10-K 1 ocsl-09302021x10xk.htm 10-K Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
(Mark One)
 
þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2021
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 1-33901
Oaktree Specialty Lending Corporation

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
DELAWARE
(State or jurisdiction of
incorporation or organization)
 
26-1219283
(I.R.S. Employer
Identification No.)
333 South Grand Avenue, 28th Floor
Los Angeles, CA
(Address of principal executive office)
 
90071
(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(213) 830-6300


SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each ClassTrading Symbol(s)Name of Each Exchange
on Which Registered
Common Stock, par value $0.01 per shareOCSL The Nasdaq Stock Market LLC

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨        No  þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨        No  þ
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   þ     NO   ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES   ¨   NO   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  þ
Accelerated filer  ¨
Non-accelerated filer  ¨
Smaller reporting company  ¨
Emerging growth company  ¨

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    YES  ¨     NO  þ
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of March 31, 2021 was $948.5 million. For the purposes of calculating the aggregate market value of common stock held by non-affiliates, the registrant has excluded (1) shares held by its current directors and officers and (2) those reported to be held by Leonard M. Tannenbaum and his affiliates. The registrant had 180,360,662 shares of common stock outstanding as of November 12, 2021.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement relating to the registrant’s 2022 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission, or the SEC, within 120 days following the end of the Company’s fiscal year, are incorporated by reference in Part III of this Annual Report on Form 10-K as indicated herein.


OAKTREE SPECIALTY LENDING CORPORATION
FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 2021



TABLE OF CONTENTS

PART I
PART II
PART III
PART IV
 


 




 

 







 




 
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PART I

Item 1.     Business
General
Oaktree Specialty Lending Corporation, a Delaware corporation, or together with its subsidiaries, where applicable, the Company, which may also be referred to as “we,” “us” or “our”, is a specialty finance company dedicated to providing customized, one-stop credit solutions to companies with limited access to public or syndicated capital markets. We were formed in late 2007 and currently operate as a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a Business Development Company under the Investment Company Act of 1940, as amended, or the Investment Company Act. In addition, we have qualified and elected to be treated as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended, or the Code, for tax purposes. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any net ordinary income or net realized capital gains that we distribute to our stockholders if we meet certain source-of-income, income distribution and asset diversification requirements.
We are externally managed by Oaktree Fund Advisors, LLC, which we also refer to as “Oaktree” or our “Adviser,” pursuant to an investment advisory agreement, as amended from time to time, or the Investment Advisory Agreement, between the Company and Oaktree. Oaktree is an affiliate of Oaktree Capital Management, L.P., or OCM, the Company's external investment adviser from October 17, 2017 through May 3, 2020, and a subsidiary of Oaktree Capital Group, LLC, or OCG. In 2019, Brookfield Asset Management Inc., which we refer to as "Brookfield," acquired a majority economic interest in OCG. OCG operates as an independent business within Brookfield, with its own product offerings and investment, marketing and support teams. Oaktree Fund Administration, LLC, which we refer to as “Oaktree Administrator,” a subsidiary of OCM, provides certain administrative and other services necessary for us to operate.
Our investment objective is to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions, including first and second lien loans, unsecured and mezzanine loans, bonds, preferred equity and certain equity co-investments. We may also seek to generate capital appreciation and income through secondary investments at discounts to par in either private or syndicated transactions. We invest in companies that typically possess resilient business models with strong underlying fundamentals. We intend to deploy capital across credit and economic cycles with a focus on long-term results, which we believe will enable us to build lasting partnerships with financial sponsors and management teams, and we may seek to opportunistically take advantage of dislocations in the financial markets and other situations that may benefit from our Adviser’s credit and structuring expertise, including during the COVID-19 pandemic. Sponsors may include financial sponsors, such as an institutional investor or a private equity firm, or a strategic entity seeking to invest in a portfolio company.
Our Adviser is generally focused on middle-market companies, which we define as companies with enterprise values of between $100 million and $750 million. We expect our portfolio to include a mix of first and second lien loans, including asset backed loans, unitranche loans, mezzanine loans, unsecured loans, bonds, preferred equity and certain equity co-investments. Our portfolio may also include certain structured finance and other non-traditional structures. We generally invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “high yield” and “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.
Our portfolio totaled $2.6 billion at fair value as of September 30, 2021 and was composed of 138 portfolio companies. These included debt investments in 121 companies, equity investments in 35 companies, including our limited partnership interests in one private equity fund, and our investments in Senior Loan Fund JV I, LLC, or the SLF JV I, a joint venture through which we and Trinity Universal Insurance Company, a subsidiary of Kemper Corporation, or Kemper, co-invest in senior secured loans of middle-market companies and other corporate debt securities, and OCSI Glick JV LLC, or the Glick JV, a joint venture through which we and GF Equity Funding 2014 LLC, or GF Equity Funding, co-invest primarily in senior secured loans of middle-market companies. Twenty of our equity investments were in companies in which we also had a debt investment. At fair value, 94.3% of our portfolio consisted of debt investments, including our debt investments in SLF JV I and Glick JV, and 86.7% of our portfolio consisted of senior secured loans as of September 30, 2021. The weighted average annual yield of our debt investments at fair value as of September 30, 2021, including the return on our debt investments in SLF JV I and Glick JV, was approximately 8.7%, including 7.4% representing cash payments. The weighted average annual yield of our debt investments is determined before the payment of, and therefore does not take into account, our expenses and the payment by an investor of any stockholder transaction expenses, and does not represent the return on investment for our stockholders. See “—Investments—SLF JV I” and “—Investments—Glick JV ” below for additional information regarding our investment in SLF JV I and Glick JV.
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We are permitted to, and expect to continue to, finance our investments through borrowings. However, as a Business Development Company, subject to certain limited exceptions, we are currently only allowed to borrow amounts in accordance with the asset coverage requirements in the Investment Company Act. We generally expect to target a long-term debt to equity ratio of 0.85x to 1.0x (i.e., one dollar of equity for each $0.85 to $1.00 of debt outstanding). As of September 30, 2021, we had a debt to equity ratio of 0.97x (i.e., one dollar of equity for each $0.97 of debt outstanding). At a special meeting of stockholders held on June 28, 2019, our stockholders approved the application of the reduced asset coverage requirements in Section 61(a)(2) of the Investment Company Act to us, effective as of June 29, 2019. The reduced asset coverage requirements permit us to double the maximum amount of leverage that we are permitted to incur by reducing the asset coverage requirements applicable to us from 200% to 150%. As a result of the reduced asset coverage requirement, we can incur $2 of debt for each $1 of equity.
On March 19, 2021, we acquired Oaktree Strategic Income Corporation, or OCSI, pursuant to that certain Agreement and Plan of Merger, or the Merger Agreement, dated as of October 28, 2020, by and among OCSI, us, Lion Merger Sub, Inc., our wholly-owned subsidiary, or Merger Sub, and, solely for the limited purposes set forth therein, Oaktree. Pursuant to the Merger Agreement, Merger Sub was first merged with and into OCSI, with OCSI as the surviving corporation, or the Merger, and, immediately following the Merger, OCSI was then merged with and into us, with us as the surviving company, or together with the Merger, the Mergers. In accordance with the terms of the Merger Agreement, at the effective time of the Merger, each outstanding share of OCSI’s common stock was converted into the right to receive 1.3371 shares of our common stock (with OCSI’s stockholders receiving cash in lieu of fractional shares of our common stock). As a result of the Mergers, we issued an aggregate of 39,400,011 shares of our common stock to former OCSI stockholders.
Our Adviser
We are externally managed and advised by Oaktree, a registered investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act. Oaktree, subject to the overall supervision of our Board of Directors, manages our day-to-day operations, and provides investment advisory services to us pursuant to the Investment Advisory Agreement.
Our Adviser is an affiliate of OCM, a leading global investment management firm headquartered in Los Angeles, California, focused on less efficient markets and alternative investments. A number of the senior executives and investment professionals of our Adviser and its affiliates have been investing together for over 35 years and have generated impressive investment performance through multiple market cycles. Our Adviser and its affiliates emphasize an opportunistic, value-oriented and risk-controlled approach to investments in distressed debt, corporate debt (including high-yield debt and senior loans), control investing, real estate, convertible securities and listed equities.
In 2019, Brookfield acquired a majority economic interest in OCG. OCG operates as an independent business within Brookfield, with its own product offerings and investment, marketing and support teams. Brookfield is a leading global alternative asset manager with a history spanning over 100 years and approximately $625 billion of assets under management (inclusive of OCG) across a broad portfolio of real estate, infrastructure, renewable power, credit and private equity assets. Commencing in 2022, OCG's founders, senior management and current and former employee-unitholders of OCG will be able to sell their remaining OCG units to Brookfield over time pursuant to an agreed upon liquidity schedule and approach to valuing such units at the time of liquidation. Pursuant to this liquidity schedule, the earliest year in which Brookfield could own 100% of the OCG business is 2029.
The primary firm-wide goal of our Adviser and OCM is to achieve attractive returns while bearing less than commensurate risk. Our Adviser believes that it can achieve this goal by taking advantage of market inefficiencies in which financial markets and their participants fail to accurately value assets or fail to make available to companies the capital that they reasonably require.
Our Adviser and its affiliates believe that their defining characteristic is adherence to the highest professional standards, which has yielded several important benefits. First and foremost, this characteristic has allowed our Adviser and its affiliates to attract and retain an extremely talented group of investment professionals, or the Investment Professionals, as well as accounting, valuation, legal, compliance and other administrative professionals. As of September 30, 2021, our Adviser and its affiliates had more than 1,000 professionals in 19 cities and 14 countries, including 44 portfolio managers with an average experience of 25 years and approximately 1,000 years of combined industry experience. Specifically, the Strategic Credit group that is primarily responsible for implementing our investment strategy consists of over 20 Investment Professionals led by Armen Panossian, our Chief Executive Officer and Chief Investment Officer, who focus on the investment strategy employed by our Adviser and certain of its affiliates. Second, it has permitted the investment team to build strong relationships with brokers, banks and other market participants. These institutional relationships have been instrumental in strengthening access to trading opportunities, to understanding the current market, and to executing the investment team’s investment strategies. OCM aims to attract, motivate and retain talented employees (both Investment Professionals and accounting, valuation, legal, compliance and other administrative professionals) by making them active participants in, and beneficiaries of, the platform’s
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success. In addition to competitive base salaries, all OCM employees share in the discretionary bonus pool. An employee’s participation in the bonus pool is based on the overall success of our Adviser and its affiliates and the individual employee’s performance and level of responsibility.
Our Adviser and its affiliates provide discretionary investment management services to other managed accounts and investment funds, which may have overlapping investment objectives and strategies with our own and, accordingly, may invest in asset classes similar to those targeted by us. The activities of such managed accounts and investment funds may raise actual or potential conflicts of interest.
Strategic Credit
Our Adviser's affiliates officially launched the Strategic Credit strategy in early 2013 as a step-out from the Distressed Debt strategy, to capture attractive investment opportunities that appear to offer too little return for distressed debt investors, but may pose too much uncertainty for high-yield bond creditors. The strategy seeks to achieve an attractive total return by investing in public and private revenue-generating, performing debt.
Strategic Credit focuses on U.S. and non-U.S. investment opportunities that arise from pricing inefficiencies that occur in the primary and secondary markets or from the financing needs of healthy companies with limited access to traditional lenders or public markets. Typical investments will be in high yield bonds and senior secured loans for borrowers that are in need of direct loans, rescue financings, or other capital solutions or that have had challenged or unsuccessful primary offerings.
The Investment Professionals employ a fundamental, value-driven opportunistic approach to credit investing, which seeks to benefit from the resources, relationships and proprietary information of the global investment platform of our Adviser and its affiliates.
Our Administrator
We entered into an administration agreement, as amended from time to time, or the Administration Agreement, with Oaktree Administrator, a Delaware limited liability company and a wholly owned subsidiary of OCM. The principal executive offices of Oaktree Administrator are located at 333 South Grand Avenue, 28th Floor, Los Angeles, CA 90071. Pursuant to the Administration Agreement, Oaktree Administrator provides services to us, and we reimburse Oaktree Administrator for costs and expenses incurred by Oaktree Administrator in performing its obligations under the Administration Agreement and providing personnel and facilities thereunder.
Business Strategy

Our investment objective is to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions, including first and second lien loans, unsecured and mezzanine loans, bonds, preferred equity and certain equity co-investments. We may also seek to generate capital appreciation and income through secondary investments at discounts to par in either private or syndicated transactions. We invest in companies across a variety of industries that typically possess resilient business models with strong underlying fundamentals. We deploy capital across credit and economic cycles with a focus on long-term results, which we believe will enable us to build lasting partnerships with financial sponsors and management teams, and we may seek to opportunistically take advantage of dislocations in the financial markets and other situations that may benefit from our Adviser’s deep credit and structuring expertise, including throughout the COVID-19 pandemic. Our Adviser intends to implement the following business strategy to achieve our investment objective:

•Emphasis on Proprietary Deals.  Our Adviser is focused on proprietary opportunities as well as partnering with other lenders as appropriate. Dedicated sourcing professionals of our Adviser and its affiliates are in continuous contact with financial sponsors and corporate clients to originate proprietary deals and seek to leverage the networks and relationships of Oaktree’s Investment Professionals with management teams and corporations to originate non-sponsored transactions. Since 2005, our Adviser and its affiliates have invested more than $25 billion in over 450 directly originated loans, and the platform has the capacity to invest in large deals and to solely underwrite transactions.

•Focus on Quality Companies and Extensive Diligence.  Our Adviser seeks to maintain a conservative approach to investing with discipline around fundamental credit analysis and downside protection. Our Adviser intends to focus on companies with resilient business models, strong underlying fundamentals, significant asset or enterprise value and seasoned management teams, although not all portfolio companies will meet each of these criteria. Our Adviser intends to leverage its deep credit and deal structuring expertise to lend to companies that have unique needs, complex business models or specific business challenges. Our Adviser conducts diligence on underlying collateral value,
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including cash flows, hard assets or intellectual property, and will typically model exit scenarios as part of the diligence process, including assessing potential “work-out” scenarios.

•Disciplined Portfolio Management.  Our Adviser monitors our portfolio on an ongoing basis to manage risk and take preemptive action to resolve potential problems where possible. Our Adviser intends to seek to reduce the impact of individual investment risks by diversifying portfolios across industry sectors and, with the exception of our investment in SLF JV I, which has a diversified portfolio, limiting positions to no more than 5% of our portfolio.

•Manage Risk Through Loan Structures.  Our Adviser seeks to leverage its experience in identifying structural risks in prospective portfolio companies and developing customized solutions to enhance downside protection where possible. Our Adviser has the expertise to structure comprehensive, flexible and customized solutions for companies of all sizes across numerous industry sectors. Our Adviser employs a rigorous due diligence process and seeks to include covenant protections designed to ensure that we, as the lender, can negotiate with a portfolio company before a debt investment reaches impairment. The platform of our Adviser and its affiliates can address a wide range of borrower needs, with capability to invest across the capital structure and to fund large loans, and our Adviser pays close attention to market trends. Our Adviser provides certainty to borrowers by seeking to provide fully underwritten financing commitments and has expertise in both performing credit as well as restructuring and turnaround situations, which allowed us to invest and lend throughout the COVID-19 pandemic and other times of market stress when our competitors may halt or reduce investment activity.

Our Adviser’s emphasis is on fundamental credit analysis, consistency and downside protection, all of which are key tenets of its investment philosophy and important in times of market dislocation, including during the COVID-19 pandemic. We believe this philosophy strongly aligns with the interests of our stockholders. Our Adviser controls primarily for risk, rather than return. Although this may lead us to underperform in bullish markets, we expect that prudence across the economic cycle and limiting losses will allow us to achieve our investment objectives.
Identification of Investment Opportunities
Our primary focus is on identifying differentiated private lending opportunities, with a secondary emphasis on identifying opportunities in the public markets.
Private Lending Opportunities. We believe that the market for lending to private companies is underserved and presents a compelling investment opportunity. We intend to focus on private lending opportunities in the following key areas:

•Situational Lending. Certain businesses may present challenges for traditional lenders to understand or value, thus presenting attractive lending opportunities for the Company. Prospective borrowers with little-to-no revenue or earnings before interest, taxes, depreciation and amortization, or EBITDA, may be unable to secure financing from traditional lenders. In these instances, a debt-to-EBITDA approach may not be appropriate, instead requiring a value-oriented approach that involves targeting low loan-to-value ratios and negotiating bespoke covenants, contingencies and terms that help mitigate business-specific risks. Examples of these opportunities may include life sciences companies that have revenue-generating drugs and hard assets, but reinvest that capital into research and development for promising new products.

•Sponsor-Related Financings. Financing for portfolio companies backed by private equity firms is one the most active areas of opportunity, including those opportunities related to leveraged buyouts and refinancings. The Investment Professionals have many longstanding relationships with established, reputable sponsors, and generally favor those that view their portfolio companies as long-term partners and those that specialize in certain industries where they have significant subject matter expertise. In addition, the Investment Professionals have historically favored borrowers backed by sponsors that have demonstrated a willingness to invest large amounts of equity, which provides enhanced downside protection. Examples of these opportunities may include financings for software- or healthcare-focused borrowers backed by private equity firms.

•Stressed Sector/Rescue Lending. Individual businesses or sectors experiencing stress or reduced access to capital can create attractive private lending opportunities. Broad market weakness or sector-specific issues can constrain borrowers’ access to capital. Further, certain factors such as regulation may cause entire industries (e.g., energy) to be rebuffed by more traditional lenders (e.g., commercial banks) such that all borrowers in the industry lose access to capital, regardless of their individual financial condition. Oftentimes, by sifting through an industry issuer-by-issuer, the Investment Professionals can identify attractive investment opportunities that are over-secured by valuable assets.
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Examples of these opportunities may include debtor-in-possession loans or loans to companies in sectors severely impacted by COVID-19, such as entertainment, real estate and travel.

Opportunities in Public Markets. Certain factors may also drive opportunities for us in the public market and will allow us to leverage Oaktree’s broader credit platform and decades of credit investing experience. These factors may include:

•Macro Factors. Macro factors that drive market dislocations can ripple through the global economy and include sovereign debt crises, political elections, global pandemics, including the ongoing COVID-19 pandemic, and other unexpected geopolitical events. These factors drive highly correlated “risk on” and “risk off” market swings and frequently result in the indiscriminate selling of securities and obligations at prices that the Investment Professionals believe are well below their intrinsic values.

•Industry Headwinds. Select industries may face secular challenges or may fall out of favor due to a variety of factors such as evolving technology or regulation. These headwinds can cause the debt of healthy and unhealthy companies alike to trade lower, potentially allowing the Investment Professionals to identify mispriced opportunities.

•Company Characteristics. Company-specific factors that drive market dislocations include overleveraged balance sheets, near-term liquidity or maturity issues, secular pressures, acute shock to company operations, asset-light businesses and new or relatively small issuers. These factors may result in mispriced securities or obligations or require a highly structured direct loan.
Investment Criteria and Guidelines
Once the Investment Professionals have identified a potential investment opportunity, they will evaluate the opportunity against the following investment criteria and guidelines. However, not all of these criteria will be met by each prospective portfolio company in which we invest.

•Covenant Protections.  We generally expect to invest in loans that have covenants that may help to minimize our risk of capital loss and meaningful equity investments in the portfolio company. We intend to target investments that have strong credit protections, including default penalties, information rights and affirmative, negative and financial covenants, such as limitations on debt incurrence, lien protection and prohibitions on dividends.

•Sustainable Cash Flow. Our investment philosophy places emphasis on fundamental analysis from an investor’s perspective and has a distinct value orientation. We intend to focus on companies with significant asset or enterprise value in which we can invest at relatively low multiples of normalized operating cash flow. Additionally, we anticipate investing in companies with a demonstrated ability or credible plan to de-lever. Typically, we will not invest in start-up companies or companies having speculative business plans or structures that could impair capital over the long-term although we may target certain earlier stage companies that have yet to reach profitability.

•Experienced Management Team.  We generally will look to invest in portfolio companies with an experienced management team and proper incentive arrangements, including equity compensation, to induce management to succeed and to act in concert with our interests as investors.

•Strong Relative Position in Its Market.  We intend to target companies with what we believe to be established and leading market positions within their respective markets and well-developed long-term business strategies.

•Exit Strategy. We generally intend to invest in companies that we believe will provide us with the opportunity to exit our investments in three to eight years, including through (1) the repayment of the remaining principal outstanding at maturity, (2) the recapitalization of the company resulting in our debt investments being repaid or (3) the sale of the company resulting in the repayment of all of its outstanding debt.

•Geography.  As a Business Development Company, we will invest at least 70% of our total assets in U.S. companies. To the extent we invest in non-U.S. companies, we intend to do so only in jurisdictions with established legal frameworks and a history of respecting creditor rights.

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Investment Process

Our investment process consists of the following five distinct stages.
Source
Strategic Credit has dedicated sourcing professionals and also leverages the strong market presences and relationships across the global platform of our Adviser and its affiliates to gain access to opportunities from advisers, sponsors, banks, management teams, capital raising advisers and other sources. Our Adviser is a trusted partner to financial sponsors and management teams based on its long-term commitment and focus on lending across economic cycles. We believe this gives us access to proprietary deal flow and "first looks" at investment opportunities and that we are well-positioned for difficult and complex transactions.
Screen Using Investment Criteria
We expect to be highly selective in making new investments. The initial screening process will typically include a review of the proposed capital structure of the prospective portfolio company, including level of assets or enterprise value coverage, an assessment by our Adviser of the company’s management team and its equity ownership levels as well as the viability of its long-term business model, and a review of forecasted financial statements and liquidity profile. In addition, our Adviser may assess the prospect of industry or macroeconomic catalysts that may create enhanced value in the investment as well as the potential ability to enforce creditor rights, particularly where collateral is located outside of the United States.
Research
Prior to making any new investment, our Adviser intends to engage in an extensive due diligence process led by investment analysts assigned to each transaction. The analysts will assess a company’s management team, products, services, competitive position in its markets, barriers to entry and operating and financial performance, as well as the growth potential of its markets. In performing this evaluation, the analysts may use financial, descriptive and other due diligence materials provided by the prospective portfolio company, commissioned third party reports and internal sources, including members of the investment team, industry participants and experts with whom our Adviser has relationships. As part of the research process, our Adviser’s analysts typically perform a “what-if” analysis that explores a range of values for each proposed investment and a range of potential credit events.
Evaluate
Our Adviser assesses each potential investment through a rigorous, collaborative decision-making process. Our Adviser applies disciplined investment criteria and evaluates potential risk and reward of each investment with significant focus on downside risk. Our Adviser sizes investments at the portfolio level across a variety of characteristics, including based on the investment criteria described above.
Monitor
Our Adviser prioritizes managing risk. In managing our portfolio, our Adviser monitors each portfolio company to be well-positioned to make hold and exit decisions when credit events occur, our collateral becomes overvalued or opportunities with more attractive risk/reward profiles are identified. Investment analysts are assigned to each investment to monitor industry developments, review company financial statements, attend company presentations and regularly speak with company management. Based on their monitoring, the Investment Professionals seek to determine the optimal time and strategy for exiting and maximizing the return on the investment, typically when prices or yields reach target valuations. In circumstances where a particular investment is underperforming, our Adviser intends to employ a variety of strategies to maximize its recovery based on the specific facts and circumstances of the underperforming investment, including actively working with the management to restructure all or a portion of the business, explore the possibility of a sale or merger of all or a portion of the assets, recapitalize or refinance the balance sheet, negotiate deferrals or other concessions from existing creditors and arrange new liquidity or new equity contributions. We believe that our Adviser’s experience with restructurings and our access to our Adviser’s deep knowledge, expertise and contacts in the distressed debt area will help us preserve the value of our investments.
In addition, throughout the COVID-19 pandemic, our Adviser has remained in close contact with many of our portfolio companies to understand their liquidity and solvency positions and changes thereto. We believe that these efforts to closely monitor and identify vulnerable investments have allowed us to address potential problems early and provide constructive solutions to our portfolio companies.
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Investments
Debt Investments
At fair value, 94.3% of our portfolio consisted of debt investments and 86.7% of our portfolio consisted of senior secured loans as of September 30, 2021. Our debt investments generally consist of the following:

•First Lien Loans.    Our first lien loans generally have terms of three to seven years, provide for a variable or fixed interest rate, contain prepayment penalties and are secured by a first priority security interest in all existing and future assets of the borrower. Our first lien loans may take many forms, including revolving lines of credit, term loans and acquisition lines of credit.

•Unitranche Loans.    Our unitranche loans generally have terms of five to seven years and provide for a variable or fixed interest rate, contain prepayment penalties and are generally secured by a first priority security interest in all existing and future assets of the borrower. Our unitranche loans may take many forms, including revolving lines of credit, term loans and acquisition lines of credit. Unitranche loans typically provide a borrower with all of its capital except for common equity, often with higher interest rates than those associated with traditional first lien loans.

•Second Lien Loans.    Our second lien loans generally have terms of five to eight years, provide for a variable or fixed interest rate, contain prepayment penalties and are secured by a second priority security interest in all existing and future assets of the borrower.

•Mezzanine Loans.    Our mezzanine loans generally have maturities of five to ten years. Mezzanine loans may take the form of a second priority lien on the assets of a portfolio company and have interest-only payments in the early years with cash or PIK payments with amortization of principal deferred to the later years. In some cases, we may invest in debt securities that, by their terms, convert into equity or additional debt securities or defer payments of interest for the first few years after our investment.

•Unsecured Loans.  Our unsecured investments generally have terms of five to ten years and provide for a fixed interest rate. We may make unsecured investments on a stand-alone basis, or in connection with a senior secured loan, a junior secured loan or a “one-stop” financing.

•Bonds.  We may selectively invest in high yield corporate bonds issued by middle-market companies that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. The bonds in which we may invest are expected to have terms of five to eight years and provide for fixed interest rate payments. We do not expect that these bonds would be secured by any assets of the issuer.
Equity Investments
When we make a debt investment, we may also be granted equity, such as warrants to purchase common stock in a portfolio company. To a lesser extent, we may also make preferred and/or common equity investments, which may be in conjunction with a concurrent debt investment or the result of an investment restructuring. For non-control equity investments, we generally seek to structure our non-control equity investments to provide us with minority rights provisions and event-driven put rights. We also seek to obtain limited registration rights in connection with these investments, which may include “piggyback” registration rights.
SLF JV I
We and Kemper co-invest through SLF JV I, an unconsolidated Delaware limited liability company, or LLC. SLF JV I was formed in May 2014 to invest in middle-market and other corporate debt securities. As of September 30, 2021, we and Kemper had funded an aggregate of approximately $165.5 million to SLF JV I, of which $144.8 million was from us. As of September 30, 2021, we had aggregate commitments to fund SLF JV I of $35.0 million, of which approximately $26.2 million was to fund additional subordinated notes issued by SLF JV I, or the SLF JV I Notes, and approximately $8.8 million was to fund LLC equity interests in SLF JV I. Additionally, SLF JV I has a senior revolving credit facility with Deutsche Bank AG, New York Branch, as amended, or the Deutsche Bank I Facility, which permitted up to $260.0 million of borrowings (subject to borrowing base and other limitations) as of September 30, 2021. Borrowings under the Deutsche Bank I Facility are secured by all of the assets of a special purpose financing subsidiary of SLF JV I. SLF JV I is managed by a four-person Board of Directors, two of whom are selected by us and two of whom are selected by Kemper. SLF JV I is generally capitalized as transactions are completed and all portfolio decisions must be approved by its investment committee consisting of one representative selected by us and one representative selected by Kemper (with approval of each required).
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As of September 30, 2021, our investment in SLF JV I was approximately $133.9 million at fair value. We do not consolidate SLF JV I in our Consolidated Financial Statements.
Glick JV
On March 19, 2021, as a result of the consummation of the Mergers, we became party to the LLC agreement of the Glick JV. The Glick JV invests primarily in senior secured loans of middle-market companies. Approximately $84.0 million in aggregate commitments was funded to the Glick JV as of September 30, 2021, of which $73.5 million was from us. As of September 30, 2021, we had aggregate unfunded commitments to Glick JV of approximately $14.0 million, of which $12.4 million was to fund subordinated notes issued by the Glick JV, or the Glick JV Notes, and $1.6 million was to fund LLC equity interests in the Glick JV. The Glick JV has a senior revolving credit facility with Deutsche Bank AG, New York Branch, or the Glick JV Deutsche Bank Facility, which permitted borrowings of up to $90.0 million (subject to borrowing base and other limitations) as of September 30, 2021. Borrowings under the Glick JV Deutsche Bank Facility are secured by all of the assets of the Glick JV and all of the equity interests in the Glick JV. The Glick JV is managed by a four-person Board of Directors, two of whom are selected by us and two of whom are selected by GF Equity Funding. The Glick JV is generally capitalized as transactions are completed and all portfolio decisions must be approved by its investment committee consisting of one representative selected by us and one representative selected by GF Equity Funding (with approval of each required). As of September 30, 2021, our investment in the Glick JV was approximately $55.6 million at fair value. We do not consolidate Glick JV in our Consolidated Financial Statements.
Valuation Procedures
As a Business Development Company, we generally invest in illiquid debt and equity securities issued by private middle-market companies. We are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value as determined by our Board of Directors. See Note 2 to our Consolidated Financial Statements in this Annual Report on Form 10-K.
Investment Advisory Agreement
The following is a description of the Investment Advisory Agreement. From October 17, 2017 through May 3, 2020, we were externally managed by OCM pursuant to an investment advisory agreement. On May 4, 2020, OCM effected the novation of such investment advisory agreement to Oaktree. Immediately following such novation, we and Oaktree entered into a new investment advisory agreement with the same terms, including fee structure, as the investment advisory agreement with OCM. The investment advisory agreement with Oaktree was subsequently amended and restated on March 19, 2021 in connection with the closing of the Mergers. The term “Investment Advisory Agreement” refers collectively to the agreements with Oaktree and, prior to its novation, with OCM.
Management Services
Subject to the overall supervision of our Board of Directors, Oaktree manages our day-to-day operations and provides us with investment advisory services. Under the Investment Advisory Agreement, Oaktree:
 
•determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;
•identifies, evaluates and negotiates the structure of the investments we make;
•executes, closes, monitors and services the investments we make;
•determines what securities and other assets we purchase, retain or sell;
•performs due diligence on prospective portfolio companies; and
•provides us with such other investment advisory, research and related services as we may, from time to time, reasonably required for the investment of our funds.
The Investment Advisory Agreement provides that Oaktree’s services are not exclusive to us and Oaktree is generally free to furnish similar services to other entities so long as its services to us are not impaired.
Management and Incentive Fee
Under the Investment Advisory Agreement, we pay Oaktree a fee for its services under the investment advisory agreement consisting of two components: a base management fee and an incentive fee. The cost of both the base management fee payable to Oaktree and any incentive fees earned by Oaktree is ultimately borne by our common stockholders.
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Base Management Fee
Under the Investment Advisory Agreement, the base management fee is calculated at an annual rate of 1.50% of total gross assets, including any investment made with borrowings, but excluding cash and cash equivalents. Effective May 3, 2019, the base management fee on the Company’s gross assets, including any investments made with borrowings, but excluding any cash and cash equivalents, that exceed the product of (A) 200% and (B) the Company’s net asset value will be 1.00%. For the avoidance of doubt, the 200% will be calculated in accordance with the Investment Company Act and will give effect to exemptive relief the Company received from the SEC with respect to debentures issued by a small business investment company subsidiary. In connection with the Mergers, the Company and Oaktree entered into an amended and restated investment advisory agreement, which among other items, waived an aggregate of $6 million of base management fees otherwise payable to Oaktree in the two years following the closing of the Mergers on March 19, 2021 at a rate of $750,000 per quarter (with such amount appropriately prorated for any partial quarter).
Incentive Fee
The incentive fee consists of two parts. Under the Investment Advisory Agreement, the first part of the incentive fee, which is referred to as the incentive fee on income or the Part I incentive fee, is calculated and payable quarterly in arrears based upon our “pre-incentive fee net investment income” for the immediately preceding quarter. The payment of the incentive fee on income is subject to payment of a preferred return to investors each quarter (i.e., a “hurdle rate”), expressed as a rate of return on the value of our net assets at the end of the most recently completed quarter, of 1.50%, subject to a “catch up” feature.
For this purpose, “pre-incentive fee net investment income” means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies, other than fees for providing managerial assistance) accrued during the fiscal quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, or OID, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. In addition, pre-incentive fee net investment income does not include any amortization or accretion of any purchase premium or purchase discount to interest income resulting solely from merger-related accounting adjustments in connection with the assets acquired in the Mergers, including any premium or discount paid for the acquisition of such assets, solely to the extent that the inclusion of such merger-related accounting adjustments, in the aggregate, would result in an increase in pre-incentive fee net investment income.
Under the Investment Advisory Agreement, the calculation of the incentive fee on income for each quarter is as follows:
 
•No incentive fee is payable to Oaktree in any quarter in which our pre-incentive fee net investment income does not exceed the preferred return rate of 1.50% (the “preferred return”) on net assets.
•100% of our pre-incentive fee net investment income, if any, that exceeds the preferred return but is less than or equal to 1.8182% in any fiscal quarter is payable to Oaktree. We refer to this portion of the incentive fee on income as the “catch-up” provision, and it is intended to provide Oaktree with an incentive fee of 17.5% on all of our pre-incentive fee net investment income when our pre-incentive fee net investment income reaches 1.8182% on net assets in any fiscal quarter.
•For any quarter in which our pre-incentive fee net investment income exceeds 1.8182% on net assets, the incentive fee on income is equal to 17.5% of the amount of our pre-incentive fee net investment income, as the preferred return and catch-up will have been achieved.
There is no accumulation of amounts on the hurdle rate from quarter to quarter and accordingly there is no clawback of amounts previously paid if subsequent quarters are below the quarterly hurdle.
The following is a graphical representation of the calculation of the incentive fee on income under the Investment Advisory Agreement:

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Quarterly Incentive Fee on Income
Pre-incentive fee net investment income
(expressed as a percentage of net assets)


incentivefeeonincomegraph.jpg

Percentage of pre-incentive fee net investment income allocated to income-related portion of incentive fee

Under the Investment Advisory Agreement, the second part of the incentive fee is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Investment Advisory Agreement, as of the termination date) commencing with the fiscal year ended September 30, 2019 and equals 17.5% of our realized capital gains, if any, on a cumulative basis from the beginning of the fiscal year ended September 30, 2019 through the end of each subsequent fiscal year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees under the Investment Advisory Agreement. Any realized capital gains, realized capital losses, unrealized capital appreciation and unrealized capital depreciation with respect to our portfolio as of the end of the fiscal year ended September 30, 2018 are excluded from the calculations of the second part of the incentive fee. In addition, the calculation of realized capital gains, realized capital losses and unrealized capital depreciation does (1) not include any such amounts resulting solely from merger-related accounting adjustments in connection with the assets acquired in the Mergers, including any premium or discount paid for the acquisition of such assets, solely to the extent that the inclusion of such merger-related accounting adjustments, in the aggregate, would result in an increase in the capital gains incentive fee and (2) include any such amounts associated with the investments acquired in the Mergers for the period from October 1, 2018 to the date of closing of the Mergers, solely to the extent that the exclusion of such amounts, in the aggregate, would result in an increase in the capital gains incentive fee.
Examples of Quarterly Incentive Fee Calculation under the Investment Advisory Agreement (A)
Example 1: Incentive Fee on Income for Each Quarter
Alternative 1
Assumptions
Investment income (including interest, dividends, fees, etc.) = 2%
Preferred return under the Investment Advisory Agreement1 = 1.50%
Management fee under the Investment Advisory Agreement2 = 0.375%
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.20%
Pre-incentive fee net investment income
    (investment income - (management fee + other expenses)) = 1.425%

Pre-incentive fee net investment income does not exceed the preferred return under the Investment Advisory Agreement, therefore there is no incentive fee on income under the Investment Advisory Agreement.

Alternative 2
Assumptions
Investment income (including interest, dividends, fees, etc.) = 2.375%
Preferred return under the Investment Advisory Agreement1 = 1.50%
Management fee under the Investment Advisory Agreement2 = 0.375%
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.20%
Pre-incentive fee net investment income
    (investment income - (management fee + other expenses)) = 1.80%
Incentive fee = 17.5% × pre-incentive fee net investment income, subject to “catch-up”3
= 100% × (1.80% - 1.50%)
= 0.30%

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Alternative 3
Assumptions
Investment income (including interest, dividends, fees, etc.) = 3.5%
Preferred return under the Investment Advisory Agreement1 = 1.50%
Management fee under the Investment Advisory Agreement2 = 0.375%
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.20%
Pre-incentive fee net investment income
    (investment income - (management fee + other expenses)) = 2.925%
Incentive fee = 17.5% × pre-incentive fee net investment income, subject to “catch-up”3
Incentive fee = 100% × “catch-up” + (17.5% × (pre-incentive fee net investment income - 1.8182%))
Catch-up = 1.8182% - 1.50% = 0.3182%
Incentive fee = (100% × 0.3182%) + (17.5% × (2.925% - 1.8182%))
= 0.3182% + (17.5% × 1.1068%)
= 0.3182% + 0.1937%
= 0.5119%
__________ 
(A) Solely for purposes of these illustrative examples, we have assumed that we have not incurred any leverage. However, we have in the past and expect to continue in the future to use leverage to partially finance our investments.

1.Represents 6.0% annualized preferred return.
2.Represents 1.50% annualized management fee and does not reflect any waivers of the management fee.
3.The “catch-up” provision is intended to provide our Adviser with an incentive fee of 17.5% on all of our pre-incentive fee net investment income as if a preferred return did not apply when our net investment income exceeds 1.50% in any calendar quarter and is not applied once our Adviser has received 17.5% of investment income in a quarter. The “catch-up” portion of our pre-incentive fee net investment income is the portion that exceeds the 1.50% preferred return but is less than or equal to approximately 1.8182% (that is, 1.50% divided by (1 - 0.175)) in any fiscal quarter.

Example 2: Incentive Fee on Capital Gains under the Investment Advisory Agreement
Assumptions
•Year 1: $10 million investment made in Company A (“Investment A”), $10 million investment made in Company B (“Investment B”), $10 million investment made in Company C (“Investment C”), $10 million investment made in Company D (“Investment D”) and $10 million investment made in Company E (“Investment E”).
•Year 2: Investment A sold for $20 million, fair market value (“FMV”) of Investment B determined to be $8 million, FMV of Investment C determined to be $12 million, and FMV of Investments D and E each determined to be $10 million.
•Year 3: FMV of Investment B determined to be $8 million, FMV of Investment C determined to be $14 million, FMV of Investment D determined to be $14 million and FMV of Investment E determined to be $16 million.
•Year 4: Investment D sold for $12 million, FMV of Investment B determined to be $10 million, FMV of Investment C determined to be $16 million and FMV of Investment E determined to be $14 million.
•Year 5: Investment C sold for $20 million, FMV of Investment B determined to be $14 million and FMV of Investment E determined to be $10 million.
•Year 6: Investment B sold for $16 million and FMV of Investment E determined to be $8 million.
•Year 7: Investment E sold for $8 million and FMV.



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These assumptions are summarized in the following chart:
Investment AInvestment BInvestment CInvestment DInvestment ECumulative Unrealized Capital DepreciationCumulative Realized Capital LossesCumulative Realized Capital Gains
Year 1$10 million (cost basis)$10 million (cost basis)$10 million (cost basis)$10 million (cost basis)$10 million (cost basis)------
Year 2$20 million (sale price)$8 million
FMV		$12 million FMV$10 million FMV$10 million FMV$2 million--$10 million
Year 3 --$8 million
FMV		$14 million FMV$14 million FMV$16 million FMV$2 million--$10 million
Year 4--$10 million FMV$16 million FMV$12 million (sale price)$14 million FMV----$12 million
Year 5--$14 million FMV$20 million (sale price)--$10 million FMV----$22 million
Year 6--$16 million (sale price)----$8 million FMV$2 million--$28 million
Year 7--------$8 million (sale price)--$2 million$28 million


The Incentive Fee on Capital Gains under the Investment Advisory Agreement would be:
•Year 1:    None

•Year 2:    Capital Gains Fee = 17.5% multiplied by ($10 million realized capital gains on sale of Investment A less $2 million cumulative capital depreciation) = $1.4 million

•Year 3:    Capital Gains Fee = (17.5% multiplied by ($10 million cumulative realized capital gains less $2 million cumulative capital depreciation)) less $1.4 million cumulative Capital Gains Fee previously paid = $1.4 million less $1.4 million = $0.00 million

•Year 4:    Capital Gains Fee = (17.5% multiplied by ($12 million cumulative realized capital gains)) less $1.4 million cumulative Capital Gains Fee previously paid = $2.1 million less $1.4 million = $0.7 million

•Year 5:    Capital Gains Fee = (17.5% multiplied by ($22 million cumulative realized capital gains)) less $2.1 million cumulative Capital Gains Fee previously paid = $3.85 million less $2.1 million = $1.75 million

•Year 6:    Capital Gains Fee = (17.5% multiplied by ($28 million cumulative realized capital gains less $2 million cumulative capital depreciation)) less $3.85 million cumulative Capital Gains Fee previously paid = $4.55 million less $3.85 million = $0.70 million

•Year 7:    Capital Gains Fee = (17.5% multiplied by ($28 million cumulative realized capital gains less $2 million cumulative realized capital losses)) less $4.55 million cumulative Capital Gains Fee previously paid = $4.55 million less $4.55 million = $0.00 million
Duration and Termination
Unless earlier terminated as described below, the Investment Advisory Agreement will remain in effect from year-to-year if approved annually by our Board or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested persons. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. The Investment Advisory Agreement may also be terminated, without penalty, upon the vote of a majority of our outstanding voting securities.
Indemnification
The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of their respective duties or by reason of the reckless disregard of their respective duties and obligations, Oaktree and its officers, managers, partners, members (and their members, including the owners of their members), agents, employees, controlling persons and any other person or entity affiliated with it, are entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of Oaktree’s services under the Investment Advisory Agreement or otherwise as our investment adviser.
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Organization of our Adviser
Our Adviser is a Delaware limited liability company that is registered as an investment adviser under the Advisers Act. The principal address of our Adviser is 333 South Grand Avenue, 28th Floor, Los Angeles, CA 90071.
Board Approval of the Investment Advisory Agreement
At the meeting held on July 30, 2021, our Board of Directors, including all of the independent directors, unanimously approved the Investment Advisory Agreement. In reaching its decision to approve the Investment Advisory Agreement, our Board of Directors, including all of the independent directors, reviewed a significant amount of information, which had been furnished by Oaktree at the request of independent counsel, on behalf of the independent directors. In reaching a decision to approve the Investment Advisory Agreement, our Board of Directors considered, among other things:
 
•the nature, extent and quality of services performed by Oaktree;
•the investment performance of us and other Business Development Companies with a similar investment objective to us;
•the costs of services provided and the profits realized by Oaktree and its affiliates from their relationship with us;
•the possible economies of scale that would be realized due to our growth;
•whether fee levels reflect such economies of scale for the benefit of investors; and
•comparisons of services rendered to and fees paid by us with the services provided by and the fees paid to other investment advisers and the services provided to and the fees paid by other Oaktree clients.
No single factor was determinative of the decision of our Board of Directors, including all of the independent directors, to approve the Investment Advisory Agreement and individual directors may have weighed certain factors differently. Throughout the process, the independent directors were advised by, and met separately with, independent counsel.
Payment of Our Expenses
Our primary operating expenses are the payment of (i) a base management fee and any incentive fees and (ii) the allocable portion of overhead and other expenses incurred by Oaktree Administrator in performing its obligations under the Administration Agreement. Our management fee compensates our Adviser for its work in identifying, evaluating, negotiating, executing and servicing our investments. We generally bear all other expenses of our operations and transactions, including (without limitation) fees and expenses relating to:
 
•expenses of offering our debt and equity securities;
•the investigation and monitoring of our investments;
•the cost of calculating our net asset value;
•the cost of effecting sales and repurchases of shares of our common stock and other securities;
•management and incentive fees payable pursuant to the Investment Advisory Agreement;
•fees payable to third parties relating to, or associated with, making investments and valuing investments (including third-party valuation firms);
•transfer agent, trustee and custodial fees;
•interest payments and other costs related to our borrowings;
•fees and expenses associated with marketing efforts (including attendance at investment conferences and similar events);
•federal and state registration fees;
•any exchange listing fees;
•federal, state and local taxes;
•independent directors’ fees and expenses;
•brokerage commissions;
•costs of mailing proxy statements, stockholders’ reports and notices;
•costs of preparing government filings, including periodic and current reports with the SEC;
•fidelity bond, liability insurance and other insurance premiums; and
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•printing, mailing, independent accountants and outside legal costs and all other direct expenses incurred by either our administrator or us in connection with administering our business, including payments under the Administration Agreement.
Administration Agreement
We are party to the Administration Agreement with Oaktree Administrator. Pursuant to the Administration Agreement, Oaktree Administrator provides administrative services to us necessary for our operations, which include providing office facilities, equipment, clerical, bookkeeping and record keeping services at such facilities and such other services as Oaktree Administrator, subject to review by our Board of Directors, shall from time to time deem to be necessary or useful to perform its obligations under the Administration Agreement. Oaktree Administrator may, on behalf of us, conduct relations and negotiate agreements with custodians, trustees, depositories, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable. Oaktree Administrator will make reports to our Board of Directors of its performance of obligations under the Administration Agreement and furnish advice and recommendations with respect to such other aspects of our business and affairs, in each case, as it shall determine to be desirable or as reasonably required by our Board of Directors; provided that Oaktree Administrator shall not provide any investment advice or recommendation.
Oaktree Administrator also provides portfolio collection functions for interest income, fees and warrants and is responsible for the financial and other records that we are required to maintain, and prepares, prints and disseminates reports to our stockholders and all other materials filed with the SEC. In addition, Oaktree Administrator assists us in determining and publishing our net asset value, overseeing the preparation and filing of our tax returns, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others. Oaktree Administrator may also offer to provide, on our behalf, managerial assistance to our portfolio companies.
For providing these services, facilities and personnel, we reimburse Oaktree Administrator the allocable portion of overhead and other expenses incurred by Oaktree Administrator in performing its obligations under the Administration Agreement, including our allocable portion of the rent of our principal executive offices (which are located in a building owned by a Brookfield affiliate) at market rates and our allocable portion of the costs of compensation and related expenses of our Chief Financial Officer, Chief Compliance Officer, their staffs and other non-investment professionals at Oaktree that perform duties for us. Such reimbursement is at cost, with no profit to, or markup by, Oaktree Administrator.
The Administration Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of their respective duties or by reason of the reckless disregard of their respective duties and obligations, Oaktree Administrator and its officers, managers, partners, agents, employees, controlling persons, members (or their owners) and any other person or entity affiliated with it, are entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of Oaktree Administrator’s services under the Administration Agreement or otherwise as our administrator.
Unless earlier terminated as described below, the Administration Agreement will remain in effect from year-to-year if approved annually by our Board of Directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested persons. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. The Administration Agreement may also be terminated, without penalty, upon the vote of a majority of our outstanding voting securities.
Competition
We operate in a highly competitive market for investment opportunities. We compete for investments with various other investors, such as other public and private funds, other Business Development Companies, commercial and investment banks, commercial finance companies and to the extent they provide an alternative form of financing, private equity funds, some of which may be our affiliates. Other Oaktree funds may have investment objectives that overlap with ours, which may create competition for investment opportunities. Many competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that will not be available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we do, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the Investment Company Act and the Code impose on us. The competitive pressures could impair our business, financial condition and results of operations. As a result of this competition, we may not be able to take advantage of attractive investment opportunities. See
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“Item 1A. Risk Factors – Risks Relating to Our Business and Structure – We may face increasing competition for investment opportunities, which could reduce returns and result in losses."
Staffing
We do not currently have any employees and do not expect to have any employees. Services necessary for our business are provided through the Administration Agreement and the Investment Advisory Agreement.
Allocation of Investment Opportunities and Potential Conflicts of Interest
Our executive officers and directors, and certain members of our Adviser, serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do or of investment funds managed by our affiliates. For example, Oaktree presently serves as the investment adviser to Oaktree Strategic Income II, Inc., or OSI II, a private Business Development Company. All of our executive officers serve in substantially similar capacities for OSI II, and one of our independent directors serves as an independent director of OSI II. OSI II has historically invested in senior secured loans, including first lien, unitranche and second lien debt instruments that pay interest at rates which are determined periodically on the basis of a floating base lending rate, made to private middle-market companies whose debt is rated below investment grade, similar to those we target for investment. Oaktree and its affiliates also manage or sub-advise other Business Development Companies, registered investment companies and private investment funds and accounts, and may manage other such funds and accounts in the future, which have investment mandates that are similar, in whole and in part, with ours. Therefore, there may be certain investment opportunities that satisfy the investment criteria for OSI II and us as well as other Business Development Companies, registered investment companies and private investment funds and accounts advised or sub-advised by Oaktree or its affiliates. In addition, Oaktree and its affiliates may have obligations to investors in other entities that they advise or sub-advise, the fulfillment of which might not be in the best interests of us or our stockholders.
For example, the personnel of our Adviser may face conflicts of interest in the allocation of investment opportunities to us and such other funds and accounts. Oaktree has investment allocation guidelines that govern the allocation of investment opportunities among the investment funds and accounts managed or sub-advised by Oaktree and its affiliates. To the extent an investment opportunity is appropriate for us or OSI II or any other investment fund or account managed or sub-advised by Oaktree or its affiliates, Oaktree will adhere to its investment allocation guidelines in order to determine a fair and equitable allocation.
We may invest alongside funds and accounts managed or sub-advised by our Adviser and its affiliates in certain circumstances where doing so is consistent with applicable law and SEC staff interpretations. For example, we may invest alongside such accounts consistent with guidance promulgated by the staff of the SEC permitting us and such other accounts to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that our Adviser, acting on our behalf and on behalf of other clients, negotiates no term other than price or terms related to price.
In addition, affiliates of our Adviser have received exemptive relief from the SEC to allow certain managed funds and accounts, each of whose investment adviser is OCM or an investment adviser controlling, controlled by or under common control with OCM, such as our Adviser, as well as proprietary accounts (subject to certain conditions) to participate in negotiated co-investment transactions where doing so is consistent with the applicable registered fund’s or Business Development Company’s investment objective and strategies as well as regulatory requirements and other pertinent factors, and pursuant to the conditions of the exemptive relief. Each potential co-investment opportunity that falls under the terms of the exemptive relief and is appropriate for us and any affiliated fund or account, and satisfies the then-current board-established criteria, will be offered to us and such other eligible funds and accounts. If there is a sufficient amount of securities to satisfy all participants, the securities will be allocated among the participants in accordance with their proposed order size and if there is an insufficient amount of securities to satisfy all participants, the securities will be allocated pro rata based on the investment proposed by the applicable investment adviser to such participant, up to the amount proposed to be invested by each, which is reviewed and approved by an independent committee of legal, compliance and accounting professionals at our Adviser. We may also invest alongside funds managed by our Adviser and its affiliates in certain circumstances where doing so is consistent with applicable law and SEC staff interpretations. For example, we may invest alongside such accounts consistent with guidance promulgated by the staff of the SEC permitting us and such other accounts to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that our Adviser, acting on our behalf and on behalf of other clients, negotiates no term other than price.
Although Oaktree will endeavor to allocate investment opportunities in a fair and equitable manner, we and our common stockholders could be adversely affected to the extent investment opportunities are allocated among us and other investment
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vehicles managed or sponsored by, or affiliated with, our executive officers, directors and members of our Adviser. We might not participate in each individual opportunity, but will, on an overall basis, be entitled to participate equitably with other entities managed by Oaktree and its affiliates. Oaktree is committed to treating all clients fairly and equitably over time such that none receive preferential treatment vis-à-vis the others over time, in a manner consistent with its fiduciary duty to each of them; however, in some instances, especially in instances of limited liquidity, the factors may not result in pro rata allocations or may result in situations where certain funds or accounts receive allocations where others do not.
Pursuant to the Investment Advisory Agreement, our Adviser’s liability is limited and we are required to indemnify our Adviser against certain liabilities. This may lead our Adviser to act in a riskier manner in performing its duties and obligations under the Investment Advisory Agreement than it would if it were acting for its own account, and creates a potential conflict of interest.
Pursuant to the Administration Agreement, Oaktree Administrator furnishes us with the facilities, including our principal executive office, and administrative services necessary to conduct our day-to-day operations. We pay Oaktree Administrator its allocable portion of overhead and other expenses incurred by Oaktree Administrator in performing its obligations under the Administration Agreement, including, without limitation, a portion of the rent at market rates and compensation of our Chief Financial Officer, Chief Compliance Officer, their respective staffs and other non-investment professionals at Oaktree that perform duties for us.
Election to be Taxed as a Regulated Investment Company
We have elected to be treated, and intend to operate in a manner so as to continuously qualify annually, as a RIC for U.S. federal income tax purposes under Subchapter M of the Code. As a RIC, we generally will not be required to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we timely distribute (or are deemed to distribute) to our stockholders as dividends. Instead, dividends we distribute (or are deemed to distributed) generally will be taxable to stockholders, and any net operating losses, foreign tax credits and most other tax attributes generally will not pass through to stockholders. To continue to qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, to qualify for RIC tax treatment we must distribute to our stockholders, for each taxable year, at least 90% of the Company’s “investment company taxable income” for that year, which is generally its ordinary income plus the excess of its realized net short-term capital gains over its realized net long-term capital losses, or the Annual Distribution Requirement.
If we:
•qualify as a RIC; and
•satisfy the Annual Distribution Requirement;

then we will not be subject to U.S. federal income tax on the portion of our investment company taxable income and net capital gain (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) we distribute to stockholders. We are subject to U.S. federal income tax at the regular corporate rates on any income or capital gain not distributed (or deemed distributed) to our stockholders.
We will be subject to a 4% nondeductible federal excise tax on certain undistributed income unless we distribute in a timely manner an amount at least equal to the sum of (1) 98% of our ordinary income for each calendar year, (2) 98.2% of our capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, and on which we paid no U.S. federal income tax, in preceding years.
In order to maintain our qualification as a RIC for U.S. federal income tax purposes, we must, among other things:
•at all times during each taxable year, have in effect an election to be treated as a Business Development Company under the Investment Company Act;

•derive in each taxable year at least 90% of our gross income from (a) dividends, interest, payments with respect to certain securities (including loans), gains from the sale of stock or other securities or currencies, or other income derived with respect to our business of investing in such stock, securities or currencies and (b) net income derived from an interest in a “qualified publicly traded partnership;” (the “90% Gross Income Test”) and

•diversify our holdings so that at the end of each quarter of the taxable year:

◦(i) at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities,
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securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of its assets or more than 10% of the outstanding voting securities of the issuer; and

◦(ii) no more than 25% of the value of our assets is invested in (a) the securities, other than U.S. government securities or securities of other RICs, of one issuer, (b) the securities of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or (c) the securities of one or more “qualified publicly traded partnerships” ((i) and (ii) collectively, the “Diversification Tests”).
We may be required to recognize taxable income in circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having OID (such as debt instruments with increasing interest rates or debt instruments issued with warrants), we must include in income each year a portion of the OID that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. Because any OID accrued will be included in our investment company taxable income for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount.
Because we use debt financing, we are subject to certain asset coverage ratio requirements under the Investment Company Act described above and financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the Annual Distribution Requirement. If we are unable to obtain cash from other sources or are otherwise limited in our ability to make distributions, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.
Certain of our investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things: (a) disallow, suspend or otherwise limit the allowance of certain losses or deductions; (b) convert lower taxed long-term capital gain into higher taxed short-term capital gain or ordinary income; (c) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited); (d) cause us to recognize income or gain without a corresponding receipt of cash; (e) adversely affect the time as to when a purchase or sale of securities is deemed to occur; (f) adversely alter the characterization of certain complex financial transactions; or (g) produce income that will not be qualifying income for purposes of the 90% Gross Income Test described above. We will monitor our transactions and may make certain tax elections in order to mitigate the potential adverse effect of these provisions.
If, in any particular taxable year, we do not qualify as a RIC, all of our taxable income (including our net capital gains) will be subject to tax at regular corporate rates without any deduction for distributions to stockholders, and distributions will be taxable to the stockholders as ordinary dividends to the extent of our current and accumulated earnings and profits.
Business Development Company Regulations
We have elected to be a Business Development Company under the Investment Company Act. As with other companies regulated by the Investment Company Act, a Business Development Company must adhere to certain substantive regulatory requirements. The Investment Company Act contains prohibitions and restrictions relating to transactions between Business Development Companies and their affiliates (including any investment advisers), principal underwriters and affiliates of those affiliates or underwriters.
The Investment Company Act further requires that a majority of our directors be persons other than “interested persons,” as that term is defined in the Investment Company Act. In addition, we may not change the nature of our business so as to cease to be, or withdraw our election as, a Business Development Company unless authorized by a vote of a majority of the outstanding voting securities, as required by the Investment Company Act. A majority of the outstanding voting securities of a company is defined under the Investment Company Act as the lesser of: (a) 67% or more of such company’s voting securities present at a meeting if more than 50% of the outstanding voting securities of such company are present or represented by proxy, or (b) more than 50% of the outstanding voting securities of such company. We do not anticipate any substantial change in the nature of our business.
We are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, warrants, options or rights to acquire our common stock, at a price below the current net asset value of the common stock if our Board of Directors determines that such sale is in our best interests and that of our stockholders, and our stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our Board of Directors, closely approximates the market value of such securities (less any distributing commission or discount). We may also make rights offerings to our stockholders at prices per share less than the net asset value per share, subject to applicable requirements of the Investment Company Act.
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Investment Restrictions
We do not intend to acquire securities issued by any investment company that exceed the limits imposed by the Investment Company Act. Under such limits, except for registered money market funds, we generally cannot acquire more than 3% of the voting stock of any registered investment company, invest more than 5% of the value of our total assets in the securities of one registered investment company or invest more than 10% of the value of our total assets in the securities of registered investment companies in the aggregate. The portion of our portfolio invested in securities issued by investment companies ordinarily will subject stockholders to additional indirect expenses. None of the policies described above is fundamental and each such policy may be changed without stockholder approval, subject to any limitations imposed by the Investment Company Act.
Qualifying Assets
Under the Investment Company Act, a Business Development Company may not acquire any asset other than assets of the type listed in Section 55(a) of the Investment Company Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. The principal categories of qualifying assets relevant to our business are any of the following:
(1) Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the Investment Company Act as any issuer which:
(a) is organized under the laws of, and has its principal place of business in, the United States;
(b) is not an investment company (other than a small business investment company wholly owned by the Business Development Company) or a company that would be an investment company but for certain exclusions under the Investment Company Act; and
(c) satisfies any of the following:
(i) does not have any class of securities that is traded on a national securities exchange;
(ii) has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less than $250 million;
(iii) is controlled by a Business Development Company or a group of companies including a Business Development Company and the Business Development Company has an affiliated person who is a director of the eligible portfolio company; or
(iv) is a small and solvent company having total assets of not more than $4 million and capital and surplus of not less than $2 million;
(2) Securities of any eligible portfolio company that we control;
(3) Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements;
(4) Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company;
(5) Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities; or
(6) Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.
Managerial Assistance to Portfolio Companies
A Business Development Company must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above. However, in order to count portfolio securities as qualifying assets for the purpose of the 70% test, a Business Development Company must either control the issuer of the securities or must offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance. However,
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when a Business Development Company purchases securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance. Making available managerial assistance includes any arrangement whereby a Business Development Company, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company.
Temporary Investments
Pending investment in other types of "qualifying assets," as described above, our investments may consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment (collectively, “temporary investments”) so that 70% of our assets are qualifying assets. We may also invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as the Company, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our gross assets constitute repurchase agreements from a single counterparty, we would not meet the Diversification Tests. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. Our Adviser will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.
Senior Securities
At a special meeting of stockholders held on June 28, 2019, our stockholders approved the application of the reduced asset coverage requirements in Section 61(a)(2) of the Investment Company Act to us, effective as of June 29, 2019. The reduced asset coverage requirements permit us to double the maximum amount of leverage that we are permitted to incur by reducing the asset coverage requirements applicable to us from 200% to 150%. As a result of the reduced asset coverage requirement, we can incur $2 of debt for each $1 of equity.
Consistent with applicable legal and regulatory requirements, we are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as calculated as provided in the Investment Company Act, is at least 150% immediately after each such issuance. In addition, while any senior securities remain outstanding, we may make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We would also be permitted to borrow amounts up to 5% of the value of our total assets for generally up to 60 days for temporary purposes without regard to asset coverage.
Other
We are subject to periodic examination by the SEC for compliance with the Investment Company Act.
We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a Business Development Company, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.
We and our Adviser are each required to adopt and implement written policies and procedures reasonably designed to prevent violation of the U.S. federal securities laws, review these policies and procedures annually for their adequacy and the effectiveness of their implementation, and designate a Chief Compliance Officer to be responsible for administering the policies and procedures.
Code of Ethics
We have adopted a joint code of ethics with OSI II pursuant to Rule 17j-1 under the Investment Company Act and we have also approved Oaktree’s code of ethics that was adopted by it under Rule 17j-1 under the Investment Company Act and Rule 204A-1 under the Advisers Act. These codes establish procedures for personal investments and restrict certain personal securities transactions. Personnel subject to the codes may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the applicable code’s requirements. You may read and copy the codes of ethics at the SEC’s Public Reference Room located at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the codes of ethics are available on the EDGAR Database on the SEC’s website at www.sec.gov
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and our code of ethics is available at the Investors: Corporate Governance portion of our website at www.oaktreespecialtylending.com.
Proxy Voting Policies and Procedures
We have delegated our proxy voting responsibility to our Adviser. The proxy voting policies and procedures of our Adviser are set forth below. These guidelines are reviewed periodically by our Adviser and our independent directors, and, accordingly, are subject to change.
An investment adviser registered under the Advisers Act has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, our Adviser recognizes that it must vote portfolio securities in a timely manner free of conflicts of interest and in the best interests of its clients.
These policies and procedures for voting proxies are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.
Our Adviser will vote proxies relating to our portfolio securities, if any, in what it perceives to be the best interest of our stockholders. Our Adviser will review on a case-by-case basis each proposal submitted to a shareholder vote to determine its impact on portfolio securities held by us. Although our Adviser will generally vote against proposals that may have a negative impact on our portfolio securities, it may vote for such a proposal if there are compelling long-term reasons to do so.
Our Adviser’s proxy voting decisions will be made by officers who are responsible for monitoring each of our investments. To ensure that the vote is not the product of a conflict of interest, our Adviser will require that: (1) anyone involved in the decision-making process disclose to the Chief Compliance Officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (2) employees involved in the decision-making process or vote administration are prohibited from revealing how our Adviser intends to vote on a proposal, in order to reduce any attempted influence from interested parties.
Stockholders may obtain information regarding how we voted proxies by making a written request for proxy voting information to: Oaktree Specialty Lending Corporation, Chief Compliance Officer, 333 South Grand Avenue, 28th Floor, Los Angeles, CA 90071.
Reporting Obligations
We file annual reports containing audited financial statements, quarterly reports, and such other periodic reports as we determine to be appropriate or as may be required by law. We are required to comply with all periodic reporting, proxy solicitation and other applicable requirements under the Securities Exchange Act of 1934, as amended, or the Exchange Act.
We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the SEC in accordance with the Exchange Act. These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K. We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. The SEC also maintains a website that contains reports, proxy and information statements and other information we file with the SEC at www.sec.gov.
We maintain a website at www.oaktreespecialtylending.com. The information on our website is not incorporated by reference in this annual report on Form 10-K.
Sarbanes-Oxley Act Compliance
We are subject to the reporting and disclosure requirements of the Exchange Act, including the filing of quarterly, annual and current reports, proxy statements and other required items. In addition, we are subject to the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, which imposes a wide variety of regulatory requirements on public companies and their insiders. For example:
 
•pursuant to Rule 13a-14 under the Exchange Act, our chief executive officer and chief financial officer are required to certify the accuracy of the financial statements contained in our periodic reports;
•pursuant to Item 307 of Regulation S-K, our periodic reports are required to disclose our conclusions about the effectiveness of our disclosure controls and procedures; and
•pursuant to Rule 13a-15 under the Exchange Act, our management is required to prepare a report regarding its assessment of our internal control over financial reporting. Our independent registered public accounting firm is required to audit our internal control over financial reporting.
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The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder. We will continue to monitor compliance with all regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance therewith.

Stock Exchange Corporate Governance Regulations
The Nasdaq Stock Market LLC has adopted corporate governance regulations that listed companies must comply with. We are in compliance with such corporate governance regulations as applicable to us.

Item 1A. Risk Factors
Investing in our securities involves a number of significant risks. In addition to the other information contained in this annual report on Form 10-K, you should consider carefully the following information before making an investment in our securities. The risks set out below are not the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us might also impair our operations and performance. If any of the following events occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, our net asset value and the trading price of our securities could decline, and you may lose part or all of your investment. The risk factors described below are the principal risk factors associated with an investment in us as well as those factors generally associated with an investment company with investment objectives, investment policies, capital structure or trading markets similar to ours.
An investment in our securities involves risks. The following is a summary of the principal risks that you should carefully consider before investing in our securities.
•Global economic, political and market conditions, including those caused by the COVID-19 public health crisis, have (and in the future, could further) adversely affect our business, results of operations and financial condition and those of our portfolio companies.
•We have acquired, and may in the future opportunistically acquire the securities and obligations of distressed companies, including through opportunistic acquisitions made during the COVID-19 pandemic. These investments in distressed companies are subject to significant risks, including lack of income, extraordinary expenses, uncertainty with respect to satisfaction of debt, lower-than-expected investment values or income potentials and resale restrictions.
•Changes in interest rates, changes in the method for determining the London Interbank Offered Rate, or LIBOR, and the potential replacement of LIBOR may affect our cost of capital and net investment income.
•A significant portion of our investment portfolio is and will continue to be recorded at fair value as determined in good faith by our Board of Directors and, as a result, there is and will continue to be uncertainty as to the value of our portfolio investments.
•Our ability to achieve our investment objective depends on our Adviser’s ability to support our investment process; if our Adviser were to lose key personnel or they were to resign, our ability to achieve our investment objective could be significantly harmed.
•Because we borrow money, the potential for loss on amounts invested in us will be magnified and may increase the risk of investing in us.
•There are significant potential conflicts of interest that could adversely impact our investment returns.
•Regulations governing our operation as a Business Development Company and RIC affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.
•Our investments in portfolio companies may be risky, and we could lose all or parts of our investments.
•Shares of closed-end investment companies, including Business Development Companies, may trade at a discount to their net asset value.
•The market price of our common stock may fluctuate significantly.
•There are risks related to the Mergers that could adversely impact us or our stockholders.
•Economic recessions or downturns may have a material adverse effect on our business, financial condition and results of operations, and could impair the ability of our portfolio companies to repay debt or pay interest.

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Risks Relating to the COVID-19 Pandemic
Global economic, political and market conditions caused by the COVID-19 public health crisis have (and in the future, could further) adversely affect our business, results of operations and financial condition and those of our portfolio companies.

A novel strain of coronavirus initially appeared in China in late 2019 and rapidly spread to other countries, including the United States.  In an attempt to slow the spread of the coronavirus, governments around the world, including the United States, placed restrictions on travel, issued “stay at home” orders and ordered the temporary closure of certain businesses, such as factories and retail stores. Such restrictions and closures have impacted supply chains, consumer demand and/or the operations of many businesses. As jurisdictions around the United States and the world continue to experience periodic surges in cases of COVID-19, there continues to be considerable uncertainty surrounding the full economic impact of the coronavirus pandemic and the long-term effects on the U.S. and global financial markets.

Any disruptions in the capital markets, as a result of the COVID-19 pandemic or otherwise, may increase the spread between the yields realized on risk-free and higher risk securities and can result in illiquidity in parts of the capital markets, significant write-offs in the financial sector and re-pricing of credit risk in the broadly syndicated market.  These and any other unfavorable economic conditions could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. During the spring of 2020, the occurrence of these events negatively impacted the fair value of the investments that we held and, if they were to occur again in the future, could limit our investment originations (including as a result of the investment professionals of our Adviser diverting their time to the restructuring of certain investments), negatively impact our operating results and limit our ability to grow. In addition, our success depends in substantial part on the management, skill and acumen of our Adviser, whose operations may be adversely impacted, including through quarantine measures and travel restrictions imposed on its investment professionals, service providers, or any related health issues of such investment professionals, service providers, or their families.

In addition, the restrictions, closures and related market conditions (including impacts on supply chains and consumer demand) resulted in and in the future, could further result in certain of our portfolio companies halting or significantly curtailing operations.  The financial results of many middle-market companies, like those in which we invest, experienced deterioration, which could ultimately lead to difficulty in meeting debt service requirements and an increase in defaults, and further deterioration in market conditions will further depress the outlook for those companies. Further, adverse economic conditions decreased and may in the future decrease the value of collateral securing some of our loans and the value of our equity investments. Such conditions have required and may in the future require us to modify the payment terms of our investments, including changes in PIK interest provisions and/or cash interest rates. The performance of certain of our portfolio companies has been, and in the future may be, negatively impacted by these economic or other conditions, which can result in our receipt of reduced interest income from our portfolio companies and/or realized and unrealized losses related to our investments, and, in turn, may adversely affect distributable income and have a material adverse effect on our results of operations. In addition, as governments continue to ease COVID-19 related restrictions and impose certain COVID-19 mitigation measures, certain of our portfolio companies may experience increased health and safety expenses, payroll costs and other operating expenses.

As the potential long-term impact of the coronavirus pandemic remains difficult to predict, the extent to which the pandemic could negatively affect our and our portfolio companies’ operating results or the duration or reoccurrence of any potential business or supply-chain disruption is uncertain. Any potential impact to our results of operations will depend to a large extent on future developments regarding the duration and severity of the pandemic and the actions taken by governments (including stimulus measures or the lack thereof) and their citizens to contain the coronavirus or treat its impact, all of which are beyond our control.
We have acquired, and may in the future opportunistically acquire the securities and obligations of distressed companies, including through opportunistic acquisitions made during the COVID-19 pandemic.  These investments in distressed companies are subject to significant risks, including lack of income, extraordinary expenses, uncertainty with respect to satisfaction of debt, lower-than-expected investment values or income potentials and resale restrictions.

We have acquired, and may in the future acquire, the securities and other obligations of distressed or bankrupt companies, including opportunistic acquisitions during the COVID-19 pandemic. At times, distressed debt obligations may not produce income and may require us to bear certain extraordinary expenses (including legal, accounting, valuation and transaction expenses) in order to protect and recover our investment. Therefore, when we invest in distressed debt, our ability to achieve current income for our stockholders may be diminished, particularly where the portfolio company has negative EBITDA.

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We also are subject to significant uncertainty as to when and in what manner and for what value the distressed debt we acquire will eventually be satisfied whether through a refinancing, restructuring, liquidation, an exchange offer or plan of reorganization involving the distressed debt securities or a payment of some amount in satisfaction of the obligation. In addition, even if an exchange offer is made or plan of reorganization is adopted with respect to distressed debt held by us, there can be no assurance that the securities or other assets received by us in connection with such exchange offer or plan of reorganization will not have a lower value or income potential than may have been anticipated when the investment was made.

Moreover, any securities received by us upon completion of an exchange offer or plan of reorganization may be restricted as to resale. As a result of our participation in negotiations with respect to any exchange offer or plan of reorganization with respect to an issuer of distressed debt, we may be restricted from disposing of such securities.

Risks Relating to Our Business and Structure
Changes in interest rates, changes in the method for determining LIBOR and the potential replacement of LIBOR may affect our cost of capital and net investment income.
General interest rate fluctuations and changes in credit spreads on floating rate loans may have a substantial negative impact on our investments and investment opportunities and, accordingly, may have a material adverse effect on our rate of return on invested capital, our net investment income, our net asset value and the market price of our common stock. The majority of our debt investments have, and are expected to have, variable interest rates that reset periodically based on benchmarks such as LIBOR, the federal funds rate or prime rate. An increase in interest rates may make it more difficult for our portfolio companies to service their obligations under the debt investments that we will hold and increase defaults even where our investment income increases. Rising interest rates could also cause borrowers to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults. Additionally, as interest rates increase and the corresponding risk of a default by borrowers increases, the liquidity of higher interest rate loans may decrease as fewer investors may be willing to purchase such loans in the secondary market in light of the increased risk of a default by the borrower and the heightened risk of a loss of an investment in such loans. Decreases in credit spreads on debt that pays a floating rate of return would have an impact on the income generation of our floating rate assets. Trading prices for debt that pays a fixed rate of return tend to fall as interest rates rise. Trading prices tend to fluctuate more for fixed rate securities that have longer maturities.
Conversely, if interest rates decline, borrowers may refinance their loans at lower interest rates, which could shorten the average life of the loans and reduce the associated returns on the investment, as well as require our Adviser and the Investment Professionals to incur management time and expense to re-deploy such proceeds, including on terms that may not be as favorable as our existing loans.
In addition, because we borrow to fund our investments, a portion of our net investment income is dependent upon the difference between the interest rate at which we borrow funds and the interest rate at which we invest these funds. Portions of our investment portfolio and our borrowings have floating rate components. As a result, a significant change in market interest rates could have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds could increase, which would reduce our net investment income. We may hedge against interest rate fluctuations by using standard hedging instruments such as interest rate swap agreements, futures, options and forward contracts, subject to applicable legal requirements, including all necessary registrations (or exemptions from registration) with the Commodity Futures Trading Commission. These activities may limit our ability to participate in the benefits of lower interest rates with respect to the hedged borrowings. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations.
As a result of concerns about the accuracy of the calculation of LIBOR, a number of British Bankers’ Association, or BBA, member banks entered into settlements with certain regulators and law enforcement agencies with respect to the alleged manipulation of LIBOR. Actions by the BBA, regulators or law enforcement agencies as a result of these or future events, may result in changes to the manner in which LIBOR is determined (to the extent it continues beyond June 30, 2023). Potential changes, or uncertainty related to such potential changes may adversely affect the market for LIBOR-based securities, including our portfolio of LIBOR-indexed, floating-rate debt securities and our borrowings.
In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021. However, in March 2021, the FCA announced that most U.S. dollar LIBOR would continue to be published through June 30, 2023 effectively extending the LIBOR transition period to June 30, 2023. However, the FCA has indicated it will not compel panel banks to continue to contribute to LIBOR after the end of 2021 and the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation have encouraged banks to cease entering into new contracts that use U.S. dollar LIBOR as a reference rate no later than December 31, 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S.
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financial institutions, supports replacing U.S.-dollar LIBOR with the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities. Although there have been a few issuances utilizing SOFR or the Sterling Over Night Index Average, an alternative reference rate that is based on transactions, it is unknown whether these alternative reference rates will attain market acceptance as replacements for LIBOR. Any transition away from LIBOR to alternative reference rates is complex and could have a material adverse effect on our business, financial condition and results of operations, including as a result of any changes in the pricing of our investments, changes to the documentation for certain of our investments and the pace of such changes, disputes and other actions regarding the interpretation of current and prospective loan documentation or modifications to processes and systems.
In anticipation of the cessation of LIBOR, we may need to renegotiate any credit agreements extending beyond June 30, 2023 with our portfolio companies that utilize LIBOR as a factor in determining the interest rate or rely on certain fallback provisions that could cause interest rates to shift to a base rate plus a margin. Any such renegotiations may have a material adverse effect on our business, financial condition and results of operations, including as a result of changes in interest rates payable to us by our portfolio companies.
A general increase in interest rates will likely have the effect of increasing our net investment income, which would make it easier for our Adviser to receive incentive fees.
Any general increase in interest rates would likely have the effect of increasing the interest rate that we receive on many of our debt investments. Accordingly, a general increase in interest rates may make it easier for our Adviser to meet the quarterly hurdle rate for payment of income incentive fees under the Investment Advisory Agreement and may result in a substantial increase in the amount of the income-based incentive fee payable to our Adviser.
A significant portion of our investment portfolio is and will continue to be recorded at fair value as determined in good faith by our Board of Directors and, as a result, there is and will continue to be uncertainty as to the value of our portfolio investments.
Under the Investment Company Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value as determined in good faith by our Board of Directors. Typically, there is not a public market for the securities of the privately held companies in which we have invested and will generally continue to invest. As a result, we value these securities quarterly at fair value as determined in good faith by our Board of Directors. The fair value of such securities may change, potentially materially, between the date of the fair value determination by our Board of Directors and the release of the financial results for the corresponding period or the next date at which fair value is determined.
Certain factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company’s earnings and its ability to make payments on its indebtedness, the markets in which the portfolio company does business, comparison to comparable publicly-traded companies, discounted cash flow and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. In addition, any investments that include OID or PIK interest may have unreliable valuations because their continuing accruals require ongoing judgments about the collectability of their deferred payments and the value of their underlying collateral. Due to these uncertainties, our fair value determinations may cause our net asset value on a given date to materially understate or overstate the value that we may ultimately realize upon the sale of one or more of our investments. As a result, investors purchasing our common stock based on an overstated net asset value would pay a higher price than the realizable value of our investments might warrant.
In addition, the participation of the Investment Professionals in the valuation process, and the indirect pecuniary interest of John B. Frank, an interested member of our Board of Directors, in the Adviser could result in a conflict of interest as the management fee payable to our Adviser is based on our gross assets and the incentive fees earned by the Adviser will be based, in part, on unrealized gains and losses.
Our ability to achieve our investment objective depends on our Adviser’s ability to support our investment process; if our Adviser were to lose key personnel or they were to resign, our ability to achieve our investment objective could be significantly harmed.
We depend on the investment expertise, skill and network of business contacts of the senior personnel of our Adviser. Our Adviser evaluates, negotiates, structures, executes, monitors and services our investments. Key personnel of our Adviser have departed in the past and current key personnel could depart at any time. Our Adviser’s capabilities in structuring the investment process, providing competent, attentive and efficient services to us, and facilitating access to financing on acceptable terms depend on the employment of investment professionals in adequate number and of adequate sophistication to match the corresponding flow of transactions. The departure of key personnel or of a significant number of the investment
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professionals or partners of our Adviser could have a material adverse effect on our ability to achieve our investment objective. Our Adviser may need to hire, train, supervise and manage new investment professionals to participate in our investment selection and monitoring process and may not be able to find investment professionals in a timely manner or at all.
In addition, our Adviser may resign on 60 days’ notice. If we are unable to quickly find a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms, our operations are likely to experience a disruption and our ability to achieve our investment objective and pay distributions would likely be materially and adversely affected.
Our business model depends to a significant extent upon strong referral relationships, and the inability of the personnel associated with our Adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
We expect that personnel associated with our Adviser will maintain and develop their relationships with intermediaries, banks and other sources, and we will rely to a significant extent upon these relationships to provide us with potential investment opportunities. If these individuals fail to maintain their existing relationships or develop new relationships with other sources of investment opportunities, we may not be able to grow or maintain our investment portfolio. In addition, individuals with whom the personnel associated with our Adviser have relationships are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us. The failure of the personnel associated with our Adviser to maintain existing relationships, grow new relationships, or for those relationships to generate investment opportunities could have an adverse effect on our business, financial condition and results of operations.
We may face increasing competition for investment opportunities, which could reduce returns and result in losses.
We compete for investments with other Business Development Companies, public and private funds (including hedge funds, mezzanine funds and CLOs) and private equity funds (to the extent they provide an alternative form of financing), as well as traditional financial services companies such as commercial and investment banks, commercial financing companies and other sources of financing. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we are able to do. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we are forced to match our competitors’ pricing, terms and structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors are not subject to, the regulatory restrictions that the Investment Company Act imposes on us as a Business Development Company.
The incentive fee we pay to our Adviser relating to capital gains may be effectively greater than 17.5%.
The Adviser may be entitled to receive an incentive fee based on our capital gains, calculated on a cumulative basis from the beginning of the fiscal year ended September 30, 2019 through the end of each fiscal year. As a result of the operation of the cumulative method of calculating such capital gains portion of the incentive fee, the cumulative aggregate capital gains fee received by our Adviser could be effectively greater than 17.5%, depending on the timing and extent of subsequent net realized capital losses or net unrealized depreciation. This result would occur to the extent that, following receipt by the Adviser of a capital gain incentive fee, we subsequently realized capital depreciation and capital losses in excess of cumulative realized capital gains. We cannot predict whether, or to what extent, this payment calculation would affect your investment in our securities.
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Our ability to enter into transactions with our affiliates is restricted.
We are prohibited under the Investment Company Act from participating in certain transactions with certain of our affiliates without the prior approval of our independent directors and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities is our affiliate for purposes of the Investment Company Act, and we are generally prohibited from buying or selling any securities (other than our securities) from or to such affiliate, absent the prior approval of our independent directors. The Investment Company Act also prohibits certain “joint” transactions with certain of our affiliates, which could include investments in the same portfolio company (whether at the same or different times), without prior approval of our independent directors and, in some cases, the SEC. If a person acquires more than 25% of our voting securities, we will be prohibited from buying or selling any security (other than any security of which we are the issuer) from or to such person or certain of that person’s affiliates, or entering into prohibited joint transactions with such person, absent the prior approval of the SEC. Similar restrictions limit our ability to transact business with our officers or directors or their affiliates. As a result of these restrictions, except in situations described below, we may be prohibited from buying or selling any security (other than any security of which we are the issuer) from or to any portfolio company of a private equity fund managed by our Adviser without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us.
We may also invest alongside funds managed by our Adviser and its affiliates in certain circumstances where doing so is consistent with applicable law and SEC staff interpretations. For example, we may invest alongside such accounts consistent with guidance promulgated by the staff of the SEC permitting us and such other accounts to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that our Adviser, acting on our behalf and on behalf of other clients, negotiates no term other than price.
A failure on our part to maintain our qualification as a Business Development Company would significantly reduce our operating flexibility.
If we fail to continuously qualify as a Business Development Company, we might be subject to regulation as a registered closed-end investment company under the Investment Company Act, which would significantly decrease our operating flexibility. In addition, failure to comply with the requirements imposed on Business Development Companies by the Investment Company Act could cause the SEC to bring an enforcement action against us.
Regulations governing our operation as a Business Development Company and RIC affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.
In order to qualify for the tax benefits available to RICs and to minimize corporate-level U.S. federal income taxes, we intend to distribute to our stockholders at least 90% of our taxable income each taxable year, except that we may retain certain net capital gains for investment, and treat such amounts as deemed distributions to our stockholders. If we elect to treat any amounts as deemed distributions, we would be subject to U.S. federal income tax at the corporate rate on such deemed distributions on behalf of our stockholders.
As a Business Development Company, we are required to invest at least 70% of our total assets primarily in securities of U.S. private or thinly-traded public companies, cash, cash equivalents, U.S. government securities and other high-quality debt instruments that mature in one year or less from the date of investment.
As a Business Development Company, we may issue “senior securities,” including borrowing money from banks or other financial institutions only in amounts such that our asset coverage, as defined in the Investment Company Act, equals at least 150% after such incurrence or issuance. These requirements limit the amount that we may borrow, may unfavorably limit our investment opportunities and may reduce our ability in comparison to other companies to profit from favorable spreads between the rates at which we can borrow and the rates at which we can lend. If the value of our assets declines, we may be unable to satisfy the asset coverage test, which could prohibit us from paying distributions and could prevent us from being subject to tax as a RIC. If we cannot satisfy the asset coverage test, we may be required to sell a portion of our investments and, depending on the nature of our debt financing, repay a portion of our indebtedness at a time when such sales may be disadvantageous.
Because we will continue to need capital to grow our investment portfolio, these limitations may prevent us from incurring debt and require us to raise additional equity at a time when it may be disadvantageous to do so. As a result of these requirements we need to periodically access the capital markets to raise cash to fund new investments at a more frequent pace than our privately owned competitors. We generally are not able to issue or sell our common stock at a price below net asset value per share, which may be a disadvantage as compared with other public companies or private investment funds. When our common stock trades at a discount to net asset value, this restriction could adversely affect our ability to raise capital. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the current net asset value of the common stock if our Board of Directors and independent directors determine that such sale is in our best interests and the best interests of our stockholders, and our stockholders as well as those stockholders that are not affiliated with
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us approve such sale in accordance with the requirements of the Investment Company Act. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board of Directors, closely approximates the market value of such securities (less any underwriting commission or discount). We cannot assure you that equity financing will be available to us on favorable terms, or at all.  If additional funds are not available to us, we could be forced to curtail or cease new investment activities. 
We also may make rights offerings to our stockholders at prices less than net asset value, subject to applicable requirements of the Investment Company Act. If we raise additional funds by issuing more shares of our common stock or issuing senior securities convertible into, or exchangeable for, our common stock, the percentage ownership of our stockholders may decline at that time and such stockholders may experience dilution. Moreover, we can offer no assurance that we will be able to issue and sell additional equity securities in the future, on terms favorable to us or at all.
In addition, we may in the future seek to securitize our portfolio securities to generate cash for funding new investments. To securitize loans, we would likely create a wholly-owned subsidiary and contribute a pool of loans to the subsidiary. We would then sell interests in the subsidiary on a non-recourse basis to purchasers and we would retain all or a portion of the equity in the subsidiary. An inability to successfully securitize our loan portfolio could limit our ability to grow our business or fully execute our business strategy and may decrease our earnings, if any. The securitization market is subject to changing market conditions and we may not be able to access this market when we would otherwise deem appropriate. Moreover, the successful securitization of our portfolio might expose us to losses as the residual investments in which we do not sell interests will tend to be those that are riskier and more apt to generate losses. The Investment Company Act also may impose restrictions on the structure of any securitization.
Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.
Our Board of Directors has the authority to modify or waive our current investment objective, operating policies and strategies without prior notice and without stockholder approval. We cannot predict the effect any changes to our current investment objective, operating policies and strategies would have on our business, net asset value, operating results and value of our stock. However, the effects might be adverse, which could negatively impact our ability to pay you distributions and cause you to lose part or all of your investment.
Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
We and our portfolio companies are subject to regulation at the local, state and federal level. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of investments we are permitted to make or that impose limits on our ability to pledge a significant amount of our assets to secure loans or that restrict the operations of a portfolio company, any of which could harm us and our stockholders and the value of our investments, potentially with retroactive effect. For example, certain provisions of the Dodd-Frank Act, which influences many aspects of the financial services industry, have been amended or repealed and the Code has been substantially amended and reformed. Any amendment or repeal of legislation, or changes in regulations or regulatory interpretations thereof, could create uncertainty in the near term, which could have a material adverse impact on our business, financial condition and results of operations.
Additionally, any changes to the laws and regulations governing our operations relating to permitted investments may cause us to alter our investment strategy in order to avail ourselves of new or different opportunities. Such changes could result in material differences to the strategies and plans set forth herein and may result in our investment focus shifting from the areas of expertise of our Adviser to other types of investments in which our Adviser may have less expertise or little or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment.
We are subject to risks associated with communications and information systems. 

We depend on the communications and information systems of our Adviser and its affiliates as well as certain third-party service providers. As these systems became more important to our business, the risks posed to these communications and information systems have continued to increase. Any failure or interruption in these systems could cause disruptions in our activities.  In addition, these systems are subject to potential attacks, including through adverse events that threaten the confidentiality, integrity or availability of our information resources.  These attacks, which may include cyber incidents, may involve a third party gaining unauthorized access to our communications or information systems for purposes of misappropriating assets, stealing confidential information related to our operations or portfolio companies, corrupting data or causing operational disruption.  Any such attack could result in disruption to our business, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to
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our business relationships, any of which could have a material adverse effect on our business, financial condition and results of operations. 
We may be unable to invest a significant portion of the net proceeds from an offering of our securities on acceptable terms within an attractive timeframe.
Delays in investing the net proceeds raised in an offering of our securities may cause our performance to be worse than that of fully invested Business Development Companies or other lenders or investors pursuing comparable investment strategies. We cannot assure you that we will be able to identify any investments that meet our investment objective or that any investment that we make will produce a positive return. We may be unable to invest the net proceeds of any offering on acceptable terms within the time period that we anticipate or at all, which could harm our financial condition and operating results.
We anticipate that, depending on market conditions, it may take us a substantial period of time to invest substantially all of the net proceeds of any offering in securities meeting our investment objective. During this period, we may use the net proceeds to pay down outstanding debt or we may invest the net proceeds of an offering primarily in cash, cash equivalents, U.S. government securities, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, which may produce returns that are significantly lower than the returns which we expect to achieve when our portfolio is fully invested in securities meeting our investment objective. As a result, any distributions that we pay during this period may be substantially lower than the distributions that we may be able to pay when our portfolio is fully invested in securities meeting our investment objective. In addition, until such time as the net proceeds of an offering are invested in securities meeting our investment objective, the market price for our common stock may decline. Thus, the return on your investment may be lower than when, if ever, our portfolio is fully invested in securities meeting our investment objective.
We may allocate the net proceeds from an offering in ways with which you may not agree.
We have significant flexibility in investing the net proceeds of an offering, and may do so in a way with which you may not agree. Additionally, our Adviser will select our investments subsequent to the closing of an offering, and our stockholders will have no input with respect to such investment decisions. Further, other than general limitations that may be included in a future credit facility, the holders of our debt securities will generally not have veto power or a vote in approving any changes to our investment or operational policies. These factors increase the uncertainty, and thus the risk, of investing in our securities. In addition, pending such investments, we will invest the net proceeds from an offering primarily in high quality, short-term debt securities, consistent with our Business Development Company election and our election to be taxed as a RIC, at yields significantly below the returns which we expect to achieve when our portfolio is fully invested in securities meeting our investment objective. If we are not able to identify or gain access to suitable investments, our income may be limited.

Risks Relating to Conflicts of Interest

Our base management fee may induce our Adviser to incur leverage.

Our base management fee is payable based upon our gross assets, which includes borrowings for investment purposes, which may encourage our Adviser to use leverage to make additional investments. Given the subjective nature of the investment decisions made by our Adviser on our behalf and the discretion related to incurring leverage in connection with any such investments, it will be difficult to monitor this potential conflict of interest between us and our Adviser.

Our incentive fee may induce our Adviser to make speculative investments.

The incentive fee payable by us to our Adviser may create an incentive for it to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement, which could result in higher investment losses, particularly during cyclical economic downturns. The incentive fee payable to our Adviser includes a component based on a percentage of our net investment income (subject to a hurdle rate), which may encourage our Adviser to use leverage to increase the return on our investments or otherwise manipulate our income so as to recognize income in quarters where the hurdle rate is exceeded and may result in an obligation for us to pay an incentive fee to the Adviser even if we have incurred a loss for an applicable period.

The incentive fee payable by us to our Adviser also may create an incentive for our Adviser to invest on our behalf in instruments that have a deferred interest feature. Under these investments, we would accrue the interest over the life of the investment but would not receive the cash income from the investment until the end of the investment’s term, if at all. Our net investment income used to calculate the income portion of our incentive fee, however, includes accrued interest. Thus, a portion of the incentive fee would be based on income that we have not yet received in cash and may never receive in cash if the portfolio company is unable to satisfy such interest payment obligation to us. While we may make incentive fee payments on
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income accruals that we may not collect in the future and with respect to which we do not have a formal “clawback” right against our Adviser, the amount of accrued income written off in any period will reduce the income in the period in which such write-off was taken and thereby reduce such period’s incentive fee payment.

In addition, our Adviser may be entitled to receive an incentive fee based upon net capital gains realized on our investments. Unlike the portion of the incentive fee based on income, there is no performance threshold applicable to the portion of the incentive fee based on net capital gains. As a result, our Adviser may have a tendency to invest more in investments that are likely to result in capital gains as compared to income producing securities. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.

Given the subjective nature of the investment decisions made by our Adviser on our behalf, we will be unable to monitor these potential conflicts of interest between us and our Adviser.

There are significant potential conflicts of interest that could adversely impact our investment returns.

Our executive officers and directors, and certain members of our Adviser, serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do or of investment funds managed by our affiliates. For example, Oaktree presently serves as the investment adviser to OSI II, a private Business Development Company. All of our executive officers serve in substantially similar capacities for OSI II, and one of our independent directors serves as an independent director of OSI II. OSI II has historically invested in senior secured loans, including first lien, unitranche and second lien debt instruments that pay interest at rates which are determined periodically on the basis of a floating base lending rate, made to private middle-market companies whose debt is rated below investment grade, similar to those we target for investment. Oaktree and its affiliates also manage or sub-advise other Business Development Companies, registered investment companies and private investment funds and accounts, and may manage other such funds and accounts in the future, which have investment mandates that are similar, in whole and in part, with ours. Therefore, there may be certain investment opportunities that satisfy the investment criteria for OSI II and us as well as other Business Development Companies, registered investment companies and private investment funds and accounts advised or sub-advised by Oaktree or its affiliates. In addition, Oaktree and its affiliates may have obligations to investors in other entities that advise or sub-advise, the fulfillment of which might not be in the best interests of us or our stockholders. An investment in us is not an investment in any of these other entities.

For example, the personnel of our Adviser may face conflicts of interest in the allocation of investment opportunities to us and such other funds and accounts. Moreover, the Adviser and the Investment Professionals are engaged in other business activities which divert their time and attention. The Investment Professionals will devote as much time to us as such professionals deem appropriate to perform their duties in accordance with the Investment Advisory Agreement. However, such persons may be committed to providing investment advisory and other services for other clients, and engage in other business ventures in which we have no interest. As a result of these separate business activities, the Adviser may have conflicts of interest in allocating management time, services and functions among us, other advisory clients and other business ventures.

Oaktree has investment allocation guidelines that govern the allocation of investment opportunities among the investment funds and accounts managed or sub-advised by Oaktree and its affiliates. To the extent an investment opportunity is appropriate for us or OSI II or any other investment fund or account managed or sub-advised by Oaktree or its affiliates, Oaktree will adhere to its investment allocation guidelines in order to determine a fair and equitable allocation.
In addition, affiliates of our Adviser have received exemptive relief from the SEC to allow certain managed funds and accounts, each of whose investment adviser is OCM or an investment adviser controlling, controlled by or under common control with OCM, such as our Adviser, as well as proprietary accounts (subject to certain conditions) to participate in negotiated co-investment transactions where doing so is consistent with the applicable registered fund’s or Business Development Company’s investment objective and strategies as well as regulatory requirements and other pertinent factors, and pursuant to the conditions of the exemptive relief. Each potential co-investment opportunity that falls under the terms of the exemptive relief and is appropriate for us and any affiliated fund or account, and satisfies the then-current board-established criteria, will be offered to us and such other eligible funds and accounts. If there is a sufficient amount of securities to satisfy all participants, the securities will be allocated among the participants in accordance with their proposed order size and if there is an insufficient amount of securities to satisfy all participants, the securities will be allocated pro rata based on the investment proposed by the applicable investment adviser to such participant, up to the amount proposed to be invested by each, which is reviewed and approved by an independent committee of legal, compliance and accounting professionals at our Adviser. We may also invest alongside funds managed by our Adviser and its affiliates in certain circumstances where doing so is consistent with applicable law and SEC staff interpretations. For example, we may invest alongside such accounts consistent with
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guidance promulgated by the staff of the SEC permitting us and such other accounts to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that our Adviser, acting on our behalf and on behalf of other clients, negotiates no term other than price or terms related to price.

Although Oaktree will endeavor to allocate investment opportunities in a fair and equitable manner, we and our common stockholders could be adversely affected to the extent investment opportunities are allocated among us and other investment vehicles managed or sponsored by, or affiliated with, our executive officers, directors and members of our Adviser. We might not participate in each individual opportunity, but will, on an overall basis, be entitled to participate equitably with other entities managed by Oaktree and its affiliates. Oaktree seeks to treat all clients fairly and equitably such that none receive preferential treatment vis-à-vis the others over time, in a manner consistent with its fiduciary duty to each of them; however, in some instances, especially in instances of limited liquidity, the factors may not result in pro rata allocations or may result in situations where certain funds or accounts receive allocations where others do not.

Pursuant to the Investment Advisory Agreement, our Adviser’s liability is limited and we are required to indemnify our Adviser against certain liabilities. This may lead our Adviser to act in a riskier manner in performing its duties and obligations under the Investment Advisory Agreement than it would if it were acting for its own account, and creates a potential conflict of interest.

Pursuant to the Administration Agreement, Oaktree Administrator furnishes us with the facilities, including our principal executive office, and administrative services necessary to conduct our day-to-day operations. We pay Oaktree Administrator its allocable portion of overhead and other expenses incurred by Oaktree Administrator in performing its obligations under the Administration Agreement, including, without limitation a portion of the rent at market rates and the compensation of our Chief Financial Officer, Chief Compliance Officer, their respective staffs and other non-investment professionals at Oaktree that perform duties for us. This arrangement creates conflicts of interest that our Board of Directors must monitor.

Risks Relating to Our Use of Leverage

Because we borrow money, the potential for loss on amounts invested in us will be magnified and may increase the risk of investing in us.

Borrowings, also known as leverage, magnify the potential for loss on invested equity capital. We expect to continue to use leverage to partially finance our investments, through borrowings from banks and other lenders and/or issuing unsecured notes, which will increase the risks of investing in our common stock, including the likelihood of default. We borrow under our credit facilities and unsecured notes. On November 30, 2017, we entered into a Senior Secured Revolving Credit Agreement, or as amended and/or restated from time to time, the Syndicated Facility, with the lenders, ING Capital LLC, as administrative agent, ING Capital LLC, JPMorgan Chase Bank, N.A., BofA Securities, Inc. and MUFG Union Bank, N.A. as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A. and Bank of America, N.A., as syndication agents. On March 19, 2021, as a result of the consummation of the Mergers, we became party to a revolving credit facility, or as amended and/or restated from time to time, the Citibank Facility, with OCSL Senior Funding II LLC, our wholly-owned, special purpose financing subsidiary, as the borrower, us, as collateral manager and seller, each of the lenders from time to time party thereto, Citibank, N.A., as administrative agent, and Wells Fargo Bank, National Association, as collateral agent and custodian. In addition, we have two series of unsecured notes outstanding: our 3.500% notes due 2025, or the 2025 Notes, and our 2.700% notes due 2027, or the 2027 Notes. We may issue other debt securities or enter into other types of borrowing arrangements in the future. If the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. To the extent we incur additional leverage, these effects would be further magnified, increasing the risk of investing in us. Such a decline could negatively affect our ability to make common stock distributions or scheduled debt payments. Leverage is generally considered a speculative investment technique and we only intend to use leverage if expected returns will exceed the cost of borrowing.

As of September 30, 2021, we had $630.0 million of outstanding indebtedness under our credit facilities, $300.0 million of outstanding 2025 Notes and $350.0 million of outstanding 2027 Notes. These debt instruments require periodic payments of interest. The weighted average interest rate charged on our borrowings as of September 30, 2021 was 2.4% (exclusive of deferred financing costs and inclusive of the impact of an interest rate swap designated as a hedging instrument). We will need to generate sufficient cash flow to make these required interest payments. In order for us to cover our annual interest payments on indebtedness, we must achieve annual returns on our September 30, 2021 total assets of at least 1.17%. If we are unable to meet the financial obligations under our credit facilities, the lenders under such credit facilities will have a superior claim to our assets over our stockholders. If we are unable to meet the financial obligations under the 2025 Notes or 2027 Notes, the holders
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thereof will have the right to declare the principal amount and accrued and unpaid interest on such notes to be due and payable immediately.

Historically, as a Business Development Company, under the Investment Company Act we generally were not permitted to incur indebtedness unless immediately after such borrowing we had an asset coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets). However, on March 23, 3018, the Small Business Credit Availability Act, or the SBCAA, was enacted into law. The SBCAA, among other things, amended Section 61(a) of the Investment Company Act to add a new Section 61(a)(2) that reduces the asset coverage requirement applicable to Business Development Companies from 200% to 150% (i.e., the amount of debt may not exceed 66.67% of the value of the Business Development Company’s assets) so long as the Business Development Company meets certain disclosure requirements and obtains certain approvals. At a special meeting of stockholders held on June 28, 2019, our stockholders approved the application of the reduced asset coverage requirements in Section 61(a)(2) of the Investment Company Act to us, effective as of June 29, 2019. If we incur additional leverage in accordance with the reduced asset coverage requirements, our net asset value will decline more sharply if the value of our assets declines than if we had not incurred such additional leverage and the effects of leverage described above will be magnified.

Illustration. The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing below.
Assumed Return on Portfolio (Net of Expenses)- 10%- 5%0%5%10%
Corresponding net return to common stockholder
-21.96%
-12.13%
-2.30%
7.53%
17.36%

For purposes of this table, we have assumed $2,581.6 million in total assets (less all liabilities and indebtedness not represented by senior securities), $1,280.0 million in debt outstanding, $1,312.8 million in net assets as of September 30, 2021, and a weighted average interest rate of 2.4% as of September 30, 2021 (exclusive of deferred financing costs and inclusive of the impact of an interest rate swap designated as a hedging instrument). Actual interest payments may be different.

Substantially all of our assets are subject to security interests under our credit facilities and if we default on our obligations under any such facility, we may suffer adverse consequences, including foreclosure on our assets.

As of September 30, 2021, substantially all of our assets were pledged as collateral under our credit facilities and may be pledged as collateral under future credit facilities. If we default on our obligations under these facilities, the lenders may have the right to foreclose upon and sell, or otherwise transfer, the collateral subject to their security interests or their superior claim. In such event, we may be forced to sell our investments to raise funds to repay our outstanding borrowings in order to avoid foreclosure and these forced sales may be at times and at prices we would not consider advantageous. Moreover, such deleveraging of our company could significantly impair our ability to effectively operate our business in the manner in which we have historically operated. As a result, we could be forced to curtail or cease new investment activities and lower or eliminate the distributions that we have historically paid to our stockholders.

In addition, if the lenders exercise their right to sell the assets pledged under our credit facilities or future credit facilities, such sales may be completed at distressed sale prices, thereby diminishing or potentially eliminating the amount of cash available to us after repayment of the amounts outstanding under the credit facilities.

We may enter into reverse repurchase agreements, which are another form of leverage.

We may enter into reverse repurchase agreements as part of our management of our temporary investment portfolio. Our entry into any such reverse repurchase agreements would be subject to the Investment Company Act limitations on leverage. In connection with entry into a reverse repurchase agreement, we would effectively pledge our assets as collateral to secure a short-term loan. Generally, the other party to the agreement would make a loan to us in an amount equal to a percentage of the fair value of the collateral we have pledged. At the maturity of the reverse repurchase agreement, we will be required to repay the loan and then receive back our collateral. While used as collateral, the assets continue to pay principal and interest which are for the benefit of us.

Our use of reverse repurchase agreements, if any, involves many of the same risks involved in our use of leverage. For example, the market value of the securities acquired in the reverse repurchase agreement may decline below the price of the securities that we have sold but we would remain obligated to purchase those securities, meaning that we bear the risk of loss that the proceeds at settlement are less than the fair value of the securities pledged. In addition, the market value of the securities retained by us may decline. If a buyer of securities under a reverse repurchase agreement were to file for bankruptcy
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or experience insolvency, we would be adversely affected. In addition, due to the interest costs associated with reverse repurchase agreements, our net asset value would decline, and, in some cases, we may be worse off than if we had not used such agreements.

Risks Related to Distributions

Because we intend to distribute at least 90% of our taxable income each taxable year to our stockholders in connection with our election to be treated as a RIC, we will continue to need additional capital to finance our growth.

In order to qualify for the tax benefits available to RICs and to minimize corporate-level U.S. federal income taxes, we intend to distribute to our stockholders at least 90% of our taxable income each taxable year, except that we may retain certain net capital gains for investment, and treat such amounts as deemed distributions to our stockholders. If we elect to treat any amounts as deemed distributions, we would be subject to U.S. federal income tax at the corporate rate applicable to net capital gains on such deemed distributions on behalf of our stockholders. As a result of these requirements, we will likely need to raise capital from other sources to grow our business. Because we will continue to need capital to grow our investment portfolio, these limitations together with the asset coverage requirements applicable to us may prevent us from incurring debt and require us to raise additional equity at a time when it may be disadvantageous to do so.

We may not be able to pay you distributions, our distributions may not grow over time and a portion of our distributions may be a return of capital.

We intend to pay distributions to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to sustain a specified level of cash distributions or periodic increases in cash distributions. In addition, the inability to satisfy the asset coverage test applicable to us as a Business Development Company can limit our ability to pay distributions. All distributions will be paid at the discretion of our Board of Directors and will depend on our earnings, our financial condition, maintenance of our ability to be subject to tax as a RIC, compliance with applicable Business Development Company regulations and such other factors as our Board of Directors may deem relevant from time to time. We cannot assure you that we will continue to pay distributions to our stockholders at current levels, or at all.

When we make distributions, our distributions generally will be treated as dividends for U.S. federal income tax purposes to the extent such distributions are paid out of our current or accumulated earnings and profits. Distributions in excess of current and accumulated earnings and profits will be treated as a non-taxable return of capital to the extent of a stockholder's basis in our stock and, assuming that a stockholder holds our stock as a capital asset, thereafter as a capital gain. A return of capital generally is a return of a stockholder’s investment rather than a return of earnings or gains derived from our investment activities. Moreover, we may pay all or a substantial portion of our distributions from the proceeds of the sale of shares of our common stock or from borrowings in anticipation of future cash flow, which could constitute a return of stockholders’ capital and will lower such stockholders’ tax basis in our shares, which may result in increased tax liability to stockholders when they sell or otherwise dispose of such shares. The tax liability incurred by such stockholders upon the sale or other disposition of shares of our common stock may increase even if such shares are sold at a loss.

We will be subject to corporate-level U.S. federal income tax if we are unable to maintain our qualification as a RIC under Subchapter M of the Code or do not satisfy the Annual Distribution Requirement.

To maintain our tax status as a RIC and be relieved of U.S. federal taxes on income and gains distributed to our stockholders, we must meet the following annual distribution, income source and asset diversification requirements:

•The Annual Distribution Requirement will be satisfied if we distribute dividends to our stockholders each taxable year of an amount generally at least equal to 90% of the sum of our net taxable income plus realized net short-term capital gains in excess of realized net long-term capital losses, if any. Because we use debt financing, we are and may, in the future, be subject to certain financial covenants under our debt arrangements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the Annual Distribution Requirement. If we are unable to obtain cash from other sources, we could fail to qualify for RIC tax treatment and thus could become subject to corporate-level U.S. federal income tax.

•The 90% Gross Income Test will be satisfied if we earn at least 90% of our gross income for each taxable year from dividends, interest, gains from the sale of stock or securities or similar sources.

•The Diversification Tests will be satisfied if, at the end of each quarter of our taxable year, at least 50% of the value of our assets consist of cash, cash equivalents, U.S. government securities, securities of other RICs, and other acceptable securities; and no more than 25% of the value of our assets can be invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer, of two or more issuers that are controlled, as
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determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly traded partnerships.” Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could cause us to incur substantial losses.

If we fail to be subject to tax as a RIC and are subject to corporate-level U.S. federal corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions.

We may have difficulty paying our required distributions if we are required to recognize income for U.S. federal income tax purposes before or without receiving cash representing such income.

For U.S. federal income tax purposes, we generally are required to include in income certain amounts that we have not yet received in cash, such as OID or certain income accruals on contingent payment debt instruments, which may occur if we receive warrants in connection with the origination of a loan or possibly in other circumstances. Such OID is generally required to be included in income before we receive any corresponding cash payments. In addition, our loans typically contain PIK interest provisions. Any PIK interest, computed at the contractual rate specified in each loan agreement, is generally required to be added to the principal balance of the loan and recorded as interest income. We also may be required to include in income certain other amounts that we do not receive, and may never receive, in cash. To avoid the imposition of corporate-level tax on us, this non-cash source of income may need to be distributed to our stockholders in cash or, in the event that we determine to do so, in shares of our common stock, even though we may have not yet collected and may never collect the cash relating to such income.

Since, in certain cases, we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the Annual Distribution Requirement necessary to be relieved of corporate-level U.S. federal taxes on income and gains distributed to our stockholders. Accordingly, we may have to sell or otherwise dispose of some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to satisfy the Annual Distribution Requirement and thus become subject to corporate-level U.S. federal income tax.

We may in the future choose to pay distributions partly in our own stock, in which case you may be subject to tax in excess of the cash you receive.

We may distribute taxable distributions that are payable in part in our stock. In accordance with certain applicable Treasury Regulations and other related administrative pronouncements or interpretations therefore issued by the Internal Revenue Service, or the IRS, a RIC may be eligible to treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder is permitted to elect to receive his or her entire distribution in either cash or stock of the RIC, subject to the satisfaction of certain guidelines. If too many stockholders elect to receive cash, each stockholder electing to receive cash must receive a pro rata amount of cash (with the balance of the distribution paid in stock). If these and certain other requirements are met, the amount of the distribution paid in stock for U.S. federal income tax purposes generally will be equal to the amount of cash that could have been received instead of stock. Taxable stockholders receiving such distributions will be required to include the full amount of the distribution as ordinary income (or as long-term capital gain to the extent such distribution is properly reported as a capital gain dividend) to the extent of their share of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, a U.S. stockholder may be subject to tax with respect to such distributions in excess of any cash received. If a U.S. stockholder sells the stock it receives as a distribution in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such distribution, including in respect of all or a portion of such distribution that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on a distribution, such sales may put downward pressure on the trading price of our stock.
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Risks Relating to Our Investments
Our investments in portfolio companies may be risky, and we could lose all or parts of our investments.
The companies in which we invest are typically highly leveraged, and, in most cases, our investments in such companies are not rated by any rating agency. If such investments were rated, we believe that they would likely receive a rating from a nationally recognized statistical rating organization of below investment grade (i.e., below BBB- or Baa), which is often referred to as "high yield" and “junk.” Exposure to below investment grade securities involves certain risks, and those securities are viewed as having predominately speculative characteristics with respect to the issuer's capacity to pay interest and repay principal. Investing in small and mid-sized companies involves a number of significant risks.
Certain of our debt investments consist of debt securities for which issuers are not required to make principal payments until the maturity of such debt securities, which could result in a substantial loss to us if such issuers are unable to refinance or repay their debt at maturity. Increases in interest rates may affect the ability of our portfolio companies to repay debt or pay interest, which may in turn affect the value of our portfolio investments, and our business, financial condition and results of operations.
Among other things, our portfolio companies:
•may have limited financial resources, may have limited or negative EBITDA and may be unable to meet their obligations under their debt instruments that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees from subsidiaries or affiliates of our portfolio companies that we may have obtained in connection with our investments, as well as a corresponding decrease in the value of the equity components of our investments;
•may have shorter operating histories, narrower product lines, smaller market shares and/or significant customer concentrations than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns;
•may operate in regulated industries and/or provide services to federal, state or local governments, or operate in industries that provide services to regulated industries or federal, state or local governments, any of which could lead to delayed payments for services or subject the company to changing payment and reimbursement rates or other terms;
•may not have collateral sufficient to pay any outstanding interest or principal due to us in the event of a default by these companies;
•are more likely to depend on the management talents and efforts of a small group of people; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;
•may have difficulty accessing the capital markets to fund capital needs, which may limit their ability to grow or repay outstanding indebtedness at maturity;
•may not have audited financial statements or be subject to the Sarbanes-Oxley Act and other rules that govern public companies;
•generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position; and
•generally have less publicly available information about their businesses, operations and financial condition.
These factors may make certain of our portfolio companies more susceptible to the adverse events in the economy. As a result of the limitations associated with certain of our portfolio companies, we must therefore rely on the ability of our Adviser to obtain adequate information through due diligence to evaluate the creditworthiness and potential returns from investing in these companies. In addition, certain of our officers and directors may serve as directors on the boards of such companies. To the extent that litigation arises out of our investments in these companies, our officers and directors may be named as defendants in such litigation, which could result in an expenditure of funds (through our indemnification of such officers and directors) and the diversion of management time and resources.
Finally, as noted above, little public information generally exists about privately owned companies, and these companies may not have third-party debt ratings or audited financial statements. We must therefore rely on the ability of our Adviser to obtain adequate information through due diligence to evaluate the creditworthiness and potential returns from investing in these companies. Additionally, these companies and their financial information will not generally be subject to the Sarbanes-Oxley Act and other rules that govern public companies.
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We may be exposed to higher risks with respect to our investments that include OID or PIK interest.
Our investments may include OID and contractual PIK interest, which typically represents contractual interest added to a loan balance and due at the end of such loan’s term. To the extent OID or PIK interest constitute a portion of our income, we are exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash, including the following:
•OID and PIK instruments may have higher yields, which reflect the payment deferral and credit risk associated with these instruments;
•OID and PIK accruals may create uncertainty about the source of our distributions to stockholders;
•OID and PIK instruments may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of the collateral; and
•OID and PIK instruments may represent a higher credit risk than coupon loans.
If we acquire the securities and obligations of distressed or bankrupt companies, such investments may be subject to significant risks, including lack of income, extraordinary expenses, uncertainty with respect to satisfaction of debt, lower-than-expected investment values or income potentials and resale restrictions.
We may acquire the securities and other obligations of distressed or bankrupt companies. At times, distressed debt obligations may not produce income and may require us to bear certain extraordinary expenses (including legal, accounting, valuation and transaction expenses) in order to protect and recover our investment. Therefore, to the extent we invest in distressed debt, our ability to achieve current income for our stockholders may be diminished, particularly where the portfolio company has negative EBITDA.
We also will be subject to significant uncertainty as to when and in what manner and for what value the distressed debt we invest in will eventually be satisfied whether through a liquidation, an exchange offer or plan of reorganization involving the distressed debt securities or a payment of some amount in satisfaction of the obligation. In addition, even if an exchange offer is made or plan of reorganization is adopted with respect to distressed debt held by us, there can be no assurance that the securities or other assets received by us in connection with such exchange offer or plan of reorganization will not have a lower value or income potential than may have been anticipated when the investment was made.
Moreover, any securities received by us upon completion of an exchange offer or plan of reorganization may be restricted as to resale. As a result of our participation in negotiations with respect to any exchange offer or plan of reorganization with respect to an issuer of distressed debt, we may be restricted from disposing of such securities.
Our portfolio companies may prepay loans, which may reduce our yields if capital returned cannot be invested in transactions with equal or greater expected yields.
The loans in our investment portfolio may be prepaid at any time, generally with little advance notice. Whether a loan is prepaid will depend both on the continued positive performance of the portfolio company and the existence of favorable financing market conditions that allow such company the ability to replace existing financing with less expensive capital. As market conditions change, we do not know when, and if, prepayment may be possible for each portfolio company. In some cases, the prepayment of a loan may reduce our achievable yield if the capital returned cannot be invested in transactions with equal or greater expected yields, which could have a material adverse effect on our business, financial condition and results of operations.
The lack of liquidity in our investments may adversely affect our business.
We invest, and will continue to invest, in companies whose securities are not publicly traded, and whose securities are subject to legal and other restrictions on resale or are otherwise less liquid than publicly traded securities. In fact, all of our assets may be invested in illiquid securities. The illiquidity of these investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments and suffer losses. Our investments may be subject to contractual or legal restrictions on resale or are otherwise illiquid because there is usually no established trading market for such investments. In addition, we may also face restrictions on our ability to liquidate our investments if our Adviser or any of its affiliates have material nonpublic information regarding the portfolio company.
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We may not have the funds or ability to make additional investments in our portfolio companies.
After our initial investment in a portfolio company, we may be called upon from time to time to provide additional funds to such company or have the opportunity to increase our investment through a follow-on investment. There is no assurance that we will make, or will have sufficient funds to make, follow-on investments. Any decisions not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a portfolio company in need of such an investment, may result in a missed opportunity for us to increase our participation in a successful operation, may reduce the expected yield on the investment or impair the value of our investment in any such portfolio company.
Our portfolio companies may be highly leveraged.
Our investments may include companies with significant leverage. Such investments are inherently more sensitive to declines in revenues and to increases in expenses and interest rates. The leveraged capital structure of such investments will increase the exposure of the portfolio companies to adverse economic factors, such as downturns in the economy or deterioration in the condition of the portfolio company or its industry. Additionally, the securities acquired by us may be the most junior in what will typically be a complex capital structure, and thus subject to the greatest risk of loss.
Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
We invest primarily in first lien, second lien and subordinated debt issued by middle-market companies. Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest. By their terms, such debt instruments may entitle the holders to receive payments of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
The disposition of our investments may result in contingent liabilities.
In connection with the disposition of an investment in private securities, we may be required to make representations about the business and financial affairs of the portfolio company typical of those made in connection with the sale of a business. We may also be required to indemnify the purchasers of such investment to the extent that any such representations turn out to be inaccurate or with respect to certain potential liabilities. These arrangements may result in contingent liabilities that ultimately yield funding obligations that must be satisfied through our return of certain distributions previously made to us.
There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
Even though we have structured some of our investments as senior loans, if one of our portfolio companies were to enter bankruptcy proceedings, a bankruptcy court might re-characterize our debt investment and subordinate all or a portion of our claim to that of other creditors, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio company. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower. It is possible that we could become subject to a lender’s liability claim, including as a result of actions taken in rendering significant managerial assistance.
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Second priority liens on collateral securing loans that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
Certain loans that we make to portfolio companies are secured on a second priority basis by the same collateral securing senior secured debt of such companies. The first priority liens on the collateral secures the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the company under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the loan obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the company’s remaining assets, if any.
The rights we may have with respect to the collateral securing the loans we make to our portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more inter-creditor agreements that we enter into with the holders of senior debt. Under such an inter-creditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions may be taken with respect to the collateral and will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected.
If we make unsecured debt investments, we may lack adequate protection in the event our portfolio companies become distressed or insolvent and will likely experience a lower recovery than more senior debtholders in the event such portfolio companies default on their indebtedness.
We have made, and may in the future make, unsecured debt investments in portfolio companies. Unsecured debt investments are unsecured and junior to other indebtedness of the portfolio company. As a consequence, the holder of an unsecured debt investment may lack adequate protection in the event the portfolio company becomes distressed or insolvent and will likely experience a lower recovery than more senior debtholders in the event the portfolio company defaults on its indebtedness. In addition, unsecured debt investments of small and mid-sized companies are often highly illiquid and in adverse market conditions may experience steep declines in valuation even if they are fully performing.
Our investments may include “covenant-lite” loans, which may give us fewer rights and subject us to greater risk of loss than loans with financial maintenance covenants.

Although the loans in which we expect to invest will generally have financial maintenance covenants, which are used to proactively address materially adverse changes in a portfolio company’s financial performance, we do invest to a lesser extent in “covenant-lite” loans. We use the term “covenant-lite” to refer generally to loans that do not have financial maintenance covenants. Generally, “covenant-lite” loans provide borrower companies more freedom to negatively impact lenders because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrower’s financial condition or operating results. Accordingly, to the extent we invest in “covenant-lite” loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with financial maintenance covenants.

Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.

Certain of our portfolio companies may be impacted by inflation. If such portfolio companies are unable pass any increases in their costs along to their customers, it could adversely affect their results and their ability to impacting their ability to pay interest and principal on our loans. In addition, any projected future decreases in our portfolio companies’ operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future unrealized losses and therefore reduce our net assets resulting from operations.
We may incur greater risk with respect to investments we acquire through assignments or participations of interests.
Although we originate a substantial portion of our loans, we may acquire loans through assignments or participations of interests in such loans. The purchaser of an assignment typically succeeds to all the rights and obligations of the assigning
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institution and becomes a lender under the credit agreement with respect to such debt obligation. However, the purchaser’s rights can be more restricted than those of the assigning institution, and we may not be able to unilaterally enforce all rights and remedies under an assigned debt obligation and with regard to any associated collateral. A participation typically results in a contractual relationship only with the institution participating out the interest and not directly with the borrower. Sellers of participations typically include banks, broker-dealers, other financial institutions and lending institutions. In purchasing participations, we generally will have no right to enforce compliance by the borrower with the terms of the loan agreement against the borrower, and we may not directly benefit from the collateral supporting the debt obligation in which we have purchased the participation. As a result, we will be exposed to the credit risk of both the borrower and the institution selling the participation. Further, in purchasing participations in lending syndicates, we will not be able to conduct the same level of due diligence on a borrower or the quality of the loan with respect to which we are buying a participation as we would conduct if we were investing directly in the loan. This difference may result in us being exposed to greater credit or fraud risk with respect to such loans than we expected when initially purchasing the participation.
We generally do not, and do not expect to, control our portfolio companies.
We do not, and do not expect to, control most of our portfolio companies. As a result, we are subject to the risk that a portfolio company may make business decisions with which we disagree and the management of such company, as representatives of the holders of their common equity, may take risks or otherwise act in ways that do not serve our interests as a debt investor, including actions that could decrease the value of our investment. Due to the lack of liquidity for the majority of our investments, we may not be able to dispose of our interests in our portfolio companies as readily as we would like or at an appropriate valuation.     
Defaults by our portfolio companies would harm our operating results.
A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company. In addition, we may write-down the value of a portfolio company investment upon the worsening of the financial condition of the portfolio company or in anticipation of a default, which could also have a material adverse effect on our business, financial condition and results of operations.
Our portfolio companies may experience financial distress and our investments in such companies may be restructured.
Our portfolio companies may experience financial distress from time to time. Debt investments in such companies may cease to be income-producing, may require us to bear certain expenses to protect our investment and may subject us to uncertainty as to when, in what manner and for what value such distressed debt will eventually be satisfied, including through liquidation, reorganization or bankruptcy. Any restructuring can fundamentally alter the nature of the related investment, and restructurings may not be subject to the same underwriting standards that our Adviser employs in connection with the origination of an investment. In addition, we may write-down the value of our investment in any such company to reflect the status of financial distress and future prospects of the business. Any restructuring could alter, reduce or delay the payment of interest or principal on any investment, which could delay the timing and reduce the amount of payments made to us. For example, if an exchange offer is made or plan of reorganization is adopted with respect to the debt securities we currently hold, there can be no assurance that the securities or other assets received by us in connection with such exchange offer or plan of reorganization will have a value or income potential similar to what we anticipated when our original investment was made or even at the time of restructuring. Restructurings of investments might also result in extensions of the term thereof, which could delay the timing of payments made to us, or we may receive equity securities, which may require significantly more of our management’s time and attention or carry restrictions on their disposition. We cannot assure you that any particular restructuring strategy pursued by our Adviser will maximize the value of or recovery on any investment.
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We may not realize gains from our equity investments.
Certain investments that we have made in the past and may make in the future include warrants or other equity securities. In addition, we have made in the past and may make in the future direct equity investments in companies. Our goal is ultimately to realize gains upon our disposition of such equity interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We may seek puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer. We may be unable to exercise these put rights for the consideration provided in our investment documents if the issuer is in financial distress.
We are subject to certain risks associated with foreign investments.
We have made in the past and may make in the future investments in foreign companies. Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in foreign exchange rates, exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the U.S., higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility. In addition, our foreign investments generally do not constitute "qualifying assets" under the Investment Company Act.
Our success will depend, in part, on our ability to anticipate and effectively manage these and other risks. We cannot assure you that these and other factors will not have a material adverse effect on our business as a whole.
We may have foreign currency risks related to our investments denominated in currencies other than the U.S. dollar.
As of September 30, 2021, a portion of our investments are, and may continue to be, denominated in currencies other than the U.S. dollar. Changes in the rates of exchange between the U.S. dollar and other currencies will have an effect, which could be adverse, on our performance, amounts available for withdrawal and the value of securities distributed by us. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation and political developments. Additionally, a particular foreign country may impose exchange controls, devalue its currency or take other measures relating to its currency which could adversely affect us. Finally, we could incur costs in connection with conversions between various currencies.
We may expose ourselves to risks if we engage in hedging transactions.
Subject to applicable provisions of the Investment Company Act and applicable regulations promulgated by the Commodity Futures Trading Commission, we have in the past and may in the future enter into hedging transactions, which may expose us to risks associated with such transactions. Such hedging may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions and amounts due under any credit facility from changes in currency exchange rates and market interest rates. Use of these hedging instruments may include counterparty credit risk. Hedging against a decline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions and amounts due under our credit facilities or prevent losses if the values of such positions decline. However, such hedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for gain if the values of the underlying portfolio positions should increase. Moreover, it may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price.
The success of any hedging transactions will depend on our ability to correctly predict movements in currencies and interest rates. Therefore, while we may enter into such transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange rate or interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary. Moreover, for a variety of reasons, we may not seek to (or be able to) establish a perfect correlation between such hedging instruments and the portfolio holdings or credit facilities being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as a result of factors not related to currency fluctuations.
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We are a non-diversified investment company within the meaning of the Investment Company Act, and therefore have few restrictions with respect to the proportion of our assets that may be invested in securities of a single industry or issuer.
We are classified as a non-diversified investment company within the meaning of the Investment Company Act, which means that we are not limited by the Investment Company Act with respect to the proportion of our assets that we may invest in securities of a single industry or issuer, excluding limitations on investments in other investment companies. We cannot predict the industries or sectors in which our investment strategy may cause us to concentrate and cannot predict the level of our diversification among industries or issuers. To the extent that we assume large positions in a certain type of security or the securities of a small number of industries or issuers, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the security, industry or issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. Beyond RIC diversification requirements, we do not have fixed guidelines for diversification, and our investments could be concentrated in relatively few industries or issuers.
Our portfolio may be concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry.

