CAPITAL SOUTHWEST CORP

Previous wording

Because we are internally managed, we do not pay any external investment advisory fees, but instead directly incur the operating costs associated with employing investment and portfolio management professionals. We believe that our internally managed structure provides us with a beneficial operating expense structure when compared to other publicly traded and privately held investment firms that are externally managed, and our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our investment portfolio. For the six months ended September 30,

Current wording

Because we are internally managed, we do not pay any external investment advisory fees, but instead directly incur the operating costs associated with employing investment and portfolio management professionals. We believe that our internally managed structure provides us with a beneficial operating expense structure when compared to other publicly traded and privately held investment firms that are externally managed, and our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our investment portfolio. For the nine months ended December 31,

Previous wording

2024 and 2023, the ratio of our last twelve months ("LTM") operating expenses, excluding interest expense, as a percentage of our LTM average total assets was 1.74% and 1.84%, respectively.

Current wording

2024 and 2023, the ratio of our last twelve months ("LTM") operating expenses, excluding interest expense, as a percentage of our LTM average total assets was 1.61% and 1.84%, respectively.

Previous wording

The most significant determination inherent in the preparation of our consolidated financial statements is the valuation of our investment portfolio and the related amounts of unrealized appreciation and depreciation. As of September 30, 2024 and March 31, 2024, our investment portfolio at fair value represented approximately 94.0% and 94.8% of our total assets, respectively. We are required to report our investments at fair value. We follow the provisions of ASC 820. ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. ASC 820 requires us to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. See Note 4 — Fair Value Measurements in the Notes to the Consolidated Financial Statements for a detailed discussion of our investment portfolio valuation process and procedures.

Current wording

The most significant determination inherent in the preparation of our consolidated financial statements is the valuation of our investment portfolio and the related amounts of unrealized appreciation and depreciation. As of December 31, 2024 and March 31, 2024, our investment portfolio at fair value represented approximately 95.1% and 94.8% of our total assets, respectively. We are required to report our investments at fair value. We follow the provisions of ASC 820. ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. ASC 820 requires us to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. See Note 4 — Fair Value Measurements in the Notes to the Consolidated Financial Statements for a detailed discussion of our investment portfolio valuation process and procedures.

Previous wording

Beginning as of the fiscal quarter ended June 30, 2023, pursuant to Rule 2a-5 under the 1940 Act, the Board of Directors designated a valuation committee (the "Valuation Committee") comprised of certain officers of the Company as its valuation designee to determine the fair value of the Company's investments that do not have readily available market quotations, subject to the oversight of the Board of Directors. Our Valuation Committee and the Board of Directors believe that our investment portfolio as of September 30, 2024 and March 31, 2024, respectively, reflects the fair value as of those dates based on the markets in which we operate and other conditions in existence on those reporting dates.

Current wording

Pursuant to Rule 2a-5 under the 1940 Act, the Board of Directors designated a valuation committee (the "Valuation Committee") comprised of certain officers of the Company as its valuation designee to determine the fair value of the Company's investments that do not have readily available market quotations, subject to the oversight of the Board of Directors. Our Valuation Committee and the Board of Directors believe that our investment portfolio as of December 31, 2024 and March 31, 2024, respectively, reflects the fair value as of those dates based on the markets in which we operate and other conditions in existence on those reporting dates.

Previous wording

Interest and dividend income is recorded on an accrual basis to the extent amounts are expected to be collected. Dividend income is recognized on the date dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. Discounts/premiums received to par on loans purchased are capitalized and accreted or amortized into income over the life of the loan using the effective interest method. In accordance with our valuation policy, accrued interest and dividend income is evaluated quarterly for collectability. When we do not expect the debtor to be able to service all of its debt or other obligations, we will generally establish a reserve against interest income receivable, thereby placing the loan or debt security on non-accrual status, and cease to recognize interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security’s status significantly improves regarding its ability to service debt or other obligations, it will be restored to accrual basis. As of September 30, 2024, investments on non-accrual status represented approximately 3.5% of our total investment portfolio's fair value and approximately 5.4% of its cost. As of March 31, 2024, investments on non-accrual status represented approximately 2.3% of our total investment portfolio's fair value and approximately 3.9% of its cost.

Current wording

Interest and dividend income is recorded on an accrual basis to the extent amounts are expected to be collected. Dividend income is recognized on the date dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. Discounts/premiums received to par on loans purchased are capitalized and accreted or amortized into income over the life of the loan using the effective interest method. In accordance with our valuation policy, accrued interest and dividend income is evaluated quarterly for collectability. When we do not expect the debtor to be able to service all of its debt or other obligations, we will generally establish a reserve against interest income receivable, thereby placing the loan or debt security on non-accrual status, and cease to recognize interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security’s status significantly improves regarding its ability to service debt or other obligations, it will be restored to accrual basis. As of December 31, 2024, investments on non-accrual status represented approximately 2.7% of our total investment portfolio's fair value and approximately 5.2% of its cost. As of March 31, 2024, investments on non-accrual status represented approximately 2.3% of our total investment portfolio's fair value and approximately 3.9% of its cost.

Previous wording

The total fair value of our investment portfolio was $1,508.5 million as of September 30, 2024, as compared to $1,476.6 million as of March 31, 2024. As of September 30, 2024, we had investments in 118 portfolio companies with an aggregate cost of $1,522.7 million. As of March 31, 2024, we had investments in 116 portfolio companies with an aggregate cost of $1,476.7 million.

Current wording

The total fair value of our investment portfolio was $1,701.3 million as of December 31, 2024, as compared to $1,476.6 million as of March 31, 2024. As of December 31, 2024, we had investments in 125 portfolio companies with an aggregate cost of $1,713.3 million. As of March 31, 2024, we had investments in 116 portfolio companies with an aggregate cost of $1,476.7 million.

Previous wording

As of September 30, 2024 and March 31, 2024, approximately $1,340.0 million, or 97.5%, and $1,310.0 million, or 97.4%, respectively, of our debt investment portfolio (at fair value) bore interest at floating rates, of which 99.3% and 99.1%, respectively, were subject to contractual minimum interest rates. As of September 30, 2024 and March 31, 2024, the weighted average contractual minimum interest rate is 1.38% and 1.28%, respectively. As of September 30, 2024 and March 31, 2024, approximately $34.0 million, or 2.5%, and $34.5 million, or 2.6%, respectively, of our debt investment portfolio (at fair value) bore interest at fixed rates.

Current wording

As of December 31, 2024 and March 31, 2024, approximately $1,508.7 million, or 97.8%, and $1,310.0 million, or 97.4%, respectively, of our debt investment portfolio (at fair value) bore interest at floating rates, of which 99.2% and 99.1%, respectively, were subject to contractual minimum interest rates. As of December 31, 2024 and March 31, 2024, the weighted average contractual minimum interest rate is 1.46% and 1.28%, respectively. As of December 31, 2024 and March 31, 2024, approximately $33.8 million, or 2.2%, and $34.5 million, or 2.6%, respectively, of our debt investment portfolio (at fair value) bore interest at fixed rates.

Previous wording

(a)At September 30, 2024 and March 31, 2024, we had equity ownership in approximately 61.0% and 56.0%, respectively, of our portfolio companies.

Current wording

(a)At December 31, 2024 and March 31, 2024, we had equity ownership in approximately 61.6% and 56.0%, respectively, of our portfolio companies.

Previous wording

(b)The weighted average annual effective yield of debt investments is not the same as a return on investment for CSWC's shareholders, but rather relates to CSWC's investment portfolio and is calculated before the payment of all of CSWC's and subsidiaries' fees and expenses. The weighted average annual effective yields were computed using the effective interest rates during the quarter for all debt investments at cost as of September 30, 2024 and March 31, 2024, respectively, including accretion of original issue discount but excluding fees payable upon repayment of the debt instruments. As of September 30, 2024, investments on non-accrual status represented approximately 3.5% of our total investment portfolio's fair value and approximately 5.4% of its cost. As of March 31, 2024, investments on non-accrual status represented approximately 2.3% of our total investment portfolio's fair value and approximately 3.9% of its cost. Weighted average annual effective yield is not a return to shareholders and is higher than what an investor in shares in our common stock will realize on its investment because it does not reflect our expenses or any sales load paid by an investor.

Current wording

(b)The weighted average annual effective yield of debt investments is not the same as a return on investment for CSWC's shareholders, but rather relates to CSWC's investment portfolio and is calculated before the payment of all of CSWC's and subsidiaries' fees and expenses. The weighted average annual effective yields were computed using the effective interest rates during the quarter for all debt investments at cost as of December 31, 2024 and March 31, 2024, respectively, including accretion of original issue discount but excluding fees payable upon repayment of the debt instruments. As of December 31, 2024, investments on non-accrual status represented approximately 2.7% of our total investment portfolio's fair value and approximately 5.2% of its cost. As of March 31, 2024, investments on non-accrual status represented approximately 2.3% of our total investment portfolio's fair value and approximately 3.9% of its cost. Weighted average annual effective yield is not a return to shareholders and is higher than what an investor in shares in our common stock will realize on its investment because it does not reflect our expenses or any sales load paid by an investor.

Previous wording

(d)Includes CSWC debt investments only. Weighted average EBITDA metric is calculated using investment cost basis weighting. For the three months ended September 30, 2024, 12 portfolio companies are excluded from this calculation due to a reported debt to adjusted

Current wording

(d)Includes CSWC debt investments only. Weighted average EBITDA metric is calculated using investment cost basis weighting. For the three months ended December 31, 2024, 14 portfolio companies are excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful. For the year ended March 31, 2024, 12 portfolio companies are excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful.

Previous wording

During the six months ended September 30, 2024, we made debt investments totaling $165.5 million and equity investments totaling $4.9 million. We received contractual principal repayments totaling approximately $16.2 million and full prepayments of approximately $103.0 million. We funded $23.6 million on revolving loans and received $13.0 million in repayments on revolving loans. In addition, we received proceeds from sales of debt investments totaling $22.6 million.

Current wording

During the nine months ended December 31, 2024, we made debt investments totaling $420.3 million and equity investments totaling $9.1 million. We received contractual principal repayments totaling approximately $40.8 million and full prepayments of approximately $131.1 million. We funded $37.5 million on revolving loans and received $29.6 million in repayments on revolving loans. In addition, we received proceeds from sales of debt investments totaling $27.3 million.

Previous wording

During the six months ended September 30, 2023, we made debt investments totaling $186.5 million and equity investments totaling $7.5 million. We received contractual principal repayments totaling approximately $31.5 million. We funded $12.0 million on revolving loans and received $9.9 million in repayments on revolving loans. In addition, we received proceeds from sales of debt and equity investments totaling $17.3 million.

Current wording

During the nine months ended December 31, 2023, we made debt investments totaling $276.8 million and equity investments totaling $13.6 million. We received contractual principal repayments totaling approximately $42.6 million and full prepayments of approximately $79.7 million. We funded $27.4 million on revolving loans and received $20.1 million in repayments on revolving loans. In addition, we received proceeds from sales of debt and equity investments totaling $18.0 million.

Previous wording

Total portfolio investment activity for the six months ended September 30, 2024 and 2023 was as follows (dollars in thousands):

Current wording

Total portfolio investment activity for the nine months ended December 31, 2024 and 2023 was as follows (dollars in thousands):

Previous wording

1 In connection with the dissolution and liquidation of I-45 SLF, the Company received distributions-in-kind of investments of $6.4 million.

Current wording

1 In connection with the dissolution and liquidation of I-45 SLF LLC ("I-45 SLF"), the joint venture between CSWC and Main Street Capital Corporation, the Company received distributions-in-kind of investments of $6.4 million.

Previous wording

The composite measure of our financial performance in the Consolidated Statements of Operations is captioned “Net increase in net assets from operations” and consists of four elements. The first is “Net investment income,” which is the difference between income from interest, dividends and fees and our combined operating and interest expenses, net of applicable income taxes. The second element is “Net realized (loss) gain on investments, net of tax,” which is the difference between the proceeds received from the disposition of portfolio securities and their stated cost. The third element is the “Net unrealized (depreciation) appreciation on investments, net of tax,” which is the net change in the market or fair value of our investment portfolio, compared with the stated cost. The “Net realized (loss) gain on investments before income tax” and “Net unrealized appreciation (depreciation) on investments, net of tax” are directly related in that when an appreciated portfolio security is sold to realize a gain, a corresponding decrease in net unrealized appreciation occurs by transferring the gain associated with the transaction from being “unrealized” to being “realized.” Conversely, when a loss is realized on a depreciated portfolio security, an increase in net unrealized appreciation occurs. The fourth element is the “Realized loss on extinguishment of debt”, which is the acceleration of unamortized deferred fees associated with amendments to the Corporate Credit Facility that trigger a debt extinguishment or, in relation to notes payable, the difference between the principal amount due at maturity adjusted for any unamortized debt issuance costs and any "make-whole" premium payable at the time of the debt extinguishment.

Current wording

The composite measure of our financial performance in the Consolidated Statements of Operations is captioned “Net increase in net assets from operations” and consists of four elements. The first is “Net investment income,” which is the difference between income from interest, dividends and fees and our combined operating and interest expenses, net of applicable income taxes. The second element is “Net realized (loss) gain on investments, net of tax,” which is the difference between the proceeds received from the disposition of portfolio securities and their stated cost. The third element is the “Net unrealized (depreciation) appreciation on investments, net of tax,” which is the net change in the market or fair value of our investment portfolio, compared with the stated cost. The “Net realized (loss) gain on investments before income tax” and “Net unrealized appreciation (depreciation) on investments, net of tax” are directly related in that when an appreciated portfolio security is sold to realize a gain, a corresponding decrease in net unrealized appreciation occurs by transferring the gain associated with the transaction from being “unrealized” to being “realized.” Conversely, when a loss is realized on a depreciated portfolio security, an increase in net unrealized appreciation occurs. The fourth element is the “Realized loss on extinguishment of debt”, which is the acceleration of unamortized deferred fees associated with amendments to the Corporate Credit Facility that trigger a debt extinguishment or, with respect to the full redemption of the January 2026 Notes, the difference between the principal amount due at maturity adjusted for any unamortized debt issuance costs.

Previous wording

Total investment income for the three months ended September 30, 2024 was approximately $48.7 million, a $5.9 million, or 13.9%, increase as compared to the three months ended September 30, 2023. Investment income primarily consists of interest income, dividend income, fee income and other income for each applicable period.

Current wording

Total investment income for the three months ended December 31, 2024 was approximately $52.0 million, a $3.4 million, or 7.0%, increase as compared to the three months ended December 31, 2023. Investment income primarily consists of interest income, dividend income, fee income and other income for each applicable period.

Previous wording

Interest income (including PIK interest income and amortization of purchase discounts and fees) for the three months ended September 30, 2024 totaled $46.1 million as compared to $39.5 million for the three months ended September 30, 2023. The increase was primarily due to a 22.2% increase in the average monthly cost basis of debt investments held by us from $1,150.2 million to $1,405.4 million year-over-year, partially offset by a decrease in the weighted average yield on debt investments from 13.5% to 12.9% year-over-year. Dividend income for the three months ended September 30, 2024 decreased $1.9 million as compared to the three months ended September 30, 2023 primarily due to the liquidation of I-45 SLF during the quarter ended March 31, 2024, partially offset by an increase in distributions received from our equity investments. Fee income for the three months ended September 30, 2024 increased $0.8 million as compared to the three months ended September 30, 2023 primarily due to an increase in prepayment and amendment fees in the current quarter. Other income for the three months ended September 30, 2024 increased $0.4 million as compared to the three months ended September 30, 2023 primarily due to an increase in interest income on cash balances held.

Current wording

Interest income (including PIK interest income and amortization of purchase discounts and fees) for the three months ended December 31, 2024 totaled $46.1 million as compared to $41.9 million for the three months ended December 31, 2023. The increase was primarily due to a 24.6% increase in the average monthly cost basis of debt investments held by us from $1,210.4 million to $1,508.0 million year-over-year, partially offset by a decrease in the weighted average yield on debt investments from 13.5% to 12.1% year-over-year. Dividend income for the three months ended December 31, 2024 decreased $4.1 million as compared to the three months ended December 31, 2023 primarily due to the liquidation of I-45 SLF during the quarter ended March 31, 2024 and a non-recurring dividend received during the quarter ended December 31, 2023. Fee income for the three months ended December 31, 2024 increased $2.4 million as compared to the three months ended December 31, 2023 primarily due to an increase in amendment and other fees in the current quarter. Other income for the three months ended December 31, 2024 increased $0.9 million as compared to the three months ended December 31, 2023 primarily due to an increase in interest income on cash balances held.

Previous wording

For the three months ended September 30, 2024, our total interest expense was $12.6 million, an increase of $2.1 million, as compared to the total interest expense of $10.5 million for the three months ended September 30, 2023. The increase was primarily attributable to an increase in average borrowings outstanding and an increase in the weighted average interest rate on our total debt from 5.42% to 5.61% for the three months ended September 30, 2023 and September 30, 2024, respectively. This increase in the weighted average interest rate was primarily due to an increase in SBA Debentures outstanding and the addition of the SPV Credit Facility.

Current wording

For the three months ended December 31, 2024, our total interest expense was $14.7 million, an increase of $3.2 million, as compared to the total interest expense of $11.5 million for the three months ended December 31, 2023. The increase was primarily attributable to an increase in average borrowings outstanding, partially offset by a decrease in the weighted average interest rate on our total debt from 5.60% to 5.49% for the three months ended December 31, 2023 and December 31, 2024, respectively. This decrease in the weighted average interest rate on our total debt was primarily due to the issuance of the 2029 Convertible Notes.

Previous wording

For the three months ended September 30, 2024, our total employee compensation expense (including both cash and share-based compensation) remained relatively flat as compared to the total employee compensation expense for the three months ended September 30, 2023. For the three months ended September 30, 2024, our total general and administrative expense was $2.6 million, an increase of $0.3 million or 11.3%, as compared to the total general and administrative expense of $2.3 million for the three months ended September 30, 2023. The increase was attributable to individually immaterial increases across several general operating expenses.

Current wording

For the three months ended December 31, 2024, our total employee compensation expense (including both cash and share-based compensation) decreased by $1.2 million, or 23.0%, as compared to the total employee compensation expense for the three months ended December 31, 2023. The decrease was primarily due to a decrease in accrued bonus compensation based on the Company's projected performance compared to its plan. For the three months ended December 31, 2024, our total general and administrative expense was $2.6 million, an increase of $0.4 million or 19.0%, as compared to the total general and administrative expense of $2.2 million for the three months ended December 31, 2023. The increase was primarily attributable to individually immaterial increases across various professional fees, as well as the write off of deferred offering costs related to our previous shelf registration statement during the current quarter.

Previous wording

For the three months ended September 30, 2024, income before taxes increased by $3.6 million, or 13.6%. Net investment income increased from the prior year period by $4.0 million, or 14.6%, to $31.2 million as a result of a $5.9 million increase in total investment income and a $0.4 million increase in income tax benefit, partially offset by a $2.1 million increase in interest expense.

Current wording

For the three months ended December 31, 2024, income before taxes increased by $0.9 million, or 3.1%. Net investment income increased from the prior year period by $1.5 million, or 5.0%, to $30.3 million as a result of a $3.4 million increase in total investment income and a $0.5 million decrease in income tax provision, partially offset by a $3.2 million increase in interest expense.

Previous wording

(1)Included in "Other" is a $28.0 thousand income tax provision related to realized gains on equity investments, as well as realized gains and losses from transactions, which are not considered to be significant individually or in the aggregate.

Current wording

(1)Included in "Other" is a $7.0 thousand income tax provision related to realized gains on equity investments, as well as realized gains and losses from transactions, which are not considered to be significant individually or in the aggregate.

Previous wording

During the six months ended September 30, 2024, we did not recognize any loss on extinguishment of debt. During the six months ended September 30, 2023, we recognized a loss on extinguishment of debt of $0.4 million due to two non-extending lenders in connection with an amendment to the credit agreement relating to the Corporate Credit Facility on August 2, 2023.

Current wording

During the three months ended December 31, 2024, we recognized a loss on extinguishment of debt of $0.4 million due to the full redemption of the January 2026 Notes. During the three months ended December 31, 2023, the Company did not recognize any loss on extinguishment of debt.

Previous wording

Total investment income for the six months ended September 30, 2024 was approximately $100.1 million, a $16.9 million, or 20.4%, increase as compared to the six months ended September 30, 2023. Investment income primarily consists of interest income, dividend income, fee income and other income for each applicable period.

Current wording

Total investment income for the nine months ended December 31, 2024 was approximately $152.0 million, a $20.3 million, or 15.4%, increase as compared to the nine months ended December 31, 2023. Investment income primarily consists of interest income, dividend income, fee income and other income for each applicable period.

Previous wording

Interest income (including PIK interest income and amortization of purchase discounts and fees) for the six months ended September 30, 2024 totaled $92.1 million as compared to $76.0 million for the six months ended September 30, 2023. The increase was primarily due to a 23.3% increase in the average monthly cost basis of debt investments held by us from $1,128.6 million to $1,391.3 million year-over-year, partially offset by a decrease in weighted average yield on debt investments from 13.5% to 12.9% year-over-year. Dividend income for the six months ended September 30, 2024 decreased $2.2 million as compared to the six months ended September 30, 2023 primarily due to the liquidation of I-45 SLF during the quarter ended March 31, 2024, partially offset by an increase in distributions received from our equity investments.

Current wording

Interest income (including PIK interest income and amortization of purchase discounts and fees) for the nine months ended December 31, 2024 totaled $138.3 million as compared to $117.9 million for the nine months ended December 31, 2023. The increase was primarily due to a 24.3% increase in the average monthly cost basis of debt investments held by us from $1,154.4 million to $1,435.1 million year-over-year, partially offset by a decrease in weighted average yield on debt investments from 13.5% to 12.1% year-over-year. Dividend income for the nine months ended December 31, 2024 decreased $6.3 million as compared to the nine months ended December 31, 2023 primarily due to the liquidation of I-45 SLF during the quarter ended March 31, 2024.

Previous wording

For the six months ended September 30, 2024, our total interest expense was $25.0 million, an increase of $4.9 million, as compared to the total interest expense of $20.2 million for the six months ended September 30, 2023. The increase was primarily attributable to an increase in average borrowings outstanding and an increase in the weighted average interest rate on our total debt from 5.33% to 5.60% for the six months ended September 30, 2023 and September 30, 2024, respectively. The increase in the weighted average interest rate was primarily due to an increase to the base rate on our Corporate Credit Facility and the addition of the SPV Credit Facility.

Current wording

For the nine months ended December 31, 2024, our total interest expense was $39.8 million, an increase of $8.1 million, as compared to the total interest expense of $31.6 million for the nine months ended December 31, 2023. The increase was primarily attributable to an increase in average borrowings outstanding and an increase in the weighted average interest rate on our total debt from 5.40% to 5.54% for the nine months ended December 31, 2023 and December 31, 2024, respectively. The increase in the weighted average interest rate was primarily due to an increase in the base rate on the Corporate Credit Facility and the addition of the SPV Credit Facility.

Previous wording

For the six months ended September 30, 2024, our total employee compensation expense (including both cash and share-based compensation) increased by $1.2 million, or 16.7%, as compared to the total employee compensation expense for the six months ended September 30, 2023. The increase was primarily due to an increase in headcount year over year. For the six months ended September 30, 2024, our total general and administrative expense was $5.5 million, an increase of $1.0 million, or 21.9%, as compared to the total general and administrative expense of $4.5 million for the six months ended September 30, 2023. The increase was primarily attributable to an increase in professional fees incurred in connection with the compensation consultant engaged by the Compensation Committee and an increase in audit fees, as well as individually immaterial increases across several general operating expenses.

Current wording

For the nine months ended December 31, 2024, our total employee compensation expense (including both cash and share-based compensation) remained relatively flat as compared to the total employee compensation expense for the nine months ended December 31, 2023. For the nine months ended December 31, 2024, our total general and administrative expense was $8.1 million, an increase of $1.4 million, or 20.9%, as compared to the total general and administrative expense of $6.7 million for the nine months ended December 31, 2023. The increase was primarily attributable to an increase in professional fees incurred in connection with the compensation consultant engaged by the Compensation Committee, an increase in audit fees, an increase in rent expense due to additional office space, and the write off of deferred offering costs related to our previous shelf registration statement during the current quarter, as well as individually immaterial increases across several general operating expenses.

Previous wording

For the six months ended September 30, 2024, income before taxes increased by $9.9 million, or 19.2%. Net investment income increased from the prior year period by $8.3 million, or 16.0%, to $60.0 million as a result of a $16.9 million increase in total investment income, partially offset by a $4.9 million increase in interest expense and a $1.6 million increase in income tax provision.

Current wording

For the nine months ended December 31, 2024, income before taxes increased by $10.8 million, or 13.3%. Net investment income increased from the prior year period by $9.7 million, or 12.1%, to $90.3 million as a result of a $20.3 million increase in total investment income, partially offset by a $8.1 million increase in interest expense and a $1.1 million increase in income tax provision.

Previous wording

During the three months ended September 30, 2024, we did not recognize any loss on extinguishment of debt. During the three months ended September 30, 2023, we recognized a loss on extinguishment of debt of $0.4 million due to two non-extending lenders in connection with an amendment to the credit agreement relating to the Corporate Credit Facility on August 2, 2023.

Current wording

During the nine months ended December 31, 2024, we recognized a loss on extinguishment of debt of $0.4 million due to the full redemption of the January 2026 Notes. During the nine months ended December 31, 2023, we recognized a loss on extinguishment of debt of $0.4 million due to two non-extending lenders in connection with the Credit Agreement relating to the Corporate Credit Facility entered into on August 2, 2023.

Previous wording

Our liquidity and capital resources are generated primarily from cash flows from operations, the net proceeds of public offerings of debt and equity securities, advances from our credit facilities and our continued access to the debentures guaranteed by the Small Business Administration (the "SBA Debentures"). Management believes that the Company’s cash and cash equivalents, cash available from investments, and commitments under our credit facilities are adequate to meet its needs for the next twelve months. We anticipate that we will continue to fund our investment activities through existing cash and cash equivalents, cash flows generated through our ongoing operating activities, utilization of available borrowings under our credit facilities and future issuances of debt and equity on terms we believe are favorable to the Company and our shareholders (including our Equity ATM Program, as described below). Our primary uses of funds will be investments in portfolio companies and operating expenses. Due to the diverse capital sources available to us at this time, we believe we have adequate liquidity to support our near-term capital requirements. We continually evaluate our overall liquidity position and take proactive steps to maintain that position based on the current circumstances. This "Financial Liquidity and Capital Resources" section should be read in conjunction with the notes of our consolidated financial statements.

Current wording

Our liquidity and capital resources are generated primarily from cash flows from operations, the net proceeds of public offerings of equity securities and debt securities, including debt securities convertible into common stock, advances from our credit facilities and our continued access to the debentures guaranteed by the Small Business Administration (the "SBA Debentures"). Management believes that the Company’s cash and cash equivalents, cash available from investments, and commitments under our credit facilities are adequate to meet its needs for the next twelve months. We anticipate that we will continue to fund our investment activities through existing cash and cash equivalents, cash flows generated through our ongoing operating activities, utilization of available borrowings under our credit facilities and future issuances of debt and equity on terms we believe are favorable to the Company and our shareholders (including our Equity ATM Program, as described below). Our primary uses of funds will be investments in portfolio companies and operating expenses. Due to the diverse capital sources available to us at this time, we believe we have adequate liquidity to support our near-term capital requirements. We continually evaluate our overall liquidity position and take proactive steps to maintain that position based on the current circumstances. This "Financial Liquidity and Capital Resources" section should be read in conjunction with the notes of our consolidated financial statements.

Previous wording

In accordance with the 1940 Act, effective April 25, 2019, the Company is only allowed to borrow amounts such that its asset coverage (i.e., the ratio of assets less liabilities not represented by senior securities to senior securities such as borrowings), calculated pursuant to the 1940 Act, is at least 150% after such borrowing. The Board of Directors also approved a resolution that limits the Company’s issuance of senior securities such that the asset coverage ratio, taking into account any such issuance, would not be less than 166%, which became effective April 25, 2019. On August 11, 2021, we received an exemptive order from SEC to permit us to exclude the senior securities issued by SBIC I or any future SBIC subsidiary of the Company from the definition of senior securities in the asset coverage requirement applicable to the Company under the 1940 Act. As of September 30, 2024, the Company’s asset coverage was 224%.

Current wording

In accordance with the 1940 Act, effective April 25, 2019, the Company is only allowed to borrow amounts such that its asset coverage (i.e., the ratio of assets less liabilities not represented by senior securities to senior securities such as borrowings), calculated pursuant to the 1940 Act, is at least 150% after such borrowing. The Board of Directors also approved a resolution that limits the Company’s issuance of senior securities such that the asset coverage ratio, taking into account any such issuance, would not be less than 166%, which became effective April 25, 2019. On August 11, 2021, we received an exemptive order from SEC to permit us to exclude the senior securities issued by SBIC I or any future SBIC subsidiary of the Company from the definition of senior securities in the asset coverage requirement applicable to the Company under the 1940 Act. As of December 31, 2024, the Company’s asset coverage was 209%.

Previous wording

For the six months ended September 30, 2024, we experienced a net increase in cash and cash equivalents in the amount of $15.0 million. During the foregoing period, our operating activities provided $7.3 million in cash, consisting primarily of $153.1 million from sales and repayments received from debt investments in portfolio companies, partially offset by new portfolio investments made by the Company of $194.0 million. In addition, our financing activities used cash of $8.2 million, consisting primarily of cash dividends paid in the amount of $60.0 million, partially offset by net proceeds from the Equity ATM Program of $58.0 million and net borrowings on our Credit Facilities of $13.0 million. At September 30, 2024, the Company had cash and cash equivalents of approximately $47.2 million.

Current wording

For the nine months ended December 31, 2024, we experienced a net increase in cash and cash equivalents in the amount of $3.7 million. During the foregoing period, our operating activities used $158.5 million in cash, consisting primarily of new portfolio investments made by the Company of $466.9 million, partially offset by $226.9 million from sales and repayments received from debt investments in portfolio companies. In addition, our financing activities provided cash of $163.5 million, consisting primarily of net proceeds from the issuance of the 2029 Convertible Notes of $223.1 million, net proceeds from the Equity ATM Program of $111.0 million, net borrowings on our Credit Facilities of $43.0 million and net proceeds from the issuance of SBA Debentures of $21.5 million, partially offset by the full redemption of the January 2026 Notes of $140.0 million and cash dividends paid in the amount of $91.6 million. At December 31, 2024, the Company had cash and cash equivalents of approximately $36.0 million.

Previous wording

For the six months ended September 30, 2023, we experienced a net increase in cash and cash equivalents in the amount of $1.4 million. During that period, our operating activities used $104.4 million in cash, consisting primarily of new portfolio investments made by the Company of $206.0 million, partially offset by $54.8 million from sales and repayments received from debt investments in portfolio companies and $3.4 million from sales and return of capital relating to our equity investments in portfolio companies. In addition, our financing activities provided cash of $105.9 million, consisting primarily of net proceeds from the issuance of the August 2028 Notes of $69.7 million, net proceeds from the Equity ATM Program of $67.4 million, net borrowings on our Corporate Credit Facility of $15.0 million and net proceeds from the issuance of SBA debentures of $9.8 million, partially offset by cash dividends paid in the amount of $47.7 million. At September 30, 2023, the Company had cash and cash equivalents of approximately $23.0 million.

Current wording

For the nine months ended December 31, 2023, we experienced a net increase in cash and cash equivalents in the amount of $2.0 million. During that period, our operating activities used $86.4 million in cash, consisting primarily of new portfolio investments made by the Company of $317.9 million, partially offset by $154.5 million from sales and repayments received from debt investments in portfolio companies and $4.1 million from sales and return of capital relating to our equity investments in portfolio companies. In addition, our financing activities provided cash of $88.4 million, consisting primarily of net proceeds from the issuance of the August 2028 Notes of $69.7 million, net proceeds from the Equity ATM Program of $132.9 million and net proceeds from the issuance of SBA debentures of $9.8 million, partially offset by cash dividends paid in the amount of $74.5 million and net repayments on our Corporate Credit Facility of $40.0 million. At December 31, 2023, the Company had cash and cash equivalents of approximately $23.6 million.

Previous wording

As of September 30, 2024, we had $47.2 million in cash and cash equivalents and $406.2 million of unused capacity under the Credit Facilities that we maintain to support our investment and operating activities.

Current wording

As of December 31, 2024, we had $36.0 million in cash and cash equivalents and $376.2 million of unused capacity under the Credit Facilities that we maintain to support our investment and operating activities.

Previous wording

As of September 30, 2024, we had $200.0 million outstanding and $284.2 million of undrawn commitments under the Corporate Credit Facility, and $78.0 million outstanding and $122.0 million of undrawn commitments under the SPV Credit Facility. Availability under the Credit Facilities is subject to certain leverage and borrowing base limitations, various covenants, reporting requirements and other customary requirements for similar credit facilities. For more information on our Credit Facilities, including material terms and financial covenants, refer to Note 5 - Borrowings in the Notes to the Consolidated Financial Statements.

Current wording

As of December 31, 2024, we had $190.0 million outstanding and $294.2 million of undrawn commitments under the Corporate Credit Facility, and $118.0 million outstanding and $82.0 million of undrawn commitments under the SPV Credit Facility. Availability under the Credit Facilities is subject to certain leverage and borrowing base limitations, various covenants, reporting requirements and other customary requirements for similar credit facilities. For more information on our Credit

Previous wording

In December 2020, the Company issued $75.0 million in aggregate principal amount of 4.50% Notes due 2026 (the "January 2026 Notes"). In February 2021, the Company issued an additional $65.0 million in aggregate principal amount of the January 2026 Notes. The outstanding aggregate principal amount of January 2026 Notes was $140.0 million as of both September 30, 2024 and March 31, 2024.

Current wording

In December 2020, the Company issued $75.0 million in aggregate principal amount of 4.50% Notes due 2026 (the "January 2026 Notes"). In February 2021, the Company issued an additional $65.0 million in aggregate principal amount of the January 2026 Notes. The outstanding aggregate principal amount of January 2026 Notes was $140.0 million as of March 31, 2024. On December 9, 2024, the Company redeemed $140.0 million in aggregate principal amount of the issued and outstanding January 2026 Notes in full. The January 2026 Notes were redeemed at 100% of their principal amount, plus the accrued and unpaid interest thereon, through, but excluding the redemption date. Accordingly, the Company recognized a realized loss on extinguishment of debt, equal to the write-off of the related unamortized debt issuance costs, of $0.4 million during the quarter ended December 31, 2024.

Previous wording

In August 2021, the Company issued $100.0 million in aggregate principal amount of 3.375% Notes due 2026 (the "October 2026 Notes"). In November 2021, the Company issued an additional $50.0 million in aggregate principal amount of the October 2026 Notes. The outstanding aggregate principal amount of October 2026 Notes was $150.0 million as of both September 30, 2024 and March 31, 2024.

Current wording

In August 2021, the Company issued $100.0 million in aggregate principal amount of 3.375% Notes due 2026 (the "October 2026 Notes"). In November 2021, the Company issued an additional $50.0 million in aggregate principal amount of the October 2026 Notes. The outstanding aggregate principal amount of the October 2026 Notes was $150.0 million as of both December 31, 2024 and March 31, 2024.

Previous wording

In June 2023, the Company issued approximately $71.9 million in aggregate principal amount, including the underwriters' full exercise of their option to purchase an additional $9.4 million in aggregate principal amount to cover over-allotments, of 7.75% notes due 2028 (the "August 2028 Notes"). The outstanding aggregate principal amount of August 2028 Notes was $71.9 million as of both September 30, 2024 and March 31, 2024.

Current wording

In June 2023, the Company issued approximately $71.9 million in aggregate principal amount, including the underwriters' full exercise of their option to purchase an additional $9.4 million in aggregate principal amount to cover over-allotments, of 7.75% notes due 2028 (the "August 2028 Notes"). The outstanding aggregate principal amount of the August 2028 Notes was $71.9 million as of both December 31, 2024 and March 31, 2024.

Previous wording

For more information on each of the January 2026 Notes, the October 2026 Notes, and the August 2028 Notes, including material terms, refer to Note 5 - Borrowings in the Notes to the Consolidated Financial Statements.

Current wording

For more information on each of the January 2026 Notes, the October 2026 Notes, the August 2028 Notes, and the 2029 Convertible Notes, including material terms, refer to Note 5 - Borrowings in the Notes to the Consolidated Financial Statements.

Previous wording

On April 20, 2021, SBIC I received a license from the SBA to operate as an SBIC under Section 301(c) of the Small Business Investment Act of 1958, as amended. The license allows SBIC I to obtain leverage by issuing SBA Debentures, subject to the issuance of a leverage commitment by the SBA. Current SBA regulations permit SBIC I to borrow up to $175 million in SBA Debentures with at least $87.5 million in regulatory capital (as defined in the SBA regulations). As of September 30, 2024, SBIC I had a total leverage commitment from the SBA in the amount of $175.0 million, of which $153.0 million is outstanding. SBA Debentures have interest payable semi-annually and a ten-year maturity. The interest rate is fixed shortly after issuance at a market-driven spread over U.S. Treasury Notes with ten-year maturities. Interest on SBA Debentures is payable semi-annually on March 1 and September 1. The first maturity related to the SBA Debentures occurs in September 2031.

Current wording

On April 20, 2021, SBIC I received a license from the SBA to operate as an SBIC under Section 301(c) of the Small Business Investment Act of 1958, as amended. The license allows SBIC I to obtain leverage by issuing SBA Debentures, subject to the issuance of a leverage commitment by the SBA. Current SBA regulations permit SBIC I to borrow up to $175 million in SBA Debentures with at least $87.5 million in regulatory capital (as defined in the SBA regulations). As of December 31, 2024, SBIC I had a total leverage commitment from the SBA in the amount of $175.0 million, all of which was drawn. SBA Debentures have interest payable semi-annually and a ten-year maturity. The interest rate is fixed shortly after issuance at a market-driven spread over U.S. Treasury Notes with ten-year maturities. Interest on SBA Debentures is payable semi-annually on March 1 and September 1. The first maturity date related to the SBA Debentures occurs in September 2031.

Previous wording

On March 4, 2019, the Company established an at-the-market offering (the "Equity ATM Program") pursuant to which the Company may offer and sell, from time to time through sales agents, shares of its common stock having an aggregate offering price of up to $50.0 million. On February 4, 2020, the Company (i) increased the maximum amount of shares of its common stock to be sold through the Equity ATM Program to $100.0 million from $50.0 million and (ii) added two additional sales agents to the Equity ATM Program. On May 26, 2021, the Company (i) increased the maximum amount of shares of its common stock to be sold through the Equity ATM Program to $250.0 million from $100.0 million and (ii) reduced the commission paid to the sales agents for the Equity ATM Program to 1.5% from 2.0% of the gross sales price of shares of the Company's common stock sold through the sales agents pursuant to the Equity ATM Program on and after May 26, 2021. On August 2, 2022, the Company increased the maximum amount of shares of its common stock to be sold through the Equity ATM Program to $650.0 million from $250.0 million. On May 21, 2024, the Company (i) increased the maximum amount of shares of its common stock to be sold through the Equity ATM Program to $1.0 billion from $650.0 million and (ii) amended the term "Settlement Date" to reflect that, on or after May 28, 2024, the settlement of shares will occur on the first trading day following the date on which such sales were made.

Current wording

On March 4, 2019, the Company established an at-the-market offering (the "Equity ATM Program") pursuant to which the Company may offer and sell, from time to time through sales agents, shares of its common stock having an aggregate offering price of up to $50.0 million. On February 4, 2020, the Company (i) increased the maximum amount of shares of its common stock to be sold through the Equity ATM Program to $100.0 million from $50.0 million and (ii) added two additional sales agents to the Equity ATM Program. On May 26, 2021, the Company (i) increased the maximum amount of shares of its common stock to be sold through the Equity ATM Program to $250.0 million from $100.0 million and (ii) reduced the commission paid to the sales agents for the Equity ATM Program to 1.5% from 2.0% of the gross sales price of shares of the