What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-05-11 compared with 2020-05-12 · 606 added, 865 removed, 470 unchanged (76% of the section changed)

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Our common stock is traded on Nasdaq under the symbol GAIN. The following table reflects, by quarter, the high and low intraday sales

prices per share of our common stock on the Nasdaq, the intraday sales prices as a percentage of NAV per share and quarterly distributions declared per common share for each fiscal quarter during the last two completed fiscal years and the current

prices per share of our common stock on Nasdaq, the intraday sales prices as a percentage of NAV per share and quarterly distributions declared per common share for each fiscal quarter during the last two completed fiscal years and the current

fiscal year through May 10, 2021.

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prices per share for the relevant quarter minus the NAV per share as of the end of such quarter, and therefore may not reflect the premium (discount) to NAV per share on the date of the high and low intraday sales prices.

Includes a $0.06 per common share supplemental distribution paid in each of June 2018 and December 2018.

Includes a $0.09 per common share supplemental distribution paid in each June and December 2019 and a $0.03 per

common share supplemental distribution paid in September 2019.

Includes a $0.09 per common share supplemental distribution paid in each of June 2019 and December 2019 and a

$0.03 per common share supplemental distribution paid in September 2019.

Includes a $0.09 per common share supplemental distribution paid in June 2020.

Includes a $0.06 per common share supplemental distribution to be paid in June 2021.

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For the year ended March 31,

2020, we elected to retain $38.0 million, or $1.15 per common share, of net long-term capital gains and to designate the retained amount as deemed distributions to common stockholders.

As a result, each common stockholder will (i) be

required to report their pro-rata share of the retained gain on their tax return as long-term capital gain, (ii) receive a refundable tax credit for their pro-rata

share of federal income tax paid by us on the retained gain, and (iii) increase the tax basis of their shares of common stock by an amount equal to the deemed distribution less the tax credit.

We incurred $8.0 million, or $0.24 per common

share, of federal income taxes on behalf of common stockholders for the year ended March 31, 2020.

The Credit Facility also generally restricts distributions on our common stock to the sum of certain

amounts, including, our net investment income, plus net capital gains, plus amounts elected by the Company to be considered as having been paid during the prior fiscal year in accordance with Section 855(a) of the Code.

2021, we did not elect to retain long-term capital gains and to treat them as deemed distributions to common stockholders.

For the year ended March 31, 2020, we elected to retain $38.0 million, or $1.15 per common share, of net long-term

capital gains and to designate the retained amount as deemed distributions to common stockholders.

As a result, each common stockholder (i) was required

to report their pro-rata share of the retained gain on their tax return as long-term capital gain, (ii) received a refundable tax credit for their pro-rata share of federal income tax paid by us on the retained gain, and (iii) increased the tax basis of their shares of common stock by an amount equal to the deemed distribution less the tax credit.

incurred $8.0 million, or $0.24 per common share, of federal income taxes on behalf of common stockholders for the year ended March 31, 2020.

The Credit Facility also generally restricts distributions on our common stock to the sum of

certain amounts, including, our net investment income, plus net capital gains, plus amounts elected by the Company to be considered as having been paid during the prior fiscal year in accordance with Section 855(a) of the Code.

Recent Sales of Unregistered Securities

We did not sell

any unregistered shares of stock during the fiscal year ended March 31, 2020.

any unregistered securities during the fiscal year ended March 31, 2021.

Purchases of Equity Securities

We did not repurchase any shares of our stock during the fourth quarter ended March 31, 2020.

The following table provides information with respect to the purchases made by or on behalf of the Company of our 6.25% Series D Cumulative Term Preferred

Stock, par value $0.001 per share (the Series D Term Preferred Stock), during the fourth quarter of our fiscal year 2021.

The Company elected to voluntarily redeem the entirety of the then issued and outstanding Series D Term Preferred

Stock on March 3, 2021.

On May 7, 2021, the Company executed and filed a Certificate of Elimination of 6.25% Series D Cumulative Term Preferred Stock, thereby removing the Certificate of Designation of the Series D Term Preferred Stock

from the Companys Amended and Restated Certificate of Incorporation.

The Company does not have any existing publicly announced repurchase plans or programs.

Average Price

Paid per Share

Term Preferred

Total Number of

Shares of Series D

Term Preferred

Stock Purchased

as Part of Publicly

Announced Plans

Maximum Number

of Shares of Series

D Term Preferred

Stock that May Yet

Under the Plans

January 1 through 31, 2021

February 1 through 28, 2021

March 1 through 31, 2021

Stock Performance Graph

The following graph shows the

total stockholder return on an investment of $100 in cash on March 31, 2015 for (i) our common stock, (ii) the Nasdaqs 100 Total Return index (Nasdaq 100 TR), (iii) the Russell 1000 Total Return index (Russell

1000 TR) and (iv) the Wells Fargo BDC Total Return index (WF BDC TR).

The graph and other information furnished under the heading Stock Performance Graph shall not be deemed to be incorporated by reference into any

filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference and shall not be deemed to be soliciting material or to be filed with the SEC or subject to Regulation

14A or 14C under, or to the liabilities of Section 18 of, the Exchange Act.

The following graph shows the total stockholder return on an investment of $100 in cash on March 31, 2016 for (i) our common stock, (ii) the

Nasdaqs 100 Total Return index (Nasdaq 100 TR), (iii) the Russell 1000 Total Return index (Russell 1000 TR) and (iv) the Wells Fargo BDC Total Return index (WF BDC TR).

The graph and other information

furnished under the heading Stock Performance Graph shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference

and shall not be deemed to be soliciting material or to be filed with the SEC or subject to Regulation 14A or 14C under, or to the liabilities of Section 18 of, the Exchange Act.

The returns on each investment assume reinvestment of dividends.

stock performance graph and the related textual information are not necessarily indicative of future performance.

Nasdaq 100 TR

Russell 1000 TR

This stock performance graph and the related textual information are not

necessarily indicative of future performance.

Fees and Expenses

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Dividend reinvestment plan expenses (per sales transaction fee) (2)

Up to $25 Transaction fee

25 Transaction

Total stockholder transaction expenses (as a percentage of offering price) (1)

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The base management fee is payable quarterly to the Adviser pursuant to our Advisory Agreement and is assessed

at an annual rate of 2.0% computed on the basis of the value of our average gross assets at the end of the two most recently completed quarters (inclusive of the current quarter), which are total assets, including investments made with proceeds of

borrowings, less any uninvested cash or cash equivalents resulting from borrowings, valued at the end of the applicable quarters within the respective period and adjusted appropriately for any share issuances or repurchases during the period.

accordance with the requirements of the SEC, the table above shows our base management fee as a percentage of average net assets attributable to common stockholders.

For purposes of the table, the annualized base management fee has been converted to

2.91% of the average net assets for the quarter ended March 31, 2020 by dividing the total annualized amount of the base management fee by our average net assets for the quarter ended March 31, 2020.

The base management fee for the quarter

ended March 31, 2020 before application of any credits was $2.9 million.

Pursuant to the requirements of the

1940 Act, the Adviser makes available significant managerial assistance to our portfolio companies.

The Adviser may also provide other services to our portfolio companies under certain agreements and may receive fees for services other than

managerial assistance.

at an annual rate of 2.0% computed on the basis of the value of our average gross assets at the end

of the two most recently completed quarters (inclusive of the current quarter), which are total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash

equivalents resulting from borrowings, valued at the end of the applicable quarters within the respective period and adjusted appropriately for any share issuances or repurchases during the period.

In accordance with the requirements of the SEC, the

table above shows our base management fee as a percentage of average net assets attributable to common stockholders.

For purposes of the table, the annualized base management fee has been converted to 3.38% of the average net assets for the quarter

ended March 31, 2021 by dividing the total annualized amount of the base management fee by our average net assets for the quarter ended March 31, 2021.

The base management fee for the quarter ended March 31, 2021 before application of

any credits was $3.2 million.

Pursuant to the requirements of the 1940 Act, the Adviser makes available significant

managerial assistance to our portfolio companies.

The Adviser may also provide other services to our portfolio companies under certain agreements and may receive fees for services other than managerial assistance.

Such services may include:

(i) assistance obtaining, sourcing or structuring credit facilities, long term loans or additional

equity from unaffiliated third parties;

(i) assistance obtaining, sourcing or structuring credit facilities, long term loans or additional equity from unaffiliated third parties;

(ii) negotiating important contractual financial relationships;

(iii) consulting services regarding restructuring of the portfolio company and

financial modeling as it relates to raising additional debt and equity capital from unaffiliated third parties;

and (iv) primary role in interviewing, vetting, and negotiating employment contracts with candidates in connection with adding and

retaining key portfolio company management team members.

The Adviser non-contractually, unconditionally, and irrevocably credits 100% of any fees received for such services against the base management fee that

we would otherwise be required to pay to the Adviser;

however, pursuant to the terms of the Advisory Agreement, a small percentage of certain of such fees is retained by the Adviser in the form of reimbursement, at cost, for tasks completed by

personnel of the Adviser and primarily related to the valuation of portfolio companies.

For the quarter ended March 31, 2020, $1.8 million of these fees were non-contractually, unconditionally and

irrevocably credited against the base management fee.

See Item 1.

(iii) consulting services

regarding restructuring of the portfolio company and financial modeling as it relates to raising additional debt and equity capital from unaffiliated third parties;

and (iv) primary role in interviewing, vetting, and negotiating employment

contracts with candidates in connection with adding and retaining key portfolio company management team members.

The Adviser non-contractually, unconditionally, and irrevocably credits 100% of any fees

received for such services against the base management fee that we

would otherwise be required to pay to the Adviser;

however, pursuant to

the terms of the Advisory Agreement, a small percentage of certain of such fees is retained by the Adviser in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser and primarily related to the valuation of portfolio

For the quarter ended March 31, 2021, $0.4 million of these fees were non-contractually, unconditionally and irrevocably credited against the base management fee.

Business Transactions with Related Parties Investment Advisory and Management Agreement for additional information.

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any calendar quarter.

There was no income-based incentive fee for the three months ended March 31, 2020.

capital gains-based incentive fee equals 20% of our net realized capital gains in excess of unrealized depreciation since our inception, if any, computed as all realized capital gains net of all realized capital losses and unrealized depreciation

since our inception, less any prior payments, measured at the end of each calendar year and payable at the end of each fiscal year.

During the three months ended March 31, 2020, we recorded a reversal of capital gains-based incentive fees of

$8.4 million in accordance with GAAP, which were not contractually due or refundable under the terms of the Advisory Agreement.

Accordingly, the above table assumes no incentive fee reversal in determining total annual expenses as a percentage

of average net assets.

Including this reversal, our incentive fees as a percentage of average net assets would be (8.56)%.

were applied to incentive fees for the three months ended March 31, 2020;

however, the Adviser may credit such fees in the future.

For the three months ended March 31, 2021, the income-based incentive fee was $1.7 million.

The capital gains-based incentive fee equals 20% of our net realized capital gains in excess

of unrealized depreciation since our inception, if any, computed as all realized capital gains net of all realized capital losses and unrealized depreciation since our inception, less any prior payments, measured at the end of each calendar year and

payable at the end of each fiscal year.

During the three months ended March 31, 2021, we recorded capital gains-based incentive fees of $3.6 million in accordance with GAAP, which were not contractually due under the terms of the Advisory

No credits were applied to incentive fees for the three months ended March 31, 2021;

however, the Adviser may credit such

fees in the future.

Examples of how the incentive fee would be calculated are as follows:

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As of March 31, 2021, we had $22.4 million in

borrowings outstanding under our Credit Facility and $5.1 million of secured borrowings.

See Item 7.

Management s Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital

ResourcesRevolving Line of Credit for additional information regarding the Credit Facility.

Includes dividends paid on our Series D Term Preferred Stock and Series E Term Preferred Stock and amortization

of deferred financing costs.

borrowings outstanding under our Credit Facility, $127.9 million of 2026 Notes, at cost, and $5.1 million of secured borrowings.

See Item 7.

Management s Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesEquityTerm Preferred Stock for

additional information.

Management s Discussion and Analysis of Financial Condition and

Results of OperationsLiquidity and Capital ResourcesRevolving Line of Credit and Item 7.

Management s Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and

Capital ResourcesNotes Payable for additional information regarding the Credit Facility and the 2026 Notes.

Includes dividends paid on our Series E Term Preferred Stock and amortization of deferred financing costs.

Management s Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesEquityTerm Preferred Stock for additional information.

Includes our overhead expenses, including payments under the Administration Agreement based on our projected

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Total annualized gross expenses, based on actual amounts incurred for the three months ended March 31,

2020 (except as set forth in footnotes 6 and 9), would be $36.6 million.

After all non-contractual, unconditional, and irrevocable credits described in footnote 4, footnote 5, and footnote 6 above

are applied to the base management fee and the loan servicing fee, total annualized expenses after fee credits, based on actual amounts incurred for the three months ended March 31, 2020 (except as set forth in footnotes 6 and 9), would be

2021 (except as set forth in footnote 9), would be $63.0 million.

After all non-contractual, unconditional, and irrevocable credits described in footnote 4, footnote 5, and footnote 6 above are

applied to the base management fee and the loan servicing fee, total annualized expenses after fee credits, based on actual amounts incurred for the three months ended March 31, 2021 (except as set forth in footnote 9), would be

$54.3 million or 14.52% as a percentage of average net assets.

The amounts reflected in this example are based on actual amounts for the three months ended March 31, 2020, excluding a reversal of capital gains-based incentive fees of

$8.4 million recorded in accordance with GAAP.

In accordance with GAAP and including the reversal of capital gains-based incentive fees of $8.4 million, total annualized gross expenses would be $2.9 million, or 0.74%, as a percentage

of average net assets, and total annualized expenses after fee credits would be $(11.1) million, or (2.83)%, as a percentage of average net assets.

The following example demonstrates the projected

dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock.

In calculating the following expense amounts, we have assumed that our annual operating expenses

would remain at the levels set forth in the table above.

The example below and the expenses in the table above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown.

the example assumes, as required by the SEC, a 5.0% annual return, our performance will vary and may result in a return greater or less than 5.0%.

The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a

hypothetical investment in our common stock.

In calculating the following expense amounts, we have assumed that our annual operating expenses would remain at the levels set forth in the table above.

The example below and the expenses in the table

above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown.

While the example assumes, as required by the SEC, a 5.0% annual return, our performance will vary and may result in

a return greater or less than 5.0%.

Dollar amounts in the table below are not in thousands.

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constitute capital gains and that no accumulated capital losses or unrealized depreciation would have to be overcome first before a capital gains-based incentive fee is payable.

Senior Securities

Information about our senior

securities is shown in the following table as of the end of each of our last ten fiscal years.

The annual information has been derived from our audited financial statements for each respective period, which have been audited by

PricewaterhouseCoopers LLP, our independent registered public accounting firm.

