UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2022

OR

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

For the transition period to

Commission File No. 814-01410

Carlyle Secured Lending III

(Exact name of Registrant as specified in its charter)

Delaware	86-6498423
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
One Vanderbilt Avenue, Suite 3400, New York, NY 10017	(212) 813-4900
(Address of principal executive office) (Zip Code)	(Registrant’s telephone number, including area code)

N/A

(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
N/A	N/A	N/A

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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	o
Emerging growth company	x

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 Exchange Act).    Yes  ☐    No  x

The number of the registrant’s common shares of beneficial interest, $0.001 par value per share, outstanding at August 12, 2022 was 2,294,820.

1

Carlyle Secured Lending III

INDEX

Part I.	Financial Information
Item 1.	Financial Statements
	Statements of Assets and Liabilities as of June 30, 2022 (unaudited) and December 31, 2021	1
	Statements of Operations for the three and six month period ended June 30, 2022 (unaudited) and for the period from May 28, 2021 (Commencement) through June 30, 2021	2
	Statements of Changes in Net Assets for the six month period ended June 30, 2022 (unaudited) and for the period from May 28, 2021 (Commencement) through June 30, 2021	3
	Statements of Cash Flows for the six month period ended June 30, 2022 (unaudited) and for the period from May 28, 2021 (Commencement) through June 30, 2021	4
	Schedules of Investments as of June 30, 2022 (unaudited) and December 31, 2021	5
	Notes to Financial Statements (unaudited)	16
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	48
Part II.	Other Information
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	49
	Signatures	50

CARLYLE SECURED LENDING III

STATEMENTS OF ASSETS AND LIABILITIES

	June 30, 2022		December 31, 2021
ASSETS	(unaudited)
Investments—non-controlled/non-affiliated, at fair value (amortized cost of $34,107,543 and $115,783, respectively)	$	33,720,870	$	116,119
Cash and cash equivalents	31,061,884		185,010
Deferred financing costs	519,864		—
Deferred offering costs	59,399		56,805
Due from Investment Adviser	1,678,855		—
Interest and other income receivable from non-controlled/non-affiliated investments	314,907		891
Receivable for issuance of common shares of beneficial interest	897,300		—
Total assets	$	68,253,079	$	358,825
LIABILITIES
Secured borrowings (Note 5)	$	19,650,000	$	—
Payable for investments purchased	895,000		—
Interest and credit facility fees payable (Note 5)	35,384		—
Dividend payable (Note 7)	390,680		—
Administrative service fees payable (Note 4)	126,284		89,185
Deferred offering costs payable	198,933		136,333
Accrued organizational expenses	124,680		88,889
Deferred income	162,680		145,764
Trustees' fees and expenses payable	163,775		184,653
Other accrued expenses and liabilities	849,169		342,480
Total liabilities	22,596,585		987,304
Commitments and contingencies (Notes 5 and 8)
NET ASSETS
Common shares of beneficial interest, $0.001 par value; unlimited shares authorized; 2,294,820 and 5,000 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	2,295		5
Paid-in capital in excess of par value	45,863,538		99,995
Total distributable earnings (loss)	(209,339)		(728,479)
Total net assets	$	45,656,494	$	(628,479)
NET ASSETS PER SHARE	$	19.90	$	(125.70)

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

1

CARLYLE SECURED LENDING III

STATEMENTS OF OPERATIONS

(unaudited)

	For the three  months ended		For the six months ended		For the period from May 28, 2021 (Commencement) through
	June 30, 2022		June 30, 2022		June 30, 2021
Investment income:
From non-controlled/non-affiliated investments:
Interest income	$	460,521	$	468,032	$	171
Other income	127,069		165,849		2
Total investment income from non-controlled/non-affiliated investments	587,590		633,881		173
Total investment income	587,590		633,881		173
Expenses:
Organizational expenses (Note 2)	33,356		35,791		27,774
Offering cost expense (Note 2)	25,377		60,006		2,284
Professional fees	133,173		284,201		15,000
Administrative service fees (Note 4)	37,099		37,099		—
Interest expense (Note 5)	169,820		169,820		—
Credit facility fees (Note 5)	22,804		22,804		—
Trustees’ fees and expenses (Note 4)	85,250		183,622		17,654
Other general and administrative	99,047		222,546		25,450
Total expenses	605,926		1,015,889		88,162
Less waivers and reimbursements of expenses (Note 4)	(484,337)		(1,678,855)		—
Expenses after waivers and reimbursements of expenses	121,589		(662,966)		88,162
Net investment income (loss)	466,001		1,296,847		(87,989)
Net realized gain (loss) and change in unrealized appreciation (depreciation):
Net change in unrealized appreciation (depreciation) on investments:
Non-controlled/non-affiliated investments	(385,576)		(387,009)		(9)
Net change in unrealized currency gains (losses) on non-investment assets and liabilities	(17)		(18)		—
Net realized and unrealized gain (loss) on investments and non-investment assets and liabilities	(385,593)		(387,027)		(9)
Net increase (decrease) in net assets resulting from operations	$	80,408	$	909,820	$	(87,998)
Basic and diluted earnings per common share (Note 7)	$	0.10	$	2.30	$	(17.60)
Weighted-average shares of common shares of beneficial interest outstanding—Basic and Diluted (Note 7)	774,422		395,713		5,000

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

2

CARLYLE SECURED LENDING III

STATEMENTS OF CHANGES IN NET ASSETS

(unaudited)

	For the six months ended		For the period from May 28, 2021 (Commencement) through
	June 30, 2022		June 30, 2021
Increase (decrease) in net assets resulting from operations:
Net investment income (loss)	$	1,296,847	$	(87,989)
Net change in unrealized appreciation (depreciation) on investments	(387,009)		—
Net change in unrealized appreciation (depreciation) on non-investment assets and liabilities	(18)		(9)
Net increase (decrease) in net assets resulting from operations	909,820		(87,998)
Capital transactions:
Common shares of beneficial interest issued	45,765,833		100,000
Dividends declared	(390,680)		—
Net increase (decrease) in net assets resulting from capital share transactions	45,375,153		100,000
Net increase (decrease) in net assets	46,284,973		12,002
Net assets at beginning of period	(628,479)		—
Net assets at end of period	$	45,656,494	$	12,002

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

3

CARLYLE SECURED LENDING III

STATEMENTS OF CASH FLOWS

(unaudited)

	For the six months ended		For the period from May 28, 2021 (Commencement) through
	June 30, 2022		June 30, 2021
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations	$	909,820	$	(87,998)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Amortization of deferred financing costs	69,361		—
Amortization of deferred offering costs	60,006		2,284
Net accretion of discount on investments	(27,678)		(9)
Paid-in-kind interest	(426)		—
Net change in unrealized (appreciation) depreciation on investments	387,009		9
Net change in unrealized currency (gains) losses on non-investment assets and liabilities	18		—
Cost of investments purchased and change in payable for investments purchased	(33,417,259)		(27,229)
Proceeds from sales and repayments of investments and change in receivable for investments sold/repaid	348,585		—
Changes in operating assets:
Interest and other income receivable	(314,016)		(120)
Prepaid expenses and other assets	—		(185)
Due from Investment Adviser	(1,678,855)		—
Changes in operating liabilities:
Interest and credit facility fees payable	35,384		—
Administrative service fees payable	37,099		—
Accrued organizational expenses	35,791		27,774
Deferred income	16,916		—
Trustees' fees and expenses payable	(20,878)		—
Other accrued expenses and liabilities	506,689		58,104
Net cash provided by (used in) operating activities	(33,052,434)		(27,370)
Cash flows from financing activities:
Proceeds from issuance of common shares of beneficial interest, net of change in receivable for issuance of common shares of beneficial interest	44,868,533		100,000
Borrowings on the Subscription Facility	19,650,000		—
Debt issuance costs paid	(589,225)		—
Net cash provided by (used in) financing activities	63,929,308		100,000
Net increase (decrease) in cash and cash equivalents	30,876,874		72,630
Cash and cash equivalents, beginning of period	185,010		—
Cash and cash equivalents, end of period	$	31,061,884	$	72,630
Supplemental disclosures:
Interest paid during the period	$	84,201	$	—
Dividends declared during the period	$	390,680	$	—

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

4

CARLYLE SECURED LENDING III

SCHEDULE OF INVESTMENTS

As of June 30, 2022

(unaudited)

Investments—non-controlled/non-affiliated (1)	Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)		Fair Value (5)		Percentage of Net Assets
First Lien Debt (99.9% of fair value)
Alpine Acquisition Corp II	(2)(3)(9)(10)	Transportation: Cargo	SOFR + 6.00%	7.22%	4/19/2022	11/30/2026	$	7,476,911	$	7,278,962	$	7,140,788	15.64	%
Ascend Buyer, LLC	(2)(3)(10)	Containers, Packaging & Glass	L + 5.75%	7.99%	9/30/2021	9/30/2028	4,244		4,160		4,109		0.01
Associations, Inc.	(2)(3)(10)	Construction & Building	L + 4.00%, 2.50% PIK	8.99%	7/2/2021	7/2/2027	8,370		8,295		8,259		0.02
DCA Investment Holding LLC	(2)(3)(10)	Healthcare & Pharmaceuticals	SOFR + 6.00%	6.75%	2/25/2022	4/3/2028	2,063		2,039		2,001		0.00
Dwyer Instruments, Inc	(2)(3)(10)	Capital Equipment	L + 5.50%	8.38%	7/21/2021	7/21/2027	8,127		7,979		8,015		0.02
Eliassen Group, LLC	(2)(3)(10)	Business Services	SOFR + 5.75%	7.80%	4/14/2022	4/14/2028	7,444,841		7,272,722		7,162,894		15.69
Ellkay, LLC	(2)(3)(10)	Healthcare & Pharmaceuticals	L + 5.75%	6.85%	9/14/2021	9/14/2027	3,545		3,474		3,383		0.01
Excel Fitness Holdings, Inc.	(2)(3)(9)(10)	Hotel, Gaming & Leisure	SOFR + 5.25%	7.83%	4/29/2022	4/29/2029	4,156,250		4,063,347		4,061,250		8.90
Flagship Intermediate Holdco, LLC	(2)(3)(9)(10)	Consumer Services	SOFR + 5.75%	7.28%	2/18/2022	2/18/2028	2,715		2,630		2,553		0.01
Hercules Borrower LLC	(2)(3)(10)	Environmental Industries	L + 5.50%	7.75%	9/10/2021	12/14/2026	930		896		836		0.00
Hoosier Intermediate, LLC	(2)(3)(10)	Healthcare & Pharmaceuticals	L + 5.50%	6.96%	11/15/2021	11/15/2028	4,090		3,998		3,832		0.01
HS Spa Holdings Inc.	(2)(3)(10)	Consumer Services	SOFR + 5.75%	7.56%	6/2/2022	6/2/2029	864,826		845,249		845,059		1.85
Individual FoodService Holdings, LLC	(2)(3)	Wholesale	L + 6.25%	7.66%	1/6/2022	11/22/2025	4,848		4,766		4,778		0.01
IQN Holding Corp.	(2)(3)(10)	Business Services	SOFR + 5.50%	6.65%	5/2/2022	5/2/2029	2,187,029		2,129,410		2,128,090		4.66
Jeg's Automotive, LLC	(2)(3)(10)	Automotive	L + 5.75%	7.84%	12/22/2021	12/22/2027	3,930		3,838		3,821		0.01
Kaseya, Inc.	(2)(3)(10)	High Tech Industries	SOFR + 5.75%	8.29%	6/23/2022	6/23/2029	993,754		874,262		873,911		1.91
LinQuest Corporation	(2)(3)(10)	Aerospace & Defense	L + 5.75%	8.04%	7/28/2021	7/28/2028	—		—		—		0.00
LVF Holdings, Inc.	(2)(3)(10)	Beverage, Food & Tobacco	L + 6.25%	8.49%	6/10/2021	6/10/2027	20,914		20,513		19,354		0.04
Material Holdings, LLC	(2)(3)(10)	Business Services	L + 5.75%	7.98%	8/19/2021	8/19/2027	—		—		—		0.00
Maverick Acquisition, Inc.	(2)(3)(10)	Aerospace & Defense	L + 6.25%	8.50%	6/1/2021	6/1/2027	21,871		21,461		20,194		0.04
Medical Manufacturing Technologies, LLC	(2)(3)(9)(10)	Healthcare & Pharmaceuticals	SOFR + 5.75%	7.69%	12/23/2021	12/23/2027	2,844		2,771		2,724		0.01
MMIT Holdings, LLC	(2)(3)(10)	High Tech Industries	L + 6.25%	8.50%	9/15/2021	9/15/2027	2,727		2,675		2,634		0.01
North Haven Fairway Buyer, LLC	(2)(3)(10)	Consumer Services	L + 5.75%	7.20%	5/17/2022	5/17/2026	3,529,412		3,214,115		3,207,953		7.03
Oak Purchaser, Inc.	(2)(3)(10)	Business Services	SOFR + 5.50%	7.55%	4/28/2022	4/28/2028	2,263,514		2,192,446		2,201,113		4.82
PF Atlantic Holdco 2, LLC	(2)(3)(10)	Hotel, Gaming & Leisure	L + 6.00%	7.30%	11/12/2021	11/12/2027	3,448		3,358		3,279		0.01

5

CARLYLE SECURED LENDING III

SCHEDULE OF INVESTMENTS (Continued)

As of June 30, 2022

(unaudited)

