What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-11-15 compared with 2021-11-16 · 248 added, 310 removed, 412 unchanged (58% of the section changed)

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The forward-looking statements contained in this annual report on Form 10-K may include statements as to:

• the ability of the parties to consummate the Mergers on the expected timeline, or at all;

• the expected synergies and savings associated with the Mergers;

• the ability to realize the anticipated benefits of the Mergers including the expected elimination of certain expenses and costs due to the Mergers;

• the percentage of our stockholders and OSI 2’s stockholders voting in favor of the proposals submitted for their approval;

• the possibility that competing offers or acquisition proposals will be made;

• the possibility that any or all of the various conditions to the consummation of the Mergers may not be satisfied or waived;

• risks related to diverting management’s attention from ongoing business operations;

• the combined company’s plans, expectations, objectives and intentions, as a result of the Mergers;

• any potential termination of the Merger Agreement;

• the actions of our stockholders or OSI 2’s stockholders with respect to any of the proposals submitted for their approval;

• our future operating results and distribution projections;

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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;

• changes or potential disruptions in our operations, the economy, financial markets or political environment, including the impacts of inflation and rising interest rates;

• risks associated with possible disruption in our operations or the economy generally due to terrorism, war or other geopolitical conflict (including the current conflict between Russia and Ukraine), natural disasters or pandemics;

• 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;

• 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.

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 Securities and Exchange Commission, or 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.

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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 may also seek to generate capital appreciation and income through secondary 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.

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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:

In the current market environment, Oaktree intends to focus on the following area, 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.

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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.

Since an Oaktree affiliate became our investment adviser in October 2017, Oaktree and its affiliates have reduced the investments identified as non-core by approximately $800 million at fair value.

Over time, Oaktree intends to rotate us out of the remaining non-core investments, which were approximately $71 million at fair value as of September 30, 2022.

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.

On March 19, 2021, we acquired Oaktree Strategic Income Corporation, or OCSI, pursuant to the OCSI Merger Agreement, dated as of October 28, 2020, by and among OCSI, us, Lion Merger Sub, Inc., our wholly-owned subsidiary, and, solely for the limited purposes set forth therein, Oaktree.

As a result of the OCSI Merger, we issued an aggregate of 39,400,011 shares of our common stock to former OCSI stockholders.

Merger Agreement

On September 14, 2022, we entered into the Merger Agreement, which provides that, subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into OSI 2, with OSI 2 continuing as the surviving company and as our wholly-owned subsidiary and, immediately thereafter, OSI 2 will merge with and into us, with us continuing as the surviving company.

Both our Board of Directors and the Board of Directors of OSI 2, in each case, on the recommendation of a special committee comprised solely of certain independent directors of us or OSI 2, as applicable, have approved the Merger Agreement and the transactions contemplated thereby.

At the Effective Time, each share of OSI 2 Common Stock issued and outstanding immediately prior to the Effective Time (other than Cancelled Shares) will be converted into the right to receive a number of shares of our common stock equal to the Exchange Ratio (as defined below), plus any cash (without interest) in lieu of fractional shares.

As of a mutually agreed date no earlier than 48 hours (excluding Sundays and holidays) prior to the Effective Time, which we refer as the “Determination Date”, each of us and OSI 2 will deliver to the other a calculation of its net asset value as of such date, in each case using a pre-agreed set of assumptions, methodologies and adjustments.

We refer to such calculation with respect to OSI 2 as the “Closing OSI 2 Net Asset Value” and with respect to us as the “Closing OCSL Net Asset Value”.

Based on such calculations, the parties will calculate the “OSI 2 Per Share NAV”, which will be equal to (i) the Closing OSI 2 Net Asset Value divided by (ii) the number of shares of OSI 2 Common Stock issued and outstanding as of the Determination Date (excluding any Cancelled Shares), and the “OCSL Per Share NAV”, which will be equal to (A) the Closing OCSL Net Asset Value divided by (B) the number of shares of our common stock issued and outstanding as of the Determination Date.

The “Exchange Ratio” will be equal to the quotient (rounded to four decimal places) of (i) the OSI 2 Per Share NAV divided by (ii) the OCSL Per Share NAV.

We and OSI 2 will update and redeliver the Closing OCSL Net Asset Value or the Closing OSI 2 Net Asset Value, respectively, in the event of a material change to such calculation between the Determination Date and the closing of the Mergers and if needed to ensure that the calculation is determined within 48 hours (excluding Sundays and holidays) prior to the Effective Time.

The Merger Agreement contains customary representations and warranties by each of us, OSI 2 and Oaktree.

The Merger Agreement also contains customary covenants, including, among others, covenants relating to the operation of each of our and OSI 2’s businesses during the period prior to the closing of the Mergers.

Consummation of the Mergers, which is currently anticipated to occur during the second fiscal quarter of 2023, is subject to certain closing conditions, including requisite approvals of our and OSI 2’s stockholders and certain other closing conditions.

The Merger Agreement also contains certain termination rights in favor of us and OSI 2, including if the Mergers are not completed on or before June 30, 2023 or if the requisite approvals of our or OSI 2’s stockholders are not obtained.

The Merger Agreement provides that, upon the termination of the Merger Agreement under certain circumstances, a third party acquiring OSI 2 may be required to pay us a termination fee of approximately $9.8 million.

The Merger Agreement provides that, upon the termination of the Merger Agreement under certain circumstances, a third party acquiring us may be required to pay OSI 2 a termination fee of approximately $37.9 million.

The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement.

The representations, warranties, covenants and agreements contained in the Merger Agreement were made only for purposes of the Merger Agreement and as of specific dates;

were solely for the benefit of the parties to the Merger Agreement (except as may be expressly set forth in the Merger Agreement);

may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts;

and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors.

Investors and security holders should not rely on such representations, warranties, covenants or agreements, or any descriptions thereof, as characterizations of the actual state of facts or condition of any of the parties to the Merger Agreement or any of their respective subsidiaries or affiliates.

Moreover, information concerning the subject matter of the representations, warranties, covenants and agreements may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in public disclosures by the parties to the Merger Agreement.

Management Fee Waiver

In connection with entry into the Merger Agreement and subject to completion of the transactions contemplated thereby, Oaktree has agreed to waive $9.0 million of base management fees payable to it under the Investment Advisory Agreement as follows:

$6.0 million at a rate of $1.5 million per quarter (with such amount appropriately prorated for any partial quarter) in the first year following closing of the Mergers and $3.0 million at a rate of $750,000 per quarter (with such amount appropriately prorated for any partial quarter) in the second year following closing of the Mergers.

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.

Global financial markets have experienced an increase in volatility as concerns about the impact of higher inflation, rising interest rates, a potential recession and the current conflict in Ukraine have weighed on market participants.

These factors have created disruptions in supply chains and economic activity and have had a particularly adverse impact on certain companies in the energy, raw materials and transportation sectors, among others.

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.

We are unable to predict the full effects of these macroeconomic events or how long any further market disruptions or volatility might last.

We continue to closely monitor the impact these events have on our business, industry and portfolio companies and will provide constructive solutions where necessary.

Against this uncertain macroeconomic backdrop, we believe attractive risk-adjusted returns can be achieved by making loans to middle market companies that typically possess resilient business models with strong underlying fundamentals.

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.

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.

As of September 30, 2022, 86.5% of our debt investment portfolio (at fair value) and 86.3% of our debt investment portfolio (at cost) bore interest at floating rates.

Most of our floating rate loans are 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.

Certain loans may also be indexed to SOFR or SONIA.

dollar LIBOR rates will continue to be published through June 30, 2023.

The FCA no longer compels panel banks to continue to contribute to LIBOR 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.

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.

financial institutions, supports replacing U.S.-dollar LIBOR with SOFR.

Although there are an increasing number of issuances utilizing SOFR or SONIA, these alternative reference rates may not 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.

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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.

We value our investments in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or 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.

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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.

• Level 3 — Unobservable inputs that reflect Oaktree’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.

Oaktree'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.

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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 our investments for which quotations are available.

As such, Oaktree obtains and analyzes readily available market quotations provided by pricing vendors and brokers for all of our investments for which quotations are

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 seeks to obtain at least two quotations for the subject or similar securities, typically from pricing vendors.

If Oaktree is unable to obtain two quotes from pricing vendors, or if the prices obtained from pricing vendors are not within our set threshold, Oaktree 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.

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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.

Generally, Oaktree 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, Oaktree 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.

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(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.

Oaktree 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.

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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.

As debt investments held by us are substantially illiquid with no active transaction market, Oaktree 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.

Under the market yield technique, the significant unobservable input used in the fair value measurement of our 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.

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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.

Oaktree 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 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.

The fair value of our investments as of September 30, 2022 was determined by our Adviser, as our valuation designee, and the fair value of our investments as of September 30, 2021 was determined in good faith by our Board of Directors.

We have 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.

As of September 30, 2022, 93.2% 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.

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.

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.

Due to these uncertainties, Oaktree's 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, 2022, we held $2,494.1 million of investments at fair value, down from $2,556.6 million held at September 30, 2021, primarily driven by unrealized losses related to credit spread widening and partially offset by new originations.

As of September 30, 2022 and September 30, 2021, approximately 94.2% and 97.0%, respectively, of our total assets represented investments at fair value.

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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.

As of each of September 30, 2022 and September 30, 2021, there were no investments on non-accrual status.

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.

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Portfolio Composition

Our investments principally consist of loans, common and preferred equity and warrants in privately-held companies, and the JVs.

Our investments principally consist of loans, common and preferred equity and warrants in privately-held companies, SLF JV I and Glick JV.

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).

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Preferred equity 3.26 2.60

Common equity and warrants 2.15 3.69

LLC equity interests of the JVs 1.94 2.95

Subordinated debt 2.57 1.67

LLC equity interests of the JVs 1.88 1.94

Common equity and warrants 1.62 2.15

Total 100.00 % 100.00 %

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Preferred equity 3.19 2.49

Common equity and warrants 1.71 2.40

Subordinated debt 2.28 1.67

Common equity and warrants 0.96 1.71

LLC equity interests of the JVs 0.83 1.47

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Biotechnology 4.20 4.41

Personal Products 4.08 3.00

Health Care Technology 3.82 0.55

Industrial Machinery 3.12 3.47

Health Care Services 3.34 4.26

Specialized Finance 3.09 2.70

Aerospace & Defense 2.66 1.68

Fertilizers & Agricultural Chemicals 2.63 2.02

Internet & Direct Marketing Retail 2.59 2.45

Aerospace & Defense 2.37 2.66

Construction & Engineering 2.33 2.44

Integrated Telecommunication Services 1.85 2.67

Automotive Retail 2.26 1.65

Health Care Services 2.24 3.34

Health Care Distributors 2.18 0.78

Internet Services & Infrastructure 2.07 1.85

Specialty Chemicals 1.84 2.68

Personal Products 2.03 4.08

Fertilizers & Agricultural Chemicals 1.88 2.63

Metal & Glass Containers 1.82 0.69

Real Estate Operating Companies 1.82 1.08

Home Improvement Retail 1.75 1.83

Automotive Retail 1.65 —

Airport Services 1.65 1.64

Diversified Support Services 1.60 1.13

Real Estate Services 1.54 1.59

Oil & Gas Storage & Transportation 1.44 1.59

Oil & Gas Refining & Marketing 1.42 1.87

Leisure Facilities 1.52 0.99

Diversified Support Services 1.45 1.60

Specialty Chemicals 1.43 1.84

Health Care Supplies 1.39 1.17

Insurance Brokers 1.36 1.00

Integrated Telecommunication Services 1.32 1.85

Soft Drinks 1.31 1.32

Electrical Components & Equipment 1.29 1.27

Health Care Supplies 1.17 1.30

Other Diversified Financial Services 1.12 0.63

Advertising 1.08 1.13

Real Estate Operating Companies 1.08 —

Cable & Satellite 1.05 —

Movies & Entertainment 1.00 1.02

Insurance Brokers 1.00 1.05

Leisure Facilities 0.99 0.11

Distributors 0.97 —

Health Care Equipment 0.93 0.93

Independent Power Producers & Energy Traders 0.92 1.29

Airlines 0.88 0.63

Health Care Distributors 0.78 0.77

Commercial Printing 0.78 0.47

Oil & Gas Storage & Transportation 0.85 1.44

Environmental & Facilities Services 0.80 —

Cable & Satellite 0.79 1.05

Home Furnishings 0.75 0.77

Managed Health Care 0.73 1.65

Metal & Glass Containers 0.69 0.68

Other Diversified Financial Services 0.63 0.01

Thrifts & Mortgage Finance 0.63 0.06

Health Care Technology 0.55 1.29

Systems Software 0.57 0.26

Consumer Finance 0.55 —

Hotels, Resorts & Cruise Lines 0.53 —

Auto Parts & Equipment 0.48 0.49

Electronic Components 0.40 1.53

Property & Casualty Insurance 0.39 2.88

Restaurants 0.37 0.61

IT Consulting & Other Services 0.45 0.30

Restaurants 0.36 0.37

Research & Consulting Services 0.35 0.29

Systems Software 0.26 1.24

Leisure Products 0.26 —

Alternative Carriers 0.26 —

Apparel, Accessories & Luxury Goods 0.20 0.82

Education Services 0.35 0.04

Oil & Gas Refining & Marketing 0.33 1.42

Trading Companies & Distributors 0.29 —

Air Freight & Logistics 0.28 0.19

Apparel Retail 0.20 —

Apparel, Accessories & Luxury Goods 0.20 0.20

Integrated Oil & Gas 0.19 0.19

Food Distributors 0.18 0.18

Food Retail 0.15 0.41

Specialized REITs 0.16 —

Diversified Banks 0.13 0.14

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Housewares & Specialties 0.09 0.07

Education Services 0.04 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

Electronic Components 0.08 0.40

Alternative Carriers 0.01 0.26

Independent Power Producers & Energy Traders — 0.92

Airlines — 0.88

Commercial Printing — 0.78

Managed Health Care — 0.73

Thrifts & Mortgage Finance — 0.63

Property & Casualty Insurance — 0.39

Leisure Products — 0.26

Food Retail — 0.15

Total 100.00 % 100.00 %

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Biotechnology 4.35 4.44

Personal Products 4.13 3.24

Health Care Technology 3.90 0.55

Industrial Machinery 3.25 3.53

Health Care Services 3.31 3.81

Aerospace & Defense 2.72 1.56

Specialized Finance 2.93 2.69

Internet & Direct Marketing Retail 2.82 2.68

Fertilizers & Agricultural Chemicals 2.64 2.14

Aerospace & Defense 2.48 2.72

Construction & Engineering 2.45 2.47

Integrated Telecommunication Services 1.94 2.61

Automotive Retail 2.31 1.65

Health Care Distributors 2.19 0.77

Internet Services & Infrastructure 2.16 1.87

Specialty Chemicals 1.82 2.48

Fertilizers & Agricultural Chemicals 2.08 2.64

Personal Products 2.01 4.13

Real Estate Operating Companies 1.93 1.11

Metal & Glass Containers 1.91 0.68

Health Care Services 1.84 3.31

Home Improvement Retail 1.82 1.82

Automotive Retail 1.65 —

Airport Services 1.72 1.59

Real Estate Services 1.59 1.61

Leisure Facilities 1.57 0.90

Diversified Support Services 1.47 1.60

Airport Services 1.59 1.35

Oil & Gas Refining & Marketing 1.43 1.90

Oil & Gas Storage & Transportation 1.35 1.64

Health Care Supplies 1.47 1.18

Specialty Chemicals 1.36 1.82

Soft Drinks 1.35 1.31

Insurance Brokers 1.33 1.08

Electrical Components & Equipment 1.32 1.26

Integrated Telecommunication Services 1.29 1.94

Advertising 1.08 1.19

Health Care Supplies 1.18 1.37

Real Estate Operating Companies 1.11 —

Insurance Brokers 1.08 1.15

Cable & Satellite 1.06 —

Movies & Entertainment 1.07 1.06

Airlines 0.96 0.83

Distributors 0.98 —

Other Diversified Financial Services 0.98 0.62

Health Care Equipment 0.97 0.93

Independent Power Producers & Energy Traders 0.92 1.32

Leisure Facilities 0.90 —

Commercial Printing 0.79 0.47

Oil & Gas Storage & Transportation 0.84 1.35

Environmental & Facilities Services 0.83 —

Cable & Satellite 0.78 1.06

Home Furnishings 0.73 0.77

Health Care Distributors 0.77 0.78

Managed Health Care 0.74 1.70

Metal & Glass Containers 0.68 0.75

Thrifts & Mortgage Finance 0.62 0.02

Other Diversified Financial Services 0.62 —

Health Care Technology 0.55 1.40

Hotels, Resorts & Cruise Lines 0.56 —

Consumer Finance 0.53 —

Systems Software 0.51 0.26

Auto Parts & Equipment 0.46 0.48

Electronic Components 0.40 1.69

Property & Casualty Insurance 0.39 2.97

Restaurants 0.35 0.37

Research & Consulting Services 0.30 1.54

Oil & Gas Refining & Marketing 0.34 1.43

IT Consulting & Other Services 0.34 0.29

Alternative Carriers 0.27 —

Systems Software 0.26 1.30

Leisure Products 0.26 —

Education Services 0.34 0.04

Research & Consulting Services 0.34 0.30

Air Freight & Logistics 0.26 0.19

Trading Companies & Distributors 0.22 —

Apparel Retail 0.21 —

Integrated Oil & Gas 0.20 0.19

Food Distributors 0.18 —

Food Retail 0.15 0.44

Diversified Banks 0.14 0.14

Food Distributors 0.13 0.18

Specialized REITs 0.13 —

Technology Distributors 0.12 0.12

Construction Materials 0.09 0.13

Housewares & Specialties 0.10 0.08

Education Services 0.04 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

Construction Materials 0.08 0.09

Electronic Components 0.08 0.40

Alternative Carriers 0.01 0.27

Airlines — 0.96

Independent Power Producers & Energy Traders — 0.92

Commercial Printing — 0.79

Managed Health Care — 0.74

Thrifts & Mortgage Finance — 0.62

Property & Casualty Insurance — 0.39

Leisure Products — 0.26

Food Retail — 0.15

Total 100.00 % 100.00 %

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(1) This industry includes our investments in the JVs and certain limited partnership interests.

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

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

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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.

SLF JV I is capitalized pro rata with LLC equity interests as transactions are completed and may be capitalized with additional SLF JV I 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.

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As of each of September 30, 2022 and September 30, 2021, 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.

As of each of September 30, 2022 and 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.

Both the cost and fair value of our SLF JV I Notes were $96.3 million as of each of September 30, 2022 and September 30, 2021.

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.

We earned interest income of $8.0 million, $7.4 million and $8.1 million on the SLF JV I Notes for the years ended September 30, 2022, 2021 and 2020, respectively.

As of September 30, 2022, 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 us was $49.3 million and $20.7 million, respectively, as of September 30, 2022, and $49.3 million and $37.7 million, respectively, as of September 30, 2021.

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.

Below is a summary of SLF JV I's portfolio as of September 30, 2021:

September 30, 2021

We earned $2.9 million and $0.9 million in dividend income for the years ended September 30, 2022 and September 30, 2021, respectively, with respect to our investment in the LLC equity interests of SLF JV I.

We did not earn dividend income for the year ended September 30, 2020 with respect to our investment in the LLC equity interests of SLF JV I.

Below is a summary of SLF JV I's portfolio as of September 30, 2022 and September 30, 2021:

September 30, 2022 September 30, 2021

Senior secured loans (1) $383,194 $344,196

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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.

On March 19, 2021, we became party to the LLC agreement of the Glick JV.

The Glick JV invests primarily in senior secured loans of middle-market companies.

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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 members provide capital to the Glick JV in exchange for LLC equity interests, and we and GF Debt Funding, an entity advised by affiliates of GF Equity Funding, provide capital to the Glick JV in exchange for 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.

As of September 30, 2022 and 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 each of September 30, 2022 and September 30, 2021, of which $73.5 million was from us.

As of September 30, 2022 and September 30, 2021, we had commitments to fund Glick JV Notes of $78.8 million, of which $12.4 million was unfunded.

As of each of September 30, 2022 and 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.

The cost and fair value of our aggregate investment in the Glick JV was $50.2 million and $50.3 million, respectively, as of September 30, 2022 .

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

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 year ended September 30, 2022 and for the period from March 19, 2021 to September 30, 2021, our investment in the Glick JV Notes earned interest income of $4.7 million and $2.4 million, respectively.

We did not earn any dividend income for the year ended September 30, 2022 and 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.

Below is a summary of the Glick JV's portfolio as of September 30, 2022 and September 30, 2021:

September 30, 2022 September 30, 2021

Senior secured loans (1) $143,225 $126,512

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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, 2022 and September 30, 2021

4 unchanged sentences

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.

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.

The increase of $53.1 million, or 25.4%, in our total investment income for the year ended September 30, 2022, as compared to the year ended September 30, 2021, was due primarily to (1) a $58.6 million increase in interest income, which was primarily driven by the impact of rising reference rates on interest income and a larger average investment portfolio as a result of the increase in assets resulting from the OCSI Merger and new originations and (2) a $2.0 million increase in dividend income mainly driven by larger dividends received from our equity investment in the SLF JV I.

This was partially offset by a $7.5 million decrease in fee income primarily due to lower prepayment and amendment fees.

Net expenses (expenses net of fee waivers) for the years ended September 30, 2022 and 2021 were $110.6 million and $109.5 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.

Net expenses increased for the year ended September 30, 2022, as compared to the year ended September 30, 2021, by $1.1 million, or 1.0%, primarily due to (1) a $16.4 million increase in interest expense due to higher borrowings outstanding and the impact of rising reference rates, (2) a $5.0 million increase in Part I incentive fees mainly due to higher total investment income, partially offset by higher interest expense and management fees and (3) a $5.9 million increase in base management fees (net of management fee waivers) primarily as a result of a larger average investment portfolio.

These were partially offset by $26.4 million of lower accrued Part II incentive fees as a result of a reversal of previously accrued capital gains incentive fees driven by unrealized losses during the current period.

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.

Primarily as a result of the $53.1 million increase in total investment income, the $1.1 million increase in net expenses and a $0.5 million increase in the provision for taxes on net investment income, net investment income for the year ended September 30, 2022 increased by $51.5 million compared to the year ended September 30, 2021.

Realized Gain (Loss)

1 unchanged sentence

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.

During the years ended September 30, 2022, 2021 and 2020, we recorded aggregate net realized gains (losses) of $17.2 million, $26.4 million and $(13.9) million, respectively, in connection with the exits of various investments and foreign currency forward contracts.

See “ Note 8.

3 unchanged sentences

During the years ended September 30, 2022, 2021 and 2020, we recorded net unrealized appreciation (depreciation) of $(136.2) million, $114.5 million and $(20.6) million, respectively.

For the year ended September 30, 2022, this consisted of $94.1 million of net unrealized depreciation on debt investments, $35.4 million of net unrealized depreciation on equity investments and $11.7 million of net unrealized depreciation related to exited investments (a portion of which resulted in a reclassification to realized gains), partially offset by $4.9 million of net unrealized appreciation of foreign currency forward contracts.

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.

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 OCSI Merger.

Comparison of Years ended September 30, 2021 and September 30, 2020

The comparison of the fiscal years ended September 30, 2021 and 2020 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.

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, 2021.

Financial Condition, Liquidity and Capital Resources

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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

obligations through operating cash flow or with funds obtained through future equity and debt offerings or credit facilities, as we deem appropriate.

For example, our common stock has generally traded at prices below net asset value for the past several years, and we may not be able 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 or equity offerings.

We intend to fund our future distribution 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.

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As of September 30, 2022, we had $1,350.0 million in senior securities and our asset coverage ratio was 188.6%.

During the year, we increased our target debt to equity ratio from 0.85x to 1.0x to 0.90x to 1.25x (i.e., one dollar of equity for each $0.90 to $1.25 of debt outstanding) to provide us with increased capacity to opportunistically deploy capital into the markets.

As of September 30, 2022, our debt to equity ratio was 1.08x.

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, 2022, we experienced a net decrease in cash and cash equivalents (including restricted cash) of $5.3 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.

During that period, net cash provided by operating activities was $22.4 million, primarily from $693.7 million of principal payments and sale proceeds received, $22.4 million of net increase in payables from unsettled transactions and the cash activities related to $148.6 million of net investment income, partially offset by funding $702.1 million of investments, $43.9 million of increase in due from broker (cash held at a broker to cover collateral obligations under the interest swap agreement) and $20.5 million increase in due from portfolio companies.

During the same period, net cash used in financing activities was $26.8 million, primarily consisting of $115.2 million of cash distributions paid to our stockholders, $1.9 million of repurchases of common stock under our dividend reinvestment plan, DRIP, and $0.3 million of deferred financing costs paid, partially offset by $70.0 million of net borrowings under the credit facilities and $20.6 million of proceeds (net of offering costs) from shares issued under the "at the market" offering.

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 OCSI Merger, 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 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, 2022, we had $26.4 million in cash and cash equivalents (including $2.8 million of restricted cash), portfolio investments (at fair value) of $2.5 billion, $35.6 million of interest, dividends and fees receivable, $22.5 million of due from portfolio companies, $500.0 million of undrawn capacity on our credit facilities (subject to borrowing base and other limitations), $22.3 million of net payables from unsettled transactions, $700.0 million of borrowings outstanding under our credit facilities and $601.0 million of unsecured notes payable (net of unamortized financing costs, unaccreted discount and interest rate swap fair value adjustment).

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, 2022, our only off-balance sheet arrangements consisted of $224.2 million of unfunded commitments, which was comprised of $175.2 million to provide debt and equity financing to certain of our portfolio companies and $49.0 million to provide financing to the JVs.

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

and may involve, to varying degrees, elements of credit risk in excess of the amount recognized in our Consolidated Statements of Assets and Liabilities.

Such commitments are subject to our 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 our Consolidated Statements of Assets and Liabilities.

As of September 30, 2022, 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:

The following table reflects information pertaining to our principal debt outstanding under the Syndicated Facility (as defined below), Citibank Facility (as defined below), the 2025 Notes and the 2027 Notes:

Debt Outstanding

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135,000 160,000 160,986 185,000

Deutsche Bank Facility — — 13,107 115,700

2025 Notes 300,000 300,000 300,000 300,000

2027 Notes 350,000 350,000 350,000 350,000

Secured borrowings — — 102 9,341

Total debt $ 1,280,000 $ 1,350,000 $ 1,361,151

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Payments due by period as of September 30, 2022

Contractual Obligations Total Less than 1 year 1-3 years 3-5 years More than 5 years

Contractual Obligations Total Less than 1 year 1-3 years 3-5 years

Syndicated Facility $ 540,000 $ — $ — $ 540,000

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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.

Significant Capital Transactions

During the year ended September 30, 2022, we issued an aggregate of 212,382 shares of common stock as part of the DRIP.

On February 7, 2022, we entered into an equity distribution agreement by and among us, Oaktree, Oaktree Administrator and Keefe, Bruyette & Woods, Inc., JMP Securities LLC, Raymond James & Associates, Inc.

and SMBC Nikko Securities America, Inc., as placement agents, in connection with the issuance and sale by us of shares of common stock, having an aggregate offering price of up to $125.0 million.

Sales of the common stock, if any, may be made in negotiated transactions or transactions that are deemed to be “at the market,” as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on the Nasdaq Global Select Market or similar securities exchanges or sales made to or through a market maker other than on an exchange, at prices related to the prevailing market prices or at negotiated prices.

In connection with the "at the market" offering, we issued and sold the following shares of common stock during the year ended September 30, 2022:

Number of Shares Issued Gross Proceeds Placement Agent Fees Net Proceeds (1) Average Sales Price per Share (2)

"At the market" offering 2,801,206 $ 21,049 $ 210 $ 20,839 $ 7.51

(1) Net proceeds excludes offering costs of $0.2 million.

(2) Represents the gross sales price before deducting placement agent fees and estimated offering expenses.

On March 19, 2021, in connection with the OCSI Merger, we issued an aggregate of 39,400,011 shares of common stock to former OCSI stockholders.

There were no other common stock issuances during the year ended September 30, 2021.

Distributions

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, 2020:

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November 13, 2020 December 15, 2020 December 31, 2020 $ 0.11 $ 15.0 million 93,964 $ 0.5 million

February 1, 2019 March 15, 2019 March 29, 2019 0.095 13.1 million 59,603 0.3 million

May 3, 2019 June 14, 2019 June 28, 2019 0.095 13.1 million 61,093 0.3 million

August 2, 2019 September 13, 2019 September 30, 2019 0.095 13.1 million 61,205 0.3 million

November 12, 2019 December 13, 2019 December 31, 2019 0.095 12.9 million 87,747 0.5 million

January 29, 2021 March 15, 2021 March 31, 2021 0.12 16.4 million 81,702 0.5 million

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July 30, 2021 September 15, 2021 September 30, 2021 0.145 25.5 million 85,075 0.6 million

November 13, 2020 December 15, 2020 December 31, 2020 0.11 15.0 million 93,964 0.5 million

October 13, 2021 December 15, 2021 December 31, 2021 0.155 27.2 million 107,971 0.8 million

January 28, 2022 March 15, 2022 March 31, 2022 0.16 28.5 million 104,411 0.8 million

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______________

(1) Shares were purchased on the open market and distributed.

(1) Shares were purchased on the open market and distributed other than with respect to the distributions paid on December 31, 2021 and March 31, 2022.

New shares were issued and distributed during the quarters ended December 31, 2021 and March 31, 2022.

See “ Note 6.

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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%.

As of September 30, 2022, (i) the size of the Syndicated Facility was $1.0 billion (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.

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Our borrowings under the Syndicated Facility bore interest at a weighted average interest rate of 2.876%, 2.197% and 3.028% for the years ended September 30, 2022, 2021 and 2020, respectively.

For the years ended September 30, 2021, 2020 and 2019, we

recorded interest expense (inclusive of fees) of $13.8 million, $14.9 million and $17.1 million, respectively, related to the Syndicated Facility.

For the years ended September 30, 2022, 2021 and 2020, we recorded interest expense (inclusive of fees) of $19.5 million, $13.8 million and $14.9 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.

On March 19, 2021, we became party to the Citibank Facility.

As of September 30, 2022, we were able to borrow up to $200 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, 2022, the reinvestment period under the Citibank Facility was scheduled to expire on November 18, 2023 and the maturity date for the Citibank Facility was November 18, 2024.

As of September 30, 2022, 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.

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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.

As of September 30, 2022 and September 30, 2021, we had $160.0 million and $135.0 million outstanding under the Citibank Facility, respectively, which had a fair value of $160.0 million and $135.0 million, respectively.

Our borrowings under the Citibank Facility bore interest at a weighted average interest rate of 3.179% and 2.086% for the year ended September 30, 2022 and the period from March 19, 2021 to September 30, 2021, respectively.

For the year ended September 30, 2022 and the period from March 19, 2021 to September 30, 2021, we recorded interest expense (inclusive of fees) of $5.8 million and $1.9 million, respectively, related to the Citibank Facility.

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.

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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.

Under the interest rate swap agreement, we receive a fixed interest rate of 2.700% 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.

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 Notes 2027 Notes

The below table presents the components of the carrying value of the 2025 Notes and the 2027 Notes as of September 30, 2022 and September 30, 2021:

As of September 30, 2022 As of September 30, 2021

($ in millions) 2025 Notes 2027 Notes 2025 Notes 2027 Notes

Principal $ 300.0 $ 350.0 $ 300.0 $ 350.0

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Fair Value $ 283.1 $ 294.0 $ 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, 2022:

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Coupon interest rate (net of effect of interest rate swap for 2027 Notes) 3.500 % 2.585 %

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 Notes 2027 Notes

Coupon interest $ 10.5 $ 3.5

Amortization of financing costs and discount 1.3 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:

4 unchanged sentences

Coupon interest rate 3.500 %

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.

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.

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

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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.

income derived from the prior taxable year carried forward into and distributed in the current taxable year.

Distributions also may include returns of capital.

3 unchanged sentences

We did not incur a U.S.

federal excise tax for calendar years 2019 and 2020.

federal excise tax for calendar years 2020 and 2021 and do not expect to incur a U.S.

federal excise tax for calendar year 2022.

We may incur a federal excise tax in future years.

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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.

Oaktree is a registered investment adviser under the Investment Advisers Act of 1940, as amended, that is partially and indirectly owned by Oaktree Capital Group, LLC.

See “ Note 10.

Related Party Transactions – Investment Advisory Agreement ” and “ – Administrative Services ” in the notes to the accompanying Consolidated Financial Statements.

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.

McKown is also expected to succeed Mel Carlisle as Chief Financial Officer and Treasurer of OSI II as of December 31, 2021.

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.

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).

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.

Pak was also elected as Chief Compliance Officer of OSI II as of the close of business on November 12, 2021.

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.

Pak received a B.A.

in Business Administration from Seattle University and an MBA from the University of Massachusetts, Amherst – Isenberg School of Management.

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.

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.

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.

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.

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.

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.

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.

On November 10, 2022, our Board of Directors declared a quarterly distribution of $0.18 per share, payable in cash on December 30, 2022 to stockholders of record on December 15, 2022.

On November 10, 2022, our Board of Directors also declared a special distribution of $0.14 per share payable on December 30, 2022 to stockholders of record on December 15, 2022.

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 7. Management’s Discussion and Analysis