PricewaterhouseCoopers LLPs report on the senior securities table as of March 31, 2020 is attached as Exhibit 99.1 to this Annual Report.

Information about our senior securities is shown in the following table as of the end of each of our last ten fiscal years.

The annual information has been

derived from our audited financial statements for each respective period, which have been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm.

The report of our independent registered public accounting firm,

PricewaterhouseCoopers LLP, on the senior securities table as of March 31, 2021, is included elsewhere in this Annual Report.

Class and Year

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March 31, 2013

March 31, 2012

6.75% Series B Cumulative Term Preferred

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March 31, 2016

March 31, 2015

6.50% Series C Cumulative Term Preferred Stock due

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March 31, 2017

March 31, 2016

6.25% Series D Cumulative Term Preferred Stock due 2023 (8)

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March 31, 2018

March 31, 2017

6.375% Series E Cumulative Term Preferred Stock due 2025 (9)

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March 31, 2020

March 31, 2019

Revolving credit facilities

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March 31, 2015

Class and Year

Outstanding Exclusive of

Treasury Securities (1)

Preference Per

March 31, 2014

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March 31, 2012

2026 Notes (10)

March 31, 2021

Secured borrowings (11)

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March 31, 2014

March 31, 2013

Total amount of each class of senior securities outstanding as of the dates presented.

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issuer in preference to any security junior to it.

Only applicable to our Term Preferred Stock because the other senior securities are not registered for public

Only applicable to our Term Preferred Stock and our 2026 Notes because the other senior securities are not

registered for public trading.

Average market value per unit is the average of the closing price of the shares on Nasdaq during the last 10 trading days of the period.

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Our Series C Term Preferred Stock was issued in May 2015 and redeemed in August 2018.

Our Series D Term Preferred Stock was issued in September 2016.

Our Series D Term Preferred Stock was issued in September 2016 and redeemed in March 2021.

Our Series E Term Preferred Stock was issued in August 2018.

Our 2026 Notes were issued in March 2021.

In August 2012, we entered into a participation agreement with a third-party related to $5.0 million of

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Specifically, the third-party has a senior claim to our remaining investment in the event of default by Ginsey which, in part,

resulted in the loan participation bearing a rate of interest lower than the contractual rate established at origination.

Therefore, our Consolidated Statements of Assets and Liabilities reflect the entire secured second lien term debt

investment in Ginsey and a corresponding $5.1 million secured borrowing liability.

resulted in the loan participation bearing a rate of interest lower than the

contractual rate established at origination.

Therefore, our accompanying Consolidated Statements of Assets and Liabilities reflect the entire secured second lien term debt investment

in Ginsey and a corresponding $5.1 million secured borrowing liability.

The secured borrowing has a stated fixed interest rate of 7.0% and a maturity date of January 3, 2025.

SELECTED FINANCIAL DATA

The following consolidated selected financial data as of and for the fiscal years ended March 31, 2020, 2019, 2018, 2017, and 2016, are derived from our

accompanying audited Consolidated Financial Statements .

The other data included in the second table below is unaudited.

The data should be read in conjunction with our accompanying audited Consolidated Financial Statements and notes

thereto and Managements Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Annual Report.

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SELECTED FINANCIAL AND OTHER DATA

Year Ended March 31,

Statement of Operations Data:

Total investment income

Total expenses, net of credits from Adviser

Net investment income

Net realized and unrealized (loss) gain, net of taxes on deemed distribution of long-term capital

Net (decrease) increase in net assets resulting from operations

Per Common Share Data:

Net (decrease) increase in net assets resulting from operations per common sharebasic and

Net investment income per common sharebasic and diluted (A)

Cash distributions declared per common

Statement of Assets and Liabilities Data:

Net asset value per common share

Common shares outstanding

Weighted common shares outstandingbasic and diluted

Senior Securities Data:

Total borrowings, at cost (C)

Mandatorily redeemable preferred

Per share data is based on the weighted-average common stock outstanding for both basic and diluted.

The tax character of distributions is determined on an annual basis.

For further information on the estimated

character of our distributions to common stockholders, refer to Note 9 Distributions to Common Stockholders in the accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

Includes borrowings under the Credit Facility and other secured borrowings, as applicable.

Represents the total liquidation preference of our mandatorily redeemable preferred stock.

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SELECTED FINANCIAL AND OTHER DATA (Continued)

Year Ended March 31,

Other Unaudited Data:

Number of portfolio companies

Average size of portfolio company investment, at cost

Principal amount of new investments

Proceeds from loan repayments and investments sold

Weighted-average yield on investments, excluding loans on

non-accrual status (A)

Weighted-average yield on investments, including loans on

Total return (C)

Weighted-average yield on investments, excluding loans on non-accrual

status, equals interest income earned on investments divided by the weighted-average interest-bearing principal balance throughout the fiscal year.

Weighted-average yield on investments, including loans on non-accrual

status, equals interest income earned on investments divided by the weighted-average total principal balance throughout the fiscal year.

Total return equals the change in the ending market value of our common stock from the beginning of the fiscal

year, assuming reinvestment of dividends on our common stock in accordance with the terms of the dividend reinvestment plan.

Total return does not take into account common distributions that may be characterized as a return of capital.

information on the estimated character of our distributions to common stockholders, refer to Note 9 Distributions to Common Stockholders in the accompanying Notes to Consolidated Financial Statements included elsewhere in this

Annual Report.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

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federal income tax purposes, we have elected to be treated as a RIC under Subchapter M of the Code.

In order to continue to qualify as a RIC for U.S.

federal income tax purposes and obtain favorable RIC tax

treatment, we must meet certain requirements, including certain minimum distribution requirements.

We were established for the purpose of investing in

debt and equity securities of established private businesses operating in the U.S.

To continue to qualify as a RIC for U.S.

federal income tax purposes and obtain favorable RIC tax treatment, we

must meet certain requirements, including certain minimum distribution requirements.

We were established for the purpose of investing in debt and equity

securities of established private businesses operating in the U.S.

Our investment objectives are to:

(i) achieve and grow current income by investing in debt securities of established businesses that we believe will provide

stable earnings and cash flow to pay expenses, make principal and interest payments on our outstanding indebtedness and make distributions to stockholders that grow over time;

and (ii) provide our stockholders with long-term capital

appreciation in the value of our assets by investing in equity securities of established businesses, generally, in combination with the aforementioned debt securities, that we believe can grow over time to permit us to sell our equity investments

for capital gains.

To achieve our objectives, our investment strategy is to invest in several categories of debt and equity securities, with individual investments generally totaling up to $30 million, although investment size may vary,

depending upon our total assets or available capital at the time of investment.

(i) achieve and grow current income by investing in debt securities of established businesses that we believe will provide stable earnings and

cash flow to pay expenses, make principal and interest payments on our outstanding indebtedness, and make distributions to stockholders that grow over time;

and (ii) provide our stockholders with long-term capital appreciation in the value of

our assets by investing in equity securities of established businesses, generally, in combination with the aforementioned debt securities, that we believe can grow over time to permit us to sell our equity investments for capital gains.

our objectives, our investment strategy is to invest in several categories of debt and equity securities, with individual investments generally totaling up to $40 million, although investment size may vary, depending upon our total assets or

available capital at the time of investment.

We expect that our investment portfolio over time will consist of approximately 75% in debt securities and 25% in equity securities, at cost.

As of March 31, 2020,

our investment portfolio was made up of 74.4% in debt securities and 25.6% in equity securities, at cost.

We focus on investing in Lower Middle Market

businesses in the U.S.

that meet certain criteria, including:

the sustainability of the business free cash flow and its ability to grow it over time, adequate assets for loan collateral, experienced management teams with a significant

ownership interest in the portfolio company, reasonable capitalization of the portfolio company, including an ample equity contribution or cushion based on prevailing enterprise valuation multiples, and the potential to realize appreciation and gain

liquidity in our equity position, if any.

We anticipate that liquidity in our equity position will be achieved through a merger or acquisition of the portfolio company, a public offering of the portfolio companys stock or, to a lesser extent,

by exercising our right to require the portfolio company to repurchase our warrants, though there can be no assurance that we will always have these rights.

We invest in portfolio companies that need funds for growth capital, to finance

acquisitions, including management buyouts, recapitalize or, to a lesser extent, refinance their existing debt facilities.

As of March 31, 2021, our investment portfolio was

comprised of 74.4% in debt securities and 25.6% in equity securities, at cost.

We focus on investing in Lower Middle Market businesses in the U.S.

meet certain criteria, including:

the sustainability of the business free cash flow and its ability to grow it over time, adequate assets for loan collateral, experienced management teams with a significant ownership interest in the portfolio

company, reasonable capitalization of the portfolio company, including an ample equity contribution or cushion based on prevailing enterprise valuation multiples, and the potential to realize appreciation and gain liquidity in our equity position,

the portfolio company to repurchase our warrants, though there can be no assurance that we will always have these rights.

We invest in portfolio companies that need funds for growth capital, to finance acquisitions, including management buyouts,

recapitalize or, to a lesser extent, refinance their existing debt facilities.

We seek to avoid investing in high-risk, early-stage enterprises.

We invest by ourselves or jointly with other funds and/or management of the portfolio company, depending on the opportunity, and have opportunistically made

several co-investments with Gladstone Capital pursuant to the Co-Investment Order.

We believe the Co-Investment Order has

enhanced and will continue to enhance our ability to further our investment objectives and strategies.

If we are participating in an investment with one or more co-investors, whether or not an affiliate of

ours, our investment is likely to be smaller than if we were investing alone.

invest by ourselves or jointly with other funds and/or management of the portfolio company, depending on the opportunity, and have opportunistically made several co-investments with Gladstone Capital pursuant

to the Co-Investment Order.

We believe the Co-Investment Order has enhanced and will continue to enhance our ability to further our investment objectives and strategies.

If we are participating in an investment with one or more co-investors, whether or not an affiliate of ours, our investment is likely to be smaller than if we were investing alone.

Portfolio Activity

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buyouts of Lower Middle Market companies in the U.S.

During the year ended March 31, 2020, we exited six portfolio companies with a combined fair value prior to their exits of $125.7 million, and invested $79.1 million in three new

portfolio companies and retained a common stock ownership in one of the exited portfolio companies, resulting in a net reduction of two companies in our portfolio, which was comprised of 28 companies as of March 31, 2020.

From our initial

public offering in June 2005 through March 31, 2020, we made investments in 52 companies, excluding investments in syndicated loans, for a total of approximately $1.3 billion, before giving effect to principal repayments and divestitures.

The majority of the debt securities in our portfolio have a success fee component, which enhances the yield

on our debt investments.

Unlike PIK income, we generally do not recognize success fees as income until payment has been received.

Due to the contingent nature of success fees, there are no guarantees that we will be able to collect any or all of

these success fees or know the timing of any such collections.

During the year ended March 31, 2021, we invested in one new portfolio company and exited one portfolio company.

From our initial public offering in June 2005 through March 31, 2021, we

invested in 53 companies, excluding investments in syndicated loans, for a total of approximately $1.4 billion, before giving effect to principal repayments and divestitures.

The majority of the debt securities in our portfolio have a success fee component, which enhances the yield on our debt investments.

Unlike PIK income, we

generally do not recognize success fees as income until payment has been received.

Due to the contingent nature of success fees, there are no guarantees that we will be able to collect any or all of these success fees or know the timing of any such

As a result, as of March 31, 2021, we had unrecognized, contractual success fees of $46.2 million, or $1.39 per common share.

Consistent with GAAP, we generally have not

recognized success fee receivables and related income in our accompanying Consolidated Financial Statements until earned.

From inception through

March 31, 2020, we completed sales of 22 portfolio companies that we acquired under our buyout strategy (which excludes investments in syndicated loans).

In the aggregate, these sales have generated $222.1 million in net realized gains and

$30.3 million in other income upon exit, for a total increase to our net assets of $252.4 million.

We believe, in aggregate, these transactions were equity-oriented investment successes and exemplify our investment strategy of striving to

achieve returns through current income on the debt portion of our investments and capital gains from the equity portion.

The 22 liquidity events have offset any realized losses since inception, which were primarily incurred during the recession in

connection with the sale of performing syndicated loans at a realized loss to pay off a former lender.

The successful exits, in part, enabled us to increase the monthly distribution by 75.0% from March 2011 through March 31, 2020 and allowed us

to declare and pay ten supplemental distributions to common stockholders through March 31, 2020.

Consistent with GAAP, we generally have not recognized success fee receivables and related income in

our accompanying Consolidated Financial Statements until earned.

From inception through March 31, 2021, we completed sales of 23 portfolio

companies that we acquired under our buyout strategy (which excludes investments in syndicated loans).

In the aggregate, these sales have generated $238.4 million in net realized gains and $31.4 million in other income upon exit, for a

total increase to our net assets of $269.8 million.

We believe, in aggregate, these transactions were equity-oriented investment successes and exemplify our investment strategy of striving to achieve returns through current income on the debt

portion of our investments and capital gains from the equity portion.

The 23 liquidity events have offset any realized losses since inception, which were primarily incurred during the 2008-2009 recession in connection with the sale of performing

syndicated loans at a realized loss to pay off a former lender.

The successful exits, in part, enabled us to increase the monthly distribution by 75.0% from March 2011 through March 31, 2021 and allowed us to declare and pay 11 supplemental

distributions to common stockholders through March 31, 2021.

Capital Raising Efforts

We have been able to meet our capital needs through extensions of and increases to the Credit Facility and by accessing the capital markets in the form of

public offerings of common and preferred stock.

We have successfully extended the Credit Facilitys revolving period multiple times, most recently to August 2021, and currently have a total commitment amount of $200.0 million (with a

potential total commitment of $300.0 million through additional commitments from new or existing lenders).

During the year ended March 31, 2020, we sold 227,004 shares of our common stock under our at-the-market program (ATM Program) for gross proceeds of approximately $3.1 million.

During the year ended March 31, 2019, we sold 168,824 shares of our common stock under our ATM

public offerings of registered notes, as well as common and preferred stock.

We have successfully extended the Credit Facilitys revolving period multiple times, most recently to February 2024, and currently have a total commitment amount of

$180.0 million (with a potential total commitment of $300.0 million through additional commitments from new or existing lenders).

During the year ended March 31, 2021, we issued our 2026 Notes for gross proceeds of

$127.9 million, and sold 155,560 shares of our common stock under our at-the-market program (the Common Stock ATM Program) for gross proceeds of

approximately $1.8 million, and 784,853 shares of our Series E Term Preferred Stock under our preferred stock at-the-market program (the Series E ATM

Program) for gross proceeds of approximately $19.3 million.

Additionally, we issued approximately 2.3 million shares of common stock for gross proceeds of $21.2 million in May 2017, inclusive of the June 2017 over-allotment, and

approximately 3.0 million shares of our Series E Term Preferred Stock for gross proceeds of $74.8 million in August 2018.