Investments—non-controlled/non-affiliated (1)	Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)		Fair Value (5)		Percentage of Net Assets
Project Castle, Inc.	(2)(3)	Capital Equipment	SOFR + 5.50%	6.90%	6/24/2022	6/1/2029	$	1,000,000	$	895,000	$	895,000	1.96	%
PXO Holdings I Corp.	(2)(3)(9)(10)	Chemicals, Plastics & Rubber	SOFR + 5.50%	7.01%	3/8/2022	3/8/2028	3,689		3,630		3,530		0.01
Quantic Electronics, LLC	(2)(3)(10)	Aerospace & Defense	L + 6.25%	8.43%	8/17/2021	3/1/2027	6,758		6,589		6,445		0.01
RSC Acquisition, Inc.	(2)(3)(9)(10)	Banking, Finance, Insurance & Real Estate	SOFR + 5.50%	6.86%	5/31/2022	11/1/2026	—		—		—		0.00
Smarsh Inc.	(2)(3)(10)	Software	SOFR + 6.50%	8.62%	2/18/2022	2/18/2029	816		795		772		0.00
Spotless Brands, LLC	(2)(3)(9)(10)	Consumer Services	SOFR + 5.75%	7.40%	6/21/2022	6/21/2028	878,347		806,963		806,658		1.77
Trafigura Trading LLC	(2)(3)(8)(10)	Metals & Mining	L + 8.40%	10.64%	7/26/2021	7/18/2022	2,201		2,173		2,176		0.00
USALCO, LLC	(2)(3)	Chemicals, Plastics & Rubber	L + 6.00%	8.25%	10/19/2021	10/19/2027	4,975		4,885		4,748		0.01
USR Parent Inc.	(2)(3)	Retail	SOFR + 7.60%	8.65%	4/22/2022	4/25/2027	4,444,444		4,401,370		4,268,108		9.35
Wineshipping.com LLC	(2)(3)(10)	Beverage, Food & Tobacco	L + 5.75%	7.54%	10/29/2021	10/29/2027	3,633		3,570		3,524		0.01
Yellowstone Buyer Acquisition, LLC	(2)(3)	Consumer Goods: Durable	L + 5.75%	7.36%	9/13/2021	9/13/2027	1,985		1,950		1,906		0.00
First Lien Debt Total									$	34,090,291	$	33,703,697	73.83	%
Second Lien Debt (0.1% of fair value)
11852604 Canada Inc. (Canada)	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 9.50% (100% PIK)	10.51%	9/30/2021	9/30/2028	$	3,565	$	3,491	$	3,449	0.01	%
AP Plastics Acquisition Holdings, LLC	(2)(3)	Chemicals, Plastics & Rubber	L + 7.50%	9.01%	8/10/2021	8/10/2029	10,000		9,748		9,735		0.02
Blackbird Purchaser, Inc.	(2)(3)(10)	Capital Equipment	L + 7.50%	9.17%	12/14/2021	4/8/2027	2,299		2,243		2,156		0.00
Second Lien Debt Total									$	15,482	$	15,340	0.03	%

Investments—non-controlled/non-affiliated (1)	Footnotes	Industry	Acquisition Date	Shares/ Units	Cost		Fair Value (5)		Percentage of Net Assets
Equity Investments (0.0% of fair value)
Blackbird Holdco, Inc.	(7)	Capital Equipment	12/14/2021	2	$	1,638	$	1,698	0.00	%
Buckeye Parent, LLC	(7)	Automotive	12/22/2021	44	44		44		0.00
GB Vino Parent, L.P.	(7)	Beverage, Food & Tobacco	10/29/2021	—	18		19		0.00
Pascal Ultimate Holdings, L.P	(7)	Capital Equipment	7/21/2021	4	36		38		0.00
Profile Holdings I, LP	(7)	Chemicals, Plastics & Rubber	3/8/2022	—	34		34		0.00
Equity Investments Total					$	1,770	$	1,833	0.00	%
Total investments—non-controlled/non-affiliated					$	34,107,543	$	33,720,870	73.86	%
Total investments					$	34,107,543	$	33,720,870	73.86	%

6

CARLYLE SECURED LENDING III

SCHEDULE OF INVESTMENTS (Continued)

As of June 30, 2022

(unaudited)

(1)    Unless otherwise indicated, issuers of debt and equity investments held by Carlyle Secured Lending III (“the Company”) are domiciled in the United States. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of June 30, 2022, the Company does not “control” any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of June 30, 2022, the Company is not an “affiliated person” of any of these portfolio companies. Certain portfolio company investments are subject to contractual restrictions on sales.

(2)Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”), the Secured Overnight Financing Rate (“SOFR”) or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of June 30, 2022. As of June 30, 2022, the reference rates for our variable rate loans were the 30-day LIBOR at 1.80%, the 90-day LIBOR at 2.30%, the 180-day LIBOR at 2.90%, the 30-day SOFR at 1.70%, and the 90-day SOFR at 2.10%.

(3)Loan includes interest rate floor feature, generally 1.00%.

(4)Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.

(5)Fair value is determined in good faith by or under the direction of the Board of Trustees of the Company (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements, to these financial statements), pursuant to the Company’s valuation policy. The fair value of all first lien and second lien debt investments and equity investments was determined using significant unobservable inputs.

(6)The Company has determined the indicated investments are non-qualifying assets under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

(7)Security acquired in transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act, unless otherwise noted. As of June 30, 2022, the aggregate fair value of these securities is $1,833, or 0% of the Company's net assets.

(8)The investment is secured by receivables purchased from the portfolio company, with an implied discount of 10.64%. The investment was made via a tranched participation arrangement between the purchaser of such receivables and the Company. The investment has a secondary priority behind the rights of such purchaser.

(9)Loans include a credit spread adjustment that ranges from 0.10% to 0.43%.

(10)As of June 30, 2022, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans:

Investments—non-controlled/non-affiliated	Type	Unused Fee		Par/ Principal Amount		Fair Value
First and Second Lien Debt—unfunded delayed draw and revolving term loans commitments
Alpine Acquisition Corp II	Delayed Draw	1.00	%	$	1,097,360	$	(35,818)
Alpine Acquisition Corp II	Revolver	0.50		1,723,502		(56,256)
Ascend Buyer, LLC	Revolver	0.50		371		(11)
Associations, Inc.	Delayed Draw	1.00		5,788,422		(71,960)
Associations, Inc.	Revolver	0.50		517		(6)
Blackbird Purchaser, Inc.	Delayed Draw	1.00		766		(36)
DCA Investment Holding, LLC	Delayed Draw	1.00		429		(11)
Dwyer Instruments, Inc	Delayed Draw	1.00		5,486,059		—
Dwyer Instruments, Inc	Revolver	0.50		417		(5)
Eliassen Group, LLC	Delayed Draw	1.00		4,400,826		(104,747)
Ellkay, LLC	Revolver	0.50		446		(18)
Excel Fitness Holdings, Inc.	Revolver	0.50		593,750		(11,875)
Flagship Intermediate Holdco, LLC	Delayed Draw	1.00		1,800		(65)
Hercules Borrower LLC	Delayed Draw	1.00		1,065		(50)
Hoosier Intermediate, LLC	Revolver	0.50		900		(47)
HS Spa Holdings Inc.	Revolver	0.50		123,547		(2,471)
IQN Holding Corp.	Delayed Draw	1.00		3,217,966		(32,180)
IQN Holding Corp.	Revolver	0.50		488,923		(4,889)

7

CARLYLE SECURED LENDING III

SCHEDULE OF INVESTMENTS (Continued)

As of June 30, 2022

(unaudited)

Investments—non-controlled/non-affiliated	Type	Unused Fee		Par/ Principal Amount		Fair Value
Jeg's Automotive, LLC	Delayed Draw	1.00	%	$	833	$	(18)
Jeg's Automotive, LLC	Revolver	0.50		219		(5)
Kaseya, Inc.	Delayed Draw	0.50		4,484,917		(89,698)
Kaseya, Inc.	Revolver	0.50		513,514		(10,270)
LinQuest Corporation	Delayed Draw	1.00		10,000,000		—
LVF Holdings, Inc.	Delayed Draw	1.00		2,335		(154)
LVF Holdings, Inc.	Revolver	0.50		379		(25)
Material Holdings, LLC	Delayed Draw	—		8,814		—
Maverick Acquisition, Inc.	Delayed Draw	1.00		2,339		(162)
Medical Manufacturing Technologies, LLC	Delayed Draw	1.00		888		(27)
Medical Manufacturing Technologies, LLC	Revolver	0.50		181		(6)
MMIT Holdings, LLC	Revolver	0.50		245		(8)
North Haven Fairway Buyer, LLC	Delayed Draw	0.50		1,470,588		(29,412)
North Haven Fairway Buyer, LLC	Delayed Draw	0.50		9,149,856		(182,997)
North Haven Fairway Buyer, LLC	Revolver	0.50		1,923,077		(38,462)
Oak Purchaser, Inc.	Delayed Draw	0.50		4,461,777		(38,092)
Oak Purchaser, Inc.	Revolver	0.50		583,878		(4,985)
PF Atlantic HoldCo 2, LLC	Delayed Draw	0.80		1,190		(40)
PF Atlantic HoldCo 2, LLC	Revolver	0.50		345		(12)
PXO Holdings I Corp.	Delayed Draw	1.00		822		(27)
PXO Holdings I Corp.	Revolver	0.50		329		(11)
Quantic Electronics, LLC	Delayed Draw	1.00		3,183		(100)
RSC Acquisition, Inc.	Delayed Draw	0.50		10,318,425		(386,074)
Smarsh Inc.	Delayed Draw	1.00		204		(8)
Smarsh Inc.	Revolver	0.50		51		(2)
Spotless Brands, LLC	Delayed Draw	1.00		2,570,940		(51,419)
Spotless Brands, LLC	Revolver	0.50		135,135		(2,703)
Trafigura Trading LLC	Revolver	0.50		1,299		(10)
Wineshipping.com LLC	Delayed Draw	1.00		403		(10)
Wineshipping.com LLC	Revolver	0.50		417		(10)
Total unfunded commitments				$	68,563,649	$	(1,155,192)

8

CARLYLE SECURED LENDING III

SCHEDULE OF INVESTMENTS (Continued)

As of June 30, 2022

(unaudited)

As of June 30, 2022, investments at fair value consisted of the following:

Type	Amortized Cost		Fair Value		% of Fair Value
First Lien Debt	$	34,090,291	$	33,703,697	99.9	%
Second Lien Debt	15,482		15,340		0.1
Equity Investments	1,770		1,833		—
Total	$	34,107,543	$	33,720,870	100.0	%

The rate type of debt investments at fair value as of June 30, 2022 was as follows:

Rate Type	Amortized Cost		Fair Value		% of Fair Value of First and Second Lien Debt
Floating Rate	$	34,105,773	$	33,719,037	100.0	%
Fixed Rate	—		—		—
Total	$	34,105,773	$	33,719,037	100.0	%

The industry composition of investments at fair value as of June 30, 2022 was as follows:

Industry	Amortized Cost		Fair Value		% of Fair Value
Aerospace & Defense	$	28,050	$	26,639	0.1	%
Automotive	3,882		3,865		—
Beverage, Food & Tobacco	24,101		22,897		0.1
Business Services	11,594,578		11,492,097		34.1
Capital Equipment	906,896		906,907		2.7
Chemicals, Plastics & Rubber	18,297		18,047		0.1
Construction & Building	8,295		8,259		—
Consumer Goods: Durable	1,950		1,906		—
Consumer Services	4,868,957		4,862,223		14.4
Containers, Packaging & Glass	4,160		4,109		—
Environmental Industries	896		836		—
Healthcare & Pharmaceuticals	15,773		15,389		—
High Tech Industries	876,937		876,545		2.6
Hotel, Gaming & Leisure	4,066,705		4,064,529		12.0
Metals & Mining	2,173		2,176		—
Retail	4,401,370		4,268,108		12.7
Software	795		772		—
Transportation: Cargo	7,278,962		7,140,788		21.2
Wholesale	4,766		4,778		—
Total	$	34,107,543	$	33,720,870	100.0	%

9

CARLYLE SECURED LENDING III

SCHEDULE OF INVESTMENTS (Continued)

As of June 30, 2022

(unaudited)

The geographical composition of investments at fair value as of June 30, 2022 was as follows:

Geography	Amortized Cost		Fair Value		% of Fair Value
Canada	$	3,491	$	3,449	—	%
United States	34,104,052		33,717,421		100.0
Total	$	34,107,543	$	33,720,870	100.0	%

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

10

CARLYLE SECURED LENDING III

SCHEDULE OF INVESTMENTS

As of December 31, 2021

Investments—non-controlled/non-affiliated (1)	Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)		Fair Value (5)		Percentage of Net Assets
First Lien Debt (85.2% of fair value)
Ascend Buyer, LLC	(2)(3)(6)	Containers, Packaging & Glass	L + 5.75%	6.50%	9/30/2021	9/30/2028	$	4,279	$	4,190	$	4,206	(0.67)	%
Associations, Inc.	(2)(3)(6)	Construction & Building	L + 4.00%, 2.50% PIK	7.50%	7/2/2021	7/2/2027	8,265		8,184		8,284		(1.32)
Dwyer Instruments, Inc	(2)(3)(6)	Capital Equipment	L + 5.50%	6.25%	7/21/2021	7/21/2027	8,309		8,148		8,287		(1.32)
Ellkay, LLC	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 5.75%	6.75%	9/14/2021	9/14/2027	3,562		3,486		3,481		(0.55)
Hercules Borrower LLC	(2)(3)(6)	Environmental Industries	L + 5.50%	6.50%	9/10/2021	12/14/2026	197		159		156		(0.02)
Hoosier Intermediate, LLC	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 5.50%	6.50%	11/15/2021	11/15/2028	4,000		3,902		3,900		(0.62)
Jeg's Automotive, LLC	(2)(3)(6)	Automotive	L + 5.75%	6.75%	12/22/2021	12/22/2027	3,750		3,651		3,650		(0.58)
LinQuest Corporation	(2)(3)(6)	Aerospace & Defense	L + 5.75%	6.50%	7/28/2021	7/28/2028	—		—		—		0.00
LVF Holdings, Inc.	(2)(3)(6)	Beverage, Food & Tobacco	L + 6.25%	7.25%	6/10/2021	6/10/2027	20,614		20,176		20,028		(3.19)
Material Holdings, LLC	(2)(3)(6)	Business Services	L + 5.75%	6.50%	8/19/2021	8/19/2027	—		—		—		0.00
Maverick Acquisition, Inc.	(2)(3)(6)	Aerospace & Defense	L + 6.00%	7.00%	6/1/2021	6/1/2027	21,971		21,525		21,448		(3.42)
Medical Manufacturing Technologies, LLC	(2)(3)(6)	Healthcare & Pharmaceuticals	SOFR + 6.00%	7.00%	12/23/2021	12/23/2027	2,661		2,582		2,582		(0.41)
MMIT Holdings, LLC	(2)(3)(6)	High Tech Industries	L + 6.25%	7.25%	9/15/2021	9/15/2027	2,772		2,715		2,713		(0.43)
PF Atlantic Holdco 2, LLC	(2)(3)(6)	Hotel, Gaming & Leisure	L + 6.00%	7.00%	11/12/2021	11/12/2027	3,465		3,368		3,365		(0.54)
Quantic Electronics, LLC	(2)(3)(6)	Aerospace & Defense	L + 6.25%	7.25%	8/17/2021	3/1/2027	5,827		5,641		5,699		(0.91)
Trafigura Trading LLC	(2)(3)(6)(9)	Metals & Mining	L + 8.40%	8.75%	7/26/2021	7/18/2022	805		803		752		(0.12)
USALCO, LLC	(2)(3)	Chemicals, Plastics & Rubber	L + 6.00%	7.00%	10/19/2021	10/19/2027	5,000		4,903		4,903		(0.78)
Wineshipping.com LLC	(2)(3)(6)	Beverage, Food & Tobacco	L + 5.75%	6.75%	10/29/2021	10/29/2027	3,615		3,528		3,528		(0.56)
Yellowstone Buyer Acquisition, LLC	(2)(3)	Consumer Goods: Durable	L + 5.75%	6.75%	9/13/2021	9/13/2027	1,995		1,957		1,955		(0.31)
First Lien Debt Total									$	98,918	$	98,937	(15.75)	%
Second Lien Debt (13.4% of fair value)
11852604 Canada Inc. (Canada)	(2)(3)(7)	Healthcare & Pharmaceuticals	L + 9.50% (100% PIK)	10.50%	9/30/2021	9/30/2028	$	3,295	$	3,217	$	3,213	(0.51)	%
AP Plastics Acquisition Holdings, LLC	(2)(3)	Chemicals, Plastics & Rubber	L + 7.50%	8.25%	8/10/2021	8/10/2029	10,000		9,735		10,056		(1.60)
Blackbird Purchaser, Inc.	(2)(3)(6)	Capital Equipment	L + 7.50%	8.25%	12/14/2021	4/8/2027	2,299		2,238		2,238		(0.36)
Second Lien Debt Total									$	15,190	$	15,507	(2.47)	%

