortization of deferred financing costs		600			55			1,018			55

Total	$	5,239		$	201		$	9,196		$	201

Weighted average interest rate		4.24	%		3.51	%		4.17	%		3.51	%
Average outstanding balance	$	351,703		$	8,894		$	327,033		$	8,894

8. Income Taxes

The Company has elected to be regulated 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 Unitholders as dividends. The Company elected to be taxed as a RIC in 2018. The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.

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, 2019 and December 31, 2018, the Company’s aggregate investment unrealized appreciation and depreciation for federal income tax purposes is as follows:


	June 30, 2019		December 31, 2018
Cost of investments for federal income tax purposes	$	800,077	$	687,614
Unrealized appreciation	$	9,750	$	4,804
Unrealized depreciation	$	1,700	$	1,229
Net unrealized appreciation on investments	$	8,050	$	3,575

The Company did not have any unrecognized tax benefits as of December 31, 2018, nor were there any increases or decreases in unrecognized tax benefits for the period then ended; therefore, no interest or penalties were accrued. The Company is subject to examination by the U.S federal and state tax authorities for returns filed for the prior year.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

9. Financial Highlights

Selected data for a unit outstanding throughout the six months ended June 30, 2019 and 2018 is presented below.


	For the Six Months Ended June 30,
	2019⁽¹⁾			2018⁽¹⁾
Net Asset Value Per Unit (accrual base), Beginning of Period	$	100.23		$	100.00

Net Decrease in Common Unitholder NAV from Prior Period		(0.05	)		—

Income (Loss) from Investment Operations:
Net investment income (loss)		0.88			(0.18	)
Net realized and unrealized gain		0.34			0.08

Total from investment operations		1.22			(0.10	)
Less Distributions:
From distributable earnings		(0.14	)		—

Total distributions		(0.14	)		—

Net Asset Value Per Unit (accrual base), End of Period	$	101.26		$	99.90
Unitholder Total Return⁽²⁾⁽³⁾		4.5	%		(1.33	)%
Unitholder IRR before incentive fees⁽⁴⁾		10.6	%		0.00	%
Unitholder IRR after all fees and expenses⁽⁴⁾		9.0	%		0.00	%
Ratios and Supplemental Data
Members’ Capital, end of period	$	477,371		$	74,683
Units outstanding, end of period		13,734,010			5,054,260
Ratios based on average net assets of Members’ Capital:
Ratio of total expenses to average net assets⁽⁵⁾		10.33	%		9.56	%
Expenses reimbursed by Investment Adviser⁽³⁾		—	%		3.10	%

Ratio of net expenses to average net assets⁽⁶⁾		10.33	%		12.66	%
Ratio of financing cost to average net assets⁽³⁾		2.39	%		1.27	%
Ratio of net investment income (loss) before expense recapture to average net assets⁽⁵⁾		6.31	%		(5.58	)%
Ratio of net investment income (loss) to average net assets⁽⁶⁾		6.31	%		(11.83	)%
Ratio of incentive fees to average net assets⁽⁵⁾		2.37	%		—	%
Credit facility payable	$	352,000		$	57,500
Asset coverage ratio		2.4			2.3
Portfolio turnover rate⁽³⁾		5.0	%		0.0	%

⁽¹⁾	Per unit data was calculated using the number of Common Units issued and outstanding as of June 30, 2019 and 2018, respectively.

⁽²⁾	The Total Return for the six months ended June 30, 2019 and 2018 was calculated by taking the net investment income 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.

⁽³⁾	Not annualized.

⁽⁴⁾

The IRR since inception for the Common Unitholders, after management fees, financing costs and operating expenses, but before incentive fees is 10.6%. The IRR since inception for the Common Unitholders, after management fees, financing costs, operating expenses and Advisor incentive fees is 9.0%. The IRR is computed based on cash flow due dates contained in notices to Members (contributions from and distributions to the 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 except for organizational costs and expenses recaptured by the Adviser.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amounts in thousands, except for unit data)

June 30, 2019

10. Subsequent Events

The Company has evaluated subsequent events through the date of issuance of the consolidated financial statements. There have been no subsequent events that require recognition or disclosure in these consolidated financial statements.

