What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2021-11-16 compared with 2020-11-19 · 31 added, 70 removed, 155 unchanged (39% of the section changed)

23 unchanged sentences

stockholders as ordinary income or capital gains.

(4) On November 13, 2020, our Board of Directors declared a distribution of $0.11 per share payable on December 31, 2020 to stockholders of record on December 15, 2020.

The last reported price for our common stock on November 17, 2020 was $5.20 per share, which represented a 19.9% discount to our NAV as of September 30, 2020.

(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.

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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 Wells Fargo BDC Total Return 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 the Former Adviser for the periods from September 30, 2015 through October 16, 2017 and during management by Oaktree and its affiliates for the period from October 17, 2017 through September 30, 2020.

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.

September 30, 2016 September 30, 2017 September 30, 2018 September 30, 2019 September 30, 2020 September 30, 2021

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Russell 2000 Financial Services $ 100.00 $ 120.74 $ 139.14 $ 126.77 $ 127.27 $ 187.94

Wells Fargo BDC Total Return Index 100.00 121.53 133.53 137.98 148.03 114.90

S&P BDC Index $ 100.00 $ 108.84 $ 113.27 $ 121.96 $ 97.89 $ 151.09

Stock Repurchase Program

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(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, a corresponding prospectus supplement will disclose the estimated offering expenses.

(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.

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(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 investment made with borrowings, but excluding cash and cash equivalents;

(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 $1.6 billion of total gross assets (excluding cash and cash equivalents), which was the actual amount of our total gross assets as of September 30, 2020.

Business - Investment Advisory and Management Agreement - Management Fee” and “ Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments—Management Fee Waiver.

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.

Business - Investment Advisory Agreement - Management and Incentive Fee.”

(6) The incentive fee consists of two parts.

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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.

Business - Investment Advisory and Management Agreement - Management Fee” for additional information.

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.

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.

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.

For the two-year period commencing on October 17, 2017, OCM agreed to waive, to the extent necessary, any management or incentive fees payable to OCM that exceed what would have been paid to the Former Adviser in the aggregate under the Former Investment Advisory Agreement.

For illustrative purposes, however, the table above assumes that no management or incentive fees payable to OCM were waived by OCM pursuant to this waiver.

The incentive fee referenced in the table above is based on actual amounts of the incentive fee on income incurred during the year ended September 30, 2020 and the capital gains incentive fee payable under the Investment Advisory Agreement as of September 30, 2020.

(7) “Interest payments on borrowed funds (including other costs of servicing and offering debt securities)” is calculated as the weighted average interest rate in effect as of September 30, 2020 multiplied by the actual debt outstanding as of September 30, 2020 of $714.8 million.

The weighted average interest rate for our borrowings as of September 30, 2020 was 2.7% (exclusive of deferred financing costs).

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.

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.

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(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.

There are no fees paid by SLF JV I to the Adviser.

See "Management Discussion and Analysis - Senior Loan Fund I LLC" and Note 3 to our Consolidated Financial Statements in this Form 10-K for more information on SLF JV I.

The annual expenses of SLF JV I include interest payments on the subordinated notes held by Kemper, which represented 13.0% of such expenses, and exclude interest payments on the subordinated notes held by us.

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.

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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.

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.

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.

Financial Highlights

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Net realized gains (losses) (2) 0.16 (0.10) 0.14 (0.83) (1.21)

Provision for income tax (expense) benefit (2) 0.01 — — — —

(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) —

Net issuance/repurchases of common stock — — — 0.05 0.14

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

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(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.

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(5) Calculated based upon the weighted average net assets for the period.

(5) Calculated based upon the weighted average of debt outstanding 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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Ratio of net investment income to average net assets 8.68% 8.13% 10.23% 10.50% 11.13%

Ratio of total expenses to average net assets (excluding base management fee waiver) 10.69% 10.91% 9.95% 9.95% 8.79%

Base management fee waiver effect (0.04)% (0.05)% (0.21)% —% —%

Ratio of total expenses to average net assets 13.09% 10.69% 10.91% 9.95% 9.95%

Ratio of net expenses to average net assets 11.48% 10.65% 10.86% 9.74% 9.95%

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Selected Financial Data

The table below sets forth our selected historical financial data for the periods indicated.

Our historical results are not necessarily indicative of future results.

The selected financial data in this section is not intended to replace the financial statements and is qualified in its entirety by the financial statements and related notes included in this filing.

The following selected financial data should be read together with the information contained in Part II, Item 7 of this Form 10-K, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ,” and the audited financial statements and the notes thereto in Part II, Item 8 of this Form 10-K, "Financial Statements and Supplementary Data." The financial information as of and for the fiscal years ended September 30, 2020, 2019, 2018, 2017 and 2016 set forth below was derived from our audited financial statements and related notes which are included in "Financial Statements and Supplementary Data" in Part II, Item 8 of this Form 10-K.

As of and for the Years Ended

(dollars in thousands, except per share amounts)

September 30,

2020 September 30,

2019 September 30,

2018 September 30,

2017 September 30,

Statement of Operations data:

Total investment income $143,133 $147,702 $138,722 $177,964 $247,872

Base management fee 22,895 22,343 22,652 31,369 41,483

Part I incentive fee 15,194 14,873 10,485 10,713 22,091

Part II incentive fee (5,557) 10,194 — — —

Fees waived 5,200 (7,990) (1,342) (240) (338)

All other expenses 33,409 40,373 46,881 64,729 97,338

Insurance recoveries — — — (1,259) (19,429)

Net investment income 71,992 67,909 60,046 72,652 106,727

Net unrealized appreciation (depreciation) (20,614) 38,457 102,605 (97,839) (48,000)

Net realized gains (losses) (13,924) 20,805 (115,267) (171,782) (125,283)

Provision for income tax (expense) benefit 1,770 (1,011) (622) — —

Net increase (decrease) in net assets resulting from operations 39,224 126,160 46,762 (196,969) (66,556)

Per share data:

Net asset value per common share at period end $6.49 $6.60 $6.09 $6.16 $7.97

Market price at period end 4.84 5.18 4.96 5.47 5.81

Net investment income 0.51 0.48 0.43 0.51 0.72

Net realized and unrealized gains (losses), net of taxes (0.23) 0.41 (0.10) (1.90) (1.17)

Net increase (decrease) in net assets resulting from operations 0.28 0.89 0.33 (1.39) (0.45)

Distributions per common share 0.39 0.38 0.40 0.465 0.72

Balance Sheet data at period end:

Total investments at fair value $1,573,851 $1,438,042 $1,491,201 $1,541,755 $2,165,491

Cash, cash equivalents and restricted cash 39,096 15,406 13,489 59,913 130,362

Other assets 27,765 27,590 46,768 14,380 47,432

Total assets 1,640,712 1,481,038 1,551,458 1,616,048 2,343,285

Total liabilities 725,833 550,408 693,423 748,391 1,200,997

Total net assets 914,879 930,630 858,035 867,657 1,142,288

Weighted average yield on debt investments (1) 8.3% 8.9% 8.4% 9.6% 10.4%

Number of portfolio companies at period end 113 104 113 125 129

(1) Weighted average yield is calculated based upon our debt investments at fair value, including the return on the subordinated note investment in SLF JV I, at the end of the period.

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity