T. Rowe Price OHA Select Private Credit Fund Annual Report - Your Annual Investment Check-up

Welcome to your annual review of the T. Rowe Price OHA Select Private Credit Fund. This summary aims to provide a clear, straightforward understanding of the fund's performance and strategy over the past year, helping you assess if it aligns with your financial goals. We've distilled the key information from the official report into plain English, making complex financial concepts accessible.

1. Business Overview

To begin, let's clarify "private credit." While traditional banks lend money to businesses, private credit involves funds like T. Rowe Price OHA directly financing private companies. These are typically growing businesses not listed on public stock exchanges, seeking capital for initiatives such as expansions or acquisitions.

This fund specifically invests in "first-lien debt securities." Imagine these as being at the front of the repayment line. If a company experiences financial difficulty, the fund's loans are among the first to be repaid. This position generally makes them a less risky private credit option, prioritizing capital preservation and consistent income generation for stability, even in volatile markets.

The fund diversifies its investments across a wide range of industries. This broad approach helps spread risk and reduces reliance on any single sector. The portfolio includes loans to companies in sectors such as:

• Healthcare (e.g., PetVet Care Centers, Modernizing Medicine)
• Technology (e.g., Diligent Corporation, SolarWinds Holdings)
• Business Services (e.g., Baker Tilly Advisory Group, Jensen Hughes Inc.)
• Financial Services (e.g., Beacon Pointe Advisors)
• Consumer Products (e.g., Poly-Wood, LLC)
• Automotive (e.g., FleetPride, Inc., Mammoth Holdings, LLC)
• Aerospace, Chemicals, Construction, Insurance, Media, Retail, and more!

2. Risk Factors

While the fund's first-lien strategy aims to reduce risk, investors should understand the inherent risks:

• Credit Risk: The primary risk is that borrowers may default on their loans, leading to losses for the fund. While first-lien status offers protection, it does not entirely eliminate this risk. Future defaults remain a possibility.
• Interest Rate Risk: Although the portfolio largely consists of floating-rate investments, significant declines in interest rates could reduce the fund's net investment income. Conversely, rising rates can increase the cost of the fund's own borrowings, though its floating-rate assets generally benefit from such environments.
• Illiquidity Risk: Private credit investments are generally illiquid, meaning they cannot be easily sold or quickly converted to cash without potentially significant loss in value. This can impact the fund's ability to manage redemptions, especially during periods of market stress.
• Economic Downturns: A severe economic recession could lead to widespread defaults among portfolio companies, negatively impacting the fund's performance and NAV. Broader economic uncertainty and inflationary pressures created a more challenging environment for some portfolio companies this year, requiring closer monitoring.
• Valuation Risk: Valuing private assets can be subjective, and the fund's NAV may not always perfectly reflect the true market value of its underlying investments. Certain sectors within the portfolio experienced modest valuation adjustments due to market sentiment and specific company performance issues during the year.
• Competition Risk: The private credit market saw increased competition, which could potentially impact future origination yields and terms, affecting the fund's ability to source attractive new investments.
• Regulatory Risk: Regulatory scrutiny on private markets is increasing, which could lead to new reporting requirements, capital constraints, or other operational changes that may impact the fund.

3. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

Results of Operations: The fund's financial performance for the fiscal year showed consistent income generation and NAV stability. Its predominantly floating-rate debt investments benefited from rising interest rates, contributing positively to the fund's earnings. This robust underwriting and active management helped preserve capital and support income.

Despite these strengths, the fund faced challenges from broader economic uncertainty and inflationary pressures, which created a more demanding environment for some portfolio companies. This necessitated closer monitoring and proactive management. Additionally, increased competition within the private credit market could impact future origination yields and terms. Certain sectors within the portfolio also experienced modest valuation adjustments due to market sentiment and specific company performance issues during the year, though overall portfolio strength and diversification largely offset these.

Market and Regulatory Environment: The private credit market continues to grow, driven by traditional banks' retreat from certain lending areas and the increasing capital needs of private equity-backed companies. Rising interest rates have generally provided a tailwind for the fund's floating-rate portfolio, enhancing income generation. However, persistent inflation and potential economic slowdowns could increase credit risk for some borrowers. Regulatory scrutiny on private markets is also increasing, which could lead to new reporting requirements or capital constraints, though regulators did not enact specific changes that significantly impacted the fund's operations during the reporting period. The fund remains vigilant in monitoring these broader economic and regulatory developments.

Leadership & Strategy Stability: The fund's investment strategy and management team remained consistent throughout the year, providing continuity and stability. The experienced team continues to execute the established investment philosophy, focusing on rigorous credit analysis and disciplined portfolio construction. The fund made no significant changes in key personnel or its core investment approach during the reporting period, ensuring a stable and consistent approach to investment management.

4. Future Outlook

Management anticipates continued demand for private credit as traditional lenders remain cautious and private companies seek flexible financing solutions. The fund expects to maintain its disciplined approach to underwriting, focusing on companies with strong business models and resilient cash flows. While acknowledging potential economic volatility and competitive pressures, the fund believes its first-lien, diversified strategy is well-positioned to generate attractive risk-adjusted returns and consistent income for shareholders in the upcoming year. Management will continue to monitor market conditions closely and adapt sourcing and portfolio management strategies as needed to capitalize on opportunities and mitigate risks.

5. Competitive Position

The T. Rowe Price OHA Select Private Credit Fund benefits from the combined expertise of T. Rowe Price's extensive investment platform and OHA's deep specialization in private credit. This partnership provides access to a broad network for deal sourcing, robust credit underwriting capabilities, and active portfolio management. The fund's focus on senior, secured first-lien debt differentiates it from higher-risk private credit strategies, appealing to investors seeking consistent income and capital preservation in the private markets. Its diversified portfolio across industries and geographies further strengthens its competitive edge by reducing concentration risk and enhancing overall portfolio resilience. This unique combination of institutional backing and specialized expertise positions the fund favorably in a competitive market.