Exhibit 10.1

INVESTMENT ADVISORY AGREEMENT

BETWEEN

OAKTREE SPECIALTY LENDING CORPORATION

AND

OAKTREE CAPITAL MANAGEMENT, L.P.

This Investment Advisory Agreement (this “Agreement”) made effective as of
September 30, 2019 (the “Effective Date”), by and between OAKTREE SPECIALTY
LENDING CORPORATION, a Delaware corporation (the “Company”), and OAKTREE CAPITAL
MANAGEMENT, L.P., a Delaware limited partnership (the “Adviser”).

WHEREAS, the Company is a closed-end management investment fund that has elected
to be regulated as a business development company (“BDC”) under the Investment
Company Act of 1940, as amended (the “Investment Company Act”); and

WHEREAS, the Adviser is organized as an investment adviser that is registered
under the Investment Advisers Act of 1940, as amended (the “Advisers Act”); and

WHEREAS, the Company and the Adviser desire to set forth the terms and
conditions for the provision by the Adviser of investment advisory services to
the Company.

NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the parties hereby agree as follows:

 

1.

Duties of the Adviser.

(a)    The Company hereby appoints the Adviser to act as the investment adviser
to the Company and to manage the investment and reinvestment of the assets of
the Company, subject to the supervision of the Board of Directors of the
Company, (the “Board”) for the period and upon the terms herein set forth,
(i) in accordance with the investment objective, policies and restrictions that
are set forth in the reports and/or registration statements that the Company
files with the Securities and Exchange Commission (the “SEC”) from time to time;
(ii) in accordance with all other applicable federal and state laws, rules and
regulations, and the Company’s charter and by-laws; and (iii) in accordance with
the Investment Company Act. Without limiting the generality of the foregoing,
the Adviser shall, during the term and subject to the provisions of this
Agreement (A) determine the composition of the portfolio of the Company, the
nature and timing of the changes therein and the manner of implementing such
changes; (B) identify, evaluate and negotiate the structure of the investments
made by the Company; (C) execute, close, monitor and service the Company’s
investments; (D) determine the securities and other assets that the Company will
purchase, retain, or sell; (E) perform due diligence on prospective portfolio
companies; and (F) provide the Company with such other investment advisory,
research and related services as the Company may, from time to time, reasonably
require for the investment of its funds. The Adviser shall have the power and
authority on behalf of the Company to effectuate its investment decisions for
the Company, including the negotiation,

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execution and delivery of all documents relating to the Company’s investments
and the placing of orders for other purchase or sale transactions on behalf of
the Company. In the event that the Company determines to obtain debt financing
(or refinance such financing), the Adviser shall arrange for such financing on
the Company’s behalf, subject to the oversight and approval of the Board. If it
is necessary for the Adviser to make investments on behalf of the Company
through a special purpose vehicle, the Adviser shall have authority to create or
arrange for the creation of such special purpose vehicle and to make such
investments through such special purpose vehicle.

(b)    The Adviser hereby accepts such appointment and agrees during the term
hereof to render the services described herein for the compensation provided
herein.

(c)    The Adviser is hereby authorized to enter into one or more sub-advisory
agreements with other investment advisers (each, a “Sub-Adviser”) pursuant to
which the Adviser may obtain the services of the Sub-Adviser(s) to assist the
Adviser in fulfilling its responsibilities hereunder. Specifically, the Adviser
may retain a Sub-Adviser to recommend specific securities or other investments
based upon the Company’s investment objective and policies, and work, along with
the Adviser, in structuring, negotiating, arranging or effecting the acquisition
or disposition of such investments and monitoring investments on behalf of the
Company, subject to the oversight of the Adviser and the Company. The Adviser,
and not the Company, shall be responsible for any compensation payable to any
Sub-Adviser. Any sub-advisory agreement entered into by the Adviser shall be in
accordance with the requirements of the Investment Company Act and other
applicable federal and state law.

