CAPITAL SOUTHWEST CORP

Previous wording

The information contained herein may contain “forward-looking statements” based on our current expectations, assumptions and estimates about us and our industry. These forward-looking statements involve risks and uncertainties. Words such as “may,” “predict,” “will,” “continue,” “likely,” “would,” “could,” “should,” “expect,” “anticipate,” “potential,” “estimate,” “indicate,” “seek,” “believe,” “target,” “intend,” “plan,” or “project” and other similar expressions identify forward-looking statements. These risks include risks related to changes in the markets in which the Company invests; changes in the financial and lending markets; interest rate volatility; the impact of supply chain constraints and labor difficulties on our portfolio companies and the global economy; the elevated level of inflation, and its impact on our portfolio companies and on the industries in which we invest; the impact of geopolitical conditions and its impact on financial market volatility, global economic markets and various sectors and industries; regulatory changes; changes in tax treatment; an economic downturn and its impact on the ability of our portfolio companies to operate and the investment opportunities available to us; and our ability to operate our wholly owned subsidiary, Capital Southwest SBIC I, LP, as a small business investment company. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results could differ materially from those we express in the forward-looking statements as a result of several factors more fully described in “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 and in this Quarterly Report on Form 10-Q. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. You should read the following discussion in conjunction with the consolidated financial statements and related footnotes and other financial information included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024. We undertake no obligation to update publicly any forward-looking statements for any reason, whether as a result of new information, future events or otherwise, except as required by law.

Current wording

The information contained herein may contain “forward-looking statements” based on our current expectations, assumptions and estimates about us and our industry. These forward-looking statements involve risks and uncertainties. Words such as “may,” “predict,” “will,” “continue,” “likely,” “would,” “could,” “should,” “expect,” “anticipate,” “potential,” “estimate,” “indicate,” “seek,” “believe,” “target,” “intend,” “plan,” or “project” and other similar expressions identify forward-looking statements. These risks include risks related to changes in the markets in which the Company invests; changes in the financial and lending markets; interest rate volatility; the impact of supply chain constraints and labor difficulties on our portfolio companies and the global economy; the elevated level of inflation, and its impact on our portfolio companies and on the industries in which we invest; the impact of geopolitical conditions and its impact on financial market volatility, global economic markets and various sectors and industries; regulatory changes; changes in tax treatment; an economic downturn and its impact on the ability of our portfolio companies to operate and the investment opportunities available to us; and our ability to operate our wholly owned subsidiaries, Capital Southwest SBIC I, LP and Capital Southwest SBIC II, LP, as small business investment companies. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results could differ materially from those we express in the forward-looking statements as a result of several factors more fully described in “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 and in this Quarterly Report on Form 10-Q. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. You should read the following discussion in conjunction with the consolidated financial statements and related footnotes and other financial information included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025. We undertake no obligation to update publicly any forward-looking statements for any reason, whether as a result of new information, future events or otherwise, except as required by law.

Previous wording

We are an internally managed closed-end, non-diversified management investment company that has elected to be regulated as a BDC under the 1940 Act. We specialize in providing customized debt and equity financing to LMM companies in a broad range of investment segments located primarily in the United States. Our investment objective is to produce attractive risk-adjusted returns by generating current income from our debt investments and capital appreciation from our equity and equity related investments. Our investment strategy is to partner with business owners, management teams and financial sponsors to provide flexible financing solutions to fund growth, changes of control, or other corporate events. We invest primarily in senior debt securities, secured by security interests in portfolio company assets. We also may invest in equity interests in our portfolio companies alongside our debt securities.

Current wording

We are an internally managed closed-end, non-diversified management investment company that has elected to be regulated as a BDC under the 1940 Act. We specialize in providing customized debt and equity financing to LMM companies in a broad range of investment segments located primarily in the United States. Our investment objective is to produce attractive risk-adjusted returns by generating current income from our debt investments and capital appreciation from our equity and equity related investments. Our investment strategy is to partner with business owners, management teams and financial sponsors to provide flexible financing solutions to fund growth, changes of control, or other corporate events. We invest primarily in first lien debt securities, secured by security interests in portfolio company assets. We also may invest in equity interests in our portfolio companies alongside our debt securities.

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 nine months ended December 31,

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 three months ended June 30, 2025 and 2024, the ratio of our last twelve months ("LTM") operating expenses, excluding interest expense, as a percentage of our LTM average total assets was 1.69% and 1.79%, 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 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.

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 both June 30, 2025 and March 31, 2025, our investment portfolio at fair value represented approximately 94.6% 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

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.

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 believes that our investment portfolio as of June 30, 2025 and March 31, 2025 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 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.

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. Upon the prepayment of a loan, any unamortized discount or premium is accelerated into interest income. 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 the portfolio company's ability to service debt or other obligations, it will be restored to accrual basis. As of June 30, 2025, investments on non-accrual status represented approximately 0.8% of our total investment portfolio's fair value and approximately 2.6% of its cost. As of March 31, 2025, investments on non-accrual status represented approximately 1.7% of our total investment portfolio's fair value and approximately 3.5% of its cost.

Previous wording

In November 2024, the FASB issued ASU 2024-03, "Disaggregation of Income Statement Expenses," which requires additional disclosure of the nature of expenses included in the income statement in response to requests from investors for more information about an entity's expenses. The new standard requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The new guidance is effective for annual periods beginning after December 15, 2027. The Company is currently evaluating the impact of the new standard on the Company's consolidated financial statements and related disclosures and does not believe it will have a material impact on its consolidated financial statements or its disclosures.

Current wording

In November 2024, the FASB issued ASU 2024-03, "Disaggregation of Income Statement Expenses," which requires additional disclosure of the nature of expenses included in the income statement in response to requests from investors for more information about an entity's expenses. The new standard requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The new guidance is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of the new standard on the Company's consolidated financial statements and related disclosures and does not believe it will have a material impact on its consolidated financial statements or its disclosures.

Previous 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.

Current wording

The total fair value of our investment portfolio was $1,780.2 million as of June 30, 2025, as compared to $1,785.3 million as of March 31, 2025. As of June 30, 2025, we had investments in 122 portfolio companies with an aggregate cost of $1,798.4 million. As of March 31, 2025, we had investments in 121 portfolio companies with an aggregate cost of $1,779.4 million. The following table presents certain additional selected information regarding our debt investments as of June 30, 2025 and March 31, 2025 (dollars in millions):

Previous 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.

Current wording

(a)At June 30, 2025 and March 31, 2025, we had equity ownership in approximately 65.6% and 65.3%, 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 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.

Current wording

The weighted average annual effective yields were computed using the effective interest rates during the quarter for all debt investments at cost as of June 30, 2025 and March 31, 2025, respectively, including accretion of original issue discount but excluding fees payable upon repayment of the debt instruments. As of June 30, 2025, investments on non-accrual status represented approximately 0.8% of our total investment portfolio's fair value and approximately 2.6% of its cost. As of March 31, 2025, investments on non-accrual status represented approximately 1.7% of our total investment portfolio's fair value and approximately 3.5% 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

•Investment Rating 3 involves an investment performing below underwriting expectations and the trends and risk factors are generally neutral to negative. The investment may be out of compliance with financial covenants and interest payments may be impaired, however principal payments are generally not past due.

Current wording

•Investment Rating 3 involves an investment performing below underwriting expectations and the trends and risk factors are generally neutral to negative. The investment may be out of compliance with financial covenants, however interest payments are generally not past due and the investment is typically on accrual.

Previous wording

•Investment Rating 4 indicates that the investment is performing materially below underwriting expectations, the trends and risk factors are generally negative and the risk of the investment has increased substantially. Interest and principal payments on our investment are likely to be impaired.

Current wording

•Investment Rating 4 indicates that the investment is performing materially below underwriting expectations, the trends and risk factors are generally negative and the risk of the investment has increased. Interest payments on our investment are likely to be impaired and the investment is typically on non-accrual, however there is not an expectation of significant principal loss.

Previous wording

Wecontinue to observe supply chain disruptions, labor and resource shortages, commodity inflation, elements of financial market instability (including elevated interest rates and volatility in the banking systems, particularly with small and regional banks), an uncertain economic outlook for the United States (which may include a recession), and elements of geopolitical instability (including the ongoing war in Ukraine, conflict in the Middle East, and U.S. and China relations). In the event that the U.S. economy enters into a protracted recession, it is possible that the results of certain U.S. middle market companies could experience deterioration. We are closely monitoring the effect of such market volatility may have on our portfolio companies and our investment activities, and we have also increased oversight of credits in vulnerable industries to mitigate any decline in loan performance and reduce credit risk.

Current wording

Wecontinue to observe commodity inflation, elements of financial market instability (including elevated interest rates), supply chain disruptions, changes to U.S. tariff and import/export regulations, and elements of geopolitical instability (including the ongoing war in Ukraine, conflict in the Middle East, and U.S. and China relations). Changes to trade policies, including the imposition of new tariffs, could disrupt supply chains and may negatively impact the financial condition of certain of our portfolio companies as well as the macro-economic environment. In the event that the U.S. economy enters into a protracted recession, it is possible that the results of certain U.S. middle market companies could experience deterioration. We are closely monitoring the effect of such market volatility may have on our portfolio companies and our investment activities, and we have also increased oversight of credits in vulnerable industries to mitigate any decline in loan performance and reduce credit risk.

Previous wording

The following table shows the distribution of our debt portfolio investments on the 1 to 4 investment rating scale at fair value as of December 31, 2024 and March 31, 2024:

Current wording

The following table shows the distribution of our debt portfolio investments on the 1 to 5 investment rating scale at fair value as of June 30, 2025 and March 31, 2025:

Previous 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.

Current wording

During the three months ended June 30, 2025, we made debt investments totaling $83.2 million and equity investments totaling $2.0 million. We also received, in connection with the sale of a preferred equity investment, an earnout with a current fair value of $3.5 million, which is included in financial instruments. We received contractual principal repayments totaling approximately $8.8 million and full prepayments of approximately $54.0 million. We funded $9.6 million on revolving loans and received $12.4 million in repayments on revolving loans. In addition, we received proceeds from sales of debt and equity investments totaling $31.7 million.

Previous 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.

Current wording

During the three months ended June 30, 2024, we made debt investments totaling $76.8 million and equity investments totaling $3.1 million. We received contractual principal repayments totaling approximately $9.0 million and full prepayments of approximately $71.1 million. We funded $11.3 million on revolving loans and received $8.2 million in repayments on revolving loans. In addition, we received proceeds from sales of debt investments totaling $8.2 million.

Previous wording

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

Current wording

Total portfolio investment activity for the three months ended June 30, 2025 and 2024 was as follows (dollars in thousands):

Previous 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.

Current wording

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

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, 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.

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 three 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 (depreciation) appreciation 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.

Previous 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.

Current wording

Total investment income for the three months ended June 30, 2025 was approximately $55.9 million, a $4.6 million, or 8.9%, increase as compared to the three months ended June 30, 2024. 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 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.

Current wording

Interest income (including PIK interest income and amortization of purchase discounts and fees) for the three months ended June 30, 2025 totaled $50.4 million as compared to $46.0 million for the three months ended June 30, 2024. The increase was primarily due to a 21.7% increase in the average monthly cost basis of debt investments held by us from $1,375.7 million to $1,673.8 million year-over-year, partially offset by a decrease in the weighted average yield on debt investments from 13.3% to 11.8% year-over-year. Dividend income for the three months ended June 30, 2025 increased $1.3 million as compared to the three months ended June 30, 2024 primarily due to an increase in distributions received from portfolio companies, as well as a non-recurring dividend received during the current quarter. Fee income for the three months ended June 30, 2025 decreased $0.7 million as compared to the three months ended June 30, 2024 primarily due to a decrease in amendment fees in the current quarter. Other income for the three months ended June 30, 2025 decreased $0.3 million as compared to the three months ended June 30, 2024 primarily due to a decrease in interest income on cash balances held.

Previous 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.

Current wording

For the three months ended June 30, 2025, our total interest expense was $15.3 million, an increase of $2.8 million, as compared to the total interest expense of $12.4 million for the three months ended June 30, 2024. 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 5.46% for the three months ended June 30, 2024 and June 30, 2025, respectively. This decrease in the weighted average interest rate on our total debt was primarily due to a decrease in the weighted average interest rate on our Credit Facilities.

Previous 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.

Current wording

For the three months ended June 30, 2025, our total employee compensation expense (including both cash and share-based compensation) increased by $0.4 million, or 8.7%, as compared to the total employee compensation expense for the three months ended June 30, 2024. The increase was primarily due to an increase in accrued bonus compensation based on the Company's projected performance compared to its plan. For the three months ended June 30, 2025, our total general and administrative expense remained relatively flat at $2.9 million as compared to the total general and administrative expense for the three months ended June 30, 2024.

Previous 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.

Current wording

For the three months ended June 30, 2025, income before taxes increased by $1.4 million, or 4.6%. Net investment income increased from the prior year period by $3.0 million, or 10.5%, to $31.9 million as a result of a $4.6 million increase in total investment income and a $1.6 million decrease in income tax provision, partially offset by a $2.8 million increase in interest expense.

Previous wording

(1)Included in "Other" is a $0.3 million 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 $6.2 million 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

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%.

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 the SBIC Subsidiaries from the definition of senior securities in the asset coverage requirement applicable to the Company under the 1940 Act. As of June 30, 2025, the Company’s asset coverage was 220%.

Previous 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.

Current wording

For the three months ended June 30, 2025, we experienced a net increase in cash and cash equivalents in the amount of $3.7 million. During the foregoing period, our operating activities provided $30.5 million in cash, consisting primarily of $73.8 million from sales and repayments received from debt investments in portfolio companies and $26.3 million from sales of equity investments in portfolio companies, partially offset by new portfolio investments made by the Company of $94.9 million. In addition, our financing activities used cash of $26.7 million, consisting primarily of cash dividends paid in the amount of $35.3 million and net repayments on our Credit Facilities of $31.0 million, partially offset by net proceeds from the Equity ATM Program of $41.2 million. At June 30, 2025, the Company had cash and cash equivalents of approximately $46.9 million and restricted cash of approximately $1.7 million.

Previous 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.

Current wording

For the three months ended June 30, 2024, we experienced a net increase in cash and cash equivalents in the amount of $1.0 million. During that period, our operating activities provided $31.1 million in cash, consisting primarily of $95.4 million from sales and repayments received from debt investments in portfolio companies, partially offset by new portfolio investments made by the Company of $91.2 million. In addition, our financing activities used cash of $30.1 million, consisting primarily of net repayments on our Credit Facilities of $36.0 million and cash dividends paid in the amount of $29.5 million, partially offset by net proceeds from the Equity ATM Program of $37.8 million. At June 30, 2024, the Company had cash and cash equivalents of approximately $33.3 million.

Previous 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.

Current wording

As of June 30, 2025, we had $46.9 million in unrestricted cash and cash equivalents and $397.2 million of unused capacity under the Credit Facilities that we maintain to support our investment and operating activities.

Previous 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

Current wording

As of June 30, 2025, we had $200.0 million outstanding and $309.2 million of undrawn commitments under the Corporate Credit Facility, and $112.0 million outstanding and $88.0 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.

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 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.

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. 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 year ended March 31, 2025.

Previous wording

In November 2024, the Company issued $230.0 million in aggregate principal amount of 5.125% convertible notes due 2029 (the "2029 Convertible Notes"), including the underwriters' full exercise of their option to purchase an additional $30.0 million in aggregate principal amount to cover over-allotments. The outstanding aggregate principal amount of the 2029 Convertible Notes as of December 31, 2024 was $230.0 million.

Current wording

In November 2024, the Company issued $230.0 million in aggregate principal amount of 5.125% convertible notes due 2029 (the "2029 Convertible Notes"), including the underwriters' full exercise of their option to purchase an additional $30.0 million in aggregate principal amount to cover over-allotments. The outstanding aggregate principal amount of the 2029 Convertible Notes as of both June 30, 2025 and March 31, 2025was $230.0 million.

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 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.

Current wording

On April 20, 2021 and April 17, 2025, SBIC I and SBIC II, respectively, 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 licenses allow each of SBIC I and SBIC II to obtain leverage by issuing SBA Debentures, subject to the issuance of a leverage commitment by the SBA. Current SBA regulations permit SBIC I and SBIC II to each 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 June 30, 2025, SBIC I had a total leverage commitment from the SBA in the amount of $175.0 million, all of which was drawn. As of June 30, 2025, SBIC II did not have a leverage commitment from the SBA. 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

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 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

Previous wording

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

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.

Previous wording

1 Net proceeds reflects proceeds after deducting commissions to the sales agents on shares sold. As of December 31, 2024, no amounts remained receivable. As of December 31, 2023,0.9 million in proceeds remained receivable and were included in other receivables in the Consolidated Statements of Assets and Liabilities.

Current wording

(1)Net proceeds reflects proceeds after deducting commissions to the sales agents on shares sold. As of both June 30, 2025 and June 30, 2024, no amounts remained receivable.

Previous wording

Cumulative to date, the Company has sold 30,048,664 shares of its common stock under the Equity ATM Program at a weighted-average price of $21.35, raising $641.4 million of gross proceeds. Net proceeds were $631.5 million after commissions to the sales agents on shares sold. As of December 31, 2024, the Company had $358.6 million available under the Equity ATM Program.

Current wording

Cumulative to date, the Company has sold 35,076,094 shares of its common stock under the Equity ATM Program at a weighted-average price of $21.43, raising $751.7 million of gross proceeds. Net proceeds were $740.2 million after commissions to the sales agents on shares sold. As of June 30, 2025, the Company had $248.3 million available under the Equity ATM Program.

Previous wording

On July 28, 2021, the Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $20 million of its outstanding shares of common stock in the open market at certain thresholds below its NAV per share, in accordance with guidelines specified in Rules 10b5-1(c)(1)(i)(B) and 10b-18 under the Exchange Act. On August 31, 2021, the Company entered into a share repurchase agreement, which became effective immediately, and the Company will cease purchasing its common stock under the share repurchase program upon the earlier of, among other things: (1) the date on which the aggregate price for all shares purchased under the share repurchase program equals $20 million including, without limitation, all applicable fees, costs and expenses; or (2) upon written notice by the Company to the broker that the share repurchase agreement is terminated. During the three and nine ended December 31, 2024 and 2023, the Company did not repurchase any shares under the share repurchase program.

Current wording

On July 28, 2021, the Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $20 million of its outstanding shares of common stock in the open market at certain thresholds below its NAV per share, in accordance with guidelines specified in Rules 10b5-1(c)(1)(i)(B) and 10b-18 under the Exchange Act. On August 31, 2021, the Company entered into a share repurchase agreement, which became effective immediately, and the Company will cease purchasing its common stock under the share repurchase program upon the earlier of, among other things: (1) the date on which the aggregate price for all shares purchased under the share repurchase program equals $20 million including, without limitation, all applicable fees, costs and expenses; or (2) upon written notice by the Company to the broker that the share repurchase agreement is terminated. During the three months ended June 30, 2025 and 2024, the Company did not repurchase any shares under the share repurchase program.

Previous wording

At December 31, 2024 and March 31, 2024, we had a total of approximately $192.8 million and $140.1 million, respectively, in currently unfunded commitments (as discussed in Note 11 - Commitments and Contingencies to the Consolidated Financial Statements). As of December 31, 2024, the total unfunded commitments included commitments to issue letters of credit through a financial intermediary on behalf of certain portfolio companies. As of December 31, 2024, we had $0.9 million in letters of credit issued and outstanding under these commitments on behalf of the portfolio companies. For the letters of credit issued and outstanding, we would be required to make payments to third parties if the portfolio companies were to default on their related payment obligations. Of these letters of credit, $0.4 million expire in February 2025, $0.3 million expire in March 2025, and $0.2 million expire in April 2025. As of December 31, 2024, none of the letters of credit issued and outstanding were recorded as a liability on the Company's balance sheet as such letters of credit are considered in the valuation of the investments in the portfolio company.

Current wording

At June 30, 2025 and March 31, 2025, we had a total of approximately $223.0 million and $197.4 million, respectively, in currently unfunded commitments (as discussed in Note 11 - Commitments and Contingencies to the Consolidated Financial Statements). As of June 30, 2025, the total unfunded commitments included commitments to issue letters of credit through a financial intermediary on behalf of certain portfolio companies. As of June 30, 2025, we had $0.9 million in letters of credit issued and outstanding under these commitments on behalf of the portfolio companies. For the letters of credit issued and outstanding, we would be required to make payments to third parties if the portfolio companies were to default on their related payment obligations. Of these letters of credit, $0.4 million expire in February 2026, $0.3 million expire in March 2026, and $0.2 million expire in April 2026. As of June 30, 2025, none of the letters of credit were drawn and as such, were not recorded as a liability on the Company's balance sheet.

Previous wording

(1)Amounts include interest payments calculated at an average rate of 7.19% of outstanding borrowings under the Corporate Credit Facility, which were $190.0 million as of December 31, 2024.

Current wording

(1)Amounts include interest payments calculated at an average rate of 6.65% of outstanding borrowings under the Corporate Credit Facility, which were $200.0 million as of June 30, 2025.