Refer to Liquidity and Capital Resources Revolving Line of Credit for further discussion of

the Credit Facility and to Liquidity and Capital Resources Equity Common Stock and Liquidity and Capital Resources Equity Term Preferred Stock for further discussion of our common

stock, including our ATM Program, and mandatorily redeemable preferred stock.

Although we have been able to access the capital markets historically,

market conditions, including the impact of COVID-19, may continue to affect the trading price of our common stock and thus our ability to finance new investments through the issuance of common equity.

March 31, 2020, the closing market price of our common stock was $7.85 per share, representing a 29.7% discount to our NAV of $11.17 per share as of March 31, 2020.

When our common stock trades below NAV, our ability to issue additional

equity is constrained by provisions of the 1940 Act, which generally prohibits the issuance and sale of our common stock at an issuance price below the then current NAV per share without stockholder approval, other than through sales to our then

existing stockholders pursuant to a rights offering.

During the year ended March 31, 2020, we sold 227,004 shares of our common stock under our Common Stock ATM Program for gross proceeds of approximately $3.1 million.

Additionally, we issued approximately 3.0 million shares of our Series E Term Preferred Stock for gross proceeds of $74.8 million in August 2018.

Refer to Liquidity and Capital Resources.

Although we have been able to access the capital markets historically, market conditions, including the impact of

COVID-19, may continue to affect the trading price of our common stock and thus our ability to finance new investments through the issuance of common equity.

On March 31, 2021, the closing market price of

our common stock was $12.23 per share, representing a 6.2% premium to our NAV of $11.52 per share as of March 31, 2021.

When our common stock trades below NAV, our ability to issue additional equity is constrained by provisions of the 1940 Act,

which generally prohibits the issuance and sale of our common stock at an issuance price below the then current NAV per share without stockholder approval, other than through sales to our then existing stockholders pursuant to a rights offering.

At our 2020 Annual Meeting of Stockholders held on August 20, 2020, our stockholders approved a

proposal authorizing us to issue and sell shares of our common stock at a price below our then current NAV per share, subject to certain limitations, including that the number of common shares issued and sold pursuant to such authority does not

exceed 25.0% of our then outstanding common stock immediately prior to each such sale, provided that our Board of Directors makes certain determinations prior to any such sale.

This August 2019 stockholder authorization is in effect for one year

from the date of stockholder approval.

We sought and obtained stockholder approval concerning similar proposals at each Annual Meeting of Stockholders since 2008, and with our Board of Directors subsequent approval, we issued shares of our

common stock in three offerings at a price below the then current NAV per share, once in May 2017, once in March 2015, and once in October 2012.

Certain sales under the ATM Program in March and April of 2018 were also below the then current

estimated NAV per share.

The resulting proceeds, in part, have allowed us to (i) grow our portfolio by making new investments, (ii) generate additional income through these new investments, (iii) ensure continued compliance with

regulatory tests and (iv) increase our debt capital while still complying with our applicable debt-to-equity ratios.

Refer to Liquidity and Capital

Resources Equity Common Stock for further discussion of our common stock.

proposal authorizing us, with the subsequent approval of our Board of Directors, to issue and sell shares of our common stock at a price below our then current NAV per share, provided that the number of common shares issued and sold pursuant to such

authority does not exceed 25.0% of our then outstanding common stock immediately prior to each such sale.

This August 2020 stockholder authorization is in effect for one year from the date of stockholder approval.

We sought and obtained stockholder

approval concerning similar proposals at each Annual Meeting of Stockholders since 2008, and with our Board of Directors subsequent approval, we issued shares of our common stock in three offerings at a price below the then current NAV per

share, once in May 2017, once in March 2015, and once in October 2012.

Certain sales under the previous Common Stock ATM Program in March and April of 2018 were also below the then current estimated NAV per share.

The resulting proceeds, in part,

have allowed us to (i) grow our portfolio by making new investments, (ii) generate additional income through these new investments, (iii) ensure continued compliance with regulatory tests and (iv) increase our debt capital while

still complying with our applicable debt-to-equity ratios.

Refer to Liquidity and Capital Resources Equity Common Stock for further

discussion of our common stock.

Regulatory Compliance

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two series of term preferred stock currently outstanding).

Notwithstanding the modified asset coverage requirement under the 1940 Act described above, we are separately subject to a minimum asset coverage requirement of 200% with respect to our

Series D Term Preferred Stock.

On April 10, 2018, our Board of Directors, including a required majority (as such term is defined in

Section 57(o) of the 1940 Act) thereof, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act.

As a result, our asset coverage requirements for senior securities changed from 200% to 150%,

effective as of April 10, 2019, one year after the date of the Board of Directors approval.

As of March 31, 2020, our asset coverage ratio on our senior securities representing indebtedness was 993.5% and our asset coverage on our

senior securities that are stock was 293.8%.

On April 10, 2018, our Board of Directors, including a required majority (as

such term is defined in Section 57(o) of the 1940 Act) thereof, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act.

As a result, our asset coverage requirements for senior securities changed

from 200% to 150%, effective as of April 10, 2019, one year after the date of the Board of Directors approval.

As of March 31, 2021, our

asset coverage ratio on our senior securities representing indebtedness was 398.0% and our asset coverage on our senior securities that are stock was 248.6%.

Investment Highlights

For the fiscal year ended March 31, 2020, and inclusive of non-cash transactions, we invested $79.1 million

in three new portfolio companies, received $170.4 million in proceeds from repayments and sales, and extended $66.4 million of follow-on investments to existing portfolio companies through revolver

draws, term loans, and equity.

Investment Activity

During the fiscal year ended March 31, 2021, the following significant transactions occurred:

In April 2019, we sold our investment in Tread Corporation (Tread), which resulted in a realized loss

of $2.7 million.

In connection with the sale, we received net cash proceeds of $4.9 million, including the repayment of our debt investment of $3.2 million at par.

In April 2019, we sold our investment in Jackrabbit Inc.

(Jackrabbit), which resulted in dividend

income of $2.1 million and a realized gain of $3.2 million.

In connection with the sale, we received net cash proceeds of $19.8 million, including the repayment of our debt investment of $11.0 million at par.

In April and May 2019, we extended a line of credit to J.R.

Hobbs with a total commitment amount of

$10.0 million, which matures in October 2024.

In May 2019, our $15.8 million debt investment in Old World Christmas, Inc.

was repaid at par.

In connection

with the repayment, we received success fee income of $0.2 million.

In June 2019, we invested $38.8 million in Horizon Facilities Services, Inc.

(Horizon) through a

combination of secured first lien debt and preferred equity.

Horizon, headquartered in Allentown, Pennsylvania, is a leading provider of outsourced services to the rental car industry.

In August 2019, we sold our investment in Alloy Die Casting Co.

(ADC), which resulted in success fee

income of $1.9 million and a realized gain of $20.4 million.

In connection with the sale, we received net cash proceeds of $38.8 million, including the repayment of our debt investment of $13.3 million at par.

In September 2019, we invested $4.4 million in Phoenix Door Systems, Inc.

(Phoenix) through a

combination of secured first lien debt and common equity.

Phoenix, headquartered in Mason, Ohio, manufactures high impact traffic doors for the commercial and industrial market and architectural doors for the municipal market.

In September 2019, we invested an additional $8.5 million in Bassett Creek in the form of first lien debt.

In October 2019, we exited our investment in B-Dry, LLC (B-Dry) and recorded a realized loss of $14.5 million.

In November 2019, we invested an additional $16.9 million in Brunswick in the form of second lien debt, of

which $10.0 million was repaid in December 2019.

In December 2019, we exited our investment in Nth Degree, Inc.

(Nth Degree), which resulted in

In July 2020, we invested $46.9 million in Mason West, LLC (Mason West) through a combination of

secured first lien debt and preferred equity.

Mason West, headquartered in Placentia, California, is a provider of engineered seismic restraint and vibration isolation solutions.

In September 2020, Mason West repaid $7.0 million of secured

first lien debt and redeemed $3.1 million of preferred equity.

In September 2020, we invested an additional $8.0 million in PSI Molded Plastics, Inc.

Molded) in the form of preferred equity and also amended certain terms of our existing debt.

In December 2020, we recapitalized our investment in Old World Christmas, Inc.

(Old World) and

invested an additional $27.0 million in the form of secured first lien debt.

In connection with this investment, Old World paid dividend income of $3.2 million and additional equity proceeds of $10.8 million, resulting in a

$7.5 million return of preferred equity cost basis and a realized gain of $3.3 million.

In December 2020, we invested an additional $3.0 million in Galaxy Technologies, Inc.

in the form of secured second lien debt.

In connection with this investment, Galaxy purchased SBS Industries, LLC (a subsidiary of SBS Industries Holdings, Inc.

(SBS Industries), one of our other portfolio companies).

SBS Industries used

proceeds from the sale to partially repay our $11.4 million first lien debt, resulting in a realized loss of $8.5 million.

In December 2020, we sold our investment in Frontier Packaging, Inc.

(Frontier), which resulted in

dividend income of $0.9 million, success fee income of $0.2 million, and a realized gain of $14.0 million.

In connection with the sale, we received net cash proceeds of $26.0 million, including the repayment of our debt

investment of $13.3 million at par, and retained an equity investment in common stock in Nth Degree Investment Group, LLC.

In January 2020, we exited our investment in Meridian Rack & Pinion, Inc.

(Meridian) and

recorded a realized loss of $13.0 million.

In January 2020, we invested an additional $4.4 million into Edge Adhesives Holdings, Inc.

in the form of

preferred equity.

In February 2020, we invested an additional $5.0 million into J.R.

Hobbs in the form of preferred equity.

In March 2020, we invested $35.9 million in The Maids through a combination of secured first lien debt and

preferred equity.

The Maids, headquartered in Omaha, Nebraska, is a franchisor of residential cleaning services.

investment of $9.5 million at par.

Recent Developments

Distributions and Dividends

In April 2020, our Board of Directors declared the following monthly and supplemental cash distributions to common stockholders and monthly dividends to

holders of our Series D Term Preferred Stock and Series E Term Preferred Stock:

In April 2021, our

Board of Directors declared the following monthly and supplemental cash distributions to common stockholders and monthly dividends to holders of our Series E Term Preferred Stock:

Distribution per

Preferred Stock

Series E Term

Preferred Stock

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debt securities have a term of five years, accrue interest at variable rates (based on the one-month LIBOR) and, to a lesser extent, at fixed rates.

LIBOR is currently anticipated to be phased out during late

LIBOR is currently expected to transition to a new standard rate, the SOFR, which will incorporate certain overnight repo market data collected from multiple data sets.

To attain an equivalent one-month

rate, we currently intend to adjust the SOFR to minimize the difference between the interest that a borrower would be paying using LIBOR versus what it will be paying using SOFR.

dollar LIBOR are currently anticipated to be

phased out in June 2023.

LIBOR may transition to a new standard rate, SOFR, which will incorporate certain overnight repo market data collected from multiple data sets.

To attain an equivalent one-month rate,

we currently intend to adjust the SOFR to minimize the difference between the interest that a borrower would be paying using LIBOR versus what it will be paying using SOFR.

We are currently monitoring the transition and cannot assure you

whether SOFR will become a standard rate for variable rate debt.

However, we expect we will need to renegotiate certain loan documents with our portfolio companies that utilize LIBOR as a factor in determining the interest rate to replace LIBOR

with the new standard that is established and may also need to renegotiate certain provisions of the Credit Facility.

Assuming that SOFR replaces LIBOR and is appropriately adjusted to equate to one-month

LIBOR, we expect that there should be minimal impact on our operations.

We expect we will need to continue to renegotiate a limited number of loan agreements with our portfolio companies to include fallback language providing a mechanism for the

parties to negotiate a new reference interest rate in the event that LIBOR ceases to exists.

Assuming that SOFR replaces LIBOR and is appropriately adjusted to equate to one-month LIBOR, we expect that there

should be minimal impact on our operations.

COVID-19 Impact

We continue to closely monitor and work with our portfolio companies to navigate the significant challenges created by the

COVID-19 pandemic and are focused on ensuring the safety of the Advisers and Administrators personnel and of the employees of our portfolio companies, while also managing our ongoing business

continuing COVID-19 pandemic, and remain focused on ensuring the safety of the Advisers and Administrators personnel and of the employees of our portfolio companies, while also managing

our ongoing business activities.

While we are closely monitoring all of our portfolio companies, our portfolio continues to be diverse from a geographic and industry perspective.

Through proactive measures and continued diligence, the management teams of our portfolio

companies continue to demonstrate their ability to respond effectively and efficiently to the challenges posed by COVID-19 and related orders imposed by state and local governments.

We believe we have

sufficient levels of liquidity to support our existing portfolio companies, as necessary, and selectively deploy capital in new investment opportunities.

Through proactive measures and continued diligence, the management

teams of our portfolio companies continue to demonstrate their ability to respond effectively and efficiently to the challenges posed by COVID-19 and related orders imposed by state and local

governments, including paused or reversed reopening orders.

We believe we have sufficient levels of liquidity to support our existing portfolio companies, as necessary, and selectively deploy capital in new investment opportunities.

RESULTS OF OPERATIONS

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Net realized loss on other

Net unrealized (depreciation) appreciation of investments

Net unrealized depreciation of other

Net realized and unrealized (loss) gain, net of taxes on deemed distribution of long-term capital

NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

Net unrealized appreciation (depreciation) of investments

Net realized and unrealized gain (loss), net of taxes on deemed distribution of long-term capital

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

BASIC AND DILUTED PER COMMON SHARE:

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Investment Income

Total investment income increased by

3.8% for the year ended March 31, 2020 as compared to the prior year.

This increase was primarily due to an increase in dividend and success fee income.

Interest income from our investments in debt securities decreased 0.2% for the year ended March 31, 2020, as compared to the prior year.

Generally, the

level of interest income from investments is directly related to the principal balance of our interest-bearing investment portfolio outstanding during the period multiplied by the weighted-average yield.

The weighted-average principal balance of our

interest-bearing investment portfolio during the year ended March 31, 2020 was $374.3 million, compared to $380.2 million during the prior year.

This decrease was primarily due to the pay-off,

restructuring, or write-off of $134.9 million of debt investments and $73.2 million of loans placed on non-accrual status after March 31, 2018, partially

offset by the origination of $105.5 million of new debt investments and $80.6 million of follow-on debt investments to existing portfolio companies, and their respective impact on the

weighted-average principal balance when considering the timing of new investments, pay-offs, restructures, write-offs, and accrual status changes, as applicable.

The weighted-average yield on our

interest-bearing investments, excluding cash and cash equivalents and receipts recorded as other income, was 13.2% and 13.0% for the year ended March 31, 2020 and 2019, respectively.

The weighted-average yield may vary from period to period,

based on the current stated interest rate on interest-bearing investments.

As of March 31, 2020, certain of our loans to B+T Group Acquisition, Inc.

Mountain Corporation (The Mountain), PSI Molded Plastics, Inc.