11

CARLYLE SECURED LENDING III

SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2021

Investments—non-controlled/non-affiliated (1)	Footnotes	Industry	Acquisition Date	Shares/ Units	Cost		Fair Value (5)		Percentage of Net Assets
Equity Investments (1.4% of fair value)
Blackbird Holdco, Inc.	(8)	Capital Equipment	12/14/2021	2	$	1,577	$	1,577	(0.25)	%
Buckeye Parent, LLC	(8)	Automotive	12/22/2021	44	44		44		(0.01)
GB Vino Parent, L.P.	(8)	Beverage, Food & Tobacco	10/29/2021	—	$	18	$	18	0.00
Pascal Ultimate Holdings, L.P	(8)	Capital Equipment	7/21/2021	4	36		36		(0.01)
Equity Investments Total					$	1,675	$	1,675	(0.27)	%
Total investments—non-controlled/non-affiliated					$	115,783	$	116,119	(18.49)	%
Total investments					$	115,783	$	116,119	(18.49)	%

(1)    Unless otherwise indicated, issuers of debt and equity investments held by Carlyle Secured Lending III (“the Company”) are domiciled in the United States. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of December 31, 2021, the Company does not “control” any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of December 31, 2021, the Company is not an “affiliated person” of any of these portfolio companies. Certain portfolio company investments are subject to contractual restrictions on sales.

(2)Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2021. As of December 31, 2021, the reference rates for all LIBOR loans were the 30-day LIBOR at 0.10%, the 90-day LIBOR at 0.22% and the 180-day LIBOR rate at 0.33%.

(3)Loan includes interest rate floor feature, generally 1.00%.

(4)Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.

(5)Fair value is determined in good faith by or under the direction of the Board of Trustees of the Company (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements, to these financial statements), pursuant to the Company’s valuation policy. The fair value of all first lien and second lien debt investments and equity investments was determined using significant unobservable inputs.

12

CARLYLE SECURED LENDING III

SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2021

(6)As of December 31, 2021, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans:

Investments—non-controlled/non-affiliated	Type	Unused Fee		Par/ Principal Amount		Fair Value
First and Second Lien Debt—unfunded delayed draw and revolving term loans commitments
Ascend Buyer, LLC	Revolver	0.50	%	$	357	$	(6)
Associations, Inc.	Revolver	0.50		517		—
Blackbird Purchaser, Inc.	Delayed Draw	1.00		766		(15)
Dwyer Instruments, Inc	Delayed Draw	1.00		5,486,059		—
Dwyer Instruments, Inc	Revolver	0.50		274		(1)
Ellkay, LLC	Revolver	0.50		446		(9)
Hercules Borrower LLC	Delayed Draw	1.00		1,802		(38)
Hoosier Intermediate, LLC	Revolver	0.50		1,000		(20)
Individual Foodservice Holdings, LLC	Delayed Draw	1.00		4,872		—
Jeg's Automotive, LLC	Delayed Draw	1.00		833		(17)
Jeg's Automotive, LLC	Revolver	0.50		417		(8)
LinQuest Corporation	Delayed Draw	1.00		10,000,000		—
LVF Holdings, Inc.	Delayed Draw	1.00		2,335		(58)
LVF Holdings, Inc.	Revolver	0.50		730		(18)
Material Holdings, LLC	Delayed Draw	—		8,814		—
Maverick Acquisition, Inc.	Delayed Draw	1.00		2,339		(50)
Medical Manufacturing Technologies, LLC	Delayed Draw	1.00		1,033		(21)
Medical Manufacturing Technologies, LLC	Revolver	0.50		233		(4)
MMIT Holdings, LLC	Revolver	0.50		214		(5)
PF Atlantic HoldCo 2, LLC	Delayed Draw	0.75		1,190		(24)
PF Atlantic HoldCo 2, LLC	Revolver	0.50		345		(7)
Quantic Electronics, LLC	Delayed Draw	1.00		4,143		(53)
Trafigura Trading LLC	Revolver	0.50		2,695		(46)
Wineshipping.com LLC	Delayed Draw	1.00		497		(10)
Wineshipping.com LLC	Revolver	0.50		358		(7)
Total unfunded commitments				$	15,522,269	$	(417)

(7)The Company has determined the indicated investments are non-qualifying assets under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

(8)Security acquired in transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act, unless otherwise noted. As of December 31, 2021, the aggregate fair value of these securities is $1,675, or (0.27)% of the Company's net assets.

(9)The investment is secured by receivables purchased from the portfolio company, with an implied discount of 8.75%. The investment was made via a tranched participation arrangement between the purchaser of such receivables and the Company. The investment has a secondary priority behind the rights of such purchaser.

13

CARLYLE SECURED LENDING III

SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2021

As of December 31, 2021, investments at fair value consisted of the following:

Type	Amortized Cost		Fair Value		% of Fair Value
First Lien Debt	$	98,918	$	98,937	85.2	%
Second Lien Debt	15,190		15,507		13.4
Equity Investments	1,675		1,675		1.4
Total	$	115,783	$	116,119	100.0	%

The rate type of debt investments at fair value as of December 31, 2021 was as follows:

Rate Type	Amortized Cost		Fair Value		% of Fair Value of First and Second Lien Debt
Floating Rate	$	114,108	$	114,444	100.0	%
Fixed Rate	—		—		—
Total	$	114,108	$	114,444	100.0	%

The industry composition of investments at fair value as of December 31, 2021 was as follows:

Industry	Amortized Cost		Fair Value		% of Fair Value
Aerospace & Defense	$	27,166	$	27,147	23.5	%
Automotive	3,695		3,694		3.2
Beverage, Food & Tobacco	23,722		23,574		20.3
Business Services	—		—		—
Capital Equipment	11,999		12,138		10.5
Chemicals, Plastics & Rubber	14,638		14,959		12.9
Construction & Building	8,184		8,284		7.1
Consumer Goods: Durable	1,957		1,955		1.7
Containers, Packaging & Glass	4,190		4,206		3.6
Environmental Industries	159		156		0.1
Healthcare & Pharmaceuticals	13,187		13,176		11.3
High Tech Industries	2,715		2,713		2.3
Hotel, Gaming & Leisure	3,368		3,365		2.9
Metals & Mining	803		752		0.6
Total	$	115,783	$	116,119	100.0	%

14

CARLYLE SECURED LENDING III

SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2021

The geographical composition of investments at fair value as of December 31, 2021 was as follows:

Geography	Amortized Cost		Fair Value		% of Fair Value
Canada	$	3,217	$	3,213	2.8	%
United States	112,566		112,906		97.2
Total	$	115,783	$	116,119	100.0	%

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

15

CARLYLE SECURED LENDING III

NOTES TO FINANCIAL STATEMENTS (unaudited)

As of June 30, 2022

1. ORGANIZATION

Carlyle Secured Lending III (the “Company” or “CSL III”) is a Delaware statutory trust that was formed on February 8, 2021 and commenced operations on May 28, 2021 (“Commencement”). The Company is structured as an externally managed, non-diversified closed-end investment company. The Company has elected to be regulated as a business development company (a “BDC”) under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”). In addition, for federal income tax purposes, the Company intends to elect to be treated, and to comply with the requirements to qualify annually, as a regulated investment company (a “RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the “Code”) beginning with the year ending December 31, 2022 as well as maintain such election in future taxable years. However, there is no guarantee that the Company will qualify to make such an election for any taxable year. For the initial tax year ended December 31, 2021, the Company was taxed as a regular C Corporation.

The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation primarily through secured debt investments with favorable risk-adjusted returns. The Company’s investment strategy seeks to extract enhanced yield from a directly originated, and defensively constructed, portfolio of credit investments. The strategy’s core focus is U.S. middle market cash flow finance, principally in companies supported by financial sponsors. This core strategy will be supplemented with complementary specialty lending and opportunistic investing strategies, which take advantage of the broad capabilities of Carlyle’s Global Credit business segment’s platform while offering risk diversifying portfolio benefits. In describing the Company’s business, the Company uses the term “middle market” to refer generally to companies with approximately $25 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”).

The Company invests primarily in loans to middle market companies whose debt, if rated, is rated below investment grade and, if not rated, would likely be rated below investment grade if it were rated (that is, below BBB- or Baa3, which is often referred to as “junk”). Exposure to below investment grade instruments involves certain risks, including speculation with respect to the borrower’s capacity to pay interest and repay principal. The Company’s expected portfolio will be predominantly invested in first lien loans, while a minority of the portfolio may also include, but not be limited to, assets such as second lien loans, unsecured debt, mezzanine debt, and select investments in preferred and common equities.

On February 24, 2022, the Company completed its initial closing of capital commitments from unaffiliated investors in the Company’s private offering (the “Initial Closing Date”). The Company has held and intends to hold additional closings subsequent to the Initial Closing Date.

The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.

The Company is externally managed by CSL III Advisor, LLC (together with its successors, the “Investment Adviser”), an investment adviser registered with the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended. Carlyle Global Credit Administration L.L.C. (the “Administrator”) provides the administrative services necessary for the Company to operate. Both the Investment Adviser and Administrator are consolidated subsidiaries of Carlyle Investment Management L.L.C., a subsidiary of The Carlyle Group Inc. (together with its affiliates and consolidated subsidiaries (other than portfolio companies of its affiliated funds), “Carlyle”), a global investment firm publicly traded on the Nasdaq Global Select Market under the symbol “CG”. Refer to the sec.gov website for further information on Carlyle.

As a BDC, the Company is required to comply with certain regulatory requirements. As part of these requirements, the Company must not acquire any assets other than “qualifying assets” specified in the Investment Company Act unless, at the time the acquisition is made, at least 70% of its total assets are qualifying assets (with certain limited exceptions).

To qualify as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements and timely distribute to its shareholders generally at least 90% of its investment company taxable income, as defined by the Code, for each year. Pursuant to this election, the Company generally does not have to pay corporate level taxes on any income that it distributes to shareholders, provided that the Company satisfies those requirements.

16

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The Company is an investment company for the purposes of accounting and financial reporting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies (“ASC 946”). U.S. GAAP for an investment company requires investments to be recorded at fair value. The carrying value for all other assets and liabilities approximates their fair value.

The interim financial statements have been prepared in accordance with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X. Accordingly, certain disclosures accompanying the annual financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, all adjustments considered necessary for the fair presentation of financial statements for the interim periods presented have been included. These adjustments are of a normal, recurring nature. This Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the period ended December 31, 2021. The results of operations for the periods presented are not necessarily indicative of the operating results to be expected for the full year.

Certain reclassifications were made to prior year amounts to conform to the current period presentation. In 2021, the Company separately presented payables relating to sub-administrative service fees and professional fees payable on the statement of assets and liabilities, and sub-administrative service fees on the statement of operations. In 2022, these amounts are presented as a component of other accrued expenses and liabilities and other general and administrative expenses on their respective statements. There was no change to total net assets as a result of this reclassification.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on management and incentive fees involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the financial statements. Actual results could differ from these estimates and such differences could be material.

Investments

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the accompanying Statements of Operations reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. See Note 3, Fair Value Measurements, for further information about fair value measurements.

Cash and Cash Equivalents

Cash and cash equivalents consist of demand deposits and highly liquid investments (e.g., money market funds, U.S. treasury notes) with original maturities of three months or less. Cash equivalents are carried at amortized cost, which approximates fair value. The Company’s cash and cash equivalents are held with one large financial institution and cash held in such financial institution may, at times, exceed the Federal Deposit Insurance Corporation insured limit. As of June 30, 2022 and December 31, 2021, the Company had no restricted cash balance.

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Revenue Recognition

Interest from Investments and Realized Gain/Loss on Investments

Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. The Company may have delayed draw loans in its portfolio with original issue discount (“OID”) interest received at origination. OID received prior to funding on delayed draw loans is included in deferred income in the Statements of Assets and Liabilities. This amount is recorded and accreted into interest income over the life of the respective security using the effective interest method. At time of exit, the realized gain or loss on an investment is the difference between the amortized cost at time of exit and the cash received at exit using the specific identification method.

The Company may have loans in its portfolio that contain payment-in-kind (“PIK”) provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. Such income is included in interest income in the Statements of Operations. As of June 30, 2022 and December 31, 2021, the fair value of the loans in the portfolio with PIK provisions was $11,708 and $11,497 respectively, which represented approximately 0.0% and 9.9%, respectively, of total investments at fair value. For the three and six month periods ended June 30, 2022, the Company earned $196 and $379, respectively, in PIK income, included in interest income in the Statements of Operations. The Company did not earn any PIK income for the period from May 28, 2021 (Commencement) through June 30, 2021.

Other Income

Other income may include income such as consent, waiver, amendment, unused, underwriting, arranger and prepayment fees associated with the Company’s investment activities as well as any fees for managerial assistance services rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. The Company may receive fees for guaranteeing the outstanding debt of a portfolio company. Such fees are amortized into other income over the life of the guarantee. The unamortized amount, if any, is included in other assets in the accompanying Statements of Assets and Liabilities. For the three and six month periods ended June 30, 2022, the Company earned $127,069 and $165,849, respectively, in other income, primarily from unused fees and arranger fees. For the period from May 28, 2021 (Commencement) through June 30, 2021, the Company earned $2 in other income.