Our portfolio may be concentrated in a limited number of portfolio companies and industries. As a result, the aggregate returns we realize may be significantly and adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment. Additionally, while we are not targeting any specific industries, our investments may be concentrated in relatively few industries. As a result, a downturn in any particular industry in which we are invested could also significantly impact the aggregate returns we realize.

Risks Relating to Our Common Stock
Shares of closed-end investment companies, including Business Development Companies, may trade at a discount to their net asset value.
Shares of closed-end investment companies, including Business Development Companies, may trade at a discount from net asset value. This characteristic of closed-end investment companies and Business Development Companies is separate and distinct from the risk that our net asset value per share may decline. During the last two years, shares of our common stock have regularly traded below our net asset value. We cannot predict whether our common stock will trade at, above or below net asset value.
Investing in our common stock may involve an above average degree of risk.
The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and a higher risk of volatility or loss of principal. Our investments in portfolio companies involve higher levels of risk, and therefore, an investment in our shares may not be suitable for someone with lower risk tolerance.
The market price of our common stock may fluctuate significantly.
The market price and liquidity of the market for shares of our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include:
•significant volatility in the market price and trading volume of securities of Business Development Companies or other companies in our sector, which are not necessarily related to the operating performance of these companies;
•inability to obtain any exemptive relief that may be required by us from the SEC;
•changes in regulatory policies, accounting pronouncements or tax guidelines, particularly with respect to RICs and Business Development Companies;
•loss of our Business Development Company or RIC status;
•changes in earnings or variations in operating results or distributions that exceed our net investment income;
•increases in expenses associated with defense of litigation and responding to SEC inquiries;
•changes in accounting guidelines governing valuation of our investments;
•changes in the value of our portfolio of investments and any derivative instruments, including as a result of general economic conditions, interest rate shifts and changes in the performance of our portfolio companies;
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•any shortfall in investment income or net investment income or any increase in losses from levels expected by investors or securities analysts;
•departure of our Adviser’s key personnel; and
•general economic trends and other external factors, including those related to the COVID-19 pandemic.
Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.
Sales of substantial amounts of our common stock, including by large stockholders, or the availability of such common stock for sale, could adversely affect the prevailing market prices for our common stock. If this occurs and continues for a sustained period of time, it could impair our ability to raise additional capital through the sale of securities should we desire to do so.
Certain provisions of our restated certificate of incorporation and fourth amended and restated bylaws as well as the Delaware General Corporation Law could deter takeover attempts and have an adverse impact on the price of our common stock.
Our restated certificate of incorporation and our fourth amended and restated bylaws as well as the Delaware General Corporation Law contain provisions that may have the effect of discouraging a third party from making an acquisition proposal for us. These anti-takeover provisions may inhibit a change in control in circumstances that could give the holders of our common stock the opportunity to realize a premium over the market price for our common stock.
Stockholders may incur dilution if we issue securities to subscribe to, convert to or purchase shares of our common stock.
The Investment Company Act prohibits us from selling shares of our common stock at a price below the current net asset value per share of such stock with certain exceptions. One such exception is prior stockholder approval of issuances of securities to subscribe to, convert to or purchase shares of our common stock even if the subscription, conversion or purchase price per share of our common stock is below the net asset value per share of our common stock at the time of any such subscription, conversion or purchase. At our 2011 annual meeting of stockholders, our stockholders approved a proposal to authorize us to issue securities to subscribe to, convert to, or purchase shares of our common stock in one or more offerings, including under such circumstance. Such authorization has no expiration. Any decision to sell securities to subscribe to, convert to, or purchase shares of our common stock will be subject to the determination by our Board of Directors that such issuance is in our and our stockholders’ best interests. If we issue securities to subscribe to, convert to or purchase shares of common stock, the exercise or conversion of such securities would increase the number of outstanding shares of our common stock. Any such exercise or conversion would be dilutive on the voting power of existing stockholders, and could be dilutive with regard to distributions and our net asset value, and other economic aspects of the common stock.
Because the number of shares of common stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive effect cannot be predicted; however, the table below illustrates the impact on the net asset value per common share of a Business Development Company that would be experienced upon the exercise of a subscription right to acquire shares of common stock of the Business Development Company.
Example of Impact of Exercise of Subscription Right to Acquire Common Stock on Net Asset Value Per Share
The example assumes that the Business Development Company has 1,000,000 shares of common stock outstanding, $15,000,000 in total assets and $5,000,000 in total liabilities at the time of the exercise of the subscription right. As a result, the net asset value and net asset value per common share of the Business Development Company are $10,000,000 and $10.00, respectively.
Further, the example assumes that the subscription right permits the holder thereof to acquire 250,000 common shares under the following three different scenarios: (i) with an exercise price equal to a 10% premium to the Business Development Company’s net asset value per share at the time of exercise, or $11.00 per share, (ii) with an exercise price equal to the Business Development Company’s net asset value per share at the time of exercise, or $10.00 per share, and (iii) with an exercise price equal to a 10% discount to the Business Development Company’s net asset value per share at the time of exercise, or $9.00 per share.
Subscription Rights Exercise PriceNet Asset Value Per Share
Prior To Exercise		Net Asset Value Per Share
After Exercise
10% premium to net asset value per common share$10.00 $10.20 
Net asset value per common share$10.00 $10.00 
10% discount to net asset value per common share$10.00 $9.80 
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Although have we chosen to demonstrate the impact on the net asset value per common share of a Business Development Company that would be experienced by existing stockholders of the Business Development Company upon the exercise of a subscription right to acquire shares of common stock of the Business Development Company, the results noted above would be similar in connection with the exercise or conversion of other securities exercisable or convertible into shares of the Business Development Company’s common stock. In addition, the example does not take into account the impact of other securities that may be issued in connection with the issuance of exercisable or convertible securities (e.g., the issuance of shares of common stock in conjunction with the issuance of subscription rights to acquire shares of common stock).
Risks Related to Our Notes
The Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.
The 2025 Notes and the 2027 Notes, which we refer to collectively as the "Notes", are not secured by any of our assets or any of the assets of our subsidiaries. As a result, the Notes are effectively subordinated to any secured indebtedness we or our subsidiaries have currently incurred and may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security) to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes. As of September 30, 2021, we had $630 million of outstanding borrowings under our credit facilities, all of which is secured.
The Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries

The Notes are obligations exclusively of Oaktree Specialty Lending Corporation and not of any of our subsidiaries. None of our subsidiaries is a guarantor of the Notes and the Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future. The assets of such subsidiaries are not directly available to satisfy the claims of our creditors, including holders of the Notes.
Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors (including trade creditors) and holders of preferred stock, if any, of our subsidiaries have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries. Even if we are recognized as a creditor of one or more of our subsidiaries, our claims are effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims. Consequently, the Notes are structurally subordinated to all indebtedness and other liabilities (including trade payables) of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish as financing vehicles or otherwise. As of September 30, 2021, our subsidiaries had $135.0 million of outstanding borrowings under the Citibank Facility, all of which is structurally senior to the Notes.
In addition, our subsidiaries may incur substantial additional indebtedness in the future, all of which would be structurally senior to the Notes.
The indentures under which the Notes are issued contains limited protection for holders of the Notes.
The indentures under which the Notes are issued offers limited protection to holders of the Notes. The terms of the indentures and the Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have a material adverse impact on investments in the Notes. In particular, the terms of the indenture and the Notes do not place any restrictions on our or our subsidiaries’ ability to:
•issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) of the Investment Company Act as modified by Section 61(a)(1) and (2) of the Investment Company Act or any successor provisions, whether or not we continue to be subject to such provisions of the Investment Company Act, but giving effect, in either case, to any exemptive relief granted to us by the SEC;
•pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes;
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•sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);
•enter into transactions with affiliates;
•create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;
•make investments; or
•create restrictions on the payment of dividends or other amounts to us from our subsidiaries.
Furthermore, the terms of the indenture and the Notes do not protect holders of the Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow or liquidity.
Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the Notes may have important consequences for holders of the Notes, including making it more difficult for us to satisfy our obligations with respect to the Notes or negatively affecting the trading value of the Notes.
Certain of our current debt instruments include more protections for their holders than the indenture and the Notes. In addition, other debt we issue or incur in the future could contain more protections for its holders than the indenture and the Notes, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of the Notes.
An active trading market for the Notes may not exist, which could limit your ability to sell the Notes or affect the market price of the Notes.
We cannot provide any assurances that an active trading market for the Notes will exist in the future or that holders will be able to sell their Notes. Even if an active trading market does exist, the Notes may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, if any, general economic conditions, our financial condition, performance and prospects and other factors. To the extent an active trading market does not exist, the liquidity and trading price for the Notes may be harmed. Accordingly, holder of the Notes may be required to bear the financial risk of an investment in the Notes for an indefinite period of time.
If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.
Any default under the agreements governing our indebtedness, including our credit facilities and our Notes or other indebtedness to which we may be a party that is not waived by the required lenders or holders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the Notes and substantially decrease the market value of the Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under our credit facilities or other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to seek to obtain waivers from the required lenders under our credit facilities or the required holders of our Notes or other debt that we may incur in the future to avoid being in default. If we breach our covenants under our credit facilities, our Notes or other debt and seek a waiver, we may not be able to obtain a waiver from the required lenders or holders. If this occurs, we would be in default and our lenders or debt holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations, including the lenders under our credit facilities, could proceed against the collateral securing the debt. Because our credit facilities and our Notes have, and any future credit facilities will likely have, customary cross-default provisions, if the indebtedness thereunder or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due. In the event holders of any debt securities we have outstanding exercise their rights to accelerate following a cross-default, those holders would be entitled to receive the principal amount of their investment, subject to any subordination arrangements that may be in place. We cannot assure you that we will have sufficient liquidity to be able to repay such amounts, in which case we would be in default under the accelerated debt and holders would have the ability to sue us to recover amounts then owing.




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General Risk Factors

Economic recessions or downturns, such as the current recession, may have a material adverse effect on our business, financial condition and results of operations, and could impair the ability of our portfolio companies to repay debt or pay interest.

Economic recessions or downturns may result in a prolonged period of market illiquidity which could have a material adverse effect on our business, financial condition and results of operations. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could limit our investment originations, limit our ability to grow and negatively impact our operating results. In addition, uncertainty with regard to economic recovery from recessions or downturns could also have a negative impact on our business, financial condition and results of operations.
When recessionary conditions exist, such as current recession, the financial results of middle-market companies, like those in which we invest, typically experience deterioration, which could ultimately lead to difficulty in meeting debt service requirements and an increase in defaults. Additionally, there can be reduced demand for certain of our portfolio companies’ products and services and/or other economic consequences, such as decreased margins or extended payment terms. Further, adverse economic conditions may decrease the value of collateral securing some of our loans and the value of our equity investments. Such conditions may require us to modify the payment terms of our investments, including changes in PIK interest provisions and/or cash interest rates. The performance of certain of our portfolio companies has been, and in the future may be, negatively impacted by these economic or other conditions, which may result in our receipt of reduced interest income from our portfolio companies and/or realized and unrealized losses related to our investments, and, in turn, may adversely affect distributable income and have a material adverse effect on our results of operations.

Global economic, political and market conditions, including downgrades of the U.S. credit rating, may adversely affect our business, results of operations and financial condition.

The current global financial market situation, as well as various social and political tensions in the United States and around the world, may contribute to increased market volatility, may have long-term effects on the United States and worldwide financial markets and may cause economic uncertainties or deterioration in the U.S. and worldwide. The impact of downgrades by rating agencies to the U.S. government’s sovereign credit rating or its perceived creditworthiness as well as potential government shutdowns and uncertainty surrounding transfers of power could adversely affect the U.S. and global financial markets and economic conditions. Since 2010, several European Union, or EU, countries have faced budget issues, some of which may have negative long-term effects for the economies of those countries and other EU countries. There is concern about national-level support for the Euro and the accompanying coordination of fiscal and wage policy among European Economic and Monetary Union member countries. In addition, the fiscal policy of foreign nations, such as Russia and China, may have a severe impact on the worldwide and U.S. financial markets. Additionally, trade wars and volatility in the U.S. repo market, the U.S. high yield bond markets, the Chinese stock markets and global markets for commodities may affect other financial markets worldwide. In addition, while governments worldwide have used stimulus measures recently to reduce volatility in the financial markets, volatility has returned as such measures are phased out, and the long-term impacts of such stimulus on fiscal policy and inflation remain unknown. We cannot predict the effects of these or similar events in the future on the U.S. and global economies and securities markets or on our investments. We monitor developments in economic, political and market conditions and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so.

Future control deficiencies could prevent us from accurately and timely reporting our financial results.

We may identify deficiencies in our internal control over financial reporting in the future, including significant deficiencies and material weaknesses. A “significant deficiency” is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of a company’s financial reporting. A "material weakness" is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.
Our failure to identify deficiencies in our internal control over financial reporting in a timely manner or remediate any deficiencies, or the identification of material weaknesses or significant deficiencies in the future could prevent us from accurately and timely reporting our financial results.
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We may experience fluctuations in our quarterly originations and results.

We could experience fluctuations in our quarterly originations and results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate payable on the debt securities we acquire, changes in accrual status of our portfolio company investments, distributions, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our market and general economic conditions. In addition, expected originations for a given quarter may be delayed past quarter-end and into the next quarter as a result of factors outside of our control. As a result of these factors, originations or results for any period should not be relied upon as being indicative of performance in future periods.

We incur significant costs as a result of being a publicly traded company.

As a publicly-traded company, we incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act, and other rules implemented by the SEC and the listing standards of the Nasdaq Global Select Market.

We may be the target of litigation or similar proceedings in the future.

We could generally be subject to litigation or similar proceedings in the future, including securities litigation and derivative actions by our stockholders. Any litigation or similar proceedings could result in substantial costs, divert management’s attention and resources from our business or otherwise have a material adverse effect on our business, financial condition and results of operations.

Item 1B. Unresolved Staff Comments
None.

Item 2. Properties
We do not own any real estate or other physical properties material to our operations. Our administrative and principal executive offices are located at 333 South Grand Avenue, 28th Floor, Los Angeles, CA 90071. We believe that our office facilities are suitable and adequate for our business as it is presently conducted.

Item 3.     Legal Proceedings
We are currently not a party to any pending material legal proceedings.

Item 4.     Mine Safety Disclosures
Not applicable.

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PART II

Item 5.     Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities


Price Range of Common Stock
Our common stock trades on the Nasdaq Global Select Market under the symbol "OCSL." The following table sets forth, for each fiscal quarter during the last two most recently completed fiscal years and for the current fiscal year, the range of high and low sales prices of our common stock as reported on the Nasdaq Global Select Market, the premium (discount) of sales price to our net asset value, or NAV, and the distributions declared by us for each fiscal quarter.
 
Sale Price
NAV (1)HighLowPremium (Discount) of High Sales Price to NAV (2)Premium (Discount) of Low Sales Price to NAV (2)Cash Distribution per Share (3)
Year ended September 30, 2020
First quarter$6.61$5.52 $5.00 (16.5)%(24.4)%$0.095 
Second quarter$5.34$5.65 $2.33 5.8 %(56.4)%$0.095 
Third quarter$6.09$4.90 $3.00 (19.5)%(50.7)%$0.095 
Fourth quarter$6.49$5.23 $4.29 (19.4)%(33.9)%$0.105 
Year ended September 30, 2021
First quarter$6.85$5.66 $4.52 (17.4)%(34.0)%$0.110 
Second quarter$7.09$6.36 $5.47 (10.3)%(22.8)%$0.120 
Third quarter$7.22$6.92 $6.19 (4.2)%(14.3)%$0.130 
Fourth quarter$7.28$7.40 $6.58 1.6 %(9.6)%$0.145 
Year ending September 30, 2022
First quarter (through November 12, 2021)*$7.57 $7.03 **$0.155(4)
__________ 
* Not determinable at the time of filing.
(1)NAV per share is determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The NAVs shown are based on outstanding shares at the end of each period.
(2)Calculated as the respective high or low sales price less NAV, divided by NAV.
(3)Represents the distribution declared in the specified quarter. We have adopted an “opt out” dividend reinvestment plan for our common stockholders. Distributions by us are generally taxable to U.S. stockholders as ordinary income or capital gains.
(4)On October 13, 2021, our Board of Directors declared a distribution of $0.155 per share payable on December 31, 2021 to stockholders of record on December 15, 2021.
The last reported price for our common stock on November 12, 2021 was $7.43 per share, which represented a 2.1 % premium to our NAV as of September 30, 2021. As of November 12, 2021, we had 59 stockholders of record, which did not include stockholders for whom shares are held in nominee or “street” name.
Sales of Unregistered Securities
We did not engage in any sales of unregistered securities during the fiscal year ended September 30, 2021.




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Stock Performance Graph
The following graph compares the cumulative 5-year total return provided to shareholders on Oaktree Specialty Lending Corporation’s common stock relative to the cumulative total returns of the Standard & Poor’s 500 Index, the Russell 2000 Financial Services Index and the S&P BDC Index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each index on September 30, 2016 and its relative performance is tracked through September 30, 2021. The stock performance graph shows returns during management by Fifth Street Management LLC, or the Former Adviser, for the periods from September 30, 2016 through October 16, 2017 and during management by Oaktree and its affiliates for the period from October 17, 2017 through September 30, 2021.
For the fiscal year ended September 30, 2020, we included a comparison to the Wells Fargo BDC Total Return Index, which had a total return of $94.54 for the period from September 30, 2016 to September 30, 2020 (based on $100 invested on September 30, 2016). For the fiscal year ended September 30, 2021, we have switched to a comparison to the S&P BDC Index, which had a total return of $97.89 for the period from September 30, 2016 to September 30, 2020 (based on $100 invested on September 30, 2016) due to the termination of the Wells Fargo BDC Total Return Index during the 2021 fiscal year.
comparisonof5yearcumulativ.jpg


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September 30, 2016September 30, 2017September 30, 2018September 30, 2019September 30, 2020September 30, 2021
Oaktree Specialty Lending Corporation$100.00 $102.82 $101.41 $114.18 $116.02 $182.99 
S&P 500$100.00 $118.61 $139.85 $145.80 $167.89 $218.27 
Russell 2000 Financial Services$100.00 $120.74 $139.14 $126.77 $127.27 $187.94 
S&P BDC Index$100.00 $108.84 $113.27 $121.96 $97.89 $151.09 
 
Stock Repurchase Program
We did not repurchase shares of our common stock during the years ended September 30, 2021 and 2020.
Fee and Expenses
The following table is intended to assist stockholders in understanding the costs and expenses that an investor in shares of our common stock will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this Form 10-K contains a reference to fees or expenses paid by “you” or “us”, or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in us. Such expenses also include those of our consolidated subsidiaries.
Stockholder transaction expenses:
Sales load (as a percentage of offering price)—%(1)
Offering expenses (as a percentage of offering price)—%(2)
Dividend reinvestment plan feesUp to $15(3)
Total stockholder transaction expenses (as a percentage of offering price)—%(4)
Annual expenses (as a percentage of net assets attributable to common stock):
Base management fees2.98%(5)
Incentive fees (17.5%)2.65%(6)
Interest payments on borrowed funds (including other costs of servicing and offering debt securities)2.77%(7)
Other expenses0.76%(8)
Acquired fund fees and expenses0.76%(9)
Total annual expenses9.92%(10)
__________ 
(1)If applicable, the prospectus or prospectus supplement relating to an offering of our common stock will disclose the applicable sales load.
(2)In the event that we conduct an offering of our securities, the related prospectus or prospectus supplement will disclose the estimated offering expenses.
(3)The expenses of administering our dividend reinvestment plan are included in “Other expenses.” The plan administrator’s fees under the plan are paid by us. If a participant elects by notice to the plan administrator in advance of termination to have the plan administrator sell part or all of the shares held by the plan administrator in the participant’s account and remit the proceeds to the participant, the plan administrator is authorized to deduct a transaction fee of up to $15 plus a $0.10 per share fee from the proceeds.
(4)Total stockholder transaction expenses may include sales load and will be disclosed in a future prospectus supplement, if any.
(5)Under the Investment Advisory Agreement, the base management fee is calculated at an annual rate of 1.50% of our total gross assets at the end of each quarter, including any investments made with borrowings, but excluding cash and cash equivalents; provided, however, the base management fee will be calculated at an annual rate of 1.00% of the value of our total gross assets, including any investments made with borrowings, but excluding cash and cash equivalents, that exceeds the product of (i) 200% (calculated in accordance with the Investment Company Act and giving effect to exemptive relief we have received with respect to debentures issued by a small business investment company subsidiary) and (ii) our net assets. For purposes of this table, we have assumed $2.6 billion of total gross assets (excluding cash and cash equivalents), which was the actual amount of our total gross assets as of September 30, 2021 and does not reflect the waiver by Oaktree of $750,000 of base management fees in each quarter. The base management fee net of such waiver would be 2.75% of net assets attributable to common stock. See “Item 1. Business - Investment Advisory Agreement - Management and Incentive Fee.”
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(6)The incentive fee consists of two parts. Under the Investment Advisory Agreement, the incentive fee on income is calculated and payable quarterly in arrears based upon our pre-incentive fee net investment income for the immediately preceding quarter. The payment of the incentive fee on income is subject to payment of a preferred return to investors each quarter (i.e., a “hurdle rate”), expressed as a rate of return on the value of our net assets at the end of the most recently completed quarter, of 1.50%, subject to a “catch up” feature. In addition, pre-incentive fee net investment income does not include any amortization or accretion of any purchase premium or purchase discount to interest income resulting solely from merger-related accounting adjustments in connection with the assets acquired in the Mergers, including any premium or discount paid for the acquisition of such assets, solely to the extent that the inclusion of such merger-related accounting adjustments, in the aggregate, would result in an increase in pre-incentive fee net investment income. See “Item 1. Business - Investment Advisory Agreement - Management and Incentive Fee” for additional information.

Under the Investment Advisory Agreement, the second part of the incentive fee (the “capital gains incentive fee”) is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Investment Advisory Agreement, as of the termination date) commencing with the fiscal year ended September 30, 2019 and equals 17.5% of our realized capital gains, if any, on a cumulative basis from the beginning of the fiscal year ended September 30, 2019 through the end of each fiscal year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gains incentive fees under the Investment Advisory Agreement. Any realized capital gains or losses and unrealized capital depreciation with respect to our portfolio as of the end of the fiscal year ended September 30, 2018 are excluded from the calculations of the second part of the incentive fee. In addition, the calculation of realized capital gains, realized capital losses and unrealized capital depreciation does (1) not include any such amounts resulting solely from merger-related accounting adjustments in connection with the assets acquired in the Mergers, including any premium or discount paid for the acquisition of such assets, solely to the extent that the inclusion of such merger-related accounting adjustments, in the aggregate, would result in an increase in the capital gains incentive fee and (2) include any such amounts associated with the investments acquired in the Mergers for the period from October 1, 2018 to the date of closing of the Mergers, solely to the extent that the exclusion of such amounts, in the aggregate, would result in an increase in the capital gains incentive fee. See “Item 1. Business - Investment Advisory Agreement - Management and Incentive Fee” for additional information.     

The incentive fee referenced in the table above is based on annualized actual amounts of the incentive fee on income incurred during the three months ended June 30, 2021 and September 30, 2021, which are the first two full quarters subsequent to the closing of the Mergers, and the capital gains incentive fee payable under the Investment Advisory Agreement as of September 30, 2021.
(7)“Interest payments on borrowed funds (including other costs of servicing and offering debt securities)” is calculated as (1) the weighted average interest rate in effect as of September 30, 2021 multiplied by the actual debt outstanding as of September 30, 2021 of $1,280.0 million plus (2) unused fees and the expected amortization of deferred financing costs and discounts based on the unamortized financing costs and discounts as of September 30, 2021. The weighted average interest rate for our borrowings as of September 30, 2021 was 2.4% (exclusive of deferred financing costs and inclusive of the impact of an interest rate swap designated as a hedging instrument). The amount of leverage that we employ at any particular time will depend on, among other things, our Board of Directors’ assessment of market and other factors at the time of any proposed borrowing.
(8)“Other expenses” are based on estimated amounts for the current fiscal year. These expenses include certain expenses allocated to us under the Investment Advisory Agreement, including travel expenses incurred by the Adviser’s personnel in connection with investigating and monitoring our investments, such as investment due diligence.
(9)Our stockholders indirectly bear the expenses of underlying funds or other investment vehicles that would be an investment company under section 3(a) of the Investment Company Act but for the exceptions to that definition provided for in sections 3(c)(1) and 3(c)(7) of the Investment Company Act ("Acquired Funds") in which we invest. This amount includes the annual expenses of SLF JV I and the Glick JV, which we refer to collectively as the "JVs". There are no fees paid by the JVs to the Adviser. See Note 3 to our Consolidated Financial Statements in this Form 10-K for more information on the JVs. The annual expenses of the JVs include interest payments on the subordinated notes held by Kemper and GF Debt Funding 2014 LLC, or GF Debt Funding, an entity advised by affiliates of GF Equity Funding, as applicable, which represented 13.8% of such expenses, and exclude interest payments on the subordinated notes held by us.
(10) “Total annual expenses” is presented as a percentage of net assets attributable to common stockholders because our common stockholders bear all of our fees and expenses and includes all fees and expenses of our consolidated subsidiaries. “Total annual expenses” does not reflect any potential provision (benefit) for income taxes because of the uncertainties associated with determining such amounts in future periods.


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Example
The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock assuming that we hold no cash or liabilities other than debt. In calculating the following expense amounts, we have assumed that our annual operating expenses remain at the levels set forth in the table above. The example does not include any sales load or offering expenses.
An investor would pay the following expenses on a $1,000 investment1 Year3 Years5 Years10 Years
Assuming a 5% annual return (assumes no return from net realized capital gains)$72$218$368$760
Assuming a 5% annual return (assumes return entirely from net realized capital gains)$88$266$446$901
The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. The incentive fee based on pre-incentive fee net investment income under the Investment Advisory Agreement, which, assuming a 5% annual return, would either not be payable or would have an insignificant impact on the expense amounts shown above, is not included in the example. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger a greater incentive fee, our expenses, and returns to our investors, would be higher. For purposes of this example, we have assumed that as of October 1, 2021, the sum of our realized capital losses and unrealized capital depreciation on a cumulative basis since October 1, 2018 equaled zero. In addition, while the example assumes reinvestment of all distributions at NAV, participants in our dividend reinvestment plan will receive a number of shares of our common stock, determined by dividing the total dollar amount of the cash distribution payable to a participant by either (i) the greater of (a) the current NAV per share of our common stock and (b) 95% of the market price per share of our common stock at the close of trading on the payment date fixed by our Board of Directors in the event that we use newly issued shares to satisfy the share requirements of the dividend reinvestment plan or (ii) the average purchase price, excluding any brokerage charges or other charges, of all shares of common stock purchased by the administrator of the dividend reinvestment plan in the event that shares are purchased in the open market to satisfy the share requirements of the dividend reinvestment plan, which may be at, above or below NAV.
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Financial Highlights
(Share amounts in thousands)Year ended
September 30,
2021		Year ended
September 30,
2020		Year ended
September 30,
2019		Year ended
September 30,
2018 (1)		Year ended
September 30,
2017
Net asset value per share at beginning of period$6.49$6.60$6.09$6.16$7.97
Net investment income (2)0.600.510.480.430.51
Net unrealized appreciation (depreciation) (2)(3)0.73(0.14)0.270.73(0.69)
Net realized gains (losses) (2)0.16(0.10)0.14(0.83)(1.21)
(Provision) benefit for taxes on realized and unrealized gains (losses) (2)—0.01———
Distributions of net investment income to stockholders(0.51)(0.39)(0.38)(0.27)(0.47)
Tax return of capital———(0.13)—
Issuance of common stock(0.19)———0.05
Net asset value per share at end of period$7.28$6.49$6.60$6.09$6.16
Per share market value at beginning of period$4.84$5.18$4.96$5.47$5.81
Per share market value at end of period$7.06$4.84$5.18$4.96$5.47
Total return (4)57.61%2.10%12.56%(1.49)%2.84%
Common shares outstanding at beginning of period140,961140,961140,961140,961143,259
Common shares outstanding at end of period180,361140,961140,961140,961140,961
Net assets at beginning of period$914,879$930,630$858,035$867,657$1,142,288
Net assets at end of period$1,312,823$914,879$930,630$858,035$867,657
Average net assets (5)$1,150,662$871,305$909,264$841,583$1,018,498
Ratio of net investment income to average net assets (5)8.44%8.26%7.47%7.13%7.13%
Ratio of total expenses to average net assets (5)9.65%7.57%9.65%9.51%10.49%
Ratio of net expenses to average net assets (5)9.51%8.16%8.78%9.35%10.35%
Ratio of portfolio turnover to average investments at fair value39.66%38.99%32.50%67.66%39.06%
Weighted average outstanding debt (6)$964,390$647,080$573,891$608,553$982,372
Average debt per share (2)$5.95$4.59$4.07$4.32$6.95
Asset coverage ratio at end of period (7)201.68%227.22%294.91%232.98%227.40%
 __________
(1)Beginning on October 17, 2017, the Company is externally managed by Oaktree or its affiliates. Prior to October 17, 2017, the Company was externally managed by the Former Adviser.
(2)Calculated based upon weighted average shares outstanding for the period.
(3)For the year ended September 30, 2021, the amount shown for net unrealized appreciation (depreciation) includes the effect of the timing of common stock issuances in connection with the Mergers.
(4)Total return equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value, assuming dividend reinvestment prices obtained under the Company's DRIP. Total return does not include sales load.
(5)Calculated based upon the weighted average net assets for the period.
(6)Calculated based upon the weighted average of principal debt outstanding for the period.
(7)Based on outstanding senior securities of $1,280.0 million, $714.8 million, $476.1 million, $643.4 million, and $680.7 million as of September 30, 2021, 2020, 2019, 2018 and 2017, respectively.

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Year ended
September 30,
2016		Year Ended
September 30,
2015		Year Ended
September 30,
2014		Year Ended
September 30,
2013		Year Ended
September 30,
2012
Net asset value at beginning of period$9.00$9.64$9.85$9.92$10.07
Net investment income (4)0.720.751.001.041.11
Net unrealized appreciation (depreciation) on investments and secured borrowings (4)(0.33)(0.46)(0.23)0.120.70
Net realized gain (loss) on investments, interest rate swap and secured borrowings (4)(0.84)(0.19)0.02(0.24)(0.81)
Distributions of net investment income to stockholders (4)(0.67)(0.79)(0.94)(0.90)(1.04)
Tax return of capital (4)(0.05)—(0.06)(0.25)(0.14)
Net issuance/repurchase of common stock (4)0.140.05—0.160.03
Net asset value at end of period$7.97$9.00$9.64$9.85$9.92
Per share market value at beginning of period$6.17$9.18$10.29$10.98$9.32
Per share market value at end of period$5.81$6.17$9.18$10.29$10.98
Total return (1)7.02%(27.18)%(0.97)%4.89%32.59%
Common shares outstanding at beginning of period150,263153,340139,04191,04872,376
Common shares outstanding at end of period143,259150,263153,340139,04191,048
Net assets at beginning of period$1,353,094$1,478,475$1,368,872$903,570$728,627
Net assets at end of period$1,142,288$1,353,094$1,478,475$1,368,872$903,570
Average net assets (2)$1,229,639$1,413,357$1,393,635$1,095,225$790,921
Ratio of net investment income to average net assets8.68%8.13%10.23%10.50%11.13%
Ratio of total expenses to average net assets13.09%10.69%10.91%9.95%9.95%
Ratio of net expenses to average net assets11.48%10.65%10.86%9.74%9.95%
Ratio of portfolio turnover to average investments at fair value23.39%23.02%25.50%38.22%29.74%
Weighted average outstanding debt (3)$1,190,105$1,228,413$1,110,021$597,596$421,366
Average debt per share (4)$8.07$8.02$7.82$5.42$5.30
Asset coverage ratio at end of period (5)220.84%238.95%259.50%394.86%385.71%
 __________
(1)Total return equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value, assuming dividend reinvestment prices obtained under the Company's DRIP.
(2)Calculated based upon the weighted average net assets for the period.
(3)Calculated based upon the weighted average of loans payable for the period.
(4)Calculated based upon weighted average shares outstanding for the period.
(5)Based on outstanding senior securities of $946.5 million, $975.3 million, $928.4 million, $464.3 million and $316.3 million as of September 30, 2016, 2015, 2014, 2013 and 2012, respectively.

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Item 6.     Selected Financial Data
Not applicable.
 

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Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in connection with our Consolidated Financial Statements and the notes thereto included elsewhere in this annual report on Form 10-K.
Some of the statements in this annual report on Form 10-K constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this annual report on Form 10-K may include statements as to:

•our future operating results and distribution projections;
•the ability of Oaktree to reposition our portfolio and to implement Oaktree's future plans with respect to our business;
•the ability of Oaktree and its affiliates to attract and retain highly talented professionals;
•our business prospects and the prospects of our portfolio companies;
•the impact of the investments that we expect to make;
•the ability of our portfolio companies to achieve their objectives;
•our expected financings and investments and additional leverage we may seek to incur in the future;
•the adequacy of our cash resources and working capital;
•the timing of cash flows, if any, from the operations of our portfolio companies; and
•the cost or potential outcome of any litigation to which we may be a party.
In addition, words such as “anticipate,” “believe,” “expect,” “seek,” “plan,” “should,” “estimate,” “project” and “intend” indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this annual report on Form 10-K involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Item 1A. Risk Factors” in this annual report on Form 10-K.
Other factors that could cause actual results to differ materially include:
•changes or potential disruptions in our operations, the economy, financial markets or political environment;
•risks associated with possible disruption in our operations or the economy generally due to terrorism, natural disasters or the COVID-19 pandemic;
•future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in our operating areas, particularly with respect to Business Development Companies or RICs;
•general considerations associated with the COVID-19 pandemic;
•the ability to realize the anticipated benefits of the Mergers; and
•other considerations that may be disclosed from time to time in our publicly disseminated documents and filings.
We have based the forward-looking statements included in this annual report on Form 10-K on information available to us on the date of this annual report, 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 in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
All dollar amounts in tables are in thousands, except share and per share amounts and as otherwise indicated.
Business Overview
We are a specialty finance company dedicated to providing customized, one-stop credit solutions to companies with limited access to public or syndicated capital markets. We are a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a Business Development Company under the Investment Company Act. In addition, we have qualified and elected to be treated as a RIC under the Code for U.S. federal income tax purposes.
We are externally managed by Oaktree pursuant to the Investment Advisory Agreement. Oaktree Administrator, an affiliate of Oaktree, provides certain administrative and other services necessary for us to operate pursuant to the Administration Agreement.
Our investment objective is to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions, including first and second lien loans, unsecured and mezzanine loans, bonds, preferred equity and certain equity co-investments. We may also seek to generate capital appreciation and income through secondary
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investments at discounts to par in either private or syndicated transactions. Our portfolio may also include certain structured finance and other non-traditional structures. We invest in companies that typically possess resilient business models with strong underlying fundamentals. We intend to deploy capital across credit and economic cycles with a focus on long-term results, which we believe will enable us to build lasting partnerships with financial sponsors and management teams, and we may seek to opportunistically take advantage of dislocations in the financial markets and other situations that may benefit from Oaktree’s credit and structuring expertise, including during the COVID-19 pandemic. Sponsors may include financial sponsors, such as an institutional investor or a private equity firm, or a strategic entity seeking to invest in a portfolio company. Oaktree is generally focused on middle-market companies, which we define as companies with enterprise values of between $100 million and $750 million. We generally invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “high yield” and “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.
In the current market environment, Oaktree intends to focus on the following areas, in which Oaktree believes there is less competition and thus potential for greater returns, for our new investment opportunities: (1) situational lending, which we define to include directly originated loans to non-sponsor companies that are hard to understand and value using traditional underwriting techniques, (2) select sponsor lending, which we define to include financing to support leveraged buyouts of companies with specialized sponsors that have expertise in certain industries, and (3) stressed sector and rescue lending, which we define to include opportunistic private loans in industries experiencing stress or limited access to capital.
Oaktree intends to continue to rotate our portfolio into investments that are better aligned with Oaktree's overall approach to credit investing and that it believes have the potential to generate attractive returns across market cycles (which we call "core investments"). Oaktree has performed a comprehensive review of our portfolio and categorized our portfolio into core investments, non-core performing investments and underperforming investments. Certain additional information on such categorization and our portfolio composition is included in investor presentations that we file with the SEC. Since an Oaktree affiliate became our investment adviser in October 2017, Oaktree and its affiliates have reduced the investments identified as non-core by over $700 million at fair value. Over time, Oaktree intends to rotate us out of the remaining non-core investments, which were approximately $134 million at fair value as of September 30, 2021. Oaktree periodically reviews designations of investments as core and non-core and may change such designations over time.
On March 19, 2021, we acquired OCSI pursuant to the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub was first merged with and into OCSI, with OCSI as the surviving corporation, and, immediately following the Merger, OCSI was then merged with and into us, with us as the surviving company. In accordance with the terms of the Merger Agreement, at the effective time of the Merger, each outstanding share of OCSI’s common stock was converted into the right to receive 1.3371 shares of our common stock (with OCSI’s stockholders receiving cash in lieu of fractional shares of our common stock). As a result of the Mergers, we issued an aggregate of 39,400,011 shares of our common stock to former OCSI stockholders.
Business Environment and Developments
The rapid spread of COVID-19 in early 2020 led to disruptions in the U.S. and global financial markets. While several countries, including the U.S., have eased certain travel restrictions, business closures and social distancing measures, the U.S. and global economies continue to rapidly evolve and experience uncertainty, particularly due to recurring COVID-19 outbreaks, vaccine hesitancy and potential re-imposition of certain restrictions. The general uncertainty surrounding the dangers and long-term impact of COVID-19 have created significant disruption in supply chains and economic activity and have had a particularly adverse impact on transportation, oil-related, hospitality, tourism, entertainment and other industries. These uncertainties can ultimately impact the overall supply and demand of the market through changing spreads, deal terms and structures and equity purchase price multiples.
We are unable to predict the full effects of the COVID-19 pandemic or how long any further outbreaks, market disruptions or volatility might last. We continue to closely monitor the impact that this has had on our business, industry and portfolio companies, which we believe may help us identify vulnerabilities and allow us to address potential problems early and provide constructive solutions if necessary.
Despite the ongoing uncertainty surrounding the COVID-19 pandemic, we believe attractive risk-adjusted returns can be achieved by making loans to companies in the middle market. Given the breadth of the investment platform and decades of credit investing experience of Oaktree and its affiliates, we believe that we have the resources and experience to source, diligence and structure investments in these companies and are well placed to generate attractive returns for investors.

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As of September 30, 2021, 91.5% of our debt investment portfolio (at fair value) and 91.8% of our debt investment portfolio (at cost) bore interest at floating rates indexed to the LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly or monthly at the borrower’s option. As a result of the COVID-19 pandemic and the related decision of the U.S. Federal Reserve to reduce certain interest rates, LIBOR decreased beginning in March 2020. A prolonged reduction in interest rates will result in a decrease in our total investment income and could result in a decrease in our net investment income to the extent the decreases are not offset by an increase in the spread on our floating rate investments, a decrease in our interest expense or a reduction of our incentive fee on income. In July 2017, the head of the United Kingdom Financial Conduct Authority, or the FCA, announced the desire to phase out the use of LIBOR by the end of 2021. However, in March 2021 the FCA announced that most U.S. dollar LIBOR would continue to be published through June 30, 2023 effectively extending the LIBOR transition period to June 30, 2023. However, the FCA has indicated it will not compel panel banks to continue to contribute to LIBOR after the end of 2021 and the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation have encouraged banks to cease entering into new contracts that use U.S. dollar LIBOR as a reference rate no later than December 31, 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, supports replacing U.S.-dollar LIBOR with the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities. Although there have been a few issuances utilizing SOFR or the Sterling Over Night Index Average, an alternative reference rate that is based on transactions, it is unknown whether these alternative reference rates will attain market acceptance as replacements for LIBOR. In anticipation of the cessation of LIBOR, we may need to renegotiate any credit agreements extending beyond the applicable phase out date with our prospective portfolio companies that utilize LIBOR as a factor in determining the interest rate. Certain of the loan agreements with our portfolio companies have included fallback language in the event that LIBOR becomes unavailable. This language generally provides that the administrative agent may identify a replacement reference rate, typically with the consent of (or prior consultation with) the borrower. In certain cases, the administrative agent will be required to obtain the consent of either a majority of the lenders under the facility, or the consent of each lender, prior to identifying a replacement reference rate. Certain of the loan agreements with our portfolio companies do not include any fallback language providing a mechanism for the parties to negotiate a new reference interest rate and will instead revert to the base rate in the event LIBOR ceases to exist.

Critical Accounting Estimates
Investment Valuation
We value our investments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820, which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. ASC 820 prioritizes the use of observable market prices over entity-specific inputs. Where observable prices or inputs are not available or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments’ complexity.
Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
 
•Level 1 — Unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.
•Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.
•Level 3 — Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
If inputs used to measure fair value fall into different levels of the fair value hierarchy, an investment's level is based on the lowest level of input that is significant to the fair value measurement. Our 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. This includes investment securities that are valued using "bid" and "ask" prices obtained from independent third party pricing services or directly from brokers. These investments may be classified as Level 3 because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustments for investment-specific factors or restrictions.
Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, Oaktree obtains and analyzes readily
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available market quotations provided by pricing vendors and brokers for all of our investments for which quotations are available. In determining the fair value of a particular investment, pricing vendors and brokers use observable market information, including both binding and non-binding indicative quotations.
We seek to obtain at least two quotations for the subject or similar securities, typically from pricing vendors. If we are unable to obtain two quotes from pricing vendors, or if the prices obtained from pricing vendors are not within our set threshold, we seek to obtain a quote directly from a broker making a market for the asset. Oaktree evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Oaktree also performs back-testing of valuation information obtained from pricing vendors and brokers against actual prices received in transactions. In addition to ongoing monitoring and back-testing, Oaktree performs due diligence procedures over pricing vendors to understand their methodology and controls to support their use in the valuation process. Generally, we do not adjust any of the prices received from these sources.
If the quotations obtained from pricing vendors or brokers are determined to not be reliable or are not readily available, we value such investments using any of three different valuation techniques. The first valuation technique is the transaction precedent technique, which utilizes recent or expected future transactions of the investment to determine fair value, to the extent applicable. The second valuation technique is an analysis of the enterprise value, or EV, of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The EV analysis is typically performed to determine (i) the value of equity investments, (ii) whether there is credit impairment for debt investments and (iii) the value for debt investments that we are deemed to control under the Investment Company Act. To estimate the EV of a portfolio company, Oaktree analyzes various factors, including the portfolio company’s historical and projected financial results, macroeconomic impacts on the company and competitive dynamics in the company’s industry. Oaktree also utilizes some or all of the following information based on the individual circumstances of the portfolio company: (i) valuations of comparable public companies, (ii) recent sales of private and public comparable companies in similar industries or having similar business or earnings characteristics, (iii) purchase prices as a multiple of their earnings or cash flow, (iv) the portfolio company’s ability to meet its forecasts and its business prospects, (v) a discounted cash flow analysis, (vi) estimated liquidation or collateral value of the portfolio company’s assets and (vii) offers from third parties to buy the portfolio company. We may probability weight potential sale outcomes with respect to a portfolio company when uncertainty exists as of the valuation date. Under the EV technique, the significant unobservable input used in the fair value measurement of our investments in debt or equity securities is the EBITDA, revenue or asset multiple, as applicable. Increases or decreases in the valuation multiples in isolation may result in a higher or lower fair value measurement, respectively. The third valuation technique is a market yield technique, which is typically performed for non-credit impaired debt investments. In the market yield technique, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk, and we consider the current contractual interest rate, the capital structure and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by us are substantially illiquid with no active transaction market, we depend on primary market data, including newly funded transactions and industry-specific market movements, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable. Under the market yield technique, the significant unobservable input used in the fair value measurement of the Company's investments in debt securities is the market yield. Increases or decreases in the market yield may result in a lower or higher fair value measurement, respectively.
In accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946 may be valued using net asset value as a practical expedient for fair value. Consistent with FASB guidance under ASC 820, these investments are excluded from the hierarchical levels. These investments are generally not redeemable.
We estimate the fair value of certain privately held warrants using a Black Scholes pricing model, which includes an analysis of various factors and subjective assumptions, including the current stock price (by using an EV analysis as described above), the expected period until exercise, expected volatility of the underlying stock price, expected dividends and the risk-free rate. Changes in the subjective input assumptions can materially affect the fair value estimates.
The fair value of our investments as of September 30, 2021 and September 30, 2020 was determined in good faith by our Board of Directors. Our Board of Directors has and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of a portion of our portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and the Board of Directors may reasonably rely on that assistance. As of September 30, 2021, 88.4% of our portfolio at fair value was valued either based on market quotations, the transactions precedent approach or corroborated by independent valuation firms. However, our Board of Directors is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to our valuation policy and a consistently applied valuation process.
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Certain factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company’s earnings and its ability to make payments on its indebtedness, the markets in which the portfolio company does business, comparison to comparable publicly-traded companies, discounted cash flow and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Due to these uncertainties, our fair value determinations may cause our net asset value on a given date to materially understate or overstate the value that we may ultimately realize upon the sale of one or more of our investments.
As of September 30, 2021, we held $2,556.6 million of investments at fair value, up from $1,573.9 million held at September 30, 2020, primarily driven by new originations, investment acquired in the Mergers and unrealized appreciation. As of September 30, 2021 and September 30, 2020, approximately 97.0% and 95.9%, respectively, of our total assets represented investments at fair value.
Revenue Recognition
Interest Income
Interest income, adjusted for accretion of OID is recorded on an accrual basis to the extent that such amounts are expected to be collected. We stop accruing interest on investments when it is determined that interest is no longer collectible. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when there is reasonable doubt that principal or interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or a return of capital depending upon management’s judgment. A non-accrual investment is restored to accrual status if past due principal and interest are paid in cash, and the portfolio company, in management’s judgment, is likely to continue timely payment of its remaining obligations.
In connection with our investment in a portfolio company, we sometimes receive nominal cost equity that is valued as part of the negotiation process with the portfolio company. When we receive nominal cost equity, we allocate our cost basis in the investment between debt securities and the nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan.
PIK Interest Income
Our investments in debt securities may contain PIK interest provisions. PIK interest, which typically represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We generally cease accruing PIK interest if there is insufficient value to support the accrual or if we do not expect the portfolio company to be able to pay all principal and interest due. Our decision to cease accruing PIK interest on a loan or debt security involves subjective judgments and determinations based on available information about a particular portfolio company, including whether the portfolio company is current with respect to its payment of principal and interest on its loans and debt securities; financial statements and financial projections for the portfolio company; our assessment of the portfolio company's business development success; information obtained by us in connection with periodic formal update interviews with the portfolio company's management and, if appropriate, the private equity sponsor; and information about the general economic and market conditions in which the portfolio company operates. Our determination to cease accruing PIK interest is generally made well before our full write-down of a loan or debt security. In addition, if it is subsequently determined that we will not be able to collect any previously accrued PIK interest, the fair value of the loans or debt securities would be reduced by the amount of such previously accrued, but uncollectible, PIK interest. The accrual of PIK interest on our debt investments increases the recorded cost bases of these investments in our Consolidated Financial Statements including for purposes of computing the capital gains incentive fee payable by us to Oaktree. To maintain our status as a RIC, certain income from PIK interest may be required to be distributed to our stockholders, even though we have not yet collected the cash and may never do so.
Portfolio Composition
Our investments principally consist of loans, common and preferred equity and warrants in privately-held companies, and the JVs. Our loans are typically secured by a first, second or subordinated lien on the assets of the portfolio company and generally have terms of up to ten years (but an expected average life of between three and four years).
During the fiscal year ended September 30, 2021, we originated $1,167.4 million of investment commitments in 55 new and 16 existing portfolio companies and funded $1,125.0 million of investments.
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During the fiscal year ended September 30, 2021, we received $762.0 million of proceeds from prepayments, exits, other paydowns and sales and exited 46 portfolio companies.
A summary of the composition of our investment portfolio at cost and fair value as a percentage of total investments is shown in the following tables: 
September 30, 2021September 30, 2020
Cost:
Senior secured debt85.85 %80.58 %
Debt investments in the JVs5.79 5.77 
Preferred equity2.60 2.37 
Common equity and warrants2.15 3.69 
LLC equity interests of the JVs1.94 2.95 
Subordinated debt1.67 4.64 
Total100.00 %100.00 %
 
September 30, 2021September 30, 2020
Fair value:
Senior secured debt86.72 %84.06 %
Debt investments in the JVs5.94 6.12 
Preferred equity2.49 1.90 
Common equity and warrants1.71 2.40 
Subordinated debt1.67 4.17 
LLC equity interests of the JVs1.47 1.35 
Total100.00 %100.00 %

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The industry composition of our portfolio at cost and fair value as a percentage of total investments was as follows:
September 30, 2021September 30, 2020
Cost:
Application Software14.49 %9.71 %
Multi-Sector Holdings (1)7.73 8.87 
Pharmaceuticals5.44 5.96 
Data Processing & Outsourced Services4.74 6.57 
Biotechnology4.41 5.36 
Personal Products4.08 3.00 
Industrial Machinery3.47 0.90 
Health Care Services3.34 4.26 
Specialized Finance2.70 3.11 
Aerospace & Defense2.66 1.68 
Fertilizers & Agricultural Chemicals2.63 2.02 
Internet & Direct Marketing Retail2.45 0.89 
Construction & Engineering2.44 0.80 
Integrated Telecommunication Services1.85 2.67 
Internet Services & Infrastructure1.85 1.72 
Specialty Chemicals1.84 2.68 
Home Improvement Retail1.83 — 
Automotive Retail1.65 — 
Airport Services1.64 1.34 
Diversified Support Services1.60 1.13 
Real Estate Services1.59 2.34 
Oil & Gas Storage & Transportation1.44 1.59 
Oil & Gas Refining & Marketing1.42 1.87 
Soft Drinks1.32 — 
Electrical Components & Equipment1.27 1.25 
Health Care Supplies1.17 1.30 
Advertising1.13 0.82 
Real Estate Operating Companies1.08 — 
Cable & Satellite1.05 — 
Movies & Entertainment1.02 2.68 
Insurance Brokers1.00 1.05 
Leisure Facilities0.99 0.11 
Health Care Equipment0.93 — 
Independent Power Producers & Energy Traders0.92 1.29 
Airlines0.88 0.63 
Health Care Distributors0.78 0.77 
Commercial Printing0.78 0.47 
Home Furnishings0.77 — 
Managed Health Care0.73 1.65 
Metal & Glass Containers0.69 0.68 
Other Diversified Financial Services0.63 0.01 
Thrifts & Mortgage Finance0.63 0.06 
Health Care Technology0.55 1.29 
Auto Parts & Equipment0.49 2.02 
Electronic Components0.40 1.53 
Property & Casualty Insurance0.39 2.88 
Restaurants0.37 0.61 
IT Consulting & Other Services0.30 0.89 
Research & Consulting Services0.29 1.49 
Systems Software0.26 1.24 
Leisure Products0.26 — 
Alternative Carriers0.26 — 
Apparel, Accessories & Luxury Goods0.20 0.82 
Air Freight & Logistics0.19 — 
Integrated Oil & Gas0.19 — 
Food Distributors0.18 — 
Food Retail0.15 0.41 
Diversified Banks0.14 — 
Technology Distributors0.12 — 
Construction Materials0.09 0.13 
Housewares & Specialties0.07 — 
Education Services0.04 1.37 
General Merchandise Stores— 1.15 
Hotels, Resorts & Cruise Lines— 0.92 
Diversified Real Estate Activities— 0.92 
Trading Companies & Distributors— 0.61 
Oil & Gas Equipment & Services— 0.20 
Health Care Facilities— 0.19 
Specialty Stores— 0.08 
Specialized REITs— 0.01 
Total100.00 %100.00 %
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September 30, 2021September 30, 2020
Fair value:
Application Software14.58 %10.21 %
Multi-Sector Holdings (1)7.41 7.74 
Pharmaceuticals5.56 6.55 
Data Processing & Outsourced Services4.46 6.33 
Biotechnology4.44 6.14 
Personal Products4.13 3.24 
Industrial Machinery3.53 0.74 
Health Care Services3.31 3.81 
Aerospace & Defense2.72 1.56 
Specialized Finance2.69 3.08 
Internet & Direct Marketing Retail2.68 0.97 
Fertilizers & Agricultural Chemicals2.64 2.14 
Construction & Engineering2.47 0.86 
Integrated Telecommunication Services1.94 2.61 
Internet Services & Infrastructure1.87 1.69 
Specialty Chemicals1.82 2.48 
Home Improvement Retail1.82 — 
Automotive Retail1.65 — 
Real Estate Services1.61 2.40 
Diversified Support Services1.60 1.12 
Airport Services1.59 1.35 
Oil & Gas Refining & Marketing1.43 1.90 
Oil & Gas Storage & Transportation1.35 1.64 
Soft Drinks1.31 — 
Electrical Components & Equipment1.26 1.30 
Advertising1.19 0.85 
Health Care Supplies1.18 1.37 
Real Estate Operating Companies1.11 — 
Insurance Brokers1.08 1.15 
Cable & Satellite1.06 — 
Movies & Entertainment1.06 2.77 
Airlines0.96 0.83 
Health Care Equipment0.93 — 
Independent Power Producers & Energy Traders0.92 1.32 
Leisure Facilities0.90 — 
Commercial Printing0.79 0.47 
Home Furnishings0.77 — 
Health Care Distributors0.77 0.78 
Managed Health Care0.74 1.70 
Metal & Glass Containers0.68 0.75 
Thrifts & Mortgage Finance0.62 0.02 
Other Diversified Financial Services0.62 — 
Health Care Technology0.55 1.40 
Auto Parts & Equipment0.48 1.99 
Electronic Components0.40 1.69 
Property & Casualty Insurance0.39 2.97 
Restaurants0.37 0.50 
Research & Consulting Services0.30 1.54 
IT Consulting & Other Services0.29 0.88 
Alternative Carriers0.27 — 
Systems Software0.26 1.30 
Leisure Products0.26 — 
Air Freight & Logistics0.19 — 
Integrated Oil & Gas0.19 — 
Food Distributors0.18 — 
Food Retail0.15 0.44 
Diversified Banks0.14 — 
Technology Distributors0.12 — 
Construction Materials0.09 0.13 
Housewares & Specialties0.08 — 
Education Services0.04 0.45 
Apparel, Accessories & Luxury Goods— 0.50 
General Merchandise Stores— 1.14 
Hotels, Resorts & Cruise Lines— 1.09 
Diversified Real Estate Activities— 1.07 
Trading Companies & Distributors— 0.64 
Health Care Facilities— 0.23 
Oil & Gas Equipment & Services— 0.16 
Specialized REITs— 0.01 
Total100.00 %100.00 %
___________________
(1)This industry includes our investments in the JVs and certain limited partnership interests.

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Loans and Debt Securities on Non-Accrual Status
As of September 30, 2021, there were no investments on non-accrual status. As of September 30, 2020, there were two investments on which we had stopped accruing cash and/or PIK interest or OID income. During the year ended September 30, 2021, we exited the two investments previously on non-accrual status as of September 30, 2020.
The percentages of our debt investments at cost and fair value by accrual status as of September 30, 2020 were as follows:
 September 30, 2020
 Cost% of Debt
Portfolio		Fair Value% of Debt
Portfolio
Accrual$1,500,364 98.79 %$1,483,284 99.89 %
PIK non-accrual (1)12,661 0.83 — — 
Cash non-accrual (2)5,712 0.38 1,571 0.11 
Total$1,518,737 100.00 %$1,484,855 100.00 %
 ___________________
(1)PIK non-accrual status is inclusive of other non-cash income, where applicable.
(2)Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.


The Joint Ventures

Senior Loan Fund JV I, LLC
In May 2014, we entered into an LLC agreement with Kemper to form SLF JV I. We co-invest in senior secured loans of middle-market companies and other corporate debt securities with Kemper through our investment in SLF JV I. SLF JV I is managed by a four person Board of Directors, two of whom are selected by us and two of whom are selected by Kemper. All portfolio decisions and investment decisions in respect of SLF JV I must be approved by the SLF JV I investment committee, which consists of one representative selected by us and one representative selected by Kemper (with approval from a representative of each required). Since we do not have a controlling financial interest in SLF JV I, we do not consolidate SLF JV I. SLF JV I is not an "eligible portfolio company" as defined in section 2(a)(46) of the Investment Company Act. SLF JV I is capitalized pro rata with LLC equity interests as transactions are completed and may be capitalized with additional subordinated notes issued to us and Kemper by SLF JV I. The SLF JV I Notes are senior in right of payment to SLF JV I LLC equity interests and subordinated in right of payment to SLF JV I’s secured debt.
As of September 30, 2021 and September 30, 2020, we and Kemper owned, in the aggregate, 87.5% and 12.5%, respectively, of the LLC equity interests of SLF JV I and the outstanding SLF JV I Notes. As of each of September 30, 2021 and September 30, 2020, we and Kemper had funded approximately $165.5 million to SLF JV I, of which $144.8 million was from us. As of September 30, 2021, we had aggregate commitments to fund SLF JV I of $35.0 million, of which approximately $26.2 million was to fund additional SLF JV I Notes and approximately $8.8 million was to fund LLC equity interests in SLF JV I. As of September 30, 2020, we had commitments to fund LLC equity interests in SLF JV I of $17.5 million, of which $1.3 million was unfunded.
Both the cost and fair value of our SLF JV I Notes were $96.3 million as of each of September 30, 2021 and September 30, 2020. We earned interest income of $7.4 million, $8.1 million and $9.8 million on our investment in the SLF JV I Notes for the years ended September 30, 2021, 2020 and 2019, respectively. The cost and fair value of the LLC equity interests in SLF JV I held by us was $49.3 million and $37.7 million, respectively, as of September 30, 2021 and $49.3 million and $21.2 million, respectively, as of September 30, 2020. We earned $0.9 million in dividend income for the year ended September 30, 2021 with respect to our investment in the LLC equity interests of SLF JV I. We did not earn dividend income for the years ended September 30, 2020 and 2019 with respect to our investment in the LLC equity interests of SLF JV I. The LLC equity interests of SLF JV I are dividend producing to the extent SLF JV I has residual cash to be distributed on a quarterly basis.
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Below is a summary of SLF JV I's portfolio as of September 30, 2021:
September 30, 2021
Senior secured loans (1)$344,196
Weighted average interest rate on senior secured loans (2)5.60%
Number of borrowers in SLF JV I55
Largest exposure to a single borrower (1)$9,875
Total of five largest loan exposures to borrowers (1)$46,984
__________________
(1) At principal amount.
(2) Computed using the weighted average annual interest rate on accruing senior secured loans at fair value.

See "Note 3. Portfolio Investments" in the notes to the accompanying financial statements for more information on SLF JV I and its portfolio.
OCSI Glick JV LLC
On March 19, 2021, as a result of the consummation of the Mergers, we became party to the LLC agreement of the Glick JV. The Glick JV invests primarily in senior secured loans of middle-market companies. We co-invest in these securities with GF Equity Funding through the Glick JV. The Glick JV is managed by a four person Board of Directors, two of whom are selected by us and two of whom are selected by GF Equity Funding. All portfolio decisions and investment decisions in respect of the Glick JV must be approved by the Glick JV investment committee, consisting of one representative selected by us and one representative selected by GF Equity Funding (with approval from a representative of each required). Since we do not have a controlling financial interest in the Glick JV, we do not consolidate the Glick JV. The Glick JV is not an "eligible portfolio company" as defined in section 2(a)(46) of the Investment Company Act. The Glick JV is capitalized as transactions are completed. The members provide capital to the Glick JV in exchange for LLC equity interests, and we and GF Debt Funding 2014 LLC, or GF Debt Funding, an entity advised by affiliates of GF Equity Funding, provide capital to the Glick JV in exchange for subordinated notes issued by the Glick JV, or the Glick JV Notes. The Glick JV Notes are junior in right of payment to the repayment of temporary contributions made by us to fund investments of the Glick JV that are repaid when GF Equity Funding and GF Debt Funding make their capital contributions and fund their Glick JV Notes, respectively.
As of September 30, 2021, we and GF Equity Funding owned 87.5% and 12.5%, respectively, of the outstanding LLC equity interests, and we and GF Debt Funding owned 87.5% and 12.5%, respectively, of the Glick JV Notes. Approximately $84.0 million in aggregate commitments was funded as of September 30, 2021, of which $73.5 million was from us. As of September 30, 2021, we had commitments to fund Glick JV Notes of $78.8 million, of which $12.4 million was unfunded. As of September 30, 2021, we had commitments to fund LLC equity interests in the Glick JV of $8.7 million, of which $1.6 million was unfunded as of each such date.
The cost and fair value of our aggregate investment in the Glick JV was $50.7 million and $55.6 million, respectively, as of September 30, 2021. For the period from March 19, 2021 to September 30, 2021, our investment in the Glick JV Notes earned interest income of $2.4 million. We did not earn any dividend income for the period from March 19, 2021 to September 30, 2021 with respect to our investment in the LLC equity interests of the Glick JV. The LLC equity interests of the Glick JV are income producing to the extent there is residual cash to be distributed on a quarterly basis.
Below is a summary of the Glick JV's portfolio as of September 30, 2021:
September 30, 2021
Senior secured loans (1)$126,512
Weighted average current interest rate on senior secured loans (2)5.86%
Number of borrowers in the Glick JV37
Largest loan exposure to a single borrower (1)$6,907
Total of five largest loan exposures to borrowers (1)$28,324
__________
(1) At principal amount.
(2) Computed using the weighted average annual interest rate on accruing senior secured loans at fair value.
See "Note 3. Portfolio Investments" in the notes to the accompanying financial statements for more information on the Glick JV and its portfolio.
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Discussion and Analysis of Results and Operations
Results of Operations
Net increase (decrease) in net assets resulting from operations includes net investment income, net realized gains (losses) and net unrealized appreciation (depreciation). Net investment income is the difference between our income from interest, dividends and fees and net expenses. Net realized gains (losses) is the difference between the proceeds received from dispositions of investment related assets and liabilities and their stated costs. Net unrealized appreciation (depreciation) is the net change in the fair value of our investment related assets and liabilities carried at fair value during the reporting period, including the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized.
On March 19, 2021, we completed our previously announced acquisition of OCSI pursuant to the Merger Agreement. We were the accounting survivor of the Mergers. The Mergers were accounted for as an asset acquisition in accordance with the asset acquisition method of accounting as detailed in ASC 805-50, Business Combinations—Related Issues, or ASC 805. We determined the fair value of the shares of our common stock that were issued to former OCSI stockholders pursuant to the Merger Agreement plus transaction costs to be the consideration paid in connection with the Mergers under ASC 805. The consideration paid to OCSI stockholders was less than the aggregate fair values of the assets acquired and liabilities assumed, which resulted in a purchase discount (the “purchase discount”). The consideration paid was allocated to the individual assets acquired and liabilities assumed based on the relative fair values of net identifiable assets acquired other than “non-qualifying” assets (for example, cash) and did not give rise to goodwill. As a result, the purchase discount was allocated to the cost basis of the OCSI investments acquired by us on a pro-rata basis based on their relative fair values as of the effective time of the Mergers. Immediately following the Mergers, the investments were marked to their respective fair values in accordance with ASC 820, which resulted in $34.1 million of unrealized appreciation in the Consolidated Statement of Operations as a result of the Mergers. The purchase discount allocated to the debt investments acquired will accrete over the life of each respective debt investment through interest income, with a corresponding adjustment recorded to unrealized appreciation on such investment acquired through its ultimate disposition. The purchase discount allocated to equity investments acquired will not amortize over the life of such investments through interest income and, assuming no subsequent change to the fair value of the equity investments acquired and disposition of such equity investments at fair value, we will recognize a realized gain with a corresponding reversal of the unrealized appreciation on disposition of such equity investments acquired. The Mergers were considered a tax-free reorganization and we have elected to carry forward the historical cost basis of the acquired OCSI investments for tax purposes.
Comparison of Years ended September 30, 2021 and September 30, 2020
Total Investment Income
Total investment income includes interest on our investments, fee income and dividend income.
Total investment income for the years ended September 30, 2021 and 2020 was $209.4 million and $143.1 million, respectively. For the year ended September 30, 2021, this amount consisted of $190.8 million of interest income from portfolio investments (which included $16.4 million of PIK interest), $14.1 million of fee income and $4.5 million of dividend income. For the year ended September 30, 2020, this amount consisted of $133.4 million of interest income from portfolio investments (which included $7.9 million of PIK interest), $8.5 million of fee income and $1.2 million of dividend income. The increase of $66.3 million, or 46.3%, in our total investment income for the year ended September 30, 2021, as compared to the year ended September 30, 2020, was due primarily to (1) a $57.4 million increase in interest income, which was primarily driven by a larger investment portfolio primarily due to the increase in assets resulting from the Mergers and new originations, OID accretion that resulted from merger-related accounting adjustments and higher OID acceleration resulting from exits of investments, (2) a $5.6 million increase in fee income primarily due to higher prepayment fees and amendment fees and (3) a $3.3 million increase in dividend income mainly driven by dividends received from two investments that did not pay dividends in the prior year.
Expenses
Net expenses (expenses net of fee waivers) for the years ended September 30, 2021 and 2020 were $109.5 million and $71.1 million, respectively. Net expenses increased for the year ended September 30, 2021, as compared to the year ended September 30, 2020, by $38.3 million, or 53.9%, primarily due to (1) $18.0 million of higher accrued Part II incentive fees (net of waivers) as a result of higher cumulative capital gains earned and the impact of the waiver reversal in the prior year, (2) $7.8 of higher base management fees (net of management fee waivers) primarily as a result of a larger investment portfolio, including due to the Mergers, (3) a $6.4 million increase in Part I incentive fees mainly due to increased total investment income and (4) a $4.2 million increase in interest expense due to higher borrowings outstanding.
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Net Investment Income
Primarily as a result of the $66.3 million increase in total investment income and the $38.3 million increase in net expenses, net investment income for the year ended September 30, 2021 increased by $25.1 million, or 34.9%, compared to the year ended September 30, 2020.
Realized Gain (Loss)
Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of investments and foreign currency and the cost basis without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period, net of recoveries. Realized losses may also be recorded in connection with our determination that certain investments are considered worthless securities and/or meet the conditions for loss recognition per the applicable tax rules.
During the years ended September 30, 2021, 2020 and 2019, we recorded aggregate net realized gains (losses) of $26.4 million, $(13.9) million and $20.8 million, respectively, in connection with the exits or restructurings of various investments. See “Note 9. Realized Gains or Losses and Net Unrealized Appreciation or Depreciation” in the notes to the accompanying Consolidated Financial Statements for more details regarding investment realization events for the years ended September 30, 2021, 2020 and 2019.
Net Unrealized Appreciation (Depreciation)
Net unrealized appreciation or depreciation is the net change in the fair value of our investments and foreign currency during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
During the years ended September 30, 2021, 2020 and 2019, we recorded net unrealized appreciation (depreciation) of $114.5 million, $(20.6) million and $38.5 million, respectively. For the year ended September 30, 2021, this consisted of $70.0 million of net unrealized appreciation on debt investments, $36.3 million of net unrealized appreciation on equity investments, $6.6 million of net unrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses) and $1.7 million of net unrealized appreciation of foreign currency forward contracts. For the year ended September 30, 2020, this consisted of $35.3 million of net unrealized depreciation on equity investments, $12.0 million of net unrealized depreciation on debt investments and $0.3 million of net unrealized depreciation of foreign currency forward contracts, partially offset by $26.9 million of net unrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses). For the year ended September 30, 2019, this consisted of $57.0 million of net unrealized appreciation related to exited investments (a portion of which results in a reclassification to realized losses), $10.6 million of net unrealized appreciation on equity investments and $0.3 million net unrealized appreciation of foreign currency forward contracts, partially offset by $26.8 million of net unrealized depreciation on debt investments and $2.7 million of net unrealized depreciation of secured borrowings (which results in a reclassification to realized gains).
For the year ended September 30, 2021, there were $22.8 million of net realized and unrealized gains (losses) that resulted solely from accounting adjustments related to the Mergers.
Comparison of Years ended September 30, 2020 and September 30, 2019
The comparison of the fiscal years ended September 30, 2020 and 2019 can be found within Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our annual report on Form 10-K for the fiscal year ended September 30, 2020 which is incorporated by reference herein.
Financial Condition, Liquidity and Capital Resources
We have a number of alternatives available to fund our investment portfolio and our operations, including raising equity, increasing or refinancing debt and funding from operational cash flow. We generally expect to fund the growth of our investment portfolio through additional debt and equity capital, which may include securitizing a portion of our investments. We cannot assure you, however, that our efforts to grow our portfolio will be successful. For example, our common stock has generally traded at prices below net asset value for the past several years, and we are currently limited in our ability to raise additional equity at prices below the then-current net asset value per share. We intend to continue to generate cash primarily from cash flows from operations, including interest earned, and future borrowings. We intend to fund our future distribution
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obligations through operating cash flow or with funds obtained through future equity and debt offerings or credit facilities, as we deem appropriate.
Our primary uses of funds are investments in our targeted asset classes and cash distributions to holders of our common stock. We may also from time to time repurchase or redeem some or all of our outstanding notes. At a special meeting of our stockholders held on June 28, 2019, our stockholders approved the application of the reduced asset coverage requirements in Section 61(a)(2) of the Investment Company Act to us effective as of June 29, 2019. As a result of the reduced asset coverage requirement, we can incur $2 of debt for each $1 of equity as compared to $1 of debt for each $1 of equity. As of September 30, 2021, we had $1,280.0 million in senior securities and our asset coverage ratio was 201.7%. As of September 30, 2021, our debt to equity ratio was 0.97x. Our target debt to equity ratio is 0.85x to 1.0x (i.e., one dollar of equity for each $0.85 to $1.00 of debt outstanding) as we plan to continue to opportunistically deploy capital into the markets.
For the year ended September 30, 2021, we experienced a net decrease in cash and cash equivalents (including restricted cash) of $7.5 million. During that period, we used $230.5 million of net cash from operating activities, primarily from funding $1,120.2 million of investments, partially offset by $792.2 million of principal payments and sale proceeds received, $20.9 million of cash acquired in the Mergers, the cash activities related to $97.1 million of net investment income and $10.1 million of net increases in payables and net decreases in receivables from unsettled transactions. During the same period, net cash provided by financing activities was $224.2 million, primarily consisting of $349.0 million of borrowings of unsecured notes (net of OID), partially offset by $24.6 million of net repayments under the credit facilities, $79.9 million of cash distributions paid to our stockholders, $9.3 million of repayments of secured borrowings, $2.2 million of repurchases of common stock under our dividend reinvestment plan, or DRIP, and $8.9 million of deferred financing costs paid.
For the year ended September 30, 2020, we experienced a net increase in cash and cash equivalents of $23.7 million. During that period, we used $152.9 million of net cash from operating activities, primarily from funding $727.2 million of investments, a $63.7 million of net decrease in payables from unsettled transactions, partially offset by $579.6 million of principal payments and sale proceeds received and the cash activities related to $72.0 million of net investment income. During the same period, net cash provided by financing activities was $176.3 million, primarily consisting of $100.0 million of net borrowings under the Credit Facility (as defined below) and $136.2 million net incurrence of unsecured notes, partially offset by $53.1 million of cash distributions paid to our stockholders, $4.8 million of deferred financing costs paid and $1.9 million of repurchases of common stock under our dividend reinvestment plan, or DRIP.
For the year ended September 30, 2019, we experienced a net increase in cash and cash equivalents and restricted cash of $1.9 million. During that period, we received $215.8 million of net cash from operating activities, primarily from $606.3 million of principal payments and sale proceeds received, $44.5 million of a net increase in payables from unsettled transactions and the cash activities related to $67.9 million of net investment income, partially offset by funding $478.0 million of investments. During the same period, net cash used in financing activities was $214.1 million, primarily consisting of $228.8 million of repayments of unsecured notes, $2.7 million of repayments of secured borrowings, $52.2 million of cash distributions paid to our stockholders, $2.9 million of deferred financing costs paid and $1.3 million of repurchases of common stock under our DRIP, partially offset by $73.8 million of net borrowings under the Credit Facility.
As of September 30, 2021, we had $31.6 million in cash and cash equivalents (including $2.3 million of restricted cash), portfolio investments (at fair value) of $2.6 billion, $22.1 million of interest, dividends and fees receivable, $470.0 million of undrawn capacity on our credit facilities (subject to borrowing base and other limitations), $0.1 million of net receivables from unsettled transactions, $630.0 million of borrowings outstanding under our credit facilities and $638.7 million of unsecured notes payable (net of unamortized financing costs, unaccreted discount and interest rate swap fair value adjustment).
As of September 30, 2020, we had $39.1 million in cash and cash equivalents, portfolio investments (at fair value) of $1.6 billion, $6.9 million of interest, dividends and fees receivable, $285.2 million of undrawn capacity on the Syndicated Facility (as defined below) (subject to borrowing base and other limitations), $8.6 million of net receivables from unsettled transactions, $414.8 million of borrowings outstanding under our Syndicated Facility and $294.5 million of unsecured notes payable (net of unamortized financing costs and unaccreted discount).
We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. As of September 30, 2021, our only off-balance sheet arrangements consisted of $264.9 million of unfunded commitments, which was comprised of $212.4 million to provide debt and equity financing to certain of our portfolio companies, $49.0 million to provide financing to the JVs and $3.5 million related to unfunded limited partnership interests. As of September 30, 2020, our only off-balance sheet arrangements consisted of $157.5 million of unfunded commitments, which was comprised of $152.7 million to provide debt financing to certain of our portfolio companies, $1.3 million to provide equity financing to SLF JV I and $3.5 million related to unfunded limited partnership interests. Such commitments are subject to our portfolio companies' satisfaction of certain financial and nonfinancial covenants
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and may involve, to varying degrees, elements of credit risk in excess of the amount recognized in our Consolidated Statements of Assets and Liabilities.
As of September 30, 2021, we have analyzed cash and cash equivalents, availability under our credit facilities, the ability to rotate out of certain assets and amounts of unfunded commitments that could be drawn and believe our liquidity and capital resources are sufficient to take advantage of market opportunities in the current economic climate.
Contractual Obligations
The following table reflects information pertaining to our principal debt outstanding under the Syndicated Facility, Citibank Facility, Deutsche Bank Facility, 2025 Notes, 2027 Notes and secured borrowings:
Debt Outstanding
as of September 30, 2020		Debt Outstanding
as of September 30, 2021		Weighted average debt
outstanding for the
year ended
September 30, 2021		Maximum debt
outstanding for the year ended
September 30, 2021
Syndicated Facility$414,825 $495,000 $455,292 $700,025 
Citibank Facility
— 135,000 65,478 149,057 
Deutsche Bank Facility— — 13,107 115,700 
2025 Notes300,000 300,000 300,000 300,000 
2027 Notes— 350,000 130,411 350,000 
Secured borrowings— — 102 9,341 
Total debt$714,825 $1,280,000 $964,390 
 
The following table reflects our contractual obligations arising from the Syndicated Facility, Citibank Facility, 2025 Notes and 2027 Notes:
 
 Payments due by period as of September 30, 2021
Contractual ObligationsTotalLess than 1 year1-3 years3-5 yearsMore than 5 years
Syndicated Facility$495,000 $— $— $495,000 $— 
Interest due on Syndicated Facility49,305 10,731 21,462 17,112 — 
Citibank Facility135,000 — 135,000 — — 
Interest due on Citibank Facility7,311 2,611 4,700 — — 
2025 Notes300,000 — — 300,000 — 
Interest due on 2025 Notes35,786 10,500 21,000 4,286 — 
2027 Notes350,000 — — — 350,000 
Interest due on 2027 Notes (a)33,607 6,346 12,692 12,692 1,877 
Total$1,406,009 $30,188 $194,854 $829,090 $351,877 
__________ 
(a) The interest due on the 2027 Notes was calculated net of the interest rate swap.

Equity Issuances
On March 19, 2021, in connection with the Mergers, we issued an aggregate of 39,400,011 shares of our common stock to former OCSI stockholders. There were no other common stock issuances during the year ended September 30, 2021, 2020 and 2019.

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Significant Capital Transactions
The following table reflects the distributions per share that we have paid, including shares issued under our DRIP, on our common stock since October 1, 2018:
Date DeclaredRecord DatePayment DateAmount
per Share		Cash
Distribution		DRIP Shares
Issued (1)		DRIP Shares
Value
November 19, 2018December 17, 2018December 28, 2018$0.095 $ 13.0 million87,429 $ 0.4 million
February 1, 2019March 15, 2019March 29, 20190.095 13.1 million59,603  0.3 million
May 3, 2019June 14, 2019June 28, 20190.095 13.1 million61,093  0.3 million
August 2, 2019September 13, 2019September 30, 20190.095 13.1 million61,205  0.3 million
November 12, 2019December 13, 2019December 31, 20190.095 12.9 million87,747 0.5 million
January 31, 2020March 13, 2020March 31, 20200.095 12.9 million157,523 0.5 million
April 30, 2020June 15, 2020June 30, 20200.095 13.0 million87,351 0.4 million
July 31, 2020September 15, 2020September 30, 20200.105 14.3 million102,404 0.5 million
November 13, 2020December 15, 2020December 31, 20200.11 15.0 million93,964 0.5 million
January 29, 2021March 15, 2021March 31, 20210.12 16.4 million81,702 0.5 million
April 30, 2021June 15, 2021June 30, 20210.13 22.9 million76,979 0.5 million
July 30, 2021September 15, 2021September 30, 20210.145 25.5 million85,075 0.6 million
 ______________
(1)Shares were purchased on the open market and distributed.
Indebtedness
See “Note 6. Borrowings” in the Consolidated Financial Statements for more details regarding our indebtedness.
Syndicated Facility

As of September 30, 2021, (i) the size of the Syndicated Facility was $950 million (with an “accordion” feature that permits us, under certain circumstances, to increase the size of the facility to up to the greater of $1.25 billion and our net worth (as defined in the Syndicated Facility) on the date of such increase), (ii) the period during which we may make drawings will expire on May 4, 2025 and the maturity date was May 4, 2026 and (iii) the interest rate margin for (a) LIBOR loans (which may be 1-, 2-, 3- or 6-month, at our option) was 2.00% and (b) alternate base rate loans was 1.00%.

Each loan or letter of credit originated or assumed under the Syndicated Facility is subject to the satisfaction of certain conditions. Borrowings under the Syndicated Facility are subject to the facility’s various covenants and the leverage restrictions contained in the Investment Company Act. We cannot assure you that we will be able to borrow funds under the Syndicated Facility at any particular time or at all.
The following table describes significant financial covenants, as of September 30, 2021, with which we must comply under the Syndicated Facility on a quarterly basis:
Financial CovenantDescriptionTarget ValueJune 30, 2021 Reported Value (1)
Minimum shareholders' equityNet assets shall not be less than the sum of (x) $600 million, plus (y) 50% of the aggregate net proceeds of all sales of equity interests after May 6, 2020
$600 million $1,302 million
Asset coverage ratioAsset coverage ratio shall not be less than the greater of 1.50:1 and the statutory test applicable to us1.50:12.16:1
Interest coverage ratioInterest coverage ratio shall not be less than 2.25:12.25:14.18:1
Minimum net worthNet worth shall not be less than $550 million$550 million$1,121 million
 ___________ 
(1) As contractually required, we report financial covenants based on the last filed quarterly or annual report, in this case our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021. We were in compliance with all financial covenants under the Syndicated Facility based on the financial information contained in this Annual Report on Form 10-K.

As of September 30, 2021 and September 30, 2020, we had $495.0 million and $414.8 million of borrowings outstanding under the Syndicated Facility, respectively, which had a fair value of $495.0 million and $414.8 million, respectively. Our borrowings under the Syndicated Facility bore interest at a weighted average interest rate of 2.197%, 3.028% and 4.550% for the years ended September 30, 2021, 2020 and 2019, respectively. For the years ended September 30, 2021, 2020 and 2019, we
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recorded interest expense (inclusive of fees) of $13.8 million, $14.9 million and $17.1 million, respectively, related to the Syndicated Facility.
Citibank Facility
On March 19, 2021, as a result of the consummation of the Mergers, we became party to the Citibank Facility. As of September 30, 2021, we were able to borrow up to $150 million under the Citibank Facility (subject to borrowing base and other limitations). As of September 30, 2021, the reinvestment period under the Citibank Facility was scheduled to expire on July 18, 2023 and the maturity date for the Citibank Facility was July 18, 2024.
As of September 30, 2021, borrowings under the Citibank Facility are subject to certain customary advance rates and accrue interest at a rate equal to LIBOR plus between 1.25% and 2.20% per annum on broadly syndicated loans, subject to observable market depth and pricing, and LIBOR plus 2.25% per annum on all other eligible loans during the reinvestment period. In addition, as of September 30, 2021, for the duration of the reinvestment period there is a non-usage fee payable of 0.50% per annum on the undrawn amount under the Citibank Facility. The minimum asset coverage ratio applicable to us under the Citibank Facility is 150% as determined in accordance with the requirements of the Investment Company Act. Borrowings under the Citibank Facility are secured by all of the assets of OCSL Senior Funding II LLC and all of our equity interests in OCSL Senior Funding II LLC. We may use the Citibank Facility to fund a portion of our loan origination activities and for general corporate purposes. Each loan origination under the Citibank Facility is subject to the satisfaction of certain conditions.
As of September 30, 2021, we had $135.0 million outstanding under the Citibank Facility, which had a fair value of $135.0 million. Our borrowings under the Citibank Facility bore interest at a weighted average interest rate of 2.086% for the period from March 19, 2021 to September 30, 2021. For the period from March 19, 2021 to September 30, 2021, we recorded interest expense (inclusive of fees) of $1.9 million related to the Citibank Facility.
Deutsche Bank Facility
On March 19, 2021, as a result of the consummation of the Mergers, we became party to a loan financing and servicing agreement, or, as amended, the Deutsche Bank Facility, with OCSI Senior Funding Ltd., our wholly-owned, special purpose financing subsidiary, as borrower, us, as equityholder and as servicer, the lenders from time to time party thereto, Deutsche Bank AG, New York Branch, as facility agent, and Wells Fargo Bank, National Association, as collateral agent and as collateral custodian.
On May 4, 2021, we repaid all outstanding borrowings under the Deutsche Bank Facility using borrowings under the Syndicated Facility, following which the Deutsche Bank Facility was terminated. For the period from March 19, 2021 to May 4, 2021, our borrowings under the Deutsche Bank Facility bore interest at a weighted average interest rate of 2.900%. For the period from March 19, 2021 to September 30, 2021, we recorded interest expense (inclusive of fees) of $0.3 million related to the Deutsche Bank Facility.
2025 Notes
On February 25, 2020, we issued $300.0 million in aggregate principal amount of the 2025 Notes for net proceeds of $293.8 million after deducting OID of $2.5 million, underwriting commissions and discounts of $3.0 million and offering costs of $0.7 million. The OID on the 2025 Notes is amortized based on the effective interest method over the term of the notes.
2027 Notes
On May 18, 2021, we issued $350.0 million in aggregate principal amount of the 2027 Notes for net proceeds of $344.8 million after deducting OID of $1.0 million, underwriting commissions and discounts of $3.5 million and offering costs of $0.7 million. The OID on the 2027 Notes is amortized based on the effective interest method over the term of the notes.
In connection with the 2027 Notes, we entered into an interest rate swap to more closely align the interest rates of our liabilities with our investment portfolio, which consists of predominately floating rate loans. Under the interest rate swap agreement, we receive a fixed interest rate of 2.7% and pay a floating interest rate of the three-month LIBOR plus 1.658% on a notional amount of $350 million. We designated the interest rate swap as the hedging instrument in an effective hedge accounting relationship.
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The below table presents the components of the carrying value of the 2025 Notes and the 2027 Notes as of September 30, 2021:
 As of September 30, 2021
($ in millions)2025 Notes2027 Notes
Principal$300.0 $350.0 
  Unamortized financing costs(2.6)(4.0)
  Unaccreted discount(1.7)(0.9)
  Interest rate swap fair value adjustment— (2.1)
Net carrying value$295.7 $343.0 
Fair Value$314.5 $351.1 
The below table presents the components of the carrying value of the 2025 Notes as of September 30, 2020:
 As of September 30, 2020
($ in millions)2025 Notes
Principal$300.0 
  Unamortized financing costs(3.3)
  Unaccreted discount(2.2)
Net carrying value$294.5 
Fair Value$301.4 
The below table presents the components of interest and other debt expenses related to the 2025 Notes and the 2027 Notes for the year ended September 30, 2021:
($ in millions)2025 Notes2027 Notes
Coupon interest$10.5 $3.5 
Amortization of financing costs and discount1.3 0.3 
Effect of interest rate swap— (1.1)
 Total interest expense$11.8 $2.7 
Coupon interest rate (net of effect of interest rate swap for 2027 Notes)3.500 %1.813 %
The below table presents the components of interest and other debt expenses related to the 2025 Notes for the year ended September 30, 2020:
($ in millions)2025 Notes
Coupon interest$6.3 
Amortization of financing costs and discount0.7 
 Total interest expense$7.0 
Coupon interest rate3.500 %
2024 Notes
For the years ended September 30, 2020 and 2019, we recorded interest expense of $1.9 million and $4.6 million (inclusive of fees), respectively, related to our 5.875% notes due 2024, or the 2024 Notes.
On March 2, 2020, we redeemed 100%, or $75.0 million aggregate principal amount, of the issued and outstanding 2024 Notes. The redemption price per 2024 Note was $25 plus accrued and unpaid interest. We recognized a loss of $1.0 million in connection with the redemption of the 2024 Notes during the year ended September 30, 2020. As of September 30, 2021 and September 30, 2020, there were no 2024 Notes outstanding.
2028 Notes
For the year ended September 30, 2020 and 2019, we recorded interest expense of $2.5 million and $5.5 million (inclusive of fees), respectively, related to our 6.125% notes due 2028, or the 2028 Notes.
On March 13, 2020, we redeemed 100%, or $86.3 million aggregate principal amount, of the issued and outstanding 2028 Notes. The redemption price per 2028 Note was $25 plus accrued and unpaid interest. We recognized a loss of $1.5 million in connection with the redemption of the 2028 Notes during the year ended September 30, 2020. As of September 30, 2021 and September 30, 2020, there were no 2028 Notes outstanding.
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Secured Borrowings
As of September 30, 2021 and September 30, 2020, we did not have any secured borrowings outstanding. On March 19, 2021, as a result of the consummation of the Mergers, we became party to a secured borrowing arrangement under which certain securities were sold and simultaneously repurchased at a premium. The amounts due under the secured borrowing arrangement were settled prior to September 30, 2021. For the period from March 19, 2021 to September 30, 2021, we recorded less than $0.1 million of interest expense in connection with secured borrowings. Our secured borrowings bore interest at a weighted average rate of 3.123% for the period from March 19, 2021 to September 30, 2021.
During the year ended September 30, 2019, $7.2 million of secured borrowings were extinguished in exchange for $7.2 million of preferred stock in C5 Technology Holdings, LLC, which was restructured during the year. For the year ended September 30, 2019, we recorded interest expense of $0.1 million related to the secured borrowings. For the year ended September 30, 2019, we recorded unrealized depreciation on secured borrowings of $2.7 million. For the year ended September 30, 2019, we recorded a realized gain of $2.6 million as a result of the extinguishment of secured borrowings in connection with the C5 Technology Holdings, LLC restructuring.

Regulated Investment Company Status and Distributions

We have qualified and elected to be treated as a RIC under Subchapter M of the Code for U.S. federal income tax purposes. As long as we continue to qualify as a RIC, we will not be subject to tax on our investment company taxable income (determined without regard to any deduction for dividends paid) or realized net capital gains, to the extent that such taxable income or gains is distributed, or deemed to be distributed as dividends, to stockholders on a timely basis.
Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation. Distributions declared and paid by us in a taxable year may differ from taxable income for that taxable year as such distributions may include the distribution of taxable income derived from the current taxable year or the distribution of taxable income derived from the prior taxable year carried forward into and distributed in the current taxable year. Distributions also may include returns of capital.
To maintain RIC tax treatment, we must, among other things, distribute dividends, with respect to each taxable year, of an amount at least equal to 90% of our investment company taxable income (i.e., our net ordinary income and our realized net short-term capital gains in excess of realized net long-term capital losses, if any), determined without regard to any deduction for dividends paid. As a RIC, we are also subject to a federal excise tax, based on distribution requirements of our taxable income on a calendar year basis. We anticipate timely distribution of our taxable income in accordance with tax rules. We did not incur a U.S. federal excise tax for calendar years 2019 and 2020. We may incur a federal excise tax in future years.
We intend to distribute at least 90% of our annual taxable income (which includes our taxable interest and fee income) to our stockholders. The covenants contained in our credit facilities may prohibit us from making distributions to our stockholders, and, as a result, could hinder our ability to satisfy the distribution requirement associated with our ability to be subject to tax as a RIC. In addition, we may retain for investment some or all of our net capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) and treat such amounts as deemed distributions to our stockholders. If we do this, our stockholders will be treated as if they received actual distributions of the capital gains we retained and then reinvested the net after-tax proceeds in our common stock. Our stockholders also may be eligible to claim tax credits (or, in certain circumstances, tax refunds) equal to their allocable share of the tax we paid on the capital gains deemed distributed to them. To the extent our taxable earnings for a fiscal and taxable year fall below the total amount of our dividend distributions for that fiscal and taxable year, a portion of those distributions may be deemed a return of capital to our stockholders.
We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings applicable to us as a Business Development Company under the Investment Company Act and due to provisions in our credit facilities and debt instruments. If we do not distribute a certain percentage of our taxable income annually, we will suffer adverse tax consequences, including possible loss of our ability to be subject to tax as a RIC. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.
A RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder elects to receive his or her entire distribution in either cash or stock of the RIC, subject to certain limitations regarding the aggregate amount of cash to be distributed to all stockholders. If these and certain other requirements are met, for U.S federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.
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We may generate qualified net interest income or qualified net short-term capital gains that may be exempt from U.S. withholding tax when distributed to foreign stockholders. A RIC is permitted to designate distributions of qualified net interest income and qualified short-term capital gains as exempt from U.S. withholding tax when paid to non-U.S. shareholders with proper documentation. The following table, which may be subject to change as we finalize our annual tax filings, lists the percentage of qualified net interest income and qualified short-term capital gains for the year ended September 30, 2021.
Year EndedQualified Net Interest IncomeQualified Short-Term Capital Gains
September 30, 202189.8 %— 
We have adopted a DRIP that provides for the reinvestment of any distributions that we declare in cash on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if our Board of Directors declares a cash distribution, then our stockholders who have not “opted out” of the DRIP will have their cash distributions automatically reinvested in additional shares of our common stock, rather than receiving a cash distribution. If our shares are trading at a premium to net asset value, we typically issue new shares to implement the DRIP, with such shares issued at the greater of the most recently computed net asset value per share of our common stock or 95% of the current market value per share of our common stock on the payment date for such distribution. If our shares are trading at a discount to net asset value, we typically purchase shares in the open market in connection with our obligations under the DRIP.
Related Party Transactions
We have entered into the Investment Advisory Agreement with Oaktree and the Administration Agreement with Oaktree Administrator, an affiliate of Oaktree. Mr. John B. Frank, an interested member of our Board of Directors, has an indirect pecuniary interest in Oaktree. Oaktree is a registered investment adviser under the Investment Advisers Act of 1940, as amended, that is partially and indirectly owned by OCG. See “Note 11. Related Party Transactions – Investment Advisory Agreement” and “– Administrative Services” in the notes to the accompanying Consolidated Financial Statements.
Recent Developments
Distribution Declaration
On October 13, 2021, our Board of Directors declared a quarterly distribution of $0.155 per share, payable in cash on December 31, 2021 to stockholders of record on December 15, 2021.
Election of Chief Financial Officer and Treasurer
On November 12, 2021, our Board of Directors elected Christopher McKown, age 40, as its Chief Financial Officer and Treasurer effective as of November 30, 2021. Mr. McKown is also expected to succeed Mel Carlisle as Chief Financial Officer and Treasurer of OSI II as of December 31, 2021. Mr. McKown joined OCM in 2011 and currently serves as a Managing Director responsible for fund accounting and reporting for Oaktree’s Strategic Credit strategy and as the Assistant Treasurer of the Company and OSI II. Prior to joining OCM., he worked in the audit practice at KPMG LLP. Mr. McKown received a B.A. degree in business economics with a minor in accounting cum laude from the University of California, Los Angeles and is a Certified Public Accountant (inactive).
Mr. McKown has no family relationships with any current director, executive officer, or person nominated to become a director or executive officer, of us, and there are no transactions or proposed transactions, to which we are a party, or intended to be a party, in which Mr. McKown has, or will have, a material interest subject to disclosure under Item 404(a) of Regulation S-K.
Election of Chief Compliance Officer
On November 12, 2021, our Board of Directors, including a majority of our independent directors, elected Ashley Pak, age 43, as its Chief Compliance Officer effective as of the close of business on November 12, 2021. Ms. Pak was also elected as Chief Compliance Officer of OSI II as of the close of business on November 12, 2021. Ms. Pak joined OCM in 2007 and currently serves as a Senior Vice President in the Compliance Department. Prior to joining OCM, she was a Compliance/Legal Specialist at Associated Securities Corp. Ms. Pak received a B.A. in Business Administration from Seattle University and an MBA from the University of Massachusetts, Amherst – Isenberg School of Management.
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Ms. Pak has no family relationships with any current director, executive officer, or person nominated to become a director or executive officer, of us, and there are no transactions or proposed transactions, to which we are a party, or intended to be a party, in which Ms. Pak has, or will have, a material interest subject to disclosure under Item 404(a) of Regulation S-K.
Election of Independent Director
On November 12, 2021, the Board of Directors elected Phyllis R. Caldwell to the Board of Directors and each of its committees effective as of December 31, 2021. Ms. Caldwell is founder and has served since 2012 as the managing member of Wroxton Civic Ventures, which provides advisory services on various financial, housing and economic development matters. Previously, Ms. Caldwell was Chief Homeownership Preservation Officer at the U.S. Department of the Treasury, responsible for oversight of the U.S. housing market stabilization, economic recovery and foreclosure prevention initiatives established through the Troubled Asset Relief Program. In addition, Ms. Caldwell held various leadership roles during eleven years at Bank of America, including serving as President of Community Development Banking. Ms. Caldwell has served as Chair of the board of directors of Ocwen Financial Corporation since March 2016 and has served as a director of the company since January 2015. In June 2021, Ms. Caldwell became a member of the board of directors of OneMain Holdings, Inc., the country’s largest nonprime installment lender. In March 2021, Ms. Caldwell was appointed as a member of the board of trustees of JBG SMITH, an owner and developer of mixed-use properties in the Washington, D.C. market. From December 2020 to July 2021, Ms. Caldwell served as a member of the board of directors of Revolution Acceleration Acquisition Corp., a special purpose acquisition company, and from January 2014 through September 2018, she served as an independent director of American Capital Senior Floating, Ltd., a Business Development Company. Ms. Caldwell also serves or has served on the boards of other public and private businesses and numerous non-profit organizations engaged in housing and community development finance. Ms. Caldwell received her Master of Business Administration from the Robert H. Smith School of Business at the University of Maryland, College Park and holds a Bachelor of Arts in Sociology, also from the University of Maryland.
Ms. Caldwell has no family relationships with any current director, executive officer, or person nominated to become a director or executive officer, of us, and there are no transactions or proposed transactions, to which we are a party, or intended to be a party, in which Ms. Caldwell has, or will have, a material interest subject to disclosure under Item 404(a) of Regulation S-K.

73


Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are subject to financial market risks, including changes in the valuations of our investment portfolio and interest rates.
Valuation Risk
Our investments may not have a readily available market price, and we value these investments at fair value as determined in good faith by our Board of Directors, with the assistance of the Audit Committee and Oaktree. There is no single standard for determining fair value in good faith and valuation methodologies involve a significant degree of management judgment. In addition, our valuation methodology utilizes discount rates in part in valuing our investments, and changes in those discount rates may have an impact on the valuation of our investments. Accordingly, valuations by us do not necessarily represent the amounts which may eventually be realized from sales or other dispositions of investments. Estimated fair values may differ from the values that would have been used had a ready market for the investment existed, and the differences could be material to the financial statements.
Interest Rate Risk
We are subject to financial market risks, including changes in interest rates. Changes in interest rates may affect both our cost of funding and our interest income from portfolio investments, cash and cash equivalents and idle fund investments. Our risk management procedures are designed to identify and analyze our risk, to set appropriate policies and to continually monitor these risks. Our investment income will be affected by changes in various interest rates, including LIBOR and prime rates, to the extent our debt investments include floating interest rates.
As of September 30, 2021, 91.5% of our debt investment portfolio (at fair value) and 91.8% of our debt investment portfolio (at cost) bore interest at floating rates. As of September 30, 2020, 88.3% of our debt investment portfolio (at fair value) and 88.8% of our debt investment portfolio (at cost) bore interest at floating rates. The composition of our floating rate debt investments by interest rate floor as of September 30, 2021 and September 30, 2020, was as follows: 
 September 30, 2021September 30, 2020
($ in thousands)Fair Value% of Floating Rate PortfolioFair Value% of Floating Rate Portfolio
0%$322,222 14.6 %$553,829 42.2 %
>0% and <1%283,065 12.8 %39,789 3.0 %
1%1,507,977 68.4 %672,529 51.3 %
>1%92,384 4.2 %45,362 3.5 %
Total Floating Rate Investments$2,205,648 100.0 %$1,311,509 100.0 %

Based on our Consolidated Statement of Assets and Liabilities as of September 30, 2021, the following table shows the approximate annualized net increase (decrease) in net assets resulting from operations of hypothetical base rate changes in interest rates, assuming no changes in our investment and capital structure. However, there can be no assurances our portfolio companies will be able to meet their contractual obligations at any or all levels on increases in interest rates.
($ in thousands)
Basis point increaseIncrease in Interest Income(Increase) in Interest ExpenseNet increase (decrease) in net assets resulting from operations
250$38,500 $(24,500)$14,000 
20027,660 (19,600)8,060 
15016,905 (14,700)2,205 
1006,338 (9,800)(3,462)
501,744 (4,900)(3,156)

The net effect of any decrease in interest rates is limited and would not be of significance due to interest rate floors on investments and borrowings outstanding.
74

We regularly measure exposure to interest rate risk. We assess interest rate risk and manage our interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on this review, we determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates. The following table shows a comparison of the interest rate base for our interest-bearing cash and outstanding investments, at principal, and our outstanding borrowings as of September 30, 2021 and September 30, 2020: 
 September 30, 2021September 30, 2020
($ in thousands)Interest Bearing
Cash and
Investments		BorrowingsInterest Bearing
Cash and
Investments		Borrowings
Money market rate$23,600 $— $35,248 $— 
Prime rate305 10,000 305 — 
LIBOR
30 day674,613 485,000 717,576 414,825 
60 day— — 6,861 — 
90 day (a)1,037,019 485,000 362,141 — 
180 day323,869 — 201,699 — 
360 day96,095 — 23,351 — 
EURIBOR
30 day28,786 — 29,126 — 
90 day19,599 — — — 
180 day18,516 — 1,689 — 
UK LIBOR
30 day28,991 — 23,270 — 
180 day25,128 — 14,612 — 
Fixed rate200,599 300,000 171,976 300,000 
Total$2,477,120 $1,280,000 $1,587,854 $714,825 
__________ 
(a)Borrowings include the 2027 Notes, which pay interest at a floating rate under the terms of the interest rate swap.
75

Item 8.Consolidated Financial Statements.
Index to Consolidated Financial Statements


76



Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Oaktree Specialty Lending Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of assets and liabilities of Oaktree Specialty Lending Corporation (the Company), including the consolidated schedules of investments, as of September 30, 2021 and 2020, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended September 30, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2021 and 2020, and the results of its operations, changes in its net assets, and its cash flows for each of the three years in the period ended September 30, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated November 15, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of September 30, 2021 and 2020 by correspondence with the custodians, syndication agents and underlying investee companies, and by other appropriate auditing procedures where confirmation was not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.




77












Valuation of investments using significant unobservable inputs

Description of the MatterAs described in Note 3 to the consolidated financial statements, the Company classified $2,161,581 thousand of its investments as Level 3 within the fair value hierarchy (Level 3 investments) as of September 30, 2021. As described in Note 2 and Note 3 to the consolidated financial statements, the Company’s Board of Directors determined the fair value of the Company’s Level 3 investments by using valuation techniques such as broker quotations, precedent transactions, enterprise value analyses or market yield techniques. These techniques require management to make judgments about the significant unobservable inputs including, among others, comparable EBITDA, revenue or asset multiples, market yields and broker quoted prices.

Auditing the fair value of the Company’s Level 3 investments involved a high degree of auditor judgment and extensive audit effort, as changes in the valuation techniques or significant unobservable inputs could have resulted in significant changes in fair value measurements.
How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls related to the Company’s investment valuation process, including controls related to the Company’s assessment of valuation techniques and significant unobservable inputs used in determining the fair value measurements of the Level 3 investments.

Our audit procedures included, among others, evaluating the Company’s valuation techniques and significant unobservable inputs used. Our audit procedures also included, for a sample of Level 3 investments, validating the mathematical accuracy of the fair value calculations and validating the accuracy of other relevant inputs used in estimating fair value measurement, such as investment terms and portfolio company financial information.

For example, we compared publicly available information in the Company’s valuation models (e.g., market yields, EBITDA, revenue, and asset multiples of comparable public companies and comparable public transactions) to information available from third-party market research providers. We also compared the significant company-specific inputs in the Company’s valuation models to source documents, such as portfolio company financial statements and covenant certificates provided by the Company. To evaluate the reasonableness of significant unobservable inputs, we assessed whether these inputs were developed in a manner consistent with the Company’s valuation policies and in some instances, we involved our valuation specialists to independently develop ranges using portfolio company and available market information to estimate the fair value of selected investments and we compared these ranges to the Company’s fair value measurements. We also evaluated subsequent events and transactions and considered whether they corroborated or contradicted the Company’s fair value measurements.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2018.

Los Angeles, CA
November 15, 2021
78

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Oaktree Specialty Lending Corporation

Opinion on Internal Control Over Financial Reporting

We have audited Oaktree Specialty Lending Corporation’s internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Oaktree Specialty Lending Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of assets and liabilities of the Company, including the consolidated schedules of investments, as of September 30, 2021 and 2020, the related consolidated statements of operations, changes in net assets and cash flows for each of the three years in the period ended September 30, 2021, and the related notes and our report dated November 15, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Los Angeles, California
November 15, 2021



79

Oaktree Specialty Lending Corporation
Consolidated Statements of Assets and Liabilities
(in thousands, except per share amounts)
September 30, 2021September 30, 2020
ASSETS
Investments at fair value:
Control investments (cost September 30, 2021: $283,599; cost September 30, 2020: $245,950)$270,765 $201,385 
Affiliate investments (cost September 30, 2021: $18,763; cost September 30, 2020: $7,551)18,289 6,509 
Non-control/Non-affiliate investments (cost September 30, 2021: $2,236,759; cost September 30, 2020: $1,415,669)2,267,575 1,365,957 
Total investments at fair value (cost September 30, 2021: $2,539,121; cost September 30, 2020: $1,669,170)2,556,629 1,573,851 
Cash and cash equivalents29,334 39,096 
Restricted cash2,301 — 
Interest, dividends and fees receivable22,125 6,935 
Due from portfolio companies1,990 2,725 
Receivables from unsettled transactions8,150 9,123 
Due from broker1,640 — 
Deferred financing costs9,274 5,947 
Deferred offering costs34 67 
Deferred tax asset, net714 847 
Derivative assets at fair value1,912 223 
Other assets2,284 1,898 
Total assets$2,636,387 $1,640,712 
LIABILITIES AND NET ASSETS
Liabilities:
Accounts payable, accrued expenses and other liabilities$3,024 $1,072 
Base management fee and incentive fee payable32,649 11,212 
Due to affiliate4,357 2,130 
Interest payable4,597 1,626 
Payables from unsettled transactions8,086 478 
Derivative liability at fair value2,108 — 
Credit facilities payable630,000 414,825 
Unsecured notes payable (net of $6,501 and $3,272 of unamortized financing costs as of September 30, 2021 and September 30, 2020, respectively)638,743 294,490 
Total liabilities1,323,564 725,833 
Commitments and contingencies (Note 14)
Net assets:
Common stock, $0.01 par value per share, 250,000 shares authorized; 180,361 and 140,961 shares issued and outstanding as of September 30, 2021 and September 30, 2020, respectively1,804 1,409 
Additional paid-in-capital1,804,354 1,487,774 
Accumulated overdistributed earnings(493,335)(574,304)
Total net assets (equivalent to $7.28 and $6.49 per common share as of September 30, 2021 and September 30, 2020, respectively) (Note 12)1,312,823 914,879 
Total liabilities and net assets$2,636,387 $1,640,712 

See notes to Consolidated Financial Statements.
80

Oaktree Specialty Lending Corporation
Consolidated Statements of Operations
(in thousands, except per share amounts)

Year ended
September 30, 2021		Year ended
September 30, 2020		Year ended
September 30, 2019
Interest income:
Control investments$11,792 $9,832 $11,886 
Affiliate investments716 467 206 
Non-control/Non-affiliate investments161,864 114,947 120,888 
Interest on cash and cash equivalents9 322 690 
Total interest income174,381 125,568 133,670 
PIK interest income:
Control investments— — 67 
Non-control/Non-affiliate investments16,447 7,863 5,430 
Total PIK interest income16,447 7,863 5,497 
Fee income:
Control investments59 42 25 
Affiliate investments20 20 19 
Non-control/Non-affiliate investments14,019 8,457 6,666 
Total fee income14,098 8,519 6,710 
Dividend income:
Control investments4,459 1,180 1,825 
Non-control/Non-affiliate investments— 3 — 
Total dividend income4,459 1,183 1,825 
Total investment income209,385 143,133 147,702 
Expenses:
Base management fee32,288 22,895 22,343 
Part I incentive fee21,598 15,194 14,873 
Part II incentive fee17,615 (5,557)10,194 
Professional fees4,231 2,532 2,906 
Directors fees607 570 570 
Interest expense30,518 26,289 32,426 
Administrator expense1,510 1,524 1,941 
General and administrative expenses2,725 2,494 2,530 
Total expenses111,092 65,941 87,783 
Reversal of fees waived (fees waived)(1,608)5,200 (7,990)
Net expenses109,484 71,141 79,793 
Net investment income before taxes99,901 71,992 67,909 
(Provision) benefit for taxes on net investment income(2,795)— — 
Net investment income97,106 71,992 67,909 
Unrealized appreciation (depreciation):
Control investments31,731 (29,488)1,519 
Affiliate investments568 (1,763)(360)
Non-control/Non-affiliate investments80,531 10,904 39,689 
Secured borrowings— — (2,719)
Foreign currency forward contracts1,689 (267)328 
Net unrealized appreciation (depreciation) 114,519 (20,614)38,457 
Realized gains (losses):
Control investments— (4,155)— 
Non-control/Non-affiliate investments27,094 (4,615)15,300 
Extinguishment of unsecured notes payable— (2,541)— 
Secured borrowings— — 2,625 
Foreign currency forward contracts(674)(2,613)2,880 
Net realized gains (losses)26,420 (13,924)20,805 
(Provision) benefit for taxes on realized and unrealized gains (losses)(785)1,770 (1,011)
Net realized and unrealized gains (losses), net of taxes140,154 (32,768)58,251 
Net increase (decrease) in net assets resulting from operations$237,260 $39,224 $126,160 
Net investment income per common share — basic and diluted$0.60 $0.51 $0.48 
Earnings (loss) per common share — basic and diluted (Note 5)$1.46 $0.28 $0.89 
Weighted average common shares outstanding — basic and diluted162,118 140,961 140,961 


See notes to Consolidated Financial Statements.
81

Oaktree Specialty Lending Corporation
Consolidated Statements of Changes in Net Assets
(in thousands, except per share amounts)
(unaudited)
Year ended
September 30,
2021		Year ended
September 30,
2020		Year ended
September 30,
2019
Operations:
Net investment income$97,106 $71,992 $67,909 
Net unrealized appreciation (depreciation)114,519 (20,614)38,457 
Net realized gains (losses)26,420 (13,924)20,805 
(Provision) benefit for taxes on realized and unrealized gains (losses)(785)1,770 (1,011)
Net increase (decrease) in net assets resulting from operations237,260 39,224 126,160 
Stockholder transactions:
Distributions to stockholders(82,020)(54,975)(53,565)
Net increase (decrease) in net assets from stockholder transactions(82,020)(54,975)(53,565)
Capital share transactions:
Issuance of common stock in connection with the Mergers242,704 — — 
Issuance of common stock under dividend reinvestment plan2,170 1,878 1,344 
Repurchases of common stock under dividend reinvestment plan(2,170)(1,878)(1,344)
Net increase (decrease) in net assets from capital share transactions242,704 — — 
Total increase (decrease) in net assets397,944 (15,751)72,595 
Net assets at beginning of period914,879 930,630 858,035 
Net assets at end of period$1,312,823 $914,879 $930,630 
Net asset value per common share$7.28 $6.49 $6.60 
Common shares outstanding at end of period180,361 140,961 140,961 



See notes to Consolidated Financial Statements.
82
Oaktree Specialty Lending Corporation
Consolidated Statements of Cash Flows
(in thousands)






Year ended
September 30,
2021		Year ended
September 30,
2020		Year ended
September 30,
2019
Operating activities:
Net increase (decrease) in net assets resulting from operations$237,260 $39,224 $126,160 
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Net unrealized (appreciation) depreciation(114,519)20,614 (38,457)
Net realized (gains) losses(26,420)13,924 (20,805)
PIK interest income(16,447)(7,863)(5,497)
Accretion of original issue discount on investments(29,391)(12,305)(17,982)
Accretion of original issue discount on unsecured notes payable572 302 107 
Amortization of deferred financing costs4,151 2,187 2,471 
Deferred taxes133 (1,551)282 
Purchases of investments (1,120,168)(727,161)(477,967)
Proceeds from the sales and repayments of investments792,161 579,550 606,270 
Cash acquired in the Mergers20,945 — — 
Changes in operating assets and liabilities:
(Increase) decrease in interest, dividends and fees receivable(8,495)4,232 (895)
(Increase) decrease in due from portfolio companies1,360 (109)(1,259)
(Increase) decrease in receivables from unsettled transactions2,514 (4,537)22,174 
(Increase) decrease in due from broker(1,640)— — 
(Increase) decrease in other assets(1,427)437 673 
Increase (decrease) in accounts payable, accrued expenses and other liabilities(426)(517)(1,992)
Increase (decrease) in base management fee and incentive fee payable19,516 1,045 1,944 
Increase (decrease) in due to affiliate1,119 (559)(585)
Increase (decrease) in interest payable1,163 (670)(1,069)
Increase (decrease) in payables from unsettled transactions7,608 (59,118)22,360 
Increase (decrease) in director fees payable(90)— — 
Increase (decrease) in amounts payable to syndication partners— — (109)
Net cash provided by (used in) operating activities(230,521)(152,875)215,824 
Financing activities:
Distributions paid in cash(79,850)(53,097)(52,221)
Borrowings under credit facilities505,000 286,000 298,825 
Repayments of borrowings under credit facilities(529,582)(186,000)(225,000)
Repayments of unsecured notes— (161,250)(228,825)
Issuance of unsecured notes349,020 297,459 — 
Repayments of secured borrowings(9,341)— (2,659)
Repurchases of common stock under dividend reinvestment plan(2,170)(1,878)(1,344)
Deferred financing costs paid(8,890)(4,835)(2,883)
Deferred offering costs paid— (67)— 
Net cash provided by (used in) financing activities224,187 176,332 (214,107)
Effect of exchange rate changes on foreign currency(1,127)233 200 
Net increase (decrease) in cash and cash equivalents and restricted cash(7,461)23,690 1,917 
Cash and cash equivalents and restricted cash, beginning of period39,096 15,406 13,489 
Cash and cash equivalents and restricted cash, end of period$31,635 $39,096 $15,406 
Supplemental information:
Cash paid for interest$24,006 $24,470 $31,025 
Non-cash financing activities:
Issuance of shares of common stock under dividend reinvestment plan$2,170 $1,878 $1,344 
Deferred financing costs(162)— — 
Issuance of shares in connection with the Mergers242,704 — — 
Extinguishment of secured borrowings— — (7,163)
Reconciliation to the Consolidated Statements of Assets and LiabilitiesSeptember 30, 2021September 30, 2020September 30, 2019
Cash and cash equivalents$29,334 $39,096 $15,406 
Restricted cash2,301 — — 
Total cash and cash equivalents and restricted cash$31,635 $39,096 $15,406 

See notes to Consolidated Financial Statements.
83
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2021
(dollar amounts in thousands)



Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
Control Investments
(8)(9)
C5 Technology Holdings, LLCData Processing & Outsourced Services
829 Common Units$— $— (15)
34,984,460.37 Preferred Units34,984 27,638 (15)
34,984 27,638 
Dominion Diagnostics, LLCHealth Care Services
First Lien Term Loan, LIBOR+5.00% cash due 2/28/20246.00 %$27,381 27,381 27,381 (6)(15)
First Lien Revolver, LIBOR+5.00% cash due 2/28/2024— — — (6)(15)(19)
30,030.8 Common Units in DD Healthcare Services Holdings, LLC18,625 18,065 (12)(15)
46,006 45,446 
First Star Speir Aviation LimitedAirlines(10)
First Lien Term Loan, 9.00% cash due 12/15/20257,500 — 7,500 (11)(15)
100% equity interest6,332 698 (11)(12)(15)
6,332 8,198 
OCSI Glick JV LLCMulti-Sector Holdings(14)
Subordinated Debt, LIBOR+4.50% cash due 10/20/20284.60 %61,709 50,705 55,582  (6)(11)(15)(19)
87.5% equity interest— —  (11)(16)(19)
50,705 55,582 
Senior Loan Fund JV I, LLCMulti-Sector Holdings(14)
Subordinated Debt, LIBOR+7.00% cash due 12/29/20288.00 %96,250 96,250 96,250 (6)(11)(15)(19)
87.5% LLC equity interest49,322 37,651 (11)(12)(16)(19)
145,572 133,901 
 Total Control Investments (20.6% of net assets)$283,599 $270,765 
Affiliate Investments (17)
Assembled Brands Capital LLCSpecialized Finance
First Lien Revolver, LIBOR+6.00% cash due 10/17/20237.00 %$15,899 $15,900 $15,712 (6)(15)(19)
1,609,201 Class A Units764 587 (15)
1,019,168.80 Preferred Units, 6%1,019 1,152 (15)
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029— — (15)
17,683 17,451 
Caregiver Services, Inc.Health Care Services
1,080,399 shares of Series A Preferred Stock, 10%1,080 838 (15)
1,080 838 
 Total Affiliate Investments (1.4% of net assets)$18,763 $18,289 
Non-Control/Non-Affiliate Investments(18)
4 Over International, LLCCommercial Printing
First Lien Term Loan, LIBOR+6.00% cash due 6/7/20227.00 %$10,927 $10,524 $10,484 (6)(15)
First Lien Revolver, LIBOR+6.00% cash due 6/7/2022— (24)(93)(6)(15)(19)
10,500 10,391 
109 Montgomery Owner LLCReal Estate Operating Companies
First Lien Delayed Draw Term Loan, LIBOR+7.00% cash due 2/2/20237.50 %3,102 2,984 3,153 (6)(15)(19)
2,984 3,153 
A.T. Holdings II SÀRLBiotechnology
First Lien Term Loan, 9.50% cash due 12/22/202237,158 36,930 36,972 (11)(15)
36,930 36,972 
Access CIG, LLCDiversified Support Services
First Lien Term Loan, LIBOR+3.75% cash due 2/27/20253.83 %5,352 5,021 5,332 (6)
Second Lien Term Loan, LIBOR+7.75% cash due 2/27/20267.83 %17,000 16,923 17,028 (6)
21,944 22,360 
84
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2021
(dollar amounts in thousands)



Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
Accupac, Inc.Personal Products
First Lien Term Loan, LIBOR+6.00% cash due 1/17/20267.00 %$16,140 $15,758 $16,140 (6)(15)
First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 1/17/2026— (29)— (6)(15)(19)
First Lien Revolver, LIBOR+6.00% cash due 1/17/20267.00 %1,838 1,789 1,838 (6)(15)(19)
17,518 17,978 
Acquia Inc.Application Software
First Lien Term Loan, LIBOR+7.00% cash due 10/31/20258.00 %27,349 26,936 27,295 (6)(15)
First Lien Revolver, LIBOR+7.00% cash due 10/31/20258.00 %179 148 175 (6)(15)(19)
27,084 27,470 
ADB Companies, LLCConstruction & Engineering
First Lien Term Loan, LIBOR+6.25% cash due 12/18/20257.25 %15,463 14,817 15,287 (6)(15)
14,817 15,287 
Aden & Anais Merger Sub, Inc.Apparel, Accessories & Luxury Goods
51,645 Common Units in Aden & Anais Holdings, Inc.5,165 — (15)
5,165 — 
AI Sirona (Luxembourg) Acquisition S.a.r.l.Pharmaceuticals
Second Lien Term Loan, EURIBOR+7.25% cash due 9/28/20267.25 %€24,838 27,720 28,738 (6)(11)(15)
27,720 28,738 
AirStrip Technologies, Inc.Application Software
5,715 Common Stock Warrants (exercise price $139.99) expiration date 5/11/202590 — (15)
90 — 
All Web Leads, Inc.Advertising
First Lien Term Loan, LIBOR+6.50% cash due 12/29/20237.50 %$23,899 21,512 22,992 (6)(15)
21,512 22,992 
Alvogen Pharma US, Inc.Pharmaceuticals
First Lien Term Loan, LIBOR+5.25% cash due 12/31/20236.25 %13,825 13,329 13,383 (6)
13,329 13,383 
Alvotech Holdings S.A.Biotechnology(13)
Fixed Rate Bond 15% PIK Tranche A due 6/24/202520,967 20,576 20,967 (11)(15)
Fixed Rate Bond 15% PIK Tranche B due 6/24/202520,512 20,169 20,512 (11)(15)
27,308 Common Shares6,322 6,322 (15)
47,067 47,801 
Amplify Finco Pty Ltd.Movies & Entertainment
First Lien Term Loan, LIBOR+4.25% cash due 11/26/20265.00 %15,376 13,814 14,985 (6)(11)(15)
Second Lien Term Loan, LIBOR+8.00% cash due 11/26/20278.75 %12,500 12,188 12,063 (6)(11)(15)
26,002 27,048 
Ankura Consulting Group LLCResearch & Consulting Services
Second Lien Term Loan, LIBOR+8.00% cash due 3/19/20298.75 %7,466 7,354 7,606 (6)(15)
7,354 7,606 
Apptio, Inc.Application Software
First Lien Term Loan, LIBOR+7.25% cash due 1/10/20258.25 %34,458 33,420 33,922 (6)(15)
First Lien Revolver, LIBOR+7.25% cash due 1/10/20258.25 %892 849 858 (6)(15)(19)
34,269 34,780 
Ardonagh Midco 3 PLCInsurance Brokers
First Lien Term Loan, EURIBOR+7.25% cash due 7/14/20268.25 %€1,964 2,179 2,283 (6)(11)(15)
First Lien Term Loan, UK LIBOR+7.25% cash due 7/14/20268.00 %£18,636 23,336 25,329 (6)(11)(15)
First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 7/14/2026$— — — (6)(11)(15)(19)
First Lien Delayed Draw Term Loan, SONIA+6.00% cash due 7/14/2026£— — — (6)(11)(15)(19)
25,515 27,612 
85
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2021
(dollar amounts in thousands)



Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
Associated Asphalt Partners, LLCConstruction Materials
First Lien Term Loan, LIBOR+5.25% cash due 4/5/20246.25 %$2,531 $2,245 $2,350 (6)
2,245 2,350 
Athenex, Inc.Pharmaceuticals
First Lien Term Loan, 11.00% cash due 6/19/202642,145 40,475 41,845 (11)(15)
First Lien Delayed Draw Term Loan, 11.00% cash due 6/19/2026— (274)(150)(11)(15)(19)
328,149 Common Stock Warrants (exercise price $12.63) expiration date 6/19/2027973 95 (11)(15)
41,174 41,790 
Aurora Lux Finco S.À.R.L.Airport Services
First Lien Term Loan, LIBOR+6.00% cash due 12/24/20267.00 %22,655 22,232 21,318 (6)(11)(15)
22,232 21,318 
The AveryReal Estate Operating Companies
First Lien Delayed Draw Term Loan in T8 Urban Condo Owner, LLC, LIBOR+7.30% cash due 2/17/20237.55 %20,287 19,933 20,490 (6)(15)(19)
Subordinated Delayed Draw Debt in T8 Senior Mezz LLC, LIBOR+12.50% cash due 2/17/202312.75 %4,692 4,614 4,698 (6)(15)(19)
24,547 25,188 
BAART Programs, Inc.Health Care Services
Second Lien Term Loan, LIBOR+8.50% cash due 6/11/20289.50 %7,166 7,059 7,130 (6)(15)
Second Lien Delayed Draw Term Loan, LIBOR+8.50% cash due 6/11/2028— (52)(18)(6)(15)(19)
7,007 7,112 
Berner Food & Beverage, LLCSoft Drinks
First Lien Term Loan, LIBOR+6.50% cash due 7/30/20277.50 %33,412 32,844 32,844 (6)(15)
First Lien Revolver, LIBOR+6.50% cash due 7/30/20277.50 %619 566 566 (6)(15)(19)
33,410 33,410 
Blackhawk Network Holdings, Inc.Data Processing & Outsourced Services
Second Lien Term Loan, LIBOR+7.00% cash due 6/15/20267.13 %30,625 30,181 30,523 (6)
30,181 30,523 
Blumenthal Temecula, LLCAutomotive Retail
First Lien Term Loan, 9.00% cash due 9/24/20233,979 3,980 3,979 (15)
1,293,324 Preferred Units in Unstoppable Automotive AMV, LLC1,293 1,293 (15)
298,460 Preferred Units in Unstoppable Automotive VMV, LLC298 298 (15)
298,460 Common Units in Unstoppable Automotive AMV, LLC298 298 (15)
99,486 Common Units in Unstoppable Automotive VMV, LLC100 99 (15)
5,969 5,967 
Cadence Aerospace, LLCAerospace & Defense
First Lien Term Loan, LIBOR+6.50% cash 2.00% PIK due 11/14/20237.50 %14,146 12,574 12,992 (6)(15)
12,574 12,992 
Chief Power Finance II, LLCIndependent Power Producers & Energy Traders
First Lien Term Loan, LIBOR+6.50% cash due 12/31/20227.50 %23,850 23,458 23,552 (6)(15)
23,458 23,552 
CircusTrix Holdings, LLCLeisure Facilities
First Lien Term Loan, LIBOR+5.50% cash 2.50% PIK due 7/16/20236.50 %10,686 9,793 8,816 (6)(15)(19)
9,793 8,816 
CITGO Holding, Inc.Oil & Gas Refining & Marketing
First Lien Term Loan, LIBOR+7.00% cash due 8/1/20238.00 %11,635 11,517 11,512 (6)
Fixed Rate Bond, 9.25% cash due 8/1/202410,672 10,672 10,765 
22,189 22,277 
86
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2021
(dollar amounts in thousands)



Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
CITGO Petroleum Corp.Oil & Gas Refining & Marketing
First Lien Term Loan, LIBOR+6.25% cash due 3/28/20247.25 %$14,221 $13,855 $14,269 (6)
13,855 14,269 
Clear Channel Outdoor Holdings Inc.Advertising
Fixed Rate Bond, 7.50% cash due 6/1/20297,137 7,137 7,431 (11)
7,137 7,431 
Continental Intermodal Group LPOil & Gas Storage & Transportation
First Lien Term Loan, LIBOR+9.50% PIK due 1/28/202538,876 36,668 32,628 (6)(15)
Common Stock Warrants expiration date 7/28/2025648 1,909 (15)
37,316 34,537 
Convergeone Holdings, Inc.IT Consulting & Other Services
First Lien Term Loan, LIBOR+5.00% cash due 1/4/20265.08 %7,024 6,848 7,003 (6)
6,848 7,003 
Conviva Inc.Application Software
517,851 Shares of Series D Preferred Stock605 894 (15)
605 894 
CorEvitas, LLCHealth Care Services
First Lien Term Loan, LIBOR+5.50% cash due 12/13/20256.50 %10,196 10,071 10,109 (6)(15)
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 12/13/20256.50 %1,943 1,894 1,912 (6)(15)(19)
First Lien Revolver, PRIME+4.50% cash due 12/13/20257.75 %305 283 290 (6)(15)(19)
1,099 Class A2 Common Units in CorEvitas Holdings, L.P.1,038 1,177 (15)
13,286 13,488 
Coty Inc.Personal Products
First Lien Revolver, LIBOR+1.75% cash due 4/5/2023— (712)(395)(6)(11)(15)(19)
(712)(395)
Coyote Buyer, LLCSpecialty Chemicals
First Lien Term Loan, LIBOR+6.00% cash due 2/6/20267.00 %18,387 17,887 18,225 (6)(15)
First Lien Revolver, LIBOR+6.00% cash due 2/6/2025— (13)(12)(6)(15)(19)
17,874 18,213 
Curium Bidco S.à.r.l.Biotechnology
Second Lien Term Loan, LIBOR+7.75% cash due 10/27/20288.50 %16,787 16,535 17,070 (6)(11)(15)
16,535 17,070 
Delta Topco, Inc.Systems Software
Second Lien Term Loan, LIBOR+7.25% cash due 12/1/20288.00 %6,680 6,647 6,769 (6)
6,647 6,769 
Dialyze Holdings, LLCHealth Care Equipment
First Lien Term Loan, LIBOR+7.00% cash 2.00% PIK due 8/4/20268.00 %24,093 22,439 22,467 (6)(15)
First Lien Delayed Draw Term Loan, LIBOR+7.00% cash 2.00% PIK due 8/4/2026— (170)(163)(6)(15)(19)
5,403,823 Class A Warrants (exercise price $1.00) expiration date 8/4/20281,405 1,459 (15)
23,674 23,763 
Digital.AI Software Holdings, Inc.Application Software
First Lien Term Loan, LIBOR+7.00% cash due 2/10/20278.00 %10,003 9,627 9,783 (6)(15)
First Lien Revolver, LIBOR+7.00% cash due 2/10/20278.00 %180 151 156 (6)(15)(19)
9,778 9,939 
DirecTV Financing, LLCCable & Satellite
First Lien Term Loan, LIBOR+5.00% cash due 8/2/20275.75 %27,000 26,730 27,048 (6)
26,730 27,048 
Eagleview Technology CorporationApplication Software
Second Lien Term Loan, LIBOR+7.50% cash due 8/14/20268.50 %8,974 8,884 8,918 (6)(15)
8,884 8,918 
87
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2021
(dollar amounts in thousands)



Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
EHR Canada, LLCFood Retail
First Lien Term Loan, LIBOR+8.00% cash due 12/31/20219.00 %$3,750 $3,745 $3,750 (6)(15)
3,745 3,750 
EOS Fitness Opco Holdings, LLCLeisure Facilities
487.5 Class A Preferred Units, 12%488 274 (15)
12,500 Class B Common Units— — (15)
488 274 
Firstlight Holdco, Inc.Alternative Carriers
First Lien Term Loan, LIBOR+3.50% cash due 7/23/20253.58 %7,012 6,578 6,939 (6)
6,578 6,939 
Fortress Biotech, Inc.Biotechnology
First Lien Term Loan, 11.00% cash due 8/27/202511,359 10,722 11,075 (11)(15)
331,200 Common Stock Warrants (exercise price $3.20) expiration date 8/27/2030405 341 (11)(15)
11,127 11,416 
GI Chill Acquisition LLCManaged Health Care
First Lien Term Loan, LIBOR+3.75% cash due 8/6/20253.90 %12,653 12,442 12,621 (6)(15)
Second Lien Term Loan, LIBOR+7.50% cash due 8/6/20267.63 %6,250 6,212 6,219 (6)(15)
18,654 18,840 
GKD Index Partners, LLCSpecialized Finance
First Lien Term Loan, LIBOR+8.50% cash due 6/29/20239.50 %26,360 25,837 25,931 (6)(15)
First Lien Revolver, LIBOR+8.50% cash due 6/29/20239.50 %1,280 1,251 1,252 (6)(15)(19)
27,088 27,183 
Global Medical Response, Inc.Health Care Services
First Lien Term Loan, LIBOR+4.25% cash due 3/14/20255.25 %8,630 8,399 8,674 (6)
8,399 8,674 
Gulf Operating, LLCOil & Gas Storage & Transportation
First Lien Revolver, LIBOR+4.00% cash due 12/27/2021— (704)(75)(6)(15)(19)
(704)(75)
Houghton Mifflin Harcourt Publishers Inc.Education Services
First Lien Term Loan, LIBOR+6.25% cash due 11/22/20247.25 %1,007 981 1,009 (6)(11)
981 1,009 
iCIMs, Inc.Application Software
First Lien Term Loan, LIBOR+6.50% cash due 9/12/20247.50 %25,635 25,024 25,525 (6)(15)
First Lien Revolver, LIBOR+6.50% cash due 9/12/20247.50 %1,176 1,147 1,171 (6)(15)
26,171 26,696 
Immucor, Inc.Health Care Supplies
First Lien Term Loan, LIBOR+5.75% cash due 7/2/20256.75 %8,657 8,425 8,570 (6)(15)
Second Lien Term Loan, LIBOR+8.00% cash 3.50% PIK due 10/2/20259.00 %21,834 21,225 21,616 (6)(15)
29,650 30,186 
Integral Development CorporationOther Diversified Financial Services
1,078,284 Common Stock Warrants (exercise price $0.9274) expiration date 7/10/2024113 — (15)
113 — 
Inventus Power, Inc.Electrical Components & Equipment
First Lien Term Loan, LIBOR+5.00% cash due 3/29/20246.00 %18,849 18,693 18,708 (6)(15)
Second Lien Term Loan, LIBOR+8.50% cash due 9/29/20249.50 %13,674 13,434 13,434 (6)(15)
32,127 32,142 
88
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2021
(dollar amounts in thousands)



Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
INW Manufacturing, LLCPersonal Products
First Lien Term Loan, LIBOR+5.75% cash due 5/7/20276.50 %$37,031 $35,988 $36,291 (6)(15)
35,988 36,291 
Itafos Inc.Fertilizers & Agricultural Chemicals
First Lien Term Loan, LIBOR+8.25% cash due 8/25/20249.25 %22,506 21,636 21,651 (6)(15)
21,636 21,651 
Ivanti Software, Inc.Application Software
Second Lien Term Loan, LIBOR+8.50% cash due 12/1/20289.50 %17,346 16,864 17,368 (6)(15)
16,864 17,368 
Jazz Acquisition, Inc.Aerospace & Defense
First Lien Term Loan, LIBOR+7.50% cash due 1/29/20278.50 %36,603 35,292 36,531 (6)(15)
35,292 36,531 
Latam Airlines Group S.A.Airlines
First Lien Delayed Draw Term Loan, LIBOR+11.00% PIK due 3/29/202216,239 16,085 16,356 (6)(11)(15)(19)
16,085 16,356 
Lift Brands Holdings, Inc.Leisure Facilities
2,000,000 Class A Common Units in Snap Investments, LLC1,399 — (15)
1,399 — 
Lightbox Intermediate, L.P.Real Estate Services
First Lien Term Loan, LIBOR+5.00% cash due 5/9/20265.13 %41,432 40,445 41,225 (6)(15)
40,445 41,225 
LogMeIn, Inc.Application Software
First Lien Term Loan, LIBOR+4.75% cash due 8/31/20274.83 %3,970 3,720 3,973 (6)
3,720 3,973 
LTI Holdings, Inc.Electronic Components
Second Lien Term Loan, LIBOR+6.75% cash due 9/6/20266.83 %10,140 10,080 10,127 (6)
10,080 10,127 
Marinus Pharmaceuticals, Inc.Pharmaceuticals
First Lien Term Loan, 11.50% cash due 5/11/20263,441 3,377 3,389 (11)(15)
First Lien Delayed Draw Term Loan, 11.50% cash due 5/11/20266,881 6,755 6,778 (11)(15)(19)
10,132 10,167 
Mayfield Agency Borrower Inc.Property & Casualty Insurance
First Lien Term Loan, LIBOR+4.50% cash due 2/28/20254.58 %9,949 9,884 9,949 (6)
9,884 9,949 
MedAssets Software Intermediate Holdings, Inc.Health Care Technology
Second Lien Term Loan, LIBOR+7.75% cash due 1/29/20298.50 %14,137 13,877 13,960 (6)(15)
13,877 13,960 
MHE Intermediate Holdings, LLCDiversified Support Services
First Lien Term Loan, LIBOR+5.75% cash due 7/21/20276.75 %16,429 16,111 16,100 (6)(15)
First Lien Delayed Draw Term Loan, LIBOR+5.75% cash due 7/21/20276.75 %106 84 83 (6)(15)(19)
First Lien Revolver, LIBOR+5.75% cash due 7/21/2027— (27)(28)(6)(15)(19)
16,168 16,155 
Mindbody, Inc.Internet Services & Infrastructure
First Lien Term Loan, LIBOR+7.00% cash 1.50% PIK due 2/14/20258.00 %38,774 37,513 38,038 (6)(15)
First Lien Revolver, LIBOR+8.00% cash due 2/14/2025— (75)(76)(6)(15)(19)
37,438 37,962 
89
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2021
(dollar amounts in thousands)



Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
Ministry Brands, LLCApplication Software
First Lien Revolver, LIBOR+5.00% cash due 12/2/2022$— $(9)$(9)(6)(15)(19)
Second Lien Term Loan, LIBOR+9.25% cash due 6/2/202310.25 %11,000 10,844 10,906 (6)(15)
10,835 10,897 
Mosaic Companies, LLCHome Improvement Retail
First Lien Term Loan, LIBOR+6.75% cash due 7/2/20267.75 %47,388 46,487 46,488 (6)(15)
46,487 46,488 
MRI Software LLCApplication Software
First Lien Term Loan, LIBOR+5.50% cash due 2/10/20266.50 %27,352 26,815 27,335 (6)(15)
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026— (25)— (6)(15)(19)
First Lien Revolver, LIBOR+5.50% cash due 2/10/2026— (13)(1)(6)(15)(19)
26,777 27,334 
Navisite, LLCData Processing & Outsourced Services
Second Lien Term Loan, LIBOR+8.50% cash due 12/30/20269.50 %22,560 22,165 22,176 (6)(15)
22,165 22,176 
NeuAG, LLCFertilizers & Agricultural Chemicals
First Lien Term Loan, LIBOR+5.50% cash 7.00% PIK due 9/11/20247.00 %47,031 45,279 45,996 (6)(15)
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash 7.00% PIK due 9/11/2024— (202)(120)(6)(15)(19)
45,077 45,876 
NN, Inc.Industrial Machinery
First Lien Term Loan, LIBOR+6.88% cash due 9/19/20267.88 %59,309 57,971 58,419 (6)(11)(15)
57,971 58,419 
OEConnection LLCApplication Software
First Lien Term Loan, LIBOR+4.00% cash due 9/25/20264.08 %3,355 3,152 3,351 (6)
3,152 3,351 
Olaplex, Inc.Personal Products
First Lien Term Loan, LIBOR+6.25% cash due 1/8/20267.25 %52,122 50,906 51,731 (6)(15)
First Lien Revolver, LIBOR+6.25% cash due 1/8/2025— (58)(75)(6)(15)(19)
50,848 51,656 
OmniSYS Acquisition CorporationDiversified Support Services
100,000 Common Units in OSYS Holdings, LLC1,000 729 (15)
1,000 729 
Onvoy, LLCIntegrated Telecommunication Services
First Lien Term Loan, LIBOR+4.50% cash due 2/10/20245.50 %3,601 3,410 3,603 (6)
Second Lien Term Loan, LIBOR+10.50% cash due 2/10/202511.50 %9,277 9,277 9,277 (6)(15)
19,666.67 Class A Units in GTCR Onvoy Holdings, LLC1,967 2,372 (15)
13,664.73 Series 3 Class B Units in GTCR Onvoy Holdings, LLC— — (15)
14,654 15,252 
OTG Management, LLCAirport Services
First Lien Term Loan, LIBOR+10.00% cash due 9/1/202511.00 %19,894 19,504 19,496 (6)(15)
First Lien Delayed Draw Term Loan, LIBOR+10.00% cash due 9/1/2025— (37)(38)(6)(15)(19)
19,467 19,458 
P & L Development, LLCPharmaceuticals
Fixed Rate Bond, 7.75% cash due 11/15/20257,776 7,832 8,089 
7,832 8,089 
Park Place Technologies, LLCInternet Services & Infrastructure
First Lien Term Loan, LIBOR+5.00% cash due 11/10/20276.00 %9,950 9,479 9,961 (6)
9,479 9,961 
90
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2021
(dollar amounts in thousands)



Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
Performance Health Holdings, Inc.Health Care Distributors
First Lien Term Loan, LIBOR+6.00% cash due 7/12/20277.00 %$20,085 $19,698 $19,683 (6)(15)
19,698 19,683 
Pingora MSR Opportunity Fund I-A, LPThrifts & Mortgage Finance
1.86% limited partnership interest752 112 (11)(16)(19)
752 112 
Planview Parent, Inc.Application Software
Second Lien Term Loan, LIBOR+7.25% cash due 12/18/20288.00 %28,627 28,198 28,699 (6)(15)
28,198 28,699 
PLNTF Holdings, LLCLeisure Facilities
First Lien Term Loan, LIBOR+8.00% cash due 3/22/20269.00 %13,729 13,482 13,798 (6)(15)
13,482 13,798 
Pluralsight, LLCApplication Software
First Lien Term Loan, LIBOR+8.00% cash due 4/6/20279.00 %48,689 47,788 47,763 (6)(15)
First Lien Revolver, LIBOR+8.00% cash due 4/6/2027— (65)(67)(6)(15)(19)
47,723 47,696 
PRGX Global, Inc.Data Processing & Outsourced Services
First Lien Term Loan, LIBOR+6.75% cash due 3/3/20267.75 %34,118 33,016 33,547 (6)(15)
First Lien Revolver, LIBOR+6.75% cash due 3/3/2026— (44)(42)(6)(15)(19)
80,515 Class B Common Units79 81 (15)
33,051 33,586 
ProFrac Services, LLCIndustrial Machinery
First Lien Term Loan, LIBOR+8.50% cash due 9/15/20239.75 %30,910 29,146 30,600 (6)(15)
29,146 30,600 
Project Boost Purchaser, LLCApplication Software
Second Lien Term Loan, LIBOR+8.00% cash due 5/31/20278.08 %5,250 5,151 5,224 (6)(15)
5,151 5,224 
Quantum Bidco LimitedFood Distributors
First Lien Term Loan, UK LIBOR+6.00% cash due 1/29/20286.11 %£3,501 4,625 4,673 (6)(11)
4,625 4,673 
QuorumLabs, Inc.Application Software
64,887,669 Junior-2 Preferred Stock375 — (15)
375 — 
Relativity ODA LLCApplication Software
First Lien Term Loan, LIBOR+7.50% PIK due 5/12/2027$22,856 22,337 22,376 (6)(15)
First Lien Revolver, LIBOR+6.50% cash due 5/12/2027— (52)(47)(6)(15)(19)
22,285 22,329 
Renaissance Holding Corp.Diversified Banks
Second Lien Term Loan, LIBOR+7.00% cash due 5/29/20267.08 %3,542 3,515 3,562 (6)
3,515 3,562 
RevSpring, Inc.Commercial Printing
First Lien Term Loan, LIBOR+4.25% cash due 10/11/20254.38 %9,725 9,185 9,709 (6)
9,185 9,709 
RumbleOn, Inc.Automotive Retail
First Lien Term Loan, LIBOR+8.25% cash due 8/31/20269.25 %38,036 35,651 35,640 (6)(11)(15)
First Lien Delayed Draw Term Loan, LIBOR+8.25% cash due 8/31/2026— (1,022)(1,027)(6)(11)(15)(19)
164,660 Class B Common Stock Warrants (exercise price $33.00) expiration date 2/28/20231,202 1,553 (15)
35,831 36,166 
91
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2021
(dollar amounts in thousands)



Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
Sabert CorporationMetal & Glass Containers
First Lien Term Loan, LIBOR+4.50% cash due 12/10/20265.50 %$1,818 $1,711 $1,825 (6)
1,711 1,825 
Scilex Pharmaceuticals Inc.Pharmaceuticals
Fixed Rate Zero Coupon Bond due 8/15/20267,692 6,512 7,169 (15)
6,512 7,169 
ShareThis, Inc.Application Software
345,452 Series C Preferred Stock Warrants (exercise price $3.0395) expiration date 3/4/2024367 — (15)
367 — 
SIO2 Medical Products, Inc.Metal & Glass Containers
Subordinated Debt, 11.25% cash due 2/28/202215,896 15,161 15,022 (15)
Subordinated Delayed Draw Debt, 11.25% cash due 2/28/2022— (110)(119)(15)(19)
Common Stock Warrants (exercise price $0.75) expiration date 7/31/2028681 685 (15)
15,732 15,588 
Sirva Worldwide, Inc.Diversified Support Services
First Lien Term Loan, LIBOR+5.50% cash due 8/4/20255.58 %1,739 1,554 1,644 (6)
1,554 1,644 
SM Wellness Holdings, Inc.Health Care Services
Second Lien Term Loan, LIBOR+8.00% cash due 4/16/20298.75 %9,109 8,972 9,177 (6)(15)
8,972 9,177 
SonicWall US Holdings Inc.Technology Distributors
Second Lien Term Loan, LIBOR+7.50% cash due 5/18/20267.63 %3,195 3,163 3,178 (6)
3,163 3,178 
Sorrento Therapeutics, Inc.Biotechnology
50,000 Common Stock Units197 382 (11)
197 382 
Star US Bidco LLCIndustrial Machinery
First Lien Term Loan, LIBOR+4.25% cash due 3/17/20275.25 %1,194 1,114 1,199 (6)
1,114 1,199 
SumUp Holdings Luxembourg S.À.R.L.Other Diversified Financial Services
First Lien Delayed Draw Term Loan, EURIBOR+8.50% cash due 3/10/202610.00 %€13,980 15,991 15,908 (6)(11)(15)(19)
15,991 15,908 
Sunland Asphalt & Construction, LLCConstruction & Engineering
First Lien Term Loan, LIBOR+6.00% cash due 1/13/20267.00 %$43,052 41,782 42,450 (6)(15)
First Lien Revolver, LIBOR+6.00% cash due 1/13/20227.00 %203 150 169 (6)(15)(19)
41,932 42,619 
Supermoose Borrower, LLCApplication Software
First Lien Term Loan, LIBOR+3.75% cash due 8/29/20253.88 %8,576 7,581 7,996 (6)
7,581 7,996 
SVP-Singer Holdings Inc.Home Furnishings
First Lien Term Loan, LIBOR+6.75% cash due 7/28/20287.50 %20,976 19,537 19,735 (6)(15)
19,537 19,735 
Swordfish Merger Sub LLCAuto Parts & Equipment
Second Lien Term Loan, LIBOR+6.75% cash due 2/2/20267.75 %12,500 12,466 12,365 (6)(15)
12,466 12,365 
Tacala, LLCRestaurants
Second Lien Term Loan, LIBOR+7.50% cash due 2/4/20288.25 %9,448 9,317 9,451 (6)
9,317 9,451 
92
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2021
(dollar amounts in thousands)



Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
Tecta America Corp.Construction & Engineering
Second Lien Term Loan, LIBOR+8.50% cash due 4/9/20299.25 %$5,203 $5,125 $5,203 (6)(15)
5,125 5,203 
Telestream Holdings CorporationApplication Software
First Lien Term Loan, LIBOR+8.75% cash due 10/15/20259.75 %18,510 18,017 18,250 (6)(15)
First Lien Revolver, LIBOR+8.75% cash due 10/15/20259.75 %492 464 468 (6)(15)(19)
18,481 18,718 
TerSera Therapeutics LLCPharmaceuticals
Second Lien Term Loan, LIBOR+9.50% cash due 3/30/202610.50 %29,663 29,359 29,371 (6)(15)
668,879 Common Units of TerSera Holdings LLC2,192 3,487 (15)
31,551 32,858 
TGNR HoldCo LLCIntegrated Oil & Gas
Subordinated Debt, 11.50% cash due 5/14/20264,984 4,842 4,884 (11)(15)(20)
4,842 4,884 
Thermacell Repellents, Inc.Leisure Products
First Lien Term Loan, LIBOR+5.75% cash due 12/4/20266.75 %6,636 6,603 6,603 (6)(15)
First Lien Revolver, LIBOR+5.75% cash due 12/4/2026— (4)(4)(6)(15)(19)
6,599 6,599 
Thrasio, LLCInternet & Direct Marketing Retail
First Lien Term Loan, LIBOR+7.00% cash due 12/18/20268.00 %37,876 36,736 37,686 (6)(15)
8,434 Shares of Series C-3 Preferred Stock in Thrasio Holdings, Inc.101 171 (15)
284,650.32 Shares of Series C-2 Preferred Stock in Thrasio Holdings, Inc.2,410 5,764 (15)
23,201 Shares of Series X Preferred Stock in Thrasio Holdings, Inc.22,986 24,803 (15)(19)
62,233 68,424 
TIBCO Software Inc.Application Software
Second Lien Term Loan, LIBOR+7.25% cash due 3/3/20287.34 %16,788 16,681 17,002 (6)
16,681 17,002 
TigerConnect, Inc.Application Software
299,110 Series B Preferred Stock Warrants (exercise price $1.3373) expiration date 12/8/202460 525 (15)
60 525 
Transact Holdings Inc.Application Software
First Lien Term Loan, LIBOR+4.75% cash due 4/30/20264.83 %6,860 6,757 6,809 (6)(15)
6,757 6,809 
Velocity Commercial Capital, LLCThrifts & Mortgage Finance
First Lien Term Loan, LIBOR+8.00% cash due 2/5/20269.00 %15,909 15,327 15,830 (6)(15)
15,327 15,830 
Veritas US Inc.Application Software
First Lien Term Loan, LIBOR+5.00% cash due 9/1/20256.00 %5,940 5,599 5,975 (6)
5,599 5,975 
Vitalyst Holdings, Inc.IT Consulting & Other Services
675 Series A Preferred Stock Units675 440 (15)
7,500 Class A Common Stock Units75 — (15)
750 440 
Win Brands Group LLCHousewares & Specialties
First Lien Term Loan, LIBOR+9.00% cash 5.00% PIK due 1/22/202610.00 %1,894 1,875 1,884 (6)(15)
181 Class F Warrants in Brand Value Growth LLC (exercise price $0.01) expiration date 1/25/2027— 119 (15)
1,875 2,003 
93
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2021
(dollar amounts in thousands)



Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
Windstream Services II, LLCIntegrated Telecommunication Services
First Lien Term Loan, LIBOR+6.25% cash due 9/21/20277.25 %$31,598 $30,347 $31,793 (6)
18,032 Shares of Common Stock in Windstream Holdings II, LLC216 363 (15)
109,420 Warrants in Windstream Holdings II, LLC1,842 2,199 (15)
32,405 34,355 
WP CPP Holdings, LLCAerospace & Defense
First Lien Term Loan, LIBOR+3.75% cash due 4/30/20254.75 %4,369 4,005 4,264 (6)
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/20268.75 %16,000 15,758 15,815 (6)(15)
19,763 20,079 
WPEngine, Inc.Application Software
First Lien Term Loan, LIBOR+6.50% cash due 3/27/20267.50 %40,536 39,778 40,013 (6)(15)
39,778 40,013 
WWEX Uni Topco Holdings, LLCAir Freight & Logistics
Second Lien Term Loan, LIBOR+7.00% cash due 7/26/20297.75 %5,000 4,925 4,981 (6)
4,925 4,981 
Zep Inc.Specialty Chemicals
First Lien Term Loan, LIBOR+4.00% cash due 8/12/20245.00 %6,495 6,165 6,353 (6)
Second Lien Term Loan, LIBOR+8.25% cash due 8/11/20259.25 %22,748 22,692 21,993 (6)(15)
28,857 28,346 
Zephyr Bidco LimitedSpecialized Finance
Second Lien Term Loan, UK LIBOR+7.50% cash due 7/23/20267.55 %£18,000 23,783 24,210 (6)(11)
23,783 24,210 
Total Non-Control/Non-Affiliate Investments (172.7% of net assets)$2,236,759 $2,267,575 
Total Portfolio Investments (194.7% of net assets)$2,539,121 $2,556,629 
Cash and Cash Equivalents and Restricted Cash
JP Morgan Prime Money Market Fund, Institutional Shares
 $23,600 $23,600 
Other cash accounts
8,035 8,035 
Total Cash and Cash Equivalents and Restricted Cash (2.4% of net assets)$31,635 $31,635 
Total Portfolio Investments and Cash and Cash Equivalents and Restricted Cash (197.2% of net assets)$2,570,756 $2,588,264 


Derivative InstrumentNotional Amount to be PurchasedNotional Amount to be SoldMaturity DateCounterpartyCumulative Unrealized Appreciation /(Depreciation)
Foreign currency forward contract$52,186 £37,709 11/12/2021JPMorgan Chase Bank, N.A.$1,339 
Foreign currency forward contract$46,663 €39,736 11/12/2021JPMorgan Chase Bank, N.A.573 
$1,912 


Derivative InstrumentCompany ReceivesCompany PaysCounterpartyMaturity DateNotional AmountFair Value
Interest rate swapFixed 2.7%Floating 3-month LIBOR +1.658%
Royal Bank of Canada
1/15/2027$350,000$(2,108)
94
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2021
(dollar amounts in thousands)



(1)All debt investments are income producing unless otherwise noted. All equity investments are non-income producing unless otherwise noted.
(2)See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition by geographic region.
(3)Equity ownership may be held in shares or units of companies related to the portfolio companies.
(4)Interest rates may be adjusted from period to period on certain term loans and revolvers. These rate adjustments may be either temporary in nature due to tier pricing arrangements or financial or payment covenant violations in the original credit agreements or permanent in nature per loan amendment or waiver documents.
(5)Each of the Company's investments is pledged as collateral under one or more of its credit facilities. A single investment may be divided into parts that are individually pledged as collateral to separate credit facilities.
(6)The interest rate on the principal balance outstanding for all floating rate loans is indexed to the London Interbank Offered Rate ("LIBOR") and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars unless otherwise noted. As of September 30, 2021, the reference rates for the Company's variable rate loans were the 30-day LIBOR at 0.08%, the 60-day LIBOR at 0.11%, the 90-day LIBOR at 0.13%, the 180-day LIBOR at 0.16%, the 360-day LIBOR at 0.24%, the PRIME at 3.25%, the 30-day UK LIBOR at 0.05%, the 180-day UK LIBOR at 0.09%, the 30-day EURIBOR at (0.57)%, the 90-day EURIBOR at (0.56)% and the 180-day EURIBOR at (0.53)%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(7)Principal includes accumulated payment in kind ("PIK") interest and is net of repayments, if any. “£” signifies the investment is denominated in British Pounds. "€" signifies the investment is denominated in Euros. All other investments are denominated in U.S. dollars.
(8)Control Investments generally are defined by the Investment Company Act of 1940, as amended (the "Investment Company Act"), as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.
(9)As defined in the Investment Company Act, the Company is deemed to be both an "Affiliated Person" of and to "Control" these portfolio companies as the Company owns more than 25% of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). See Schedule 12-14 in the accompanying notes to the Consolidated Financial Statements for transactions during the year ended September 30, 2021 in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to control.
(10)First Star Speir Aviation 1 Limited is a wholly-owned holding company formed by the Company in order to facilitate its investment strategy. In accordance with Accounting Standards Update ("ASU") 2013-08, the Company has deemed the holding company to be an investment company under accounting principles generally accepted in the United States ("GAAP") and therefore deemed it appropriate to consolidate the financial results and financial position of the holding company and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding company are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities.
(11)Investment is not a "qualifying asset" as defined under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of September 30, 2021, qualifying assets represented 75.7% of the Company's total assets and non-qualifying assets represented 24.3% of the Company's total assets.
(12)Income producing through payment of dividends or distributions.
(13)PIK interest income for this investment accrues at an annualized rate of 15%, however, the PIK interest is not contractually capitalized on the investment subsequent to a restructure that occurred during the year ended September 30, 2021. As a result, the principal amount of the investment does not increase over time for accumulated PIK interest. As of September 30, 2021, the accumulated PIK interest balance for the A notes and the B notes was $0.9 million and $0.8 million, respectively.
(14)See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition.
(15)As of September 30, 2021, these investments were categorized as Level 3 within the fair value hierarchy established by Financial Accounting Standards Board ("FASB") guidance under Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures ("ASC 820").
(16)This investment was valued using net asset value as a practical expedient for fair value. Consistent with ASC 820, these investments are excluded from the hierarchical levels.
(17)Affiliate Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns between 5% and 25% of the voting securities.
(18)Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.
(19)Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
(20)This investment represents a participation interest in the underlying securities shown.
See notes to Consolidated Financial Statements.
95
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2020
(dollar amounts in thousands)

Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
Control Investments
(8)(9)
C5 Technology Holdings, LLCData Processing & Outsourced Services
829 Common Units$— $— (20)
34,984,460.37 Preferred Units34,984 27,638 (20)
34,984 27,638 
Dominion Diagnostics, LLCHealth Care Services
First Lien Term Loan, LIBOR+5.00% cash due 2/28/20246.00 %$27,660 27,660 27,660 (6)(20)
First Lien Revolver, LIBOR+5.00% cash due 2/28/20246.00 %5,260 5,260 5,260 (6)(19)(20)
30,030.8 Common Units in DD Healthcare Services Holdings, LLC18,626 7,667 (20)
51,546 40,587 
First Star Speir Aviation LimitedAirlines(10)
First Lien Term Loan, 9.00% cash due 12/15/202011,510 2,035 11,510 (11)(20)
100% equity interest8,500 1,622 (11)(12)(20)
10,535 13,132 
New IPT, Inc.Oil & Gas Equipment & Services
First Lien Term Loan, LIBOR+5.00% cash due 3/17/20216.00 %2,304 2,304 1,800  (6)(20)
First Lien Revolver, LIBOR+5.00% cash due 3/17/20216.00 %1,009 1,009 788  (6)(19)(20)
50.087 Class A Common Units in New IPT Holdings, LLC— — (20)
3,313 2,588 
Senior Loan Fund JV I, LLCMulti-Sector Holdings(14)
Subordinated Debt, LIBOR+7.00% cash due 12/29/20287.17 %96,250 96,250 96,250 (6)(11)(20)
87.5% LLC equity interest49,322 21,190 (11)(16)(19)
145,572 117,440 
 Total Control Investments (22.0% of net assets)$245,950 $201,385 
 Affiliate Investments (17)
Assembled Brands Capital LLCSpecialized Finance
First Lien Revolver, LIBOR+6.00% cash due 10/17/20237.00 %$4,688 $4,688 $4,194 (6)(19)(20)
1,609,201 Class A Units764 483 (20)
1,019,168.80 Preferred Units, 6%1,019 1,091 (20)
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029— — (20)
6,471 5,768 
Caregiver Services, Inc.Health Care Services
1,080,399 shares of Series A Preferred Stock, 10%1,080 741 (20)
1,080 741 
 Total Affiliate Investments (0.7% of net assets)$7,551 $6,509 
 Non-Control/Non-Affiliate Investments
(18)
4 Over International, LLCCommercial Printing
First Lien Term Loan, LIBOR+6.00% cash due 6/7/20227.00 %$5,676 $5,654 $5,264 (6)(20)
First Lien Revolver, LIBOR+6.00% cash due 6/7/20217.00 %2,232 2,214 2,070 (6)(20)
7,868 7,334 
99 Cents Only Stores LLCGeneral Merchandise Stores
First Lien Term Loan, LIBOR+5.00% cash 1.50% PIK due 1/13/20226.00 %19,431 19,220 17,877 (6)
19,220 17,877 
A.T. Holdings II SÀRLBiotechnology
First Lien Term Loan, 12.00% cash due 4/27/202322,619 22,619 26,464 (11)(20)
First Lien Delayed Draw Term Loan, 12.00% cash due 4/27/20231,508 1,508 1,780 (11)(19)(20)
24,127 28,244 
96
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2020
(dollar amounts in thousands)

Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
Access CIG, LLCDiversified Support Services
Second Lien Term Loan, LIBOR+7.75% cash due 2/27/20267.91 %$15,000 $14,909 $14,250 (6)
14,909 14,250 
Accupac, Inc.Personal Products
First Lien Term Loan, LIBOR+6.00% cash due 1/17/20267.00 %12,487 12,294 12,487 (6)(20)
First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 1/17/2026— (36)— (6)(19)(20)
First Lien Revolver, LIBOR+6.00% cash due 1/17/20267.00 %1,564 1,540 1,564 (6)(20)
13,798 14,051 
Acquia Inc.Application Software
First Lien Term Loan, LIBOR+7.00% cash due 10/31/20258.00 %20,950 20,594 20,499 (6)(20)
First Lien Revolver, LIBOR+7.00% cash due 10/31/2025— (39)(48)(6)(19)(20)
20,555 20,451 
Aden & Anais Merger Sub, Inc.Apparel, Accessories & Luxury Goods
51,645 Common Units in Aden & Anais Holdings, Inc.5,165 — (20)
5,165 — 
AdVenture Interactive, Corp.Advertising
9,073 shares of common stock13,611 13,440 (20)
13,611 13,440 
AI Ladder (Luxembourg) Subco S.a.r.l.Electrical Components & Equipment
First Lien Term Loan, LIBOR+4.50% cash due 7/9/20254.65 %21,374 20,934 20,465 (6)(11)
20,934 20,465 
AI Sirona (Luxembourg) Acquisition S.a.r.l.Pharmaceuticals
Second Lien Term Loan, EURIBOR+7.25% cash due 9/28/20267.25 %€24,838 27,668 28,435 (6)(11)(20)
27,668 28,435 
Airbnb, Inc.Hotels, Resorts & Cruise Lines
First Lien Term Loan, LIBOR+7.50% cash due 4/17/20258.50 %$15,743 15,378 17,081 (6)
15,378 17,081 
AirStrip Technologies, Inc.Application Software
5,715 Common Stock Warrants (exercise price $139.99) expiration date 5/11/202590 — (20)
90 — 
Aldevron, L.L.C.Biotechnology
First Lien Term Loan, LIBOR+4.25% cash due 10/12/20265.25 %7,960 7,880 7,977 (6)
7,880 7,977 
Algeco Scotsman Global Finance PlcConstruction & Engineering
Fixed Rate Bond, 8.00% cash due 2/15/202313,524 13,277 13,465 (11)
13,277 13,465 
Alvotech Holdings S.A.Biotechnology(13)
Fixed Rate Bond 15% PIK Note A due 12/13/202314,800 18,849 19,968 (11)(20)
Fixed Rate Bond 15% PIK Note B due 12/13/202314,800 18,849 19,196 (11)(20)
37,698 39,164 
Amplify Finco Pty Ltd.Movies & Entertainment
First Lien Term Loan, LIBOR+4.00% cash due 11/26/20264.75 %995 909 856 (6)(11)(20)
Second Lien Term Loan, LIBOR+8.00% cash due 11/26/20278.75 %12,500 12,188 9,438 (6)(11)(20)
13,097 10,294 
97
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2020
(dollar amounts in thousands)

Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
Ancile Solutions, Inc.Application Software
First Lien Term Loan, LIBOR+7.00% cash due 6/30/20218.00 %$8,181 $8,150 $8,124  (6)(20)
8,150 8,124 
Apptio, Inc.Application Software
First Lien Term Loan, LIBOR+7.25% cash due 1/10/20258.25 %23,764 23,420 23,297 (6)(20)
First Lien Revolver, LIBOR+7.25% cash due 1/10/2025— (22)(30)(6)(19)(20)
23,398 23,267 
Ardonagh Midco 3 PLCInsurance Brokers
First Lien Term Loan, EURIBOR+7.50% cash due 7/14/20268.50 %€1,440 1,594 1,640 (6)(11)(20)
First Lien Term Loan, UK LIBOR+7.50% cash due 7/14/20268.25 %£11,303 13,752 14,188 (6)(11)(20)
First Lien Delayed Draw Term Loan, UK LIBOR+7.50% cash due 7/14/2026£— — — (6)(11)(19)(20)
Fixed Rate Bond, 11.50% cash due 1/15/2027$2,222 2,200 2,255 (11)
17,546 18,083 
Associated Asphalt Partners, LLCConstruction Materials
First Lien Term Loan, LIBOR+5.25% cash due 4/5/20246.25 %2,554 2,150 2,073 (6)
2,150 2,073 
Asurion, LLCProperty & Casualty Insurance
Second Lien Term Loan, LIBOR+6.50% cash due 8/4/20256.65 %19,985 19,950 20,058 (6)
19,950 20,058 
Athenex, Inc.Pharmaceuticals
First Lien Term Loan, 11.00% cash due 6/19/202628,475 27,252 28,261 (11)(20)
First Lien Delayed Draw Term Loan, 11.00% cash due 6/19/2026— (321)(171)(11)(19)(20)
266,052 Common Stock Warrants (exercise price $12.63) expiration date 6/19/2027915 785 (11)(20)
27,846 28,875 
Aurora Lux Finco S.À.R.L.Airport Services
First Lien Term Loan, LIBOR+6.00% cash due 12/24/20267.00 %22,885 22,376 21,283 (6)(11)(20)
22,376 21,283 
Blackhawk Network Holdings, Inc.Data Processing & Outsourced Services
Second Lien Term Loan, LIBOR+7.00% cash due 6/15/20267.19 %26,250 26,049 24,150 (6)
26,049 24,150 
Boxer Parent Company Inc.Systems Software
First Lien Term Loan, LIBOR+4.25% cash due 10/2/20254.40 %13,775 13,666 13,407 (6)
13,666 13,407 
BX Commercial Mortgage Trust 2020-VIVADiversified Real Estate Activities
Class D Variable Notes due 3/9/20443.67 %12,556 10,482 11,451 (6)(11)(20)
Class E Variable Notes due 3/9/20443.67 %6,221 4,806 5,395 (6)(11)(20)
15,288 16,846 
California Pizza Kitchen, Inc.Restaurants
First Lien Term Loan, LIBOR+8.00% cash due 8/23/20223,222 3,081 983 (6)(21)
3,081 983 
Chief Power Finance II, LLCIndependent Power Producers & Energy Traders
First Lien Term Loan, LIBOR+6.50% cash due 12/31/20227.50 %21,850 21,462 20,812 (6)(20)
21,462 20,812 
CITGO Holding, Inc.Oil & Gas Refining & Marketing
First Lien Term Loan, LIBOR+7.00% cash due 8/1/20238.00 %11,753 11,570 11,081 (6)
Fixed Rate Bond, 9.25% cash due 8/1/202410,672 10,672 10,192 
22,242 21,273 
98
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2020
(dollar amounts in thousands)

Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
CITGO Petroleum Corp.Oil & Gas Refining & Marketing
First Lien Term Loan, LIBOR+5.00% cash due 3/28/20246.00 %$8,979 $8,890 $8,553 (6)
8,890 8,553 
Continental Intermodal Group LPOil & Gas Storage & Transportation
First Lien Term Loan, LIBOR+9.50% PIK due 1/28/202524,741 24,741 21,753 (6)(20)
Common Stock Warrants expiration date 7/28/2025— 1,672 (20)
24,741 23,425 
Convergeone Holdings, Inc.IT Consulting & Other Services
First Lien Term Loan, LIBOR+5.00% cash due 1/4/20265.15 %14,621 14,169 13,465 (6)
14,169 13,465 
Conviva Inc.Application Software
417,851 Series D Preferred Stock Warrants (exercise price $1.1966) expiration date 2/28/2021105 395 (20)
105 395 
Corrona, LLCHealth Care Services
First Lien Term Loan, LIBOR+5.50% cash due 12/13/20256.50 %10,300 10,144 10,152 (6)(20)
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 12/13/2025— (32)(52)(6)(19)(20)
First Lien Revolver, PRIME+4.50% cash due 12/13/20257.75 %305 277 279 (6)(19)(20)
1,099 Class A2 Common Units in Corrona Group Holdings, L.P.1,038 1,038 (20)
11,427 11,417 
Coyote Buyer, LLCSpecialty Chemicals
First Lien Term Loan, LIBOR+6.00% cash due 2/6/20267.00 %13,123 12,992 12,992 (6)(20)
First Lien Revolver, LIBOR+6.00% cash due 2/6/2025— (9)(9)(6)(19)(20)
12,983 12,983 
CTOS, LLCTrading Companies & Distributors
First Lien Term Loan, LIBOR+4.25% cash due 4/18/20254.40 %10,139 10,228 10,069 (6)
10,228 10,069 
Eagleview Technology CorporationApplication Software
Second Lien Term Loan, LIBOR+7.50% cash due 8/14/20268.50 %12,000 11,880 10,440 (6)(20)
11,880 10,440 
EHR Canada, LLCFood Retail
First Lien Term Loan, LIBOR+8.00% cash due 12/4/20209.00 %6,861 6,851 6,998 (6)(20)
6,851 6,998 
EOS Fitness Opco Holdings, LLCLeisure Facilities
487.5 Class A Preferred Units, 12%488 49 (20)
12,500 Class B Common Units— — (20)
488 49 
ExamSoft Worldwide, Inc.Application Software
180,707 Class C Units in ExamSoft Investor LLC181 500 (20)
181 500 
Fortress Biotech, Inc.Biotechnology
First Lien Term Loan, 11.00% cash due 8/27/20258,346 7,842 7,908 (11)(20)
243,348 Common Stock Warrants (exercise price $3.20) expiration date 8/27/2030258 419 (11)(20)
8,100 8,327 
GI Chill Acquisition LLCManaged Health Care
First Lien Term Loan, LIBOR+4.00% cash due 8/6/20254.22 %17,640 17,552 17,331 (6)(20)
Second Lien Term Loan, LIBOR+7.50% cash due 8/6/20267.72 %10,000 9,927 9,350 (6)(20)
27,479 26,681 
99
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2020
(dollar amounts in thousands)

Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
GKD Index Partners, LLCSpecialized Finance
First Lien Term Loan, LIBOR+7.00% cash due 6/29/20238.00 %$20,933 $20,818 $20,577 (6)(20)
First Lien Revolver, LIBOR+7.00% cash due 6/29/20238.00 %924 915 904 (6)(19)(20)
21,733 21,481 
Global Medical ResponseHealth Care Services
First Lien Term Loan, LIBOR+4.25% cash due 3/14/20255.25 %6,256 6,152 6,084 (6)
6,152 6,084 
Guidehouse LLPResearch & Consulting Services
First Lien Term Loan, LIBOR+4.50% cash due 5/1/20254.65 %4,949 4,907 4,912 (6)
Second Lien Term Loan, LIBOR+8.00% cash due 5/1/20268.15 %20,000 19,930 19,300 (6)(20)
24,837 24,212 
Gulf Operating, LLCOil & Gas Storage & Transportation
First Lien Term Loan, LIBOR+5.25% cash due 8/25/20236.25 %3,275 1,874 2,324 (6)
1,874 2,324 
Houghton Mifflin Harcourt Publishers Inc.Education Services
First Lien Term Loan, LIBOR+6.25% cash due 11/22/20247.25 %6,738 6,508 6,300 (6)(11)
6,508 6,300 
I Drive Safely, LLCEducation Services
125,079 Class A Common Units of IDS Investments, LLC1,000 200 (20)
1,000 200 
IBG Borrower LLCApparel, Accessories & Luxury Goods
First Lien Term Loan, LIBOR+7.00% cash due 8/2/20227.25 %9,056 8,569 7,856 (6)(20)
8,569 7,856 
iCIMs, Inc.Application Software
First Lien Term Loan, LIBOR+6.50% cash due 9/12/20247.50 %16,718 16,493 16,584 (6)(20)
First Lien Revolver, LIBOR+6.50% cash due 9/12/2024— (15)(7)(6)(19)(20)
16,478 16,577 
Immucor, Inc.Health Care Supplies
First Lien Term Loan, LIBOR+5.75% cash due 7/2/20256.75 %6,477 6,354 6,347 (6)(20)
First Lien Revolver, LIBOR+5.75% cash due 7/2/2025— (10)(11)(6)(19)(20)
Second Lien Term Loan, LIBOR+8.00% cash 3.50% PIK due 10/2/20259.00 %15,611 15,316 15,298 (6)(20)
21,660 21,634 
Integral Development CorporationOther Diversified Financial Services
1,078,284 Common Stock Warrants (exercise price $0.9274) expiration date 7/10/2024113 — (20)
113 — 
L Squared Capital Partners LLCMulti-Sector Holdings
2.00% limited partnership interest887 2,192 (11)(16)
887 2,192 
Lanai Holdings III, Inc.Health Care Distributors
First Lien Term Loan, LIBOR+4.75% cash due 8/29/20225.75 %12,948 12,810 12,260 (6)
12,810 12,260 
Lannett Company, Inc.Pharmaceuticals
First Lien Term Loan, LIBOR+5.00% cash due 11/25/20206.00 %460 460 456 (6)(11)
460 456 
100
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2020
(dollar amounts in thousands)

Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
Lift Brands Holdings, Inc.Leisure Facilities
2,000,000 Class A Common Units in Snap Investments, LLC$1,399 $— (20)
1,399 — 
Lightbox Intermediate, L.P.Real Estate Services
First Lien Term Loan, LIBOR+5.00% cash due 5/9/20265.15 %$39,500 39,023 37,723 (6)(20)
39,023 37,723 
LogMeIn, Inc.Application Software
Second Lien Term Loan, LIBOR+9.00% cash due 8/31/20289.16 %9,293 8,831 9,247 (6)
8,831 9,247 
LTI Holdings, Inc.Electronic Components
First Lien Term Loan, LIBOR+4.75% cash due 7/24/20264.90 %1,794 1,513 1,685 (6)
First Lien Term Loan, LIBOR+3.50% cash due 9/6/20253.65 %18,082 15,087 16,884 (6)
Second Lien Term Loan, LIBOR+6.75% cash due 9/6/20266.90 %9,000 9,000 7,983 (6)
25,600 26,552 
Maravai Intermediate Holdings, LLCBiotechnology
First Lien Term Loan, LIBOR+4.25% cash due 8/1/20255.25 %11,760 11,642 11,789 (6)(20)
11,642 11,789 
Mauser Packaging Solutions Holding CompanyMetal & Glass Containers
Fixed Rate Bond, 8.50% cash due 4/15/202411,378 11,273 11,833 
11,273 11,833 
Mayfield Agency Borrower Inc.Property & Casualty Insurance
First Lien Term Loan, LIBOR+4.50% cash due 2/28/20254.65 %28,823 28,045 26,679 (6)
28,045 26,679 
McAfee, LLCSystems Software
Second Lien Term Loan, LIBOR+8.50% cash due 9/29/20259.50 %7,000 7,028 7,074 (6)
7,028 7,074 
MHE Intermediate Holdings, LLCDiversified Support Services
First Lien Term Loan, LIBOR+5.00% cash due 3/8/20246.00 %2,910 2,888 2,832 (6)(20)
2,888 2,832 
Mindbody, Inc.Internet Services & Infrastructure
First Lien Term Loan, LIBOR+7.00% cash 1.5% PIK due 2/14/20258.00 %29,097 28,675 26,828 (6)(20)
First Lien Revolver, LIBOR+8.00% cash due 2/14/2025— (44)(241)(6)(19)(20)
28,631 26,587 
Ministry Brands, LLCApplication Software
First Lien Revolver, LIBOR+5.00% cash due 12/2/20226.00 %575 566 566 (6)(19)(20)
Second Lien Term Loan, LIBOR+9.25% cash due 6/2/202310.25 %9,000 8,934 8,923 (6)(20)
9,500 9,489 
MRI Software LLCApplication Software
First Lien Term Loan, LIBOR+5.50% cash due 2/10/20266.50 %14,369 14,242 14,022 (6)(20)
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026— (59)(144)(6)(19)(20)
First Lien Revolver, LIBOR+5.50% cash due 2/10/2026— (13)(31)(6)(19)(20)
14,170 13,847 
101
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2020
(dollar amounts in thousands)

Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
NeuAG, LLCFertilizers & Agricultural Chemicals
First Lien Term Loan, LIBOR+5.50% cash 7.00% PIK due 9/11/20247.00 %$35,306 $33,918 $33,894 (6)(20)
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash 7.00% PIK due 9/11/2024— (175)(175)(6)(19)(20)
33,743 33,719 
NuStar Logistics, L.P.Oil & Gas Refining & Marketing
Unsecured Delayed Draw Term Loan, 12.00% cash due 4/19/2023— — — (19)(20)
— — 
Olaplex, Inc.Personal Products
First Lien Term Loan, LIBOR+6.50% cash due 1/8/20267.50 %35,056 34,441 35,056 (6)(20)
First Lien Revolver, LIBOR+6.50% cash due 1/8/20257.50 %1,917 1,852 1,917 (6)(19)(20)
36,293 36,973 
OmniSYS Acquisition CorporationDiversified Support Services
100,000 Common Units in OSYS Holdings, LLC1,000 607 (20)
1,000 607 
Onvoy, LLCIntegrated Telecommunication Services
Second Lien Term Loan, LIBOR+10.50% cash due 2/10/202511.50 %16,750 16,750 15,142 (6)(20)
19,666.67 Class A Units in GTCR Onvoy Holdings, LLC1,967 268 (20)
13,664.73 Series 3 Class B Units in GTCR Onvoy Holdings, LLC— — (20)
18,717 15,410 
OZLM Funding III, Ltd.Multi-Sector Holdings
Class DR Notes, LIBOR+7.77% cash due 1/22/20298.03 %2,312 1,657 2,119 (6)(11)
1,657 2,119 
PaySimple, Inc.Data Processing & Outsourced Services
First Lien Term Loan, LIBOR+5.50% cash due 8/23/20255.65 %49,535 48,711 47,801 (6)(20)
48,711 47,801 
Pingora MSR Opportunity Fund I-A, LPThrifts & Mortgage Finance
1.86% limited partnership interest938 353 (11)(16)(19)
938 353 
PLATO Learning Inc.Education Services
Unsecured Senior PIK Note, 8.50% PIK due 12/9/20213,099 2,434 — (15)(20)
Unsecured Junior PIK Note, 10.00% PIK due 12/9/202115,010 10,227 — (15)(20)
Unsecured Revolver, 5.00% cash due 12/9/20212,938 2,631 588 (20)(21)
126,127.80 Class A Common Units of Edmentum126 — (20)
15,418 588 
ProFrac Services, LLCIndustrial Machinery
First Lien Term Loan, LIBOR+7.50% cash due 9/15/20238.75 %15,170 15,081 11,643 (6)(20)
15,081 11,643 
Project Boost Purchaser, LLCApplication Software
Second Lien Term Loan, LIBOR+8.00% cash due 5/9/20278.15 %3,750 3,750 3,375 (6)(20)
3,750 3,375 
102
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2020
(dollar amounts in thousands)

Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
Pug LLCInternet & Direct Marketing Retail
First Lien Term Loan, LIBOR+8.00% cash due 2/12/20278.75 %$15,740 $14,802 $15,307 (6)
14,802 15,307 
QuorumLabs, Inc.Application Software
64,887,669 Junior-2 Preferred Stock375 — (20)
375 — 
Refac Optical GroupSpecialty Stores
1,550.9435 Shares of Common Stock in Refac Holdings, Inc.1 — (20)
550.9435 Series A-2 Preferred Stock in Refac Holdings, Inc., 10%305 — (20)
1,000 Series A-1 Preferred Stock in Refac Holdings, Inc., 10%999 — (20)
1,305 — 
Salient CRGT, Inc.Aerospace & Defense
First Lien Term Loan, LIBOR+6.50% cash due 2/28/20227.50 %2,955 2,938 2,748 (6)(20)
2,938 2,748 
Scilex Pharmaceuticals Inc.Pharmaceuticals
Fixed Rate Zero Coupon Bond due 8/15/202615,585 12,069 12,468 (20)
12,069 12,468 
ShareThis, Inc.Application Software
345,452 Series C Preferred Stock Warrants (exercise price $3.0395) expiration date 3/4/2024367 — (20)
367 — 
Sorrento Therapeutics, Inc.Biotechnology
125,000 Common Stock Warrants (exercise price $3.94) expiration date 11/3/2029— 1,123 (11)(20)
— 1,123 
Supermoose Borrower, LLCApplication Software
First Lien Term Loan, LIBOR+3.75% cash due 8/29/20253.90 %10,196 8,925 9,193 (6)
8,925 9,193 
Surgery Center Holdings, Inc.Health Care Facilities
First Lien Term Loan, LIBOR+3.25% cash due 9/3/20244.25 %3,850 3,133 3,640 (6)(11)
3,133 3,640 
Swordfish Merger Sub LLCAuto Parts & Equipment
Second Lien Term Loan, LIBOR+6.75% cash due 2/2/20267.75 %12,500 12,458 10,563 (6)(20)
12,458 10,563 
Tacala, LLCRestaurants
Second Lien Term Loan, LIBOR+7.50% cash due 2/4/20287.65 %7,276 7,167 6,903 (6)
7,167 6,903 
TerSera Therapeutics LLCPharmaceuticals
Second Lien Term Loan, LIBOR+9.50% cash due 3/30/202410.50 %29,663 29,236 29,371 (6)(20)
668,879 Common Units of TerSera Holdings LLC2,192 3,487 (20)
31,428 32,858 
TIBCO Software Inc.Application Software
Second Lien Term Loan, LIBOR+7.25% cash due 3/3/20287.40 %15,000 14,925 14,766 (6)
14,925 14,766 
TigerConnect, Inc.Application Software
299,110 Series B Preferred Stock Warrants (exercise price $1.3373) expiration date 12/8/202460 525 (20)
60 525 
Transact Holdings Inc.Application Software
First Lien Term Loan, LIBOR+4.75% cash due 4/30/20264.90 %6,930 6,826 6,553 (6)(20)
6,826 6,553 
103
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2020
(dollar amounts in thousands)

Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
Truck Hero, Inc.Auto Parts & Equipment
Second Lien Term Loan, LIBOR+8.25% cash due 4/21/20259.25 %$21,500 $21,191 $20,819 (6)(20)
21,191 20,819 
U.S. Renal Care, Inc.Health Care Services
First Lien Term Loan, LIBOR+5.00% cash due 6/26/20265.15 %1,122 934 1,096 (6)
934 1,096 
Uniti Group Inc.Specialized REITs
21,072 Common Units— 133 222 (11)(12)
133 222 
Verscend Holding Corp.Health Care Technology
First Lien Term Loan, LIBOR+4.50% cash due 8/27/20254.65 %14,525 14,479 14,429 (6)
Fixed Rate Bond, 9.75% cash due 8/15/20267,000 7,020 7,629 
21,499 22,058 
Vertex Aerospace Services Corp.Aerospace & Defense
First Lien Term Loan, LIBOR+4.50% cash due 6/29/20254.65 %10,168 10,133 10,073 (6)
10,133 10,073 
Vitalyst Holdings, Inc.IT Consulting & Other Services
675 Series A Preferred Stock Units675 440 (20)
7,500 Class A Common Stock Units75 — (20)
750 440 
William Morris Endeavor Entertainment, LLCMovies & Entertainment
First Lien Term Loan, LIBOR+8.50% cash due 5/18/20259.50 %33,298 31,594 33,298 (6)(20)
31,594 33,298 
Windstream Services II, LLCIntegrated Telecommunication Services
First Lien Term Loan, LIBOR+6.25% cash due 9/21/20277.25 %25,935 24,900 25,168 (6)
6,129 Shares of Common Stock in Windstream Holdings II, LLC53 69 (20)
37,215 Warrants in Windstream Holdings II, LLC913 444 (20)
25,866 25,681 
WP CPP Holdings, LLCAerospace & Defense
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/20268.75 %15,000 14,893 11,700 (6)(20)
14,893 11,700 
WPEngine, Inc.Application Software
First Lien Term Loan, LIBOR+6.50% cash due 3/27/20267.50 %14,188 13,863 13,949 (6)(20)
First Lien Delayed Draw Term Loan, LIBOR+6.50% cash due 3/27/2026— (602)(443)(6)(19)(20)
13,261 13,506 
xMatters, Inc.Application Software
600,000 Common Stock Warrants (exercise price $0.593333) expiration date 2/26/2025709 336 (20)
709 336 
Zep Inc.Specialty Chemicals
First Lien Term Loan, LIBOR+4.00% cash due 8/12/20245.00 %1,955 1,895 1,845 (6)
Second Lien Term Loan, LIBOR+8.25% cash due 8/11/20259.25 %30,000 29,908 24,180 (6)(20)
31,803 26,025 
Zephyr Bidco LimitedSpecialized Finance
Second Lien Term Loan, UK LIBOR+7.50% cash due 7/23/20267.55 %£18,000 23,705 21,176 (6)(11)
23,705 21,176 
Total Non-Control/Non-Affiliate Investments (149.3% of net assets)$1,415,669 $1,365,957 
104
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2020
(dollar amounts in thousands)

Portfolio Company/Type of Investment (1)(2)(3)(4)(5) Cash Interest Rate (6)IndustryPrincipal (7)CostFair ValueNotes
Total Portfolio Investments (172.0% of net assets)$1,669,170 $1,573,851 
Cash and Cash Equivalents
JP Morgan Prime Money Market Fund, Institutional Shares
 $35,248 $35,248 
Other cash accounts
3,848 3,848 
Total Cash and Cash Equivalents (4.3% of net assets)$39,096 $39,096 
Total Portfolio Investments and Cash and Cash Equivalents (176.3% of net assets)$1,708,266 $1,612,947 
Derivative InstrumentNotional Amount to be PurchasedNotional Amount to be SoldMaturity DateCounterpartyCumulative Unrealized Appreciation /(Depreciation)
Foreign currency forward contract$35,577 £27,494 11/12/2020JPMorgan Chase Bank, N.A.$25 
Foreign currency forward contract$30,260 €25,614 11/12/2020JPMorgan Chase Bank, N.A.198 
$223 
105
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2020
(dollar amounts in thousands)

(1)All debt investments are income producing unless otherwise noted. All equity investments are non-income producing unless otherwise noted.
(2)See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition by geographic region.
(3)Equity ownership may be held in shares or units of companies related to the portfolio companies.
(4)Interest rates may be adjusted from period to period on certain term loans and revolvers. These rate adjustments may be either temporary in nature due to tier pricing arrangements or financial or payment covenant violations in the original credit agreements or permanent in nature per loan amendment or waiver documents.
(5)Each of the Company's investments is pledged as collateral under the Syndicated Facility (as defined in Note 6 to the accompanying notes to the Consolidated Financial Statements).
(6)The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars unless otherwise noted. As of September 30, 2020, the reference rates for the Company's variable rate loans were the 30-day LIBOR at 0.15%, the 60-day LIBOR at 0.19%, the 90-day LIBOR at 0.22%, the 180-day LIBOR at 0.27%, the 360-day LIBOR at 0.37%, the PRIME at 3.25%, the 30-day UK LIBOR at 0.05%, the 180-day UK LIBOR at 0.22%, the 30-day EURIBOR at (0.57)% and the 180-day EURIBOR at (0.36)%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(7)Principal includes accumulated PIK interest and is net of repayments, if any. “£” signifies the investment is denominated in British Pounds. "€" signifies the investment is denominated in Euros. All other investments are denominated in U.S. dollars.
(8)Control Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.
(9)As defined in the Investment Company Act, the Company is deemed to be both an "Affiliated Person" of and to "Control" these portfolio companies as the Company owns more than 25% of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). See Schedule 12-14 in the accompanying notes to the Consolidated Financial Statements for transactions during the year ended September 30, 2020 in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to control.
(10)First Star Speir Aviation 1 Limited is a wholly-owned holding company formed by the Company in order to facilitate its investment strategy. In accordance with ASU 2013-08, the Company has deemed the holding company to be an investment company under GAAP and therefore deemed it appropriate to consolidate the financial results and financial position of the holding company and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding company are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities.
(11)Investment is not a "qualifying asset" as defined under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of September 30, 2020, qualifying assets represented 75.4% of the Company's total assets and non-qualifying assets represented 24.6% of the Company's total assets.
(12)Income producing through payment of dividends or distributions.
(13)PIK interest income for this investment accrues at an annualized rate of 15%, however, the PIK interest is not contractually capitalized on the investment. As a result, the principal amount of the investment does not increase over time for accumulated PIK interest. As of September 30, 2020, the accumulated PIK interest balance for each of the A notes and the B notes was $4.3 million. The fair value of this investment is inclusive of PIK.
(14)See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition.
(15)This investment was on PIK non-accrual status as of September 30, 2020. PIK non-accrual status is inclusive of other non-cash income, where applicable.
(16)This investment was valued using net asset value as a practical expedient for fair value. Consistent with ASC 820, these investments are excluded from the hierarchical levels.
(17)Affiliate Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns between 5% and 25% of the voting securities.
(18)Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.
(19)Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
(20)As of September 30, 2020, these investments were categorized as Level 3 within the fair value hierarchy established by ASC 820.
(21)This investment was on cash non-accrual status as of September 30, 2020. Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.
See notes to Consolidated Financial Statements.
106
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




Note 1. Organization
Oaktree Specialty Lending Corporation (together with its consolidated subsidiaries, the "Company") is a specialty finance company that looks to provide customized, one-stop credit solutions to companies with limited access to public or syndicated capital markets. The Company was formed in late 2007 and operates as a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a Business Development Company under the Investment Company Act. The Company has qualified and elected to be treated as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"), for U.S. federal income tax purposes.
The Company's investment objective is to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions, including first and second lien loans, unsecured and mezzanine loans, bonds, preferred equity and certain equity co-investments. The Company may also seek to generate capital appreciation and income through secondary investments at discounts to par in either private or syndicated transactions.
The Company is externally managed by Oaktree Fund Advisors, LLC ("Oaktree"), a subsidiary of Oaktree Capital Group, LLC (“OCG”), pursuant to an investment advisory agreement between the Company and Oaktree (as amended and restated, the "Investment Advisory Agreement"). Oaktree is an affiliate of Oaktree Capital Management, L.P. ("OCM"), the Company's external investment adviser from October 17, 2017 through May 3, 2020 and also a subsidiary of OCG. Oaktree Fund Administration, LLC ("Oaktree Administrator"), a subsidiary of OCM, provides certain administrative and other services necessary for the Company to operate pursuant to an administration agreement between the Company and Oaktree Administrator (the "Administration Agreement"). See Note 11. In 2019, Brookfield Asset Management Inc. ("Brookfield") acquired a majority economic interest in OCG. OCG operates as an independent business within Brookfield, with its own product offerings and investment, marketing and support teams.
On March 19, 2021, the Company acquired Oaktree Strategic Income Corporation (“OCSI”), pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”), dated as of October 28, 2020, by and among OCSI, the Company, Lion Merger Sub, Inc., a wholly-owned subsidiary of the Company (“Merger Sub”), and, solely for the limited purposes set forth therein, Oaktree. Pursuant to the Merger Agreement, Merger Sub was first merged with and into OCSI, with OCSI as the surviving corporation (the “Merger”), and, immediately following the Merger, OCSI was then merged with and into the Company, with the Company as the surviving company (together with the Merger, the “Mergers”). In accordance with the terms of the Merger Agreement, at the effective time of the Merger, each outstanding share of OCSI’s common stock was converted into the right to receive 1.3371 shares of the Company’s common stock (with OCSI’s stockholders receiving cash in lieu of fractional shares of the Company’s common stock). As a result of the Mergers, the Company issued an aggregate of 39,400,011 shares of its common stock to former OCSI stockholders. See Note 15. "Merger with OCSI".