(PSI Molded), and SOG Specialty Knives & Tools, LLC (SOG) were on non-accrual status, with an

aggregate debt cost basis of $63.5 million.

At March 31, 2019, certain of our loans to B-Dry, Meridian, The Mountain, PSI Molded, and SOG were on non-accrual

status, with an aggregate debt cost basis of $68.3 million.

Dividend and success fee income for the year ended March 31, 2020 increased 23.3%

from the prior year.

Total investment income decreased by 8.6% for the year ended March 31, 2021 as compared to the prior year.

This decrease was primarily due to a decrease

in dividend and success fee income, as well as a decrease in interest income.

Interest income from our investments in debt securities decreased 4.8% for

the year ended March 31, 2021, as compared to the prior year.

During the year ended March 31, 2020, we received $2.1 million of past due interest upon the exit of our investment in Alloy Die Casting Co.

the level of interest income from investments is directly related to the principal balance of our interest-bearing investment portfolio outstanding during the period, multiplied by the weighted-average yield.

The weighted-average principal balance

of our interest-bearing investment portfolio during the year ended March 31, 2021 was $398.1 million, compared to $374.3 million during the prior year.

This increase was primarily due to the origination of $93.8 million of new

debt investments, $86.3 million of follow-on debt investments to existing portfolio companies, and $35.0 million of loans placed back on accrual status, partially offset by the pay-off, restructuring, or write-off of $109.2 million of debt investments and $47.9 million of loans placed on non-accrual

status after March 31, 2019, and their respective impact on the weighted-average principal balance when considering the timing of new investments, pay-offs, restructurings, write-offs, and accrual status

changes, as applicable.

The weighted-average yield on our interest-bearing investments, excluding cash and cash equivalents and receipts recorded as other income, was 11.9% and 13.2% for the year ended March 31, 2021 and 2020, respectively.

weighted-average yield may vary from period to period, based on the current stated interest rate on interest-bearing investments.

As of March 31,

2021, our loans to B+T Group Acquisition, Inc.

(B+T), Horizon Facilities Services, Inc.

(Horizon) and The Mountain Corporation (The Mountain) were on non-accrual status,

with an aggregate debt cost basis of $61.1 million.

As of March 31, 2020, certain of our loans B+T, The Mountain, PSI Molded, and SOG Specialty Knives & Tools, LLC (SOG) were on

non-accrual status, with an aggregate debt cost basis of $63.5 million.

Dividend and success fee income for

the year ended March 31, 2021 decreased 23.5% from the prior year.

During the year ended March 31, 2021, dividend and success fee income consisted of $7.1 million of dividend income and $2.4 million of success fee income.

During the year ended March 31, 2019, dividend and

success fee income consisted of $3.9 million of dividend income and $6.1 million of success fee income.

As of March 31, 2020 and 2019, no

single investment represented greater than 10% of our total investment portfolio at fair value.

Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, decreased 51.0%

for the year ended March 31, 2020, as compared to the prior year, primarily due to a decrease in the capital gains-based incentive fee, interest and dividend expense, and the base management fee, partially offset by a decrease in credits to

fees from Adviser.

In accordance with GAAP, we recorded a reversal of the capital gains-based incentive fee of $6.7 million during the year ended

March 31, 2020, compared to a capital gains-based incentive fee of $17.8 million during the year ended March 31, 2019.

The capital gains-based incentive fee or its reversal was a result of the net impact of net realized gains (losses)

and net unrealized appreciation (depreciation) on investments during the respective periods.

The income-based incentive fee remained consistent during the year ended March 31, 2020, as compared to the prior year, as the increase in pre-incentive fee net investment income was offset by an increase in net assets, which drives the hurdle rate.

management fee decreased during the year ended March 31, 2020, as compared to the prior year, as average total assets decreased over the respective periods as a result of a decrease in average investments at fair value.

The base management fee, loan servicing fee, incentive fee, and their related non-contractual, unconditional, and

irrevocable credits are computed quarterly, as described under Transactions with the Adviser in Note 4 Related Party Transactions in the accompanying Notes to Consolidated Financial Statements and are

summarized in the following table:

the year ended March 31, 2020, dividend and success fee income consisted of $9.4 million of dividend income and $2.9 million of success fee income.

As of March 31, 2021 and 2020, no single investment represented greater than 10% of our total investment portfolio at fair value.

Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, increased 51.4% for the year ended March 31, 2021, as compared to the prior year, primarily due to an increase in the capital

gains-based incentive fee, interest and dividend expense, and a decrease in credits to fees from Adviser, partially offset by a decrease in the income-based incentive fee and in other expenses.

In accordance with GAAP, we recorded a capital gains-based incentive fee of $5.0 million during the year ended March 31, 2021, compared to a

reversal of the capital gains-based incentive fee of $6.7 million during the year ended March 31, 2020.

The capital gains-based incentive fee and any reversal is a result of the net impact of net realized gains (losses) and net unrealized

appreciation (depreciation) on investments during the respective periods.

The income-based incentive fee decreased during the year ended March 31, 2021, as compared to the prior year, as the decrease in

pre-incentive fee net investment income more than offset the decrease in net assets, which drives the hurdle rate.

The base management fee, loan servicing fee, incentive fee, and their related

non-contractual, unconditional, and irrevocable credits are computed quarterly, as described under Transactions with the Adviser in Note 4 Related Party Transactions in the

accompanying Notes to Consolidated Financial Statements and are summarized in the following table:

Year Ended March 31,

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Base management fee (B)

Credits to fees from Adviser

Credits to fees from

Adviserother (B)

Net base management fee

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Total incentive fee (B)

Credits to fees from Adviser

Credits to fees from

Adviserother (B)

Net total incentive fee

2 unchanged sentences

issuances or repurchases during the periods.

Reflected as a line item on our Consolidated Statement of Operations .

Reflected as a line item on our accompanying Consolidated Statement of Operations .

The capital gains-based incentive fees are recorded in accordance with GAAP and do not necessarily reflect

amounts contractually due under the terms of the Advisory Agreement.

Interest and dividend expense decreased 17.3% during the year ended March 31, 2020, as compared to the

prior year, due to a lower weighted-average balance outstanding on the Credit Facility, partially offset by an increase in the effective interest rate.

The weighted-average balance outstanding on the Credit Facility during the year ended

March 31, 2020 was $38.4 million, as compared to $97.9 million in the prior year.

The effective interest rate on the Credit Facility, excluding the impact of deferred financing costs, during the year ended March 31, 2020 was

9.4%, as compared to 5.9% in the prior year.

This increase in the effective interest rate on the Credit Facility was primarily a result of the unused commitment fee on the undrawn portion of the Credit Facility, partially offset by a decrease in

Refer to Liquidity and Capital Resources Revolving Line of Credit for further discussion of the Credit Facility.

Refer to Liquidity and Capital Resources Equity Term Preferred Stock

for further discussion of the mandatorily redeemable preferred stock.

Interest and dividend expense increased 6.5% during the year ended

March 31, 2021, as compared to the prior year, due to a higher weighted-average balance outstanding on the Credit Facility, partially offset by a decrease in the effective interest rate.

The weighted-average balance outstanding on the Credit

Facility during the year ended March 31, 2021 was $82.6 million, as compared to $38.4 million in the prior year.

The effective interest rate on the Credit Facility, excluding the impact of deferred financing costs, during the year

ended March 31, 2021 was 4.3%, as compared to 9.4% in the prior year.

This decrease in the effective interest rate on the Credit Facility was primarily a result of the decrease in unused commitment fee on the undrawn portion of the Credit

Facility and a decrease in LIBOR.

Other expenses decreased 13.9% during the year ended March 31, 2021, as compared to the prior year, primarily due

to a decrease in bad debt expense and tax expense.

Realized and Unrealized Gain (Loss), net of Taxes

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During the year

ended March 31, 2020, we recorded net realized gains on investments of $44.8 million, primarily related to a $50.0 million realized gain from the exit of Nth Degree, a $20.4 million realized gain from the exit of ADC, and a

$3.2 million realized gain from the exit of Jackrabbit, partially offset by a $14.5 million realized loss from the exit of B-Dry, a $13.0 million realized loss from the exit of Meridian, and a

$2.7 million realized loss from the exit of Tread.

During the year ended March 31, 2019, we recorded net realized gains on investments of $68.6 million, primarily related to a $65.7 million realized gain from the exit of

Cambridge Sound Management, Inc.

(Cambridge), a $13.8 million realized gain from the exit of Drew Foam Companies, Inc.

(Drew Foam), a $13.0 million realized gain from the exit of Logo Sportswear, Inc.

(Logo), and a $5.4 million realized gain from the exit of Star Seed, Inc.

(Star Seed), partially offset by a $10.0 million realized loss from the restructure of our debt investments in The Mountain, a

$10.0 million realized loss from the restructure of our debt investments in SOG, a $7.7 million realized loss from the exit of our equity investment in Country Club Enterprises, LLC (CCE) and a $3.6 million realized loss

from the exit of NDLI, Inc.

ended March 31, 2021, we recorded net realized gains on investments of $11.4 million, primarily related to a $14.3 million realized gain from the exit of Frontier, a $3.5 million realized gain from the recapitalization of Old

World, and gains from previous exits, partially offset by an $8.5 million realized loss

related to the partial write-off of a debt investment in SBS Industries.

During the year ended March 31, 2020, we recorded net realized gains on

investments of $44.8 million, primarily related to a $50.0 million realized gain from the exit of Nth Degree, Inc.

(Nth Degree), a $20.4 million realized gain from the exit of ADC, and a $3.2 million realized gain

from the exit of Jackrabbit Inc.

(Jackrabbit), partially offset by a $14.5 million realized loss from the exit of B-Dry, LLC (B-Dry), a

$13.0 million realized loss from the exit of Meridian, and a $2.7 million realized loss from the exit of Tread Corporation (Tread).

Taxes on Deemed Distribution of Long-Term Capital Gains

For the year ended March 31, 2020 and 2019, we elected to retain $38.0 million and $50.0 million of long-term capital gains and to treat them as

deemed distributions to common stockholders, respectively.

We incurred $8.0 million and $10.5 million of federal income taxes on behalf of common stockholders for the year ended March 31, 2020 and 2019, respectively.

In addition, we

incurred Virginia state taxes related to the deemed distribution of $2.3 million and $3.0 million for the year ended March 31, 2020 and 2019, respectively.

Refer to Note 9 Distributions to Common Stockholders in

the accompanying Notes to Consolidated Financial Statements for additional information.

Net Realized Gain (Loss) on Other

There were no realized gains or losses on other during the year ended March 31, 2020.

During the year ended March 31, 2019, we recorded a net

realized loss on other of $1.7 million which primarily related to unamortized deferred issuance costs written off upon the redemption of our 6.750% Series B Cumulative Term Preferred Stock (our Series B Term Preferred Stock) and

6.500% Series C Cumulative Term Preferred Stock (our Series C Term Preferred Stock) in August 2018.

We did not elect to retain long-term capital gains and to treat them as deemed distributions to common stockholders for the year ended March 31, 2021.

the year ended March 31, 2020, we elected to retain $38.0 million of long-term capital gains and to treat them as deemed distributions to common stockholders.

We incurred $8.0 million of federal income taxes on behalf of common

stockholders for the year ended March 31, 2020.

In addition, we incurred Virginia state taxes related to the deemed distribution of $2.3 million for the year ended March 31, 2020.

Refer to Note 9 Distributions to

Common Stockholders in the accompanying Notes to Consolidated Financial Statements for additional information.

Net Realized Gain (Loss) on

During the year ended March 31, 2021, we recorded a net realized loss on other of $0.8 million which primarily related to unamortized

deferred issuance costs written off upon the redemption of our Series D Term Preferred Stock in March 2021.

During the year ended March 31, 2020, there were no realized gains or losses on other.

Net Unrealized Appreciation (Depreciation) of Investments

During the year ended March 31, 2020, we recorded net unrealized depreciation of investments of $78.1 million.

During the year ended March 31, 2021, we recorded net unrealized appreciation of investments of $13.9 million.

The realized gains (losses) and

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(Appreciation)

Pioneer Square Brands, Inc.

Old World Christmas, Inc.

SOG Specialty Knives & Tools, LLC

Educators Resource, Inc.

Frontier Packaging, Inc.

Schylling, Inc.

Head Country, Inc.

Ginsey Home Solutions, Inc.

Diligent Delivery Systems

ImageWorks Display and Marketing Group, Inc.

Horizon Facilities Services, Inc.

Cambridge Sound Management, Inc.

Alloy Die Casting Co.

Mason West, LLC

Galaxy Tool Holding Corporation

PSI Molded Plastics, Inc.

The Maids International, LLC

The Mountain Corporation

Nth Degree Investment Group, LLC

D.P.M.S., Inc.

SBS Industries Holdings, Inc.

Brunswick Bowling Products, Inc.

Other, net (<$1.0 million, net )

The primary drivers of net unrealized appreciation of investments of $13.9 million for the year ended March 31, 2021

were increased performance of certain of our portfolio companies and an increase in comparable multiples used to estimate the fair value of a majority of our portfolio companies, partially offset by the reversal of previously recorded unrealized

appreciation upon the exit of one of our investments and a decrease in performance of certain of our other portfolio companies.

The decrease in the performance of a limited number of our portfolio companies was driven by the continued impact COVID-19 has had or is expected to have on those portfolio companies and the markets in which they operate, including government restrictions on the portfolio companies ability to operate under historical

conditions, shutdowns, demand for products, and general economic outlook.

During the year ended March 31, 2020, we recorded net unrealized depreciation of investments of

$78.1 million.

The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the year ended March 31, 2020 were as follows:

Year Ended March 31, 2020

Portfolio Company

(Depreciation)

(Appreciation)

Alloy Die Casting Co.

Galaxy Tool Holding Corporation

Nth Degree Investment Group, LLC

Counsel Press, Inc.

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Ginsey Home Solutions, Inc.

Atlanta, LLC

Hobbs Co.Atlanta, LLC

Other, net (<$1.0 million, net )

The primary drivers of net unrealized depreciation of investments of $78.1 million for the year ended March 31, 2020

were decreased performance of certain of our portfolio companies, a decrease in comparable multiples used to estimate the fair value of majority of our portfolio companies, and the reversal of previously recorded unrealized appreciation of certain

were decreased performance of certain of our portfolio companies, a decrease in comparable multiples used to estimate the fair value of a majority of our portfolio companies, and the reversal of previously recorded unrealized appreciation of certain

investments upon their exit, partially offset by the reversal of previously recorded unrealized depreciation upon the exit of certain of our investments and an increase in performance of certain of our other portfolio companies.

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portfolio companies and the markets in which they operate, including government restrictions on the portfolio companies ability to operate under historical conditions, shutdowns, demand for products, and general economic outlook.

During the year ended March 31, 2019, we recorded net unrealized appreciation of investments of

$20.2 million.

The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the year ended March 31, 2019 were as follows:

Year Ended March 31, 2019

Portfolio Company

(Depreciation)

(Appreciation)

Cambridge Sound Management, Inc.