Non-Accrual Income

Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid current and, in management’s judgment, are likely to remain current. Management may determine not to place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. As of June 30, 2022 and December 31, 2021, there were no first or second lien debt investments on non-accrual status.

Organizational Expenses and Offering Costs

The Company will bear, among other expenses and costs, organizational expenses and offering costs relating to the offering of the common shares of beneficial interest of the Company incurred on or prior to the final closing date (collectively, the “Organizational and Offering Costs”) up to a maximum aggregate amount of 0.15% of the Company’s total capital commitments. The Company’s final closing date will occur no later than twelve months following the Initial Closing Date; provided that the Board of Trustees may extend the final closing date by up to an additional one-year period in its discretion (such date, as extended, the “Final Closing Date”). In order to more fairly allocate the organizational expenses in connection with the Company’s formation among all shareholders, investors subscribing after the initial capital drawdown from investors in the Company’s private offering (the “Initial Drawdown” and the date on which the Initial Drawdown occurs, the “Initial Drawdown Date”) will be required to bear a pro rata portion of such expenses at the time of their first investment in the Company. To the extent the Company’s total capital commitments later increase, the Investment Adviser or its affiliates may be reimbursed by the Company for past payments of excess Organizational and Offering Costs made on the Company’s behalf; provided, that the total Organizational and Offering Costs borne by the Company do not exceed 0.15% of total capital

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commitments; provided, further, that the Investment Adviser or its affiliates may not be reimbursed for payment of excess Organizational and Offering Costs that were incurred more than three years prior to the proposed reimbursement.

The Company’s offering costs will be amortized over the twelve months beginning on the closing date for call closings occurring after the Initial Closing Date. The Investment Advisor has incurred $2,131,053 of Organizational and Offering Costs as of June 30, 2022, of which $323,613 would be reimbursable by the Company as of June 30, 2022 subject to the Reimbursement Agreement (as defined below) and included in accrued organizational expenses and deferred offering costs payable in the accompanying Statements of Assets and Liabilities. For the three month period ended June 30, 2022, organizational expense and offering cost expense amounted to $33,356 and $25,377, respectively. For the six month period ended June 30, 2022, organizational expense and offering cost expense amounted to $35,791 and $60,006, respectively. For the period from May 28, 2021 (Commencement) through June 30, 2021, organizational expense and offering cost expense amounted to $27,774 and $2,284, respectively.

Subscription Facility – Related Costs, Expenses and Deferred Financing Costs

The Company has entered into a senior secured revolving credit facility (the "Subscription Facility"). Interest expense and unused commitment fees on the Subscription Facility are recorded on an accrual basis. Unused commitment fees are included in credit facility fees in the accompanying Statements of Operations.

The Subscription Facility is recorded at carrying value, which approximates fair value.

Deferred financing costs include capitalized expenses related to the closing or amendments of the Subscription Facility. Amortization of deferred financing costs for the credit facility is computed on the straight-line basis over the respective term of the credit facility. The unamortized balance of such costs is included in deferred financing costs in the accompanying Statements of Assets and Liabilities. The amortization of such costs is included in interest expense in the accompanying Statements of Operations.

Income Taxes

We were taxed as a regular C Corporation for the initial tax year ended December 31, 2021. Beginning with the year ending December 31, 2022, for federal income tax purposes, the Company intends to elect to be treated as a RIC under the Code, and intends to make the required distributions to its shareholders as specified therein. In order to qualify as a RIC, the Company must, among other things, meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute.

The minimum distribution requirements applicable to RICs require the Company to distribute to its shareholders at least 90% of its investment company taxable income, as defined by the Code, each year. Depending on the level of taxable income and net capital gain earned in a tax year, the Company may choose to carry forward taxable income or net capital gain for distribution in the following year and pay the applicable U.S. federal excise tax. Distributions will be appropriately adjusted for any taxes payable by the Company or any direct or indirect subsidiary through which it invests (including any corporate, state, local, non-U.S. and withholding taxes).

In addition, based on the excise distribution requirements, the Company will be subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any undistributed ordinary income and capital gain net income for preceding years on which the Company paid no U.S. federal income tax less certain over-distributions in prior years. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax for the tax year ending in that calendar year is considered to have been distributed by year end (or earlier if estimated taxes are paid).

The Company evaluates tax positions taken or expected to be taken in the course of preparing its financial statements to determine whether the tax positions are “more likely than not” to be sustained by the applicable tax authority. All penalties and interest associated with income taxes, if any, are included in income tax expense.

Dividends and Distributions to Shareholders

To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its shareholders. Dividends and distributions to shareholders are recorded on the record date. The amount to be distributed, if any,

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is determined by the Board of Trustees each quarter. Any dividends to the Company’s shareholders will be declared out of assets legally available for distribution.

Dividends and distributions, if any, are paid in cash to shareholders.

Functional Currency

The functional currency of the Company is the U.S. Dollar. Investments are generally made in the local currency of the country in which the investments are domiciled and are translated into U.S. Dollars with foreign currency translation gains or losses recorded within net change in unrealized appreciation (depreciation) on investments in the accompanying Statements of Operations. Foreign currency translation gains and losses on non-investment assets and liabilities are separately reflected in the accompanying Statements of Operations.

Recent Accounting Standards Updates

The Company considers the applicability and impact of all accounting standard updates (“ASU”) issued by the FASB. ASUs not listed below were assessed and either determined to be not applicable or expected to have minimal impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition. ASU 2020-04 and ASU 2021-01 are effective for all entities through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company is currently evaluating the impact of adopting ASU 2020-04 and ASU 2021-01 on its financial statements.

3. FAIR VALUE MEASUREMENTS

The Company applies fair value accounting in accordance with the terms of FASB ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. The Company values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e., “consensus pricing”). When doing so, the Company determines whether the quote obtained is sufficient according to U.S. GAAP to determine the fair value of the security. The Company may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.

Securities/instruments that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or the Company’s Board of Trustees, does not represent fair value shall each be valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment and include comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses. The process generally used to determine the applicable value is as follows: (i) the value of each portfolio company or investment is initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments (i.e. illiquid securities/instruments), a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs is used to determine a preliminary value, which is also reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of members of senior management; (iii) the Board of Trustees engages a third-party valuation firm to provide positive assurance on portions of first lien senior secured loans, “unitranche” loans and second lien senior secured loans each quarter (such that each non-traded investment is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of management’s preliminary valuation and conclusion on fair value; (iv) if applicable, the Audit Committee of the Board of Trustees (the “Audit Committee”) reviews the assessments of the

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Investment Adviser and the third-party valuation firm and provides the Board of Trustees with any recommendations with respect to changes to the fair value of each investment in the portfolio; and (v) if applicable, the Board of Trustees discusses the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.

All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:

•the nature and realizable value of any collateral;

•call features, put features and other relevant terms of debt;

•the portfolio company’s leverage and ability to make payments;

•the portfolio company’s public or private credit rating;

•the portfolio company’s actual and expected earnings and discounted cash flow;

•prevailing interest rates and spreads for similar securities and expected volatility in future interest rates;

•the markets in which the portfolio company does business and recent economic and/or market events; and

•comparisons to comparable transactions and publicly traded securities.

Investment performance data utilized are the most recently available financial statements and compliance certificates received from the portfolio companies as of the measurement date which in many cases may reflect a lag in information.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the financial statements as of June 30, 2022 and December 31, 2021.

U.S. GAAP establishes a hierarchical disclosure framework which ranks the level of observability of market price inputs used in measuring investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

Investments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of fair values, as follows:

•Level 1—inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date. Financial instruments in this category generally include unrestricted securities, including equities and derivatives, listed in active markets. The Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

•Level 2—inputs to the valuation methodology are either directly or indirectly observable as of the reporting date and are those other than quoted prices in active markets. Financial instruments in this category generally include less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

•Level 3—inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments in this category generally include investments in privately-held entities, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall

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fair value measurement. The Investment Adviser’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur. For the three month period ended June 30, 2022 and for the period from May 28, 2021 (Commencement) through June 30, 2021, there were no transfers between levels.

The following tables summarize the Company’s investments measured at fair value on a recurring basis by the above fair value hierarchy levels as of June 30, 2022 and December 31, 2021:

	June 30, 2022
	Level 1		Level 2		Level 3		Total
Assets
First Lien Debt	$	—	$	—	$	33,703,697	$	33,703,697
Second Lien Debt	—		—		15,340		15,340
Equity Investments	—		—		1,833		1,833
Total	$	—	$	—	$	33,720,870	$	33,720,870

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets
First Lien Debt	$	—	$	—	$	98,937	$	98,937
Second Lien Debt	—		—		15,507		15,507
Equity Investments	—		—		1,675		1,675
Total	$	—	$	—	$	116,119	$	116,119

The changes in the Company’s investments at fair value for which the Company has used Level 3 inputs to determine fair value and net change in unrealized appreciation (depreciation) included in earnings for Level 3 investments that continue to be held are as follows:

	Financial Assets
	For the three months ended June 30, 2022
	First Lien Debt		Second Lien Debt		Equity Investments		Total
Balance, beginning of period	$	111,732	$	15,494	$	1,776	$	129,002
Purchases	34,297,102		181		2		34,297,285
Paydowns	(347,403)		—		—		(347,403)
Accretion of discount	27,552		10		—		27,562
Net change in unrealized appreciation (depreciation)	(385,286)		(345)		55		(385,576)
Balance, end of period	$	33,703,697	$	15,340	$	1,833	$	33,720,870
Net change in unrealized appreciation (depreciation) included in earnings related to investments that continue to be held at the reporting date included in net change in unrealized appreciation (depreciation) on investments on the Statements of Operations	$	(385,286)	$	(345)	$	55	$	(385,576)

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	Financial Assets
	For the six months ended June 30, 2022
	First Lien Debt		Second Lien Debt		Equity Investments		Total
Balance, beginning of period	$	98,937	$	15,507	$	1,675	$	116,119
Purchases	34,312,303		269		95		34,312,667
Paydowns	(348,585)		—		—		(348,585)
Accretion of discount	27,655		23		—		27,678
Net change in unrealized appreciation (depreciation)	(386,613)		(459)		63		(387,009)
Balance, end of period	$	33,703,697	$	15,340	$	1,833	$	33,720,870
Net change in unrealized appreciation (depreciation) included in earnings related to investments that continue to be held at the reporting date included in net change in unrealized appreciation (depreciation) on investments on the Statements of Operations	$	(386,613)	$	(459)	$	63	$	(387,009)

	Financial Assets
	For the period from May 28, 2021 (Commencement) through June 30, 2021
	First Lien Debt		Second Lien Debt		Equity Investments		Total
Balance, beginning of period	$	—	$	—	$	—	$	—
Purchases	27,229		—		—		27,229
Sales	—		—		—		—
Paydowns	—		—		—		—
Accretion of discount	9		—		—		9
Net change in unrealized appreciation (depreciation)	(9)		—		—		(9)
Net realized gains (losses)	—		—		—		—
Balance, end of period	$	27,229	$	—	$	—	$	27,229
Net change in unrealized appreciation (depreciation) included in earnings related to investments that continue to be held at the reporting date included in net change in unrealized appreciation (depreciation) on investments on the Statements of Operations	$	(9)	$	—	$	—	$	(9)

The Company generally uses the following framework when determining the fair value of investments that are categorized as Level 3:

Investments in debt securities are initially evaluated to determine whether the enterprise value of the portfolio company is greater than the applicable debt. The enterprise value of the portfolio company is estimated using a market approach and an income approach. The market approach utilizes market value (EBITDA) multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The Company carefully considers numerous factors when selecting the appropriate companies whose multiples are used to value its portfolio companies. These factors include, but are not limited to, the type of organization, similarity to the business being valued, relevant risk factors, as well as size, profitability and growth expectations. The income approach typically uses a discounted cash flow analysis of the portfolio company.

Investments in debt securities that do not have sufficient coverage through the enterprise value analysis are valued based on an expected probability of default and discount recovery analysis.

Investments in debt securities with sufficient coverage through the enterprise value analysis are generally valued using a discounted cash flow analysis of the underlying security. Projected cash flows in the discounted cash flow typically represent the relevant security’s contractual interest, fees and principal payments plus the assumption of full principal recovery at the security’s expected maturity date. The discount rate to be used is determined using an average of two market-based methodologies. Investments in debt securities may also be valued using consensus pricing.

Investments in equities are generally valued using a market approach and/or an income approach. The market approach utilizes EBITDA multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The income approach typically uses a discounted cash flow analysis of the portfolio company.

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The following tables summarize the quantitative information related to the significant unobservable inputs for Level 3 instruments which are carried at fair value as of June 30, 2022 and December 31, 2021:

	Fair Value as of June 30, 2022		Valuation Techniques	Significant Unobservable Inputs	Range
					Low		High		Weighted Average
Investments in First Lien Debt	$	16,604,544	Discounted Cash Flow	Discount Rate	7.17	%	10.27	%	7.50	%
	12,011,262		Consensus Pricing	Indicative Quotes	89.50	%	99.00	%	97.54	%
	5,087,891		Income Approach	Discount Rate	7.10	%	9.85	%	9.01	%
Total First Lien Debt	33,703,697
Investments in Second Lien Debt	15,340		Income Approach	Discount Rate	9.60	%	12.28	%	10.21	%
Total Second Lien Debt	15,340
Investments in Equity	1,833		Income Approach	Discount Rate	13.72	%	13.72	%	13.72	%
Total Equity Investments	1,833
Total Level 3 Investments	$	33,720,870

	Fair Value as of December 31, 2021		Valuation Techniques	Significant Unobservable Inputs	Range
					Low		High		Weighted Average
Investments in First Lien Debt	$	84,687	Discounted Cash Flow	Discount Rate	6.82	%	7.98	%	7.61	%
	14,250		Consensus Pricing	Indicative Quotes	98.00	%	99.25	%	98.07	%
Total First Lien Debt	98,937
Investments in Second Lien Debt	13,269		Discounted Cash Flow	Discount Rate	9.05	%	10.75	%	9.46	%
	2,238		Consensus Pricing	Indicative Quotes	98.00	%	98.00	%	98.00	%
Total Second Lien Debt	15,507
Investments in Equity	1,675		Income Approach	Discount Rate	15.69	%	15.69	%	15.69	%
Total Equity Investments	1,675
Total Level 3 Investments	$	116,119

The significant unobservable inputs used in the fair value measurement of the Company’s investments in first and second lien debt securities are discount rates and indicative quotes. Significant increases in discount rates in isolation would result in a significantly lower fair value measurement. Significant decreases in indicative quotes in isolation would result in a significantly lower fair value measurement.

The significant unobservable inputs used in the fair value measurement of the Company’s investments in equities are discount rates and comparable EBITDA multiples. Significant increases in discount rates in isolation would result in a significantly lower fair value measurement. Significant decreases in comparable EBITDA multiples in isolation would result in a significantly lower fair value measurement.

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Financial instruments disclosed but not carried at fair value

The following table presents the carrying value and fair value of the Company’s secured borrowings disclosed but not carried at fair value as of June 30, 2022 and December 31, 2021:

	June 30, 2022				December 31, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
Secured borrowings	$	19,650,000	$	19,650,000	$	—	$	—
Total	$	19,650,000	$	19,650,000	$	—	$	—

The carrying values of the secured borrowings generally approximate their respective fair values due to their variable interest rates and are categorized as Level 3 within the hierarchy.

The carrying value of other financial assets and liabilities approximates their fair value based on the short term nature of these items.

4. RELATED PARTY TRANSACTIONS

Investment Advisory Agreement

On June 21, 2021, the Company entered into an investment advisory agreement (the “Investment Advisory Agreement”) with Carlyle Global Credit Investment Management L.L.C. (the “Initial Investment Adviser”). On November 2, 2021, the Board of Trustees approved a novation agreement, which was executed by the Company, the Investment Adviser and the Initial Investment Adviser, on November 11, 2021, pursuant to which a novation of the Investment Advisory Agreement was effected so that the Investment Adviser was substituted for the Initial Investment Adviser and the Initial Investment Adviser was released from its obligations under the Investment Advisory Agreement. In connection therewith, the Board of Trustees approved an amended and restated investment advisory agreement, which was executed by the Company and the Investment Adviser on November 11, 2021, the terms of which are substantially identical to the terms of the Investment Advisory Agreement, except for (1) the substitution of the Investment Adviser for the Initial Investment Adviser as a party thereto, (2) associated changes relating to the legal forms of such parties, and (3) a limited number of non-material changes to the existing Investment Advisory Agreement.

The initial term of the Investment Advisory Agreement is two years from June 21, 2021 and, unless terminated earlier, the Investment Advisory Agreement will renew automatically for successive annual periods, provided such continuance is specifically approved at least annually by the vote of the Board of Trustees and by the vote of a majority of the trustees of the Company who are not “interested persons” of the Company as defined in Section 2(a)(19) of the Investment Company Act (“Independent Trustees”). The Investment Advisory Agreement will automatically terminate in the event of an assignment and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party. Pursuant to the Investment Advisory Agreement and subject to the overall supervision of the Board of Trustees, the Investment Adviser provides investment advisory services to the Company. For providing these services, the Investment Adviser receives fees from the Company consisting of two components—a base management fee and an incentive fee.

The base management fee is calculated and payable quarterly in arrears at an annual rate of 1.50% of the average value of the Company's gross assets at the end of the two most recently completed fiscal quarters; provided, however, that the annual rate shall be 1.00% with respect to the amount of such average value of the gross assets as of the end of the two most recently completed calendar quarters that exceeds the product of (A) 200% and (B) the average of the Company’s net asset value (“NAV”) at the end of the two most recently completed calendar quarters. The base management fee will be appropriately adjusted for any share issuances or repurchases during such fiscal quarter and the base management fees for any partial month or quarter will be pro-rated. The Company’s gross assets exclude any cash and cash equivalents and include assets acquired through the incurrence of debt from the use of leverage.

The Investment Adviser has irrevocably agreed to waive its rights to receive any base management fee for quarterly periods ending on or prior to the date of the closing of a Liquidity Event, which means (i) a quotation or listing of CSL III’s securities on a stock exchange, including through an initial public offering (an “Exchange Listing”), (ii) a transaction or series of transactions, including, but not limited to, by way of merger, division, consolidation, share exchange (including by way of an optional exchange of the Company’s shares for shares of a publicly traded BDC), recapitalization, reorganization, or sale of shares, in each case for consideration of either cash and/or publicly listed securities, or (iii) the sale of all or substantially all of CSL III’s assets to, or other liquidity event with, another entity. Potential transactions for purposes of clauses (ii) and (iii) of the

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definition of “Liquidity Event” could include counterparties, including but not limited to other BDCs, that are advised by the Investment Adviser or its affiliates.

The incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears and equals 17.5% of pre-incentive fee net investment income for the immediately preceding calendar quarter, subject to a preferred return of 1.5% per quarter (6% annualized), or “hurdle rate,” and a “catch-up” feature. The second part is determined and payable in arrears as of the end of each calendar year in an amount equal to 17.5% of cumulative realized capital gains, if any, from inception through the end of each calendar year, computed net of all cumulative realized capital losses and unrealized capital depreciation less the aggregate amount of any previously paid capital gain incentive fees; provided, that the incentive fee determined at the end of the first calendar year of operations may be calculated for a period of shorter than twelve calendar months to take into account any realized capital gains computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation. The Investment Adviser irrevocably agreed to waive its rights to receive any incentive fee for quarterly periods ending on or prior to the date on which the value of the Company’s gross assets first exceeds $150,000,000.

Accrued capital gains incentive fees are based upon the cumulative net realized and unrealized appreciation (depreciation) from inception. Accordingly, the accrual for any capital gains incentive fee under U.S. GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual.

On June 21, 2021, the Investment Adviser entered into a personnel agreement with The Carlyle Group Employee Co., L.L.C. (“Carlyle Employee Co.”), an affiliate of the Investment Adviser and a wholly-owned subsidiary of Carlyle, pursuant to which Carlyle Employee Co. provides the Investment Adviser with access to investment professionals.

Expense Support and Conditional Reimbursement Agreement

On May 13, 2022, the Company entered into an Expense Support and Conditional Reimbursement Agreement (the “Reimbursement Agreement”) with the Investment Adviser. Under the Reimbursement Agreement, the Investment Adviser shall pay other operating expenses of the Company on the Company’s behalf (the “Required Expense Payment”) such that other operating expenses of the Company do not exceed 0.125% (0.50% on annualized basis) (the “Expense Limitation”) (i) of the Company’s total investments at amortized cost, excluding cash and cash equivalents, as of the end of the applicable calendar quarter with respect to any such quarter after the first calendar quarter for which the total investments at amortized cost exceeds $150 million, and (ii) of the average of the Company’s total investments at amortized cost, excluding cash and cash equivalents, as of the beginning of the applicable calendar quarter and as of the end of such calendar quarter with respect to any calendar quarter up to and including the first calendar quarter for which the total investments at amortized cost exceeds $150 million. For any calendar quarter prior to March 31, 2022 (the “Effective Date” and any such quarter, a “Prior Quarter”), the Investment Adviser shall make a Required Expense Payment as if the Expense Limitation had been in effect for such quarter.The Investment Adviser’s obligation to make a Required Expense Payment with respect to a Prior Quarter shall become a liability of the Investment Adviser and the Company’s right to receive a Required Expense Payment shall be an asset of the Company commencing only on and as of the Effective Date.

Other operating expenses means the Company’s organization and offering expenses, professional fees, trustee fees, administration fees, and other general and administrative expenses, all as determined in accordance with U.S. GAAP, and shall include the Company’s allocable portion of compensation, overhead (including rent, office equipment and utilities) and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement. Other operating expenses shall include disbursements made by the Investment Adviser that if made by the Company would constitute an other operating expense and does not include management fees, incentive fees and interest expense.

The Company has agreed to reimburse the Investment Adviser in the amount of all Required Expense Payments made by the Investment Adviser subject to the limitation that a reimbursement will be made by the Company only if and to the extent that (i) it is made not more than three years from the date on which the applicable Required Expense Payment became an obligation of the Investment Adviser; and (ii) the Investment Adviser reimbursement does not cause the Company’s total other operating expenses during the applicable quarter to exceed the Expense Limitation.

As of June 30, 2022, the estimated amount subject to reimbursement by the Company to the Investment Adviser under the agreement was $1,678,855, of which $484,337 and $1,678,855 relates to waivers and reimbursements related to expenses incurred for the three month period ended June 30, 2022 and from Commencement through June 30, 2022, respectively. There have been no reimbursements of Required Expense Payments by the Company as of June 30, 2022. All amounts eligible for recovery by the Investment Adviser at June 30, 2022 will expire three years after the first Required Expense Payment.

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Administration Agreement

On June 21, 2021, the Company entered into an administration agreement (the “Administration Agreement”) with the Administrator. Pursuant to the Administration Agreement, the Administrator furnishes the Company with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities. Under the Administration Agreement, the Administrator also performs, or oversees the performance of, our required administrative services, which include, among other things, providing assistance in accounting, legal, compliance, operations, technology and investor relations, and being responsible for the financial records that the Company is required to maintain and preparing reports to the Company’s shareholders and reports filed with the SEC. Payments under the Administration Agreement are equal to an amount that reimburses the Administrator for its costs and expenses and the Company’s allocable portion of overhead incurred by the Administrator in performing its obligations under the Administration Agreement, including the Company’s allocable portion of the compensation paid to or compensatory distributions received by the Company’s officers (including the Chief Compliance Officer, Chief Financial Officer and Treasurer) and their respective staff who provide services to the Company, operations staff who provide services to the Company, and internal audit staff in their role of performing the internal control assessment under the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). Reimbursement under the Administration Agreement occurs quarterly in arrears.

The initial term of the Administration Agreement is two years from June 21, 2021, and, unless terminated earlier, the Administration Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board of Trustees or by a majority vote of the outstanding voting securities of the Company, and (ii) the vote of a majority of the Company’s Independent Trustees. The Administration Agreement may not be assigned by a party without the consent of the other party and may be terminated by either party without penalty upon 60 days’ written notice to the other party.

For both the three and six month periods ended June 30, 2022, the Company incurred $37,099 in fees under the Administration Agreement. There were no fees incurred under the Administration Agreement for the period from Commencement through June 30, 2021. Fees incurred under the Administration Agreement are included in administrative service fees in the accompanying Statements of Operations. As of June 30, 2022 and December 31, 2021, $126,284 and $89,185, respectively, was unpaid and included in administrative service fees payable in the accompanying Statements of Assets and Liabilities.

Sub-Administration Agreements

On June 21, 2021, the Administrator entered into a sub-administration agreement with Carlyle Employee Co. (the “Carlyle Sub-Administration Agreement”). Pursuant to the Carlyle Sub-Administration Agreement, Carlyle Employee Co. provides the Administrator with access to personnel.The Company will ultimately bear the costs of the Carlyle Sub-Administration Agreement and any additional sub-administration agreements that the Administrator enters into.

On March 17, 2021, the Administrator entered into a sub-administration agreement with DST Asset Manager Solutions, Inc. (“DST” and, such agreement, the “DST Sub-Administration Agreement”).

On June 30, 2021, the Administrator entered into a sub-administration agreement with State Street Bank and Trust Company (“State Street” and, such agreement, the “State Street Sub-Administration Agreement” and, together with the Carlyle Sub-Administration Agreements and the DST Sub-Administration Agreement, the “Sub-Administration Agreements”).

For the three and six month periods ended June 30, 2022, fees incurred in connection with the State Street Sub-Administration Agreement and the DST Sub-Administration Agreement amounted to $49,844 and $160,564, respectively. For the period from Commencement through June 30, 2021, fees incurred in connection with the State Street Sub-Administration Agreement and the DST Sub-Administration Agreement amounted to $23,100. These fees are included in other general and administrative expenses in the accompanying Statements of Operations. As of June 30, 2022 and December 31, 2021, $241,132 and $80,568, respectively, was unpaid and included in other accrued expenses and liabilities in the accompanying Statements of Assets and Liabilities.

Placement Fees

On June 21, 2021, the Company entered into a placement fee arrangement with TCG Capital Markets L.L.C. (“TCG”), a licensed broker dealer and an affiliate of the Investment Adviser, which may require shareholders to pay a placement fee to TCG for TCG’s services.

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For the three and six month periods ended June 30, 2022, as well as for the period from Commencement through June 30, 2021, TCG did not earn placement fees from the Company’s shareholder in connection with the issuance or sale of common shares of beneficial interest of the Company.

Board of Trustees

The Company’s Board of Trustees currently consists of eight members, five of whom are independent trustees. The Board of Trustees has established an audit committee and a pricing committee of the Board of Trustees, and may establish additional committees in the future. For the three and six month periods ended June 30, 2022, the Company incurred $85,250 and $183,622, respectively, in fees and expenses associated with its Independent Trustees’ services on the Company's Board of Trustees and its committees. For the period from Commencement through June 30, 2021, the Company incurred $17,654 in fees and expenses associated with its Independent Trustees’ services on the Company Board of Trustees and its committees. These fees are included in trustees’ fees and expenses in the accompanying Statements of Operations. As of June 30, 2022 and December 31, 2021, $163,775 and $184,653, respectively, was unpaid and included in trustees’ fees and expenses payable in the accompanying Statements of Assets and Liabilities.

5. BORROWINGS

The Company is party to the Subscription Facility as described below. In accordance with the Investment Company Act, the Company is currently only allowed to borrow amounts such that its asset coverage, as defined in the Investment Company Act, is at least 200% after such borrowing. As of June 30, 2022, asset coverage was 332.35% and the Company was in compliance with all covenants and other requirements under the Subscription Facility as of June 30, 2022. Below is a summary of the borrowings and repayments under the Subscription Facility for the three and six months ended June 30, 2022.

	For the three months ended		For the six months ended
	June 30, 2022		June 30, 2022
Outstanding borrowing, beginning of period	$	—	$	—
Borrowings	19,650,000		19,650,000
Repayments	—		—
Outstanding borrowing, end of period	$	19,650,000	$	19,650,000

Subscription Facility

The Company entered into a senior secured revolving credit agreement on April 22, 2022 (the “Subscription Facility”). The Subscription Facility provides for secured borrowings of $45 million. The maximum principal amount is subject to availability under the Subscription Facility, which is based on certain of the Company’s investor equity capital commitments and a percentage determined in the lender’s reasonable discretion to account for foreign exchange volatility. The Subscription Facility has a maturity date of April 22, 2024. The Company may borrow amounts in U.S. Dollars or certain other permitted currencies. Borrowings under the Subscription Facility bear interest currently at SOFR plus an applicable spread of 2.40% per year. The Company also pays a fee of 0.40% per year on undrawn amounts under the Subscription Facility.