(d)    The Adviser shall, for all purposes herein provided, be deemed to be an
independent contractor and, except as expressly provided or authorized herein,
shall have no authority to act for or represent the Company in any way or
otherwise be deemed an agent of the Company.

(e)    Subject to review by and the overall control of the Board, the Adviser
shall keep and preserve, in the manner and for the period required by the
Investment Company Act, any books and records relevant to the provision of its
investment advisory services to the Company and shall specifically maintain all
books and records with respect to the Company’s portfolio transactions and shall
render to the Board such periodic and special reports as the Board may
reasonably request. The Adviser agrees that all records that it maintains for
the Company are the property of the Company and shall surrender promptly to the
Company any such records upon the Company’s request, provided that the Adviser
may retain a copy of such records.

 

2.

Company’s Responsibilities and Expenses Payable by the Company.

All personnel of the Adviser, when and to the extent engaged in providing
investment advisory services hereunder, and the compensation and routine
overhead expenses of such personnel allocable to such services, shall be
provided and paid for by the Adviser and not by the Company. The Company shall
bear all other costs and expenses of its operations and transactions, including
(without limitation) fees and expenses relating to: (a) offering expenses;
(b) diligence and monitoring of the Company’s financial, regulatory and legal
affairs (to the extent an investment opportunity is being considered for the
Company and any other accounts managed by Adviser or its affiliates, the
Adviser’s out-of-pocket expenses related to the due

 

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diligence for such investment will be shared with such other accounts pro rata
based on the anticipated allocation of such investments opportunity between the
Company and the other accounts); (c) the cost of calculating the Company’s net
asset value; (d) the cost of effecting sales and repurchases of shares of the
Company’s common stock and other securities; (e) management and incentive fees
payable pursuant to this Agreement; (f) fees payable to third parties relating
to, or associated with, making investments and valuing investments (including
third-party valuation firms); (g) transfer agent and custodial fees; (h) fees
and expenses associated with marketing efforts (including attendance at
investment conferences and similar events); (i) allocable out-of-pocket costs
incurred in providing managerial assistance to those portfolio companies that
request it; (j) fees, interest or other costs payable on or in connection with
any indebtedness; (k) federal and state registration fees; (l) any exchange
listing fees; (m) federal, state and local taxes; (n) independent directors’
fees and expenses; (o) brokerage commissions; (p) costs of proxy statements,
stockholders’ reports and notices; (q) costs of preparing government filings,
including periodic and current reports with the SEC; (r) fidelity bond,
liability insurance and other insurance premiums; (s) printing, mailing,
independent accountants and outside legal costs; (t) all other direct expenses
incurred by either the Company’s administrator or the Company in connection with
administering the Company’s business, including payments under the Company’s
administration agreement with its administrator (as in effect from time to time,
the “Administration Agreement”) that will be based upon the Company’s allocable
portion of overhead and other expenses incurred by the Company’s administrator
in performing its obligations under the Administration Agreement; and (u) the
compensation of the Company’s chief financial officer and chief compliance
officer, and their respective staffs.

 

3.

Compensation of the Adviser.

The Company agrees to pay, and the Adviser agrees to accept, as compensation for
the services provided by the Adviser hereunder, a base management fee (“Base
Management Fee”) and an incentive fee (“Incentive Fee”) as hereinafter set
forth. The Adviser may agree to temporarily or permanently waive or defer, in
whole or in part, the Base Management Fee and/or the Incentive Fee. See Appendix
A for examples of how these fees are calculated. The Company shall make any
payments due hereunder to the Adviser or to the Adviser’s designee as the
Adviser may otherwise direct. Any portion of a deferred fee payable to the
Adviser shall be deferred without interest and may be paid in any quarter prior
to the termination of this Agreement as the Adviser may determine upon written
notice to the Company.

(a)    As of the Effective Date, the Base Management Fee shall be calculated at
an annual rate of 1.50% of the Company’s gross assets, including any investments
made with borrowings, but excluding any cash and cash equivalents; provided,
however, that upon the effectiveness of the 150% asset coverage requirement
pursuant to Section 61(a)(2) of the Investment Company Act, the Base Management
Fee shall be calculated at an annual rate of 1.00% of the Company’s gross
assets, including any investments made with borrowings, but excluding any cash
and cash equivalents that exceeds the product of (A) 200% and (B) the Company’s
net asset value. For the avoidance of doubt, the 200% will be calculated in
accordance with the Investment Company Act and will give effect to exemptive
relief the Company received with respect to debentures issued by a small
business investment company subsidiary. For purposes of this Agreement, the term
“cash and cash equivalents” will have the

 

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meaning ascribed to it from time to time in the notes to the financial
statements that the Company files with the SEC. The Base Management Fee shall be
payable quarterly in arrears, and shall be calculated based on the value of the
Company’s gross assets at the end of each fiscal quarter, and appropriately
adjusted for any equity capital raises or repurchases during such quarter. The
Base Management Fee for any partial month or quarter shall be appropriately
prorated (upon termination of the investment advisory agreement, as of the
termination date).

(b)    Incentive Fee. The Incentive Fee shall consist of two parts, as follows:

(i)    The first part, referred to as the “Incentive Fee on Income,” shall be
calculated and payable quarterly in arrears based on the Company’s
“Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter
(or upon termination of the investment advisory agreement, as of the termination
date). The payment of the Incentive Fee on Income shall be subject to payment of
a preferred return to investors each quarter, expressed as a rate of return on
the value of the Company’s net assets at the end of the most recently completed
calendar quarter, of 1.50%, subject to a “catch up” feature (as described
below).

For this purpose, “Pre-Incentive Fee Net Investment Income” means interest
income, dividend income and any other income (including any other fees, such as
commitment, origination, structuring, diligence and consulting fees or other
fees that the Company receives from portfolio companies, other than fees for
providing managerial assistance) accrued during the calendar quarter, minus the
Company’s operating expenses for the quarter (including the Base Management Fee,
expenses payable under the Administration Agreement, and any interest expense
and dividends paid on any issued and outstanding preferred stock, but excluding
the Incentive Fee). Pre-Incentive Fee Net Investment Income includes, in the
case of investments with a deferred interest feature (such as original issue
discount debt instruments with payment-in-kind interest and zero coupon
securities), accrued income that the Company has not yet received in cash.
Pre-Incentive Fee Net Investment Income does not include any realized capital
gains, realized capital losses or unrealized capital appreciation or
depreciation.

The calculation of the Incentive Fee on Income for each quarter is as follows:

(A)    No Incentive Fee on Income shall be payable to the Adviser in any
calendar quarter in which the Company’s Pre-Incentive Fee Net Investment Income
does not exceed the preferred return rate of 1.50% (the “Preferred Return”) on
net assets;

(B)    100% of the Company’s Pre-Incentive Fee Net Investment Income, if any,
that exceeds the Preferred Return but is less than or equal to 1.8182% in any
calendar quarter shall be payable to the Adviser. This portion of the company’s
Incentive Fee on Income is referred to as the “catch up” and is intended to
provide the Adviser with an incentive fee of 17.5% on all of the Company’s
Pre-Incentive Fee Net Investment Income when the Company’s Pre-Incentive Fee Net
Investment Income reaches 1.8182% on net assets in any calendar quarter; and

 

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(C)    For any quarter in which the Company’s Pre-Incentive Fee Net Investment
Income exceeds 1.8182% on net assets, the Incentive Fee on Income shall equal
17.5% of the amount of the Company’s Pre-Incentive Fee Net Investment Income, as
the Preferred Return and catch-up will have been achieved.

(ii)    The second part of the Incentive Fee, referred to as the “Incentive Fee
on Capital Gains,” shall be determined and payable in arrears as of the end of
each fiscal year (or upon termination of the investment advisory agreement, as
of the termination date), commencing the fiscal year ending September 30, 2019,
and shall equal 17.5% of the Company’s realized capital gains, if any, on a
cumulative basis from the beginning of the fiscal year ending September 30, 2019
through the end of each subsequent fiscal year, computed net of all realized
capital losses and unrealized capital depreciation on a cumulative basis, less
the aggregate amount of any previously paid capital gain incentive fees under
this Agreement. Any realized capital gains, realized capital losses, unrealized
capital appreciation and unrealized capital depreciation with respect to the
Company’s portfolio as of the end of the fiscal year ending September 30, 2018
shall be excluded from the calculations of the second part of the incentive fee.

(c)    In certain circumstances the Adviser, any Sub-Adviser, or any of their
respective affiliates, may receive compensation from a portfolio company in
connection with the Company’s investment in such portfolio company. Any
compensation received by the Adviser, Sub-Adviser, or any of their respective
affiliates, attributable to the Company’s investment in any portfolio company,
in excess of any of the limitations in or exemptions granted from the 1940 Act,
any interpretation thereof by the staff of the SEC, or the conditions set forth
in any exemptive relief granted to the Adviser, any Sub-Adviser or the Company
by the SEC, shall be delivered promptly to the Company and the Company will
retain such excess compensation for the benefit of its shareholders.

 

4.

Covenants of the Adviser.

The Adviser covenants that it will maintain its registration as an investment
adviser under the Advisers Act. The Adviser agrees that its activities will at
all times be in compliance in all material respects with all applicable federal
and state laws governing its operations and investments.

 

5.

Brokerage Commissions.

The Adviser is hereby authorized, to the fullest extent now or hereafter
permitted by law, to cause the Company to pay a member of a national securities
exchange, broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of such
exchange, broker or dealer would have charged for effecting that transaction, if
the Adviser determines in good faith, taking into account such factors as price
(including the applicable brokerage commission or dealer spread), size of order,
difficulty of execution, and operational facilities of the firm and the firm’s
risk and skill in positioning blocks of securities, that such amount of
commission is reasonable in relation to the

 

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value of the brokerage and/or research services provided by such member, broker
or dealer, viewed in terms of either that particular transaction or its overall
responsibilities with respect to the Company’s portfolio, and constitutes the
best net results for the Company.

 

6.

Other Activities of the Adviser.

The services of the Adviser to the Company are not exclusive. Subject to the
provisions of the Company’s charter and by-laws, the Adviser and its managers,
partners, principals, officers, employees and agents shall be free to act for
their own account or the account of any other Account, and to engage in any
other business or render similar or different services to others including,
without limitation, the direct or indirect sponsorship or management of other
investment based accounts or commingled pools of capital, however structured,
having investment objectives similar to those of the Company, so long as the
Adviser’s services to the Company hereunder are not impaired thereby. The
Company agrees that the Adviser may give advice and take action in the
performance of its duties with respect to any of its other clients which may
differ from advice given or the timing or nature of action taken with respect to
the investments of the Company. Nothing in this Agreement shall limit or
restrict the right of any manager, partner, principal, officer, employee or
agent of the Adviser to engage in any other business or to devote his or her
time and attention in part to any other business, whether of a similar or
dissimilar nature, or to receive any fees or compensation in connection
therewith (including fees for serving as a director of, or providing consulting
services to, one or more of the Company’s portfolio companies, subject to
applicable law). So long as this Agreement or any extension, renewal or
amendment remains in effect, the Adviser shall be the only investment adviser
for the Company, subject to the Adviser’s right to enter into sub-advisory
agreements. The Adviser assumes no responsibility under this Agreement other
than to render the services called for hereunder. It is understood that
directors, managers, officers, employees and stockholders of the Company are or
may become interested in the Adviser and its affiliates, as directors, officers,
employees, partners, principals, stockholders, members, managers, agents or
otherwise, and that the Adviser and directors, officers, employees, partners,
principals, stockholders, members, managers and agents of the Adviser and its
affiliates are or may become similarly interested in the Company as stockholders
or otherwise.