Nth Degree, Inc.

Alloy Die Casting Co.

Counsel Press, Inc.

Brunswick Bowling Products, Inc.

SBS Industries, LLC

Jackrabbit, Inc.

Old World Christmas, Inc.

Schylling, Inc.

Star Seed, Inc.

Logo Sportswear, Inc.

Atlanta, LLC

Ginsey Home Solutions, Inc.

Educators Resource, Inc.

Funko Acquisition Holdings, LLC

Pioneer Square Brands, Inc.

Drew Foam Companies, Inc.

Country Club Enterprises, LLC

Edge Adhesives Holdings, Inc.

D.P.M.S., Inc.

Tread Corporation

Meridian Rack & Pinion, Inc.

Bassett Creek Restoration, Inc.

The Mountain Corporation

SOG Specialty Knives & Tools, LLC

PSI Molded Plastics, Inc.

Other, net (<$1.0 million, net )

The primary drivers of net unrealized appreciation of investments of $20.2 million for the year ended March 31, 2019

were increased performance of certain of our portfolio companies, an increase in comparable multiples used to estimate the fair value of certain of our portfolio companies, and the reversal of previously recorded unrealized depreciation of certain

investments upon their exit or restructure, partially offset by the reversal of previously recorded unrealized appreciation upon the exit of certain of our investments and a decline in performance of certain of our other portfolio companies.

Across our entire investment portfolio, we recorded $81.0 million of net unrealized depreciation on our equity investments and $2.9 million of net

unrealized appreciation on our debt investments for the year ended March 31, 2020.

At March 31, 2020, the fair value of our investment portfolio was less than our cost basis by $43.7 million, as compared to March 31, 2019, when

the fair value of our investment portfolio was greater than our cost basis by $34.5 million, representing net unrealized depreciation of $78.1 million for the year ended March 31, 2020.

Our entire portfolio was fair valued at 92.8% of

cost as of March 31, 2020.

Net Unrealized Depreciation (Appreciation) on Other

There was no net unrealized depreciation or appreciation of other for the year ended March 31, 2020.

During the year ended March 31, 2019, we

recorded net unrealized depreciation of other of $0.5 million related to the Credit Facility recorded at fair value.

Comparison of the Fiscal Year Ended March 31, 2019 to the Fiscal Year Ended March 31, 2018

For the Fiscal Years Ended March 31,

INVESTMENT INCOME

Interest income

Dividend and success fee income

Total investment income

Base management fee

Loan servicing fee

Incentive fee

Administration fee

Interest and dividend expense

Amortization of deferred financing costs and discounts

Expenses before credits from Adviser

Credits to fees from Adviser

Total expenses, net of credits to fees

NET INVESTMENT INCOME

REALIZED AND UNREALIZED GAIN (LOSS), NET OF TAXES

Net realized gain on investments

Taxes on deemed distribution of long-term capital gains

Net realized loss on other

Net unrealized appreciation of investments

Net unrealized depreciation (appreciation) of other

Net realized and unrealized gain, net of taxes on deemed distribution of long-term capital

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

BASIC AND DILUTED PER COMMON SHARE:

Net investment income

Net increase in net assets resulting from operations

NM = Not Meaningful

Investment Income

Total investment income increased by

2.2% for the year ended March 31, 2019, as compared to the prior year.

This increase was due to increases in both interest income and dividend and success fee income.

Interest income from our investments in debt securities increased 1.7% for the year ended March 31, 2019 as compared to the prior year.

Generally, the

The weighted-average principal balance of our

interest-bearing investment portfolio during the year ended March 31, 2019 was $380.2 million, compared to $373.4 million during the prior year.

This increase was primarily due to the origination of $44.3 million of new debt

investments and $51.7 million of follow-on debt investments to existing portfolio companies and $16.5 million of loans placed back on accrual status after March 31, 2018, partially offset by the

pay-off or restructure of $65.3 million of debt investments and $68.3 million of loans placed on non-accrual status, and their respective impact on the

weighted-average principal balance when considering the timing of new investments, pay-offs, restructures, and accrual status changes, as applicable.

The weighted-average yield on our interest-bearing

investments, excluding cash and cash equivalents and receipts recorded as other income, was 13.0% and 13.1% for the year ended March 31, 2019 and 2018, respectively.

The weighted-average yield may vary from period to period, based on the

current stated interest rate on interest-bearing investments.

At March 31, 2019, certain of our loans to B-Dry, Meridian, The

Mountain, PSI Molded, and SOG were on non-accrual status, with an aggregate debt cost basis of $68.3 million.

At March 31, 2018, certain of our loans to two portfolio companies, ADC and Tread, were

on non-accrual status, with an aggregate debt cost basis of $15.6 million.

Dividend and success fee income

for the year ended March 31, 2019 increased 5.0% from the prior year.

During the year ended March 31, 2019, dividend and success fee income consisted of $3.9 million of dividend income and $6.1 million of success fee income.

During the year ended March 31, 2018, dividend and success fee income consisted of $4.2 million of dividend income and $5.3 million of success fee income.

As of March 31, 2019 and 2018, no single investment represented greater than 10% of the total investment portfolio at fair value.

Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, increased 43.2% for the year ended March 31, 2019, as compared to the prior year, primarily due to an increase in the capital

gains-based incentive fee, the base management fee, interest and dividend expense, and other expenses.

In accordance with GAAP, we recorded a capital

gains-based incentive fee of $17.8 million and $4.4 million during the year ended March 31, 2019 and March 31, 2018, respectively, which were not contractually due under the terms of the Advisory Agreement.

gains-based incentive fee was a result of the net impact of net realized gains (losses) and net unrealized appreciation (depreciation) on investments during the respective periods.

The income-based incentive fee decreased for the year ended

March 31, 2019, as compared to the prior year, as the increase in net assets, which drives the hurdle rate, more than offset the increase in pre-incentive fee net investment income during the respective

The base management fee increased for the year ended March 31, 2019, as compared to the prior year, as average total assets increased over

the respective periods as a result of an increase in investments at fair value.

The base management fee, loan servicing fee, incentive fee, and their

related non-contractual, unconditional, and irrevocable credits are computed quarterly, as described under Transactions with the Adviser in Note 4 Related Party Transactions in

the accompanying Notes to Consolidated Financial Statements and are summarized in the following table:

Year Ended March 31,

Average total assets subject to base management fee (A)

Multiplied by annual base management fee of 2.0%

Base management fee (B)

Credits to fees from Adviser

Net base management fee

Loan servicing fee (B)

Credits to base management fee loan servicing fee (B)

Net loan servicing fee

Incentive fee income-based

Incentive fee capital

gains-based (C)

Total incentive fee (B)

Credits to fees from Adviser

Net total incentive fee

Average total assets subject to the base management fee is defined in the Advisory Agreement as total assets,

including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings, valued at the end of the applicable quarters within the respective periods and adjusted appropriately for any share

issuances or repurchases during the periods.

Reflected as a line item on our accompanying Consolidated Statement of Operations .

The capital gains-based incentive fee is not yet contractually due under the terms of the Advisory Agreement.

Interest and dividend expense increased 14.2% during the year ended March 31, 2019, as compared to the

prior year, primarily due to an increase in interest expense as a result of a higher weighted-average balance outstanding on the Credit Facility and slightly higher costs of borrowings under the Credit Facility as the increase in LIBOR more than

offset the reduced interest rate margin after the amendment of the Credit Facility in August 2018.

The effective interest rate on the Credit Facility, excluding the impact of deferred financing costs, during the year ended March 31, 2019 was

5.9%, as compared to 5.4% in the prior year.

The weighted-average balance outstanding on the Credit Facility during the year ended March 31, 2019 was $97.9 million, as compared to $67.8 million in the prior year.

Liquidity and Capital Resources Revolving Line of Credit for further discussion of the Credit Facility.

Refer to Liquidity and Capital Resources Equity Term Preferred Stock for further

discussion of the mandatorily redeemable preferred stock.

Other expenses increased 58.7% primarily due to an increase in bad debt expense of

$1.4 million largely driven by accrual status changes in the current year.

Realized and Unrealized Gain (Loss), net of Taxes

Net Realized Gain on Investments

During the year ended

March 31, 2019, we recorded net realized gains on investments of $68.6 million, primarily related to a $65.7 million realized gain from the exit of Cambridge, a $13.8 million realized gain from the exit of Drew Foam, a

$13.0 million realized gain from the exit of Logo, and a $5.4 million realized gain from the exit of Star Seed, partially offset by a $10.0 million realized loss from the restructure of our debt investments in The Mountain, a

$10.0 million realized loss from the restructure of our debt investments in SOG, a $7.7 million realized loss from the exit of our equity investment in CCE and a $3.6 million realized loss from the exit of NDLI.

During the year ended

March 31, 2018, we recorded a net realized gain on investments of $1.3 million, primarily related to a $1.0 million realized gain from the exit of Mitchell Rubber Products, Inc.

(Mitchell).

Taxes on Deemed Distribution of Long-Term Capital Gains

For the year ended March 31, 2019, we elected to retain $50.0 million of long-term capital gains and to treat them as deemed distributions to common

stockholders.

We incurred $10.5 million of federal income taxes on behalf of common stockholders for the year ended March 31, 2019.

In addition, we recorded a reserve for uncertain tax positions related to potential Virginia state tax

exposure related to the deemed distribution of $3.0 million for the year ended March 31, 2019.

Refer to Note 9 Distributions to Common Stockholders in the accompanying Notes to Consolidated Financial Statements

for additional information.

Net Realized Loss on Other

During the year ended March 31, 2019, we recorded a net realized loss on other of $1.7 million which primarily related to unamortized deferred

issuance costs written off upon the redemption of our Series B Term Preferred Stock and Series C Term Preferred Stock in August 2018.

There were no realized gains or losses on other during the year ended March 31, 2018.

Net Unrealized Appreciation of Investments

During the year ended March 31, 2019, we recorded net unrealized appreciation of investments of $20.2 million.

The realized gains (losses) and

unrealized appreciation (depreciation) across our investments for the year ended March 31, 2019 were as follows:

Year Ended March 31, 2019

Portfolio Company

(Depreciation)

(Appreciation)

Cambridge Sound Management, Inc.

Nth Degree, Inc.

Alloy Die Casting Co.

Counsel Press, Inc.

Brunswick Bowling Products, Inc.

SBS Industries, LLC

Jackrabbit, Inc.

Old World Christmas, Inc.

Schylling, Inc.

Star Seed, Inc.

Logo Sportswear, Inc.

Atlanta, LLC

Ginsey Home Solutions, Inc.

Educators Resource, Inc.

Funko Acquisition Holdings, LLC

Pioneer Square Brands, Inc.

Drew Foam Companies, Inc.

Country Club Enterprises, LLC

Edge Adhesives Holdings, Inc.

D.P.M.S., Inc.

Tread Corporation

Meridian Rack & Pinion, Inc.

Bassett Creek Restoration, Inc.

The Mountain Corporation

SOG Specialty Knives & Tools, LLC

PSI Molded Plastics, Inc.

Other, net (<$1.0 million, net )

The primary drivers of net unrealized appreciation of investments of $20.2 million for the year ended March 31, 2019

During the year ended March 31, 2018, we recorded net unrealized appreciation of investments of

$37.9 million.

The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the year ended March 31, 2018 were as follows:

Year Ended March 31, 2018

Portfolio Company

(Depreciation)

(Appreciation)

Cambridge Sound Management, Inc.

Nth Degree, Inc.

Hobbs Co.Atlanta, LLC

Ginsey Home Solutions, Inc.

Brunswick Bowling Products, Inc.

Tread Corporation

Precision Southeast, Inc.

Star Seed, Inc.

Old World Christmas, Inc.

Frontier Packaging, Inc.

Drew Foam Companies, Inc.

ImageWorks Display and Marketing Group, Inc.

Mathey Investments, Inc.

Pioneer Square Brands, Inc.

SBS Industries, LLC

Acme Cryogenics, Inc.

Schylling, Inc.

Logo Sportswear, Inc.

GI Plastek, Inc.

Alloy Die Casting Co.

Jackrabbit, Inc.

Mitchell Rubber Products, Inc.

Meridian Rack & Pinion, Inc.

Head Country, Inc.

Galaxy Tool Holding Corporation

SOG Specialty Knives & Tools, LLC

Country Club Enterprises, LLC

PSI Molded Plastics, Inc.

The Mountain Corporation

Other, net (<$250, net)

The primary drivers of net unrealized appreciation of investments of $37.9 million for the year ended March 31, 2018

were increased performance of certain of our portfolio companies and an increase in comparable multiples used to estimate the fair value of certain of our portfolio companies, partially offset by the reversal of previously recorded unrealized

appreciation upon the exit of our investment in Mitchell and a decline in performance of certain of our other portfolio companies.

Across our entire

investment portfolio, we recorded $7.8 million of net unrealized depreciation on our debt positions and $28.0 million of net unrealized appreciation on our equity holdings for the year ended March 31, 2019.

At March 31, 2019, the

fair value of our investment portfolio was greater than our cost basis by $34.5 million, as compared to March 31, 2018, when the fair value of our investment portfolio was greater than our cost basis by $14.3 million, representing net

unrealized appreciation of $20.2 million for the year ended March 31, 2019.

Across our entire investment portfolio, we recorded $14.5 million of net unrealized appreciation on our equity investments and $0.6 million of net

unrealized depreciation on our debt investments for the year ended March 31, 2021.

At March 31, 2021, the fair value of our investment portfolio was less than our cost basis by $29.7 million,

as compared to March 31, 2020, when the fair value of our investment portfolio was less than our cost basis by $43.7 million, representing net unrealized appreciation of

$13.9 million for the year ended March 31, 2021.

Our entire portfolio was fair valued at 95.5% of cost as of March 31, 2021.

Net Unrealized Depreciation (Appreciation) on Other

During the year ended March 31, 2019, we recorded net unrealized depreciation of other of $0.5 million related to the Credit Facility recorded at

During the year ended March 31, 2018, we recorded net unrealized appreciation of other of $0.5 million related to the Credit Facility recorded at fair value.

comparison of the fiscal year ended March 31, 2020 to the fiscal year ended March 31, 2019 can be found in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 located within

Managements Discussion and Analysis of Financial Condition and Results of Operations, which is incorporated by reference herein.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Cash inflows from operating

activities are primarily generated from cash collections of interest and other income from our portfolio companies, as well as from cash proceeds received from repayments of debt investments and from sales of equity investments.

collections are principally used to fund new investments, pay distributions to our common stockholders, make interest payments on the Credit Facility, make dividend payments on our mandatorily redeemable preferred stock, pay management and incentive

fees to the Adviser, and for other operating expenses.

We may also use cash inflows from operating activities to repay outstanding borrowings under the Credit Facility.

Net cash provided by operating activities for the year ended March 31, 2020 was $35.3 million, as compared to net cash provided by operating

activities of $93.6 million for the year ended March 31, 2019.

