Forward Currency Contracts

12 Months Ended

Sep. 30, 2022

Note 5. Forward Currency Contracts

The Company enters into forward currency contracts from time to time to help mitigate the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies.

The outstanding forward currency contracts as of September 30, 2022 and September 30, 2021 were as follows:



As of September 30, 2022
Counterparty	Currency to be sold			Currency to be purchased			Settlement date	Unrealized appreciation ($)		Unrealized depreciation ($)
Macquarie Bank Limited	£	8,925	GBP	$	11,219	USD	2/28/2023	$	1,226	$	—
Macquarie Bank Limited	£	3,780	GBP	$	4,804	USD	3/27/2023	572		—
Macquarie Bank Limited	£	2,228	GBP	$	2,903	USD	4/28/2023	408		—
Macquarie Bank Limited	€	13,960	EUR	$	16,735	USD	4/28/2023	2,778		—
Macquarie Bank Limited	€	6,760	EUR	$	8,044	USD	4/28/2023	1,287		—
Macquarie Bank Limited	£	10,058	GBP	$	12,706	USD	7/17/2023	1,459		—
Macquarie Bank Limited	$	18,425	CAD	$	13,783	USD	10/30/2023	372		—
Macquarie Bank Limited	$	25,000	CAD	$	19,609	USD	8/27/2024	1,267		—
Macquarie Bank Limited	$	30,000	CAD	$	23,399	USD	8/27/2024	1,399		—
Macquarie Bank Limited	£	25,000	GBP	$	34,298	USD	8/27/2024	6,285		—
Macquarie Bank Limited	$	22,600	CAD	$	17,739	USD	8/30/2024	1,156		—
Macquarie Bank Limited	£	20,550	GBP	$	28,297	USD	9/3/2024	5,265		—
Macquarie Bank Limited	€	26,000	EUR	$	31,803	USD	2/27/2025	4,637		—
Macquarie Bank Limited	£	13,945	GBP	$	19,149	USD	3/31/2025	3,538		—
Macquarie Bank Limited	$	7,000	CAD	$	5,386	USD	7/18/2025	236		—
Macquarie Bank Limited	€	10,100	EUR	$	10,918	USD	7/21/2025	448		—
								$	32,333	$	—



As of September 30, 2021
Counterparty	Currency to be sold			Currency to be purchased			Settlement date	Unrealized appreciation ($)		Unrealized depreciation ($)
Macquarie Bank Limited	€	9,300	EUR	$	10,861	USD	4/29/2022	$	106	$	—
Macquarie Bank Limited	£	8,925	GBP	$	11,219	USD	2/28/2023	—		(769)
Macquarie Bank Limited	£	3,780	GBP	$	4,804	USD	3/27/2023	—		(272)
Macquarie Bank Limited	€	6,760	EUR	$	8,044	USD	4/28/2023	40		—
Macquarie Bank Limited	£	2,228	GBP	$	2,903	USD	4/28/2023	—		(88)
Macquarie Bank Limited	€	13,960	EUR	$	16,735	USD	4/28/2023	343		—
Macquarie Bank Limited	£	10,058	GBP	$	12,706	USD	7/17/2023	—		(796)
Macquarie Bank Limited	$	18,425	CAD	$	13,783	USD	10/30/2023	—		(660)
Macquarie Bank Limited	£	25,000	GBP	$	34,298	USD	8/27/2024	663		—
Macquarie Bank Limited	$	30,000	CAD	$	23,399	USD	8/27/2024	—		(41)
Macquarie Bank Limited	$	25,000	CAD	$	19,609	USD	8/27/2024	75		—
Macquarie Bank Limited	$	22,600	CAD	$	17,739	USD	8/30/2024	81		—
Macquarie Bank Limited	£	20,550	GBP	$	28,297	USD	9/3/2024	647		—
Macquarie Bank Limited	€	26,000	EUR	$	31,803	USD	2/27/2025	426		—
Macquarie Bank Limited	£	13,945	GBP	$	19,149	USD	3/31/2025	335		—

								$	2,716	$	(2,626)

In order to better define its contractual rights and to secure rights that will help the Company mitigate its counterparty risk, the Company has entered into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) with its derivative counterparty, Macquarie Bank Limited (“Macquarie”). The ISDA Master Agreement is a bilateral agreement between the Company and Macquarie that governs over the counter (“OTC”) derivatives, including forward currency contracts, and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.

For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Company and cash collateral received from Macquarie, if any, is included in the Consolidated Statements of Financial Condition as cash collateral held at broker for forward currency contracts or cash collateral received from broker for forward currency contracts. The Company minimizes counterparty credit risk by only entering into agreements with counterparties that it believes to be of good standing and by monitoring the financial stability of those counterparties.

The following table is intended to provide additional information about the effect of the forward currency contracts on the financial statements of the Company including: the fair value of derivatives by risk category, the location of those fair values on the Consolidated Statements of Financial Condition, and the Company’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Company as of September 30, 2022 and September 30, 2021.


As of September 30, 2022
Counterparty	Risk exposure category	Unrealized appreciation on forward currency contracts		Unrealized depreciation on forward currency contracts		Net amounts presented in the Consolidated Statement of Financial Condition		Collateral (Received) Pledged (1)		Net Amount (2)
Macquarie Bank Limited	Foreign exchange	$	32,333	$	—	$	32,333	$	—	$	32,333


As of September 30, 2021
Counterparty	Risk exposure category	Unrealized appreciation on forward currency contracts		Unrealized depreciation on forward currency contracts		Net amounts presented in the Consolidated Statement of Financial Condition		Collateral (Received) Pledged (1)		Net Amount (2)
Macquarie Bank Limited	Foreign exchange	$	2,716	$	(2,626)	$	90	$	—	$	90

(1) The actual collateral pledged may be more than the amount shown due to over collateralization.

(2)Represents the net amount due from/(to) counterparties in the event of default.

The impact of derivative transactions for the years ended September 30, 2022, 2021 and 2020 on the Consolidated Statements of Operations, including realized and unrealized gains (losses) is summarized in the table below:


Realized gain (loss) on forward currency contracts recognized in income
Risk exposure category	Year ended September 30,
		2022		2021		2020
Foreign exchange		$	1,080	$	—	$	—

Change in unrealized appreciation (depreciation) on forward currency contracts recognized in income
Risk exposure category	Year ended September 30,
		2022		2021		2020
Foreign exchange		$	32,243	$	1,154	$	(949)

The following table is a summary of the average outstanding daily volume for forward currency contracts for the years ended September 30, 2022, 2021 and 2020:


Average U.S. Dollar notional outstanding	Year ended September 30,
		2022		2021		2020
Forward currency contracts		$	254,118	$	94,304	$	36,396

Exclusion of the Investment Adviser from Commodity Pool Operator Definition

Engaging in commodity interest transactions such as swap transactions or futures contracts for the Company may cause the Investment Adviser to fall within the definition of “commodity pool operator” under the Commodity Exchange Act (the “CEA”) and related Commodity Futures Trading Commission (the “CFTC”) regulations. The Investment Adviser has claimed an exclusion from the definition of the term “commodity pool operator” under the CEA and the CFTC regulations in connection with its management of the Company and, therefore, is not subject to CFTC registration or regulation under the CEA as a commodity pool operator with respect to its management of the Company.