
	As of December 31,
	2022				2021
	Amortized Cost(1)		Fair Value		Amortized Cost(1)		Fair Value
First lien senior secured loans(2)	$	9,684	$	9,373	$	9,583	$	9,459
Second lien senior secured loans	4,218		3,934		4,614		4,524
Subordinated certificates of the SDLP(3)	1,274		1,249		987		987
Senior subordinated loans	1,163		1,079		896		890

Preferred equity	2,095		2,027		1,547		1,561
Ivy Hill Asset Management, L.P.(4)	2,048		2,201		781		936
Other equity	1,561		1,917		1,402		1,652
Total	$	22,043	$	21,780	$	19,810	$	20,009

(2)First lien senior secured loans include certain loans that the Company classifies as “unitranche” loans. The total amortized cost and fair value of the loans that the Company classified as “unitranche” loans were $4,983 and $4,841 respectively, as of December 31, 2022, and $5,210 and $5,163, respectively, as of December 31, 2021.

(3)The proceeds from these certificates were applied to co-investments with Varagon and its clients to fund first lien senior secured loans to 22 and 19 different borrowers as of December 31, 2022 and 2021, respectively.

The Company uses Global Industry Classification Standards for classifying the industry groupings of its portfolio companies. The industrial and geographic compositions of the Company’s portfolio at fair value as of December 31, 2022 and 2021 were as follows:


	As of December 31,
	2022		2021
Industry
Software & Services	21.9	%	21.9	%
Diversified Financials(1)	13.3		7.5
Health Care Services	10.8		10.8
Commercial & Professional Services	9.5		9.2
Investment Funds and Vehicles(2)	6.0		5.2
Insurance Services	5.2		5.8
Power Generation	4.5		4.5
Consumer Services	4.2		3.9
Consumer Durables & Apparel	3.7		4.4
Capital Goods	3.6		4.8
Automobiles & Components	2.6		4.6
Media & Entertainment	2.1		2.2
Food & Beverage	2.0		2.2
Energy	2.0		1.9
Pharmaceuticals, Biotechnology & Life Sciences	1.7		1.9
Other	6.9		9.2
Total	100.0	%	100.0	%

(2)Includes the Company’s investment in the SDLP, which had made first lien senior secured loans to 22 and 19 different borrowers as of December 31, 2022 and 2021, respectively. The portfolio companies in the SDLP are in industries similar to the companies in the Company’s portfolio.

As of December 31, 2022 and 2021, loans on non-accrual status represented 1.7% of the total investments at amortized cost (or 1.1% at fair value) and 0.8% at amortized cost (or 0.5% at fair value), respectively.

The Company has established a joint venture with Varagon to make certain first lien senior secured loans, including certain stretch senior and unitranche loans, primarily to U.S. middle-market companies. Varagon was formed in 2013 as a lending platform by American International Group, Inc. and other partners. The joint venture is called the SDLP. In July 2016, the Company and Varagon and its clients completed the initial funding of the SDLP. The SDLP may generally commit and hold individual loans of up to $450. The Company and other accounts managed by the Company’s investment adviser and its affiliates may directly co-invest with the SDLP to accommodate larger transactions. The SDLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of the SDLP must be approved by an investment committee of the SDLP consisting of representatives of the Company and Varagon (with approval from a representative of each required).

The Company provides capital to the SDLP in the form of subordinated certificates (the “SDLP Certificates”), and Varagon and its clients provide capital to the SDLP in the form of senior notes, intermediate funding notes and SDLP Certificates. As of December 31, 2022 and 2021, the Company and a client of Varagon owned 87.5% and 12.5%, respectively, of the outstanding SDLP Certificates.

As of December 31, 2022 and 2021, the Company and Varagon and its clients had agreed to make capital available to the SDLP of $6,150 and $6,150, respectively, in the aggregate, of which $1,444 and $1,444, respectively, is to be made available from the Company. The Company will continue to provide capital to the SDLP in the form of SDLP Certificates, and Varagon and its clients will provide capital to the SDLP in the form of senior notes, intermediate funding notes and SDLP Certificates. This capital will only be committed to the SDLP upon approval of transactions by the investment committee of the SDLP as discussed above. Below is a summary of the funded capital and unfunded capital commitments of the SDLP.


	As of December 31,
	2022		2021
Total capital funded to the SDLP(1)	$	5,127	$	4,168
Total capital funded to the SDLP by the Company(1)	$	1,274	$	987
Total unfunded capital commitments to the SDLP(2)	$	294	$	262
Total unfunded capital commitments to the SDLP by the Company(2)	$	68	$	62

The SDLP Certificates pay a coupon equal to LIBOR plus 8.0% and also entitle the holders thereof to receive a portion of the excess cash flow from the loan portfolio, after expenses, which may result in a return to the holders of the SDLP Certificates that is greater than the stated coupon. The SDLP Certificates are junior in right of payment to the senior notes and intermediate funding notes.

The amortized cost and fair value of the SDLP Certificates held by the Company were $1,274 and $1,249, respectively, as of December 31, 2022 and $987 and $987, respectively, as of December 31, 2021. The Company’s yield on its investment in the SDLP Certificates at amortized cost and fair value was 13.5% and 13.8%, respectively, as of December 31, 2022, and 13.5% and 13.5%, respectively, as of December 31, 2021. The interest income from the Company’s investment in the SDLP Certificates and capital structuring service and other fees earned for the years ended December 31, 2022, 2021 and 2020 were as follows:

As of December 31, 2022 and 2021, the SDLP’s portfolio was comprised entirely of first lien senior secured loans to U.S. middle-market companies and were in industries similar to the companies in the Company’s portfolio. As of December 31, 2022, one of the loans was on non-accrual status. As of December 31, 2021, none of the loans were on non-accrual status. Below is a summary of the SDLP’s portfolio.


	As of December 31,
	2022		2021
Total first lien senior secured loans(1)(2)	$	5,174	$	4,194
Largest loan to a single borrower(1)	$	377	$	342
Total of five largest loans to borrowers(1)	$	1,631	$	1,540
Number of borrowers in the SDLP	22		19
Commitments to fund delayed draw loans(3)	$	294	$	262

(2)First lien senior secured loans include certain loans that the SDLP classifies as “unitranche” loans. As of December 31, 2022 and 2021, the total principal amount of loans in the SDLP portfolio that the SDLP classified as “unitranche” loans was $4,108 and $2,908, respectively.

Pursuant to Rule 4-08(g) of Regulation S-X, selected financial information of the SDLP, in conformity with GAAP, as of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020 are presented below:


	As of December 31,
	2022		2021
Selected Balance Sheet Information:
Investments at fair value (amortized cost of $5,166 and $4,193, respectively)	$	4,958	$	4,127
Other assets	150		84
Total assets	$	5,108	$	4,211

Senior notes	$	3,538	$	2,939
Intermediate funding notes	132		101
Other liabilities	110		51
Total liabilities	3,780		3,091
Subordinated certificates and members’ capital	1,328		1,120
Total liabilities and members’ capital	$	5,108	$	4,211


	For the Years Ended December 31,
	2022		2021		2020
Selected Statement of Operations Information:
Total investment income	$	365	$	282	$	302
Interest expense	155		91		113
Other expenses	20		18		16
Total expenses	175		109		129
Net investment income	190		173		173
Net realized and unrealized gains (losses) on investments	(147)		70		(64)
Net increase in members’ capital resulting from operations	$	43	$	243	$	109

Ivy Hill Asset Management, L.P. (“IHAM”), a wholly owned portfolio company of the Company, is an asset management services company and an SEC-registered investment adviser. As of December 31, 2022, IHAM had assets under management of approximately $13.1 billion. As of December 31, 2022, IHAM managed 21 vehicles and served as the sub-manager/sub-servicer for one other vehicle (these vehicles managed or sub-managed/sub-serviced by IHAM are referred to as the “IHAM Vehicles”). IHAM earns fee income from managing the IHAM Vehicles and has also invested in certain of these vehicles as part of its business strategy. The amortized cost of IHAM’s total investments as of December 31, 2022 and 2021 was $2,370 and $966, respectively. For the years ended December 31, 2022, 2021 and 2020, IHAM had management and incentive fee income of $48, $31 and $28, respectively, and other investment-related income of $189, $91 and $75, respectively.


	As of December 31,
	2022				2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Subordinated debt	$	500	$	500	$	16	$	16
Equity investment	1,548		1,701		765		920
Total Company’s investment in IHAM	$	2,048	$	2,201	$	781	$	936

From time to time, IHAM or certain IHAM Vehicles may purchase investments from, or sell investments to, the Company. For any such sales or purchases by the IHAM Vehicles to or from the Company, the IHAM Vehicle must obtain approval from third parties unaffiliated with the Company or IHAM, as applicable. During the year ended December 31, 2022, 2021 and 2020, IHAM or certain of the IHAM Vehicles purchased $3,358, $2,407 and $940, respectively, of loans from the Company. For the years ended December 31, 2022, 2021 and 2020, the Company recognized $20, $7 and $21, respectively, of net realized losses from these sales. During the year ended December 31, 2022, the Company purchased $27 of investments from certain IHAM Vehicles.

IHAM is party to an administration agreement, referred to herein as the “IHAM administration agreement,” with Ares Operations. Pursuant to the IHAM administration agreement, Ares Operations provides IHAM with, among other things, office facilities, equipment, clerical, bookkeeping and record keeping services, services relating to the marketing and sale of interests in vehicles managed by IHAM, services of, and oversight of, custodians, depositories, accountants, attorneys, underwriters and such other persons in any other capacity deemed to be necessary. Under the IHAM administration agreement, IHAM reimburses Ares Operations for all of the actual costs associated with such services, including Ares Operations’ allocable portion of the compensation, rent and other expenses of its officers, employees and respective staff in performing its obligations under the IHAM administration agreement.

Pursuant to Rule 4-08(g) of Regulation S-X, selected financial information of IHAM, in conformity with GAAP, as of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020 are presented below.

In conformity with GAAP, IHAM is required to consolidate entities in which IHAM has a direct or indirect controlling financial interest based on either a variable interest model or voting interest model, which include certain of the IHAM Vehicles (the “Consolidated IHAM Vehicles”). As such, for GAAP purposes only, IHAM consolidates (a) entities in which it holds a

majority voting interest or has majority ownership and control over the operational, financial and investing decisions of that entity and (b) entities that it concludes are variable interest entities in which IHAM has more than insignificant economic interest and power to direct the activities that most significantly impact the entities, and for which IHAM is deemed to be the primary beneficiary.

When IHAM consolidates an IHAM Vehicle for GAAP purposes only, IHAM reflects the assets, liabilities, revenues and expenses of the Consolidated IHAM Vehicles on a gross basis, including the economic interests held by third-party investors in the Consolidated IHAM Vehicles as debt obligations, subordinated notes or non-controlling interests, in the consolidated IHAM financials below. All of the revenues earned by IHAM as the investment manager of the IHAM Consolidated Vehicles are eliminated in GAAP consolidation. However, because the eliminated amounts are earned from and funded by third-party investors, the GAAP consolidation of an IHAM Vehicle does not impact the net income or loss attributable to IHAM. As a result, the Company believes an assessment of IHAM's business and the impact to the Company’s investment in IHAM is best viewed on a stand-alone basis as reflected in the first column in the tables below.


	As of December 31, 2022
	IHAM		Consolidated IHAM Vehicles(1)		Eliminations		Consolidated
Selected Balance Sheet Information:
Assets

Investments at fair value(2)	$	2,340	$	8,973	$	(2,315)	$	8,998
Cash and cash equivalents	5		499		—		504

Other assets	55		94		(51)		98




Total assets	$	2,400	$	9,566	$	(2,366)	$	9,600

Liabilities

Debt	$	308	$	6,968	$	—	$	7,276
Subordinated note from ARCC	500		—		—		500
Subordinated notes(3)	—		1,374		(1,093)		281

Other liabilities	17		129		(15)		131




Total liabilities	825		8,471		(1,108)		8,188
Equity
Contributed capital	1,547		—		—		1,547
Accumulated earnings	61		—		—		61
Net unrealized losses on investments and foreign currency transactions	(33)		—		—		(33)
Non-controlling interests in Consolidated IHAM Vehicles(4)	—		1,095		(1,258)		(163)


Total equity	1,575		1,095		(1,258)		1,412
Total liabilities and equity	$	2,400	$	9,566	$	(2,366)	$	9,600


	As of December 31, 2021
	IHAM		Consolidated IHAM Vehicles(1)		Eliminations		Consolidated
Selected Balance Sheet Information:
Assets

Investments at fair value(2)	$	966	$	5,510	$	(927)	$	5,549
Cash and cash equivalents	8		416		—		424

Other assets	12		79		(8)		83




Total assets	$	986	$	6,005	$	(935)	$	6,056

Liabilities

Debt	$	125	$	4,656	$	—	$	4,781
Subordinated note from ARCC	16		—		—		16
Subordinated notes(3)	—		983		(700)		283
Other liabilities	2		98		(9)		91




Total liabilities	143		5,737		(709)		5,171
Equity
Contributed capital	765		—		—		765
Accumulated earnings	78		—		—		78
Net unrealized gains on investments and foreign currency transactions	—		—		—		—
Non-controlling interests in Consolidated IHAM Vehicles(4)	—		268		(226)		42


Total equity	843		268		(226)		885
Total liabilities and equity	$	986	$	6,005	$	(935)	$	6,056

(2)The determination of such fair value is determined in accordance with IHAM’s valuation procedures (separate and apart from the Company’s valuation process described elsewhere herein). The amortized cost of IHAM’s total investments as of December 31, 2022 and 2021 was $2,370 and $966, respectively. The amortized cost of the total investments of IHAM on a consolidated basis as of December 31, 2022 and 2021 was $9,306 and $5,588, respectively.


	For the Year Ended December 31, 2022
	IHAM		Consolidated IHAM Vehicles(1)		Eliminations		Consolidated
Selected Statement of Operations Information:
Revenues

Investment income	$	188	$	594	$	(185)	$	597
Management fees and other income	49		7		(46)		10



Total revenues	237		601		(231)		607
Expenses

Interest expense	35		261		—		296
Distributions to subordinated notes	—		130		(95)		35
Management fees and other expenses	14		56		(46)		24




Total expenses	49		447		(141)		355
Net operating income	188		154		(90)		252


Net realized losses on investments and other transactions	—		(12)		—		(12)
Net unrealized losses on investments and other transactions	(33)		(279)		31		(281)



Total net realized and unrealized losses on investments and other transactions	(33)		(291)		31		(293)
Net income (loss)	155		(137)		(59)		(41)

Less: Net income (loss) attributable to non-controlling interests in Consolidated IHAM Vehicles	—		(137)		(59)		(196)
Net income attributable to Ivy Hill Asset Management, L.P.	$	155	$	—	$	—	$	155


	For the Year Ended December 31, 2021
	IHAM		Consolidated IHAM Vehicles(1)		Eliminations		Consolidated
Selected Statement of Operations Information:
Revenues

Investment income	$	97	$	285	$	(93)	$	289
Management fees and other income	31		7		(27)		11



Total revenues	128		292		(120)		300
Expenses

Interest expense	5		99		—		104
Distributions to subordinated notes	—		135		(101)		34
Management fees and other expenses	12		38		(27)		23




Total expenses	17		272		(128)		161
Net operating income	111		20		8		139


Net realized gains (losses) on investments and other transactions	(6)		80		(28)		46
Net unrealized gains on investments and other transactions	18		91		(15)		94



Total net realized and unrealized gains on investments and other transactions	12		171		(43)		140
Net income	123		191		(35)		279
Less: Net income attributable to non-controlling interests in Consolidated IHAM Vehicles	—		191		(35)		156
Net income attributable to Ivy Hill Asset Management, L.P.	$	123	$	—	$	—	$	123


	For the Year Ended December 31, 2020
	IHAM		Consolidated IHAM Vehicles(1)		Eliminations		Consolidated
Selected Statement of Operations Information:
Revenues

Investment income	$	79	$	288	$	(78)	$	289
Management fees and other income	28		7		(26)		9



Total revenues	107		295		(104)		298
Expenses

Interest expense	8		119		—		127
Distributions to subordinated notes	—		113		(79)		34
Management fees and other expenses	12		33		(26)		19




Total expenses	20		265		(105)		180
Net operating income	87		30		1		118


Net realized gains (losses) on investments and other transactions	(4)		50		—		46
Net unrealized losses on investments and other transactions	(7)		(26)		6		(27)



Total net realized and unrealized gains (losses) on investments and other transactions	(11)		24		6		19
Net income	76		54		7		137
Less: Net income attributable to non-controlling interests in Consolidated Funds	—		54		7		61
Net income attributable to Ivy Hill Asset Management, L.P.	$	76	$	—	$	—	$	76