This change was primarily due to higher purchases of investments, a decrease in Fees due to Adviser related to the payment of $8.1 million of capital gains-based incentive

fees that were contractually due, and a decline in Other liabilities due to a $10.5 million federal tax payment made related to the March 31, 2019 deemed distribution, partially offset by increased repayments and net proceeds from the sale

of investments period over period.

Purchases of investments totaled $145.4 million during the year ended March 31, 2020, compared to $91.9 million during the year ended March 31, 2019.

Repayments and net proceeds from the sale of

investments totaled $169.9 million during the year ended March 31, 2020, compared to $154.7 million during the year ended March 31, 2019.

Net cash provided by operating activities for the year ended March 31, 2019 was $93.6 million, as compared to net cash used in operating activities

of $29.7 million for the year ended March 31, 2018.

This change was primarily due to higher repayments and net proceeds from the sale of investments and lower purchases of investments period over period.

Purchases of investments totaled

$91.9 million during the year ended March 31, 2019, compared to $98.5 million during the year ended March 31, 2018.

Repayments and net proceeds from the sale of investments totaled $154.7 million during the year ended

March 31, 2019, compared to $39.9 million during the year ended March 31, 2018.

As of March 31, 2020, we had equity investments in,

or loans to, 28 companies with an aggregate cost basis of $609.6 million.

Cash inflows from operating activities are primarily generated from cash collections of interest and other income from our portfolio

companies, as well as from cash proceeds received from repayments of debt investments and from sales of equity investments.

These cash collections are principally used to fund new investments, pay distributions to our common stockholders, make

interest payments on the Credit Facility and the 2026 Notes, make dividend payments on our mandatorily redeemable preferred stock, pay management and incentive fees to the Adviser, and for other operating expenses.

We may also use cash inflows from

operating activities to repay outstanding borrowings under the Credit Facility.

Net cash used in operating activities for the year ended March 31,

2021 was $29.7 million, as compared to net cash provided by operating activities of $35.3 million for the year ended March 31, 2020.

This change was primarily due to decreases in principal repayments of investments and net proceeds

from the sale of investments and a decline in Other liabilities, principally due to $13.3 million of tax payments made related to prior year deemed distributions, partially offset by a decline in purchases of investments, and an increase in

Fees due to Adviser related to the prior year payment of $8.1 million of capital gains-based incentive fees that were contractually due period over period.

Purchases of investments totaled $95.3 million during the year ended March 31,

2021, compared to $145.4 million during the year ended March 31, 2020.

Repayments and net proceeds from the sale of investments totaled $51.8 million during the year ended March 31, 2021, compared to $169.9 million during

the year ended March 31, 2020.

Net cash provided by operating activities for the year ended March 31, 2020 was $35.3 million, as compared

to net cash provided by operating activities of $93.6 million for the year ended March 31, 2019.

This change was primarily due to higher purchases of investments, a decrease in Fees due to Adviser related to the payment of

$8.1 million of capital gains-based incentive fees that were contractually due, and a decline in Other liabilities due to a $10.5 million federal tax payment made related to the March 31, 2019 deemed distribution, partially offset by

increased repayments and net proceeds from the sale of investments period over period.

Purchases of investments totaled $145.4 million during the year ended March 31, 2020, compared to $91.9 million during the year ended

March 31, 2019.

Repayments and net proceeds from the sale of investments totaled $169.9 million during the year ended March 31, 2020, compared to $154.7 million during the year ended March 31, 2019.

As of March 31, 2021, we had equity investments in, or loans to, 28 companies with an aggregate cost

basis of $663.6 million.

As of March 31, 2020, we had equity investments in, or loans to, 28 companies with an aggregate cost basis of $609.6 million.

The following table summarizes our

total portfolio investment activity for the years ended March 31, 2020 and 2019:

The following table summarizes our total portfolio investment activity for the

years ended March 31, 2021 and 2020:

Years Ended March 31,

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Net realized gain on investments

Net unrealized (depreciation) appreciation of investments

Net unrealized appreciation (depreciation) of investments

Reversal of net unrealized appreciation of investments

9 unchanged sentences

Financing Activities

Net cash used in financing activities for the year ended March 31, 2020 was $34.9 million, which was primarily a result of $33.9 million in

distributions to common stockholders and $3.8 million of net repayments on our Credit Facility, partially offset by $3.1 million of net proceeds from the issuance of common stock under the ATM Program.

Net cash used in financing activities for the year ended March 31, 2019 was $94.0 million, which was primarily a result of the redemption of our

Series B Term Preferred Stock and Series C Term Preferred Stock of $81.7 million, $54.0 million of net repayments on the Credit Facility, and $30.5 million in distributions to common stockholders, partially offset by

$72.1 million of net proceeds from the issuance of our Series E Term Preferred Stock and $1.8 million of net proceeds from the issuance of common stock under the ATM Program.

Net cash provided by financing activities for the year ended March 31, 2018 was $29.6 million, which consisted primarily of $37.3 million of

net proceeds from the Credit Facility, $21.4 million of net proceeds from the issuance of common stock in May 2017, including the partial exercise of the underwriters over-allotment option in June 2017, and net proceeds from the issuance

of common stock under the ATM Program in March 2018, partially offset by $28.9 million in distributions paid to common stockholders.

Net cash provided by financing activities for the year ended March 31, 2021 was $28.1 million, which was primarily a result of $127.9 million in

gross proceeds from the issuance of our 2026 Notes, $19.3 million of gross proceeds from the issuance of mandatorily redeemable preferred stock under the Series E ATM program, and $1.8 million of gross proceeds from the issuance of common

stock under the Common Stock ATM Program, partially offset by the redemption of our Series D Term Preferred Stock of $57.5 million, $30.9 million in distributions to common stockholders, $26.8 million of net repayments on our Credit

Facility, and $5.7 million of deferred financing and offering costs.

Net cash used in financing activities for the year ended March 31, 2020

was $34.9 million, which was primarily a result of $33.9 million in distributions to common stockholders and $3.8 million of net repayments on our Credit Facility, partially offset by $3.1 million of net proceeds from the

issuance of common stock under the Common Stock ATM Program.

Net cash used in financing activities for the year ended March 31, 2019 was $94.0 million, which

was primarily a result of the redemption of our Series B Term Preferred Stock and Series C Term Preferred Stock of $81.7 million, $54.0 million of net repayments on the Credit Facility, and $30.5 million in distributions to common

stockholders, partially offset by $72.1 million of net proceeds from the issuance of our Series E Term Preferred Stock and $1.8 million of net proceeds from the issuance of common stock under the Common Stock ATM Program.

Distributions and Dividends to Stockholders

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In accordance with these

requirements, our Board of Directors declared, and we paid, monthly cash distributions of $0.068 per common share for each of the nine months from April through December 2019, $0.07 per common share for each of the three months from January through

March 2020, a supplemental distribution of $0.09 per common share in June 2019, a supplemental distribution of $0.03 per common share in September 2019, and a supplemental distribution of $0.09 per common share in December 2019.

In addition, in

April 2020, our Board of Directors declared a deemed distribution of $1.15 per common share to stockholders of record as of March 31, 2020.

See also Recent DevelopmentsDistributions and Dividends for a discussion of

cash distributions to common stockholders declared by our Board of Directors in April 2020.

For each of the fiscal years ended March 31, 2020 and

2019, Investment Company Taxable Income exceeded distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $17.9 million and $16.0 million, respectively, of the first distributions paid

to common stockholders in the respective subsequent fiscal year as having been paid in the respective prior year.

In addition, for each of the fiscal years ended March 31, 2020 and 2019, net capital gains exceeded distributions declared and

paid, and, in accordance with Section 855(a) of the Code, we elected to treat $5.3 million and $13.2 million, respectively, of the first distributions paid to common stockholders in the respective subsequent fiscal year as having been

paid in the respective prior year.

For the year ended March 31, 2020, we recorded $6.5 million of net adjustments for estimated permanent book-tax differences to reflect tax character, which

decreased Capital in excess of par value and increased Underdistributed (overdistributed) net investment income and Accumulated net realized gain in excess of distributions.

For the year ended March 31, 2019, we recorded $16.1 million of

net adjustments for estimated permanent book-tax differences to reflect tax character, which decreased Capital in excess of par value and increase Accumulated net realized gain in excess of

distributions and Underdistributed (overdistributed) net investment income.

requirements, our Board of Directors declared, and we paid, monthly cash distributions of $0.07 per common share and a supplemental distribution of $0.09 per common share in June 2020.

See also Recent DevelopmentsDistributions and

Dividends for a discussion of cash distributions to common stockholders declared by our Board of Directors in April 2021.

For each of the

fiscal years ended March 31, 2021 and 2020, Investment Company Taxable Income exceeded distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $16.1 million and $17.9 million,

respectively, of the first distributions paid subsequent to fiscal year-end as having been paid in the prior year.

In addition, for each of the fiscal years ended March 31, 2021 and 2020, net capital

gains exceeded distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $8.5 million and $5.3 million, respectively, of the first distributions paid subsequent to fiscal year-end as having been paid in the prior year.

For the year ended March 31, 2021, we recorded $2.0 million of net adjustments for estimated permanent book-tax

differences to reflect tax character, which decreased Capital in excess of par value and Accumulated net realized gain in excess of distributions and increased Underdistributed net investment income.

For the year ended March 31, 2020, we

recorded $6.5 million of net adjustments for estimated permanent book-tax differences to reflect tax character, which decreased Capital in excess of par value and increased Underdistributed net

investment income and Accumulated net realized gain in excess of distributions.

Preferred Stock Dividends

Our Board of Directors declared and we paid monthly cash dividends of (i) $0.13020833 per share to holders of our Series D Term Preferred Stock for each of the

twelve months from April 2019 through March 2020 and (ii) $0.1328125 per share to holders of our Series E Term Preferred Stock for each of the twelve months from April 2019 through March 2020.

In accordance with GAAP, we treat these monthly

dividends as an operating expense.

See also Recent DevelopmentsDistributions and Dividends for a discussion of dividends to preferred stockholders declared by our Board of Directors in April 2020.

Dividend Reinvestment Plan

Our Board of Directors declared and we paid monthly cash dividends of (i) $0.13020833 per share to holders of our Series D Term Preferred Stock per month for

April 2020 through February 2021 and $0.008680555 per share of our Series D Term Preferred Stock for the period from March 1, 2021 up to, but excluding, the redemption date of March 3, 2021, and (ii) $0.1328125 per share to holders of our

Series E Term Preferred Stock for each of the twelve months from April 2020 through March 2021.

In accordance with GAAP, we treat these monthly dividends as an operating expense.

See also Recent DevelopmentsDistributions and

Dividends for a discussion of dividends to preferred stockholders declared by our Board of Directors in April 2021.

Dividend Reinvestment

Our common stockholders who hold their shares through our transfer agent, Computershare, Inc.

(Computershare), have the option to participate in a

dividend reinvestment plan offered by Computershare, as the plan agent.

This is an opt in dividend reinvestment plan, meaning that common stockholders may elect to have their cash distributions automatically reinvested in additional

shares of our common stock.

(Computershare), have the option to

participate in a dividend reinvestment plan offered by Computershare, as the plan agent.

This is an opt in dividend reinvestment plan, meaning that common stockholders may elect to

have their cash distributions automatically reinvested in additional shares of our common stock.

Common stockholders who do not make such election will receive their distributions in cash.

Any distributions reinvested under the plan will be taxable to a common stockholder to the same extent, and with the same

character, as if the common stockholder had received the distribution in cash.

The common stockholder generally will have an adjusted basis in the additional common shares purchased through the plan equal to the dollar amount that would have been

received if the U.S.

distributions reinvested under the plan will be taxable to a common stockholder to the same extent, and with the same character, as if the common stockholder had received the distribution in cash.

The common stockholder generally will have an

adjusted basis in the additional common shares purchased through the plan equal to the dollar amount that would have been received if the U.S.

stockholder had received the dividend or distribution in cash.

The additional common shares will have a new holding period commencing on the day following the date on which the shares are credited to the common

stockholders account.

The additional common shares will have a

new holding period commencing on the day following the date on which the shares are credited to the common stockholders account.

Computershare purchases shares in the open market in connection with the obligations under the plan.

The Computershare dividend reinvestment plan is not open to holders of our preferred stock.

Computershare dividend reinvestment plan is not open to holders of our preferred stock.

Registration Statement

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of March 31, 2021, we had the ability to issue up to $147.5 million in securities under the registration statement.

In December 2019, we entered into equity distribution agreements with Wedbush Securities, Inc.

(Wedbush), Cantor Fitzgerald &

Co., and Ladenburg Thalmann & Co., Inc.

(each, a Sales Agent), under which we have the ability to issue and sell shares of our common stock, from time to time, through the Sales Agents, up to an aggregate offering price of

$35.0 million in an ATM Program.

This ATM Program replaced the February 2018 ATM Program discussed below.

As of March 31, 2020, we had remaining capacity to sell up to $31.9 million of common stock under the ATM Program.

During the year ended March 31, 2020, we sold 227,004 shares of our common stock under the ATM Program with Wedbush at a weighted-average gross price of

In December 2019, we entered into

equity distribution agreements with Wedbush Securities, Inc., Cantor Fitzgerald & Co., and Ladenburg Thalmann & Co., Inc.

(each, a Common Stock ATM Sales Agent), under which we have the ability to issue and sell shares

of our common stock, from time to time, through the Common Stock Sales Agents, up to an aggregate offering price of $35.0 million in the Common Stock ATM Program.

As of March 31, 2021, we had remaining capacity to sell up to

$30.1 million of common stock under the Common Stock ATM Program.

During the year ended March 31, 2021, we sold 155,560 shares of our common

stock under the Common Stock ATM Program at a weighted-average gross price of $11.39 per share and raised approximately $1.8 million of gross proceeds.

The weighted-average net price per share, after deducting commissions and offering

costs borne by us, was $11.17 and resulted in total net proceeds of approximately $1.7 million.

These sales were above our then current estimated NAV per share.

During the year ended March 31, 2020, we sold 227,004 shares of our common stock under the Common Stock ATM Program at a weighted-average gross price of

$13.80 per share and raised approximately $3.1 million of gross proceeds.

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These sales were above our then current estimated NAV per share.

In February 2018, we entered into equity distribution agreements with

Cantor Fitzgerald & Co.

(Cantor), Ladenburg Thalmann & Co., Inc., and Wedbush, under which we had the ability to issue and sell shares of our common stock, from time to time, through the Sales Agents, up to an aggregate

offering price of $35.0 million in an ATM Program.

The February 2018 ATM Program was replaced by the December 2019 ATM Program.

During the year

ended March 31, 2019, we sold 168,824 shares of our common stock under the February 2018 ATM Program with Cantor at a weighted-average gross price of $11.09 per share and raised approximately $1.9 million of gross proceeds.

weighted-average net price per share, after deducting commissions and offering costs borne by us, was $10.87 and resulted in total net proceeds of approximately $1.8 million.