 

7.

Responsibility of Dual Directors, Officers and/or Employees.

If any person who is a manager, partner, principal, officer, employee or agent
of the Adviser is or becomes a director, manager, officer and/or employee of the
Company and acts as such in any business of the Company, then such manager,
partner, principal, officer, employee and/or agent of the Adviser shall be
deemed to be acting in such capacity solely for the Company, and not as a
manager, partner, principal, officer, employee or agent of the Adviser or under
the control or direction of the Adviser, even if paid by the Adviser.

 

8.

Limitation of Liability of the Adviser; Indemnification.

The Adviser (and its officers, managers, partners, members (and their members,
including the owners of their members), agents, employees, controlling persons
and any other person or entity affiliated with the Adviser) shall not be liable
to the Company for any action taken or omitted to be taken by the Adviser in
connection with the performance of any of its

 

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duties or obligations under this Agreement or otherwise as an investment adviser
of the Company (except to the extent specified in Section 36(b) of the
Investment Company Act concerning loss resulting from a breach of fiduciary duty
(as the same is finally determined by judicial proceedings) with respect to the
receipt of compensation for services, and the Company shall indemnify, defend
and protect the Adviser (and its officers, managers, partners, members (and
their members, including the owners of their members), agents, employees,
controlling persons and any other person or entity affiliated with the Adviser,
each of whom shall be deemed a third party beneficiary hereof) (collectively,
the “Indemnified Parties”) and hold them harmless from and against all damages,
liabilities, costs and expenses (including reasonable attorneys’ fees and
amounts reasonably paid in settlement) incurred by the Indemnified Parties in or
by reason of any pending, threatened or completed action, suit, investigation or
other proceeding (including an action or suit by or in the right of the Company
or its security holders) arising out of or otherwise based upon the performance
of any of the Adviser’s duties or obligations under this Agreement or otherwise
as an investment adviser of the Company. Notwithstanding the preceding sentence
of this Paragraph 8 to the contrary, nothing contained herein shall protect or
be deemed to protect the Indemnified Parties against or entitle or be deemed to
entitle the Indemnified Parties to indemnification in respect of, any liability
to the Company or its security holders to which the Indemnified Parties would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Adviser’s duties or by reason of the
reckless disregard of the Adviser’s duties and obligations under this Agreement.

 

9.

Effectiveness, Duration and Termination of Agreement.

This Agreement shall become effective as of the Effective Date. This Agreement
shall remain in effect for two years from the Effective Date, and thereafter
shall continue automatically for successive annual periods, provided that such
continuance is specifically approved at least annually by (a) the vote of the
Board or a majority of the outstanding voting securities of the Company and
(b) the vote of a majority of the Company’s directors who are not parties to
this Agreement or “interested persons” (as such term is defined in
Section 2(a)(19) of the Investment Company Act) of any such party, in accordance
with the requirements of the Investment Company Act and each of whom is an
“independent director” under applicable New York Stock Exchange listing
standards. This Agreement may be terminated at any time, without the payment of
any penalty, upon 60 days’ written notice, by the vote of a majority of the
outstanding voting securities of the Company, or by the vote of the Company’s
directors or by the Adviser. This Agreement shall automatically terminate in the
event of its “assignment” (as such term is defined for purposes of
Section 15(a)(4) of the Investment Company Act). Further, notwithstanding the
termination or expiration of this Agreement as aforesaid, the Adviser shall be
entitled to any amounts owed under Paragraph 3 through the date of termination
or expiration.

 

10.

Notices.

Any notice under this Agreement shall be given in writing, addressed and
delivered or mailed, postage prepaid, to the other party at its principal
office.

 

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11.

Amendments.

This Agreement may be amended by mutual consent.

 

12.

Entire Agreement; Governing Law.

This Agreement contains the entire agreement of the parties and supersedes all
prior agreements, understandings and arrangements with respect to the subject
matter hereof. Notwithstanding the place where this Agreement may be executed by
any of the parties hereto, this Agreement shall be construed in accordance with
the laws of the State of New York. For so long as the Company is regulated as a
BDC under the Investment Company Act, this Agreement shall also be construed in
accordance with the applicable provisions of the Investment Company Act. In such
case, to the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the provisions of the Investment Company Act,
the latter shall control. To the fullest extent permitted by law, in the event
of any dispute arising out of the terms and conditions of this Agreement, the
parties hereto consent and submit to the jurisdiction of the courts of the State
of New York in the county of New York and of the U.S. District Court for the
Southern District of New York.

 

13.

Forum Selection.

Any legal action or proceeding with respect to this Agreement or the services
provided hereunder or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns must be
brought and determined in the state or United States district courts of the
State of New York (and may not be brought or determined in any other forum or
jurisdiction), and each party hereto submits with regard to any action or
proceeding for itself and in respect of its property, generally and
unconditionally, to the sole and exclusive jurisdiction of the aforesaid courts.

 

14.

No Third Party Beneficiary.

Other than expressly provided for in Paragraph 8 of this Agreement, this
Agreement does not and is not intended to confer any rights or remedies upon any
person other than the parties to this Agreement; there are no third-party
beneficiaries of this Agreement, including but not limited to stockholders of
the Company.

 

15.

Severability.

Every term and provision of this Agreement is intended to be severable. If any
term or provision hereof is illegal or invalid for any reason whatsoever, such
term or provision will be enforced to the maximum extent permitted by law and,
in any event, such illegality or invalidity shall not affect the validity of the
remainder of this Agreement.

 

16.

Counterparts.

This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of which taken together shall constitute a
single agreement.

 

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17.

Survival of Certain Provisions.

The provisions of Paragraph 8 of this Agreement shall survive any termination or
expiration of this Agreement and the dissolution, termination and winding up of
the Company.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the date above written.

 

OAKTREE SPECIALTY LENDING CORPORATION By:  

/s/ Mathew Pendo

Name:   Mathew Pendo Title:   President and Chief Operating Officer OAKTREE
CAPITAL MANAGEMENT, L.P. By:  

/s/ Mathew Pendo

Name:   Mathew Pendo Title:   Managing Director By:  

/s/ Mary Gallegly

Name:   Mary Gallegly Title:   Senior Vice President

[Signature Page to Investment Advisory Agreement]

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Appendix A

Example 1: Incentive Fee on Income for Each Quarter

Alternative 1

Assumptions

Investment income (including interest, dividends, fees, etc.) = 2%

Preferred return1 = 1.50%

Management fee2 = 0.375%

Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.20%

Pre-Incentive Fee net investment income

        (investment income – (management fee + other expenses)) = 1.425%

Pre-Incentive Fee Net Investment Income does not exceed the Preferred Return,
therefore there is no Incentive Fee on Income.

Alternative 2

Assumptions

Investment income (including interest, dividends, fees, etc.) = 2.375%

Preferred Return1 = 1.5%

Management fee2 = 0.375%

Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.20%

Pre-Incentive Fee net investment income

        (investment income – (management fee + other expenses)) = 1.80%

Incentive Fee = 17.5% × pre-Incentive Fee net investment income, subject to
“catch-up”3

        = 100% × (1.80% – 1.5%)

        = 0.30%

 

1 

Represents 6.0% annualized preferred return.

2 

Represents 1.5% annualized management fee.

3 

The “catch-up” provision is intended to provide the Adviser with an Incentive
Fee of 17.5% on all of our pre-Incentive Fee net investment income as if a
preferred return did not apply when our net investment income exceeds 1.5% in
any calendar quarter and is not applied once the Adviser has received 17.5% of
investment income in a quarter. The “catch-up” portion of our pre-Incentive Fee
Net Investment Income is the portion that exceeds the 1.5% preferred return but
is less than or equal to approximately 1.8182% (that is, 1.5% divided by (1 –
0.175)) in any fiscal quarter.

 

A-1

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Alternative 3

Assumptions

Investment income (including interest, dividends, fees, etc.) = 3.5%

Preferred Return1 = 1.5%

Management fee2 = 0.375%

Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.20%

Pre-Incentive Fee net investment income

        (investment income – (management fee + other expenses)) = 2.925%

Incentive Fee = 17.5% × pre-Incentive Fee net investment income, subject to
“catch-up”3

Incentive Fee = 100% × “catch-up” + (17.5% × (pre-Incentive Fee net investment
income – 1.8182%))

Catch-up = 1.8182% – 1.5% = 0.3182%

Incentive Fee = (100% × 0.3182%) + (17.5% × (2.925% – 1.8182%))

        = 0.3182% + (17.5% × 1.1068%)

        = 0.3182% + 0.1937%

        = 0.5119%

Example 2: Incentive Fee on Capital Gains

Assumptions

 

  •  

Year 1: $10 million investment made in Company A (“Investment A”), $10 million
investment made in Company B (“Investment B”), $10 million investment made in
Company C (“Investment C”), $10 million investment made in Company D
(“Investment D”) and $10 million investment made in Company E (“Investment E”).

 

  •  

Year 2: Investment A sold for $20 million, fair market value (“FMV”) of
Investment B determined to be $8 million, FMV of Investment C determined to be
$12 million, and FMV of Investments D and E each determined to be $10 million.

 

  •  

Year 3: FMV of Investment B determined to be $8 million, FMV of Investment C
determined to be $14 million, FMV of Investment D determined to be $14 million
and FMV of Investment E determined to be $16 million.

 

  •  

Year 4: Investment D sold for $12 million, FMV of Investment B determined to be
$10 million, FMV of Investment C determined to be $16 million and FMV of
Investment E determined to be $14 million.

 

  •  

Year 5: Investment C sold for $20 million, FMV of Investment B determined to be
$14 million and FMV of Investment E determined to be $10 million

 

  •  

Year 6: Investment B sold for $16 million and FMV of Investment E determined to
be $8 million.

 

A-2

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  •  

Year 7: Investment E sold for $8 million and FMV.

These assumptions are summarized in the following chart:

 

     Investment
A    Investment
B    Investment
C    Investment
D    Investment
E    Cumulative
Unrealized
Capital
Depreciation    Cumulative
Realized
Capital
Losses    Cumulative
Realized
Capital
Gains

Year 1

   $10 million
(cost basis)    $10 million
(cost basis)    $10 million
(cost basis)    $10 million
(cost basis)    $10 million
(cost basis)    —      —      —  

Year 2

   $20 million
(sale price)    $8 million
FMV    $12 million
FMV    $10 million
FMV    $10 million
FMV    $2 million    —      $10 million

Year 3

   —      $8 million
FMV    $14 million
FMV    $14 million
FMV    $16 million
FMV    $2 million    —      $10 million

Year 4

   —      $10 million
FMV    $16 million
FMV    $12 million
(sales price)    $14 million
FMV    —      —      $12 million

Year 5

   —      $14 million
FMV    $20 million
(sale price)    —      $10 million
FMV    —      —      $22 million

Year 6

   —      $16 million
(sale price)    —      —      $8 million
FMV    $2 million    —      $28 million

Year 7

   —      —      —      —      $8 million
(sale price)    —      $2 million    $28 million

 

  •  

Year 1: None

 

  •  

Year 2:

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

 

  •  

Year 3:

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

 

  •  

Year 4:

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

 

  •  

Year 5:

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

 

  •  

Year 6:

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

 

A-3

--------------------------------------------------------------------------------

  •  

Year 7:

Capital Gains Fee = (17.5% multiplied by ($28 million cumulative realized
capital gains less $2 million cumulative realized capital losses)) less
$4.55 million cumulative Capital Gains Fee previously paid = $4.55 million less
$4.55 million = $0.00 million

 

A-4