Subject to certain exceptions, the Subscription Facility is secured by a first lien security interest in the Company’s unfunded investor equity capital commitments. The Subscription Facility includes customary covenants, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for senior secured revolving credit facilities of this nature.

Summary of Subscription Facility

The Subscription Facility consisted of the following as of June 30, 2022:

	June 30, 2022
	Total Facility		Borrowings Outstanding		Unused  Portion (1)		Amount Available (2)
Subscription Facility	$	45,000,000	$	19,650,000	$	25,350,000	$	20,606,588

(1)The unused portion is the amount upon which commitment fees are based.

(2)Available for borrowing based on the computation of collateral to support the borrowings and subject to compliance with applicable covenants and financial ratios.

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For the three and six months ended June 30, 2022, the components of interest expense and credit facility fees were as follows:

	For the three months ended			For the six months ended
	June 30, 2022			June 30, 2022
Interest expense	$	100,459		$	100,459
Facility unused commitment fee	22,804			22,804
Amortization of deferred financing costs	69,361			69,361
Total interest expense and credit facility fees	$	192,624		$	192,624
Cash paid for interest expense	$	84,201		$	84,201
Average principal debt outstanding	$	11,845,604		$	5,955,525
Weighted average interest rate	3.35		%	3.35		%

There were no interest expense and credit facility fees for the period from Commencement through June 30, 2021.

As of June 30, 2022, the components of interest and credit facility fees payable were as follows:

	As of
	June 30, 2022
Interest expense payable	$	12,580
Unused commitment fees payable	22,804
Total interest expense and credit facility fees payable	$	35,384
Weighted average interest rate (1)	3.35		%

(1) Based on floating SOFR rates.

6. COMMITMENTS AND CONTINGENCIES

A summary of significant contractual payment obligations was as follows as of June 30, 2022 and December 31, 2021:

	Par Value as of
	June 30, 2022		December 31, 2021
Less than one year	$	—	$	—
1-3 years	19,650,000		—
3-5 years	—		—
More than 5 years	—		—
Total	$	19,650,000	$	—

In the ordinary course of its business, the Company enters into contracts or agreements that contain indemnification or warranties. Future events could occur that lead to the execution of these provisions against the Company. The Company believes that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in the financial statements as of June 30, 2022 and December 31, 2021 for any such exposure.

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The Company currently is and may in the future become obligated to fund commitments such as revolving credit facilities, bridge financing commitments, or delayed draw commitments. The Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of the indicated dates:

	Par Value as of
	June 30, 2022		December 31, 2021
Unfunded delayed draw commitments	$	62,472,207	$	15,514,683
Unfunded revolving commitments	6,091,442		7,586
Total unfunded commitments	$	68,563,649	$	15,522,269

7. NET ASSETS

In connection with its formation, the Company has the authority to issue an unlimited number of common shares of beneficial interest of the Company, par value $0.001 per share (“Shares”).

The following table summarizes capital activity during the three month period ended June 30, 2022:

	Common Shares of Beneficial Interest			Capital in Excess of Par Value		Accumulated Net Investment Income (Loss)		Accumulated Net Unrealized Appreciation (Depreciation)		Total Net Assets
	Shares	Amount
Balance, beginning of period	766,040	$	766	$	15,320,034	$	102,038	$	(1,105)	$	15,421,733
Common shares of beneficial interest issued	1,528,780	1,529		30,543,504		—		—		30,545,033
Net investment income (loss)	—	—		—		466,001		—		466,001
Net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities	—	—		—		—		(385,593)		(385,593)
Dividends declared	—	—		—		(390,680)		—		(390,680)
Balance, end of period	2,294,820	$	2,295	$	45,863,538	$	177,359	$	(386,698)	$	45,656,494

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The following table summarizes capital activity during the six month period ended June 30, 2022:

	Common Shares of Beneficial Interest			Capital in Excess of Par Value		Accumulated Net Investment Income (Loss)		Accumulated Net Unrealized Appreciation (Depreciation)		Total Net Assets
	Shares	Amount
Balance, beginning of period	5,000	$	5	$	99,995	$	(728,808)	$	329	$	(628,479)
Common Shares of Beneficial Interest issued	2,289,820	2,290		45,763,543		—		—		45,765,833
Net investment income (loss)	—	—		—		1,296,847		—		1,296,847
Net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities	—	—		—		—		(387,027)		(387,027)
Dividends declared	—	—		—		(390,680)		—		(390,680)
Balance, end of period	2,294,820	$	2,295	$	45,863,538	$	177,359	$	(386,698)	$	45,656,494

The following table summarizes capital activity during the period from May 28, 2021 (Commencement) through June 30, 2021:

	Shares of Beneficial Interest			Capital in Excess of Par Value		Accumulated Net Investment Income (Loss)		Accumulated Net Unrealized Appreciation (Depreciation)		Total Net Assets
	Shares	Amount
Balance, beginning of period	—	$	—	$	—	$	—	$	—	$	—
Common Shares of Beneficial Interest issued	5,000	5		99,995		—		—		100,000
Net investment income (loss)	—	—		—		(87,989)		—		(87,989)
Net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities	—	—		—		—		(9)		(9)
Balance, end of period	5,000	$	5	$	99,995	$	(87,989)	$	(9)	$	12,002

    The following table summarizes total Shares issued and proceeds related to capital activity during the six month period ended June 30, 2022:

	Shares Issued	Proceeds
March 31, 2022	761,040	$	15,220,800
June 30, 2022	1,528,780	30,545,033
Total	2,289,820	$	45,765,833

The following table summarizes total Shares issued and proceeds related to capital activity during the period from Commencement through June 30, 2021:

	Shares Issued	Proceeds
May 28, 2021	5,000	$	100,000
Total	5,000	$	100,000

Capital transactions during the period from Commencement to June 30, 2022 were executed at an offering price at a premium to net asset value in order to effect a reallocation of previously incurred expenses to investors. Such transactions increased net asset value by $143.28 per share for the period from Commencement to June 30, 2022.

The Company computes earnings per Share in accordance with ASC 260, Earnings Per Share. Basic earnings per Share were calculated by dividing net increase (decrease) in net assets resulting from operations attributable to the Company by the weighted-average number of Shares outstanding for the period.

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Basic and diluted earnings per Share were as follows:

	For the three months period ended		For the six month period ended		For the period from May 28, 2021 (Commencement) through
	June 30, 2022		June 30, 2022		June 30, 2021
Net increase (decrease) in net assets resulting from operations	$	80,408	$	909,820	$	(87,998)
Weighted-average Shares outstanding	774,422		395,713		5,000
Basic and diluted earnings per common Share	$	0.10	$	2.30	$	(17.60)

The following table summarizes our dividends declared since Commencement:

Date Declared	Record Date	Payment Date	Per Share Amount
June 15, 2022	June 15, 2022	July 15, 2022	$	0.51
Total			$	0.51

8. FINANCIAL HIGHLIGHTS

The following is a schedule of financial highlights for the six month period ended June 30, 2022:

	For the six month period ended
	June 30, 2022
Per Share Data:
Net asset value per Share, beginning of period	$	(125.70)
Net investment income (loss) (1)	3.28
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities	(0.98)
Net increase (decrease) in net assets resulting from operations	2.30
Dividends declared (2)	(0.51)
Effect of offering price of subscriptions(2)	143.28
Net asset value per Share, end of period	$	19.90
Number of Shares outstanding, end of period	2,294,820
Total return based on net asset value (3)	(116.24)		%
Net assets, end of period	$	45,656,494
Ratio to average net assets (4):
Expenses before incentive fees and waivers and reimbursements of expenses	5.04		%
Expenses after incentive fees excluding waivers and reimbursements of expenses	5.04		%
Expenses after incentive fees and waivers and reimbursements of expenses	(3.29)		%
Net investment income (loss)	6.44		%
Ratios/Supplemental Data:
Portfolio turnover	7.08		%
Total committed capital, end of period	$	215,765,000
Ratio of total contributed capital to total committed capital, end of period	21.26		%
Weighted-average Shares outstanding	395,713

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

(2)Increase is due to the offering price of subscriptions during the period (See Note 6).

(3)Total return based on net asset value (not annualized) is based on the change in net asset value per Share during the period divided by the beginning net asset value for the period.

(4)These ratios to average net assets have not been annualized.

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9. LITIGATION

The Company may become party to certain lawsuits in the ordinary course of business. The Company does not believe that the outcome of current matters, if any, will materially impact the Company or its financial statements. As of June 30, 2022 and December 31, 2021, the Company was not subject to any material legal proceedings, nor, to the Company’s knowledge, is any material legal proceeding threatened against the Company.

In addition, portfolio investments of the Company could be the subject of litigation or regulatory investigations in the ordinary course of business. The Company does not believe that the outcome of any current contingent liabilities of its portfolio investments, if any, will materially affect the Company or these financial statements.

10. TAX

The Company has not recorded a liability for any uncertain tax positions pursuant to the provisions of ASC 740, Income Taxes, as of June 30, 2022.

In the normal course of business, the Company is subject to examination by federal and certain state, local and foreign tax regulators. As of June 30, 2022, the Company has not yet filed any tax returns and therefore is not yet subject to examination.

The Company’s taxable income for each period is an estimate and will not be finally determined until the Company files its tax return for each year. Therefore, the final taxable income earned in each period and carried forward for distribution in the following period, may be different than this estimate. The Company has not had any distributions since inception.

11. SUBSEQUENT EVENTS

Subsequent events have been evaluated through the date the financial statements were issued. Except as noted above, there have been no subsequent events that require recognition or disclosure through the date the financial statements were issued.

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

We have included or incorporated by reference in this Quarterly Report on Form 10-Q (“Form 10-Q”), and from time to time our management may make, “forward-looking statements”. These forward-looking statements are not historical facts, but instead relate to future events or the future performance or financial condition of Carlyle Secured Lending III (“we,” “us,” “our,” “CSL III” or the “Company”). These statements are based on current expectations, estimates and projections about us, our current or prospective portfolio investments, our industry, our beliefs, and our assumptions. The forward-looking statements contained in this Form 10-Q involve a number of risks and uncertainties, including statements concerning:

•our ability to replicate the historical success of The Carlyle Group Inc. (together with its affiliates and consolidated subsidiaries (other than portfolio companies of its affiliated funds), “Carlyle”) or the historical performance of other business development companies (“BDCs”) managed by Carlyle;

•our, or our portfolio companies’, future business, operations, operating results or prospects, including our and their ability to achieve our respective objectives as a result of the COVID-19 pandemic;

•the return or impact of current and future investments;

•the general economy and its impact on the industries in which we invest and the impact of the COVID-19 pandemic thereon;

•the impact of any protracted decline in the liquidity of credit markets on our business;

•the impact of fluctuations in interest rates on our business, including from the discontinuation of the London Interbank Offered Rate (“LIBOR”) and the implementation of alternatives to LIBOR;

•the valuation of our investments in portfolio companies, particularly those having no liquid trading market, and the impact of the COVID-19 pandemic thereon;

•the impact of supply chain constraints on our portfolio companies and the global economy;

•the elevating levels of inflation, and its impact on our portfolio companies and on the industries in which we invest;

•the impact on our business of changes in laws, policies or regulations (including the interpretation thereof) affecting our operations or the operations of our portfolio companies;

•our ability to recover unrealized losses;

•market conditions and our ability to access alternative debt markets and additional debt and equity capital, and the impact of the COVID-19 pandemic thereon;

•our contractual arrangements and relationships with third parties;

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

•the social, geopolitical, financial, trade and legal implications of the exit of the United Kingdom from the European Union, or Brexit;

•competition with other entities and our affiliates for investment opportunities;

•the speculative and illiquid nature of our investments;

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

•our expected financings and investments;

•the adequacy of our cash resources and working capital;

•the timing, form and amount of any dividend distributions;

•the timing of cash flows, if any, from the operations of our portfolio companies, and the impact of the COVID-19 pandemic thereon;

•our ability to consummate any liquidation event;

•the impact of information technology system failures, data security breaches, data privacy compliance, network disruptions, and cybersecurity attacks;

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•the ability of CSL III Advisor, LLC (the “Investment Adviser”) to locate suitable investments for us and to monitor and administer our investments;

•the ability of The Carlyle Group Employee Co., L.L.C. (“Carlyle Employee Co.”) to attract and retain highly talented professionals that can provide services to our Investment Adviser and Carlyle Global Credit Administration L.L.C. (the “Administrator”);

•our ability to maintain our status as a BDC; and

•our ability to satisfy the requirements of a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

We use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may,” “plans,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “targets,” “projects,” “outlook,” “potential,” “predicts” and variations of these words and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Our actual results and condition could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in this Form 10-Q.

We have based the forward-looking statements included in this Form 10-Q on information available to us on the date of this Form 10-Q, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission (the “SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

OVERVIEW

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part I, Item 1 of this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to those described in “Risk Factors” in Part I, Item 1A of our 2021 Annual Report on Form 10-K. Our actual results could differ materially from those anticipated by such forward-looking statements due to factors discussed under “Risk Factors” in our 2021 Annual Report on Form 10-K and “Cautionary Statements Regarding Forward-Looking Statements” appearing elsewhere in this Quarterly Report on Form 10-Q.

We were formed on February 8, 2021 as a Delaware statutory trust and commenced operations on May 28, 2021 (“Commencement”). We are structured as an externally managed, non-diversified closed-end investment company. We have elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”). We intend to elect to be treated, and intend to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code beginning with the year ending December 31, 2022. We were taxed as a regular C Corporation for the initial tax year ended December 31, 2021.

Our investment objective is to generate current income and, to a lesser extent, capital appreciation primarily through secured debt investments with favorable risk-adjusted returns. Our investment strategy seeks to extract enhanced yield from a directly originated, and defensively constructed, portfolio of credit investments. The strategy’s core focus is U.S. middle market cash flow finance, principally in companies supported by financial sponsors. This core strategy will be supplemented with complementary specialty lending and opportunistic investing strategies, which take advantage of the broad capabilities of Carlyle’s Global Credit business segment’s platform while offering risk diversifying portfolio benefits. Generally, we expect our core strategy, complementary strategies, and opportunistic strategies to be 50-70%, 30-40%, and 0-15%, respectively, of the portfolio. In describing our business, we use the term “middle market” to refer generally to companies with approximately $25 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”).

We invest primarily in loans to middle market companies whose debt, if rated, is rated below investment grade and, if not rated, would likely be rated below investment grade if it were rated (that is, below BBB- or Baa3, which is often referred to as "junk"). Exposure to below investment grade instruments involves certain risks, including speculation with respect to the borrower's capacity to pay interest and repay principal. Our expected portfolio will be predominantly invested in first lien loans, while a minority of the portfolio may also include, but not be limited to, assets such as second lien loans, unsecured debt, mezzanine debt, and select investments in preferred and common equities.