Note 2. Significant Accounting Policies
Basis of Presentation:
The Consolidated Financial Statements of the Company have been prepared in accordance with GAAP and pursuant to the requirements for reporting on Form 10-K and Regulation S-X. All intercompany balances and transactions have been eliminated. The Company is an investment company following the accounting and reporting guidance in ASC Topic 946, Financial Services - Investment Companies ("ASC 946").
Use of Estimates:
The preparation of the financial statements in conformity with GAAP requires management to make certain estimates and assumptions affecting amounts reported in the financial statements and accompanying notes. These estimates are based on the information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Changes in the economic and political environments, financial markets and any other parameters used in determining these estimates could cause actual results to differ and such differences could be material. Significant estimates include the valuation of investments and revenue recognition.
Consolidation:
The accompanying Consolidated Financial Statements include the accounts of Oaktree Specialty Lending Corporation and its consolidated subsidiaries. Each consolidated subsidiary is wholly-owned and, as such, consolidated into the Consolidated Financial Statements. Certain subsidiaries that hold investments are treated as pass through entities for U.S. federal income tax purposes. The assets of certain of the consolidated subsidiaries are not directly available to satisfy the claims of the creditors of Oaktree Specialty Lending Corporation or any of its other subsidiaries.
107
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




As an investment company, portfolio investments held by the Company are not consolidated into the Consolidated Financial Statements but rather are included on the Statements of Assets and Liabilities as investments at fair value.

Fair Value Measurements:
The Company values its investments in accordance with ASC 820, which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A liability's fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. ASC 820 prioritizes the use of observable market prices over entity-specific inputs. Where observable prices or inputs are not available or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments' complexity.
Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
 
•Level 1 — Unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.
•Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.
•Level 3 — Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
If inputs used to measure fair value fall into different levels of the fair value hierarchy, an investment's level is based on the lowest level of input that is significant to the fair value measurement. The Company'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. This includes investment securities that are valued using "bid" and "ask" prices obtained from independent third party pricing services or directly from brokers. These investments may be classified as Level 3 because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustments for investment-specific factors or restrictions.
Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, Oaktree obtains and analyzes readily available market quotations provided by pricing vendors and brokers for all of the Company's investments for which quotations are available. In determining the fair value of a particular investment, pricing vendors and brokers use observable market information, including both binding and non-binding indicative quotations.
The Company seeks to obtain at least two quotations for the subject or similar securities, typically from pricing vendors. If the Company is unable to obtain two quotes from pricing vendors, or if the prices obtained from pricing vendors are not within the Company's set threshold, the Company seeks to obtain a quote directly from a broker making a market for the asset. Oaktree evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Oaktree also performs back-testing of valuation information obtained from pricing vendors and brokers against actual prices received in transactions. In addition to ongoing monitoring and back-testing, Oaktree performs due diligence procedures over pricing vendors to understand their methodology and controls to support their use in the valuation process. Generally, the Company does not adjust any of the prices received from these sources.
If the quotations obtained from pricing vendors or brokers are determined to not be reliable or are not readily available, the Company values such investments using any of three different valuation techniques. The first valuation technique is the transaction precedent technique, which utilizes recent or expected future transactions of the investment to determine fair value, to the extent applicable. The second valuation technique is an analysis of the enterprise value ("EV") of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The EV analysis is typically performed to determine (i) the value of equity investments, (ii) whether there is credit impairment for debt investments and (iii) the value for debt investments that the Company is deemed to control under the Investment Company Act. To estimate the EV of a portfolio company, Oaktree analyzes various factors, including the portfolio company’s historical and projected financial results, macroeconomic impacts on the company and competitive dynamics in the company’s industry. Oaktree also utilizes some or all of the following information based on the individual circumstances of the portfolio company: (i) valuations of comparable public companies, (ii) recent sales of private and public comparable companies in similar industries or having similar business or earnings characteristics, (iii) purchase prices as a multiple of their earnings or cash flow, (iv) the portfolio company’s ability to meet its
108
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




forecasts and its business prospects, (v) a discounted cash flow analysis, (vi) estimated liquidation or collateral value of the portfolio company's assets and (vii) offers from third parties to buy the portfolio company. The Company may probability weight potential sale outcomes with respect to a portfolio company when uncertainty exists as of the valuation date. The third valuation technique is a market yield technique, which is typically performed for non-credit impaired debt investments. In the market yield technique, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk, and the Company considers the current contractual interest rate, the capital structure and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by the Company are substantially illiquid with no active transaction market, the Company depends on primary market data, including newly funded transactions and industry specific market movements, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.
In accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946 may be valued using net asset value as a practical expedient for fair value. Consistent with FASB guidance under ASC 820, these investments are excluded from the hierarchical levels. These investments are generally not redeemable.
The Company estimates the fair value of certain privately held warrants using a Black Scholes pricing model, which includes an analysis of various factors and subjective assumptions, including the current stock price (by using an EV analysis as described above), the expected period until exercise, expected volatility of the underlying stock price, expected dividends and the risk free rate. Changes in the subjective input assumptions can materially affect the fair value estimates.
The Company's Board of Directors undertakes a multi-step valuation process each quarter in connection with determining the fair value of the Company's investments:
•The quarterly valuation process begins with each portfolio company or investment being initially valued by Oaktree's valuation team in conjunction with Oaktree's portfolio management team and investment professionals responsible for each portfolio investment;
•Preliminary valuations are then reviewed and discussed with management of Oaktree;
•Separately, independent valuation firms engaged by the Board of Directors prepare valuations of the Company's investments, on a selected basis, for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment, and submit the reports to the Company and provide such reports to Oaktree and the Audit Committee of the Board of Directors;
•Oaktree compares and contrasts its preliminary valuations to the valuations of the independent valuation firms and prepares a valuation report for the Audit Committee;
•The Audit Committee reviews the preliminary valuations with Oaktree, and Oaktree responds and supplements the preliminary valuations to reflect any discussions between Oaktree and the Audit Committee;
•The Audit Committee makes a recommendation to the full Board of Directors regarding the fair value of the investments in the Company's portfolio; and
•The Board of Directors discusses valuations and determines the fair value of each investment in the Company's portfolio.
The fair value of the Company's investments as of September 30, 2021 and September 30, 2020 was determined in good faith by the Board of Directors. The Board of Directors has and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of a portion of the Company's portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and the Board of Directors may reasonably rely on that assistance. However, the Board of Directors is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to the Company's valuation policy and a consistently applied valuation process.
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.
With the exception of the line items entitled "deferred financing costs," "deferred offering costs," "other assets," "deferred tax asset, net," "credit facilities payable" and "unsecured notes payable," which are reported at amortized cost, all assets and liabilities approximate fair value on the Consolidated Statements of Assets and Liabilities. The carrying value of the line items titled "interest, dividends and fees receivable," "due from portfolio companies," "receivables from unsettled transactions," "due
109
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




from broker," "accounts payable, accrued expenses and other liabilities," "base management fee and incentive fee payable," "due to affiliate," "interest payable" and "payables from unsettled transactions" approximate fair value due to their short maturities.
Foreign Currency Translation:
The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the prevailing foreign exchange rate on the reporting date. The Company does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. The Company’s investments in foreign securities may involve certain risks, including foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments and therefore the earnings of the Company.
Derivative Instruments:
Foreign Currency Forward Contracts
The Company uses foreign currency forward contracts to reduce the Company's exposure to fluctuations in the value of foreign currencies. In a foreign currency forward contract, the Company agrees to receive or deliver a fixed quantity of one currency for another at a pre-determined price at a future date. Foreign currency forward contracts are marked-to-market at the applicable forward rate. Unrealized appreciation (depreciation) on foreign currency forward contracts are recorded within derivative assets or derivative liabilities on the Consolidated Statements of Assets and Liabilities by counterparty on a net basis, not taking into account collateral posted which is recorded separately, if applicable. Purchases and settlements of foreign currency forward contracts having the same settlement date and counterparty are generally settled net and any realized gains or losses are recognized on the settlement date. The Company does not utilize hedge accounting with respect to foreign currency forward contracts and as such, the Company recognizes its foreign currency forward contracts at fair value with changes included in the net unrealized appreciation (depreciation) on the Consolidated Statements of Operations.
Interest Rate Swaps
The Company uses an interest rate swap to hedge some of the Company's fixed rate debt. The Company designated the interest rate swap as the hedging instrument in an effective hedge accounting relationship, and therefore the periodic payments are recognized as components of interest expense in the Consolidated Statements of Operations. Depending on the nature of the balance at period end, the fair value of the interest rate swap is either included as a derivative asset or derivative liability on the Company's Consolidated Statements of Assets and Liabilities. The change in fair value of the interest rate swap is offset by a change in the carrying value of the fixed rate debt. Any amounts paid to the counterparty to cover collateral obligations under the terms of the interest rate swap agreement are included in due from broker on the Company's Consolidated Statements of Assets and Liabilities.
Secured Borrowings:
Securities sold and simultaneously repurchased at a premium are reported as financing transactions in accordance with FASB ASC Topic 860, Transfers and Servicing ("ASC 860"). Amounts payable to the counterparty are due on the repurchase settlement date and, excluding accrued interest, such amounts are presented in the accompanying Statements of Assets and Liabilities as secured borrowings. Premiums payable are separately reported as accrued interest.
Investment Income:
Interest Income
Interest income, adjusted for accretion of original issue discount ("OID"), is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on investments when it is determined that interest is no longer collectible. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when there is reasonable doubt that principal or interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or a return of capital depending upon management’s judgment.
110
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




A non-accrual investment is restored to accrual status if past due principal and interest are paid in cash and the portfolio company, in management’s judgment, is likely to continue timely payment of its remaining obligations.
In connection with its investment in a portfolio company, the Company sometimes receives nominal cost equity that is valued as part of the negotiation process with the portfolio company. When the Company receives nominal cost equity, the Company allocates its cost basis in the investment between debt securities and the nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan.
For the Company's secured borrowings, the interest earned on the entire loan balance is recorded within interest income and the interest earned by the counterparty is recorded within interest expense in the Consolidated Statements of Operations.
PIK Interest Income
The Company's investments in debt securities may contain PIK interest provisions. PIK interest, which generally represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. The Company generally ceases accruing PIK interest if there is insufficient value to support the accrual or if the Company does not expect the portfolio company to be able to pay all principal and interest due. The Company's decision to cease accruing PIK interest on a loan or debt security involves subjective judgments and determinations based on available information about a particular portfolio company, including whether the portfolio company is current with respect to its payment of principal and interest on its loans and debt securities; financial statements and financial projections for the portfolio company; the Company's assessment of the portfolio company's business development success; information obtained by the Company in connection with periodic formal update interviews with the portfolio company's management and, if appropriate, the private equity sponsor; and information about the general economic and market conditions in which the portfolio company operates. The Company's determination to cease accruing PIK interest is generally made well before the Company's full write-down of a loan or debt security. In addition, if it is subsequently determined that the Company will not be able to collect any previously accrued PIK interest, the fair value of the loans or debt securities would be reduced by the amount of such previously accrued, but uncollectible, PIK interest. The accrual of PIK interest on the Company’s debt investments increases the recorded cost bases of these investments in the Consolidated Financial Statements including for purposes of computing the capital gains incentive fee payable by the Company to Oaktree. To maintain its status as a RIC, certain income from PIK interest may be required to be distributed to the Company’s stockholders, even though the Company has not yet collected the cash and may never do so.
Fee Income
Oaktree or its affiliates may provide financial advisory services to portfolio companies and, in return, the Company may receive fees for capital structuring services. These fees are generally nonrecurring and are recognized by the Company upon the investment closing date. The Company may also receive additional fees in the ordinary course of business, including servicing, amendment and prepayment fees, which are classified as fee income and recognized as they are earned or the services are rendered.
The Company has also structured exit fees across certain of its portfolio investments to be received upon the future exit of those investments. These fees are typically paid to the Company upon the earliest to occur of (i) a sale of the borrower or substantially all of the assets of the borrower, (ii) the maturity date of the loan or (iii) the date when full prepayment of the loan occurs. The receipt of such fees is contingent upon the occurrence of one of the events listed above for each of the investments. These fees are included in net investment income over the life of the loan.
Dividend Income
The Company generally recognizes dividend income on the ex-dividend date for public securities and the record date for private equity investments. Distributions received from private equity investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company will not record distributions from private equity investments as dividend income unless there are sufficient earnings at the portfolio company prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.
Cash and Cash Equivalents and Restricted Cash:
Cash and cash equivalents consist of demand deposits and highly liquid investments with maturities of three months or less when acquired. The Company places its cash and cash equivalents and restricted cash with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limit. Cash and
111
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




cash equivalents are included on the Company's Consolidated Schedule of Investments and cash equivalents are classified as Level 1 assets.
As of September 30, 2021, included in restricted cash was $2.3 million that was held at Wells Fargo Bank, N.A. in connection with the Citibank Facility (as defined in Note 6. Borrowings). Pursuant to the terms of the Citibank Facility, the Company was restricted in terms of access to $2.3 million until the occurrence of the periodic distribution dates and, in connection therewith, the Company’s submission of its required periodic reporting schedules and verifications of the Company’s compliance with the terms of the Citibank Facility.
Due from Portfolio Companies:
Due from portfolio companies consists of amounts payable to the Company from its portfolio companies, including proceeds from the sale of portfolio companies not yet received or being held in escrow and excluding those amounts attributable to interest, dividends or fees receivable. These amounts are recognized as they become payable to the Company (e.g., principal payments on the scheduled amortization payment date).
Receivables/Payables from Unsettled Transactions:
Receivables/payables from unsettled transactions consist of amounts receivable to or payable by the Company for transactions that have not settled at the reporting date.
Deferred Financing Costs:
Deferred financing costs consist of fees and expenses paid in connection with the closing or amending of credit facilities and debt offerings. Deferred financing costs in connection with credit facilities are capitalized as an asset when incurred. Deferred financing costs in connection with all other debt arrangements are a direct deduction from the related debt liability when incurred. Deferred financing costs are amortized using the effective interest method over the term of the respective debt arrangement. This amortization expense is included in interest expense in the Company's Consolidated Statements of Operations. Upon early termination or modification of a credit facility, all or a portion of unamortized fees related to such facility may be accelerated into interest expense. For extinguishments of the Company’s unsecured notes payable, any unamortized deferred financing costs are deducted from the carrying amount of the debt in determining the gain or loss from the extinguishment.

Deferred Offering Costs:
Legal fees and other costs incurred in connection with the Company’s shelf registration statement are capitalized as deferred offering costs in the Consolidated Statements of Assets and Liabilities. To the extent any such costs relate to equity offerings, these costs are charged as a reduction of capital upon utilization. To the extent any such costs relate to debt offerings, these costs are treated as deferred financing costs and are amortized over the term of the respective debt arrangement. Any deferred offering costs that remain at the expiration of the shelf registration statement or when it becomes probable that an offering will not be completed are expensed.
Income Taxes:
The Company has elected to be subject to tax as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. In order to be subject to tax as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute dividends to its stockholders of an amount generally at least equal to 90% of investment company taxable income, as defined by the Code and determined without regard to any deduction for dividends paid, for each taxable year. As a RIC, the Company is not subject to U.S. federal income tax on the portion of its taxable income and gains distributed currently to stockholders as a dividend. Depending on the level of taxable income earned during a taxable year, the Company may choose to retain taxable income in excess of current year dividend distributions and would distribute such taxable income in the next taxable year. The Company would then incur a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income, determined on a calendar year basis, could exceed estimated current calendar year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. The Company anticipates timely distribution of its taxable income within the tax rules under Subchapter M of the Code. The Company did not incur a U.S. federal excise tax for calendar years 2019 and 2020 and does not expect to incur a U.S. federal excise tax for calendar year 2021.
The Company holds certain portfolio investments through taxable subsidiaries. The purpose of the Company's taxable subsidiaries is to permit the Company to hold equity investments in portfolio companies which are "pass through" entities for U.S. federal income tax purposes in order to comply with the RIC tax requirements. The taxable subsidiaries are consolidated
112
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




for financial reporting purposes, and portfolio investments held by them are included in the Company’s Consolidated Financial Statements as portfolio investments and recorded at fair value. The taxable subsidiaries are not consolidated with the Company for U.S. federal income tax purposes and may generate income tax expense, or benefit, and the related tax assets and liabilities, as a result of their ownership of certain portfolio investments. This income tax expense, if any, would be reflected in the Company's Consolidated Statements of Operations. The Company uses the liability method to account for its taxable subsidiaries' income taxes. Using this method, the Company recognizes deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences between financial reporting and tax bases of assets and liabilities. In addition, the Company recognizes deferred tax benefits associated with net operating loss carry forwards that it may use to offset future tax obligations. The Company measures deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which it expects to recover or settle those temporary differences.
FASB ASC Topic 740, Accounting for Uncertainty in Income Taxes ("ASC 740"), provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the Company's Consolidated Financial Statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Management's determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including an ongoing analysis of tax laws, regulations and interpretations thereof. The Company recognizes the tax benefits of uncertain tax positions only where the position is "more-likely-than-not" to be sustained assuming examination by tax authorities. Management has analyzed the Company's tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years 2018, 2019 and 2020. The Company identifies its major tax jurisdictions as U.S. Federal and California, and the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
Note 3. Portfolio Investments
As of September 30, 2021, 194.7% of net assets at fair value, or $2.6 billion, was invested in 138 portfolio companies, including (i) $133.9 million in subordinated notes and limited liability company ("LLC") equity interests of Senior Loan Fund JV I, LLC ("SLF JV I"), a joint venture through which the Company and Trinity Universal Insurance Company, a subsidiary of Kemper Corporation ("Kemper"), co-invest in senior secured loans of middle-market companies and other corporate debt securities and (ii) $55.6 million in subordinated notes and LLC equity interests of OCSI Glick JV LLC ("Glick JV" and, together with SLF JV I, the "JVs"), a joint venture through which the Company and GF Equity Funding 2014 LLC ("GF Equity Funding") co-invest primarily in senior secured loans of middle-market companies. As of September 30, 2021, 2.4% of net assets at fair value, or $31.6 million, was invested in cash and cash equivalents (including $2.3 million of restricted cash). In comparison, as of September 30, 2020, 172.0% of net assets at fair value, or $1.6 billion, was invested in 113 portfolio investments, including $117.4 million in subordinated notes and LLC equity interests of SLF JV I. As of September 30, 2020, 4.3% of net assets at fair value, or $39.1 million, was invested in cash and cash equivalents. As of September 30, 2021, 86.7% of the Company's portfolio at fair value consisted of senior secured debt investments and 7.6% consisted of subordinated debt investments, including the debt investments in the JVs. As of September 30, 2020, 84.1% of the Company's portfolio at fair value consisted of senior secured debt investments and 10.3% consisted of subordinated debt investments, including the debt investment in SLF JV I.
The Company also held equity investments in certain of its portfolio companies consisting of common stock, preferred stock, warrants, limited partnership interests or LLC equity interests. These instruments generally do not produce a current return but are held for potential investment appreciation and capital gain.
During the years ended September 30, 2021, 2020 and 2019, the Company recorded net realized gains (losses) of $26.4 million, $(13.9) million and $20.8 million, respectively. During the years ended September 30, 2021, 2020 and 2019, the Company recorded net unrealized appreciation (depreciation) of $114.5 million, $(20.6) million and $38.5 million, respectively.
113
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




The composition of the Company's investments as of September 30, 2021 and September 30, 2020 at cost and fair value was as follows:
 September 30, 2021September 30, 2020
 CostFair ValueCostFair Value
Investments in debt securities$2,222,223 $2,259,924 $1,422,487 $1,388,605 
Investments in equity securities120,621 107,222 101,111 67,806 
Debt investments in the JVs146,955 151,832 96,250 96,250 
Equity investments in the JVs49,322 37,651 49,322 21,190 
Total$2,539,121 $2,556,629 $1,669,170 $1,573,851 

The following table presents the composition of the Company's debt investments as of September 30, 2021 and September 30, 2020 at fixed rates and floating rates: 
 September 30, 2021September 30, 2020
 Fair Value% of Debt
Portfolio		Fair Value% of Debt
Portfolio
Floating rate debt securities, including the debt investments in the JVs$2,205,648 91.45 %$1,311,509 88.33 %
Fixed rate debt securities206,108 8.55 173,346 11.67 
Total$2,411,756 100.00 %$1,484,855 100.00 %

The following table presents the financial instruments carried at fair value as of September 30, 2021 on the Company's Consolidated Statement of Assets and Liabilities for each of the three levels of hierarchy established by ASC 820:
Level 1Level 2Level 3Measured at Net Asset Value (a)Total
Investments in debt securities (senior secured)$— $338,707 $1,878,536 $— $2,217,243 
Investments in debt securities (subordinated, including the debt investments in the JVs)— 18,196 176,317 — 194,513 
Investments in equity securities (preferred)— — 63,565 — 63,565 
Investments in equity securities (common and warrants, including LLC equity interests of the JVs)382 — 43,163 37,763 81,308 
Total investments at fair value382 356,903 2,161,581 37,763 2,556,629 
Cash equivalents
23,600 — — — 23,600 
Derivative assets— 1,912 — — 1,912 
Total assets at fair value
$23,982 $358,815 $2,161,581 $37,763 $2,582,141 
Derivative liability$— $2,108 $— $— $2,108 
Total liabilities at fair value$— $2,108 $— $— $2,108 
__________ 
(a)In accordance with ASC 820-10, certain investments that are measured using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. These investments are generally not redeemable. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities.
114
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




The following table presents the financial instruments carried at fair value as of September 30, 2020 on the Company's Consolidated Statement of Assets and Liabilities for each of the three levels of hierarchy established by ASC 820:
Level 1Level 2Level 3Measured at Net Asset Value (a)Total
Investments in debt securities (senior secured)$— $418,806 $904,237 $— $1,323,043 
Investments in debt securities (subordinated, including the debt investment in SLF JV I)— 35,660 126,152 — 161,812 
Investments in equity securities (preferred)— — 29,959 — 29,959 
Investments in equity securities (common and warrants, including LLC equity interests of SLF JV I)222 — 35,080 23,735 59,037 
Total investments at fair value222 454,466 1,095,428 23,735 1,573,851 
Cash equivalents
35,248 — — — 35,248 
Derivative assets
— 223 — — 223 
Total assets at fair value
$35,470 $454,689 $1,095,428 $23,735 $1,609,322 
__________ 
(a)In accordance with ASC 820-10, certain investments that are measured using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. These investments are generally not redeemable. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities.
When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the fact that the unobservable factors are significant to the overall fair value measurement. However, Level 3 financial instruments typically have both unobservable or Level 3 components and observable components (i.e. components that are actively quoted and can be validated by external sources). Accordingly, the appreciation (depreciation) in the tables below includes changes in fair value due in part to observable factors that are part of the valuation methodology. Transfers between levels are recognized at the beginning of the reporting period.
The following table provides a roll-forward in the changes in fair value from September 30, 2020 to September 30, 2021 for all investments for which the Company determined fair value using unobservable (Level 3) factors:
Investments
Senior Secured DebtSubordinated
Debt (including debt investments in the JVs)		Preferred
Equity		Common
Equity and Warrants		Total
Fair value as of September 30, 2020$904,237 $126,152 $29,959 $35,080 $1,095,428 
Purchases (a)1,237,783 66,537 27,692 5,665 1,337,677 
Sales and repayments(352,237)(45,353)(31)(28,629)(426,250)
Transfers in (b)(c)(d)18,458 — — 6,759 25,217 
Transfers out (b)(d)(6,228)— — — (6,228)
PIK interest income14,700 — — — 14,700 
Accretion of OID19,642 2,069 — — 21,711 
Net unrealized appreciation (depreciation)43,736 18,177 7,218 13,953 83,084 
Net realized gains (losses)(1,555)8,735 (1,273)10,335 16,242 
Fair value as of September 30, 2021$1,878,536 $176,317 $63,565 $43,163 $2,161,581 
Net unrealized appreciation (depreciation) relating to Level 3 investments still held as of September 30, 2021 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the year ended September 30, 2021$46,340 $4,857 $5,913 $13,763 $70,873 
__________
(a) Includes the Level 3 investments acquired in connection with the Mergers during the year ended September 30, 2021.
(b) There were transfers into/out of Level 3 from/to Level 2 for certain investments during the year ended September 30, 2021 as a result of a change in the number of market quotes available and/or a change in market liquidity.
(c) There was a transfer into Level 3 from Level 2 as a result of an investment restructuring in which Level 2 senior secured debt was exchanged for Level 3 senior secured debt and common equity.
115
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




(d) There was one transfer from senior secured debt to common equity and warrants during the year ended September 30, 2021 as a result of an investment restructuring, in which $6.3 million of senior secured debt was exchanged for $6.3 million of common equity.

The following table provides a roll-forward in the changes in fair value from September 30, 2019 to September 30, 2020 for all investments for which the Company determined fair value using unobservable (Level 3) factors:
Investments
Senior Secured DebtSubordinated
Debt (including debt investment in SLF JV I)		Preferred
Equity		Common
Equity and Warrants		Total
Fair value as of September 30, 2019$653,334 $110,309 $40,578 $41,006 $845,227 
Purchases 423,545 50,534 — 1,485 475,564 
Sales and repayments(207,898)(40,630)(1,388)(13,838)(263,754)
Transfers in (a)(b)67,939 5,113 — 19,229 92,281 
Transfers out (a)(b)(33,625)(605)— — (34,230)
PIK interest income7,568 — — — 7,568 
Accretion of OID6,042 2,856 — — 8,898 
Net unrealized appreciation (depreciation)15,944 12,917 (9,726)(14,981)4,154 
Net realized gains (losses)(28,612)(14,342)495 2,179 (40,280)
Fair value as of September 30, 2020$904,237 $126,152 $29,959 $35,080 $1,095,428 
Net unrealized appreciation (depreciation) relating to Level 3 investments still held as of September 30, 2020 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the year ended September 30, 2020$(11,757)$1,777 $(9,125)$(17,277)$(36,382)
__________
(a) There were transfers into/out of Level 3 from/to Level 2 for certain investments during the year ended September 30, 2020 as a result of a change in the number of market quotes available and/or a change in market liquidity.
(b) There was a transfer from senior secured debt to common equity and warrants during the year ended September 30, 2020 as a result of an investment restructuring, in which $46.5 million of senior secured debt was exchanged for new senior secured debt of $27.9 million and common equity of $18.6 million. There was also a transfer from subordinated debt to common equity and warrants during the year ended September 30, 2020 as a result of an investment restructuring, in which $0.6 million of subordinated debt was exchanged for common equity and warrants.

Significant Unobservable Inputs for Level 3 Investments
The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments, which are carried at fair value, as of September 30, 2021:
AssetFair ValueValuation TechniqueUnobservable InputRangeWeighted
Average (a)
Senior Secured Debt
$1,413,373 Market YieldMarket Yield (b)4.0%-30.0%10.4%
36,197 Enterprise ValueEBITDA Multiple(c)3.0x-9.0x4.5x
7,500 Enterprise ValueAsset Multiple(c)0.9x-1.1x1.0x
421,466 Broker QuotationsBroker Quoted Price(e)N/A-N/AN/A
Subordinated Debt
24,485 Market YieldMarket Yield (b)12.0%-14.0%12.6%
Debt Investments in the JVs151,832 Enterprise ValueN/A(f)N/A-N/AN/A
Preferred & Common Equity6,188 Enterprise ValueRevenue Multiple(c)0.9x-11.2x2.5x
93,520 Enterprise ValueEBITDA Multiple(c)3.0x-35.0x15.9x
698 Enterprise ValueAsset Multiple(c)0.9x-1.1x1.0x
6,322 Transactions PrecedentTransaction Price(d)N/A-N/AN/A
Total$2,161,581 
__________ 
(a)Weighted averages are calculated based on fair value of investments.
(b)Used when market participants would take into account market yield when pricing the investment.
(c)Used when market participants would use such multiples when pricing the investment.
(d)Used when there is an observable transaction or pending event for the investment.
116
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




(e)The Company generally uses prices provided by an independent pricing service which are non-binding indicative prices on or near the valuation date as the primary basis for the fair value determinations for quoted senior secured debt investments. Since these prices are non-binding, they may not be indicative of fair value. The Company evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Each quoted price is evaluated by the Audit Committee of the Company's Board of Directors in conjunction with additional information compiled by Oaktree.
(f)The Company determined the value of its subordinated notes of each JV based on the total assets less the total liabilities senior to the subordinated notes held at such JV in an amount not exceeding par under the EV technique.
The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments, which are carried at fair value, as of September 30, 2020:
AssetFair ValueValuation TechniqueUnobservable InputRangeWeighted
Average (a)
Senior Secured Debt
$542,354 Market YieldMarket Yield (b)6.6%-30.0%12.5%
35,508 Enterprise ValueEBITDA Multiple(c)0.6x-6.3x5.9x
11,510 Enterprise ValueAsset Multiple(c)0.9x-1.1x1.0x
314,865 Broker QuotationsBroker Quoted Price(e)N/A-N/AN/A
Subordinated Debt
29,314 Market YieldMarket Yield (b)4.8%-15.0%9.3%
588 Enterprise ValueEBITDA Multiple(c)7.6x-8.6x8.1x
SLF JV I Debt Investment
96,250 Enterprise ValueN/A(f)N/A-N/AN/A
Preferred & Common Equity16,470 Enterprise ValueRevenue Multiple(c)0.9x-7.0x3.1x
45,934 Enterprise ValueEBITDA Multiple(c)0.6x-15.0x7.6x
1,622 Enterprise ValueAsset Multiple(c)0.9x-1.1x1.0x
1,013 Transactions PrecedentTransaction Price(d)N/A-N/AN/A
Total$1,095,428 
__________ 
(a)Weighted averages are calculated based on fair value of investments.
(b)Used when market participants would take into account market yield when pricing the investment.
(c)Used when market participants would use such multiples when pricing the investment.
(d)Used when there is an observable transaction or pending event for the investment.
(e)The Company generally uses prices provided by an independent pricing service which are non-binding indicative prices on or near the valuation date as the primary basis for the fair value determinations for quoted senior secured debt investments. Since these prices are non-binding, they may not be indicative of fair value. The Company evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Each quoted price is evaluated by the Audit Committee of the Company's Board of Directors in conjunction with additional information compiled by Oaktree.
(f)The Company determined the value of its subordinated notes of SLF JV I based on the total assets less the total liabilities senior to the subordinated notes held at SLF JV I in an amount not exceeding par under the EV technique.

Under the market yield technique, the significant unobservable input used in the fair value measurement of the Company's investments in debt securities is the market yield. Increases or decreases in the market yield may result in a lower or higher fair value measurement, respectively.
Under the EV technique, the significant unobservable input used in the fair value measurement of the Company's investments in debt or equity securities is the earnings before interest, taxes, depreciation and amortization ("EBITDA"), revenue or asset multiple, as applicable. Increases or decreases in the valuation multiples in isolation may result in a higher or lower fair value measurement, respectively.
 
117
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




Financial Instruments Disclosed, But Not Carried, At Fair Value
The following table presents the carrying value and fair value of the Company's financial liabilities disclosed, but not carried, at fair value as of September 30, 2021 and the level of each financial liability within the fair value hierarchy:
 
Carrying
Value		Fair ValueLevel 1Level 2Level 3
Syndicated Facility payable$495,000 $495,000 $— $— $495,000 
Citibank Facility payable
135,000 135,000 — — 135,000 
2025 Notes payable (carrying value is net of unamortized financing costs and unaccreted discount)295,740 314,541 — 314,541 — 
2027 Notes payable (carrying value is net of unamortized financing costs, unaccreted discount and interest rate swap fair value adjustment)343,003 351,134 — 351,134 — 
Total$1,268,743 $1,295,675 $— $665,675 $630,000 

The following table presents the carrying value and fair value of the Company's financial liabilities disclosed, but not carried, at fair value as of September 30, 2020 and the level of each financial liability within the fair value hierarchy:
 
Carrying
Value		Fair ValueLevel 1Level 2Level 3
Syndicated Facility payable$414,825 $414,825 $— $— $414,825 
2025 Notes payable (carrying value is net of unamortized financing costs and unaccreted discount)294,490 301,431 — 301,431 — 
Total$709,315 $716,256 $— $301,431 $414,825 

The principal values of the credit facilities payable approximate fair value due to their variable interest rates and are included in Level 3 of the hierarchy. The Company used market quotes as of the valuation date to estimate the fair value of its 3.500% notes due 2025 (the "2025 Notes") and 2.700% notes due 2027 (the "2027 Notes"), which are included in Level 2 of the hierarchy.

Portfolio Composition
Summaries of the composition of the Company's portfolio at cost as a percentage of total investments and at fair value as a percentage of total investments and net assets are shown in the following tables:
 September 30, 2021September 30, 2020
Cost: % of Total Investments % of Total Investments
Senior secured debt$2,179,907 85.85 %$1,345,012 80.58 %
Debt investments in the JVs146,955 5.79 %96,250 5.77 %
Preferred equity65,939 2.60 %39,550 2.37 %
Common equity and warrants54,682 2.15 %61,561 3.69 %
LLC equity interests of the JVs49,322 1.94 %49,322 2.95 %
Subordinated debt42,316 1.67 %77,475 4.64 %
Total$2,539,121 100.00 %$1,669,170 100.00 %

 September 30, 2021September 30, 2020
Fair Value: % of Total Investments% of Net Assets % of Total Investments% of Net Assets
Senior secured debt$2,217,243 86.72 %168.89 %$1,323,043 84.06 %144.61 %
Debt investments in the JVs151,832 5.94 %11.56 %96,250 6.12 %10.52 %
Preferred equity63,565 2.49 %4.84 %29,959 1.90 %3.27 %
Common equity and warrants43,657 1.71 %3.33 %37,847 2.40 %4.14 %
Subordinated debt42,681 1.67 %3.25 %65,562 4.17 %7.17 %
LLC equity interests of the JVs37,651 1.47 %2.87 %21,190 1.35 %2.32 %
Total$2,556,629 100.00 %194.74 %$1,573,851 100.00 %172.03 %

118
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company's business. The following tables show the composition of the Company's portfolio by geographic region at cost as a percentage of total investments and at fair value as a percentage of total investments and net assets:
 September 30, 2021September 30, 2020
Cost: % of Total Investments % of Total Investments
Northeast$720,781 28.39 %$495,440 29.69 %
Midwest385,846 15.20 %285,674 17.11 %
West365,471 14.39 %330,468 19.80 %
Southeast294,339 11.59 %171,330 10.26 %
International268,817 10.59 %210,963 12.64 %
Southwest256,227 10.09 %67,867 4.07 %
South156,764 6.17 %72,150 4.32 %
Northwest90,876 3.58 %35,278 2.11 %
Total$2,539,121 100.00 %$1,669,170 100.00 %

 September 30, 2021September 30, 2020
Fair Value: % of Total Investments% of Net Assets % of Total Investments% of Net Assets
Northeast$721,647 28.24 %54.97 %$446,499 28.38 %48.81 %
Midwest382,475 14.96 %29.13 %252,482 16.04 %27.60 %
West371,257 14.52 %28.28 %325,708 20.69 %35.60 %
Southeast299,486 11.71 %22.81 %165,516 10.52 %18.09 %
International275,904 10.79 %21.02 %213,741 13.58 %23.36 %
Southwest258,940 10.13 %19.72 %65,647 4.17 %7.18 %
South155,526 6.08 %11.85 %70,551 4.48 %7.71 %
Northwest91,394 3.57 %6.96 %33,707 2.14 %3.68 %
Total$2,556,629 100.00 %194.74 %$1,573,851 100.00 %172.03 %
119
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




The following tables show the composition of the Company's portfolio by industry at cost as a percentage of total investments and at fair value as a percentage of total investments and net assets as of September 30, 2021 and September 30, 2020:
September 30, 2021September 30, 2020
Cost: % of Total Investments % of Total Investments
Application Software$367,265 14.49 %$162,536 9.71 %
Multi-Sector Holdings (1)196,277 7.73 148,116 8.87 
Pharmaceuticals138,250 5.44 99,471 5.96 
Data Processing & Outsourced Services120,381 4.74 109,744 6.57 
Biotechnology111,856 4.41 89,447 5.36 
Personal Products103,642 4.08 50,091 3.00 
Industrial Machinery88,231 3.47 15,081 0.90 
Health Care Services84,750 3.34 71,139 4.26 
Specialized Finance68,554 2.70 51,909 3.11 
Aerospace & Defense67,629 2.66 27,964 1.68 
Fertilizers & Agricultural Chemicals66,713 2.63 33,743 2.02 
Internet & Direct Marketing Retail62,233 2.45 14,802 0.89 
Construction & Engineering61,874 2.44 13,277 0.80 
Integrated Telecommunication Services47,059 1.85 44,583 2.67 
Internet Services & Infrastructure46,917 1.85 28,631 1.72 
Specialty Chemicals46,731 1.84 44,786 2.68 
Home Improvement Retail46,487 1.83 — — 
Automotive Retail41,800 1.65 — — 
Airport Services41,699 1.64 22,376 1.34 
Diversified Support Services40,666 1.60 18,797 1.13 
Real Estate Services40,445 1.59 39,023 2.34 
Oil & Gas Storage & Transportation36,612 1.44 26,615 1.59 
Oil & Gas Refining & Marketing36,044 1.42 31,132 1.87 
Soft Drinks33,410 1.32 — — 
Electrical Components & Equipment32,127 1.27 20,934 1.25 
Health Care Supplies29,650 1.17 21,660 1.30 
Advertising28,649 1.13 13,611 0.82 
Real Estate Operating Companies27,531 1.08 — — 
Cable & Satellite26,730 1.05 — — 
Movies & Entertainment26,002 1.02 44,691 2.68 
Insurance Brokers25,515 1.00 17,546 1.05 
Leisure Facilities25,162 0.99 1,887 0.11 
Health Care Equipment23,674 0.93 — — 
Independent Power Producers & Energy Traders23,458 0.92 21,462 1.29 
Airlines22,417 0.88 10,535 0.63 
Health Care Distributors19,698 0.78 12,810 0.77 
Commercial Printing19,685 0.78 7,868 0.47 
Home Furnishings19,537 0.77 — — 
Managed Health Care18,654 0.73 27,479 1.65 
Metal & Glass Containers17,443 0.69 11,273 0.68 
Other Diversified Financial Services16,104 0.63 113 0.01 
Thrifts & Mortgage Finance16,079 0.63 938 0.06 
Health Care Technology13,877 0.55 21,499 1.29 
Auto Parts & Equipment12,466 0.49 33,649 2.02 
Electronic Components10,080 0.40 25,600 1.53 
Property & Casualty Insurance9,884 0.39 47,995 2.88 
Restaurants9,317 0.37 10,248 0.61 
IT Consulting & Other Services7,598 0.30 14,919 0.89 
Research & Consulting Services7,354 0.29 24,837 1.49 
Systems Software6,647 0.26 20,694 1.24 
Leisure Products6,599 0.26 — — 
Alternative Carriers6,578 0.26 — — 
Apparel, Accessories & Luxury Goods5,165 0.20 13,734 0.82 
Air Freight & Logistics4,925 0.19 — — 
Integrated Oil & Gas4,842 0.19 — — 
Food Distributors4,625 0.18 — — 
Food Retail3,745 0.15 6,851 0.41 
Diversified Banks3,515 0.14 — — 
Technology Distributors3,163 0.12 — — 
Construction Materials2,245 0.09 2,150 0.13 
Housewares & Specialties1,875 0.07 — — 
Education Services981 0.04 22,926 1.37 
General Merchandise Stores— — 19,220 1.15 
Hotels, Resorts & Cruise Lines— — 15,378 0.92 
Diversified Real Estate Activities— — 15,288 0.92 
Trading Companies & Distributors— — 10,228 0.61 
Oil & Gas Equipment & Services— — 3,313 0.20 
Health Care Facilities— — 3,133 0.19 
Specialty Stores— — 1,305 0.08 
Specialized REITs— — 133 0.01 
Total$2,539,121 100.00 %$1,669,170 100.00 %
120
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




September 30, 2021September 30, 2020
Fair Value: % of Total Investments% of Net Assets % of Total Investments% of Net Assets
Application Software$372,606 14.58 %28.39 %$160,591 10.21 %17.57 %
Multi-Sector Holdings (1)189,483 7.41 14.43 121,751 7.74 13.31 
Pharmaceuticals142,194 5.56 10.83 103,092 6.55 11.27 
Data Processing & Outsourced Services113,923 4.46 8.68 99,589 6.33 10.89 
Biotechnology113,641 4.44 8.66 96,624 6.14 10.56 
Personal Products105,530 4.13 8.04 51,024 3.24 5.58 
Industrial Machinery90,218 3.53 6.87 11,643 0.74 1.27 
Health Care Services84,735 3.31 6.45 59,925 3.81 6.55 
Aerospace & Defense69,602 2.72 5.30 24,521 1.56 2.68 
Specialized Finance68,844 2.69 5.24 48,425 3.08 5.29 
Internet & Direct Marketing Retail68,424 2.68 5.21 15,307 0.97 1.67 
Fertilizers & Agricultural Chemicals67,527 2.64 5.14 33,719 2.14 3.69 
Construction & Engineering63,109 2.47 4.81 13,465 0.86 1.47 
Integrated Telecommunication Services49,607 1.94 3.78 41,091 2.61 4.49 
Internet Services & Infrastructure47,923 1.87 3.65 26,587 1.69 2.91 
Specialty Chemicals46,559 1.82 3.55 39,008 2.48 4.26 
Home Improvement Retail46,488 1.82 3.54 — — — 
Automotive Retail42,133 1.65 3.21 — — — 
Real Estate Services41,225 1.61 3.14 37,723 2.40 4.12 
Diversified Support Services40,888 1.60 3.11 17,689 1.12 1.93 
Airport Services40,776 1.59 3.11 21,283 1.35 2.33 
Oil & Gas Refining & Marketing36,546 1.43 2.78 29,826 1.90 3.26 
Oil & Gas Storage & Transportation34,462 1.35 2.63 25,749 1.64 2.81 
Soft Drinks33,410 1.31 2.54 — — — 
Electrical Components & Equipment32,142 1.26 2.45 20,465 1.30 2.24 
Advertising30,423 1.19 2.32 13,440 0.85 1.47 
Health Care Supplies30,186 1.18 2.30 21,634 1.37 2.36 
Real Estate Operating Companies28,341 1.11 2.16 — — — 
Insurance Brokers27,612 1.08 2.10 18,083 1.15 1.98 
Cable & Satellite27,048 1.06 2.06 — — — 
Movies & Entertainment27,048 1.06 2.06 43,592 2.77 4.76 
Airlines24,554 0.96 1.87 13,132 0.83 1.44 
Health Care Equipment23,763 0.93 1.81 — — — 
Independent Power Producers & Energy Traders23,552 0.92 1.79 20,812 1.32 2.27 
Leisure Facilities22,888 0.90 1.74 — — — 
Commercial Printing20,100 0.79 1.53 7,334 0.47 0.80 
Home Furnishings19,735 0.77 1.50 — — — 
Health Care Distributors19,683 0.77 1.50 12,260 0.78 1.34 
Managed Health Care18,840 0.74 1.44 26,681 1.70 2.92 
Metal & Glass Containers17,413 0.68 1.33 11,833 0.75 1.29 
Thrifts & Mortgage Finance15,942 0.62 1.21 353 0.02 0.04 
Other Diversified Financial Services15,908 0.62 1.21 — — — 
Health Care Technology13,960 0.55 1.06 22,058 1.40 2.41 
Auto Parts & Equipment12,365 0.48 0.94 31,382 1.99 3.43 
Electronic Components10,127 0.40 0.77 26,552 1.69 2.90 
Property & Casualty Insurance9,949 0.39 0.76 46,737 2.97 5.11 
Restaurants9,451 0.37 0.72 7,886 0.50 0.86 
Research & Consulting Services7,606 0.30 0.58 24,212 1.54 2.65 
IT Consulting & Other Services7,443 0.29 0.57 13,905 0.88 1.52 
Alternative Carriers6,939 0.27 0.53 — — — 
Systems Software6,769 0.26 0.52 20,481 1.30 2.24 
Leisure Products6,599 0.26 0.50 49 — 0.01 
Air Freight & Logistics4,981 0.19 0.38 — — — 
Integrated Oil & Gas4,884 0.19 0.37 — — — 
Food Distributors4,673 0.18 0.36 — — — 
Food Retail3,750 0.15 0.29 6,998 0.44 0.76 
Diversified Banks3,562 0.14 0.27 — — — 
Technology Distributors3,178 0.12 0.24 — — — 
Construction Materials2,350 0.09 0.18 2,073 0.13 0.23 
Housewares & Specialties2,003 0.08 0.15 — — — 
Education Services1,009 0.04 0.08 7,088 0.45 0.77 
Apparel, Accessories & Luxury Goods— — — 7,856 0.50 0.86 
General Merchandise Stores— — — 17,877 1.14 1.95 
Hotels, Resorts & Cruise Lines— — — 17,081 1.09 1.87 
Diversified Real Estate Activities— — — 16,846 1.07 1.84 
Trading Companies & Distributors— — — 10,069 0.64 1.10 
Health Care Facilities— — — 3,640 0.23 0.40 
Oil & Gas Equipment & Services— — — 2,588 0.16 0.28 
Specialized REITs— — — 222 0.01 0.02 
Total$2,556,629 100.00 %194.74 %$1,573,851 100.00 %172.03 %
___________________
(1)This industry includes the Company's investments in the JVs and certain limited partnership interests.

121
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




As of September 30, 2021 and September 30, 2020, the Company had no single investment that represented greater than 10% of the total investment portfolio at fair value. Income, consisting of interest, dividends, fees, other investment income and realization of gains or losses, may fluctuate and in any given period can be highly concentrated among several investments.

Senior Loan Fund JV I, LLC
In May 2014, the Company entered into an LLC agreement with Kemper to form SLF JV I. The Company co-invests in senior secured loans of middle-market companies and other corporate debt securities with Kemper through its investment in SLF JV I. SLF JV I is managed by a four person Board of Directors, two of whom are selected by the Company and two of whom are selected by Kemper. All portfolio decisions and investment decisions in respect of SLF JV I must be approved by the SLF JV I investment committee, which consists of one representative selected by the Company and one representative selected by Kemper (with approval from a representative of each required). Since the Company does not have a controlling financial interest in SLF JV I, the Company does not consolidate SLF JV I.
SLF JV I is capitalized pro rata with LLC equity interests as transactions are completed and may be capitalized with additional subordinated notes issued to the Company and Kemper by SLF JV I. The subordinated notes issued by SLF JV I (the "SLF JV I Notes") are senior in right of payment to SLF JV I LLC equity interests and subordinated in right of payment to SLF JV I’s secured debt. As of September 30, 2021 and September 30, 2020, the Company and Kemper owned, in the aggregate, 87.5% and 12.5%, respectively, of the LLC equity interests of SLF JV I and the outstanding SLF JV I Notes. SLF JV I is not an "eligible portfolio company" as defined in section 2(a)(46) of the Investment Company Act.
SLF JV I has a senior revolving credit facility with Deutsche Bank AG, New York Branch (as amended, the "SLF JV I Deutsche Bank Facility"), which permitted up to $260.0 million and $250.0 million of borrowings (subject to borrowing base and other limitations) as of September 30, 2021 and September 30, 2020, respectively. Borrowings under the SLF JV I Deutsche Bank Facility are secured by all of the assets of SLF JV I Funding LLC, a special purpose financing subsidiary of SLF JV I. As of September 30, 2021, the reinvestment period of the SLF JV I Deutsche Bank Facility was scheduled to expire May 3, 2023 and the maturity date for the SLF JV I Deutsche Bank Facility was May 3, 2028. As of September 30, 2021, borrowings under the SLF JV I Deutsche Bank Facility accrued interest at a rate equal to 3-month LIBOR plus 2.00% per annum during the reinvestment period, 3-month LIBOR plus 2.15% per annum for the first year after the reinvestment period, 3-month LIBOR plus 2.25% for the following year and plus 2.50% thereafter, in each case with a 0.125% LIBOR floor. Under the SLF JV I Deutsche Bank Facility, $215.6 million and $167.9 million of borrowings were outstanding as of September 30, 2021 and September 30, 2020, respectively.
As of September 30, 2021 and September 30, 2020, SLF JV I had total assets of $379.2 million and $313.5 million, respectively. SLF JV I's portfolio primarily consisted of senior secured loans to 55 portfolio companies as of September 30, 2021 and September 30, 2020. The portfolio companies in SLF JV I are in industries similar to those in which the Company may invest directly. As of September 30, 2021, the Company's investment in SLF JV I consisted of LLC equity interests and SLF JV I Notes of $133.9 million in aggregate, at fair value. As of September 30, 2020, the Company's investment in SLF JV I consisted of LLC equity interests and SLF JV I Notes of $117.4 million in aggregate, at fair value.
As of each of September 30, 2021 and September 30, 2020, the Company and Kemper had funded approximately $165.5 million to SLF JV I, of which $144.8 million was from the Company. As of September 30, 2021, the Company had aggregate commitments to fund SLF JV I of $35.0 million, of which approximately $26.2 million was to fund additional SLF JV I Notes and approximately $8.8 million was to fund LLC equity interests in SLF JV I. As of September 30, 2020, the Company had commitments to fund LLC equity interests in SLF JV I of $17.5 million, of which $1.3 million was unfunded.
122
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




Below is a summary of SLF JV I's portfolio, followed by a listing of the individual loans in SLF JV I's portfolio as of September 30, 2021 and September 30, 2020:
September 30, 2021September 30, 2020
Senior secured loans (1)$344,196$307,579
Weighted average interest rate on senior secured loans (2)5.60%5.44%
Number of borrowers in SLF JV I5556
Largest exposure to a single borrower (1)$9,875$10,487
Total of five largest loan exposures to borrowers (1)$46,984$49,097
__________
(1) At principal amount.
(2) Computed using the weighted average annual interest rate on accruing senior secured loans at fair value.

123
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




SLF JV I Portfolio as of September 30, 2021
Portfolio Company Investment Type Cash Interest Rate (1)(2)IndustryPrincipalCostFair Value (3)Notes
Access CIG, LLCFirst Lien Term Loan, LIBOR+3.75% cash due 2/27/20253.83 %Diversified Support Services$9,111 $9,084 $9,078 (4)
ADB Companies, LLCFirst Lien Term Loan, LIBOR+6.25% cash due 12/18/20257.25 %Construction & Engineering7,732 7,566 7,644 (4)
Altice France S.A.First Lien Term Loan, LIBOR+4.00% cash due 8/14/20264.12 %Integrated Telecommunication Services2,596 2,468 2,591 
Alvogen Pharma US, Inc.First Lien Term Loan, LIBOR+5.25% cash due 12/31/20236.25 %Pharmaceuticals9,755 9,580 9,443 (4)
Amplify Finco Pty Ltd.First Lien Term Loan, LIBOR+4.25% cash due 11/26/20265.00 %Movies & Entertainment7,880 7,801 7,680 (4)
Anastasia Parent, LLCFirst Lien Term Loan, LIBOR+3.75% cash due 8/11/20253.88 %Personal Products2,799 2,211 2,378 
Apptio, Inc.First Lien Term Loan, LIBOR+7.25% cash due 1/10/20258.25 %Application Software4,615 4,565 4,544 (4)
Apptio, Inc.First Lien Revolver, LIBOR+7.25% cash due 1/10/20258.25 %Application Software154 150 148 (4)(5)
Total Apptio, Inc.4,769 4,715 4,692 
Asurion, LLCSecond Lien Term Loan, LIBOR+5.25% cash due 1/20/20295.33 %Property & Casualty Insurance6,000 5,940 5,980 
Aurora Lux Finco S.À.R.L.First Lien Term Loan, LIBOR+6.00% cash due 12/24/20267.00 %Airport Services6,403 6,283 6,025 (4)
BAART Programs, Inc.First Lien Term Loan, LIBOR+5.00% cash due 6/11/20276.00 %Health Care Services5,985 5,925 5,970 
BAART Programs, Inc.First Lien Delayed Draw Term Loan, LIBOR+5.00% cash due 6/11/20276.00 %Health Care Services450 436 446 (5)
Total BAART Programs, Inc.6,435 6,361 6,416 
Blackhawk Network Holdings, Inc.First Lien Term Loan, LIBOR+3.00% cash due 6/15/20253.08 %Data Processing & Outsourced Services9,675 9,662 9,615 
Boxer Parent Company Inc.First Lien Term Loan, LIBOR+3.75% cash due 10/2/20253.88 %Systems Software6,643 6,570 6,615 
Brazos Delaware II, LLCFirst Lien Term Loan, LIBOR+4.00% cash due 5/21/20254.08 %Oil & Gas Equipment & Services7,253 7,234 7,158 
C5 Technology Holdings, LLC171 Common UnitsData Processing & Outsourced Services— — (4)
C5 Technology Holdings, LLC7,193,539.63 Preferred UnitsData Processing & Outsourced Services7,194 5,683 (4)
Total C5 Technology Holdings, LLC7,194 5,683 
Centerline Communications, LLCFirst Lien Term Loan, LIBOR+5.50% cash due 8/10/20276.50 %Wireless Telecommunication Services2,000 1,961 1,960 
Centerline Communications, LLCFirst Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 8/10/20236.50 %Wireless Telecommunication Services1,920 1,890 1,889 (5)
Centerline Communications, LLCFirst Lien Revolver, LIBOR+5.50% cash due 8/10/2027Wireless Telecommunication Services— (12)(12)(5)
Total Centerline Communications, LLC3,920 3,839 3,837 
CITGO Petroleum Corp.First Lien Term Loan, LIBOR+6.25% cash due 3/28/20247.25 %Oil & Gas Refining & Marketing7,111 7,040 7,134 (4)
City Football Group LimitedFirst Lien Term Loan, LIBOR+3.50% cash due 7/21/20284.00 %Movies & Entertainment6,500 6,468 6,492 
Connect U.S. Finco LLCFirst Lien Term Loan, LIBOR+3.50% cash due 12/11/20264.50 %Alternative Carriers7,362 7,204 7,376 
Convergeone Holdings, Inc.First Lien Term Loan, LIBOR+5.00% cash due 1/4/20265.08 %IT Consulting & Other Services7,449 7,229 7,427 (4)
Curium Bidco S.à.r.l.First Lien Term Loan, LIBOR+4.00% cash due 7/9/20264.13 %Biotechnology5,880 5,836 5,884 
Dcert Buyer, Inc.First Lien Term Loan, LIBOR+4.00% cash due 10/16/20264.08 %Internet Services & Infrastructure5,885 5,870 5,893 
DirecTV Financing, LLCFirst Lien Term Loan, LIBOR+5.00% cash due 8/2/20275.75 %Cable & Satellite6,000 5,940 6,011 (4)
Enviva Holdings, LPFirst Lien Term Loan, LIBOR+5.50% cash due 2/17/20266.50 %Forest Products5,878 5,819 5,893 
124
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




Portfolio Company Investment Type Cash Interest Rate (1)(2)IndustryPrincipalCostFair Value (3)Notes
eResearch Technology, Inc.First Lien Term Loan, LIBOR+4.50% cash due 2/4/20275.50 %Application Software$7,406 $7,332 $7,451 
GI Chill Acquisition LLCFirst Lien Term Loan, LIBOR+3.75% cash due 8/6/20253.90 %Managed Health Care3,721 3,737 3,712 (4)
GI Chill Acquisition LLCSecond Lien Term Loan, LIBOR+7.50% cash due 8/6/20267.63 %Managed Health Care3,750 3,674 3,731 (4)
Total GI Chill Acquisition LLC7,471 7,411 7,443 
Gibson Brands, Inc.First Lien Term Loan, LIBOR+5.00% cash due 8/11/20285.75 %Leisure Products7,500 7,425 7,463 
Global Medical Response, Inc.First Lien Term Loan, LIBOR+4.75% cash due 10/2/20255.75 %Health Care Services2,214 2,178 2,226 
Global Medical Response, Inc.First Lien Term Loan, LIBOR+4.25% cash due 3/14/20255.25 %Health Care Services1,995 1,995 2,004 (4)
Total Global Medical Response, Inc.4,209 4,173 4,230 
Grab Holdings Inc.First Lien Term Loan, LIBOR+4.50% cash due 1/29/20265.50 %Interactive Media & Services2,985 2,907 3,025 
Indivior Finance S.À.R.L.First Lien Term Loan, LIBOR+5.25% cash due 6/30/20266.00 %Pharmaceuticals7,481 7,336 7,456 
Intelsat Jackson Holdings S.A.First Lien Term Loan, PRIME+4.75% cash due 11/27/20238.00 %Alternative Carriers3,568 3,550 3,622 
Intelsat Jackson Holdings S.A.First Lien Term Loan, LIBOR+4.75% cash due 7/13/20225.75 %Alternative Carriers5,000 4,935 5,044 
Intelsat Jackson Holdings S.A.First Lien Delayed Draw Term Loan, LIBOR+4.75% cash due 7/13/2022Alternative Carriers— (13)9 (5)
Total Intelsat Jackson Holdings S.A.8,568 8,472 8,675 
INW Manufacturing, LLCFirst Lien Term Loan, LIBOR+5.75% cash due 5/7/20276.50 %Personal Products9,875 9,597 9,678 (4)
Lightbox Intermediate, L.P.First Lien Term Loan, LIBOR+5.00% cash due 5/9/20265.13 %Real Estate Services7,443 7,377 7,405 (4)
LogMeIn, Inc.First Lien Term Loan, LIBOR+4.75% cash due 8/31/20274.83 %Application Software7,940 7,812 7,946 (4)
LTI Holdings, Inc.First Lien Term Loan, LIBOR+3.50% cash due 9/6/20253.58 %Electronic Components7,442 7,329 7,354 
Maravai Intermediate Holdings, LLCFirst Lien Term Loan, LIBOR+3.75% cash due 10/19/20274.75 %Biotechnology6,819 6,751 6,846 
Mindbody, Inc.First Lien Term Loan, LIBOR+7.00% cash 1.50% PIK due 2/14/20258.00 %Internet Services & Infrastructure4,616 4,565 4,528 (4)
Mindbody, Inc.First Lien Revolver, LIBOR+8.00% cash due 2/14/2025Internet Services & Infrastructure— (6)(9)(4)(5)
Total Mindbody, Inc.4,616 4,559 4,519 
MRI Software LLCFirst Lien Term Loan, LIBOR+5.50% cash due 2/10/20266.50 %Application Software3,877 3,843 3,875 (4)
MRI Software LLCFirst Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026Application Software— (6)(1)(4)(5)
MRI Software LLCFirst Lien Revolver, LIBOR+5.50% cash due 2/10/2026Application Software— (3)— (4)(5)
Total MRI Software LLC3,877 3,834 3,874 
Northern Star Industries Inc.First Lien Term Loan, LIBOR+4.50% cash due 3/31/20255.50 %Electrical Components & Equipment6,755 6,738 6,738 
OEConnection LLCFirst Lien Term Loan, LIBOR+4.00% cash due 9/25/20264.08 %Application Software7,852 7,816 7,842 (4)
Olaplex, Inc.First Lien Term Loan, LIBOR+6.25% cash due 1/8/20267.25 %Personal Products6,273 6,189 6,226 (4)
Olaplex, Inc.First Lien Revolver, LIBOR+6.25% cash due 1/8/2025Personal Products— (7)(8)(4)(5)
Total Olaplex, Inc.6,273 6,182 6,218 
Park Place Technologies, LLCFirst Lien Term Loan, LIBOR+5.00% cash due 11/10/20276.00 %Internet Services & Infrastructure4,975 4,801 4,981 (4)
Planview Parent, Inc.Second Lien Term Loan, LIBOR+7.25% cash due 12/18/20288.00 %Application Software4,503 4,435 4,514 (4)
125
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




Portfolio Company Investment Type Cash Interest Rate (1)(2)IndustryPrincipalCostFair Value (3)Notes
Pluralsight, LLCFirst Lien Term Loan, LIBOR+8.00% cash due 4/6/20279.00 %Application Software$6,796 $6,669 $6,667 (4)
Pluralsight, LLCFirst Lien Revolver, LIBOR+8.00% cash due 4/6/2027Application Software— (8)(8)(4)(5)
Total Pluralsight, LLC6,796 6,661 6,659 
Sabert CorporationFirst Lien Term Loan, LIBOR+4.50% cash due 12/10/20265.50 %Metal & Glass Containers2,728 2,700 2,738 (4)
SHO Holding I CorporationFirst Lien Term Loan, LIBOR+5.25% cash due 4/27/20246.25 %Footwear8,288 8,277 7,874 
SHO Holding I CorporationFirst Lien Term Loan, LIBOR+5.23% cash due 4/27/20246.23 %Footwear138 138 131 
Total SHO Holding I Corporation8,426 8,415 8,005 
Sirva Worldwide, Inc.First Lien Term Loan, LIBOR+5.50% cash due 8/4/20255.58 %Diversified Support Services1,087 1,071 1,027 (4)
Sorenson Communications, LLCFirst Lien Term Loan, LIBOR+5.50% cash due 3/17/20266.25 %Communications Equipment2,854 2,825 2,877 
Star US Bidco LLCFirst Lien Term Loan, LIBOR+4.25% cash due 3/17/20275.25 %Industrial Machinery8,255 8,075 8,289 (4)
Supermoose Borrower, LLCFirst Lien Term Loan, LIBOR+3.75% cash due 8/29/20253.88 %Application Software7,823 7,465 7,294 (4)
Surgery Center Holdings, Inc.First Lien Term Loan, LIBOR+3.75% cash due 8/31/20264.50 %Health Care Facilities4,911 4,895 4,925 
Trench Plate Rental, Co.First Lien Term Loan, LIBOR+4.75% cash due 12/3/20265.75 %Construction Materials3,942 3,882 3,881 
Trench Plate Rental, Co.First Lien Delayed Draw Term Loan, LIBOR+4.75% cash due 12/3/2026Construction Materials— (11)(12)(5)
Trench Plate Rental, Co.First Lien Revolver, LIBOR+4.75% cash due 12/3/20265.75 %Construction Materials24 15 15 (5)
Total Trench Plate Rental, Co.3,966 3,886 3,884 
Veritas US Inc.First Lien Term Loan, LIBOR+5.00% cash due 9/1/20256.00 %Application Software6,435 6,333 6,473 (4)
Verscend Holding Corp.First Lien Term Loan, LIBOR+4.00% cash due 8/27/20254.08 %Health Care Technology4,080 4,052 4,091 
Waystar Technologies, Inc.First Lien Term Loan, LIBOR+4.00% cash due 10/22/20264.08 %Health Care Technology5,910 5,880 5,921 
Windstream Services II, LLCFirst Lien Term Loan, LIBOR+6.25% cash due 9/21/20277.25 %Integrated Telecommunication Services7,899 7,629 7,948 (4)
WP CPP Holdings, LLCSecond Lien Term Loan, LIBOR+7.75% cash due 4/30/20268.75 %Aerospace & Defense6,000 5,964 5,931 (4)
Total Portfolio Investments$344,196 $346,052 $346,665 
__________
(1) Represents the interest rate as of September 30, 2021. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All the LIBOR shown above is in U.S. dollars. As of September 30, 2021, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 0.08%, the 60-day LIBOR at 0.11%, the 90-day LIBOR at 0.13%, the 180-day LIBOR at 0.16%, the 360-day LIBOR at 0.24% and the PRIME at 3.25%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(3) Represents the current determination of fair value as of September 30, 2021 utilizing a similar technique as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the Company's Board of Directors' valuation process described elsewhere herein.
(4) This investment was held by both the Company and SLF JV I as of September 30, 2021.
(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.