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 on Form 10-Q. Some of the statements in this report (including in the following discussion) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or future performance or financial condition of TCW Direct Lending VII LLC. For simplicity, this report uses the terms “Company,” “we,” “us,” and “our” to refer to TCW Direct Lending VII LLC.

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 all 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 when we are using 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 financial and other business objectives;

•

competition with other entities and our affiliates for investment opportunities;

•

the impact of changing market conditions and lending standards on our ability to compete with other industry participants, including other business development companies, private and public funds, individual and institutional investors, and financial institutions for investment opportunities;

•

uncertainty surrounding the financial stability of the United States, Europe and China;

•

the social, geopolitical, financial, trade and legal implications of Brexit;

•

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 LLC (the “Adviser”);

•

the speculative and illiquid nature of our investments;

•

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

•

the adequacy of our financing sources and working capital;

•

the costs associated with being an entity registered with the Securities Exchange Commission (“SEC”);

•

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. and its subsidiaries 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 and the related tax implications;

•

the effect of legal, tax and regulatory changes; and

•

the other risks, uncertainties and other factors we identify under “Part I—Item 1A. Risk Factors” in our Form 10-K filed with the SEC on March 19, 2019 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 Securities Exchange Act of 1934 (as amended, the “1934 Act”), which preclude civil liability or 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 May 23, 2017 as a limited liability company under the laws of the State of Delaware. We conducted a private offering of our common limited liability company units (the “Units”) to investors in reliance on exemptions from the registration requirements of the U.S. Securities Act of 1933, as amended (the “Securities Act”).

On August 18, 2017, we sold and issued 10 Units at an aggregate purchase price of $1 thousand to TCW Asset Management Company LLC (the “Adviser”), an affiliate of the TCW Group, Inc.

On December 29, 2017, we filed an election to be regulated as a BDC under the 1940 Act. We also elected to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code beginning with fiscal year 2018. As a BDC and a RIC, we are required to comply with certain regulatory requirements.

On April 13, 2018, (the “Initial Closing Date”) we began accepting subscription agreements from investors for the private sale of our Units and on January 14, 2019, we completed our fourth and final closing sale of our Units.

As of June 30, 2019, we have sold 13,734,010 Units for an aggregate offering price of approximately $1.4 billion. Each Unitholder is obligated to contribute capital equal to their Commitment and each Unit’s Commitment obligation is $100.00 per Unit. The sale of the Units was made pursuant to subscription agreements entered into by us and each investor. Under the terms of the subscription agreements, we may draw down all or any portion of the undrawn commitment with respect to each Unit generally upon at least ten business days’ prior written notice to the unitholders. The amount of capital that remains to be drawn down and contributed is referred to as an “Undrawn Commitment.”

We commenced operations during the second quarter of fiscal year 2018.

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. The historical investment philosophy, strategy and approach of the direct lending team of the Adviser (the “ Direct Lending Team”) has generally not involved the use of payment-in-kind (“PIK”) interest, which represents contractual interest accrued and added to the loan balance that generally becomes due at maturity, or similar arrangements. Although we do not currently expect the Direct Lending Team to originate a significant amount of investments for us with PIK interest features, from time to time we may make investments that contain such features. We may have investments with 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, notes and other non-convertible debt 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 may 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 will mostly be in corporations, partnerships or other business entities. Additionally, in certain circumstances, we may co-invest with other investors and/or strategic partners indirectly in a company through a joint venture partnership or other special purpose vehicle. While we intend to 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 Amended and Restated Administration Agreement, dated as of September 25, 2018 (the “Administration Agreement”) and the Investment Advisory Agreement, dated as of December 29, 2017, (the “Advisory Agreement”).

We, and indirectly our Unitholders, will bear all costs, expenses and liabilities, other than Adviser Operating Expenses (which shall be borne by the Adviser), in connection with our organization, operations, administration and transactions (“Company Expenses”). Company Expenses shall include, without limitation: (a) organizational expenses and expenses associated with the issuance of the Units; (b) expenses of calculating our net asset value (including the cost and expenses of any independent valuation firm); (c) fees payable to third parties, including agents, consultants, attorneys or other advisors, relating to, or associated with, evaluating and making investments; (d) expenses incurred by the Adviser or the Administrator payable to third parties, including agents, consultants, attorneys or other advisors, relating to or associated with monitoring our financial and legal affairs, providing administrative services, monitoring or administering our investments and performing due diligence reviews of prospective investments and the corresponding portfolio companies; (e) costs associated with our reporting and compliance obligations under the 1940 Act, the 1934 Act and other applicable federal or state securities laws; (f) fees and expenses incurred in connection with debt incurred to finance our investments or operations, and payment of interest and repayment of principal on such debt; (g) expenses related to sales and purchases of Units and other securities; (h) Management Fees and Incentive Fees; (i) administrator fees, if any, payable under the Administration Agreement; (j) transfer agent, sub-administrator and custodial fees; (k) expenses relating to the issue, repurchase and transfer of Units to the extent not borne by the relevant transferring Unitholders and/or assignees; (l) federal and state registration fees; (m) federal, state and local taxes and other governmental charges assessed against us; (n) independent directors’ fees and expenses and the costs associated with convening a meeting of our board of directors or any committee thereof; (o) fees and expenses and the costs associated with convening a meeting of the Unitholders or holders of any Preferred Units, as well as the compensation of an investor relations professional responsible for the coordination and administration of the foregoing; (p) costs of any reports, proxy statements or other notices to Unitholders, including printing and mailing costs; (q) costs and expenses related to the preparation of our consolidated financial statements and tax returns; (r) our allocable portion of the fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums; (s) direct costs and expenses of administration, including printing, mailing, long distance telephone, and copying; (t) independent auditors and outside legal costs, including legal costs associated with any requests for exemptive relief, “no-action” positions or other guidance sought from a regulator, pertaining to us; (u) compensation of other personnel (including employees and secretarial and other staff of the Administrator) to the extent they are devoted to preparing our consolidated financial statements or tax returns or providing similar “back office” financial services to us; (v) Adviser costs and expenses (excluding travel) in connection with identifying and investigating investment opportunities for us, monitoring our investments and disposing of any such investments; (w) portfolio risk management costs; (x) commissions or brokerage fees or similar charges incurred in connection with the purchase or sale of securities (including merger fees); (y) costs and expenses attributable to normal and extraordinary investment banking, commercial banking, accounting, auditing, appraisal, valuation, administrative agent activities, custodial and registration services provided to us, including in each case services with respect to the proposed purchase or sale of securities by us that are not reimbursed by the issuer of such securities or others (whether or not such purchase or sale is consummated); (z) costs of amending, restating or modifying the LLC Agreement or Advisory Agreement or related documents of us or related entities; (aa) fees, costs, and expenses incurred in connection with the termination, liquidation or dissolution of the Company or related entities; and (bb) all other properly and reasonably chargeable expenses incurred by the Company or the Administrator in connection with administering our business. However, in the event of a Reorganization that results in a Public Fund or an Extension Fund, including a Reorganization pursuant to which the Company becomes the Public Fund or the Extension Fund, the fees, costs and expenses associated with any such restructuring, initial public offering, listing of equity securities or reorganization will be borne appropriately by the Public Fund and the Extension Fund (and indirectly only by Unitholders that elect to become investors in the Public Fund or the Extension Fund), as the case may be, and no others will directly or indirectly bear such fees, costs or expenses.

However, we will not bear (a) more than an amount equal to 10 basis points of our aggregate Commitments for organizational expenses and offering expenses in connection with the offering of Units through January 14, 2019 and (b) more than an amount equal to 12.5 basis points of our aggregate Commitments computed annually for Company Expenses; provided, that, any amount by which actual annual expenses in (b) exceed the 12.5 basis point limit shall be carried over to the next year, without limitation, as additional expense until the earlier of the Reorganization or the dissolution of the Company, with any partial year assessed on a pro rata basis; and provided, further, that in determining the Company Expenses subject to the 12.5 basis point limit in (b), the following expenses shall be excluded and shall be borne by us as incurred without regard to the 12.5 basis point limit in (b): the Management Fee, the Incentive Fee, organizational and offering expenses (which are subject to the separate cap), amounts incurred in connection with our borrowings (including interest, bank fees, legal fees and other transactional expenses arising out of or related to any borrowing or borrowing facility and similar costs), transfer agent fees, federal, state and local taxes and other governmental charges assessed against us, expenses of calculating our net asset value (including the cost and expenses of any independent valuation firm engaged for that purpose and the costs and expenses of the valuation of our portfolio investments performed by our independent auditors in order to comply with applicable Public Company Accounting Oversight Board standards), costs and expenses incurred in connection with

arranging or structuring investments and their ongoing operations (including expenses and liabilities related to the formation and ongoing operations of any special purpose entity or entities in connection with an investment), legal costs associated with any requests for exemptive relief, “no-action” positions or other guidance sought from a regulator pertaining to us, costs and expenses relating to any Reorganization or liquidation of the Company, and any extraordinary expenses (such as litigation expenses and indemnification payments). Notwithstanding the foregoing, in no event will the Company carryforward to future periods the amount by which actual annual Company Expenses for a year exceed the 12.5 basis point limit for more than three years from the date on which such expenses were reimbursed.

“Adviser Operating Expenses” means overhead and operating and administrative expenses incurred by or on behalf of the Adviser or any of its affiliates, including us, in connection with maintaining and operating the Adviser’s office, including salaries and other compensation (including compensation due to its officers), rent, routine office equipment expense and liability and insurance premiums (other than those incurred in maintaining fidelity bonds and Indemnitee insurance policies), in furtherance of providing supervisory investment management services for us. Adviser Operating Expenses include any expenses incurred by the Adviser or its affiliates in connection with the Adviser’s registration as an investment adviser under the Investment Advisers Act of 1940, as amended, or with its compliance as a registered investment adviser thereunder.

All Adviser Operating Expenses and all our expenses that we will not bear, as set forth above, will be borne by the Adviser or its affiliates.

In connection with borrowings, our lenders require us to pledge assets, Commitments and/or the right to draw down on Commitments. In this regard, the subscription agreement entered into with each of our investors contractually obligates each investor to fund its respective Commitments in order to pay amounts that may become due under any borrowings or other financings or similar obligations.

We expensed organization costs totaling $0.7 million (net of $0.4 million in Adviser reimbursement) since our inception through December 31, 2018. No additional organization costs were incurred during the three and six months ended June 30, 2019. Offering costs totaling $0.6 million (net of $0.3 million in Adviser reimbursement) was charged directly to Members’ Capital on December 31, 2018. No additional offering costs were incurred during the three and six months ended June 30, 2019. We did not bear more than an amount equal to 10 basis points of the aggregate capital commitments for organization and offering expenses.

Critical Accounting Policies and Estimates

Investments at Fair Value

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 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 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:

Equity, (Level 1), includes common stock valued at the closing price on the primary exchange in which the security trades.

Investment Activity

As of June 30, 2019, our non-controlled/non-affiliated portfolio consisted of 24 debt investments and one equity investment. Based on fair values as of June 30, 2019, our non-controlled/non-affiliated portfolio was 99.8% invested in debt investments, which were mostly senior secured, term loans. The remaining 0.2% represented our equity investment.

As of December 31, 2018, our non-controlled/non-affiliated portfolio consisted of 20 debt investments and one equity investment. Based on fair values as of December 31, 2018, our non-controlled/non-affiliated portfolio was 99.7% invested in debt investments, which were mostly senior secured, term loans. The remaining 0.3% represented our equity investment.

The table below describes our non-controlled/non-affiliated investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in industries as of June 30, 2019:


Industry	Percent of Total Investments
Textiles, Apparel & Luxury Goods		13	%
Household Durables		10	%
Energy Equipment and Services		10	%
Aerospace & Defense		9	%
Communications Equipment		8	%
Personal Products		8	%
Metals & Mining		7	%
Food Products		6	%
Electronic Equipment, Instrument & Components		5	%
Multiline Retail		5	%
Information Technology Services		5	%
Media		4	%
Auto Components		4	%
Professional Services		3	%
Construction and Engineering		3	%

Total		100	%

Interest income from non-controlled/non-affiliated investments was $17.2 million and $0.4 million for the three months ended June 30, 2019 and 2018, respectively, of which $0.1 million during the three months ended June 30, 2019 was paid-in-kind. Interest income from non-controlled/non-affiliated investments was $31.7 million and $0.4 million for the six months ended June 30, 2019 and 2018, respectively, of which $0.1 million during the six months ended June 30, 2019 was interest income paid-in-kind.

Results of Operations

Our operating results for the three and six months ended June 30, 2019 and 2018 were as follows (dollar amounts in thousands):


	For the three months ended June 30,						For the six months ended June 30,
	2019			2018			2019		2018
Total investment income	$	17,264		$	359		$	31,812	$	359
Net expenses		8,623			1,284			19,753		1,284

Net investment income (loss)		8,641			(925	)		12,059		(925	)

Net realized gain on non-controlled/non-affiliated investments		31			—			449		—
Net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments		(587	)		407			4,324		407

Net increase (decrease) in Members’ Capital from operations	$	8,085		$	(518	)	$	16,832	$	(518	)

Total investment income

Total investment income for the three months ended June 30, 2019 and 2018 was $17.3 million and $0.4 million, respectively. Total investment income for the six months ended June 30, 2019 and 2018 was $31.8 million and $0.4 million, respectively. The majority of our interest income for the three and six months ended June 30, 2019 was from non-controlled/non-affiliated investments, while all of our interest income from the three and six months ended June 30, 2018 was from non-controlled/non-affiliated investments.

The increase in total investment income during the three and six months ended June 30, 2019 compared to the three and six months ended June 30, 2018 reflects our ramp up of operations since the quarter ended June 30, 2018, which is when we commenced operations.

During the three and six months ended June 30, 2019, total interest income included $0.1 million in other fee income from non-controlled/non-affiliated investments.

Net investment income (loss)

Net investment income (loss) for the three months ended June 30, 2019 and 2018 was $8.6 million and ($0.9) million, respectively. Net investment income (loss) for the six months ended June 30, 2019 was $12.1 million and ($0.9) million, respectively. Our net investment income during the three and six months ended June 30, 2019 compared to the net investment loss during the three and six months ended June 30, 2018 reflects our investment activity, which commenced during, and ramped up subsequent to, the quarter ended June 30, 2018.

Operating expenses for the three and six months ended June 30, 2019 and 2018 were as follows (dollar amounts in thousands):


	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019		2018
Expenses:
Interest and credit facilities expenses	$	5,239	$	201	$	9,196	$	201
Management fees		2,536		98		4,641		98
Incentive fees		112		—		4,525		—
Professional fees		366		51		686		51
Administrative fees		234		161		419		161
Directors’ fees		96		176		190		190
Organization costs		—		—		—		95
Other expenses		40		—		96		—

Total expenses		8,623		687		19,753		796

Expenses recaptured by the Investment Adviser		—		597		—		488

Net expenses	$	8,623	$	1,284	$	19,753	$	1,284

Our total expenses were $8.6 million and $0.7 million for the three months ended June 30, 2019 and 2018, respectively. Our expenses for the three months ended June 30, 2019 include management and incentive fees attributed to the Adviser of $2.5 million and $0.1 million, respectively. Our internal rate of return since inception through June 30, 2019 exceeded the hurdle rate, as defined in our Advisory Agreement. Accordingly, we recorded $4.5 million in incentive fees payable to the Adviser as of June 30, 2019. The increase in operating expenses during the three months ended June 30, 2019 compared to the three months ended June 30, 2018 is primarily due to higher interest and credit facility expenses as well as higher management fees, reflecting a full quarter of ramped up investing activity. As previously noted, we commenced operations during the quarter ended June 30, 2018.

Our total expenses were $19.8 million and $0.8 million for the six months ended June 30, 2019 and 2018, respectively. Our expenses for the six months ended June 30, 2019 include management and incentive fees attributed to the Adviser of $4.6 million and $4.5 million, respectively, due to our internal rate of return since inception exceeding the hurdle rate as of June 30, 2019. The increase in total expenses during the six months ended June 30, 2019 compared to the six months ended June 30, 2018 is due to us being fully operational during the current period, versus the prior year comparative period, in which we did not commence operations until the second quarter.

Net expenses during the three and six months ended June 30, 2018 included an expense recapture of $0.6 million and $0.5 million, respectively. The expense recapture during the three and six months ended June 30, 2018 is primarily due to organizational and offering costs that were previously reimbursed by the Adviser.

Net realized gain on non-controlled/non-affiliated investments

Our net realized gain on non-controlled/non-affiliated investments for the three months ended June 30, 2019 and 2018 was $31 thousand and $0, respectively. Our net realized gain on non-controlled/non-affiliated investments for the six months ended June 30, 2019 and 2018 was $0.4 million and $0, respectively. Our net realized gain during the six months ended June 30, 2019 was primarily attributable to our partial disposition of our term loans to SMTC Corporation.

Net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments

Our net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments for the three months ended June 30, 2019 and 2018 was ($0.6) million and $0.4 million, respectively. Our net change in unrealized appreciation/depreciation for the three months ended June 30, 2019 was largely due to our term loans to Centric Brands, Inc., Production Resource Group, LLC, and Keeco Holdings, LLC, which collectively recognized $2.4 million in unrealized depreciation during the three months ended June 30, 2019. These were partially offset by our term loans to PSS Industrial Group Corp. and Torrid LLC, which, together, recorded $1.7 million in unrealized appreciation during the quarter.

Our net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments for the six months ended June 30, 2019 and 2018 was $4.3 million and $0.4 million, respectively. Our net change in unrealized appreciation/depreciation for the six months ended June 30, 2019 was largely due to our term loans to DBM Global, Inc. and Torrid LLC, which, together, recognized $2.1 million in unrealized gains. We also recognized unrealized gains from our term loans to PSS Industrial Group Corp.; AVI-SPL, Inc., Sparton Corporation, Greenfield World Trade Inc., and Centric Brands Inc., which collectively, recognized $3.3 million in unrealized appreciation during the six months ended June 30, 2019. These were partially offset by our term loan to Keeco Holdings, LLC, which recorded $1.1 million in unrealized depreciation during the period.

Net increase (decrease) in Members’ Capital from operations

Our net increase (decrease) in members’ capital from operations during the three months ended June 30, 2019 and 2018 was $8.1 million and ($0.5) million, respectively. Our net increase (decrease) in members’ capital from operations during the six months ended June 30, 2019 and 2018 was $16.8 million and ($0.5) million, respectively.

The increase during the three and six months ended June 30, 2019 is primarily attributable to our investments being in place for the entire first half of fiscal year 2019 compared to 2018, during which we did not commence investment activity until the second quarter. As previously noted, the decrease during the three and six months ended June 30, 2018 is primarily attributable to the commencement of operations which took place during the second quarter of fiscal year 2018. During this period, our expenses outpaced our investment income as we ramped up operations.

Financial Condition, Liquidity and Capital Resources

On April 13, 2018, we completed the first closing of the sale of our Units to persons not affiliated with the Adviser. We also commenced operations during the second quarter of fiscal year 2018. On January 14, 2019, we completed our fourth and final closing sale of our 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, 2019, aggregate Commitments, Undrawn Commitments and subscribed for Units of the Company were as follows (dollar amounts in thousands):


	June 30, 2019
Commitments	$	1,373,401
Undrawn commitments	$	913,401
Percentage of commitments funded		33.5	%
Units		13,734,010

On May 10, 2018, we entered into a Revolving Credit Agreement (the “Natixis Credit Agreement”) among the Company, as borrower, and Natixis, New York Branch (“Natixis”), as administrative agent and the committed lenders, conduit lenders and funding agents. The Natixis Credit Agreement provides for a revolving credit line (the “Natixis Credit Facility”) of up to $150,000 (the “Natixis Maximum Commitment”), subject to the lesser of the “Natixis Borrowing Base” assets or the Natixis Maximum Commitment. The Natixis Borrowing Base assets equal the sum of a percentage of unfunded commitments from certain classes of eligible investors in the Company (the “Natixis Available Commitment”). The Natixis Credit Facility is generally secured by the Natixis Borrowing Base assets.

The Natixis Maximum Commitment may be periodically increased in amounts designated by us, up to an aggregate amount of $1 billion. The maturity date of the Natixis Credit Agreement is May 10, 2021, unless such date is extended at our option, no more than two times for a term of up to 364 days after the maturity date per such extension. Borrowings under the Natixis Credit Agreement bear interest at a rate equal to either (a) a base rate calculated in a customary manner plus 0.55% or (b) an adjusted eurodollar rate calculated in a customary manner plus 1.55%. On September 21, 2018, the Natixis Maximum Commitment increased from $150,000 to $275,000. On November 5, 2018, the Natixis Maximum Commitment increased from $275,000 to $400,000.

The Natixis Credit Facility is secured by a first priority security interest, subject to customary exceptions, in (i) all of the capital commitments of the investors in the Company, (ii) our right to make capital calls, receive payment of capital contributions from the investors and enforce payment of the capital commitments and capital contributions under our operating agreement and (iii) a cash collateral account into which the capital contributions from the investors are made. The Natixis Credit Facility may be terminated, and any outstanding amounts thereunder may become due and payable, should we fail to satisfy certain covenants. As of June 30, 2019 we were in compliance with such covenants.


Natixis Credit Facility	Total Commitment		Borrowings Outstanding		Available Amount⁽¹⁾
As of June 30, 2019	$	400,000	$	252,000	$	148,000
As of December 31, 2018	$	400,000	$	300,000	$	55,000

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

On January 29, 2019, TCW DL VII Financing LLC (the “Borrower” or “TCW DL VII Financing”), a newly-formed, wholly-owned, special purpose financing subsidiary of ours, entered into a senior secured credit facility (the “PNC Credit Facility” and together with the Natixis Credit Facility, the “Credit Facilities”) pursuant to a credit and security agreement (the “PNC Credit Agreement”) with PNC Bank, National Association (“PNC”), as facility agent, the lenders from time to time party thereto, and State Street Bank and Trust Company, as collateral agent.

ending on January 29, 2020, unless, in the case of (i) and (ii), there is an earlier termination of the PNC Credit Facility or event of default thereunder. The PNC Credit Facility will mature on January 29, 2024. Loans under the PNC Credit Facility bear interest at a fluctuating rate of interest per annum equal to, at the Borrower’s option, either (i) three-month LIBOR plus the facility margin of 2.30% per annum or (ii) the Base Rate plus the facility margin of 2.30% per annum.

The Borrower’s obligations under the PNC Credit Facility, are secured by a first priority security interest in all of the assets of the Borrower, including its portfolio of loans which has been contributed by us to the Borrower, in exchange for 100% of the membership interest of the Borrower and any payments received in respect of such loans. We may contribute or sell to the Borrower additional loans from time to time after the closing date, which shall be pledged in favor of the lenders under the PNC Credit Facility.

Borrowings of the Borrower are non-recourse to us but are considered our borrowings for purposes of complying with the asset coverage requirements under the Investment Company Act of 1940, as amended.

As of June 30, 2019, the PNC Borrowing Base were less than the Amended PNC Maximum Commitment. A summary of amounts outstanding and available under the Amended PNC Credit Facility as of June 30, 2019 is as follows:


PNC Credit Facility	Total Commitment		Borrowings Outstanding		Available Amount⁽¹⁾
As of June 30, 2019	$	600,000	$	100,000	$	334,246

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

All borrowings under the PNC Credit Facility as of June 30, 2019 were from the revolving line of credit. The Borrower had no term loan borrowings under the PNC Credit Facility as of June 30, 2019. The carrying amount of the Credit Facilities, which are categorized as Level 2 within the fair value hierarchy as of June 30, 2019 and December 31, 2018, 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 the Credit Facilities’ terms and conditions. We incurred financing costs of $3,000 and $4,400, in connection with the Natixis Credit Agreement and the PNC Credit Agreement, respectively. In addition, we incurred an additional $2,070 in financing costs in connection with the Amended PNC Credit Agreement. We recorded these costs as deferred financing costs on our Consolidated Statements of Asset and Liabilities and these costs are being amortized over the respective life of the Natixis Credit Facility and PNC Credit Facility. As of June 30, 2019 and December 31, 2018, $7,978 and $2,454, respectively, of such prepaid deferred financing costs had yet to be amortized.

The summary information regarding the Credit Facilities for the three and six months ended June 30, 2019 and 2018 were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Credit facilities interest expense	$	3,771		$	45		$	6,862		$	45
Unused fees		818			51			1,266			51
Administrative fees		50			50			50			50
Amortization of deferred financing costs		600			55			1,018			55

Total	$	5,239		$	201		$	9,196		$	201

Weighted average interest rate		4.24	%		3.51	%		4.17	%		3.51	%
Average outstanding balance	$	351,703		$	8,894		$	327,033		$	8,894

We had the following unfunded commitments and unrealized losses by investment as of June 30, 2019 and December 31, 2018 (dollar amounts in thousands):


	Maturity / Expiration	June 30, 2019				December 31, 2018
Unfunded Commitments	Maturity / Expiration	Amount		Unrealized Losses		Amount		Unrealized Losses
Hometown Food Company	August 2023	$	5,881	$	24	$	5,881	$	77
Encompass Digital Media, Inc.	September 2023		1,589		22		2,167		30
SMTC Corporation	May 2019		—		—		3,902		144
Winsight, LLC	November 2023		2,217		11		2,217		16
Winsight, LLC	November 2021		18,842		94		18,842		132

Total		$	28,529	$	151	$	33,009	$	399

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to financial market risks, including changes in interest rates. At June 30, 2019, 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, 2019, the percentage of our floating rate debt investments that bore interest based on an interest rate floor was 0.0%. 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, 2019 consolidated statement of assets and liabilities, the following table shows the annual impact on net investment 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 Investment Income (Loss)
Up 300 basis points	$	24,663		$	10,707		$	13,956
Up 200 basis points		16,442			7,138			9,304
Up 100 basis points		8,221			3,569			4,652
Down 100 basis points		(6,346	)		(3,722	)		(2,624	)
Down 200 basis points		(2,438	)		(7,242	)		4,804
Down 300 basis points		(2,438	)		(8,539	)		6,101

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 that we filed with the SEC on March 19, 2019.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Sales of unregistered securities

None.

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 September 1, 2017)

3.2		Limited Liability Company Agreement, dated June 29, 2017 (incorporated by reference to Exhibit 3.2 to a registration on Form 10 filed on September 1, 2017)

3.3		Amended and Restated Limited Liability Company Agreement, dated October 2, 2017 (incorporated by reference to Exhibit 3.3 to a registration on Form 10 filed on October 16, 2017)

3.4		Third Amended and Restated Limited Liability Company Agreement, dated as of September 10, 2018 (incorporated by reference to Exhibit 3.6 to the registrant’s Quarterly Report on Form 10-Q filed November 6, 2018).

3.5		Fourth Amended and Restated Limited Liability Company Agreement, dated as of January 14, 2019 (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed on January 18, 2019).

10.1		Investment Advisory and Management Agreement dated December 29, 2017 (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on January 3, 2018).

10.2		Administration Agreement dated December 29, 2017, by and between TCW Direct Lending VII LLC and TCW Asset Management Company LLC (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on January 3, 2018).

10.3		Amended and Restated Administration Agreement, dated as of September 25, 2018, between TCW Direct Lending VII LLC and TCW Asset Management Company LLC (incorporated by reference to Exhibit 3.7 to the registrant’s Quarterly Report on Form 10-Q filed November 6, 2018).

10.4		Revolving Credit Agreement, dated as of May 10, 2018, among TCW Direct Lending VII LLC, as borrower, and Natixis, New York Branch, as Administrative Agent and Committed Lender (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed on May 14, 2018).

10.5		Credit and Security Agreement, dated as of January 29, 2019, among TCW DL VII Financing LLC, as borrower, PNC Bank, National Association, as facility agent, and State Street Bank and Trust Company, as collateral agent (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on February 4, 2019).

10.6		First Amended and Restated Credit and Security Agreement, dated as of April 11, 2019, among TCW DL VII Financing LLC, as borrower, PNC Bank, National Association, as facility agent, the lenders from time to time party thereto, and State Street Bank and Trust Company, as collateral agent (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on April 16, 2019).

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)

*	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.