Certain of these sales were below our then-current estimated NAV per

share during the sales period, with a discount of $0.002 per share, when comparing the sales price per share, after deducting commissions, to the then-current estimated NAV per share;

however, the net dilutive effect (after commissions and offering

costs borne by us) of these sales was $0.00 per common share as a result of the small number of shares sold at a slight discount to NAV per share and resulting rounding.

In aggregate, the sales during the year ended March 31, 2019 were above

our then-current estimated NAV per share.

During the year ended March 31, 2018, we sold 127,412 shares of our common stock under the February 2018

ATM Program with Cantor at a weighted-average gross price of $10.45 per share and raised approximately $1.3 million of gross proceeds.

The weighted-average net price per share, after deducting commissions and offering costs borne by us,

was $10.24 and resulted in total net proceeds of approximately $1.3 million.

These sales were below our then-current estimated NAV per share during the sales period, with such discounts ranging from $0.01 per share to $0.07 per share, when

comparing the sales price per share, after deducting commissions, to the then-current estimated NAV per share;

however, the net dilutive effect (after commissions and offering costs borne by us) of these sales was $0.00 per common share as a result

of the small number of shares sold at a slight discount to NAV per share and resulting rounding.

In May 2017, we completed a public offering of

2.1 million shares of our common stock at a public offering price of $9.38 per share, which was below our then current NAV of $9.95 per share.

Gross proceeds totaled $19.7 million and net proceeds, after deducting underwriting discounts

and commissions and estimated offering costs borne by us, were $18.7 million, which were used to repay borrowings under the Credit Facility and for other

general corporate purposes.

In June 2017, the underwriters partially exercised their over-allotment option and purchased an additional 155,265 shares at the public offering price of $9.38 per

share and on the same terms and conditions solely to cover over-allotments, which resulted in gross proceeds of $1.5 million and net proceeds, after deducting underwriting discounts and commissions and offering costs borne by us, of

$1.4 million.

During the year ended March 31, 2019, we sold 168,824 shares of

our common stock under the Common Stock ATM Program at a weighted-average gross price of $11.09 per share and raised approximately $1.9 million of gross proceeds.

The weighted-average net price per share, after deducting commissions and

offering costs borne by us, was $10.87 and resulted in total net proceeds of approximately $1.8 million.

Certain of these sales were below our then-current estimated NAV per share during the sales period, with a discount of $0.002 per share,

when comparing the sales price per share, after deducting commissions, to the then-current estimated NAV per share;

however, the net dilutive effect (after commissions and offering costs borne by us) of these sales was $0.00 per common share as a

result of the small number of shares sold at a slight discount to NAV per share and resulting rounding.

In aggregate, the sales during the year ended March 31, 2019 were above our then-current estimated NAV per share.

We anticipate issuing equity securities to obtain additional capital in the future.

However, we cannot determine the timing or terms

of any future equity issuances or whether we will be able to issue equity on terms favorable to us, or at all.

When our common stock is trading at a price below NAV per share, the 1940 Act places regulatory constraints on our ability to obtain

additional capital by issuing common stock.

Generally, the 1940 Act provides that we may not issue and sell our common stock at a price below our NAV per common share, other than to our then existing common stockholders pursuant to a rights

offering, without first obtaining approval from our stockholders and our independent directors and meeting other stated requirements.

On March 31, 2020, the closing market price of our common stock was $7.85 per share, representing a 29.7%

discount to our NAV per share of $11.17 as of March 31, 2020.

At our 2019 Annual Meeting of Stockholders held on August 15, 2019, our

stockholders approved a proposal authorizing us to issue and sell shares of our common stock at a price below our then current NAV per common share for a period of one year from the date of such approval, provided that our Board of Directors makes

certain determinations prior to any such sale.

At our 2020 Annual Meeting of Stockholders, scheduled to take place in August 2020, we intend to ask our stockholders to vote in favor of a similar proposal so that it may be in effect for another year.

However, we cannot

determine the timing or terms of any future equity issuances or whether we will be able to issue equity on terms favorable to us, or at all.

When our common stock is trading at a price below NAV per share, the 1940 Act places regulatory constraints

on our ability to obtain additional capital by issuing common stock.

Generally, the 1940 Act provides that we may not issue and sell our common stock at a price below our NAV per common share, other than to our then existing common stockholders

pursuant to a rights offering, without first obtaining approval from our stockholders and our independent directors and meeting other stated requirements.

On March 31, 2021, the closing market price of our common stock was $12.23 per share,

representing a 6.2% premium to our NAV per share of $11.52 as of March 31, 2021.

At our 2020 Annual Meeting of Stockholders held on August 20,

2020, our stockholders approved a proposal authorizing us with the subsequent approval of our Board of Directors, to issue and sell shares of our common stock at a price below our then current NAV per common share for a period of one year from the

date of such approval, provided that the number of shares issued and sold pursuant to such authority does not exceed 25.0% of our then-outstanding common stock immediately prior to each such sale.

At our 2021 Annual Meeting of Stockholders,

scheduled to take place in August 2021, we intend to ask our stockholders to vote in favor of a similar proposal so that it may be in effect for another year.

Term Preferred Stock

In August 2018, we

completed a public offering of 2,990,000 shares of our Series E Term Preferred Stock at a public offering price of $25.00 per share.

Gross proceeds totaled $74.8 million and net proceeds, after deducting underwriting discounts and offering

costs borne by us, were $72.1 million.

Total underwriting discounts and offering costs related to this offering were $2.7 million, which have been recorded as discounts to the liquidation value on our Consolidated Statements of Assets

and Liabilities and are being amortized over the period ending August 31, 2025, the mandatory redemption date.

Our Series E Term Preferred Stock

is not convertible into our common stock or any other security and provides for a fixed dividend equal to 6.375% per year, payable monthly (which equates to $4.8 million per year).

We are required to redeem all shares of our outstanding Series

E Term Preferred Stock on August 31, 2025, for cash at a redemption price equal to $25.00 per share, plus an amount equal to accumulated but unpaid dividends, if any, to, but excluding, the date of redemption.

In August 2018, we completed

a public offering of 2,990,000 shares of our Series E Term Preferred Stock at a public offering price of $25.00 per share.

Gross proceeds totaled $74.8 million and net proceeds, after deducting underwriting discounts and offering costs borne by

us, were $72.1 million.

Total underwriting discounts and offering costs related to this offering were $2.7 million, which have been recorded as discounts to the liquidation value on our accompanying Consolidated Statements of Assets and

Liabilities and are being amortized over the period ending August 31, 2025, the mandatory redemption date.

Our Series E Term Preferred Stock is

not convertible into our common stock or any other security and provides for a fixed dividend equal to 6.375% per year, payable monthly (which equates to $6.0 million per year).

We are required to redeem all outstanding shares of our Series E

Term Preferred Stock on August 31, 2025, for cash at a redemption price equal to $25.00 per share, plus an amount equal to accumulated but unpaid dividends, if any, to, but excluding, the date of redemption.

In addition, two other potential

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We may also voluntarily redeem all or a portion of our Series E Term Preferred Stock at our

sole option at the redemption price at any time on or after August 31, 2020.

In August 2018, we used the proceeds from the issuance of our Series E

Term Preferred Stock, along with borrowings under the Credit Facility, to voluntarily redeem all outstanding shares of our Series B Term Preferred Stock and Series C Term Preferred Stock, each of which had a liquidation preference of $25.00 per

In connection with the voluntary redemption of our Series B Term Preferred Stock and our Series C Term Preferred Stock, we incurred a loss on extinguishment of debt of $1.7 million, which was recorded in Realized loss on other in our

Consolidated Statements of Operations and which was primarily comprised of unamortized deferred issuance costs at the time of redemption.

September 2016, we completed a public offering of 2,300,000 shares of our Series D Term Preferred Stock at a public offering price of $25.00 per share.

Gross proceeds totaled $57.5 million and net proceeds, after deducting underwriting

discounts and offering costs borne by us, were $55.4 million.

Total underwriting discounts and offering costs related to this offering were $2.1 million, which have been recorded as discounts to the liquidation value on our Consolidated

Statements of Assets and Liabilities and are being amortized over the period ending September 30, 2023, the mandatory redemption date.

Series D Term Preferred Stock is not convertible into our common stock or any other security.

Our Series D Term Preferred Stock provides for a fixed dividend equal to 6.25% per year, payable monthly (which equates to $3.6 million per year).

are required to redeem all shares of our outstanding Series D Term Preferred Stock on September 30, 2023, for cash at a redemption price equal to $25.00 per share, plus an amount equal to accumulated but unpaid dividends, if any, to, but

excluding, the date of redemption.

In addition, two other potential mandatory redemption triggers are as follows:

(1) upon the occurrence of certain events that would constitute a change in control of us, we would be required to redeem all of

our outstanding Series D Term Preferred Stock, and (2) if we fail to maintain asset coverage of at least 200% and are unable to correct such failure within a specific amount of time, we are required to redeem a portion of our outstanding Series

D Term Preferred Stock or otherwise cure the asset coverage

redemption trigger (and we may also redeem additional securities to cause the asset coverage to be 240%).

We may also voluntarily redeem all or a portion of our Series D Term Preferred Stock at

our sole option at the redemption price at any time.

Each series of our mandatorily redeemable preferred stock has a preference over our common stock

with respect to dividends, whereby no distributions are payable on our common stock unless the stated dividends, including any accrued and unpaid dividends, on the mandatorily redeemable preferred stock have been paid in full.

The Series D Term

Preferred Stock and Series E Term Preferred Stock are considered liabilities in accordance with GAAP and, as such, affect our asset coverage, exposing us to additional leverage risks.

The asset coverage on our senior securities that are stock (our

Series D Term Preferred Stock and Series E Term Preferred Stock) as of March 31, 2020 was 293.8%, calculated pursuant to Sections 18 and 61 of the 1940 Act.

sole option at the redemption price at any time.

In August 2018, we used the proceeds from the issuance of our Series E Term Preferred Stock, along with

borrowings under the Credit Facility, to voluntarily redeem all outstanding shares of our Series B Term Preferred Stock and Series C Term Preferred Stock, each of which had a liquidation preference of $25.00 per share.

In connection with the

voluntary redemption of our Series B Term Preferred Stock and our Series C Term Preferred Stock, we incurred a loss on extinguishment of debt of $1.7 million, which was recorded in Realized loss on other in our accompanying Consolidated

Statements of Operations and which was primarily comprised of unamortized deferred issuance costs at the time of redemption.

In May 2020, we entered

into sales agreements with Wedbush Securities, Inc.

and Virtu Americas LLC (each a Series E ATM Sales Agent), under which we have the ability to issue and sell shares of our Series E Term Preferred Stock, from time to time, through the

Series E ATM Sales Agents, up to $50.0 million aggregate liquidation preference in the Series E ATM Program.

As of March 31, 2021, we had remaining capacity to sell up to $30.4 million of our Series E Term Preferred Stock under the

Series E ATM Program.

During the year ended March 31, 2021, we sold 784,853 shares of our Series E Term Preferred Stock under

the Series E ATM Program with an aggregate liquidation preference of $19.6 million.

The weighted-average gross price per share net of discounts was $24.56 and resulted in gross proceeds of approximately $19.3 million.

After deducting

commissions and offering costs borne by us, net proceeds totaled approximately $19.1 million.

In March 2021, we used a portion of the proceeds from

the issuance of our 2026 Notes, to voluntarily redeem all outstanding shares of our Series D Term Preferred Stock, which had a liquidation preference of $25.00 per share.

In connection with the voluntary redemption, we incurred a loss on

extinguishment of debt of $0.8 million, which was recorded in Realized loss on other in our accompanying Consolidated Statements of Operations and which was primarily comprised of unamortized deferred issuance costs at the time of

Our mandatorily redeemable preferred stock has a preference over our common stock with respect to dividends, whereby no distributions are

payable on our common stock unless the stated dividends, including any accrued and unpaid dividends, on the mandatorily redeemable preferred stock have been paid in full.

The Series E Term Preferred Stock are considered liabilities in accordance

with GAAP and, as such, affect our asset coverage, exposing us to additional leverage risks.

The asset coverage on our senior securities that are stock (our Series E Term Preferred Stock) as of March 31, 2021 was 248.6%, calculated pursuant to

Sections 18 and 61 of the 1940 Act.

Revolving Line of Credit

On August 22, 2018,

we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No.

4 to the Fifth Amended and Restated Credit Agreement, originally entered into on April 30, 2013, with KeyBank National Association

(KeyBank) as administrative agent, lead arranger, managing agent and lender, the Adviser, as servicer, and certain other lenders party thereto.

The revolving period was extended to August 22, 2021, and if not renewed or extended by

such date, all principal and interest will be due and payable on August 22, 2023 (two years after the revolving period end date).

As of March 31, 2020, the Credit Facility provided a one-year

extension option that may be exercised on or before August 22, 2020, subject to approval by all lenders.

Additionally, the Credit Facility commitment amount was increased from $165.0 million to $200.0 million and, subject to certain

terms and conditions, can be expanded to a total facility amount of $300.0 million through additional commitments from existing or new lenders.

Advances under the Credit Facility generally bear interest at 30-day LIBOR plus 2.85% per annum until August 21,

2021, with the margin then increasing to 3.10% for the period from August 22, 2021 to August 21, 2022, and increasing further to 3.35% thereafter.

The Credit Facility has an unused commitment fee on the daily unused commitment amount of

0.50% per annum if the average unused commitment amount for the period is less than or equal to 50% of the total commitment amount, 0.75% per annum if the average unused commitment amount for the period is greater than 50% but less than or equal to

65% of the total commitment amount, and 1.00% per annum if the average unused commitment amount for the period is greater than 65% of the total commitment amount.

We incurred fees of approximately $1.6 million in connection with this amendment.

On March 8, 2021, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No.

6 to the Fifth Amended and Restated Credit

Agreement, originally entered into on April 30, 2013, with KeyBank National Association (KeyBank) as administrative agent, lead arranger, managing agent and lender, the Adviser, as servicer, and certain other lenders party thereto.

The revolving period was extended to February 29, 2024, and if not renewed or extended by such date, all principal and interest will be due and payable on February 28, 2026 (two years after the revolving period end date).

March 31, 2021, the Credit Facility provided two one-year extension options that may be exercised on or before the first and second anniversary of March 8, 2021, subject to approval by all lenders.

Additionally, as part of this amendment, the COVID-19 Relief Period (described below) was extended to September 30, 2021.

We incurred fees of approximately $1.0 million in connection with this

On August 10, 2020, we, through Business Investment, entered into Amendment No.

5 to the Credit Facility.

Among other things,

Amendment No.

5 amended the Credit Facility to (i) add LIBOR replacement language;

(ii) implement a 0.5% LIBOR floor;

(iii) reduce the facility size from $200.0 million to $180.0 million, which may be expanded to

$300.0 million through additional commitments;

and (iv) provide certain other changes to existing terms and covenants.

In addition, Amendment No.

5 provided for certain temporary changes during the

COVID-19 Relief Period (August 10, 2020 until March 31, 2021, which may be extended, subject to certain conditions) including:

(i) amending the definition of Effective Advance Rate,

provided that during such period the overall effective advance rate does not exceed 55%;

and (ii) removing or changing certain Excess Concentration Limits (as defined in the Credit Facility).

Advances under the Credit Facility generally bear interest at 30-day LIBOR, subject to a floor of 0.5%, plus 2.85% per

annum until February 29, 2024, with the margin then increasing to 3.10% for the period from February 29, 2024 to February 28, 2025, and increasing further to 3.35% thereafter.

The Credit Facility has an unused commitment fee on the

daily unused commitment amount of 0.50% per annum if the average unused commitment amount for the period is less than or equal to 50% of the total commitment amount, 0.75% per annum if the average unused commitment amount for the period is greater

than 50% but less than or equal to 65% of the total commitment amount, and 1.00% per annum if the average unused commitment amount for the period is greater than 65% of the total commitment amount.

Interest is payable monthly during the term of the Credit Facility.

Available borrowings are subject to various constraints and applicable advance rates,

which are generally based on the size, characteristics, and quality of the collateral pledged by Business Investment.

The Credit Facility also requires that any interest and principal payments on pledged loans be remitted directly by the borrower

into a lockbox account with KeyBank.

Available borrowings are subject to

various constraints and applicable advance rates, which are generally based on the size, characteristics, and quality of the collateral pledged by Business Investment.

The Credit Facility also requires that any interest and principal payments on

pledged loans be remitted directly by the borrower into a lockbox account with KeyBank.

KeyBank is also the trustee of the account and generally remits the collected funds to us once a month.

things, the Credit Facility contains covenants that require Business Investment to maintain its status as a separate legal entity, prohibit certain significant corporate transactions (such as mergers, consolidations, liquidations or dissolutions)

and restrict certain material changes to our credit and collection policies without the lenders consent.

The Credit Facility also generally seeks to restrict distributions to stockholders to the sum of (i) our net investment income,

(ii) net capital gains, and (iii) amounts deemed by the Company to be considered as having been paid during the prior fiscal year in accordance with Section 855(a) of the Code.

Loans eligible to be pledged as collateral are subject to

certain limitations, including, among other things, restrictions on geographic concentrations, industry concentrations, loan size, payment frequency and status, average life, portfolio company leverage, and lien property.

Among other things, the Credit Facility contains covenants that require Business Investment to maintain its status as a separate legal entity, prohibit

certain significant corporate transactions (such as mergers, consolidations, liquidations or dissolutions) and restrict certain material changes to our credit and collection policies without the lenders consent.

The Credit Facility also

requires Business Investment to comply with other financial and operational covenants, which obligate Business Investment to, among other things, maintain certain financial ratios, including asset and interest coverage and a minimum number of

obligors required in the borrowing base.

Additionally, the Credit Facility contains a performance guaranty that requires the Company to maintain (i) a minimum net worth (defined in the Credit Facility to include our mandatory redeemable term

preferred stock) of the greater of $210.0 million or $210.0 million plus 50% of all equity and subordinated debt raised minus 50% of any equity or subordinated debt redeemed or retired after November 16, 2016, which equated to

$220.3 million as of March 31, 2020, (ii) asset coverage with respect to senior securities representing indebtedness of at least 150% (or such percentage as may be set forth in Section 18 of the 1940 Act, as modified by

Section 61 of the 1940 Act), and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code.

As of March 31, 2020, and as defined in the performance guaranty of the Credit Facility, we had a net worth of

$497.2 million, asset coverage on our senior securities representing indebtedness of 993.5%, calculated in accordance with the requirements of Sections 18 and 61 of the 1940 Act, and an active status as a BDC and RIC.

As of March 31, 2020,

we had availability, after adjustments for various constraints based on collateral quality, of $137.6 million under the Credit Facility and were in compliance with all covenants under the Credit Facility.

generally seeks to restrict distributions to stockholders to the sum of (i) our net investment income, (ii) net capital gains, and (iii) amounts deemed by the Company to be considered as having been paid during the prior fiscal year

in accordance with Section 855(a) of the Code.

Loans eligible to be pledged as collateral are subject to certain limitations, including, among other things, restrictions on geographic concentrations, industry concentrations, loan size, payment

frequency and status, average life, portfolio company leverage, and lien property.

The Credit Facility also requires Business Investment to comply with other financial and operational covenants, which obligate Business Investment to, among other

things, maintain certain financial ratios, including asset and interest coverage and a minimum number of obligors required in the borrowing base.

Additionally, the Credit Facility contains a performance guaranty that requires the Company to maintain

(i) a minimum net worth (defined in the Credit Facility to include our mandatory redeemable term preferred stock) of the greater of $210.0 million or $210.0 million plus 50% of all equity and subordinated debt raised minus 50% of any

equity or subordinated debt redeemed or retired after November 16, 2016, which equated to $266.2 million as of March 31, 2021, (ii) asset coverage with respect to senior securities representing indebtedness of at least 150% (or such

percentage as may be set forth in Section 18 of the 1940 Act, as modified by Section 61 of the 1940 Act), and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code.

As of March 31, 2021, and as defined in the

performance guaranty of the Credit Facility, we had a net worth of $597.1 million, asset coverage on our senior securities representing indebtedness of 398.0%, calculated in accordance with the requirements of Sections 18 and 61 of the 1940

Act, and an active status as a BDC and RIC.

As of March 31, 2021, we had availability, after adjustments for various constraints based on collateral quality, of $157.6 million under the Credit Facility and were in compliance with all

covenants under the Credit Facility.

Notes Payable

In March 2021, we completed a public offering of the 2026 Notes with an aggregate principal amount of $127.9 million, which resulted in net proceeds of

approximately $123.8 million after deducting underwriting discounts, commissions and offering costs borne by us.

The 2026 Notes are traded under the ticker symbol GAINN on Nasdaq.

The 2026 Notes will mature on May 1, 2026 and

may be redeemed in whole or in part at any time or from time to time at the Companys option on or after May 1, 2023.

The 2026 Notes bear interest at a rate of 5.00% per year (which equates to $6.4 million per year), payable quarterly

The indenture relating to the 2026 Notes contains certain covenants, including (i) an inability to incur additional debt or issue

additional debt or preferred securities unless the Companys asset coverage meets the threshold specified in the 1940 Act after such borrowing, (ii) an inability to declare any dividend or distribution (except a dividend payable in our

stock) on a class of our capital stock or to purchase shares of our capital stock unless the Companys asset coverage meets the threshold specified in the 1940 Act at the time of (and giving effect to) such declaration or purchase, and

(iii) if, at any time, we are not subject to the reporting requirements of the Exchange Act, we will provide the holders of the 2026 Notes, as applicable, and the trustee with audited annual consolidated financial statements and unaudited

interim consolidated financial statements.

The 2026 Notes are recorded at the aggregate principal amount, less underwriting discounts, commissions, and

offering costs, on our accompanying Consolidated Statements of Assets and Liabilities .

Total underwriting discounts, commissions, and offering costs related to this offering were $4.1 million, which have been recorded

as discounts to the aggregate principal amount on our accompanying Consolidated Statements of Assets and Liabilities and are being amortized over the period ending May 1,

2026, the maturity date.

OFF-BALANCE SHEET ARRANGEMENTS

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not recognized success fee receivables and related income in our accompanying Consolidated Financial Statements until earned.

We have line of credit commitments to certain of our portfolio companies that have not been fully drawn.

Since these line of credit

commitments have expiration dates and we expect many will never be fully drawn, the total line of credit commitment amounts do not necessarily represent future cash requirements.

We estimate the fair value of the combined unused line of credit

commitments as of March 31, 2020 to be immaterial.

As of March 31, 2020, we have also extended a guaranty on behalf of one of our portfolio

companies, CCE, whereby we have guaranteed $1.0 million of CCEs obligations.

As of March 31, 2020, we have not been required to make payments on this or any previous guaranties, and we consider the credit risks to be remote and the

fair value of this guaranty to be immaterial.

The following table shows our contractual obligations as of March 31, 2020, at cost:

We have line of credit and delayed draw term loan commitments to certain of our portfolio companies that have not been fully drawn.

these line of credit and delayed draw term loan commitments have expiration dates and we expect many will never be fully drawn, the total line of credit and delayed draw term loan commitment amounts do not necessarily represent future cash

requirements.

We estimate the fair value of the combined unused line of credit and delayed draw term loan commitments as of March 31, 2021 to be immaterial.

As of March 31, 2021, we have also extended a guaranty on behalf of one of our portfolio companies, CCE, whereby we have guaranteed $1.0 million of

CCEs obligations.

As of March 31, 2021, we have not been required to make payments on this or any previous guaranties, and we consider the credit risks to be remote and the fair value of this guaranty to be immaterial.

The following table shows our contractual obligations as of March 31, 2021, at cost/liquidation preference:

Payments Due by Period

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Credit Facility (B)

Notes payable

Mandatorily redeemable preferred stock

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Interest payments on obligations (C)

Excludes unused line of credit commitments and guaranties to our portfolio companies in the aggregate principal

amount of $2.2 million.

Excludes unused line of credit and delayed draw term loan commitments and guaranties to our portfolio companies

in the aggregate principal amount of $4.0 million.

Principal balance of borrowings outstanding under the Credit Facility, based on the maturity date following the

current contractual revolving period end date.

Includes interest payments due on the Credit Facility and secured borrowing and dividend obligations on each

series of our mandatorily redeemable preferred stock.

Includes interest payments due on the Credit Facility, 2026 Notes, and secured borrowing and dividend

obligations on each series of our mandatorily redeemable preferred stock, as applicable.

The amount of interest payments calculated for purposes of this table was based upon rates and outstanding balances as of March 31, 2021.

Dividend obligations on our mandatorily redeemable

preferred stock assume quarterly declarations and monthly dividend payments through the date of mandatory redemption of each series.

obligations on our mandatorily redeemable preferred stock assume quarterly declarations and monthly dividend payments through the date of mandatory redemption of each series.

Critical Accounting Policies

The preparation of

financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported consolidated amounts of assets and liabilities, including disclosure of contingent assets and

liabilities at the date of the financial statements, and revenues and expenses during the period reported.

Actual results could differ materially from those estimates under different assumptions or conditions.

We have identified our investment

valuation policy (which has been approved by our Board of Directors) as our most critical accounting policy, which is described in Note 2 Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial

Statements included elsewhere in this Annual Report.

Additionally, refer to Note 3 Investments in the accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report for additional

information regarding fair value measurements and our application of Financial Accounting Standards Board Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures. We have also identified our revenue

recognition policy as a critical accounting policy, which is described in Note 2 Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the

reported consolidated amounts of assets and liabilities, including disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period reported.

Actual results could differ materially

from those estimates under different assumptions or conditions.

We have identified our investment valuation policy (which has been approved by our Board of Directors) as our most critical accounting policy, which is described in Note

2 Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

Additionally, refer to Note 3 Investments in the accompanying

Notes to Consolidated Financial Statements included elsewhere in this Annual Report for additional information regarding fair value measurements and our application of Financial Accounting Standards Board Accounting Standards Codification

Topic 820, Fair Value Measurements and Disclosures. We have also identified our revenue recognition policy as a critical accounting policy, which is described in Note 2 Summary of Significant Accounting Policies in

the accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

Investment Valuation

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Weighted-average

intend to continue to maintain our qualification as a RIC under Subchapter M of the Code for U.S.

We intend to continue to maintain our qualification as a RIC under Subchapter M of the Code for U.S.

federal income tax purposes.

As a RIC, we generally are not subject to U.S.

federal income tax on the portion of our taxable income and gains

distributed to our stockholders.

To maintain our qualification as a RIC, we must maintain our status as a BDC and meet certain source-of-income and asset diversification

requirements.

In addition, in order to qualify to be taxed as a RIC, we must distribute to stockholders at least 90% of our Investment Company Taxable Income, determined without regard to the dividends paid deduction.

Our policy generally is to make

distributions to our stockholders in an amount up to 100% of Investment Company Taxable Income.

We may retain some or all of our net long-term capital gains, if any, and designate them as deemed distributions, or distribute such gains to

stockholders in cash.

As a RIC, we generally are

not subject to U.S.

federal income tax on the portion of our taxable income and gains distributed to our stockholders.

To maintain our qualification as a RIC, we must maintain our status as a BDC and meet certain source-of-income and asset diversification requirements.

In addition, to qualify to be taxed as a RIC, we must distribute to stockholders at least 90% of our Investment Company Taxable Income, determined

without regard to the dividends paid deduction.

Our policy generally is to make distributions to our stockholders in an amount up to 100% of Investment Company Taxable Income.

We may retain some or all of our net long-term capital gains, if any, and

designate them as deemed distributions, or distribute such gains to stockholders in cash.

See Business Material U.S.

Federal Income Tax Considerations and Liquidity and Capital Resources Distributions and Dividends to Stockholders .

In an effort to limit federal excise taxes, we have to distribute to stockholders, during each calendar year, an amount close to the sum of:

our ordinary income for the calendar year, (2) 98.2% of our net capital gains (both long-term and short-term), if any, for the one-year period ending on October 31 of the calendar year, and

(3) any income realized, but not distributed, in the preceding period (to the extent that income tax was not imposed on such amounts), less certain reductions, as applicable.

Under the RIC Modernization Act, we are permitted to carryforward any

capital losses that we may incur for an unlimited period, and such capital loss carryforwards will retain their character as either short-term or long-term capital losses.

Our capital loss carryforward balance was $0 as of both March 31, 2020

Recent Accounting Pronouncements

Refer to Note 2 Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements included

elsewhere in this Annual Report for a description of recent accounting pronouncements.

Federal Income Tax Considerations and Liquidity and Capital Resources

Distributions and Dividends to Stockholders .

In an effort to limit federal excise taxes, we have to distribute to stockholders, during

each calendar year, an amount close to the sum of:

(1) 98% of our ordinary income for the calendar year, (2) 98.2% of our net capital gains (both long-term and short-term), if any, for

the one-year period ending on October 31 of the calendar year, and (3) any income realized, but not distributed, in the preceding period (to the extent that income tax was not imposed on

such amounts), less certain reductions, as applicable.

Under the RIC Modernization Act, we are permitted to carryforward any capital losses that we may incur for an unlimited period, and such capital loss carryforwards will retain their character as

either short-term or long-term capital losses.

Our capital loss carryforward balance was $0 as of both March 31, 2021 and 2020.

Accounting Pronouncements

Refer to Note 2 Summary of Significant Accounting Policies in the accompanying Notes to Consolidated

Financial Statements included elsewhere in this Annual Report for a description of recent accounting pronouncements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity