Investment Strategy and Portfolio Composition - Oaktree has reduced non-core investments by nearly $600 million at fair value since becoming the investment adviser[336]. - The company expects its portfolio to consist of approximately 40% to 60% first lien loans and 35% to 55% second lien loans, with 0% to 10% preferred equity[334]. - The company aims to generate current income and capital appreciation through flexible financing solutions, focusing on middle-market companies with enterprise values between $100 million and $750 million[334]. - The company categorizes its portfolio into core investments, non-core performing investments, and underperforming investments[335]. - The fundamentals of middle-market companies remain strong, providing opportunities for direct lending[338]. - The company believes that attractive risk-adjusted returns can be achieved by investing in companies that cannot efficiently access traditional debt capital markets[339]. Financial Performance - The company reported a total revenue of $1.38 billion, with a significant contribution from financial services[364]. - Total investment income for the three months ended March 31, 2019, was $38.2 million, a 10.0% increase from $34.8 million in the same period of 2018[399]. - For the six months ended March 31, 2019, total investment income was $76.5 million, up 11.5% from $68.7 million in the prior year[400]. - Net investment income for the three months ended March 31, 2019, increased by $2.4 million, or 16.0%, compared to the same period in 2018[403]. - Net realized gains for the three months ended March 31, 2019, were $25.2 million, significantly higher than $4.9 million in the same period of 2018[406]. Asset and Liability Management - Total assets as of March 31, 2019, were $346.6 million, an increase from $314.2 million as of September 30, 2018[394]. - Total liabilities as of March 31, 2019, were $311.7 million, slightly down from $314.1 million as of September 30, 2018[394]. - The company intends to target a debt to equity ratio of 0.70x to 0.85x, with a minimum net worth requirement of $600 million[413]. - The company amended the ING Facility on February 25, 2019, increasing its size from $600 million to $680 million and extending the maturity date to February 25, 2024[423]. - Total debt outstanding as of March 31, 2019, was $597.6 million, down from $643.4 million as of September 30, 2018[445]. Investment Valuation and Risk Management - The company utilizes a multi-step valuation process each quarter to determine the fair value of investments, involving independent valuation firms and internal assessments[351]. - The company is subject to financial market risks, including valuation risk and interest rate risk, which may impact its investment portfolio and funding costs[461][463]. - A hypothetical 300 basis point increase in interest rates could result in a net increase of $22.404 million in income[465]. - The percentage of debt investments in accrual status was 88.54% at cost and 93.88% at fair value as of March 31, 2019[369]. Distribution and Shareholder Returns - The company intends to distribute at least 90% of its annual taxable income to stockholders, subject to covenants in the ING Facility[450][451]. - The company declared a quarterly distribution of $0.095 per share on May 3, 2019, payable on June 28, 2019, to stockholders of record on June 14, 2019[458]. - The company has adopted a Dividend Reinvestment Plan (DRIP) allowing stockholders to reinvest cash distributions into additional shares[455]. Market Activity and Sector Performance - In 2018, there was a total of $10.7 billion of syndicated middle market loan issuance, indicating strong market activity[337]. - User data showed a growth of 2.98% in the healthcare segment, indicating strong market demand[364]. - The company is focusing on expanding its market presence, particularly in the brokerage and financial services sectors, which accounted for 0.78% of total revenue[364]. - Multi-sector holdings increased from 8.67% to 9.57% year-over-year[366]. Loan Portfolio Details - The total principal amount across the portfolio is $327,645 million with a fair value of $325,603 million[381]. - The average interest rate for the loans in the portfolio is approximately 7.00%[381]. - As of March 31, 2019, 86.3% of the debt investment portfolio (at fair value) and 84.2% (at cost) bore interest at floating rates[464].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q (Mark One) þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2018 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-33901 Oaktree Specialty Lending Corporation (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE (State or jurisdiction of incorporation or organizatio ...