Great Elm Capital Corp.

Previous wording

We are a BDC that seeks to generate both current income and capital appreciation through debt and income-generating equity investments, including investments in specialty finance businesses. To achieve our investment objective, we invest in secured and senior secured debt instruments of middle market companies, as well as income generating equity investments in specialty finance companies, that we believe offer sufficient downside protection and have the potential to generate attractive returns. We generally define middle market companies as companies with enterprise values between $100 million and $2 billion. We also make investments throughout other portions of a company’s capital structure, including subordinated debt, mezzanine debt, and equity or equity‑linked securities. We source these transactions directly with issuers and in the secondary markets through relationships with industry professionals.

Current wording

We are a BDC that seeks to generate both current income and capital appreciation through debt and income generating equity investments, including investments in specialty finance businesses. To achieve our investment objective, we invest in secured and senior secured debt instruments of middle market companies, as well as income generating equity investments in specialty finance companies, that we believe offer sufficient downside protection and have the potential to generate attractive returns. In addition, we invest in collateralized loan obligation ("CLO") securities and related warehouse facilities. We generally define middle market companies as companies with enterprise values between $100 million and $2 billion. We also make investments throughout other portions of a company’s capital structure, including subordinated debt, mezzanine debt, and equity or equity linked securities. We source these transactions directly with issuers and in the secondary markets through relationships with industry professionals.

Previous wording

On September 1, 2023, we contributed investments in certain of our operating company subsidiaries and other specialty finance assets to our formerly wholly owned subsidiary, Great Elm Specialty Finance, LLC (“GESF”) in exchange for equity and subordinated indebtedness in GESF. In connection with this contribution, a strategic investor purchased approximately 12.5% of the equity interests and subordinated indebtedness in GESF. Through its subsidiaries, GESF provides a variety of financing options along a “continuum of lending” to middle-market borrowers, including receivables factoring, asset-based and asset-backed lending, lender finance, and equipment financing. GESF expects to generate both revenue and cost synergies across its specialty finance company subsidiaries. We currently own approximately 87.5% of GESF.

Current wording

On September 1, 2023, we contributed investments in certain of our operating company subsidiaries and other specialty finance assets to our formerly wholly owned subsidiary, Great Elm Specialty Finance, LLC (“GESF”) in exchange for equity and subordinated indebtedness in GESF. In connection with this contribution, a strategic investor purchased approximately 12.5% of the equity interests and subordinated indebtedness in GESF. Through its subsidiaries, GESF provides a variety of financing options along a “continuum of lending” to middle-market borrowers, including receivables factoring, asset-based and asset-backed lending, lender finance, and equipment financing. GESF expects to generate both revenue and cost synergies across its specialty finance company subsidiaries.

Previous wording

The following is a summary of our investment activity for the year ended December 31, 2023 and the nine months ended September 30, 2024:

Current wording

The following is a summary of our investment activity for the year ended December 31, 2024 and the three months ended March 31, 2025:

Previous wording

The following is a reconciliation of the investment portfolio for the nine months ended September 30, 2024 and the year ended December 31, 2023. Investments in short-term securities, including U.S. Treasury Bills and money market mutual funds, are excluded from the table below.

Current wording

The following is a reconciliation of the investment portfolio for the three months ended March 31, 2025 and the year ended December 31, 2024. Investments in short-term securities, including U.S. Treasury Bills and money market mutual funds, are excluded from the table below.

Previous wording

Interest income increased for the three and nine months ended September 30, 2024 as compared to the corresponding period in the prior year primarily due to an increased debt investment portfolio size. As of September 30, 2024, the debt investment portfolio had an average coupon rate of 12.3% on approximately $241.2 million of principal as compared to 12.5% on approximately $217.8 million of principal as of September 30, 2023, excluding positions on non-accrual in each period.

Current wording

Interest income increased for the three months ended March 31, 2025 as compared to the corresponding period in the prior year primarily due to an increased debt investment portfolio size. As of March 31, 2025, the debt investment portfolio had an average coupon rate of 11.7% on approximately $256.2 million of principal as compared to 12.6% on approximately $218.0 million of principal as of March 31, 2024, excluding positions on non-accrual in each period.

Previous wording

The increase in dividend income for the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023 is primarily due to the investment in CLO Formation JV, LLC which was formed in the current year and pays periodic dividends to its equityholders.

Current wording

The increase in dividend income for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 is primarily due to the investment in CLO JV which was formed in the current year and pays periodic dividends to its equity-holders.

Previous wording

Management fees increased for the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023 due to increases in the underlying management fee assets which primarily consists of the fair value of the portfolio of investments.

Current wording

Management fees increased for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 due to increases in the underlying management fee assets which primarily consists of the fair value of the portfolio of investments.

Previous wording

Incentive fees increased for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 due to higher pre-incentive net investment income over the same period. Incentive fees increased for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 due to increased pre-incentive net investment income over the same period.

Current wording

Incentive fees increased for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 due to higher pre-incentive net investment income over the same period.

Previous wording

Professional services costs decreased for the three and nine months ended September 30, 2024 as compared to the corresponding periods in the prior year, primarily due to decreased legal expenses associated with specific transaction matters which have been partially offset by general rate increases for professional services including valuation and accounting costs.

Current wording

Professional services costs increased for the three months ended March 31, 2025 as compared to the corresponding periods in the prior year, primarily due to general rate increases for professional services including valuation and accounting costs.

Previous wording

Interest expense increased for the three and nine months ended September 30, 2024 as compared to the corresponding periods in the prior year primarily due to the issuance of $56.5 million in aggregate principal amount of the 8.50% Notes due 2029 (the “GECCI Notes”) in April and July 2024, and the issuance of $36.0 million in aggregate principal amount of the 8.125% Notes due 2029 (the “GECCH Notes”) in September 2024.

Current wording

Interest expense increased for the three months ended March 31, 2025 as compared to the corresponding periods in the prior year primarily due to the issuance of $56.5 million in aggregate principal amount of the 8.50% Notes due 2029 (the “GECCI Notes”) in April and July 2024, and the issuance of $36.0 million in aggregate principal amount of the 8.125% Notes due 2029 (the “GECCH Notes”) in September 2024, offset with the redemption of $45.6 million in aggregate principal amount of the 6.75% Notes due in 2025 (the "GECCM Notes") in October 2024.

Previous wording

Realized gain for the three months ended September 30, 2024 includes $0.3 million in gains from the realization of our investment in Florida Marine, LLC term loan. Realized losses for the three months ended September 30, 2024 includes $0.2 million in loss from the realization of our investment in Eagle Point Credit Company common equity.

Current wording

Realized gain for the three months ended March 31, 2025 includes $0.2 million in gains from the realization of our investment in W&T Offshore Inc. secured bonds. Realized losses for the three months ended March 31, 2025 includes $0.1 million in loss from the realization of our investment in Dynata, LLC ("Dynata", formerly known as Research Now Group, Inc.) common equity.

Previous wording

Realized gain for the nine months ended September 30, 2024 includes $0.8 million in gains from the partial sale of our investment in American Coastal Insurance Corp unsecured bond and $0.8 million in gains from the partial sale of our investment in Blackstone Secured Lending Fund common equity. Realized losses for the nine months ended September 30, 2024 includes $0.6 million on the realization of our investment in PFS Holdings Corp. term loan and $0.3 million in loss from the realization of our investment in Eagle Point Credit Company common equity.

Current wording

Realized gain for the three months ended March 31, 2024 includes $0.9 million in gains from the partial sale of our investment in Blackstone Secured Lending common equity and $0.8 million in gains from the partial sale of our investment in American Coastal Insurance Corp. Realized losses for the three months ended March 31, 2024 resulted from the partial sale of our investment in Eagle Point Credit Company common equity.

Previous wording

For the three months ended September 30, 2024, unrealized appreciation was primarily driven by an increase in fair value of our investment in CW Opportunity 2 LP of approximately $1.1 million and in our investment in Nice-Pak Products, Inc. warrants of approximately $0.5 million. Unrealized depreciation for the three months ended September 30, 2024 was primarily driven by a decrease in fair value of our investment in GESF common stock of approximately $1.1 million and in our investment in Blue Ribbon, LLC term loan of approximately $0.4 million.

Current wording

For the three months ended March 31, 2025, unrealized appreciation was primarily driven by an increase in fair value of our investment in Trouvaille Re preference shares of approximately $0.8 million and in our investment in Dynata, LLC common equity of approximately $0.8 million. Unrealized depreciation for the three months ended March 31, 2025 was primarily driven by a decrease in fair value of our investment in CLO JV common equity of approximately $1.9 million and in our investment in CW Opportunity 2, LP of approximately $1.1 million.

Previous wording

As of September 30, 2024, we had approximately $0.3 million of cash and cash equivalents and approximately $25.7 million of money market fund investments at fair value. As of September 30, 2024, we had investments in 54 debt instruments across 45 companies, totaling approximately $234.5 million at fair value and 20 equity investments in 18 companies, with an aggregate fair value of approximately $98.8 million.

Current wording

As of March 31, 2025, we had approximately $1.3 million of cash and cash equivalents. As of March 31, 2025, we had investments in 58 debt instruments across 48 companies, totaling approximately $242.9 million at fair value and 18 equity investments in 14 companies, with an aggregate fair value of approximately $99.0 million.

Previous wording

In the normal course of business, we may enter into investment agreements under which we commit to make an investment in a portfolio company at some future date or over a specified period of time. As of September 30, 2024, we had approximately $11.1 million in unfunded commitments to provide financing to certain of our portfolio companies. We had sufficient availability on our Revolver as well as cash and other liquid assets on our September 30, 2024 balance sheet to satisfy the unfunded commitments.

Current wording

In the normal course of business, we may enter into investment agreements under which we commit to make an investment in a portfolio company at some future date or over a specified period of time. As of March 31, 2025, we had approximately $3.5 million in unfunded commitments to provide financing to certain of our portfolio companies. We had sufficient availability on our Revolver as well as cash and other liquid assets on our March 31, 2025 balance sheet to satisfy the unfunded commitments.

Previous wording

For the nine months ended September 30, 2024, net cash used for operating activities was approximately $114.1 million, reflecting the purchases and repayments of investments offset by net investment income, including non-cash income related to accretion of discount and PIK income and proceeds from sales of investments and principal payments received. Net cash provided by purchases and proceeds from sales of investments was approximately $47.0 million, reflecting payments for additional investments of $219.2 million, offset by proceeds from principal repayments and sales of $172.2 million.

Current wording

For the three months ended March 31, 2025, net cash used for operating activities was approximately $5.9 million, reflecting the purchases and repayments of investments offset by net investment income, including non-cash income related to accretion of discount and PIK income and proceeds from sales of investments and principal payments received. Net cash provided by purchases and proceeds from sales of investments was approximately $18.2 million, reflecting payments for additional investments of $47.8 million, offset by proceeds from principal repayments and sales of $29.6 million.

Previous wording

For the nine months ended September 30, 2024, net cash provided by financing activities was $113.5 million, consisting of $35.7 million in proceeds from our issuance of shares of our common stock, net of related expenses, $88.8 million in net proceeds from the issuance of the GECCI Notes and GECCH Notes, less $11.0 million in distributions to stockholders.

Current wording

For the three months ended March 31, 2025, net cash provided by financing activities was $7.1 million, consisting of $12.0 million in net borrowings on the revolving credit facility, less $4.8 million in distributions to stockholders.

Previous wording

See “—Revolver” and “—Notes Payable” below for more information regarding our credit facility and outstanding notes.

Current wording

See “—Revolver” and “—Notes Payable” below for more information regarding our outstanding credit facility and notes.

Previous wording

On May 5, 2021, we entered into a Loan, Guarantee and Security Agreement (the “Loan Agreement”) with City National Bank (“CNB”). The Loan Agreement provides for a senior secured revolving line of credit (the “Revolver”) of up to $25 million (subject to a borrowing base as defined in the Loan Agreement). We may request to increase the revolving line in an aggregate amount not to exceed $25 million, which increase is subject to the sole discretion of CNB. In November 2023, the Company entered into an amendment to the Loan Agreement extending the maturity date of the revolving line to May 5, 2027. Borrowings under the revolving line bear interest at a rate equal to (i) the Secured Overnight Financing Rate (“SOFR”) plus 3.00% (reduced from SOFR plus 3.50% prior to the November 2023 amendment), (ii) a base rate plus 2.00% or (iii) a combination thereof, as determined by us. Additionally, we are required to pay a commitment fee of 0.50% per annum on any unused portion of the revolving line of credit. As of September 30, 2024, there were no borrowings outstanding under the revolving line.

Current wording

On May 5, 2021, we entered into a Loan, Guarantee and Security Agreement (the “Loan Agreement”) with City National Bank (“CNB”). The Loan Agreement provides for a senior secured revolving line of credit (the “Revolver”) of up to $25 million (subject to a borrowing base as defined in the Loan Agreement). We may request to increase the revolving line in an aggregate amount not to exceed $25 million, which increase is subject to the sole discretion of CNB. In November 2023, the Company entered into an amendment to the Loan Agreement extending the maturity date of the revolving line to May 5, 2027. Borrowings under the revolving line currently bear interest at a rate equal to (i) the Secured Overnight Financing Rate (“SOFR”) plus 3.00% (reduced from SOFR plus 3.50% prior to the November 2023 amendment), (ii) a base rate plus 2.00% or (iii) a combination thereof, as determined by us. Additionally, we are required to pay a commitment fee of 0.50% per annum on any unused portion of the revolving line of credit. As of March 31, 2025, there were $12 million in borrowings outstanding under the revolving line.

Previous wording

On September 12, 2024, we caused redemption notices to be issued to the holders of the GECCM Notes regarding the Company's exercise of its option to redeem, in whole, the issued and outstanding GECCM Notes. We redeemed all of the issued and outstanding GECCM Notes on October 12, 2024 at 100% of the principal amount plus accrued and unpaid interest thereon from September 30, 2024 through, but excluding, the redemption date, October 12, 2024.

Current wording

On January 11, 2018, we issued $43.0 million in aggregate principal amount of 6.75% notes due 2025 (the “GECCM Notes”). On January 19, 2018 and February 9, 2018, we issued an additional $1.9 million and $1.5 million, respectively, of the GECCM Notes upon partial exercise of the underwriters’ over-allotment option. On September 12, 2024, we caused redemption notices to be issued to the holders of the GECCM Notes regarding the Company's exercise of its option to redeem, in whole, the issued and outstanding GECCM Notes. We redeemed all of the issued and outstanding GECCM Notes on October 12, 2024 at 100% of the principal amount plus accrued and unpaid interest thereon from September 30, 2024 through, but excluding, the redemption date, October 12, 2024.

Previous wording

On September 19, 2024, the Company issued $36.0 million in aggregate principal amount of 8.125% notes due 2029 (the "GECCH Notes"). On October 3, 2024, the Company issued an additional $5.4 million of the GECCH Notes upon full exercise of the underwriters' over-allotment option. The aggregate principal balance of the GECCH Notes outstanding as of September 30, 2024 is$36.0 million.

Current wording

On September 19, 2024, the Company issued $36.0 million in aggregate principal amount of 8.125% notes due 2029 (the "GECCH Notes" and, together with the GECCO Notes, GECCZ Notes and GECCI Notes, the "Notes"). On October 3, 2024, the Company issued an additional $5.4 million of the GECCH Notes upon full exercise of the underwriters' over-allotment option. The aggregate principal balance of the GECCH Notes outstanding as of March 31, 2025 is$41.4 million.

Previous wording

The Notes are our unsecured obligations and rank equal with all of our outstanding and future unsecured unsubordinated indebtedness. The unsecured notes are effectively subordinated, or junior in right of payment, to indebtedness under our Loan Agreement and any other future secured indebtedness that we may incur to the extent of the value of the assets securing such indebtedness and structurally subordinated to all future indebtedness and other obligations of our subsidiaries. We pay interest on the Notes on March 31, June 30, September 30 and December 31 of each year. The GECCO Notes, GECCZ Notes, GECCI and GECCH Notes will mature on June 30, 2026, September 30, 2028, April 30, 2029, and December 31, 2029 respectively. The GECCO Notes are currently callable at the Company’s option and the GECCZ Notes, GECCI Notes and GECCH Notes can be called on, or after, September 30, 2025, April 30, 2026, and December 31, 2026, respectively. Holders of the Notes do not have the option to have the Notes repaid prior to the stated maturity date. The Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

Current wording

The Notes are our unsecured obligations and rank equal with all of our outstanding and future unsecured unsubordinated indebtedness. The unsecured notes are effectively subordinated, or junior in right of payment, to indebtedness under our Loan Agreement and any other future secured indebtedness that we may incur to the extent of the value of the assets securing such indebtedness and structurally subordinated to all future indebtedness and other obligations of our subsidiaries. We pay interest on the Notes on March 31, June 30, September 30 and December 31 of each year. The GECCO Notes, GECCZ Notes, GECCI Notes and GECCH Notes will mature on June 30, 2026, September 30, 2028, April 30, 2029, and December 31, 2029 respectively. The GECCO Notes are currently callable at the Company’s option and the GECCZ Notes, GECCI Notes and GECCH Notes can be called on, or after, September 30, 2025, April 30, 2026, and December 31, 2026, respectively. Holders of the Notes do not have the option to have the Notes repaid prior to the stated maturity date. The Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

Previous wording

We may repurchase the Notes in accordance with the Investment Company Act and the rules promulgated thereunder. During the nine months ended September 30, 2024, the Company repurchased $0.3 million in principal amount of the GECCM Notes prior to redeeming them in full on October 12, 2024.

Current wording

We may repurchase the Notes in accordance with the Investment Company Act and the rules promulgated thereunder.

Previous wording

As of September 30, 2024, our asset coverage ratio was approximately 166.2%. Under the Investment Company Act, we are subject to a minimum asset coverage ratio of 150%.

Current wording

As of March 31, 2025, our asset coverage ratio was approximately 163.8%. Under the Investment Company Act, we are subject to a minimum asset coverage ratio of 150%.

Previous wording

During the last two fiscal years, using the high and low sales prices within each fiscal quarter compared to the NAV at such quarter end, our common stock has traded as high as a 26.1% premium to NAV and as low as a 40.4% discount to NAV.

Current wording

During the last two fiscal years, using the high and low sales prices within each fiscal quarter compared to the NAV at such quarter end, our common stock has traded as high as a 1.0% discount to NAV and as low as a 40.4% discount to NAV.

Previous wording

The last reported closing price for our common stock on October 24, 2024 was$10.05 per share. As of October 24, 2024, we had 9 record holders of our common stock.

Current wording

The last reported closing price for our common stock on April 30, 2025 was$10.13 per share. As of April 30, 2025, we had 10 record holders of our common stock.

Previous wording

Our board set the distribution for the quarter ending December 31, 2024 at a rate of $0.35 per share. The full amount of each distribution will be from distributable earnings. The schedule of distribution payments will be established by GECC pursuant to authority granted by our Board. The distribution will be paid in cash.

Current wording

Our board set the distribution for the quarter ending June 30, 2025 at a rate of $0.37 per share. The full amount of each distribution will be from distributable earnings. The schedule of distribution payments will be established by GECC pursuant to authority granted by our Board. The distribution will be paid in cash.

Previous wording

We are also subject to financial risks, including changes in market interest rates. As of September 30, 2024, approximately $174.6 million in principal amount of our debt investments bore interest at variable rates, which are generally based on SOFR or US prime rate, and many of which are subject to certain floors. Although interest rates began to decline during the quarter, in recent years interest rates have risen and remain elevated. A prolonged increase in interest rates will increase our gross investment income and could result in an increase in our net investment income if such increases in interest rates are not offset by a corresponding decrease in the spread over variable rates that we earn on any portfolio investments or an increase in our operating expenses. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for an analysis of the impact of hypothetical base rate changes in interest rates.

Current wording

We are also subject to financial risks, including changes in market interest rates. As of March 31, 2025, approximately $186.1 million in principal amount of our debt investments bore interest at variable rates, which are generally based on SOFR or US prime rate, and many of which are subject to certain floors. Recently, interest rates have risen and a prolonged increase in interest rates will increase our gross investment income and could result in an increase in our net investment income if such increases in interest rates are not offset by a corresponding decrease in the spread over variable rates that we earn on any portfolio investments or an increase in our operating expenses. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for an analysis of the impact of hypothetical base rate changes in interest rates.