126
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




SLF JV I Portfolio as of September 30, 2020

Portfolio Company Investment Type Cash Interest Rate (1)(2)IndustryPrincipalCostFair Value (3)Notes
Access CIG, LLCFirst Lien Term Loan, LIBOR+3.75% cash due 2/27/20253.91 %Diversified Support Services$9,206 $9,170 $9,029 
AdVenture Interactive, Corp.927 shares of common stockAdvertising1,390 1,373 (4)
AI Ladder (Luxembourg) Subco S.a.r.l.First Lien Term Loan, LIBOR+4.50% cash due 7/9/20254.65 %Electrical Components & Equipment6,038 5,914 5,781 (4)
Airbnb, Inc.First Lien Term Loan, LIBOR+7.50% cash due 4/17/20258.50 %Hotels, Resorts & Cruise Lines3,051 2,981 3,311 (4)
Altice France S.A.First Lien Term Loan, LIBOR+4.00% cash due 8/14/20264.15 %Integrated Telecommunication Services4,643 4,450 4,527 
Alvogen Pharma US, Inc.First Lien Term Loan, LIBOR+5.25% cash due 12/31/20236.25 %Pharmaceuticals9,879 9,623 9,566 
Amplify Finco Pty Ltd.First Lien Term Loan, LIBOR+4.00% cash due 11/26/20264.75 %Movies & Entertainment7,960 7,880 6,846 (4)
Anastasia Parent, LLCFirst Lien Term Loan, LIBOR+3.75% cash due 8/11/2025Personal Products2,828 2,282 1,248 (6)
Apptio, Inc.First Lien Term Loan, LIBOR+7.25% cash due 1/10/20258.25 %Application Software4,615 4,550 4,526 (4)
Apptio, Inc.First Lien Revolver, LIBOR+7.25% cash due 1/10/2025Application Software— (5)(8)(4)(5)
Total Apptio, Inc.4,615 4,545 4,518 
Aurora Lux Finco S.À.R.L.First Lien Term Loan, LIBOR+6.00% cash due 12/24/20267.00 %Airport Services6,468 6,324 6,015 (4)
Blackhawk Network Holdings, Inc.First Lien Term Loan, LIBOR+3.00% cash due 6/15/20253.15 %Data Processing & Outsourced Services9,775 9,758 9,251 
Boxer Parent Company Inc.First Lien Term Loan, LIBOR+4.25% cash due 10/2/20254.40 %Systems Software7,532 7,448 7,331 (4)
Brazos Delaware II, LLCFirst Lien Term Loan, LIBOR+4.00% cash due 5/21/20254.16 %Oil & Gas Equipment & Services7,331 7,306 5,600 
C5 Technology Holdings, LLC171 Common UnitsData Processing & Outsourced Services— — (4)
C5 Technology Holdings, LLC7,193,539.63 Preferred UnitsData Processing & Outsourced Services7,194 5,683 (4)
Total C5 Technology Holdings, LLC7,194 5,683 
Carrols Restaurant Group, Inc.First Lien Term Loan, LIBOR+6.25% cash due 4/30/20267.25 %Restaurants3,990 3,792 3,960 
CITGO Petroleum Corp.First Lien Term Loan, LIBOR+5.00% cash due 3/28/20246.00 %Oil & Gas Refining & Marketing7,184 7,112 6,842 (4)
Clear Channel Outdoor Holdings, Inc.First Lien Term Loan, LIBOR+3.50% cash due 8/21/20263.76 %Advertising331 290 302 
Connect U.S. Finco LLCFirst Lien Term Loan, LIBOR+4.50% cash due 12/11/20265.50 %Alternative Carriers7,437 7,262 7,228 
Curium Bidco S.à.r.l.First Lien Term Loan, LIBOR+3.75% cash due 7/9/20263.97 %Biotechnology5,940 5,895 5,895 
Dcert Buyer, Inc.First Lien Term Loan, LIBOR+4.00% cash due 10/16/20264.15 %Internet Services & Infrastructure7,960 7,940 7,879 
Dealer Tire, LLCFirst Lien Term Loan, LIBOR+4.25% cash due 12/12/20254.40 %Distributors943 902 924 
eResearch Technology, Inc.First Lien Term Loan, LIBOR+4.50% cash due 2/4/20275.50 %Application Software7,481 7,406 7,461 
Frontier Communications CorporationFirst Lien Term Loan, PRIME+2.75% cash due 6/15/20246.00 %Integrated Telecommunication Services3,939 3,901 3,887 
Gigamon, Inc.First Lien Term Loan, LIBOR+4.25% cash due 12/27/20245.25 %Systems Software7,781 7,734 7,684 
Global Medical Response, Inc.First Lien Term Loan, LIBOR+4.75% cash due 10/2/20255.75 %Health Care Services2,231 2,187 2,185 
Guidehouse LLPSecond Lien Term Loan, LIBOR+8.00% cash due 5/1/20268.15 %Research & Consulting Services6,000 5,979 5,790 (4)
127
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




Portfolio Company Investment Type Cash Interest Rate (1)(2)IndustryPrincipalCostFair Value (3)Notes
Helios Software Holdings, Inc.First Lien Term Loan, LIBOR+4.25% cash due 10/24/20254.52 %Systems Software$3,970 $3,930 $3,923 
Intelsat Jackson Holdings S.A.First Lien Term Loan, PRIME+4.75% cash due 11/27/20238.00 %Alternative Carriers3,568 3,541 3,598 
Intelsat Jackson Holdings S.A.First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 7/13/20226.50 %Alternative Carriers971 801 1,011 (5)
Total Intelsat Jackson Holdings S.A.4,539 4,342 4,609 
KIK Custom Products Inc.First Lien Term Loan, LIBOR+4.00% cash due 5/15/20235.00 %Household Products5,322 5,308 5,302 
LogMeIn, Inc.First Lien Term Loan, LIBOR+4.75% cash due 8/31/20274.91 %Application Software5,000 4,876 4,842 
Mindbody, Inc.First Lien Term Loan, LIBOR+7.00% cash 1.5% PIK due 2/14/20258.00 %Internet Services & Infrastructure4,546 4,481 4,192 (4)
Mindbody, Inc.First Lien Revolver, LIBOR+8.00% cash due 2/14/2025Internet Services & Infrastructure— (7)(38)(4)(5)
Total Mindbody, Inc.4,546 4,474 4,154 
MRI Software LLCFirst Lien Term Loan, LIBOR+5.50% cash due 2/10/20266.50 %Application Software3,830 3,795 3,737 (4)
MRI Software LLCFirst Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026Application Software— (1)(4)(4)(5)
MRI Software LLCFirst Lien Revolver, LIBOR+5.50% cash due 2/10/2026Application Software— (3)(8)(4)(5)
Total MRI Software LLC3,830 3,791 3,725 
Navicure, Inc.First Lien Term Loan, LIBOR+4.00% cash due 10/22/20264.15 %Health Care Technology5,970 5,940 5,849 
New IPT, Inc.First Lien Term Loan, LIBOR+5.00% cash due 3/17/20216.00 %Oil & Gas Equipment & Services1,006 1,006 786 (4)
New IPT, Inc.21.876 Class A Common Units in New IPT Holdings, LLCOil & Gas Equipment & Services— — (4)
Total New IPT, Inc.1,006 1,006 786 
Northern Star Industries Inc.First Lien Term Loan, LIBOR+4.75% cash due 3/31/20255.75 %Electrical Components & Equipment6,825 6,803 6,518 
Northwest Fiber, LLCFirst Lien Term Loan, LIBOR+5.50% cash due 4/30/20275.66 %Integrated Telecommunication Services2,400 2,314 2,403 
Novetta Solutions, LLCFirst Lien Term Loan, LIBOR+5.00% cash due 10/17/20226.00 %Application Software5,931 5,909 5,827 
OEConnection LLCFirst Lien Term Loan, LIBOR+4.00% cash due 9/25/20264.15 %Application Software7,455 7,418 7,371 
OEConnection LLCFirst Lien Delayed Draw Term Loan, LIBOR+4.00% cash due 9/25/2026Application Software— (2)(5)(5)
Total OEConnection LLC7,455 7,416 7,366 
Olaplex, Inc.First Lien Term Loan, LIBOR+6.50% cash due 1/8/20267.50 %Personal Products4,938 4,851 4,938 (4)
Olaplex, Inc.First Lien Revolver, LIBOR+6.50% cash due 1/8/20257.50 %Personal Products270 261 270 (4)(5)
Total Olaplex, Inc.5,208 5,112 5,208 
PetVet Care Centers, LLCFirst Lien Term Loan, LIBOR+4.25% cash due 2/14/20255.25 %Specialized Consumer Services2,743 2,736 2,747 
PG&E CorporationFirst Lien Term Loan, LIBOR+4.50% cash due 6/23/20255.50 %Electric Utilities5,985 5,899 5,875 
Recorded Books, Inc.First Lien Term Loan, LIBOR+4.25% cash due 8/31/20254.75 %Publishing6,000 5,940 5,940 
Sabert CorporationFirst Lien Term Loan, LIBOR+4.50% cash due 12/10/20265.50 %Metal & Glass Containers2,828 2,800 2,791 
Salient CRGT, Inc.First Lien Term Loan, LIBOR+6.50% cash due 2/28/20227.50 %Aerospace & Defense2,111 2,099 1,963 (4)
SHO Holding I CorporationFirst Lien Term Loan, LIBOR+3.00% cash PIK 2.25% due 4/27/20244.00 %Footwear8,396 8,380 5,898 
Signify Health, LLCFirst Lien Term Loan, LIBOR+4.50% cash due 12/23/20245.50 %Health Care Services9,750 9,690 9,409 
Sirva Worldwide, Inc.First Lien Term Loan, LIBOR+5.50% cash due 8/4/20255.65 %Diversified Support Services4,781 4,709 3,992 
128
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




Portfolio Company Investment Type Cash Interest Rate (1)(2)IndustryPrincipalCostFair Value (3)Notes
Star US Bidco LLCFirst Lien Term Loan, LIBOR+4.25% cash due 3/17/20275.25 %Industrial Machinery$3,718 $3,532 $3,551 
Sunshine Luxembourg VII SARLFirst Lien Term Loan, LIBOR+4.25% cash due 10/1/20265.25 %Personal Products7,940 7,900 7,911 
Supermoose Borrower, LLCFirst Lien Term Loan, LIBOR+3.75% cash due 8/29/20253.90 %Application Software4,888 4,575 4,407 (4)
Surgery Center Holdings, Inc.First Lien Term Loan, LIBOR+3.25% cash due 9/3/20244.25 %Health Care Facilities4,962 4,943 4,691 (4)
Uber Technologies, Inc.First Lien Term Loan, LIBOR+4.00% cash due 4/4/20255.00 %Application Software2,997 2,959 2,980 
UFC Holdings, LLCFirst Lien Term Loan, LIBOR+3.25% cash due 4/29/20264.25 %Movies & Entertainment2,856 2,816 2,814 
Veritas US Inc.First Lien Term Loan, LIBOR+5.50% cash due 9/1/20256.50 %Application Software6,500 6,371 6,375 
Verscend Holding Corp.First Lien Term Loan, LIBOR+4.50% cash due 8/27/20254.65 %Health Care Technology4,112 4,080 4,084 (4)
VM Consolidated, Inc.First Lien Term Loan, LIBOR+3.25% cash due 2/28/20253.40 %Data Processing & Outsourced Services10,487 10,495 10,291 
Windstream Services II, LLCFirst Lien Term Loan, LIBOR+6.25% cash due 9/21/20277.25 %Integrated Telecommunication Services7,980 7,662 7,744 (4)
WP CPP Holdings, LLCSecond Lien Term Loan, LIBOR+7.75% cash due 4/30/20268.75 %Aerospace & Defense6,000 5,956 4,680 (4)
Total Portfolio Investments$307,579 $311,428 $298,771 
__________
(1) Represents the interest rate as of September 30, 2020. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All the LIBOR shown above is in U.S. dollars. As of September 30, 2020, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 0.15%, the 60-day LIBOR at 0.19%, the 90-day LIBOR at 0.22%, the 180-day LIBOR at 0.27% and the PRIME at 3.25%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(3) Represents the current determination of fair value as of September 30, 2020 utilizing a similar technique as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the Company's Board of Directors' valuation process described elsewhere herein.
(4) This investment was held by both the Company and SLF JV I as of September 30, 2020.
(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
(6) This investment was on cash non-accrual status as of September 30, 2020. Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.

Both the cost and fair value of the Company's SLF JV I Notes were $96.3 million as of each of September 30, 2021 and September 30, 2020. The Company earned interest income of $7.4 million, $8.1 million and $9.8 million on the SLF JV I Notes for the years ended September 30, 2021, 2020 and 2019, respectively. As of September 30, 2021, the SLF JV I Notes bore interest at a rate of one-month LIBOR plus 7.00% per annum with a LIBOR floor of 1.00% and will mature on December 29, 2028.
The cost and fair value of the LLC equity interests in SLF JV I held by the Company were $49.3 million and $37.7 million, respectively, as of September 30, 2021, and $49.3 million and $21.2 million, respectively, as of September 30, 2020. The Company earned $0.9 million in dividend income for the year ended September 30, 2021 with respect to its investment in the LLC equity interests of SLF JV I. The Company did not earn dividend income for the years ended September 30, 2020 and 2019 with respect to its investment in the LLC equity interests of SLF JV I. The LLC equity interests of SLF JV I are generally dividend producing to the extent SLF JV I has residual cash to be distributed on a quarterly basis.
129
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




Below is certain summarized financial information for SLF JV I as of September 30, 2021 and September 30, 2020 and for the years ended September 30, 2021, 2020 and 2019:
September 30, 2021September 30, 2020
Selected Balance Sheet Information:
Investments at fair value (cost September 30, 2021: $346,052; cost September 30, 2020: $311,428)$346,665 $298,771 
Cash and cash equivalents23,446 5,389 
Restricted cash4,517 4,211 
Other assets4,529 5,093 
Total assets$379,157 $313,464 
Senior credit facility payable$215,620 $167,910 
SLF JV I Notes payable at fair value (proceeds September 30, 2021: $110,000; proceeds September 30, 2020: $110,000)110,000 110,000 
Other liabilities10,507 11,336 
Total liabilities$336,127 $289,246 
Members' equity 43,030 24,218 
Total liabilities and members' equity$379,157 $313,464 
Year ended September 30, 2021Year ended September 30, 2020Year ended September 30, 2019
Selected Statements of Operations Information:
Interest income$20,018 $19,808 $22,727 
Other income565 338 153 
Total investment income20,583 20,146 22,880 
Senior credit facility interest expense5,706 7,432 8,705 
SLF JV I Notes interest expense8,444 9,205 11,153 
Other expenses260 244 358 
Total expenses (1)14,410 16,881 20,216 
Net unrealized appreciation (depreciation)13,270 (9,704)2,257 
Net realized gains (losses)399 (3,691)(8,507)
Net income (loss)$19,842 $(10,130)$(3,586)
 __________
(1) There are no management fees or incentive fees charged at SLF JV I.

SLF JV I has elected to fair value the SLF JV I Notes issued to the Company and Kemper under FASB ASC Topic 825, Financial Instruments - Fair Value Option. The SLF JV I Notes are valued based on the total assets less the total liabilities senior to the SLF JV I Notes in an amount not exceeding par under the EV technique.
During the year ended September 30, 2021, the Company sold $48.0 million of senior secured debt investments to SLF JV I for $47.2 million cash consideration, which represented the fair value at the time of sale. A gain of $2.5 million was recognized by the Company on these transactions. During the year ended September 30, 2020, the Company did not sell any debt investments to SLF JV I. During the year ended September 30, 2019, the Company sold $8.4 million of senior secured debt investments to SLF JV I at fair value in exchange for $8.3 million cash consideration. A loss of $0.1 million was recognized by the Company on these transactions.
130
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





OCSI Glick JV LLC
On March 19, 2021, as a result of the consummation of the Mergers, the Company became party to the LLC agreement of Glick JV. The Glick JV invests primarily in senior secured loans of middle-market companies. The Company co-invests in these securities with GF Equity Funding through the Glick JV. The Glick JV is managed by a four person Board of Directors, two of whom are selected by the Company and two of whom are selected by GF Equity Funding. The Glick JV is capitalized as transactions are completed, and portfolio decisions and investment decisions in respect of the Glick JV must be approved by the Glick JV investment committee, which consists of one representative selected by the Company and one representative selected by GF Equity Funding (with approval from a representative of each required). Since the Company does not have a controlling financial interest in the Glick JV, the Company does not consolidate the Glick JV.
The members provide capital to the Glick JV in exchange for LLC equity interests, and the Company and GF Debt Funding 2014 LLC ("GF Debt Funding"), an entity advised by affiliates of GF Equity Funding, provide capital to the Glick JV in exchange for subordinated notes issued by the Glick JV (the "Glick JV Notes"). As of September 30, 2021, the Company and GF Equity Funding owned 87.5% and 12.5%, respectively, of the outstanding LLC equity interests, and the Company and GF Debt Funding owned 87.5% and 12.5%, respectively, of the Glick JV Notes. The Glick JV is not an "eligible portfolio company" as defined in section 2(a)(46) of the Investment Company Act.
The Glick JV has a senior revolving credit facility with Deutsche Bank AG, New York Branch (the "Glick JV Deutsche Bank Facility"), which, as of September 30, 2021, had a reinvestment period end date and maturity date of May 3, 2023 and May 3, 2028, respectively, and permitted borrowings of up to $90.0 million (subject to borrowing base and other limitations). Borrowings under the Glick JV Deutsche Bank Facility are secured by all of the assets of the Glick JV and all of the equity interests in the Glick JV and, as of September 30, 2021, bore interest at a rate equal to 3-month LIBOR plus 2.25% per annum during the reinvestment period, 3-month LIBOR plus 2.40% for the first year after the end of the reinvestment period, 3-month LIBOR plus 2.50% for the following year and 2.75% thereafter, in each case with a 0.125% LIBOR floor. Under the Glick JV Deutsche Bank Facility, $71.9 million of borrowings were outstanding as of September 30, 2021.
As of September 30, 2021, the Glick JV had total assets of $141.0 million. The Glick JV's portfolio consisted of middle-market and other corporate debt securities of 37 portfolio companies as of September 30, 2021. The portfolio companies in the Glick JV are in industries similar to those in which the Company may invest directly. The Company's investment in the Glick JV consisted of LLC equity interests and Glick JV Notes of $55.6 million in the aggregate at fair value as of September 30, 2021. The Glick JV Notes are junior in right of payment to the repayment of temporary contributions made by the Company to fund investments of the Glick JV that are repaid when GF Equity Funding and GF Debt Funding make their capital contributions and fund their Glick JV Notes, respectively.
As of September 30, 2021, the Glick JV had total capital commitments of $100.0 million, $87.5 million of which was from the Company and the remaining $12.5 million of which was from GF Equity Funding and GF Debt Funding. Approximately $84.0 million in aggregate commitments were funded as of September 30, 2021, of which $73.5 million was from the Company. As of September 30, 2021, the Company had commitments to fund Glick JV Notes of $78.8 million, of which $12.4 million were unfunded as of such date. As of September 30, 2021, the Company had commitments to fund LLC equity interests in the Glick JV of $8.7 million, of which $1.6 million were unfunded.

131
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




Below is a summary of the Glick JV's portfolio, followed by a listing of the individual loans in the Glick JV's portfolio as of September 30, 2021:
September 30, 2021
Senior secured loans (1)$126,512
Weighted average current interest rate on senior secured loans (2)5.86%
Number of borrowers in the Glick JV37
Largest loan exposure to a single borrower (1)$6,907
Total of five largest loan exposures to borrowers (1)$28,324
__________
(1) At principal amount.
(2) Computed using the weighted average annual interest rate on accruing senior secured loans at fair value.

Glick JV Portfolio as of September 30, 2021
Portfolio Company Investment Type Cash Interest Rate (1)(2)IndustryPrincipalCostFair Value (3)Notes
ADB Companies, LLCFirst Lien Term Loan, LIBOR+6.25% cash due 12/18/20257.25%Construction & Engineering$3,866 $3,783 $3,822 (4)
Alvogen Pharma US, Inc.First Lien Term Loan, LIBOR+5.25% cash due 12/31/20236.25%Pharmaceuticals6,907 6,780 6,687 (4)
Amplify Finco Pty Ltd.First Lien Term Loan, LIBOR+4.25% cash due 11/26/20265.00%Movies & Entertainment2,955 2,925 2,880 (4)
Anastasia Parent, LLCFirst Lien Term Loan, LIBOR+3.75% cash due 8/11/20253.88%Personal Products1,667 1,310 1,416 
Asurion, LLCSecond Lien Term Loan, LIBOR+5.25% cash due 1/20/20295.33%Property & Casualty Insurance3,000 2,970 2,990 
Aurora Lux Finco S.À.R.L.First Lien Term Loan, LIBOR+6.00% cash due 12/24/20267.00%Airport Services3,694 3,625 3,476 (4)
BAART Programs, Inc.First Lien Term Loan, LIBOR+5.00% cash due 6/11/20276.00%Health Care Services3,192 3,160 3,184 
BAART Programs, Inc.First Lien Delayed Draw Term Loan, LIBOR+5.00% cash due 6/11/20276.00%Health Care Services240 232 238 (5)
Total BAART Programs, Inc.3,432 3,392 3,422 
Brazos Delaware II, LLCFirst Lien Term Loan, LIBOR+4.00% cash due 5/21/20254.08%Oil & Gas Equipment & Services4,835 4,823 4,772 
CITGO Petroleum Corp.First Lien Term Loan, LIBOR+6.25% cash due 3/28/20247.25%Oil & Gas Refining & Marketing3,555 3,520 3,567 (4)
City Football Group LimitedFirst Lien Term Loan, LIBOR+3.50% cash due 7/21/20284.00%Movies & Entertainment2,500 2,488 2,497 
Curium Bidco S.à.r.l.First Lien Term Loan, LIBOR+4.00% cash due 7/9/20264.13%Biotechnology4,900 4,863 4,903 
DirecTV Financing, LLCFirst Lien Term Loan, LIBOR+5.00% cash due 8/2/20275.75%Cable & Satellite3,000 2,970 3,005 (4)
Enviva Holdings, LPFirst Lien Term Loan, LIBOR+5.50% cash due 2/17/20266.50%Forest Products3,919 3,879 3,928 
eResearch Technology, Inc.First Lien Term Loan, LIBOR+4.50% cash due 2/4/20275.50%Application Software2,469 2,444 2,484 
Gibson Brands, Inc.First Lien Term Loan, LIBOR+5.00% cash due 8/11/20285.75%Leisure Products4,000 3,960 3,981 
Houghton Mifflin Harcourt Publishers Inc.First Lien Term Loan, LIBOR+6.25% cash due 11/22/20247.25%Education Services431 420 433 (4)
Indivior Finance S.À.R.L.First Lien Term Loan, LIBOR+5.25% cash due 6/30/20266.00%Pharmaceuticals3,990 3,913 3,977 
Integro Parent, Inc.First Lien Term Loan, LIBOR+5.75% cash due 10/31/20226.75%Insurance Brokers3,229 3,221 3,173 
Intelsat Jackson Holdings S.A.First Lien Term Loan, LIBOR+4.75% cash due 7/13/20225.75%Alternative Carriers4,167 4,112 4,203 
Intelsat Jackson Holdings S.A.First Lien Delayed Draw Term Loan, LIBOR+4.75% cash due 7/13/2022Alternative Carriers— (11)7 (5)
Total Intelsat Jackson Holdings S.A.4,167 4,101 4,210 
INW Manufacturing, LLCFirst Lien Term Loan, LIBOR+5.75% cash due 5/7/20276.50%Personal Products2,469 2,399 2,419 (4)
132
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




Portfolio Company Investment Type Cash Interest Rate (1)(2)IndustryPrincipalCostFair Value (3)Notes
Lightstone Holdco LLCFirst Lien Term Loan, LIBOR+3.75% cash due 1/30/20244.75%Electric Utilities$3,439 $3,115 $2,855 
LTI Holdings, Inc.First Lien Term Loan, LIBOR+3.50% cash due 9/6/20253.58%Electronic Components1,372 1,147 1,356 
MRI Software LLCFirst Lien Term Loan, LIBOR+5.50% cash due 2/10/20266.50%Application Software1,635 1,621 1,634 (4)
MRI Software LLCFirst Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026Application Software— (1)— (4)(5)
MRI Software LLCFirst Lien Revolver, LIBOR+5.50% cash due 2/10/2026Application Software— (1)— (4)(5)
   Total MRI Software LLC1,635 1,619 1,634 
Northern Star Industries Inc.First Lien Term Loan, LIBOR+4.50% cash due 3/31/20255.50%Electrical Components & Equipment5,308 5,294 5,294 
OEConnection LLCFirst Lien Term Loan, LIBOR+4.00% cash due 9/25/20264.08%Application Software3,926 3,908 3,921 (4)
Olaplex, Inc.First Lien Term Loan, LIBOR+6.25% cash due 1/8/20267.25%Personal Products3,502 3,454 3,475 (4)
Olaplex, Inc.First Lien Revolver, LIBOR+6.25% cash due 1/8/2025Personal Products— (4)(5)(4)(5)
Total Olaplex, Inc.3,502 3,450 3,470 
Planview Parent, Inc.Second Lien Term Loan, LIBOR+7.25% cash due 12/18/20288.00%Application Software2,842 2,799 2,849 (4)
Pluralsight, LLCFirst Lien Term Loan, LIBOR+8.00% cash due 4/6/20279.00%Application Software4,465 4,383 4,380 (4)
Pluralsight, LLCFirst Lien Revolver, LIBOR+8.00% cash due 4/6/2027Application Software— (6)(6)(4)(5)
Total Pluralsight, LLC4,465 4,377 4,374 
Sabert CorporationFirst Lien Term Loan, LIBOR+4.50% cash due 12/10/20265.50%Metal & Glass Containers1,819 1,800 1,825 (4)
SHO Holding I CorporationFirst Lien Term Loan, LIBOR+5.25% cash due 4/27/20246.25%Footwear6,159 6,140 5,851 
SHO Holding I CorporationFirst Lien Term Loan, LIBOR+5.23% cash due 4/27/20246.23%Footwear102 102 97 
Total SHO Holding I Corporation6,261 6,242 5,948 
Supermoose Borrower, LLCFirst Lien Term Loan, LIBOR+3.75% cash due 8/29/20253.88%Application Software2,850 2,703 2,657 (4)
Surgery Center Holdings, Inc.First Lien Term Loan, LIBOR+3.75% cash due 8/31/20264.50%Health Care Facilities4,911 4,895 4,925 
Tribe Buyer LLCFirst Lien Term Loan, LIBOR+4.50% cash due 2/16/20245.50%Human Resource & Employment Services1,599 1,598 1,354 
Verscend Holding Corp.First Lien Term Loan, LIBOR+4.00% cash due 8/27/20254.08%Health Care Technology1,721 1,709 1,725 
Waystar Technologies, Inc.First Lien Term Loan, LIBOR+4.00% cash due 10/22/20264.08%Health Care Technology3,940 3,920 3,947 
Windstream Services II, LLCFirst Lien Term Loan, LIBOR+6.25% cash due 9/21/20277.25%Integrated Telecommunication Services4,937 4,768 4,967 (4)
WP CPP Holdings, LLCSecond Lien Term Loan, LIBOR+7.75% cash due 4/30/20268.75%Aerospace & Defense3,000 2,982 2,965 (4)
Total Portfolio Investments
$126,512 $124,112 $124,108 

__________
(1) Represents the interest rate as of September 30, 2021. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars. As of September 30, 2021, the reference rates for the Glick JV's variable rate loans were the 30-day LIBOR at 0.08%, the 60-day LIBOR at 0.11%, the 90-day LIBOR at 0.13%, the 180-day LIBOR at 0.16% and the 360-day LIBOR at 0.24%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(3) Represents the current determination of fair value as of September 30, 2021 utilizing a similar technique as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the Company's Board of Directors' valuation process described elsewhere herein.
(4) This investment was held by both the Company and the Glick JV as of September 30, 2021.
133

(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
The cost and fair value of the Company's aggregate investment in the Glick JV was $50.7 million and $55.6 million, respectively, as of September 30, 2021. For the period from March 19, 2021 to September 30, 2021, the Company's investment in the Glick JV Notes earned interest income of $2.4 million. The Company did not earn any dividend income for the period from March 19, 2021 to September 30, 2021 with respect to its investment in the LLC equity interests of the Glick JV. The LLC equity interests of the Glick JV are income producing to the extent there is residual cash to be distributed on a quarterly basis. As of September 30, 2021, the Glick JV Notes bore interest at a rate of one-month LIBOR plus 4.50% per annum and will mature on October 20, 2028.
Below is certain summarized financial information for the Glick JV as of September 30, 2021 and for the period from March 19, 2021 to September 30, 2021:
September 30, 2021
Selected Balance Sheet Information:
Investments at fair value (cost September 30, 2021: $124,112)$124,108 
Cash and cash equivalents14,087 
Restricted cash1,055 
Other assets1,750 
Total assets$141,000 
Senior credit facility payable$71,882 
Glick JV Notes payable at fair value (proceeds September 30, 2021: $70,525)63,522 
Other liabilities5,596 
Total liabilities$141,000 
Members' equity — 
Total liabilities and members' equity$141,000 
For the period from March 19, 2021 to September 30, 2021
Selected Statements of Operations Information:
Interest income$4,643 
Fee income67 
Total investment income4,710 
Senior credit facility interest expense1,157 
Glick JV Notes interest expense1,780 
Other expenses95 
Total expenses (1)3,032 
Net unrealized appreciation (depreciation)(1,710)
Realized gain (loss)32 
Net income (loss)$— 
__________
(1) There are no management fees or incentive fees charged at the Glick JV.
The Glick JV has elected to fair value the Glick JV Notes issued to the Company and GF Debt Funding under FASB ASC Topic 825, Financial Instruments - Fair Value Option. The Glick JV Notes are valued based on the total assets less the liabilities senior to the Glick JV Notes in an amount not exceeding par under the EV technique.
During the period from March 19, 2021 to September 30, 2021, the Company did not sell any debt investments to the Glick JV.
Note 4. Fee Income
For the years ended September 30, 2021, 2020 and 2019, the Company recorded total fee income of $14.1 million, $8.5 million and $6.7 million, respectively, of which $0.6 million, $0.7 million and $0.6 million, respectively, was recurring in nature. Recurring fee income primarily consisted of servicing fees and exit fees.

134
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




Note 5. Share Data and Net Assets
Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share, pursuant to ASC Topic 260-10, Earnings per Share, for the years ended September 30, 2021, 2020 and 2019:
(Share amounts in thousands)Year ended
September 30,
2021		Year ended
September 30,
2020		Year ended
September 30,
2019
Earnings (loss) per common share — basic and diluted:
Net increase (decrease) in net assets resulting from operations$237,260 $39,224 $126,160 
Weighted average common shares outstanding — basic and diluted162,118 140,961 140,961 
Earnings (loss) per common share — basic and diluted$1.46 $0.28 $0.89 

Changes in Net Assets

The following table presents the changes in net assets for the years ended September 30, 2021, 2020 and 2019:
Common Stock
SharesPar ValueAdditional paid-in-capitalAccumulated Overdistributed EarningsTotal Net Assets
Balance at September 30, 2018140,961 $1,409 $1,492,739 $(636,113)$858,035 
Net investment income———67,90967,909
Net unrealized appreciation (depreciation)———38,45738,457
Net realized gains (losses)———20,80520,805
(Provision) benefit for taxes on realized and unrealized gains (losses)———(1,011)(1,011)
Distributions to stockholders———(53,565)(53,565)
Reclassification of additional paid-in capital——(4,965)4,965—
Issuance of common stock under dividend reinvestment plan26931,341—1,344
Repurchases of common stock under dividend reinvestment plan(269)(3)(1,341)—(1,344)
Balance at September 30, 2019140,961 $1,409 $1,487,774 $(558,553)$930,630 
Net investment income———71,99271,992
Net unrealized appreciation (depreciation)———(20,614)(20,614)
Net realized gains (losses)———(13,924)(13,924)
(Provision) benefit for taxes on realized and unrealized gains (losses)———1,7701,770
Distributions to stockholders———(54,975)(54,975)
Issuance of common stock under dividend reinvestment plan43541,874—1,878
Repurchases of common stock under dividend reinvestment plan(435)(4)(1,874)—(1,878)
Balance at September 30, 2020140,961 $1,409 $1,487,774 $(574,304)$914,879 
Net investment income———97,10697,106
Net unrealized appreciation (depreciation)———114,519114,519
Net realized gains (losses)———26,42026,420
(Provision) benefit for taxes on realized and unrealized gains (losses)———(785)(785)
Distributions to stockholders———(82,020)(82,020)
Reclassification of additional paid-in capital——74,271(74,271)—
Issuance of common stock in connection with the Mergers39,400395242,309—242,704
Issuance of common stock under dividend reinvestment plan33832,167—2,170
Repurchases of common stock under dividend reinvestment plan(338)(3)(2,167)—(2,170)
Balance at September 30, 2021180,361 $1,804 $1,804,354 $(493,335)$1,312,823 


Distributions
Distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a dividend is determined by the Board of Directors and is based on management’s estimate of the Company’s annual taxable income. Net realized capital gains, if any, may be distributed to stockholders or retained for reinvestment.
135
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




The Company has adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of any distributions the Company declares in cash on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, if the Company’s Board of Directors declares a cash distribution, then the Company’s stockholders who have not “opted out” of the Company’s DRIP will have their cash distribution automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash distribution. If the Company’s shares are trading at a premium to net asset value, the Company typically issues new shares to implement the DRIP with such shares issued at the greater of the most recently computed net asset value per share of common stock or 95% of the current market price per share of common stock on the payment date for such distribution. If the Company’s shares are trading at a discount to net asset value, the Company typically purchases shares in the open market in connection with the Company’s obligations under the DRIP.
For U.S. federal income tax purposes, the Company estimates its distributions for the 2021 calendar year will be composed primarily of ordinary income. The character of such distributions will be appropriately reported to the Internal Revenue Service and stockholders for the 2020 calendar year. To the extent the Company’s taxable earnings for a fiscal and taxable year fall below the amount of distributions paid for the fiscal and taxable year, a portion of the total amount of the Company’s distributions for the fiscal and taxable year is deemed a return of capital for U.S. federal income tax purposes to the Company’s stockholders. For the year ended September 30, 2021, no portion of the distributions was deemed a return of capital for tax purposes.
The following table reflects the distributions per share that the Company has paid, including shares issued under the DRIP, on its common stock during the years ended September 30, 2021, 2020 and 2019:
Date DeclaredRecord DatePayment DateAmount
per Share		Cash
Distribution 		DRIP Shares
Issued (1)		DRIP Shares
Value (2)
November 13, 2020December 15, 2020December 31, 2020$0.11 $ 15.0 million93,964 $ 0.5 million
January 29, 2021March 15, 2021March 31, 20210.12 16.4 million81,702 0.5 million
April 30, 2021June 15, 2021June 30, 20210.13 22.9 million76,979 0.5 million
July 30, 2021September 15, 2021September 30, 20210.145 25.5 million85,075 0.6 million
Total for the year ended September 30, 2021$0.505 $ 79.8 million337,720 $ 2.2 million
Date DeclaredRecord DatePayment DateAmount
per Share		Cash
Distribution 		DRIP Shares
Issued (1)		DRIP Shares
Value
November 12, 2019December 13, 2019December 31, 2019$0.095 $ 12.9 million87,747 $ 0.5 million
January 31, 2020March 13, 2020March 31, 20200.095 12.9 million157,523 0.5 million
April 30, 2020June 15, 2020June 30, 20200.095 13.0 million87,351 0.4 million
July 31, 2020September 15, 2020September 30, 20200.105 14.3 million102,404 0.5 million
Total for the year ended September 30, 2020$0.390 $ 53.1 million435,025 $ 1.9 million
Date DeclaredRecord DatePayment DateAmount
per Share		Cash
Distribution		DRIP Shares
Issued (1)		DRIP Shares
Value
November 19, 2018December 17, 2018December 28, 2018$0.095 $ 13.0 million87,429 $ 0.4 million
February 1, 2019March 15, 2019March 29, 20190.095 13.1 million59,603  0.3 million
May 3, 2019June 14, 2019June 28, 20190.095 13.1 million61,093  0.3 million
August 2, 2019September 13, 2019September 30, 20190.095 13.1 million61,205  0.3 million
Total for the year ended September 30, 2019$0.380 $ 52.3 million269,330 $ 1.3 million
 __________
(1) Shares were purchased on the open market and distributed.
(2) Rounded balance may not sum to the total.
Common Stock Issuances
On March 19, 2021, in connection with the Mergers, the Company issued an aggregate of 39,400,011 shares of common stock to former OCSI stockholders. There were no other common stock issuances during the years ended September 30, 2021, 2020 and 2019.

Note 6. Borrowings
Syndicated Facility

On November 30, 2017, the Company entered into a senior secured revolving credit facility (as amended and restated, the “Syndicated Facility”) pursuant to a Senior Secured Revolving Credit Agreement with the lenders party thereto, ING Capital
136
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




LLC, as administrative agent, ING Capital LLC, JPMorgan Chase Bank, N.A., BofA Securities, Inc. and MUFG Union Bank, N.A. as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A. and Bank of America, N.A., as syndication agents. The Syndicated Facility provides that the Company may use the proceeds of the loans and issuances of letters of credit under the Syndicated Facility for general corporate purposes, including acquiring and funding leveraged loans, mezzanine loans, high-yield securities, convertible securities, preferred stock, common stock and other investments. The Syndicated Facility further allows the Company to request letters of credit from ING Capital LLC, as the issuing bank.

On October 28, 2020, the Company entered into an incremental commitment and assumption agreement in connection with the Company’s exercise of $75 million of the accordion feature under the Syndicated Facility. On December 28, 2020, the Company entered into an incremental commitment agreement pursuant to which a lender under the Syndicated Facility increased its commitment amount under the Syndicated Facility by $25 million. On May 4, 2021, the Company amended the Syndicated Credit Facility to, among other things, increase the size of the facility by $150 million (and increase the “accordion” feature to permit the Company, under certain circumstances, to increase the size of the facility to up to the greater of $1.25 billion and the Company’s net worth, as defined in the facility). As a result of such agreements, as of September 30, 2021, the size of the Syndicated Facility was $950 million.

As of September 30, 2021, (i) the period during which the Company may make drawings will expire on May 4, 2025 and the maturity date is May 4, 2026 and (ii) the interest rate margin for (a) LIBOR loans (which may be 1-, 2-, 3- or 6-month, at the Company’s option) was 2.00% and (b) alternate base rate loans was 1.00%.

The Syndicated Facility is secured by substantially all of the Company’s assets (excluding, among other things, investments held in and by certain subsidiaries of the Company (including OCSL Senior Funding II LLC) or investments in certain portfolio companies of the Company) and guaranteed by certain subsidiaries of the Company. As of September 30, 2021, except for assets that were held by OCSL Senior Funding II LLC and certain immaterial subsidiaries, substantially all of the Company's assets are pledged as collateral under the Syndicated Facility.

The Syndicated Facility requires the Company to, among other things, (i) make representations and warranties regarding the collateral as well as each of the Company’s portfolio companies’ businesses, (ii) agree to certain indemnification obligations, and (iii) comply with various affirmative and negative covenants, reporting requirements and other customary requirements for similar revolving credit facilities, including covenants related to: (A) limitations on the incurrence of additional indebtedness and liens, (B) limitations on certain investments, (C) limitations on certain asset transfers and restricted payments, (D) maintaining a certain minimum stockholders’ equity, (E) maintaining a ratio of total assets (less total liabilities) to total indebtedness, of the Company and its subsidiaries (subject to certain exceptions), of not less than 1.50 to 1.00, (F) maintaining a ratio of consolidated EBITDA to consolidated interest expense, of the Company and its subsidiaries (subject to certain exceptions), of not less than 2.25 to 1.00, (G) maintaining a minimum liquidity and net worth, and (H) limitations on the creation or existence of agreements that prohibit liens on certain properties of the Company and certain of its subsidiaries. The Syndicated Facility also includes usual and customary default provisions such as the failure to make timely payments under the facility, the occurrence of a change in control, and the failure by the Company to materially perform under the agreements governing the facility, which, if not complied with, could accelerate repayment under the facility. As of September 30, 2021, the Company was in compliance with all financial covenants under the Syndicated Facility. In addition to the asset coverage ratio described above, borrowings under the Syndicated Facility (and the incurrence of certain other permitted debt) are subject to compliance with a borrowing base that will apply different advance rates to different types of assets in the Company’s portfolio. Each loan or letter of credit originated or assumed under the Syndicated Facility is subject to the satisfaction of certain conditions.

As of September 30, 2021 and September 30, 2020, the Company had $495.0 million and $414.8 million of borrowings outstanding under the Syndicated Facility, respectively, which had a fair value of $495.0 million and $414.8 million, respectively. The Company's borrowings under the Syndicated Facility bore interest at a weighted average interest rate of 2.197%, 3.028% and 4.550% for the years ended September 30, 2021, 2020 and 2019, respectively. For the years ended September 30, 2021, 2020 and 2019, the Company recorded interest expense (inclusive of fees) of $13.8 million, $14.9 million and $17.1 million, respectively, related to the Syndicated Facility.
Citibank Facility
On March 19, 2021, as a result of the consummation of the Mergers, the Company became party to a revolving credit facility (as amended and/or restated from time to time, the “Citibank Facility”) with OCSL Senior Funding II LLC (formerly OCSI Senior Funding II LLC), the Company’s wholly-owned, special purpose financing subsidiary, as the borrower, the Company, as collateral manager and seller, each of the lenders from time to time party thereto, Citibank, N.A., as administrative agent, and Wells Fargo Bank, National Association, as collateral agent and custodian.
137
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




As of September 30, 2021, the Company was able to borrow up to $150 million under the Citibank Facility (subject to borrowing base and other limitations). As of September 30, 2021, the reinvestment period under the Citibank Facility was scheduled to expire on July 18, 2023 and the maturity date for the Citibank Facility was July 18, 2024. 
As of September 30, 2021, borrowings under the Citibank Facility are subject to certain customary advance rates and accrue interest at a rate equal to LIBOR plus between 1.25% and 2.20% per annum on broadly syndicated loans, subject to observable market depth and pricing, and LIBOR plus 2.25% per annum on all other eligible loans during the reinvestment period. In addition, as of September 30, 2021, for the duration of the reinvestment period there is a non-usage fee payable of 0.50% per annum on the undrawn amount under the Citibank Facility. The minimum asset coverage ratio applicable to the Company under the Citibank Facility is 150% as determined in accordance with the requirements of the Investment Company Act. Borrowings under the Citibank Facility are secured by all of the assets of OCSL Senior Funding II LLC and all of the Company’s equity interests in OCSL Senior Funding II LLC. The Company may use the Citibank Facility to fund a portion of its loan origination activities and for general corporate purposes. Each loan origination under the Citibank Facility is subject to the satisfaction of certain conditions.
As of September 30, 2021, the Company had $135.0 million outstanding under the Citibank Facility, which had a fair value of $135.0 million. The Company's borrowings under the Citibank Facility bore interest at a weighted average interest rate of 2.086% for the period from March 19, 2021 to September 30, 2021. For the period from March 19, 2021 to September 30, 2021, the Company recorded interest expense (inclusive of fees) of $1.9 million related to the Citibank Facility.
Deutsche Bank Facility
On March 19, 2021, as a result of the consummation of the Mergers, the Company became party to a loan financing and servicing agreement (as amended, the “Deutsche Bank Facility”) with OCSI Senior Funding Ltd., the Company’s wholly-owned, special purpose financing subsidiary, as borrower, the Company, as equityholder and as servicer, the lenders from time to time party thereto, Deutsche Bank AG, New York Branch, as facility agent, and Wells Fargo Bank, National Association, as collateral agent and as collateral custodian. On May 4, 2021, the Company repaid all outstanding borrowings under the Deutsche Bank Facility using borrowings under the Syndicated Credit Facility, following which the Deutsche Bank Facility was terminated. For the period from March 19, 2021 to May 4, 2021, the Company’s borrowings under the Deutsche Bank Facility bore interest at a weighted average interest rate of 2.900%. For the period from March 19, 2021 to September 30, 2021, the Company recorded interest expense (inclusive of fees) of $0.3 million related to the Deutsche Bank Facility.
2025 Notes
On February 25, 2020, the Company issued $300.0 million in aggregate principal amount of the 2025 Notes for net proceeds of $293.8 million after deducting OID of $2.5 million, underwriting commissions and discounts of $3.0 million and offering costs of $0.7 million. The OID on the 2025 Notes is amortized based on the effective interest method over the term of the 2025 Notes.
The 2025 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the fifth supplemental indenture, dated February 25, 2020 (collectively, the "2025 Notes Indenture"), between the Company and Deutsche Bank Trust Company Americas (the "Trustee"). The 2025 Notes are the Company's general unsecured obligations that rank senior in right of payment to all of the Company's existing and future indebtedness that is expressly subordinated in right of payment to the 2025 Notes. The 2025 Notes rank equally in right of payment with all of the Company's existing and future liabilities that are not so subordinated. The 2025 Notes effectively rank junior to any of the Company's secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness. The 2025 Notes rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company's subsidiaries, financing vehicles or similar facilities. 
Interest on the 2025 Notes is paid semi-annually on February 25 and August 25 at a rate of 3.500% per annum. The 2025 Notes mature on February 25, 2025 and may be redeemed in whole or in part at any time or from time to time at the Company's option prior to maturity at par plus a “make-whole” premium, if applicable. In addition, holders of the 2025 Notes can require the Company to repurchase the 2025 Notes at 100% of their principal amount upon the occurrence of certain change of control events as described in the 2025 Notes Indenture. The 2025 Notes were issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. During the year ended September 30, 2021, the Company did not repurchase any of the 2025 Notes in the open market.
The 2025 Notes Indenture contains certain covenants, including covenants requiring the Company's compliance with the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the Investment Company Act or any successor provisions (but giving effect to any exemptive relief granted to the Company by the U.S. Securities and Exchange Commission ("SEC")), as well as covenants requiring the Company to provide financial information to
138
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




the holders of the 2025 Notes and the Trustee if the Company ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These covenants are subject to limitations and exceptions that are described in the 2025 Notes Indenture.
2027 Notes
On May 18, 2021, the Company issued $350.0 million in aggregate principal amount of the 2027 Notes for net proceeds of $344.8 million after deducting OID of $1.0 million, underwriting commissions and discounts of $3.5 million and offering costs of $0.7 million. The OID on the 2027 Notes is amortized based on the effective interest method over the term of the 2027 Notes.
The 2027 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the sixth supplemental indenture, dated May 18, 2021 (collectively, the "2027 Notes Indenture"), between the Company and the Trustee. The 2027 Notes are the Company's general unsecured obligations that rank senior in right of payment to all of the Company's existing and future indebtedness that is expressly subordinated in right of payment to the 2027 Notes. The 2027 Notes rank equally in right of payment with all of the Company's existing and future liabilities that are not so subordinated. The 2027 Notes effectively rank junior to any of the Company's secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness. The 2027 Notes rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company's subsidiaries, financing vehicles or similar facilities.
Interest on the 2027 Notes is paid semi-annually on January 15 and July 15, beginning on January 15, 2022, at a rate of 2.700% per annum. The 2027 Notes mature on January 15, 2027 and may be redeemed in whole or in part at any time or from time to time at the Company's option prior to maturity at par plus a “make-whole” premium, if applicable. In addition, holders of the 2027 Notes can require the Company to repurchase the 2027 Notes at 100% of their principal amount upon the occurrence of certain change of control events as described in the 2027 Notes Indenture. The 2027 Notes were issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. During the year ended September 30, 2021, the Company did not repurchase any of the 2027 Notes in the open market.
The 2027 Notes Indenture contains certain covenants, including covenants requiring the Company's compliance with the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the Investment Company Act or any successor provisions (but giving effect to any exemptive relief granted to the Company by the SEC), as well as covenants requiring the Company to provide financial information to the holders of the 2027 Notes and the Trustee if the Company ceases to be subject to the reporting requirements of the Exchange Act. These covenants are subject to limitations and exceptions that are described in the 2027 Notes Indenture.
In connection with the 2027 Notes, the Company entered into an interest rate swap to more closely align the interest rates of its liabilities with its investment portfolio, which consists of predominately floating rate loans. Under the interest rate swap agreement, the Company receives a fixed interest rate of 2.700% and pays a floating interest rate of the three-month LIBOR plus 1.658% on a notional amount of $350 million. The Company designated the interest rate swap as the hedging instrument in an effective hedge accounting relationship. See Note 13 for more information regarding the interest rate swaps.
The below table presents the components of the carrying value of the 2025 Notes and the 2027 Notes as of September 30, 2021:
 As of September 30, 2021
($ in millions)2025 Notes2027 Notes
Principal$300.0 $350.0 
  Unamortized financing costs(2.6)(4.0)
  Unaccreted discount(1.7)(0.9)
  Interest rate swap fair value adjustment— (2.1)
Net carrying value$295.7 $343.0 
Fair Value$314.5 $351.1 
139
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




The below table presents the components of the carrying value of the 2025 Notes as of September 30, 2020:
 As of September 30, 2020
($ in millions)2025 Notes
Principal$300.0 
  Unamortized financing costs(3.3)
  Unaccreted discount(2.2)
Net carrying value$294.5 
Fair Value$301.4 
The below table presents the components of interest and other debt expenses related to the 2025 Notes and the 2027 Notes for the year ended September 30, 2021:
($ in millions)2025 Notes2027 Notes
Coupon interest$10.5 $3.5 
Amortization of financing costs and discount1.3 0.3 
Effect of interest rate swap — (1.1)
 Total interest expense$11.8 $2.7 
Coupon interest rate (net of effect of interest rate swap for 2027 Notes)3.500 %1.813 %
The below table presents the components of interest and other debt expenses related to the 2025 Notes for the year ended September 30, 2020:
($ in millions)2025 Notes
Coupon interest$6.3 
Amortization of financing costs and discount0.7 
 Total interest expense$7.0 
Coupon interest rate3.500 %
2024 Notes
On October 18, 2012, the Company issued $75.0 million in aggregate principal amount of the 5.875% notes due 2024 (the "2024 Notes") for net proceeds of $72.5 million after deducting underwriting commissions of $2.2 million and offering costs of $0.3 million. The 2024 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the first supplemental indenture, dated October 18, 2012, between the Company and the Trustee.
Interest on the 2024 Notes was paid quarterly in arrears on January 30, April 30, July 30 and October 30 at a rate of 5.875% per annum. On March 2, 2020, the Company redeemed 100%, or $75.0 million aggregate principal amount, of the issued and outstanding 2024 Notes, following which they were delisted from the New York Stock Exchange. The redemption price per 2024 Note was $25 plus accrued and unpaid interest. The Company recognized a loss of $1.0 million in connection with the redemption of the 2024 Notes during the year ended September 30, 2020.
For the years ended September 30, 2020 and 2019, the Company recorded interest expense of $1.9 million and $4.6 million (inclusive of fees), respectively, related to the 2024 Notes. As of September 30, 2021 and September 30, 2020, there were no 2024 Notes outstanding.
2028 Notes
In April and May 2013, the Company issued $86.3 million in aggregate principal amount of the 6.125% notes due 2028 (the "2028 Notes") for net proceeds of $83.4 million after deducting underwriting commissions of $2.6 million and offering costs of $0.3 million. The 2028 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the second supplemental indenture, dated April 4, 2013, between the Company and the Trustee.
Interest on the 2028 Notes was paid quarterly in arrears on January 30, April 30, July 30 and October 30 at a rate of 6.125% per annum. On March 13, 2020, the Company redeemed 100%, or $86.3 million aggregate principal amount, of the issued and outstanding 2028 Notes, following which they were delisted from the Nasdaq Global Select Market. The redemption price per 2028 Note was $25 plus accrued and unpaid interest. The Company recognized a loss of $1.5 million in connection with the redemption of the 2028 Notes during the year ended September 30, 2020.
140
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




For the year ended September 30, 2020 and 2019, the Company recorded interest expense of $2.5 million and $5.5 million (inclusive of fees), respectively, related to the 2028 Notes. As of September 30, 2021 and September 30, 2020, there were no 2028 Notes outstanding.
Secured Borrowings
As of September 30, 2021 and September 30, 2020, the Company did not have any secured borrowings outstanding. On March 19, 2021, as a result of the consummation of the Mergers, the Company became party to a secured borrowing arrangement under which certain securities were sold and simultaneously repurchased at a premium. The amounts due under the secured borrowing arrangement were settled prior to September 30, 2021. For the period from March 19, 2021 to September 30, 2021, the Company recorded less than $0.1 million of interest expense in connection with secured borrowings. The Company's secured borrowings bore interest at a weighted average rate of 3.123% for the period from March 19, 2021 to September 30, 2021.
During the year ended September 30, 2019, $7.2 million of secured borrowings were extinguished in exchange for $7.2 million of preferred stock in C5 Technology Holdings, LLC, which was restructured during the year. For the year ended September 30, 2019, the Company recorded interest expense of $0.1 million related to the secured borrowings. For the year ended September 30, 2019, the Company recorded unrealized depreciation on secured borrowings of $2.7 million. For the year ended September 30, 2019, the Company recorded a realized gain of $2.6 million as a result of the extinguishment of secured borrowings in connection with the C5 Technology Holdings, LLC restructuring.
Principal Payments
Scheduled principal payments for debt obligations as of September 30, 2021 are as follows:
 Payments due during fiscal years ended September 30,
 Total20222023202420252026 and Thereafter
Syndicated Facility$495,000 $— $— $— $— $495,000 
Citibank Facility135,000 — — 135,000 — — 
2025 Notes300,000 — — — 300,000 — 
2027 Notes350,000 — — — — 350,000 
Total$1,280,000 $— $— $135,000 $300,000 $845,000 

Note 7. Interest Income
 
As of September 30, 2021, there were no investments on non-accrual status. As of September 30, 2020, there were two investments on which the Company had stopped accruing cash and/or PIK interest or OID income. The percentages of the Company's debt investments at cost and fair value by accrual status as of September 30, 2020 were as follows: 
 September 30, 2020
 Cost% of Debt
Portfolio		Fair Value% of Debt
Portfolio
Accrual$1,500,364 98.79 %$1,483,284 99.89 %
PIK non-accrual (1)12,661 0.83 — — 
Cash non-accrual (2)5,712 0.38 1,571 0.11 
Total$1,518,737 100.00 %$1,484,855 100.00 %
 ___________________
(1)PIK non-accrual status is inclusive of other non-cash income, where applicable.
(2)Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.

 Note 8. Taxable/Distributable Income and Dividend Distributions
Taxable income differs from net increase (decrease) in net assets resulting from operations primarily due to: (1) unrealized appreciation (depreciation) on investments and foreign currency, as gains and losses are not included in taxable income until they are realized; (2) origination and exit fees received in connection with investments in portfolio companies; (3) organizational costs; (4) income or loss recognition on exited investments; and (5) recognition of interest income on certain loans.
141
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




As of September 30, 2021, the Company had net capital loss carryforwards of 547.9 million to offset net capital gains that will not expire, to the extent available and permitted by U.S. federal income tax law, of which $69.1 million are available to offset future short-term capital gains and $478.8 million are available to offset future long-term capital gains. A portion of such net capital loss carryfowards represented a realized loss under IRC 382-383, which is carried forward to future years to offset future gains subject to certain limitations.
Listed below is a reconciliation of "net increase (decrease) in net assets resulting from operations" to taxable income for the years ended September 30, 2021 and 2020.
Year ended
September 30,
2021		Year ended
September 30,
2020		Year ended
September 30,
2019
Net increase (decrease) in net assets resulting from operations$237,260 $39,224 $126,160 
Net unrealized (appreciation) depreciation(114,519)20,614 (38,457)
Book/tax difference due to organizational costs(87)(87)(87)
Book/tax difference due to interest income on certain loans— 1,214 3,330 
Book/tax difference due to capital losses utilized(41,625)(545)(18,571)
Other book/tax differences11,863 (6,058)(8,111)
Taxable/Distributable Income (1)$92,892 $54,362 $64,264 
 __________
(1) The Company's taxable income for the year ended September 30, 2021 is an estimate and will not be finally determined until the Company files its tax return for the fiscal year ended September 30, 2021. Therefore, the final taxable income may be different than the estimate.
The Company uses the liability method to account for its taxable subsidiaries' income taxes. Using this method, the Company recognizes deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences between financial reporting and tax bases of assets and liabilities. In addition, the Company recognizes deferred tax benefits associated with net loss carry forwards that it may use to offset future tax obligations. The Company measures deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which it expects to recover or settle those temporary differences.
When assessing the realizability of deferred tax assets, the Company considers whether it is probable that some or all of the deferred tax assets will not be realized. In determining whether the deferred tax assets are realizable, the Company considers the period of expiration of the tax asset, historical and projected taxable income and tax liabilities for the tax jurisdiction in which the tax asset is located. The deferred tax asset recognized by the Company, as it relates to the higher tax basis in the carrying value of certain assets compared to the book basis of those assets, will be recognized in future years by these taxable entities. Deferred tax assets are based on the amount of the tax benefit that the Company’s management has determined is more likely than not to be realized in future periods. In determining the realizability of this tax benefit, management considered numerous factors that will give rise to pre-tax income in future periods. Among these are the historical and expected future book and tax basis pre-tax income of the Company and unrealized gains in the Company’s assets at the determination date. Based on these and other factors, the Company determined that, as of September 30, 2021, $0.3 million of the $1.0 million deferred tax assets would not more likely than not be realized in future periods. As of September 30, 2021, the Company recorded a net deferred tax asset of $0.7 million on the Consolidated Statements of Assets and Liabilities.
For the year ended September 30, 2021, the Company recognized a total provision for income tax related to realized and unrealized gains of $0.8 million, which was composed of (i) a current income tax expense of approximately $0.7 million, and (ii) a deferred income tax expense of approximately $0.1 million, which resulted from unrealized appreciation on investments held by the Company’s wholly-owned taxable subsidiaries. For the year ended September 30, 2021, the Company recognized a provision for income tax related to net investment income of $2.8 million, which was all current income tax expense.
For the year ended September 30, 2020, the Company recognized a total provision for income tax benefit of $1.8 million, which was comprised of (i) a current income tax benefit of approximately $0.2 million, and (ii) a deferred income tax benefit of approximately $1.6 million, which resulted from unrealized depreciation on investments held by the Company’s wholly-owned taxable subsidiaries.
For the year ended September 30, 2019, the Company recognized a total provision for income taxes of $1.0 million, which was comprised of (i) current income tax expense of approximately $0.7 million, primarily as a result of realized gains on investments held by the Company's wholly-owned taxable subsidiaries, net of return to provision adjustments, and (ii) deferred income tax expense of approximately $0.3 million, which resulted from unrealized appreciation on investments held by the Company’s wholly-owned taxable subsidiaries.
142
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





For the year ended September 30, 2021, the Company reclassified $74.3 million, respectively, of accumulated overdistributed earnings to additional paid-in-capital on the Consolidated Statement of Assets and Liabilities related to the merger with OCSI. These reclassification entries did not impact total net assets.
As of September 30, 2021, the Company's last tax year end, the components of accumulated overdistributed earnings on a tax basis were as follows:
Undistributed ordinary income, net$(20,260)
Net realized capital losses497,255 
Unrealized losses, net16,340 
Accumulated overdistributed earnings$493,335 
The aggregate cost of investments for U.S. federal income tax purposes was $2.6 billion as of September 30, 2021. As of September 30, 2021, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over cost for U.S. federal income tax purposes was $409.5 million. As of September 30, 2021, the aggregate gross unrealized depreciation for all investments in which there was an excess of cost for U.S. federal income tax purposes over value was $425.8 million. Net unrealized depreciation based on the aggregate cost of investments for U.S. federal income tax purposes was $16.3 million.
Note 9. Realized Gains or Losses and Net Unrealized Appreciation or Depreciation
Realized Gains or Losses
Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption and the cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized, and include investments written-off during the period, net of recoveries. Realized losses may also be recorded in connection with the Company's determination that certain investments are considered worthless securities and/or meet the conditions for loss recognition per the applicable tax rules.
143
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




During the year ended September 30, 2021, the Company recorded an aggregate net realized gain of $26.4 million, which consisted of the following:
($ in millions)
Portfolio CompanyNet Realized Gain (Loss)
 PLATO Learning Inc.$7.8 
 Keypath Education Holdings, LLC6.8 
 L Squared Capital Partners LLC3.4 
 LTI Holdings, Inc.2.6 
 BX Commercial Mortgage Trust 2020-VIVA2.6 
 California Pizza Kitchen Inc.(1.8)
 Refac Optical Group(1.3)
 Other, net 6.3 
Total, net
$26.4 
During the year ended September 30, 2020, the Company recorded an aggregate net realized loss of $13.9 million, which consisted of the following:
($ in millions)
Portfolio CompanyNet Realized Gain (Loss)
Cenegenics, LLC
$(29.2)
Dominion Diagnostics, LLC
(15.6)
Thruline Marketing Inc.(4.9)
Covia Holdings Corporation
(3.3)
YETI Holdings, Inc.
17.6 
Sorrento Therapeutics, Inc.
11.5 
Lytx Holdings, LLC
5.2 
Goodrx Holdings Inc.2.1 
HealthEdge Software, Inc.
1.8 
Other, net
0.9 
Total, net
$(13.9)
During the year ended September 30, 2019, the Company recorded an aggregate net realized gain of $20.8 million, which consisted of the following:
($ in millions)
Portfolio CompanyNet Realized Gain (Loss)
 Maverick Healthcare Group, LLC
$17.5 
 BeyondTrust Holdings LLC
12.4 
 Comprehensive Pharmacy Services LLC
7.6 
 Refac Optical Group
7.5 
 YETI Holdings, Inc.
5.3 
 InMotion Entertainment Group, LLC
3.0 
 Advanced Pain Management
(22.5)
 Thing5, LLC (net of secured borrowings)
(11.1)
 Weatherford International
(3.3)
 Other, net
4.4 
Total, net
$20.8 

Net Unrealized Appreciation or Depreciation
Net unrealized appreciation or depreciation reflects the net change in the valuation of the portfolio pursuant to the Company's valuation guidelines and the reclassification of any prior period unrealized appreciation or depreciation.
144
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




During the years ended September 30, 2021, 2020 and 2019, the Company recorded net unrealized appreciation (depreciation) of $114.5 million, $(20.6) million and $38.5 million, respectively. For the year ended September 30, 2021, this consisted of $70.0 million of net unrealized appreciation on debt investments, $36.3 million of net unrealized appreciation on equity investments, $6.6 million of net unrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses) and $1.7 million of net unrealized appreciation of foreign currency forward contracts. For the year ended September 30, 2020, this consisted of $35.3 million of net unrealized depreciation on equity investments, $12.0 million of net unrealized depreciation on debt investments and $0.3 million of net unrealized depreciation of foreign currency forward contracts, partially offset by $26.9 million of net unrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses). For the year ended September 30, 2019, this consisted of $57.0 million of net unrealized appreciation related to exited investments (a portion of which results in a reclassification to realized losses), $10.6 million of net unrealized appreciation on equity investments and $0.3 million net unrealized appreciation of foreign currency forward contracts, partially offset by $26.8 million of net unrealized depreciation on debt investments and $2.7 million of net unrealized depreciation of secured borrowings (which results in a reclassification to realized gains).
For the year ended September 30, 2021, there were $22.8 million of net realized and unrealized gains (losses) that resulted solely from accounting adjustments related to the Mergers.
Note 10. Concentration of Credit Risks
The Company deposits its cash with financial institutions and at times such balances may be in excess of the FDIC insurance limit. The Company limits its exposure to credit loss by depositing its cash with high credit quality financial institutions and monitoring their financial stability.
Note 11. Related Party Transactions

As of September 30, 2021 and September 30, 2020, the Company had a liability on its Consolidated Statements of Assets and Liabilities in the amount of $32.6 million and $11.2 million, respectively, reflecting the unpaid portion of the base management fees and incentive fees payable to Oaktree.
Investment Advisory Agreement
The Company is party to the Investment Advisory Agreement. Under the Investment Advisory Agreement, the Company pays Oaktree a fee for its services under the Investment Advisory Agreement consisting of two components: a base management fee and an incentive fee. The cost of both the base management fee payable to Oaktree and any incentive fees earned by Oaktree is ultimately borne by common stockholders of the Company.
From October 17, 2017 through May 3, 2020, the Company was externally managed by OCM pursuant to an investment advisory agreement. On May 4, 2020, OCM effected the novation of such investment advisory agreement to Oaktree. Immediately following such novation, the Company and Oaktree entered into a new investment advisory agreement with the same terms, including fee structure, as the investment advisory agreement with OCM. The investment advisory agreement with Oaktree was subsequently amended and restated on March 19, 2021 in connection with the closing of the Mergers. The term “Investment Advisory Agreement” refers collectively to the agreements with Oaktree and, prior to its novation, with OCM.
Unless earlier terminated as described below, the Investment Advisory Agreement will remain in effect from year-to-year if approved annually by the Board of Directors of the Company or by the affirmative vote of the holders of a majority of the Company’s outstanding voting securities, including, in either case, approval by a majority of the directors of the Company who are not interested persons. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. The Investment Advisory Agreement may also be terminated, without penalty, upon the vote of a majority of the outstanding voting securities of the Company.
Base Management Fee

Under the Investment Advisory Agreement, the base management fee is calculated at an annual rate of 1.50% of total gross assets, including any investment made with borrowings, but excluding cash and cash equivalents. The base management fee is payable quarterly in arrears and the fee for any partial month or quarter is appropriately prorated. Effective May 3, 2019, the base management fee on the Company’s gross assets, including any investments made with borrowings, but excluding any cash and cash equivalents, that exceed the product of (A) 200% and (B) the Company’s net asset value will be 1.00%. For the avoidance of doubt, the 200% will be calculated in accordance with the Investment Company Act and will give effect to
145
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




exemptive relief the Company received from the SEC with respect to debentures issued by a small business investment company subsidiary. In connection with the Mergers, the Company and Oaktree entered into an amended and restated investment advisory agreement, which among other items, waived an aggregate of $6 million of base management fees otherwise payable to Oaktree in the two years following the closing of the Mergers on March 19, 2021 at a rate of $750,000 per quarter (with such amount appropriately prorated for any partial quarter).
For the years ended September 30, 2021, 2020 and 2019, the base management fee incurred under the Investment Advisory Agreement was $30.7 million (net of waiver), $22.9 million and $22.2 million, respectively.
Incentive Fee

The incentive fee consists of two parts. Under the Investment Advisory Agreement, the first part of the incentive fee (the “incentive fee on income” or "Part I incentive fee") is calculated and payable quarterly in arrears based upon the “pre-incentive fee net investment income” of the Company for the immediately preceding quarter. The payment of the incentive fee on income is subject to payment of a preferred return to investors each quarter (i.e., a “hurdle rate”), expressed as a rate of return on the value of the Company’s net assets at the end of the most recently completed quarter, of 1.50%, subject to a “catch up” feature.
For this purpose, “pre-incentive fee net investment income” means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies, other than fees for providing managerial assistance) accrued during the fiscal quarter, minus the Company’s operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as OID debt, instruments with PIK interest and zero coupon securities), accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. In addition, pre-incentive fee net investment income does not include any amortization or accretion of any purchase premium or purchase discount to interest income resulting solely from merger-related accounting adjustments in connection with the assets acquired in the Mergers, including any premium or discount paid for the acquisition of such assets, solely to the extent that the inclusion of such merger-related accounting adjustments, in the aggregate, would result in an increase in pre-incentive fee net investment income.

Under the Investment Advisory Agreement, the calculation of the incentive fee on income for each quarter is as follows:

•No incentive fee is payable to Oaktree in any quarter in which the Company’s pre-incentive fee net investment income does not exceed the preferred return rate of 1.50% (the “preferred return”) on net assets;
•100% of the Company’s pre-incentive fee net investment income, if any, that exceeds the preferred return but is less than or equal to 1.8182% in any fiscal quarter is payable to Oaktree. This portion of the incentive fee on income is referred to as the “catch-up” provision, and it is intended to provide Oaktree with an incentive fee of 17.5% on all of the Company’s pre-incentive fee net investment income when the Company’s pre-incentive fee net investment income exceeds 1.8182% on net assets in any fiscal quarter; and
•For any quarter in which the Company’s pre-incentive fee net investment income exceeds 1.8182% on net assets, the incentive fee on income is equal to 17.5% of the amount of the Company’s pre-incentive fee net investment income, as the preferred return and catch-up will have been achieved.

There is no accumulation of amounts on the hurdle rate from quarter to quarter and accordingly there is no clawback of amounts previously paid if subsequent quarters are below the quarterly hurdle.

For the years ended September 30, 2021, 2020 and 2019, the first part of the incentive fee (incentive fee on income) incurred under the Investment Advisory Agreement was $21.6 million, $15.2 million and $14.9 million, respectively.
Under the Investment Advisory Agreement, the second part of the incentive fee (the "capital gains incentive fee") is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Investment Advisory Agreement, as of the termination date) commencing with the fiscal year ended September 30, 2019 and equals 17.5% of the Company’s realized capital gains, if any, on a cumulative basis from the beginning of the fiscal year ended September 30, 2019 through the end of each subsequent fiscal year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees under the Investment Advisory Agreement. Any realized capital gains, realized capital losses, unrealized capital appreciation and unrealized capital depreciation with respect to the Company’s portfolio as of the end of the fiscal year ended September 30, 2018 are excluded from the calculations of the second part of the incentive fee. In addition, the calculation of realized capital gains, realized capital
146
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




losses and unrealized capital depreciation does (1) not include any such amounts resulting solely from merger-related accounting adjustments in connection with the assets acquired in the Mergers, including any premium or discount paid for the acquisition of such assets, solely to the extent that the inclusion of such merger-related accounting adjustments, in the aggregate, would result in an increase in the capital gains incentive fee and (2) include any such amounts associated with the investments acquired in the Mergers for the period from October 1, 2018 to the date of closing of the Mergers, solely to the extent that the exclusion of such amounts, in the aggregate, would result in an increase in the capital gains incentive fee. For the year ended September 30, 2021, the Company incurred $8.8 million of capital gains incentive fees under the Investment Advisory Agreement. For the year ended September 30, 2020, the Company did not incur any capital gains incentive fees under the Investment Advisory Agreement. For the year ended September 30, 2019, the Company incurred $4.6 million of capital gains incentive fees under the Investment Advisory Agreement (prior to waivers).

GAAP requires that the capital gains incentive fee accrual consider the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized on a theoretical "liquidation basis." A fee so calculated and accrued would not be payable under applicable law and may never be paid based upon the computation of capital gains incentive fees in subsequent periods. Amounts ultimately paid under the Investment Advisory Agreement will be consistent with the formula reflected in the Investment Advisory Agreement. This GAAP accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital depreciation included in the calculation of the capital gains incentive fee plus the aggregate cumulative unrealized capital appreciation. Any realized capital gains and losses and cumulative unrealized capital appreciation and depreciation with respect to the Company’s portfolio as of the end of the fiscal year ended September 30, 2018 are excluded from the GAAP accrual. If such amount is positive at the end of a period, then GAAP requires the Company to record a capital gains incentive fee equal to 17.5% of such cumulative amount, less the aggregate amount of actual capital gains incentive fees payable or capital gains incentive fees accrued under GAAP in all prior periods. The resulting accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reversal 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. There can be no assurance that such unrealized capital appreciation will be realized in the future or any accrued capital gains incentive fee will become payable under the Investment Advisory Agreement.

For the year ended September 30, 2021, $17.6 million of accrued capital gains incentive fees were expensed. For the year ended September 30, 2020, the Company reversed $5.6 million of previously accrued capital gains incentive fees. For the year ended September 30, 2019, $10.2 million of accrued capital gains incentive fees were expensed (prior to waivers). As of September 30, 2021, the total accrued capital gains incentive fee liability was $17.6 million.

To ensure compliance with Section 15(f) of the Investment Company Act, OCM entered into a two-year contractual fee waiver with the Company, which ended on October 17, 2019, pursuant to which OCM waived any management or incentive fees payable under the Investment Advisory Agreement that exceeded what would have been paid to Fifth Street Management LLC (the "Former Adviser") in the aggregate under the investment advisory agreement by and between the Company and the Former Advisor. The contractual amount of fees permanently waived at the end of the two-year period was $3.9 million. Prior to the end of the two-year period, amounts potentially subject to waiver under the two-year contractual fee waiver were accrued quarterly based on a theoretical “liquidation basis.” As of September 30, 2019, the Company had accrued cumulative fee waivers of $9.1 million. During the year ended September 30, 2020, the Company reversed $5.2 million of previously accrued fee waivers since the two-year fee waiver period ended.

The following table provides a roll-forward of the accrued waiver balance and illustrates the impact of the end of the two-year contractual fee waiver period:
($ in millions)
Accrued fee waivers as of September 30, 2019 (1)$9.1 
Reversal of previously accrued fee waivers (2)(5.2)
Contractual fees waived under the Investment Advisory Agreement (3)(3.9)
Accrued fee waivers as of September 30, 2020$— 
(1)Calculated in accordance with GAAP as of September 30, 2019 and is based on a hypothetical liquidation basis.
(2)Reflects the reversal of fee waivers that were previously accrued based on a hypothetical liquidation basis when the two-year contractual fee waiver was in effect. This reversal was recognized in connection with the expiration of the two-year contractual fee waiver, which ended on October 17, 2019, and is reflected in reversal of fees waived in the Consolidated Statement of Operations for the year ended September 30, 2020.
(3)Reflects the amount of fees permanently waived pursuant to the two-year contractual fee waiver.

147
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




The following table shows the capital gains incentive fee payable under the Investment Advisory Agreement (net of waivers) for the years ended September 30, 2021, 2020 and 2019:
($ in millions) September 30, 2019 (1) September 30, 2020September 30, 2021
Capital gains incentive fee payable under the Investment Advisory Agreement (prior to waivers)$4.6 $— $8.8 
Contractual fees waived(3.9)— — 
Capital gains incentive fee payable under the Investment Advisory Agreement (net of waivers)$0.8 $— $8.8 
(1)Amounts may not sum due to rounding.
Indemnification

The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of their respective duties or by reason of the reckless disregard of their respective duties and obligations, Oaktree and its officers, managers, partners, members (and their members, including the owners of their members), agents, employees, controlling persons and any other person or entity affiliated with it, are entitled to indemnification from the Company for any damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) arising from the rendering of Oaktree's services under the Investment Advisory Agreement or otherwise as investment adviser.
Administrative Services
The Company is party to the Administration Agreement with Oaktree Administrator. Pursuant to the Administration Agreement, Oaktree Administrator provides administrative services to the Company necessary for the operations of the Company, which include providing office facilities, equipment, clerical, bookkeeping and record keeping services at such facilities and such other services as Oaktree Administrator, subject to review by the Company’s Board of Directors, shall from time to time deem to be necessary or useful to perform its obligations under the Administration Agreement. Oaktree Administrator may, on behalf of the Company, conduct relations and negotiate agreements with custodians, trustees, depositories, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable. Oaktree Administrator makes reports to the Company’s Board of Directors of its performance of obligations under the Administration Agreement and furnishes advice and recommendations with respect to such other aspects of the Company’s business and affairs, in each case, as it shall determine to be desirable or as reasonably required by the Company’s Board of Directors; provided that Oaktree Administrator shall not provide any investment advice or recommendation.
Oaktree Administrator also provides portfolio collection functions for interest income, fees and warrants and is responsible for the financial and other records that the Company is required to maintain and prepares, prints and disseminates reports to the Company’s stockholders and all other materials filed with the SEC. In addition, Oaktree Administrator assists the Company in determining and publishing the Company’s net asset value, overseeing the preparation and filing of the Company’s tax returns, and generally overseeing the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. Oaktree Administrator may also offer to provide, on the Company’s behalf, managerial assistance to the Company’s portfolio companies.
For providing these services, facilities and personnel, the Company reimburses Oaktree Administrator the allocable portion of overhead and other expenses incurred by Oaktree Administrator in performing its obligations under the Administration Agreement, including the Company’s allocable portion of the rent of the Company’s principal executive offices (which are located in a building owned by a Brookfield affiliate) at market rates and the Company’s allocable portion of the costs of compensation and related expenses of its Chief Financial Officer, Chief Compliance Officer, their staffs and other non-investment professionals at Oaktree that perform duties for the Company. Such reimbursement is at cost, with no profit to, or markup by, Oaktree Administrator. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. The Administration Agreement may also be terminated, without penalty, upon the vote of a majority of the Company’s outstanding voting securities.
For the years ended September 30, 2021, 2020 and 2019, the Company accrued administrative expenses of $1.7 million, $1.8 million and $2.3 million, respectively, including $0.2 million, $0.3 million and $0.3 million of general and administrative expenses, respectively.
148
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




As of September 30, 2021 and September 30, 2020, $4.4 million and $2.1 million, respectively, was included in “Due to affiliate” in the Consolidated Statements of Assets and Liabilities, reflecting the unpaid portion of administrative expenses and other reimbursable expenses payable to Oaktree Administrator.

149
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




Note 12. Financial Highlights
(Share amounts in thousands)Year ended
September 30,
2021		Year ended
September 30,
2020		Year ended
September 30,
2019		Year ended
September 30,
2018 (1)		Year ended
September 30,
2017
Net asset value per share at beginning of period$6.49$6.60$6.09$6.16$7.97
Net investment income (2)0.600.510.480.430.51
Net unrealized appreciation (depreciation) (2)(3)0.73(0.14)0.270.73(0.69)
Net realized gains (losses) (2)0.16(0.10)0.14(0.83)(1.21)
(Provision) benefit for taxes on realized and unrealized gains (losses) (2)—0.01———
Distributions of net investment income to stockholders(0.51)(0.39)(0.38)(0.27)(0.47)
Tax return of capital———(0.13)—
Issuance of common stock(0.19)———0.05
Net asset value per share at end of period$7.28$6.49$6.60$6.09$6.16
Per share market value at beginning of period$4.84$5.18$4.96$5.47$5.81
Per share market value at end of period$7.06$4.84$5.18$4.96$5.47
Total return (4)57.61%2.10%12.56%(1.49)%2.84%
Common shares outstanding at beginning of period140,961140,961140,961140,961143,259
Common shares outstanding at end of period180,361140,961140,961140,961140,961
Net assets at beginning of period$914,879$930,630$858,035$867,657$1,142,288
Net assets at end of period$1,312,823$914,879$930,630$858,035$867,657
Average net assets (5)$1,150,662$871,305$909,264$841,583$1,018,498
Ratio of net investment income to average net assets (5)8.44%8.26%7.47%7.13%7.13%
Ratio of total expenses to average net assets (5)9.65%7.57%9.65%9.51%10.49%
Ratio of net expenses to average net assets (5)9.51%8.16%8.78%9.35%10.35%
Ratio of portfolio turnover to average investments at fair value39.66%38.99%32.50%67.66%39.06%
Weighted average outstanding debt (6)$964,390$647,080$573,891$608,553$982,372
Average debt per share (2)$5.95$4.59$4.07$4.32$6.95
Asset coverage ratio at end of period (7)201.68%227.22%294.91%232.98%227.40%
 __________
(1)Beginning on October 17, 2017, the Company is externally managed by Oaktree or its affiliates. Prior to October 17, 2017, the Company was externally managed by the Former Adviser.
(2)Calculated based upon weighted average shares outstanding for the period.
(3)For the year ended September 30, 2021, the amount shown for net unrealized appreciation (depreciation) includes the effect of the timing of common stock issuances in connection with the Mergers.
(4)Total return equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value, assuming dividend reinvestment prices obtained under the Company's DRIP. Total return does not include sales load.
(5)Calculated based upon the weighted average net assets for the period.
(6)Calculated based upon the weighted average of principal debt outstanding for the period.
(7)
Based on outstanding senior securities of $1,280.0 million, $714.8 million, $476.1 million, $643.4 million and $680.7 million as of September 30, 2021, 2020, 2019, 2018 and 2017, respectively.
150
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




Senior Securities
Information about our senior securities (including debt securities and other indebtedness) is shown in the following table as of the fiscal years ended September 30 for the years indicated below. We had no senior securities outstanding as of September 30 of any prior fiscal years prior to those indicated below.
Class and Year(1)Total Amount Outstanding Exclusive of Treasury Securities (2)Asset Coverage Per Unit(3)Involuntary Liquidating Preference Per Unit(4)Average Market Value Per Unit(5)
Syndicated Facility and Prior ING Facility
Fiscal 2012$141,000 3,857 — N/A
Fiscal 2013168,000 3,949 — N/A
Fiscal 2014267,395 2,595 — N/A
Fiscal 2015383,495 2,389 — N/A
Fiscal 2016472,495 2,208 — N/A
Fiscal 2017226,495 2,274 — N/A
Fiscal 2018241,000 2,330 — N/A
Fiscal 2019314,825 2,949 — N/A
Fiscal 2020414,825 2,272 — N/A
Fiscal 2021495,000 2,017 — N/A
Citibank Facility
Fiscal 2021$135,000 2,017 
Wells Fargo Facility
Fiscal 2012$60,251 3,857 — N/A
Fiscal 201320,000 3,949 — N/A
Sumitomo Facility
Fiscal 2012$— 3,857 — N/A
Fiscal 2013— 3,949 — N/A
Fiscal 201450,000 2,595 — N/A
Fiscal 201543,800 2,389 — N/A
Fiscal 201643,800 2,208 — N/A
Fiscal 201729,500 2,274 — N/A
Convertible Notes
Fiscal 2012$115,000 3,857 — N/A
Fiscal 2013115,000 3,949 — N/A
Fiscal 2014115,000 2,595 — N/A
Fiscal 2015115,000 2,389 — N/A
Secured Borrowings
Fiscal 2014$84,750 2,595 — N/A
Fiscal 201521,787 2,389 — N/A
Fiscal 201618,929 2,208 — N/A
Fiscal 201713,489 2,274 — N/A
Fiscal 201812,314 2,330 — N/A
151
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




Class and Year(1)Total Amount Outstanding Exclusive of Treasury Securities (in thousands)(2)Asset Coverage Per Unit(3)Involuntary Liquidating Preference Per Unit(4)Average Market Value Per Unit(5)
2019 Notes
Fiscal 2014$250,000 2,595 — N/A
Fiscal 2015250,000 2,389 — N/A
Fiscal 2016250,000 2,208 — N/A
Fiscal 2017250,000 2,274 — N/A
Fiscal 2018228,825 2,330 — N/A
2024 Notes
Fiscal 2013$75,000 3,949 — 979.45 
Fiscal 201475,000 2,595 — 966.96 
Fiscal 201575,000 2,389 — 991.94 
Fiscal 201675,000 2,208 — 993.70 
Fiscal 201775,000 2,274 — 1,006.74 
Fiscal 201875,000 2,330 — 1,010.72 
Fiscal 201975,000 2,949 — 1,012.76 
2025 Notes
Fiscal 2020$300,000 2,272 — N/A
Fiscal 2021300,000 2,017 — N/A
2027 Notes
Fiscal 2021$350,000 2,017 — N/A
2028 Notes
Fiscal 2013$86,250 3,949 — 957.21 
Fiscal 201486,250 2,595 — 943.73 
Fiscal 201586,250 2,389 — 988.06 
Fiscal 201686,250 2,208 — 999.29 
Fiscal 201786,250 2,274 — 1,007.51 
Fiscal 201886,250 2,330 — 994.82 
Fiscal 201986,250 2,949 — 993.33 
Total Senior Securities
Fiscal 2012$316,251 3,857 — 
Fiscal 2013464,250 3,949 — 
Fiscal 2014928,395 2,595 — 
Fiscal 2015975,332 2,389 — 
Fiscal 2016946,474 2,208 — 
Fiscal 2017680,734 2,274 — 
Fiscal 2018643,389 2,330 — 
Fiscal 2019476,075 2,949 — 
Fiscal 2020714,825 2,272 — 
Fiscal 20211,280,000 2,017 — 

152
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




______________ 
(1)This table excludes any SBA-guaranteed debentures outstanding during the relevant periods because the SEC has granted the Company exemptive relief that permits it to exclude such debentures from the definition of senior securities in the asset coverage ratio the Company is required to maintain under the Investment Company Act.
(2)Total amount of each class of senior securities outstanding at the end of the period, presented in thousands.
(3)The asset coverage ratio for a class of senior securities representing indebtedness is calculated as the Company's consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the “Asset Coverage Per Unit.”
(4)The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it. The “-” indicates information that the Securities and Exchange Commission expressly does not require to be disclosed for certain types of senior securities.
(5)Calculated on a daily average basis.
153
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Note 13. Derivative Instruments
The Company enters into foreign currency forward contracts from time to time to help mitigate the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies. In order to better define its contractual rights and to secure rights that will help the Company mitigate its counterparty risk, the Company entered into an International Swaps and Derivatives Association, Inc. Master Agreement (the "ISDA Master Agreement") with its derivative counterparty, JPMorgan Chase Bank, N.A. The ISDA Master Agreement permits a single net payment in the event of a default or similar event. As of September 30, 2021, no cash collateral has been pledged to cover obligations and no cash collateral has been received from the counterparty with respect to the Company's forward currency contracts.
During the year ended September 30, 2021, in connection with the issuance of the 2027 Notes, the Company entered into an interest rate swap agreement with the Royal Bank of Canada pursuant to an ISDA Master Agreement. As of September 30, 2021, the Company paid $1.6 million to the Royal Bank of Canada to cover collateral obligations under the terms of the interest swap agreement, which is included in due from broker on the Consolidated Statement of Assets and Liabilities.
Certain information related to the Company’s foreign currency forward contracts is presented below as of September 30, 2021.
DescriptionNotional Amount to be PurchasedNotional Amount to be SoldMaturity DateGross Amount of Recognized AssetsGross Amount of Recognized LiabilitiesBalance Sheet Location of Net Amounts
Foreign currency forward contract$52,186 £37,709 11/12/2021$1,339 $— Derivative asset
Foreign currency forward contract$46,663 €39,736 11/12/2021$573 $— Derivative asset
$1,912 $— 
Certain information related to the Company’s foreign currency forward contracts is presented below as of September 30, 2020.
DescriptionNotional Amount to be PurchasedNotional Amount to be SoldMaturity DateGross Amount of Recognized AssetsGross Amount of Recognized LiabilitiesBalance Sheet Location of Net Amounts
Foreign currency forward contract$35,577 £27,494 11/12/2020$25 $— Derivative asset
Foreign currency forward contract$30,260 €25,614 11/12/2020$198 $— Derivative asset
$223 $— 
Certain information related to the Company’s interest rate swap is presented below as of September 30, 2021.
DescriptionNotional Amount Maturity DateGross Amount of Recognized AssetsGross Amount of Recognized LiabilitiesBalance Sheet Location of Net Amounts
Interest rate swap$350,000 1/15/2027$— $2,108 Derivative liability
$— $2,108 
There was no interest rate swap as of September 30, 2020.

Note 14. Commitments and Contingencies
Merger Litigation
On December 18, 2020, putative stockholder Oklahoma Firefighters Pension and Retirement System filed a complaint on behalf of itself and all other similarly situated holders of the Company’s common stock and derivatively on behalf of the Company as nominal defendant in the Delaware Court of Chancery, captioned Oklahoma Firefighters Pension and Retirement System v. Frank, et al., No. 2020-1075-VCM (Del. Ch.). This lawsuit is referred to herein as the “Merger Litigation”. The Merger Litigation alleges a direct breach of fiduciary duty claim against the Board of Directors in connection with the solicitation of the approval by the Company’s stockholders of the issuance of shares of the Company’s common stock to be issued pursuant to the Merger Agreement and a derivative breach of fiduciary duty claim against the Board of Directors in connection with its negotiation and approval of the Mergers. The Merger Litigation alleges, among other things, that the members of the Board of Directors had certain conflicts of interest in the negotiation and approval of the Mergers and that the
154
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




initial filing of the joint proxy statement/prospectus relating to the Mergers omitted certain information that the plaintiff claims is material. The Merger Litigation, among other things, requested that the court enjoin the vote of the Company’s stockholders with respect to the approval of the issuance of shares of the Company’s common stock to be issued pursuant to the Merger Agreement and award attorneys’ fees and damages in an unspecified amount. On February 16, 2021, the plaintiff withdrew the request that the court enjoin the vote of the Company’s stockholders. On April 26, 2021, putative stockholder Oklahoma Firefighters Pension and Retirement System filed a proposed order voluntarily dismissing its claims surrounding the Mergers, with prejudice as to the plaintiff and without prejudice as to any other stockholder of the Company.
The court entered the order of dismissal on May 10, 2021. The Court retained jurisdiction solely for the purpose of adjudicating the anticipated application of plaintiff’s counsel for an award of attorneys’ fees and reimbursement of expenses in connection with the supplemental disclosures included in the amended joint proxy statement/prospectus. The Company subsequently agreed to pay $0.4 million to plaintiff’s counsel for attorneys’ fees and expenses in full satisfaction of the claim for attorneys’ fees and expenses in the action.
For the year ended September 30, 2021, the Company recognized a $0.4 million loss in connection with the litigation matter described above. In connection with the lawsuit, the Company incurred professional fees of $0.8 million during the year ended September 30, 2021. Additionally, the Company determined that it is probable that it will receive $0.7 million of insurance recoveries in connection with such loss and professional fees incurred and has recognized such amount for the year ended September 30, 2021. The Company received such insurance recoveries subsequent to September 30, 2021.
Off-Balance Sheet Arrangements
The Company may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its portfolio companies. As of September 30, 2021, the Company's only off-balance sheet arrangements consisted of $264.9 million of unfunded commitments, which was comprised of $212.4 million to provide debt and equity financing to certain of its portfolio companies, $49.0 million to provide financing to the JVs and $3.5 million related to unfunded limited partnership interests. As of September 30, 2020, the Company's only off-balance sheet arrangements consisted of $157.5 million of unfunded commitments, which was comprised of $152.7 million to provide debt financing to certain of its portfolio companies, $1.3 million to provide equity financing to SLF JV I and $3.5 million related to unfunded limited partnership interests. Such commitments are subject to the portfolio companies' satisfaction of certain financial and nonfinancial covenants and may involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Company's Consolidated Statements of Assets and Liabilities.
155
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)




A list of unfunded commitments by investment (consisting of revolvers, term loans with delayed draw components, subordinated notes and LLC equity interests in the JVs, preferred stock and limited partnership interests) as of September 30, 2021 and September 30, 2020 is shown in the table below:
September 30, 2021September 30, 2020
Senior Loan Fund JV I, LLC$35,000 $1,328 
Assembled Brands Capital LLC24,868 36,079 
Athenex, Inc.21,072 22,780 
Marinus Pharmaceuticals, Inc.18,349 — 
RumbleOn, Inc.16,301 — 
Ardonagh Midco 3 PLC14,892 3,007 
OCSI Glick JV LLC13,998 — 
Dominion Diagnostics, LLC11,148 5,887 
Gulf Operating, LLC10,064 — 
Coty Inc.9,886 — 
Latam Airlines Group S.A.7,267 — 
Sunland Asphalt & Construction, LLC6,492 — 
NeuAG, LLC5,441 4,382 
Olaplex, Inc.4,806 1,917 
Mindbody, Inc.4,000 3,048 
OTG Management, LLC3,789 — 
BAART Programs, Inc.3,583 — 
Pluralsight, LLC3,532 — 
Pingora MSR Opportunity Fund I-A, LP3,500 3,500 
MHE Intermediate Holdings, LLC3,466 — 
Dialyze Holdings, LLC3,431 — 
SIO2 Medical Products, Inc.3,406 — 
SumUp Holdings Luxembourg S.À.R.L.3,350 — 
Accupac, Inc.3,267 2,346 
CorEvitas, LLC3,235 5,189 
MRI Software LLC2,699 7,239 
Thrasio, LLC2,578 — 
PRGX Global, Inc.2,518 — 
Berner Food & Beverage, LLC2,475 — 
4 Over International, LLC2,300 — 
Relativity ODA LLC2,218 — 
Acquia Inc.2,061 2,240 
The Avery1,850 — 
Apptio, Inc.1,338 1,538 
Coyote Buyer, LLC1,333 942 
Telestream Holdings Corporation1,266 — 
Ministry Brands, LLC1,100 425 
109 Montgomery Owner LLC937 — 
Digital.AI Software Holdings, Inc.898 — 
Thermacell Repellents, Inc.833 — 
GKD Index Partners, LLC320 231 
CircusTrix Holdings, LLC37 — 
WPEngine, Inc.— 26,348 
NuStar Logistics, L.P.— 17,911 
A.T. Holdings II SÀRL— 7,541 
New IPT, Inc.— 2,229 
iCIMs, Inc.— 882 
Immucor, Inc.— 541 
Total
$264,904 $157,530 

156
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Note 15. Merger with OCSI

On March 19, 2021, the Company completed its previously announced acquisition of OCSI. The Company was the accounting survivor of the Mergers. In accordance with the terms of the Merger Agreement, at the effective time of the Merger, each outstanding share of OCSI common stock was converted into the right to receive 1.3371 shares of common stock of the Company (with OCSI stockholders receiving cash in lieu of fractional shares of the Company’s common stock). As a result of the Merger, the Company issued an aggregate of 39,400,011 shares of its common stock to former OCSI stockholders.

The Mergers were accounted for as an asset acquisition in accordance with the asset acquisition method of accounting as detailed in ASC 805-50, Business Combinations—Related Issues ("ASC 805"). The Company determined the fair value of the shares of the Company's common stock that were issued to former OCSI stockholders pursuant to the Merger Agreement plus transaction costs to be the consideration paid in connection with the Mergers under ASC 805. The consideration paid to OCSI stockholders was less than the aggregate fair values of the assets acquired and liabilities assumed, which resulted in a purchase discount (the “purchase discount”). The consideration paid was allocated to the individual assets acquired and liabilities assumed based on the relative fair values of net identifiable assets acquired other than “non-qualifying” assets (for example, cash) and did not give rise to goodwill. As a result, the purchase discount was allocated to the cost basis of the OCSI investments acquired by the Company on a pro-rata basis based on their relative fair values as of the effective time of the Mergers. Immediately following the Mergers, the investments were marked to their respective fair values in accordance with ASC 820 which resulted in $34.1 million of unrealized appreciation in the Consolidated Statement of Operations as a result of the Mergers. The purchase discount allocated to the debt investments acquired will accrete over the life of each respective debt investment through interest income, with a corresponding adjustment recorded to unrealized appreciation on such investment acquired through its ultimate disposition. The purchase discount allocated to equity investments acquired will not amortize over the life of such investments through interest income and, assuming no subsequent change to the fair value of the equity investments acquired and disposition of such equity investments at fair value, the Company will recognize a realized gain with a corresponding reversal of the unrealized appreciation on disposition of such equity investments acquired. The Mergers were considered a tax-free reorganization and the Company has elected to carry forward the historical cost basis of the acquired OCSI investments for U.S. federal tax purposes.

The following table summarizes the allocation of the consideration paid to the assets acquired and liabilities assumed as a result of the Mergers:

Common stock issued by the Company$242,704 
Transaction costs1,593 
Consideration paid$244,297 
Investments$470,155 
Cash and cash equivalents20,945 
Other assets8,995 
Total assets acquired500,095 
Debt249,098 
Other liabilities6,700 
Total liabilities assumed255,798 
Net assets acquired$244,297 

157
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Note 16. Subsequent Events
The Company’s management evaluated subsequent events through the date of issuance of the Consolidated Financial Statements. There have been no subsequent events that occurred during such period that would require disclosure in, or would be required to be recognized in the Consolidated Financial Statements as of and for the year ended September 30, 2021, except as discussed below.
Distribution Declaration
On October 13, 2021, the Company’s Board of Directors declared a quarterly distribution of $0.155 per share, payable in cash on December 31, 2021 to stockholders of record on December 15, 2021.


158

Schedule 12-14
Oaktree Specialty Lending Corporation
Schedule of Investments in and Advances to Affiliates
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Year ended September 30, 2021

Portfolio Company/Type of Investment (1) Cash Interest Rate IndustryPrincipalNet Realized Gain (Loss)Amount of
Interest,
Fees or
Dividends
Credited in
Income (2)		Fair Value
as of October 1,
2020		Gross
Additions (3)		Gross
Reductions (4)		Fair Value
as of June 30, 2021		% of Total Net Assets
Control Investments
C5 Technology Holdings, LLCData Processing & Outsourced Services
829 Common Units$— $— $— $— $— $— — %
34,984,460.37 Preferred Units— — 27,638 — — 27,638 2.1 %
Dominion Diagnostics, LLCHealth Care Services
First Lien Term Loan, LIBOR+5.00% cash due 2/28/20246.00 %$27,381 — 1,726 27,660 — (279)27,381 2.1 %
First Lien Revolver, LIBOR+5.00% cash due 2/28/2024— — 275 5,260 2,439 (7,699)— — %
30,030.8 Common Units in DD Healthcare Services Holdings, LLC— 2,795 7,667 10,398 — 18,065 1.4 %
First Star Speir Aviation Limited (5)Airlines
First Lien Term Loan, 9.00% cash due 12/15/20257,500 — — 11,510 — (4,010)7,500 0.6 %
100% equity interest— 763 1,622 1,244 (2,168)698 0.1 %
New IPT, Inc.Oil & Gas Equipment & Services
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021 — — 42 1,800 504 (2,304)— — %
First Lien Revolver, LIBOR+5.00% cash due 3/17/2021 — — 17 788 221 (1,009)— — %
50.087 Class A Common Units in New IPT Holdings, LLC — — — — — — — %
OCSI Glick JV LLC (6)Multi-Sector Holdings
Subordinated Debt, LIBOR+4.50% cash due 10/20/20284.60 %61,709 — 2,401 — 56,693 (1,111)55,582 4.2 %
87.5% equity interest— — — — — — — %
Senior Loan Fund JV I, LLC (7)Multi-Sector Holdings
Subordinated Debt, LIBOR+7.00% cash due 12/29/20288.00 %96,250 — 7,388 96,250 — — 96,250 7.3 %
87.5% LLC equity interest— 903 21,190 16,461 — 37,651 2.9 %
Total Control Investments$192,840 $— $16,310 $201,385 $87,960 $(18,580)$270,765 20.6 %
Affiliate Investments
Assembled Brands Capital LLC Specialized Finance
First Lien Revolver, LIBOR+6.00% cash due 10/17/20237.00 %$15,899 $— $736 $4,194 $12,435 $(917)$15,712 1.2 %
1,609,201 Class A Units— — 483 104 — 587 — %
1,019,168.80 Preferred Units, 6%— — 1,091 61 — 1,152 0.1 %
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029— — — — — — — %
Caregiver Services, Inc.Health Care Services
1,080,399 shares of Series A Preferred Stock, 10%— — — 741 97 — 838 0.1 %
Total Affiliate Investments$15,899 $— $736 $6,509 $12,697 $(917)$18,289 1.4 %
Total Control & Affiliate Investments$208,739 $— $17,046 $207,894 $100,657 $(19,497)$289,054 22.0 %

159

This schedule should be read in connection with the Company's Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to the Consolidated Financial Statements.
______________________
(1)The principal amount and ownership detail are shown in the Company's Consolidated Schedules of Investments .
(2)Represents the total amount of interest (net of non-accrual amounts), fees and dividends credited to income for the portion of the period an investment was included in the Control or Affiliate categories.
(3)Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest (net of non-accrual amounts) and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation as well as the movement of an existing portfolio company into this category or out of a different category.
(4)Gross reductions include decreases in the cost basis of investments resulting from principal payments or sales and exchanges of one or more existing securities for one or more new securities. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.
(5)First Star Speir Aviation Limited is a wholly-owned holding company formed by the Company in order to facilitate its investment strategy. In accordance with ASU 2013-08, the Company has deemed the holding company to be an investment company under GAAP and therefore deemed it appropriate to consolidate the financial results and financial position of the holding company and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding company are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities.
(6)Together with GF Equity Funding, the Company co-invests through Glick JV. Glick JV is capitalized as transactions are completed and all portfolio and investment decisions in respect to Glick JV must be approved by the Glick JV investment committee consisting of representatives of the Company and GF Equity Funding (with approval from a representative of each required).
(7)Together with Kemper, the Company co-invests through SLF JV I. SLF JV I is capitalized as transactions are completed and all portfolio and investment decisions in respect to SLF JV I must be approved by the SLF JV I investment committee consisting of representatives of the Company and Kemper (with approval from a representative of each required).



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Schedule 12-14
Oaktree Specialty Lending Corporation
Schedule of Investments in and Advances to Affiliates
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Year ended September 30, 2020

Portfolio Company/Type of Investment (1) Cash Interest Rate IndustryPrincipalNet Realized Gain (Loss)Amount of
Interest,
Fees or
Dividends
Credited in
Income (2)		Fair Value
at October 1,
2019		Gross
Additions (3)		Gross
Reductions (4)		Fair Value
at September 30, 2020		% of Total Net Assets
Control Investments
C5 Technology Holdings, LLCData Processing & Outsourced Services
829 Common Units$— $— $— $— $— $— — %
34,984,460.37 Preferred Units— — 34,984 — (7,346)27,638 3.0 %
Dominion Diagnostics, LLCHealth Care Services
First Lien Term Loan, LIBOR+5.00% cash due 2/28/20246.00 %$27,660 — 1,076 — 27,869 (209)27,660 3.0 %
First Lien Revolver, LIBOR+5.00% cash due 2/28/20246.00 %5,260 — 216 — 5,260 — 5,260 0.6 %
30,030.8 Common Units in DD Healthcare Services Holdings, LLC— — — 18,627 (10,960)7,667 0.8 %
 First Star Speir Aviation Limited (5)Airlines
First Lien Term Loan, 9.00% cash due 12/15/202011,510 — 1,180 11,510 106 (106)11,510 1.3 %
100% equity interest— — 4,630 — (3,008)1,622 0.2 %
New IPT, Inc.Oil & Gas Equipment & Services
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021 6.00 %2,304 — 193 3,256 — (1,456)1,800 0.2 %
First Lien Revolver, LIBOR+5.00% cash due 3/17/2021 6.00 %1,009 — 76 1,009 — (221)788 0.1 %
50.087 Class A Common Units in New IPT Holdings, LLC — — 2,903 — (2,903)— — %
 Senior Loan Fund JV I, LLC (6)Multi-Sector Holdings
Subordinated Debt, LIBOR+7.00% cash due 12/29/20287.17 %96,250 — 8,055 96,250 — — 96,250 10.5 %
87.5% LLC equity interest— — 30,052 — (8,862)21,190 2.3 %
 Thruline Marketing, Inc.Advertising
First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022— — 257 18,146 — (18,146)— — %
First Lien Revolver, LIBOR+7.75% cash due 4/3/2022 — — 1 — — — — — %
 9,073 Class A Units in FS AVI Holdco, LLC (4,932)— 6,438 4,210 (10,648)— — %
Total Control Investments$143,993 $(4,932)$11,054 $209,178 $56,072 $(63,865)$201,385 22.0 %
Affiliate Investments
 Assembled Brands Capital LLC Specialized Finance
First Lien Revolver, LIBOR+6.00% cash due 10/17/20237.00 %$4,688 $— $487 $5,585 $2,036 $(3,427)$4,194 0.5 %
1,609,201 Class A Units— — 782 — (299)483 0.1 %
1,019,168.80 Preferred Units, 6%— — 1,019 72 — 1,091 0.1 %
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029— — — — — — — %
Caregiver Services, Inc.Health Care Services
1,080,399 shares of Series A Preferred Stock, 10%— — — 1,784 — (1,043)741 0.1 %
Total Affiliate Investments$4,688 $— $487 $9,170 $2,108 $(4,769)$6,509 0.7 %
Total Control & Affiliate Investments$148,681 $(4,932)$11,541 $218,348 $58,180 $(68,634)$207,894 22.7 %

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This schedule should be read in connection with the Company's Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to the Consolidated Financial Statements.
______________________

(1)The principal amount and ownership detail are shown in the Company's Consolidated Schedules of Investments.
(2)Represents the total amount of interest (net of non-accrual amounts), fees and dividends credited to income for the portion of the period an investment was included in the Control or Affiliate categories.
(3)Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest (net of non-accrual amounts) and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation as well as the movement of an existing portfolio company into this category or out of a different category.
(4)Gross reductions include decreases in the cost basis of investments resulting from principal payments or sales and exchanges of one or more existing securities for one or more new securities. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.
(5)First Star Speir Aviation Limited is a wholly-owned holding company formed by the Company in order to facilitate its investment strategy. In accordance with ASU 2013-08, the Company has deemed the holding company to be an investment company under GAAP and therefore deemed it appropriate to consolidate the financial results and financial position of the holding company and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding company are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities.
(6)Together with Kemper, the Company co-invests through SLF JV I. SLF JV I is capitalized as transactions are completed and all portfolio and investment decisions in respect to SLF JV I must be approved by the SLF JV I investment committee consisting of representatives of the Company and Kemper (with approval from a representative of each required).




162

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Based on the evaluation of our disclosure controls and procedures as of September 30, 2021, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, in timely identifying, recording, processing, summarizing and reporting any material information relating to us that is required to be disclosed in the reports we file or submit under the Exchange Act.

(b) Management's Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. A company’s internal control over financial reporting is a process designed by, or under the supervision of, its chief executive officer and chief financial officer, and effected by such company's Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

(i)    pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii)     provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

(iii)     provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2021, based on the framework set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation, management concluded that our internal control over financial reporting was effective as of September 30, 2021.

The effectiveness of our internal control over financial reporting as of September 30, 2021 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which appears herein.


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(c) Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fourth fiscal quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information
None.

PART III — OTHER INFORMATION

Item 10. Directors, Executive Officers and Corporate Governance
The information required by Item 10 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2022 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year.

Item 11. Executive Compensation
The information required by Item 11 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2022 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2022 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year.

Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2022 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year.

Item 14. Principal Accountant Fees and Services
The information required by Item 14 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2022 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year.


PART IV

Item 15. Exhibits, Financial Statement Schedules
The following documents are filed or incorporated by reference as part of this Annual Report:

164

1. Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Assets and Liabilities as of September 30, 2021 and 2020
Consolidated Statements of Operations for the Years Ended September 30, 2021, 2020 and 2019
Consolidated Statements of Changes in Net Assets for the Years Ended September 30, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the Years Ended September 30, 2021, 2020 and 2019
Consolidated Schedule of Investments as of September 30, 2021
Consolidated Schedule of Investments as of September 30, 2020
Notes to Consolidated Financial Statements


2. Financial Statement Schedule
The following financial statement schedule is filed herewith:
 
Schedule 12-14 — Investments in and advances to affiliates

165

3. Exhibits required to be filed by Item 601 of Regulation S-K
The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:
 
Agreement and Plan of Merger among Oaktree Strategic Income Corporation, the Registrant, Lion Merger Sub, Inc. and Oaktree Fund Advisors LLC (for the limited purposes set forth therein), dated as of October 28, 2020 (Incorporated by reference to Exhibit 2.1 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on October 29, 2020).
  Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 filed with Registrant’s Form 8-A (File No. 001-33901) filed on January 2, 2008).
  Certificate of Amendment to the Registrant’s Restated Certificate of Incorporation (Incorporated by reference to Exhibit (a)(2) filed with Registrant’s Registration Statement on Form N-2 (File No. 333-146743) filed on June 6, 2008).
  Certificate of Correction to the Certificate of Amendment to the Registrant’s Restated Certificate of Incorporation (Incorporated by reference to Exhibit (a)(3) filed with Registrant’s Registration Statement on Form N-2 (File No. 333-146743) filed on June 6, 2008).
  Certificate of Amendment to Registrant’s Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 filed with Registrant’s Quarterly Report on Form 10-Q (File No. 001-33901) filed on May 5, 2010).
  Certificate of Amendment to Registrant’s Certificate of Incorporation (Incorporated by reference to Exhibit (a)(5) filed with the Registrant’s Registration Statement on Form N-2 (File No. 333-180267) filed on April 2, 2013).
Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant, dated as of October 17, 2017 (Filed with the Registrant’s Form 8-K (File No. 814-00755) filed on October 17, 2017).
Fourth Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.1 filed with Registrant’s Form 8-K (File No. 814-00755) filed on January 29, 2018).
  
Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 filed with Registrant’s Form 8-A (File No. 001-33901) filed on January 2, 2008).
  Description of Securities
166

  Indenture, dated April 30, 2012, between Registrant and Deutsche Bank Trust Company Americas, as trustee (Incorporated by reference to Exhibit (d)(4) filed with Registrant’s Registration Statement on Form N-2 (File No. 333-180267) filed on July 27, 2012).
Fourth Supplemental Indenture, dated as of October 17, 2017, between Registrant and Deutsche Bank Trust Company Americas, as trustee (Incorporated by reference to Exhibit 4.1 filed with the Registrant’s Form 8-K (File No. 814-00755) filed on October 17, 2017).
Fifth Supplemental Indenture, dated as of February 25, 2020, relating to the 3.500% Notes due 2025, between the Registrant and Deutsche Bank Trust Company Americas, as trustee (Incorporated by reference to Exhibit 4.1 filed with the Registrant’s Form 8-K (File No. 814-00755) filed on February 25, 2020).
Form of 3.500% Notes due 2025 (included as Exhibit A to Exhibit 4.5 hereto).
Sixth Supplemental Indenture, dated as of May 18, 2021, relating to the 2.700% Notes due 2027, between the Company and Deutsche Bank Trust Company Americas, as trustee (Incorporated by reference to Exhibit 4.1 filed with the Company’s Current Report on Form 8-K (File No. 814-00755) filed on May 18, 2021).
Form of 2.700% Notes due 2027 (contained in the Sixth Supplemental Indenture filed as Exhibit 4.7 hereto).
  Amended and Restated Investment Advisory Agreement, dated as of March 19, 2021, between the Registrant and Oaktree Fund Advisors, LLC (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on March 19, 2021).
  Administration Agreement, dated as of September 30, 2019 between the Registrant and Oaktree Administrator (Incorporated by reference to Exhibit 10.2 filed with the Registrant’s Form 8-K (File No. 814-00755) filed on October 2, 2019).
  Custody Agreement (Incorporated by reference to Exhibit 10.1 filed with Registrant’s Form 10-Q (File No. 001-33901) filed on January 31, 2011).
Amended and Restated Dividend Reinvestment Plan (Incorporated by reference to Exhibit 10.1 filed with Registrant’s Form 8-K (File No. 001-33901) filed on October 28, 2010).
Amended and Restated Senior Secured Revolving Credit Agreement, dated as of February 25, 2019, among the Registrant, as Borrower, the lenders party thereto, ING Capital LLC, as administrative agent, ING Capital LLC, JPMorgan Chase Bank, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A. and Bank of America, N.A., as syndication agents (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on February 26, 2019).
167

Amendment No. 1 to Amended and Restated Senior Secured Revolving Credit Agreement, dated as of December 13, 2019, among the Registrant, as Borrower, the lenders party thereto from time to time and ING Capital LLC, as administrative agent for the lenders thereunder (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on December 17, 2019).
Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement, dated as of May 6, 2020, among the Registrant, as Borrower, the lenders party thereto from time to time and ING Capital LLC, as administrative agent for the lenders thereunder (Incorporated by reference to Exhibit 10.2 filed with the Registrant’s Form 10-Q (File No. 814-00755) filed on May 7, 2020).
Incremental Commitment and Assumption Agreement, dated as of October 28, 2020, made by the Registrant, as Borrower, the assuming lender party hereto, as assuming lender, and ING Capital LLC, as administrative agent and issuing bank relating to the Amended and Restated Senior Secured Revolving Credit Agreement, dated as of February 25, 2019 among the Registrant, as Borrower, the lenders party thereto, ING Capital LLC, as administrative agent, ING Capital LLC, JPMorgan Chase Bank, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A. and Bank of America, N.A., as syndication agents (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on October 29, 2020).
Amendment No. 3 to Amended and Restated Senior Secured Revolving Credit Agreement, dated as of December 10, 2020, among the Registrant, as Borrower, the lenders party thereto from time to time and ING Capital LLC, as administrative agent for the lenders thereunder (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on December 14, 2020).
Incremental Commitment Agreement, dated as of December 28, 2020, made by the Registrant, as Borrower, MUFG Union Bank, N.A., as increasing lender, and ING Capital LLC, as administrative agent and issuing bank relating to the Amended and Restated Senior Secured Revolving Credit Agreement, dated as of February 25, 2019 among the Registrant, as Borrower, the lenders party thereto, ING Capital LLC, as administrative agent, ING Capital LLC, JPMorgan Chase Bank, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A. and Bank of America, N.A., as syndication agents (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on December 29, 2020).
Amendment No. 4 to Amended and Restated Senior Secured Revolving Credit Agreement and Amendment No. 1 to Amended and Restated Guarantee, Pledge and Security Agreement, dated May 4, 2021, among the Company, as borrower, OCSL SRNE, LLC, as subsidiary guarantor, FSFC Holdings, Inc., as subsidiary guarantor, the lenders party thereto, and ING Capital LLC, as administrative agent (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Form 10-Q (File No. 814-00755) filed on August 4, 2021).
Loan Sale Agreement by and between Registrant and FS Senior Funding II LLC, dated as of January 15, 2015 (Incorporated by reference to Exhibit 10.2 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on March 19, 2021).
Amended and Restated Loan and Security Agreement, dated as of January 31, 2018, by and among Registrant, OCSI Senior Funding II LLC, the lenders referred to therein, Citibank, N.A., and Wells Fargo Bank, National Association (Incorporated by reference to Exhibit 10.3 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on March 19, 2021).
First Amendment to the Amended and Restated Loan and Security Agreement by and among the Registrant, as collateral manager, OCSI Senior Funding II LLC, as borrower, and Citibank, N.A., as administrative agent and sole lender, dated as of May 14, 2018 (Incorporated by reference to Exhibit 10.4 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on March 19, 2021).
Second Amendment to the Amended and Restated Loan and Security Agreement by and among Registrant, as collateral manager, OCSI Senior Funding II LLC, as borrower, and Citibank, N.A., as administrative agent and sole lender, dated as of July 18, 2018 (Incorporated by reference to Exhibit 10.5 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on March 19, 2021).
168

Third Amendment to the Amended and Restated Loan and Security Agreement by and among Registrant, as collateral manager, OCSI Senior Funding II LLC, as borrower, and Citibank, N.A., as administrative agent and sole lender, dated as of September 17, 2018 (Incorporated by reference to Exhibit 10.6 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on March 19, 2021).
Fourth Amendment to the Amended and Restated Loan and Security Agreement by and among Registrant, as collateral manager, OCSI Senior Funding II LLC, as borrower, and Citibank, N.A., as administrative agent and sole lender, dated as of September 20, 2019 (Incorporated by reference to Exhibit 10.7 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on March 19, 2021).
Fifth Amendment to the Amended and Restated Loan and Security Agreement by and among the Registrant, as collateral manager, OCSI Senior Funding II LLC, as borrower, and Citibank, N.A., as administrative agent and sole lender, dated as of October 27, 2020 (Incorporated by reference to Exhibit 10.8 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on March 19, 2021).
Sixth Amendment to the Amended and Restated Loan and Security Agreement by and among the Company, as collateral manager, OCSL Senior Funding II LLC, as borrower, and Citibank, N.A., as administrative agent and sole lender, dated as of July 2, 2021 (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on July 9, 2021).
  Joint Code of Ethics of the Registrant and Oaktree Strategic Income II, Inc. (Incorporated by reference to Exhibit 14.1 filed with the Registrant’s Form 10-K (File No. 814-00755) filed on November 19, 2020).
  Code of Ethics of Oaktree Fund Advisors, LLC (Incorporated by reference to Exhibit 14.2 filed with the Registrant's Form 10-K (File No. 814-00755) filed on November 29, 2017).
21   Subsidiaries of Registrant and jurisdiction of incorporation/organizations:
FSFC Holdings, Inc. — Delaware
OCSL Senior Funding II LLC— Delaware
Consent of Registered Public Accounting Firm
Power of Attorney (included on the signature page hereto).
  Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
  Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
  Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
  Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
*Filed herewith.
^Exhibits and schedules to Exhibit 2.1 have been omitted in accordance with Item 601 of Regulation S-K. The registrant agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon its request.


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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
OAKTREE SPECIALTY LENDING CORPORATION
By: /s/   Armen Panossian
 Armen Panossian
 Chief Executive Officer
By: /s/    Mel Carlisle
 Mel Carlisle
 Chief Financial Officer and Treasurer
Date: November 15, 2021
POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Armen Panossian, Mel Carlisle, Mathew Pendo and Christopher McKown, and each of them (with full power to each of them to act alone), his true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him and on his behalf and in his name, place and stead, in any and all capacities, to sign, execute and file this Annual Report on Form 10-K for the fiscal year ended September 30, 2021, and any or all amendments to this Report, with all exhibits and any and all documents required to be filed with respect thereto, with the Securities and Exchange Commission or any other regulatory authority, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing appropriate or necessary to be done in order to effectuate the same, as fully to all intents and purposes as he himself might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

170

Signature  Title Date
/s/    ARMEN PANOSSIAN
Armen Panossian
  Chief Executive Officer
(principal executive officer)		 November 15, 2021
/s/    MEL CARLISLE
Mel Carlisle
  Chief Financial Officer and Treasurer
(principal financial officer and
principal accounting officer)		 November 15, 2021
/s/    JOHN B. FRANK
John B. Frank
  Director November 15, 2021
/s/    DEBORAH A. GERO
Deborah A. Gero
DirectorNovember 15, 2021
/s/    CRAIG JACOBSON
Craig Jacobson
  Director November 15, 2021
/s/    BRUCE ZIMMERMAN
Bruce Zimmerman
  Director November 15, 2021



171