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We are externally managed by our Investment Adviser, an investment adviser registered under the Investment Advisers Act of 1940, as amended. Our Administrator provides the administrative services necessary for us to operate. Both our Investment Adviser and our Administrator are wholly owned subsidiaries of Carlyle Investment Management L.L.C., a subsidiary of Carlyle. As of June 30, 2022, our Investment Adviser’s investment team included more than 180 investment professionals across the Carlyle Global Credit segment. Subject to certain delegated authorities, our Investment Adviser’s investment committee is responsible for reviewing and approving our investment opportunities. The members of the investment committee have experience investing through different credit cycles. Our Investment Adviser’s investment committee comprises several of the most senior credit professionals within the Carlyle Global Credit segment, with backgrounds and expertise across asset classes and over 26 years of average industry experience and 10 years of average tenure. The Investment Committee has delegated approval of certain amendments, follow-on investments with existing borrowers, investments below certain size thresholds (existing or new platforms), and other matters as determined by the Investment Committee to a screening committee. In addition, our Investment Adviser and its investment team are supported by a team of finance, operations and administrative professionals currently employed by Carlyle Employee Co., a wholly owned subsidiary of Carlyle.

In conducting our investment activities, we believe that we benefit from the significant scale and resources of Carlyle, including our Investment Adviser and its affiliates.

KEY COMPONENTS OF OUR RESULTS OF OPERATIONS

Investments

Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt available to middle market companies, the general economic environment and the competitive environment for the type of investments we make.

Revenue

We generate revenue primarily in the form of interest income on debt investments we hold. In addition, we generate income from dividends on direct equity investments, capital gains on the sales of loans and debt and equity securities and various loan origination and other fees. We expect our debt investments to generally have a stated term of five to eight years and generally bear interest at a floating rate usually determined on the basis of a benchmark such as LIBOR or SOFR. Interest on these debt investments is generally paid quarterly. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments fluctuates significantly from period to period. Our portfolio activity also reflects the proceeds of sales of securities. We may also generate revenue in the form of commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees.

Expenses

Our primary operating expenses, subject to the terms of the Expense Support and Conditional Reimbursement Agreement with our Investment Adviser (the “Reimbursement Agreement”), include the payment of: (i) investment advisory fees, including management fees and incentive fees, to our Investment Adviser pursuant to an investment advisory agreement (the “Investment Advisory Agreement”) between us and our Investment Adviser; (ii) costs and other expenses and our allocable portion of overhead incurred by our Administrator in performing its administrative obligations under an administration agreement (the “Administration Agreement”) between us and our Administrator; and (iii) other operating expenses as detailed below:

•our organizational expenses and offering costs relating to the offering of the Company’s common shares of beneficial interest, par value $0.001 per share (the “Shares”) incurred on or prior to the Final Closing Date (as defined below) (collectively, the “Organizational and Offering Costs”) (the amount of Organizational and Offering Costs in excess of 0.15% of our total capital commitments to be paid by our Investment Adviser and the offering costs to be amortized over the 12 months beginning on Commencement; to the extent the Company’s total capital commitments later increase, the Investment Adviser or its affiliates may be reimbursed by the Company for past payments of excess Organizational and Offering Costs made on the Company’s behalf provided that the total Organizational and Offering Costs borne by the Company do not exceed 0.15% of total capital commitments and provided further that the Investment Adviser or its affiliates may not be reimbursed for payment of excess Organizational and Offering Costs that were incurred more than three years prior to the proposed reimbursement);

•the costs associated with any offerings of our Shares incurred after the final closing date, which will occur no later than twelve months following February 24, 2022, the first date on which we accepted subscriptions from unaffiliated

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investors for our Shares issued in our Private Offering; provided, that the Board of Trustees may extend the final closing date by up to an additional one-year period in its discretion (such date, as extended, the “Final Closing Date”);

•the costs associated with any offerings of our securities other than our Shares;

•calculating individual asset values and our NAV (including the cost and expenses of any independent valuation firms);

•expenses, including travel expenses, incurred by our Investment Adviser, or members of our Investment Adviser’s investment team, or payable to third parties, performing due diligence on prospective portfolio companies and, if necessary, expenses of enforcing our rights;

•the base management fee and any incentive fee;

•certain costs and expenses relating to distributions paid on our Shares;

•administration fees payable under our Administration Agreement and sub-administration agreements, including related expenses;

•debt service and other costs of borrowings or other financing arrangements;

•the allocated costs incurred by our Investment Adviser in providing managerial assistance to those portfolio companies that request it;

•amounts payable to third parties relating to, or associated with, making or holding investments;

•the costs associated with subscriptions to data service, research-related subscriptions and expenses and quotation equipment and services used in making or holding investments;

•transfer agent and custodial fees;

•costs of hedging;

•commissions and other compensation payable to brokers or dealers;

•federal and state registration fees;

•any U.S. federal, state and local taxes, including any excise taxes;

•Independent Trustee fees and expenses;

•costs of preparing financial statements and maintaining books and records, costs of preparing tax returns, costs of Sarbanes-Oxley Act compliance and attestation and costs of filing reports or other documents with the SEC (or other regulatory bodies), and other reporting and compliance costs, including registration and listing fees, and the compensation of professionals responsible for the preparation or review of the foregoing;

•the costs of any reports, proxy statements or other notices to our shareholders (including printing and mailing costs), the costs of any shareholders’ meetings and the compensation of investor relations personnel responsible for the preparation of the foregoing and related matters;

•the costs of specialty and custom software for monitoring risk, compliance and overall portfolio, including any development costs incurred;

•our fidelity bond;

•Trustees and officers/errors and omissions liability insurance, and any other insurance premiums;

•indemnification payments;

•direct fees and expenses associated with independent audits, agency, consulting and legal costs;

•the Company’s fees and expenses related to any Liquidity Event (as defined in Note 4, Related Party Transactions, to the financial statements included in Part I, Item 1 of this Form 10-Q) and/or Exchange Transaction; and

•all other expenses incurred by either our Administrator or us in connection with administering our business, including payments under the Administration Agreement for administrative services that will be equal to an amount that would reimburse the Administrator for its costs and expenses and our allocable portion of overhead incurred by the Administrator in performing its obligations under the Administration Agreement, including compensation paid to or compensatory distributions received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and any of their respective staff who provide services to us, operations staff who provide services to us, and internal audit staff in their role of performing our Sarbanes-Oxley Act internal control assessment.

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Our operating expenses are subject to the terms of the Reimbursement Agreement with the Investment Adviser. See Note 4 to the financial statements included in Part I, Item 1 of this Form 10-Q for more information on the Reimbursement Agreement

We expect our general and administrative expenses to be relatively stable or to decline as a percentage of total assets during periods of asset growth and to increase during periods of asset declines.

PORTFOLIO AND INVESTMENT ACTIVITY

Below is a summary of certain characteristics of our investment portfolio as of June 30, 2022 and December 31, 2021.

	As of
	June 30, 2022		December 31, 2021
Number of investments	44		26
Number of portfolio companies	39		22
Number of industries	19		14
Percentage of total investment fair value:
First Lien Debt	99.9	%	85.2	%
Second Lien Debt	0.1	%	13.4	%
Total secured debt	100.0	%	98.6	%
Equity investments	—	%	1.4	%
Percentage of debt investment fair value:
Floating rate (1)	100.0	%	100.0	%
Fixed interest rate	—	%	—	%

(1) Primarily subject to interest rate floors.

Our investment activity for the three month period ended June 30, 2022 and for the period from Commencement through June 30, 2021 is presented below (information presented herein is at amortized cost unless otherwise indicated):

	For the three month period ended			For the period from May 28, 2021 (Commencement) through
	June 30, 2022			June 30, 2021
Investments:
Total investments, beginning of period	$	130,099		$	—
New investments purchased	34,297,285			28,190
Net accretion of discount on investments	27,562			9
Investments sold or repaid	(347,403)			—
Total Investments, end of period	$	34,107,543		$	28,199
Principal amount of investments funded:
First Lien Debt	$	34,594,044		$	28,190
Second Lien Debt	181			—
Total	$	34,594,225		$	28,190
Principal amount of investments sold or repaid:
First Lien Debt	$	(351,378)		$	—
Total	$	(351,378)		$	—
Number of new funded investments	12			2
Average amount of new funded investments	$	2,936,611		$	14,095
Percentage of new funded debt investments at floating interest rates	100		%	—		%
Percentage of new funded debt investments at fixed interest rates	—		%	100		%

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As of June 30, 2022 and December 31, 2021, investments consisted of the following:

	June 30, 2022				December 31, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
First Lien Debt	$	34,090,291	$	33,703,697	$	98,918	$	98,937
Second Lien Debt	15,482		15,340		15,190		15,507
Equity Investments	1,770		1,833		1,675		1,675
Total	$	34,107,543	$	33,720,870	$	115,783	$	116,119

The weighted average yields (1) for our first and second lien debt, based on the amortized cost and fair value as of June 30, 2022 and December 31, 2021, were as follows:

	June 30, 2022				December 31, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
First Lien Debt	8.25	%	8.35	%	7.44	%	7.44	%
Second Lien Debt	9.96	%	10.06	%	9.32	%	9.13	%
First and Second Lien Debt Total	8.25	%	8.35	%	7.70	%	7.68	%

(1)Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of June 30, 2022 and December 31, 2021. Weighted average yield on debt and income producing securities at fair value is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of original issue discount ("OID") and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at fair value included in such securities. Weighted average yield on debt and income producing securities at amortized cost is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at amortized cost included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented above.

Total weighted average yields (which includes the effect of accretion of discount and amortization of premiums) of our first and second lien debt investments as measured on an amortized cost basis increased from 7.70% to 8.25% from December 31, 2021 to June 30, 2022 due to an increase in weighted average interest rates and higher weighted average yields on new fundings.

As of June 30, 2022 and December 31, 2021, all of our first and second lien debt investments were performing and current on their interest payments. See the Schedule of Investments as of June 30, 2022 and December 31, 2021 in our financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on our investments, including a list of companies and type and amount of investments.

As part of the monitoring process, our Investment Adviser has developed risk assessment policies pursuant to which it regularly assesses the risk profile of each of our debt investments and rates each of them based on the following categories, which we refer to as “Internal Risk Ratings”. Pursuant to these risk policies, an Internal Risk Rating of 1 – 5, which ratings are defined below, is assigned to each debt investment in our portfolio. Key drivers of internal risk ratings include financial metrics, financial covenants, liquidity and enterprise value coverage.

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Internal Risk Ratings Definitions

Rating	Definition
1	Borrower is operating above expectations, and the trends and risk factors are generally favorable.
2	Borrower is operating generally as expected or at an acceptable level of performance. The level of risk to our initial cost bases is similar to the risk to our initial cost basis at the time of origination. This is the initial risk rating assigned to all new borrowers.
3	Borrower is operating below expectations and level of risk to our cost basis has increased since the time of origination. The borrower may be out of compliance with debt covenants. Payments are generally current although there may be higher risk of payment default.
4	Borrower is operating materially below expectations and the loan’s risk has increased materially since origination. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due, but generally not by more than 120 days. It is anticipated that we may not recoup our initial cost basis and may realize a loss of our initial cost basis upon exit.
5	Borrower is operating substantially below expectations and the loan’s risk has increased substantially since origination. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. It is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis upon exit.

Our Investment Adviser monitors and, when appropriate, changes the risk ratings assigned to each debt investment in our portfolio. Our Investment Adviser reviews our investment ratings in connection with our quarterly valuation process. The below table summarizes the Internal Risk Ratings assigned as of June 30, 2022 and December 31, 2021.

	June 30, 2022				December 31, 2021
	Fair Value		% of Fair Value		Fair Value		% of Fair Value
(dollar amounts in millions)
Internal Risk Rating 1	$	—	—	%	$	—	—	%
Internal Risk Rating 2	33,699,683		99.9		114,444		100.0
Internal Risk Rating 3	19,354		0.1		—		—
Internal Risk Rating 4	—		—		—		—
Internal Risk Rating 5	—		—		—		—
Total	$	33,719,037	100.0	%	$	114,444	100.0	%

As of June 30, 2022 and December 31, 2021, the weighted average Internal Risk Rating of our debt investment portfolio was 2.0 and 2.0, respectively, and none of our debt investments were assigned an Internal Risk Rating of 4-5.

RESULTS OF OPERATIONS

For the three and six month periods ended June 30, 2022 and for the period from Commencement through June 30, 2021

The net increase or decrease in net assets from operations may vary substantially from period to period as a result of various factors, including the recognition of realized gains and losses and net change in unrealized appreciation and depreciation. As a result, quarterly comparisons may not be meaningful.

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Investment Income

Investment income for the three and six month periods ended June 30, 2022 and for the period from Commencement through June 30, 2021 was as follows:

	For the three month period ended		For the six month period ended		For the period from May 28, 2021 (Commencement) through
	June 30, 2022		June 30, 2022		June 30, 2021
First Lien Debt	$	587,245	$	633,143	$	173
Second Lien Debt	344		688		—
Equity Investments	1		50		—
Total investment income	$	587,590	$	633,881	$	173

Interest income on our first and second lien debt investments is dependent on the composition and credit quality of the portfolio. Generally, we expect the portfolio to generate predictable quarterly interest income based on the terms stated in each loan’s credit agreement. As of June 30, 2022 and December 31, 2021, there were no first or second lien debt investments on non-accrual status.

Net investment income for the three and six month periods ended June 30, 2022 and for the period from Commencement through June 30, 2021was as follows:

	For the three month period ended		For the six month period ended		For the period from May 28, 2021 (Commencement) through
	June 30, 2022		June 30, 2022		June 30, 2021
Total investment income	$	587,590	$	633,881	$	173
Total Expenses	605,926		1,015,889		88,162
Less waivers and reimbursements of expenses (Note 4)	(484,337)		(1,678,855)		—
Expenses after waivers and reimbursements of expenses	121,589		(662,966)		88,162
Net investment income (loss)	$	466,001	$	1,296,847	$	(87,989)

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Waivers and reimbursement of expenses represents the amounts reimbursed by the Investment Adviser pursuant to the Reimbursement Agreement. See Note 4, Related Party Transactions, to the Financial Statements included in Part I, Item 1 of this Form 10-Q for more information on the expense waivers and reimbursement of expenses.

Expenses

Expenses, before giving effect to any waivers or reimbursement of expenses, for the three and six month periods ended June 30, 2022 and for the period from May 28, 2021 (Commencement) through June 30, 2021 comprised the following:

	For the three month period ended		For the six month period ended		For the period from May 28, 2021 (Commencement) through
	June 30, 2022		June 30, 2022		June 30, 2021
Organizational expenses	$	33,356	$	35,791	$	27,774
Offering costs	25,377		60,006		2,284
Professional fees	133,173		284,201		15,000
Administrative service fees	37,099		37,099		—
Interest expense	169,820		169,820		—
Credit facility fees	22,804		22,804		—
Trustees’ fees and expenses	85,250		183,622		17,654
Other general and administrative	99,047		222,546		25,450
Total expenses	$	605,926	$	1,015,889	$	88,162
Less waivers and reimbursements of expenses (Note 4)	(484,337)		(1,678,855)		—
Expenses after waivers and reimbursements of expenses	$	121,589	$	(662,966)	$	88,162

Organizational expenses and offering costs include expenses incurred in the initial formation of the Company and in the offering of the Shares incurred on or prior to the Final Closing Date. Professional fees include legal, rating agencies, audit, tax, valuation, technology and other professional fees incurred related to the management of the Company. Administrative service fees represent fees paid to the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our executive officers and their respective staff. Sub-administrative service fees represent fees paid to State Street Bank and Trust Company (“State Street”) pursuant to a sub-administration agreement, dated as of June 30, 2021, between our Administrator and State Street and fees paid to DST Asset Manager Solutions, Inc. (“DST”) pursuant to a sub-administration agreement, dated as of March 17, 2021, between our Administrator and DST. Other general and administrative expenses include insurance, filing, research, subscriptions, and other costs. Waivers and reimbursement of expenses represents the amounts reimbursed by the Investment Adviser pursuant to the Reimbursement Agreement.

Net Change in Unrealized Appreciation (Depreciation) on Investments

During the three month period ended June 30, 2022, we recorded a change in unrealized appreciation on 6 investments totaling approximately $8,832 and a change in unrealized depreciation on 32 investments of approximately $394,408.

During the six month period ended June 30, 2022, we recorded a change in unrealized appreciation on 6 investments totaling approximately $8,796 and a change in unrealized depreciation on 32 investments of approximately $395,805.

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Net realized gain (loss) and net change in unrealized appreciation (depreciation) for the three and six month periods ended June 30, 2022 and for the period from Commencement through June 30, 2021 were as follows:

	For the three month period ended		For the six month period ended		For the period from May 28, 2021 (Commencement) through
	June 30, 2022		June 30, 2022		June 30, 2021
Net realized gain (loss) on investments	$	—	$	—	$	—
Net change in unrealized appreciation (depreciation) on investments	(385,576)		(387,009)		(9)
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments	$	(385,576)	$	(387,009)	$	(9)

Net realized gain (loss) and net change in unrealized appreciation (depreciation) by the type of investments for the three and six month periods ended June 30, 2022 and for the period from Commencement through June 30, 2021 were as follows:

	For the three month period ended				For the six month period ended				For the period from May 28, 2021 (Commencement) through
	June 30, 2022				June 30, 2022				June 30, 2021
	Net realized gain (loss)		Net change in unrealized appreciation (depreciation)		Net realized gain (loss)		Net change in unrealized appreciation (depreciation)		Net realized gain (loss)		Net change in unrealized appreciation (depreciation)
First Lien Debt	$	—	$	(385,286)	$	—	$	(386,613)	$	—	$	(9)
Second Lien Debt	—		(345)		—		(459)		—		—
Equity Investments	—		55		—		63		—		—
Total	$	—	$	(385,576)	$	—	$	(387,009)	$	—	$	(9)

Net change in unrealized appreciation (depreciation) is driven by changes in other inputs utilized under our valuation methodology, including, but not limited to, enterprise value multiples, borrower leverage multiples and borrower ratings, and the impact of exits.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We intend to generate cash from the net proceeds of offerings of our Shares and through cash flows from operations, including investment sales and repayments as well as income earned on investments and cash equivalents. We may also fund a portion of our investments through borrowings from banks and issuances of senior securities. The primary use of existing funds and any funds raised in the future is expected to be for investments in portfolio companies, repayment of indebtedness, cash distributions to our shareholders and for other general corporate purposes. We believe our current cash position and net cash provided by operating activities, along with capital drawdowns from the private offering of our Shares and borrowings from financial institutions, will provide us with sufficient resources to meet our obligations and continue to support our investment objectives, including reserving for the capital needs which may arise at our portfolio companies.

The Company entered into a senior secured revolving credit agreement on April 22, 2022 (the “Subscription Facility”). The Subscription Facility provides for secured borrowings of $45 million. The maximum principal amount is subject to availability under the Subscription Facility, which is based on certain of the Company’s investor equity capital commitments and a percentage determined in the lender’s reasonable discretion to account for foreign exchange volatility. The Subscription Facility has a maturity date of April 22, 2024. The Company may borrow amounts in U.S. Dollars or certain other permitted currencies. Borrowings under the Subscription Facility bear interest currently at SOFR plus an applicable spread of 2.40% per year. The Company also pays a fee of 0.40% per year on undrawn amounts under the Subscription Facility.

Subject to certain exceptions, the Subscription Facility is secured by a first lien security interest in the Company’s unfunded investor equity capital commitments. The Subscription Facility includes customary covenants, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for senior secured revolving credit facilities of this nature.

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

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As of June 30, 2022 and December 31, 2021, the Company had $31,061,884 and $185,010, respectively, in cash and cash equivalents. The Subscription Facility consisted of the following as of June 30, 2022:

	June 30, 2022
	Total Facility		Borrowings Outstanding		Unused Portion (1)		Amount Available (2)
Subscription Facility	$	45,000,000	$	19,650,000	$	25,350,000	$	20,606,588

(1)The unused portion is the amount upon which commitment fees are based.

(2)Available for borrowing based on the computation of collateral to support the borrowings and subject to compliance with applicable covenants and financial ratios.

Equity Activity

Shares issued as of June 30, 2022 and December 31, 2021 were 2,294,820 and 5,000, respectively. The following table summarizes activity in the number of Shares outstanding during the six months ended June 30, 2022 and for the period from Commencement through June 30, 2021:

	For the six months ended	For the period from May 28, 2021 (Commencement) through
	June 30, 2022	June 30, 2021
Shares outstanding, beginning of period	5,000	—
Common shares of beneficial interest issued	2,289,820	5,000
Shares outstanding, end of period	2,294,820	5,000

OFF BALANCE SHEET ARRANGEMENTS

In the ordinary course of our business, we enter into contracts or agreements that contain indemnifications or warranties. Future events could occur which may give rise to liabilities arising from these provisions against us. We believe that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in these financial statements as of June 30, 2022 and December 31, 2021 included in Part I, Item 1 of this Form 10-Q for any such exposure.

We are currently and may in the future become obligated to fund commitments such as revolving credit facilities, bridge financing commitments, or delayed draw commitments.

We had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of June 30, 2022 and December 31, 2021:

	Par Value as of
	June 30, 2022		December 31, 2021
Unfunded delayed draw commitments	$	62,472,207	$	15,514,683
Unfunded revolving commitments	6,091,442		7,586
Total unfunded commitments	$	68,563,649	$	15,522,269

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS

The following table summarizes our dividends declared since Commencement:

Date Declared	Record Date	Payment Date	Per Share Amount
June 15, 2022	June 15, 2022	July 15, 2022	$	0.51
Total			$	0.51

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and judgments are based on historical information, information currently available to us and on various other assumptions management believes to be reasonable under the circumstances. Actual results could vary from those estimates and we may change our estimates and assumptions in future evaluations. Changes in these estimates and assumptions may have a material effect on our results of operations and financial condition. We believe the critical accounting policies discussed below affect our more significant judgments and estimates used in the preparation of our financial statements and should be read in conjunction with our financial statements and related notes in Part II, Item 8, as well as with our “Risk Factors” in Part I, Item 1A of the Company’s annual report on Form 10-K for the year ended December 31, 2021.

Fair Value Measurements

The Company applies fair value accounting in accordance with the terms of Financial Accounting Standards Board ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. The Company values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e. “consensus pricing”). When doing so, the Company determines whether the quote obtained is sufficient according to U.S. GAAP to determine the fair value of the security. The Company may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.

Securities/instruments that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or the Board of Trustees, does not represent fair value shall each be valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment and include comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses. The process generally used to determine the applicable value is as follows: (i) the value of each portfolio company or investment is initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments (i.e. illiquid securities/instruments), a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs is used to determine a preliminary value, which is also reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of members of senior management; (iii) the Board of Trustees engages a third-party valuation firm to provide positive assurance on portions of first lien senior secured loans, “unitranche” loans, second lien senior secured loans and equity investments each quarter (such that each non-traded investment is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of management’s preliminary valuation and conclusion on fair value; (iv) the Audit Committee of the Board of Trustees (the “Audit Committee”) reviews the assessments of the Investment Adviser and the third-party valuation firm and provides the Board of Trustees with any recommendations with respect to changes to the fair value of each investment in the portfolio; and (v) the Board of Trustees discusses the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.

All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:

•the nature and realizable value of any collateral;

•call features, put features and other relevant terms of debt;

•the portfolio company’s leverage and ability to make payments;

•the portfolio company’s public or private credit rating;

•the portfolio company’s actual and expected earnings and discounted cash flow;

•prevailing interest rates and spreads for similar securities and expected volatility in future interest rates;

•the markets in which the portfolio company does business and recent economic and/or market events; and

•comparisons to comparable transactions and publicly traded securities.

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Investment performance data utilized are the most recently available financial statements and compliance certificates received from the portfolio companies as of the measurement date which in many cases may reflect a lag in information.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the financial statements as of June 30, 2022 and December 31, 2021.

U.S. GAAP establishes a hierarchical disclosure framework which ranks the level of observability of market price inputs used in measuring investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

For further information on the fair value hierarchies, our framework for determining fair value and the composition of our portfolio, see Note 3, Fair Value Measurements, to the financial statements in Part I, Item 1 of this Form 10-Q.

Investments

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the Statements of Operations in Part I, Item 1 of this Form 10-Q reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

Revenue Recognition

Non-Accrual Income

Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid current and, in management’s judgment, are likely to remain current. Management may determine not to place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.

Income Taxes

We were taxed as a regular C Corporation for the initial tax year ended December 31, 2021. Beginning with the year ending December 31, 2022, for federal income tax purposes, the Company intends to elect to be treated as a RIC under the Code, and intends to make the required distributions to its shareholders as specified therein. In order to qualify as a RIC, the Company must, among other things, meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute.

The minimum distribution requirements applicable to RICs require the Company to distribute to its shareholders at least 90% of its investment company taxable income, as defined by the Code, each year. Depending on the level of taxable income and net capital gain earned in a year, we may choose to carry forward taxable income or net capital gain for distribution in the following year and pay the applicable U.S. federal excise tax. Distributions will be appropriately adjusted for any taxes payable by the Company or any direct or indirect subsidiary through which it invests (including any corporate, state, local, non-U.S. and withholding taxes).

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In addition, based on the excise distribution requirements, the Company will be subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any undistributed ordinary income and capital gain net income for preceding years on which we paid no U.S. federal income tax less certain over-distributions in prior years. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax for the tax year ending in that calendar year is considered to have been distributed by year end (or earlier if estimated taxes are paid).

The Company evaluates tax positions taken or expected to be taken in the course of preparing its financial statements to determine whether the tax positions are “more-likely than not” to be sustained by the applicable tax authority. All penalties and interest associated with income taxes, if any, are included in income tax expense.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are subject to financial market risks, including changes in the valuations of our investment portfolio and interest rates.

Valuation Risk

Our investments generally do not have a readily available market price, and we value these investments at fair value as determined in good faith by our Board of Trustees in accordance with our valuation policy. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. In addition, because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and it is possible that the difference could be material.

Interest Rate Risk

As of June 30, 2022, on a fair value basis, all of our debt investments bear interest at a floating rate, which primarily are subject to interest rate floors. Interest rates on the investments held within our portfolio of investments are typically based on floating LIBOR or SOFR, with many of these investments also having a reference rate floor.

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. There can be no assurance that a significant change in market interest rates will not have a material adverse effect on our income in the future.

The following table estimates the potential changes in net cash flow generated from interest income, should interest rates increase or decrease by 100, 200 or 300 basis points. These hypothetical interest income calculations are based on a model of the settled debt investments in our portfolio, held as of June 30, 2022 and December 31, 2021, and are only adjusted for assumed changes in the underlying base interest rates and the impact of that change on interest income.

We regularly measure exposure to interest rate risk. We assess interest rate risk and manage interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on that review, we determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates.

Based on our Statements of Assets and Liabilities as of June 30, 2022 and December 31, 2021, the following table shows the annual impact on net investment income of base rate changes in interest rates for our settled debt investments (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure:

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	June 30, 2022						December 31, 2021
Basis Point Change	Interest Income		Interest Expense		Net Investment Income		Interest Income		Interest Expense		Net Investment Income
Up 300 basis points	$	1,245,060	$	(589,500)	$	655,560	$	2,647	$	—	$	2,647
Up 200 basis points	$	900,104	$	(393,000)	$	507,104	$	1,479	$	—	$	1,479
Up 100 basis points	$	515,516	$	(196,500)	$	319,016	$	312	$	—	$	312
Down 100 basis points	$	(210,672)	$	196,500	$	(14,172)	$	—	$	—	$	—
Down 200 basis points	$	(282,981)	$	291,850	$	8,869	$	—	$	—	$	—
Down 300 basis points	$	(282,991)	$	291,850	$	8,859	$	—	$	—	$	—

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them of material information relating to the Company that is required to be disclosed by us in the reports we file or submit under the Exchange Act.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company may become party to certain lawsuits in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. The Company is not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against the Company. See also Note 9, Litigation, to the financial statements in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors.

In addition to the other information set forth within this Form 10-Q, consideration should be given to the information disclosed in “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2021.

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

Except as previously reported by the Company on a Current Report on Form 8-K filed by the Company on June 21, 2022, the Company did not sell any equity securities during the period covered in this report that were not registered under the Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.

31.1	Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.*
31.2	Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*
32.1	Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

* Filed herewith

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SIGNATURES

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

	CARLYLE SECURED LENDING III
Dated: August 12, 2022	By	/s/ Thomas M. Hennigan
		Thomas M. Hennigan Chief Financial Officer (principal financial officer)

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